The Ramsey Show - App - THIS Is the Most Effective Way To Pay Off Debt (Hour 1)

Episode Date: September 19, 2023

🎵 Live from the headquarters of Ramsey Solutions, it is The Ramsey Show, where we're helping people build wealth, do work that matters, and create actual amazing relationships. I am your host, Jade Warshaw. I am joined to my right by Ken Coleman. Is there really anybody next to you, Ken? I mean, come on. Let's be honest about that. Not right now. I mean, I'm looking to my right. I don't see anybody to my right. I do see you, the fabulous Jade Warshaw. Always good to be together. We were together with the whole crew just this last Saturday in Chicago, the Windy City it's been referred to. Yes.

And that was a great, great crowd. Smart conference is what he's referring to. So much fun. And hung out with your husband, Sam. Yes. Sam was hanging out. It was great fun. It was super good.

You guys came out. Let me tell you, Chicago, y'all did that. It was a great weekend. I came out smarter. I hope you guys did too. But in the meantime, give us a call. The number is 888-825-5225. We want to take calls about not just money, but we've got Ken Coleman on and he is our career expert. So if you are, Ken, set it up. Inflation is real. Let's get to the

pocketbook side of this thing. And as Dave has said for decades, if you're new to the program, Dave Ramsey has said for over three decades that your income attached to your work is your greatest wealth building tool. And I focus on the income side of things for Ramsey Solutions. So, Jade, I'll take care of the outflow. I'll talk as I can about the income. Do I need a side hustle? Should I be leveling up? How do I get promoted?

Do I move and switch career moves when I'm still in the baby steps? The answer is yes. We tell you how to do it. So anything work related in a toxic environment, anything like that. And Jay's got great insight on all that as well too. So that's what we're going to do today. Coolio, let's go to the phone lines. We got Kristen in Philadelphia. PA, what's going on? Hi, how are you guys doing good how are you I'm well thanks for taking my call you bet um so the reason I'm calling is my husband and I are about 140,000 dollars in debt um the majority of it is student loans um how much is the student loans? So together I have about $20,000 but he has about $90,000 or excuse me about $80,000. Okay. So that's what the majority of it is and

then the rest is just car loans but we're struggling with how to tackle it. Like, it's definitely overwhelming. Tell me about those car loans, $40,000. So we have two cars. The one we're buying from a family member. So that one doesn't have any interest or anything. But my car, it's about $24,000 that we still owe on it. And then the one that you're buying without interest, how much is that one? A little bit over $15,000, we still owe. Okay. And then is that everything? Because that doesn't quite equal.

Okay. So that's everything. Yeah. So it's about $100,000 in student loans, $25,000 for my car, then $15,000 for his car. So $140,000 total. Okay. So breakdown. Okay okay you've got this debt you're realizing hey this is a problem we need to solve it let me know like tell me a little bit more about your income where are you hitting a brick wall so um we both are like full-time I make around $63,000. My husband makes around $62,500. So it's mainly just the loans and stuff. It's going to be the next 10 plus years of us paying it off.

And it takes up the majority of our money. We feel like we're just paying the bare minimum on all of these loans that we have and help me understand because you're making 126 000 a year combined you've got 140 in student loans living in philadelphia so a high cost of living yes okay i don't think it let me rephrase that it's not going to take you 10 years to clean this up like you said this is going to require all right you're both working full-time do you have kids yet we have i'm sorry what was that do you have kids not yet all right that's wonderful because this is going to take you guys working like you've never worked before and i wonder if there's

some places within your budget that you can cut down and live on instead of living on 120,000 maybe live on 90,000 right so we're getting on a budget are you using a budget yet we do have a budget we do our best to try to live off of just my husband's um even better very good very good. Yeah, but I mean, a lot of times we end up having to just take my savings and use it for like our loans to pay off for a car or our rent.

So something's not adding up. Okay, let me retrace what you just said and I'm going to poke holes in it. So I suggested, hey, try to live on 90 and you're like, oh, we can live on my husband's income, which is 62 and a half. So I'm like, either one of two things is happening. Either you are able to live on his 63,000 and you guys are being careless with your spending or you're not able to live on 63,000 because you're not doing a detailed budget and it's coming back to bite you in the butt. Like you're not able to live on $63,000 because you're not doing a detailed budget

and it's coming back to bite you in the butt. Like you're not being realistic on the fact like, hey, we can't live on $60,000. We need a little bit more. So which one sounds? Yeah, I would say it's probably more the second one, but maybe a little bit of a mix of it is that you know we we try to live off of his his money but also you know rent is pretty expensive in this area um so there's times where we've had to cut into any savings that we have so what anyone to pay or whatever that's a big

what you're talking about is a big swing if you're saying we can kind of live off of his, but sometimes it cuts in with rent, that's a big swing of money because you make 63,000 as well. So here's what I believe. I think that your budget is not a real budget. I think it's kind of like kind of a guide that you're looking at here and there of what we should be spending, not spending. I want you on an every dollar zero based budget. Matter of fact, we do these webinars every two weeks here at ramsey solutions where we're teaching people how to budget and there's another webinar coming up on the 19th actually that was today there's another one coming up on the 26th with george camel one of our personalities i want you on that webinar it's totally free

11 30 a.m i want you to go to that webinar because he's going to teach you and break down exactly how to budget line by line um and you're going to do with every dollar which is free but that's what you need because right now it sounds like kristen there's a lot of money that's up in the air that's floating by things like your rent mortgage that should be a no-brainer like that's that jumps that should never be well we had to pull out of my savings to cover the rent that we don't want that. Right, Ken? Yeah. Kristen, I'm going to tell you something. This is about mindset. The reason that you guys aren't making progress is because you're being reactive.

And what Jade has told you is right. You do need a budget. That's a form of being very proactive, but you actually need to experience some momentum. So you need to be looking at possibly selling one of these cars and downgrading in cars. The reason is because you can knock out a big chunk of debt very quickly and then all of a sudden getting into that budget, we find some money. You guys have got to work an extra job, both of you. You guys have got to sell stuff, both of you. And the reason is right now it's so overwhelming.

You've got a narrative that says it's going to take us 10 years. That's a mountain that feels like we'll never climb. So you know what we don't do? We don't actually climb it. This is not overwhelming. So you guys have got to make something happen and really quick to see the momentum, to high five and then move forward.

This is The Ramsey Show. All right, you guys are listening to The Ramsey Show. I'm Jade Warshaw. This is Ken Coleman. Give us a call. The number is 888-825-5225. The Ramsey Show question of the day is sponsored by Neighborly, your hub for home services.

Take your home efficiency and style to the next level with convenient solutions from Shelf Genie, Window Genie, and Glass Doctor. Visit Neighborly.com to schedule your service professionals near you. Today's question comes from Michael in Georgia. He asks, how do you determine what to budget for fun money each month while in baby step two well if you're married very very carefully and very evenly yes uh you know because this is a tough thing you know you guys are going through it and this is meant to be a by the way a very small line item in the budget when you're getting after it maybe even remove it all together if this scorched earth, I just

wanted to point that out, Jade. When Dave says to callers, you know what? You are not going to see the inside of a restaurant unless you're waiting tables. You're rice and beans, beans and rice. Then the blow or the fun category probably should not be there, but if it is there,

boy, it needs to be very, very fair, equitable across the board and reasonable and i would recommend if you're married this is if you're married that it involve something that is really really lifting to your wife sure or something you do together just to kind of have a moment of we've been busting it yeah let's celebrate that would be my boy that sounded like a politician but i was trying to get it at it from every angle well yeah i like i like what you're saying and i'd probably add to that if you're a like the average person is out you know 18 and 28 between 18 to 24 months right you're out of debt you're out of that baby stew baby two step baby step two gosh i can't talk

today yeah it happens golly. But if you're going to be in there longer, like Sam and I, we're in seven and a half years, then you have to, you have to have those moments where you're coming up to breathe. And so I would say, if you're not average, if you're going to be in this for a long time, I'll be on 18 to 24 months. Then I would say, if you're in this like three years, maybe three and a half, four, I would add back that fun category. Keep it low. Keep it just something that's,

because you can't stay in scorched earth forever. That's correct. Like if you stay in scorched earth forever, it's going to start messing with your mind. You need to schedule that out. It's like a little bit of a cheat to reward yourself for eating healthy. You know?

Yeah. Got a little cheat snack. Just a little something, something. Like you can't go. You're such a clean eater, I have to ask. Do you cheat A and B if you do? What is your cheat snack or cheat food? I cheat all the time.

Oh, you do? I feel like I do. I was eating some cookies last night. I was eating cookies in my recliner last night. Okay, there it is. Cookies in the recliner. I feel better about myself already, James. Now, they were grain-free.

They were like coconut sugar. Okay, that's not... Hold on, time out. That's not a cheat. If the cookie doesn't resemble a cookie, it's not a cookie. It did not resemble a cookie. I will say that. Do you get like a Twinkie and just get after it? Never that. No, never. Never. I can't. Well, then that's not a cheat. I'm talking like a true cheat if i want to

cheat i would say i would make a bat i would make a brownies okay good not like freaking healthy brownies just good old-fashioned good old-fashioned sugar and awful things brownie real cane sugar cane sugar all right yeah okay now i can move ahead i can focus yes we should all have a cheat meal from time to time. All right. With that, we got to go to Justin, who's in Tampa, Florida. What's going on, Justin? Hey, guys, how you doing? Doing good. How are you? Doing well. So I'm in a bit of a situation. I'm a single guy, 30 years old. I'm a firefighter here in the Tampa area. And my car, I got into a car payment, a miserable mistake, a $34,000 loan, 16% interest

with $773 a month. So it's, it's been killing me. Um, I'm living in a friend's room in a house and the rent is 800 a month and it's just i i'm unable to to get ahead with my bills i feel like i i just paid off some uh some debt i was i was in this in these payday loan cycles um these apps that i that i got so i'm tell me about the car tell me about the car real quick because i want to attack this. Jay, it'll help you with the rest of your stuff, but I'm just curious on this car. What is the car? It's a 2022 Subaru Outback. What's it?

It's worth $23,000. That's still a 32. So there's no trading it in. There's no selling it. Wait a sec. Well, sure there is. Well, wait a second. You said it's a 2022 outback or

2023? 22. Did you roll negative equity into it? Just $2,000. $2,000. Man. Yeah. Okay. Well, here's the deal. I'll just give it to Jade on this. But I mean, if I were swimming in debt like you are and the way you a loan for the difference. And now your payment's a whole lot less and you can attack that. You can put that in your debt snowball. That's something to think about. What's your credit like? I'm guessing it's bad because you've been doing these payday loans. Yeah. So that's, it's bad because I've been late a couple of times on this car because it's the price it is. But my credit, I just checked today, it's in the upper fours. It's like 480, 490. So not good.

Okay, so you're not going to get a, you're not going to be able to get a loan. Before I advise you further, can you tell me a little bit more about the other debt that you have? Because I'm assuming there's more. So really there's not. Like I said, these past couple weeks,

I was living paycheck to paycheck because of the payday loans, the cash advances from Amscot. Did you clear those? You paid those off? Yes, they were all done. And by the way, we're never going to Amscot ever again, ever, right? Never. You've realized these? Never again. They're terrible, terrible, terrible. Okay. So this is the only debt is this car note at 772 per month. What's your income? My income is about, I get paid 1,800 every two weeks. So 30, 34, yeah.

Okay. And that's for 40 hours a week? Well, our firefighter schedule is different. We work 24 hours on, 48 hours off. So it averages out to 96 hours a week can you get overtime it's tough um it's not guaranteed i have been working a lot of extra shifts for people pay cash um and so i've been doing that i think i'm around almost 8 000 extra this year. Nice.

Sounds like he doesn't know where his money's going. Yeah, I think if you're making $3,600 a month, you're paying, I think I heard you say $800 or some for rent, and then you've got this car, which is eating up half of your, like that alone is eating up half of your check. I think that you can work more. Here's the thing.

We can do what Ken said, and you can work more i here's the thing we can we can do what ken said and you can you know take a bath on this and try to before you even start this process get as much cash together as possible because do you even have a thousand dollars saved no i have two hundred and eight dollars in my account okay so thing one a1 before when we get off the call we're focusing on getting a thousand dollars saved that's the first thing you got to have that because that's going to Okay, so thing one, A1, when we get off the call, we're focusing on getting $1,000 saved. That's the first thing. You gotta have that because that's gonna keep you out of Amscot.

It's gonna keep you feeling like, okay, I have a cushion. Second thing, A2, is we're getting on a budget. If you haven't started using a budget, today's the day. I would recommend EveryDollar. It's the best budget out there. It's the one that I use personally. And that's gonna help you list out your expenses

and see how much money you have left. other than if you say you have no other debt you've got your car you're living with someone um you're are you a single guy yeah i'm single i have phone uh insurance and let's real real quick to each check, so I get paid $1,800. Each check, $1,200 are coming out each check. And so now that that's done, I can finally live off of my paycheck instead of having to re-borrow the money through those apps. Yeah, you've cleared up some margin there. Yes. My main question is I have a friend who is a big blessing. He offered to buy me a $6,000 car, but I would have to voluntarily get my car repossessed. think you can dig yourself out of it. You can keep the car if you work like crazy. I'm talking about

you're working like 60, 80 hours a week, not just 40. You're picking up double shifts. You're doing whatever you can to get money coming in. And that money is going directly out to pay that car note off because your credit's not really great for you to get a loan from the credit union. That's what I would do if I were in your shoes. This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down. And if higher costs aren't enough, the wait times to see your doctor are longer, and it's harder than ever to get anything approved through the bureaucracy.

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That's chministries.org slash budget. You are listening to The Ramsey Show. I am Jade Warshaw. This is Ken Coleman. And all afternoon, we're taking calls about your life, your money, your career. Give us a call. The number is 888-825-5225. And let's go directly to the phone lines. We've got Landon in Fort Worth, Texas.

What's going on, Landon? Hey, so I've got some cash available. And I have just a mortgage and student loans and debt. And I was wondering which I should apply my cash to. How much cash is it? It's about a little over 100K. How much over 100K? Just curious. It's like 105. Nice. How'd you get that money? Just savings and me and my wife, our bonuses and everything. Okay, cool. Is it just you and your wife or you've got kids too?

We're expecting one here in the next couple of weeks. Very, very cool. Wow, congrats. So do you have any, is this just, so you've been saving it up. This is your only savings, right? It's just this? No, we also have 60K in singular stocks, and then 50K in a 401K, and then we have 140K in a private equity fund. Those can be tied up for about five years.

Okay, cool. Very good. You guys have been very diligent with savings. So how much is the student loan debt? It's about 65. And how much is on your mortgage? It's 385. Cool. Now, if I'm you, I'm, you know, I don't know how long you've been a listener here at the Ramsey Show, but we walk through a series of baby steps. And for us, we believe, and it's tested, I mean, by millions of folks that this is the best way to build wealth. And that's by getting back as much of your income in your pocket by eliminating debt as possible and thereby eliminating risk in your life. So if I were you, I would take the $105,000 and the $60,000 and I would start using it towards my baby steps. So baby step one, you've basically already accomplished. It's saving $1,000 quickly and setting it aside. And then baby step two, if you may know, is you're going to pay off all of your debt except your mortgage. So that's where your student loan comes to play. So I would knock

that. I'd be debt free from the student loans today. And then I would make sure that I keep three to six months set aside liquid. In your case, I would do six months because you seem like the type of guy who likes to have plenty of extra money set aside. So I'd keep six months set aside. And then from there, when it comes to investing, it looks like you've already done a good job and you've been diligent about saving. But I want to make sure you're doing 15% of your income every month before taxes into retirement. What are you doing at this point? Yeah, probably somewhere around there. So you're saying that I should just apply all of it towards the student loans, even though the student loans probably have a 3% to 5% interest rate. And my home has like, I want to say 7.2%. And also, we only put 10% down on the home. And so we're still paying PMI, which is only about $75 a month. But if we put down the extra 10%,

it gets rid of that PMI. You still think you should go try to pay off the student debt? Yeah, so let's tackle the student loan debt. So if I'm talking about that first, I'm getting rid of the student loan debt because it's debt. And anytime there's debt, there's risk.

It's not bankruptable. It will fall you to the grave. And as much as people say it doesn't matter, you know that there's debt, there's risk, it's not bankruptable, it will fall you to the grave. And as much as people say it doesn't matter, you know that there's $65,000 with your name on it sitting right there and you've got the cash to pay it off. Today, correct? If I'm hearing this. Yeah, he's got 105 in cash.

Okay, so Landon, you have how much in student loans, 60? Yeah, 65. 65. So the minute that you pay that off, then that's gone. That payment, the monthly payments, which are coming due in October, correct? Yeah, the private loans. So we've been paying them. Okay, so what are you even paying?

What's your monthly payment on the loans so far? The minimum payment is $650,000, and we put about a grand each month towards those. All right, so let's take the grand that you've been putting towards those loans. That's gone. That's gone by the end of today. So now the grand you've been putting towards student loans can go towards paying down your home. You see how we're just, it's all attacking the same thing. But we're going to do it in the steps that make the most sense because you get the momentum.

And now you have no debt except your home, which is a tremendous asset. The loans are not an asset. The home is an asset. So that's why we have the baby steps in the order that they are. So now you're attacking that home and you're going to get through that PMI. You're going to get there a lot faster now that the student loans are gone, as opposed to going after the home debt and having the loan just hang around over there. Make sense now? Yeah, that makes sense. That's the reason.

It's all about momentum. How good is it going to feel later tonight when you slip into the bed and you have no student loan debt? Yeah, I mean, it'll feel good. I just... I don't think so. I don't think you think it's going to feel as good as I do. Here's the thing.

Maybe you need better sheets. I don't know. Something over 700 thread count would make it feel good. Okay. Like talk to us, Landon. What are you, what are your thoughts? Well, I mean, it's not, uh, I think regardless, um, whether we apply the money to the loans or the mortgage, uh, I just in a traditional sense, uh, you know, I've always been taught also that you want to go after your debt with the highest interest rate. And so that's why I kind of brought it into question whether or not I agree with y'all. Me and my wife have talked about it. That's why I actually called

is we're in a little bit of disagreeance about it. Well, the difference in this case, the reason we're telling you the student loan first is because, again, it's not an asset in any way. At least your home, every payment you pay, you're building equity. But with the student loan, it's almost like comparing apples to oranges in the way that you're comparing those two debts. We could have a slightly different argument if we were talking about credit card debt and student loan debt and all of that. In which case, I would still say, pay the lowest balance first, but it would be a different set of arguments to support that. In this case, again, every month when you're making your payment towards your house, you are building equity. So there's something to be said for that. With the student loan, it's just hanging around and it's like, okay, I'm going to put a towards it and i'm gonna do a little bit towards my house when you have that focused

intensity you're able to knock things out quicker and i mean in this case to in one day like today you can be gone from your student loan debt you know what i'm saying i i i think that's all important i think he's scared to talk to his wife about it that's what i think's going on but by the way is i understand that i'm not like poking fun at you, but you got to cast some vision to your wife on this. Based on what we said, we gave you the talking points. And here's one thing. Here's a great argument. And you can use our name on this. We tell people every day on the air, pay off your student loans. And they do. No one has ever called back, Ken, and said, hey, I'm so pissed that I paid off my student loans. Or I paid off my student loans and they do. No one has ever called back, Ken, and said, hey, I'm so pissed that I

paid off my student loans or I paid off my student loans and I felt terrible after. I paid off my student loans and I wish I could just go back into debt because I miss it so much. No one's ever done that, Landon. Yeah. Yeah. Yeah. That's fair. For sure. Come on, man. I don't know. You got this. Get yourself a little mini whiteboard, a couple of it out practice it a few times with the wife and then say trust me babe you know i trust me can this is just it's an interesting topic that this brings up with landon because i don't know that it was his wife i think that it's that cash money that you're sitting on top of and it's like i have this money i money. I want to do something. I don't think he expected that we would say, basically, use all of it. Pay off your student loans.

And then with whatever's left, that liquid money. We talk about this a lot. There's a huge psychological hit when you dive into a savings account with a lot of money and take a big chunk out. But you can't be focusing on what you take out. You have to focus on what you're actually doing with that money as opposed to, oh my gosh, I just pulled this money out. It's no, I just got rid of a massive amount of student loan debt and I freed up a thousand dollars because that's what they've been putting towards that.

Yeah. To me, it's about freeing up the thousand1,000 a month plus being free from the debt. Now, I'm paying off an asset. He'll still have six months of income. Big chunk of money. He'll still have three to six months. He can pay the 65 off because, again, Landon, if you're still listening, those single stocks, I'd sell those. I'd sell those and make it liquid, and I'd set that aside.

That'd be my three to six months of expenses. In your case, probably closer to six months. And then you've still got $40,000, $35,000 left from that initial cash you had. Throw that at the house and get rid of that PMI. I mean, you've got so many options and it's going to leave you in such a better situation. This is not a sacrifice. In his case, this is a trade and he's trading up for a more secure lifestyle, if you ask me. And he did. This is not a sacrifice. In his case, this is a trade and he's trading up for a more secure lifestyle. If you ask me and he did. This is the Ramsey Show. You're listening to the Ramsey Show. I'm Jade Warshaw. And next to me, do you still say America's career coach?

I mean, you can. I'm just colleague Ken. I know you guys laugh at me for calling you all colleagues. Well, you're my friend, Ken. I am your friend. There's no question. Yeah. Co-workers, friends, comrades. That feels a little Russian.

Comrade sounds... Feels a little communist. I don't know. I'm making... I don't know what's happening. Well, we were talking before the break about, you know, trades, because this whole thing is like, you know, sacrifices. Yeah sacrifices trade-offs and ken said something that i found to be a bit controversial here we go that i would like to share with the american people on the on the

youtubes and on the podcast here it comes he says you know we're talking about when you're spending money you're at a baby step two and you've got some extra margin and you know you can upgrade some areas in your life i'm not talking about you know. And you know, you can upgrade some areas in your life. I'm not talking about, you know, going out overboard, but you have the extra margin. And he says, Jade, I would rather upgrade my sheets. Before I'd upgrade my shoes. Before he'd upgrade his shoes. And I'm a big shoe guy, so she's a little bit thrown off by this. Now, when you say upgrade your sheets, what are we talking here?

What are we talking about? Over 700 thread count. That's the threshold for me. See, and I don't even know what that means that means pretty nice it's nice feels good on the skin is it like a silky interesting smooth can i tell you i have linen sheets yeah i love them yeah sure they breathe they're warm but the amount of time let me explain it quickly we'll move on the amount of time we spend in the bed, in the sheets, if you will, I want it to be comfy. I will scrimp on the shoes for a while until I can save up. Now,

I've never had to make this choice, thankfully. That's all I was saying. I mean, I love a nice pair of shoes, but I'm going to choose the sheets over the shoes. That's interesting. Do you know, there's a couple of things that I will not, like, there's a few things. You're telling me you're going to go for a really comfortable pair of shoes or nice pair of shoes that aren't comfortable over some good sheets? I walk all day. You're going to sleep on ratty sheets? I walk all day.

When you're tired, you don't care where your head hits. You just want to go to sleep. Oh, no, not me. I need optimal conditions. I can't have a flat pillow that just goes to the mattress like these freaking hotel pillows. Okay, so the pillow is more important than the sheets in my opinion if we're really talking it's a combo i'd rather spend more money on my pillow than i'd spend on my sheets and i'd rather spend more on

my shoes because i'm walking all day i don't want to come home with my dogs barking choosing between a pillow and sheets is like choosing between bread and water you gotta have both to live i gotta have the pillow and the sheets. You know, we're doing a segment, Ken, next time you and I host. We're going to talk about. Oh, that's right. That's coming up Thursday. You don't want to miss Thursday's show.

Tell them why. We're going to talk about the things that we are worth spending money on and not spending money on. And we're talking about generic versus name brand. I love this. So we're going to go through. I'm very opinionated on this. Yeah.

And I want you guys to leave your comments. I want you to drop in the comments. You can do it on today's show. Tell us some of the things that you're like, I refuse, Jade, I refuse to believe that, you know, generic toilet paper is the same as my Charmin. Like, don't, Jade, don't try to tell me. Drop it in the comments.

I want to know, is it coffee? Is it wine? Is it crackers? Like, what's the thing? Here's what I'm going to tell you. You don't want to miss Thursday's show because we're going to talk about the difference between generic toilet paper and high-end toilet paper. And my analysis on this is not to be missed.

I don't want to know about your analysis, Ken, on toilet paper. James loves my analysis on cheap versus quality toilet paper. You're not going to want to miss it. Well, we're going to be talking about it. All right. That's Thursday. In the meantime, let's go to Robert. He's in Chattanooga. What's going on, Robert?

Hey, Jayden, Ken, how are you guys today? Doing good. How are you? We're having too much fun, Robert. How can we help you? Hey, I'm doing well. First of all, I'd like to start off saying I'm coming to you from a very blessed position, but I am curious

what your plan of attack would be. Um, my question is in regards to when personal and business funds kind of collide. Um, so I'll, I'll use round numbers here for you. Um, my dad and I are 50, 50, uh, percent business partners. Um, we've got, I have a $500,000 mortgage. Um, we owe roughly, we're on a cash basis at our office. So we have roughly 600,000 that will be due at the end of the year and taxes of realized income, I guess is how that works. Um, since we're on cash basis, I can get that down to as close to zero as possible and kind of kick the can moving forward as we have done for the past few years. But that's sitting out there as a potential tax that we have to have, right? Okay. We have roughly 1.2 in a money market right now, high yield money market

kind of thing. For the business. And then we have about, you're correct. And then we have a 500K in basically checking account for the business that operates as operating cash, just as cashflow. Cash is king in our industry. Got it. What is the industry, by the way? We're in logistics. Okay. I'm curious what your plan of attack would be.

Normally, if my dad and I, at the end of the year, split a bonus or something like that, take a withdrawal, we'll do it evenly. We've never done anywhere close to this kind that would knock out my mortgage, but in a rough year, which it has been the way our market's going right now, it feels like it's still volatile. And if you have those kind of funds available, it could knock out my entire mortgage right now. But if we did that, then my dad would need to take the same amount. And if we did that, now our kitty that we've saved for years and years and years would be completely depleted, and we wouldn't have enough to pay taxes due if everything hit the fan. So you answered your question.

I wouldn't touch it. You just answered your question in more ways than one. Here's the bottom line. When you own your own business, it's great you own your own business because it goes both ways. The debt in the business is really your debt. The money in the business is really your money. But in this case, like you already said, you said, you know, in my place of business, cash is king.

Like you need this money to operate. You know, you could be on the hook for this tax bill. And it's nice to have retained earnings and it's nice to have operating cash. Your business sounds very healthy and it sounds like you guys have done things right. I think you're tempted because you see, oh, this is like as much money as we've ever had. We could both take this. I wouldn't do that. I would keep things steady. I mean, what do you guys pay yourself? What do you pay yourself out of the business? We both get about $250 a year. Yeah. At $250 a year, if you don't have

any other debt, which I'm assuming you don't, right? You said you're very blessed. That's correct. We've been debt free ever since we started after about a month then. So yes. Okay. So it's up to you. Truly, it's up to you how quickly you want to pay off this mortgage. We see that when people are debt-free, they're paying off their mortgage very quickly, seven years around average. With your income, you could do this a lot sooner if you wanted to. You don't have to be intense about it. But my guess is, Robert, if you were very intentional about putting a certain amount extra on your mortgage, you could knock this thing out in like four years or less if you

lived on less. I guess so. Leave business funds alone and knock it out with personal funds all your time. Because does your wife work? Well, let me rephrase that. you and your dad can pay yourself bonuses however you choose, but to put the business at risk financially in a down year with some uncertainty in the economy on the horizon, there's no need to do so. You don't need to. You don't need to. And you can still, you guys can still pay yourself a nice bonus at the end of the year, but it doesn't have to be a $500,000 bonus. Don't put the company at risk. I would never even consider that. You're in good shape.

You'll be fine. With the company stable, as the company continues to grow, there's a reason to believe that it shouldn't grow. Then you can do that when you get into a place of stability. If you told me that the company was booming and that this was a bonus that you'd probably pay out over next year or so and it would get you that point, then I think it's a no-brainer. But that's not the case here. So hang in there. I love your intensity. I love that.

What do you usually pay out in bonuses? Like what did you guys do last year? We did 50 last year. We just bought random things. It might be an asset for the office or it might be something at the house kind of thing. So, you know, take the growth from this year and use that to calculate what you think your bonus should be this year. Still take a bonus. Even if it's a hundred thousand, for sure, take the 50, but even if it goes up and you're like, hey, you know what? We both are going to do 75 or we're both going to do a hundred based on how our business has grown. That's fine,

but it needs to be reasonable. And I agree with Ken, I definitely would not put, you know, the business at risk for this. That's very interesting, Ken. I love, I love calls like that. And I love small business owners. I just, that's a fun side of things, but you do have to be careful because before you know it, you'll kind of get too, it's like you get too comfortable with that money. It's right there. And you're like, oh, we could just do a little something. He's not hurting in his home. He's not underwater. And so there's no reason to just gamble because that's a gamble. That's right. It's all it is. Right. Yeah. No, I think with his income, with his wife's income, if he bonuses every year, they're going to be paying that mortgage off lickety split before they know it. They're going to look up and have a paid for home.

And that's what I'm talking about. That's what this is all about. All right, that does it for this hour of The Ramsey Show. We'll be back in a minute. Hey, what's up, guys? It's Jade. If you love the show and want a deeper dive on your money journey, we have a weekly newsletter that gives you trending and helpful articles and tips on following the Ramsey way. Just go to ramsesolutions.com today to sign up for our newsletter. Again, that's ramsesolutions.com to sign up for our weekly newsletter.