The Ramsey Show - App - What Are You Willing To Do To Become Debt-Free? (Hour 3)

Episode Date: March 1, 2024

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🎵 🎵 🎵 🎵 🎵 🎵 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 the Rachel Cruz this hour. The number to call is 888-825-5225. You jump in, we'll talk about your

life and your money. Paul's going to join us to kick it off this hour in Orlando, Florida. Paul, welcome to the show. Thank you so much for having me. How are y'all? We're doing well. How can we help today? Yes, sir. My family and I are deciding to take a gap year. So we are just trying to figure out if fiscally we are being responsible. We have followed Dave's plan. So, yeah, so that's where we're at. We're just trying to figure out. Okay, so tell me about this gap year. What does that mean?

No one's working and you're going to travel or what? Yes, sir. So my wife and I are deciding to resign from our current positions. We have three kids. We already homeschool them. So we decided to take a year off and travel the United States and possibly abroad. So we've budgeted for it. It's just, you know, part of American culture tells us to continue to work and build wealth, build wealth. And, you know, sometimes... Lay this out for us. So what's your net worth

and how much are you guys making right now? So combined, my wife and I make about $160,000 a year. We're debt-free, so we've paid off the house a few years back. Oh, wow. So I don't know. Net worth was probably three quarters of a million, I would say, when it's all combined. Okay. And what's this year off going to cost you guys? Have you run the numbers on the real numbers? Yes, sir. We are looking at about $100,000. Okay. And you're going to keep your house? Yes, sir. We're keeping our house, so we would like to come back to a paid-off house. We have paid-off cars when we come back, and we're leaving our jobs on good terms. So as of right now, nothing's absolutely guaranteed, but we have commitments from at least my employer saying that it's an easy transition back. That you could come back and make the same amount of money?

Yes, sir. Yeah, and my wife is probably considering stopping working at this point. Okay, like she would just not go back to work and you guys would be fine? Yeah, yeah, absolutely. How much you guys have saved? So total savings, a little over $100,000 outside of the budgeted amount for the gap year. Oh, so you have $100,000 plus another $100,000? Yes, sir.

Wow. What's the other $100,000 for? Well, we just, we like the emergency fund. So we just want to make sure that we're able to just be able to be comfortable when we get back. And just in case the jobs don't work out, we have something to fall back on. Yeah. Where are you guys going to go? So we're looking at traveling the United States. So starting home in Orlando, going up the East Coast, then heading west and just doing that the whole United States and then coming back to Florida and then going to Europe for a few months.

That sounds incredible. Yeah, that's awesome. Where are you guys going to stay? Is this like hotels, Airbnbs? Do you have an RV? We definitely don't have an RV. No, we're looking at just doing Airbnbs or hotels. Fantastic.

Yeah. I mean, you get the green light from me. I don't know what Rachel thinks, but this sounds like a fun adventure. Yeah. I mean, you get the green light from me. I don't know what Rachel thinks, but this sounds like a fun adventure. Yeah, for sure. I mean, this is why you do it. I'm like, this is why we say you live like no one else. So later you can live and give like no one else. And this is what you guys value and what you're wanting to do. You have the money for it. You don't have any expenses, bills back home, you know, with a mortgage or anything. And so, yeah, for me, I'm like, do it.

What do you guys do for a job? What do you do specifically? I'm a home builder. I'm in construction. And my wife is a nurse practitioner. Okay. That's great. I was just wondering if for some reason the job fell through when you got home.

You know, how easy of a line of work are you to pick up something else? But that's, yeah, that's great. Yeah, well, I'm not too far removed from 2008 and the whole housing bubble there. So that's why I'm just wanting to make sure that the emergency fund covers us just in case something happens. We never know. Yeah, yeah, yeah. I love it.

I think it's great, Paul. Stop by and see us if you come through Nashville. Yeah. Yeah, I mean, we had to save the money from screaming, we're debt free. So maybe on this trip we can stop by. I love it. So great. Well, congratulations, Paul.

That sounds so fun. Thank you. Have a wonderful day. Thanks. Absolutely. I'm glad he asked for permission from us, Rachel. How cool is that? I know.

What an adventure. Man, I have such like a free spirit in me that i'm like wouldn't that just be awesome i know i just hope my kids want to hang out with me for a year you know what i mean like that's just that's cool the kids are excited about this it sounds like yeah i would think i know we had some friends do this they sold they ended up selling their house put everything in storage and they just traveled the world for a year wow came back and you know picked back up but i'm'm like, good for you. Yeah.

I don't know. I think it's great. I mean, if you do it the financially responsible way, I don't think you're going to have much regrets. No, no. And as a kid, that's a really cool experience to get. Yeah, for sure. I love it.

All right, let's go to Alex in Springfield, Massachusetts. Alex, what's going on? Hey, good afternoon. Thanks for having me. I think I'm scrapping my whole idea and doing what Paul is doing. Yeah, dude, sign me up. Maybe we all should. Yeah, so me and my wife, we just actually just had our first child.

He's about a month old now. Oh, congratulations. Lots of fun. We're getting tons of sleep. It's great. And so we're looking to potentially sell one of our, I guess, our only rental property and put that towards the mortgage. And I'm also kind of curious about how and when to start saving for college

and what a good dollar value target might be. Okay. Do you have any other debt other than the rental property mortgage and your primary mortgage? So we have about $28,000 in savings, and I have a $4,000 0% financed loan for some AC units that we had to get because I was broke in the summer last year. Okay. But aside from that, there's no debt except for a mortgage.

We paid off our student loans, and the condo is fully paid for. So what would you net from the rental property if you sold it? So I guess that's part of the question too is that I don't know how capital gains taxes work, but we paid off the property for $70,000 was the initial mortgage. And based on zero, we're looking at maybe like $140,000 for comps. Okay. That's what you would sell it for? And it's paid off?

It's paid off, yep. And we would look to sell it for around probably $140,000. Okay. That's what you would sell it for? And it's paid off? It's paid off, yep. And we would probably, we would look to sell it for around probably $140,000. Okay. So let's say you walked away with, I don't know, $110,000 or something like that. What's left on your primary mortgage? So our primary residence mortgage, we owe $150,000. Okay. Nice. That gets you guys down a lot. I would pay off this $4,000 0% loan today that brings your savings to $24,000. That probably is still a full emergency fund for you guys.

Sell the rental, apply it to your primary mortgage, and that'll knock it down to, what, maybe $40,000, $30,000 left on the primary? Yep. And it sounds like you want to get out of the rental game anyways right now. Not necessarily, but we're just kind of thinking in terms of saving for college and whether or not it's worth having that passive income while still sitting on our primary home mortgage. Yeah, well, if you go through with all this, you got the emergency fund,

invest 15%, any money beyond that, let's start throwing it into a 529 plan, an ESA, and saving up for college, man. Okay, let's go to the plan. I like your plan. Look at that. start throwing into a 529 plan, ESA, and saving up for college, man. Okay. I like your plan. Look at that. What an exciting time. So great. The kids are priority over the rental.

There's always going to be another rental, but the kids only get to grow up once. That's right. I love it. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Rachel Cruz. Open phones at 888-825-5225. We're pumped about a brand new event coming this May, May 10th and 11th, right here in Nashville.

It's called Total Money Makeover Weekend. And the lineup includes all of The Ramsey personalities, including Dave Ramsey, including Rachel Cruz, Dr. John Deloney, Ken Coleman, Jade Warshaw, and me. I'm George. And in just one weekend, you're going to get a crash course on everything we teach about money. And this is brand new content. Of course, we're going to play the hits. You're going to hear about budgeting and beating debt and investing, but we're changing things up. This is going to be a very different event, very interactive, live Q&As. So no matter what baby step you're on, this will light a fire under your butt to keep going, to keep making progress. And with the first 500 tickets sold, you're going to get a copy of the Total Money

Makeover signed by Dave himself. So don't wait. These will go fast. And the early bird tickets are just 99 bucks for a limited time. So get them now because the price will go up. RamseySolutions.com slash events. Start preparing for your trip in May to see us in Nashville. All right, Rachel, I got this article here from producer James and it gives me hope for the future. We love hope around here. We could use some of that during an election year. What is the hope, George? Here's the headline. It's pretty nerdy, but 401k millionaires and average balances rose in 2023 fidelity says oh well that's a good thing so retirement account balances which took

a sharp nosedive in 2022 due to market volatility have now started to bounce back look at that according to the latest data from fidelity so the average 401k balance ended 2023 up 14% from a year earlier to $118,600. And the average individual retirement account, the IRAs, also gained 12% year over year to $116,000. So this is very comforting. Yeah, that is great because we talked about retirement in another hour and it was not as... Well, people aren't saving. People aren't doing it. The ones that are't saving are winning, which is great because... And that's the thing with the market too. We looked at our numbers and yeah, 2022 was like...

Oh, yeah. And then 23, okay. We're back, baby. I see that. We're back. I see that. So this is exciting. So at the end of 2023, the article says, signs that inflation was cooling were not only good

news for the economy, but also good news for stocks. After the S&P 500 closed out 2023 with a nine-week win streak the number of fidelity 401k plans with a balance of a million or more increased 20 oh my gosh in the third quarter so there's 20 more 401k millionaires than there was thanks to just riding the wave of the stock market yep just this is exciting yeah yeah this is the this is a quote these are the poster children of staying the course and taking a long-term approach. That's what we say. Investing in the stock market, it's a roller coaster.

And if you don't jump off early, you won't get hurt and you'll be blessed with a fun ride. Yeah. Because here's what you see in the stock market. It goes, you know, down, but then it goes up, but then it goes down, then it goes up. But over time, it moves up and to the right, which is what we like to see. That's the power of compound growth. That's right. That basket of stocks and that mutual fund,

well, each of those shares grew in value and that made your nest egg grow. And then fear comes into play, George. Oh, well, if you look at the headlines, Rachel. Turn on the news and all everything and people are like, oh my gosh, the world's ending. We got to get out of here. And people cash out.

We saw that happen a lot. People pulled out. Yeah, it was not good. Which is the worst time to pull out when the stock market is dipping like that. And so you got to stay the course. Do not pull money out. Don't do these 401k loans. Don't do the early withdrawals.

Stay the course and you will be blessed with a solid return and a great nest egg. That's comforting. All right, let's go to the phones. Brian joins us in Manchester, New Hampshire. What's going on, Brian? Hey, this is really exciting. Thanks for taking my call. Sure. I feel like I'm talking to the perfect people. Wow. I'll let Ken Coleman know as soon as we're done. He's going to love that. Please do. How can I help? I've got the money guy and I've got a mother's heart, so that's good. Oh.

All here together. Very stark difference from Paul from Orlando earlier in the segment here, but I am 31 years old, married to a beautiful gal. We've got four children, five and under. Wow. And our – Party. I know. So it's joyful chaos. And so our only very large debt is my student loan debt for $162,000 as it stands right now. Okay. What did you get your

degree in? So I'm an orthopedic physician assistant okay cool what do you make so uh i last year i grossed 127 okay so uh we have uh we have a house with a mortgage the mortgage and property taxes together is a monthly 1500 and then we don't have credit card debt. We just sent the last $1,000 check to pay off my wife's car. Nice. Congratulations. Congrats. Thank you. So we don't have, yeah, we don't have credit card debt or anything. So my question really is, to your point right before the break, was kids only get one childhood. And so with this huge debt, we are trying to figure out the fastest way to get out of that debt. And so I don't my wife is very fearful about the idea of selling our house and going into an apartment with our four kids.

And but doing that, we would have enough. If we sold it today, we'd probably make about $200 off of it. So it's a question of, do we just do that, stroke a check, pay off our student loan debt, and then go save for a house? Or do we spend like three years really working hard, putting money away in a high-yield savings account, and then three years later have about $100K and buy a different house and sell our current home and just reap the benefits from it then? I don't know that you need to get out of this house. It doesn't seem like it's on fire.

Why not just pay off the student loans and stay in this house? So my only question about that was, so I did some math and we've probably got a $3,000 or so margin if we really try to put every penny we can towards this. And what I'm thinking about is if we do that, it takes about seven years or so to pay off my student loans, where if we just save in a high yield savings account for like three years, we'd have enough for a down payment on a slightly larger house, um, and be able to sell this current house and then stroke a check and pay off my student loans all in one swoop. So you have three grand of margin right now? So I've got three grand of margin right now with the EveryDollar app. We're looking at it.

I've only been listening to you guys religiously for about two months. Okay. So that's four and a half years, the current track, right? 36 grand a year, four and a half years, the current track, right? $36,000 a year, four and a half years, that's $162,000. And that's margin after everything is paid, right? Food, like after you budget out your life. Right. That's what's left. Exactly.

Yeah, that's what's left if we really scrounge. $2,500 is probably a little more reasonable with birthdays and all that stuff for the kids. And your wife is at home with the kids? My wife's a stay-at-home mom, yeah. What does extra work look like for you, Brian, and where you work? Is there some opportunity to do some overtime? Yeah, so I'm in the middle of nowhere, roughly. It says Manchester, but I'm quite a ways out from there. And so the place I work is really the only game in town, but I take first call. So I get sort of an hourly rate if I'm called into the building for any reason. And so it would really, my ability to work more is really just sort of taking more call. And my wife and I

talked about it and we're okay with me taking extra weeknights because it wouldn't really interrupt our life too much if our kids are sleeping anyway yeah so my plan is to try to increase that a little bit and try to bring home a little bit more by taking a little bit more weeknight call and and try to yeah try to creep on this yeah. I mean, that's what I would do. Yeah, the house, it doesn't, I mean, I know you guys want to move eventually, but I wouldn't budge with the house right now. I mean, the housing market's just insane.

If you're in a spot that you're like, okay, we can at least stay in it for three years. If the mortgage was killing you guys, if it was like a $4,000 mortgage, I'd say, yeah, we'll sell it. But the mortgage isn't the problem here. No, we're not house poor. Yeah, you need to make more money. You put $4,500, you're done in three years. And don't worry about your kids.

They're going to be fine. I don't remember anything before like eight or nine. Yeah, their dad is loving them well. He's going to be working hard. They're not going to live on a lot, and they're going to have fun. They want you guys. That's what they want in life. Not a bunch of crap.

They want you guys. So don't worry about your life. Not a bunch of crap. They want you guys. So don't worry about your kids. You're setting a great example for them. Thanks for the call, Brian. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Rachel Cruz. Open phones at 888-825-5225.

This is your friendly reminder that you can come watch the show live. We are behind the glass like zoo animals, and there's some lovely people who traveled from all over the world to be here. We got Canada. We got a newlywed couple who just got married yesterday. And they're hanging out with us.

They're choosing to honeymoon with us. Thank you, guys. So come visit us. We got free coffee and baked goods and a mug. And the show is free, of course. You don't have to make an appointment. But you can always let us know you're coming at RamseySolutions.com and our team will let you know who's on the schedule.

The schedule. In case you're hoping to see your favorite Disney character, John Deloney. We'll sometimes get the, oh, we thought Dave was going to be here. Oh, yeah. Just us. I'll be honest. There was one time a debt-free screamer was here

and they thought it was going to be Dave. We had let them know it wasn't. It was me and John. Oh, no. There were tears. There were tears. It was like going to Disney World and like, oh, yeah, no, no.

But Mickey Mouse isn't out. Nowhere to be found. The princesses, they're busy today. And you're just in tears, so. And you But Mickey Mouse isn't out. Nowhere to be found. The princesses, they're busy today. And you're just in tears. And you're stuck with the mediocre, like, we don't really know who they are. Eventually. Oh, man. That makes you feel good, George.

Yeah, it's fine. Really making a difference. Thank you. All right, Benjamin's on the line in Houston, and I'm sure he's happy to talk to us. How you doing, Benjamin? Howdy, y'all. Happy Friday. You too. How can we help, Benjamin? How are you? Happy Friday. You too.

How can we help? Well, a little back story. I've got $71,000 of debt paid off. Good news. Paid off now as of the new year. $60,000 of that was student loans. $11,000 was, you know, stupid credit cards and stuff. Anyways, I'm now putting, I've got a matched 401k, 8%,

$500 a month in Roth IRA. I'm budgeting for this year to have $30,000 in savings. And I currently have a $35,000 emergency fund. So the next step, I'm single, I'm 30 years old. The next step would be pay off mortgage. However, I'm currently a renter. I rent $20,000 a year. And so it makes sense to get into a mortgage or at least a house. But financially, I've been working with a realtor and really digging into these numbers. And I'm confused at what makes sense financially. Of course, the realtor is pushing me to get into a house, but with the interest rates and everything, a $250,000 house in Houston is going to cost me $500,000 after 30 years.

You're a good number cruncher, Benjamin. What do you do for work? Yeah, I've been thinking about this for a while, obviously a couple of years going through this with you guys. I really appreciate the help. So I'm in training and education for a vehicle manufacturer. Cool. So on the road 160 days a year.

Wow. Even to think about it, I'm only there half a year. But anyways. It's hard to find a mate when you're on the road half the year, too. That's pretty intense. Yeah, I know. George's dating advice that you didn't ask for, Benjamin. This is the start.

You said you're how old? I'm 30. A little late start. I graduated in 2020. Hey, it's all good. You're doing great, man. So you've got $30,000 in savings apart from the emergency fund. So let's call that your down payment fund. You'll have that by the end of the year?

I'm budgeting for $30,000. So by the end of the year, I'll have $30,000, but I have $35,000 currently in savings from emergency fund. Okay. So I would set a very specific goal and go, all right, the house I want to get is $250,000. Is that a reasonable amount? Yeah, that's the new construction, 1,500 square foot. Yeah, it's reasonable. Okay. And what's your take-home pay every month? So I, well, I kind of budget weirdly. I only pretend I make $5,000 a month,

but I've got $2,550 going into savings. A thousand of that is out of that $5,000. So... But what hits your bank account in a given month? So I have $5,000 going to my checking, and then I have $1,200 going into a high-yield savings account, and then I get a $6,000 bonus a year. Okay.

A year. So let's call it $6,500 take-home pay? Okay. So with our parameters of kind of 25% of your take-home pay, and you can even factor that in after taxes but before other deductions like healthcare or investing. That will help your numbers out with that 25% parameter. Right. And so if you said let's call that $7,000, 25%, $1,750, so that becomes our new goal. Can we get a mortgage that's 1750 for the principal

interest taxes and insurance and now that helps us dictate the down payment goal yeah so that would make a bigger down payment for sure exactly um so that means you might need it's like you might need 100 down on a 250 on a 15 year to get you there and that might take you know you said you have 30 by the end of the year the next year could you bump that up and and have 75 or 100 if you worked your tail off um uh yeah i mean yeah i would have to probably get a side job for that but that's not out of the question i think dave says gazelle intensity and i've definitely adapted that mentality um so a side job isn't out of the question. Well, I'm just thinking by the end of next year, you'll have six figures ready to put down.

And so unless there's a rush to get into a home, I'm going to just stay where I'm at and do this the peaceful way. Yeah, and that's kind of what I was considering. So the question is, is a mortgage necessary? Or what if I took six years or seven years and paid for a house in cash? What is the good reason to get into a mortgage without paying cash? Well, there's not a good reason to get a mortgage, but I would say if your timeline is six years, the problem with housing is that we know it's going to go up in value. And so what I don't want is you have this moving target where, oh my gosh, I saved $200,000, but now the home is $300,000. And I save another $100,000, now the home is $350,000. And so that's my worry, Rachel, when it comes to saving up cash over a

long period of time. Yeah. And long-term renting, you're just not building equity anywhere so um so yeah so the idea that yeah saving and paying cash for a house is i mean that's an awesome goal you could totally do that if you could do that in two or three years i would say that's a shorter amounts totally yeah um but i would yeah i would make i would give myself like a good two years um and this this is now kind of just changed at this point but i was even thinking for your emergency fund if you needed to take 10 grand out of that because you could be on the three month side i mean you're single um no one's dependent upon your income so even your emergency funds if you need to take a little bit out but at that point as we're talking it's just 10 grand

yeah you know are you investing more than 15 right now when you add it all up of your gross household income it's right at about for my retirement yeah up of your gross household income? It's right at about, for my retirement. Yeah. Out of your income, how much are you investing? It's right at about 15. So I got 8% match with my company and then I'm doing 500 a month in Roth. But the 8%, regardless of the 8%, are you investing 15%? Yeah, yeah, yeah. That's not including the match. Okay, cool. And another option, you know, some people do this for a temporary amount of time. You can pause that investment to save up the down payment faster.

But with your plan, I mean, I don't feel a huge sense of urgency. I know you want to be a homeowner, but I also love the idea that you have a great savings muscle. And so I would try to keep investing 15% and get a side hustle to make up the difference to hit my down payment goal. And who knows, maybe interest rates will go down and that's going to help you. I was going to say it could be another world. Yep. Another world in two years. Who knows? It does seem to move pretty fast. So yeah, we'll see. I really appreciate that. It's just the $20,000 a year in rent is, I think that's where the urgency is going.

I don't want you to feel this pain. I know it stinks because you're like, oh, I could be using this toward a house. But home ownership can be a blessing when done the right way, but we've seen it where it's a burden. And you have a lot of extra expenses when you're a homeowner. And so I'm seeing renting as buying patients right now, and I'm okay to write that check every month for the cost of patients. I appreciate that. Thank you so much. Absolutely. Thanks for the call, Benjamin.

Great job, Benjamin. Got a great head on his shoulders, Rachel. I like Benjamin. Yes, I know. Very just calm, cool, collected versus I got to get a house, I got to get a house. Yes, yeah. And when you look at the numbers, that's always what kind of is the guiding principle because our emotions and our feelings can guide us and not always in the wisest way. And a real estate agent's excitement can guide us. And then you go to the bank. Nothing like a residential agent. Just all the joy and excitement about housing. They're very intense and happy to help you get into that home of your dreams. Yes.

And the banks, they're happy to loan you way more than should be legal. Whatever you want. Wow, I got pre-approved for half a million dollars. Doesn't mean you should take out a half a million dollar mortgage. That's right. I know. I know. So that's why I like the 25% parameter.

I know people look at us, Rachel, like, these people are crazy. What world are they living in? Well, the math hasn't changed. It's just going to be harder. You have to save up more down payment. You have to move further out. You got to go for the condo instead of the single family home. So this is just a hard part of being an adult is we've got to make adult decisions. And I want this to be a long-term peaceful decision, not the next call on the Ramsey Show where they call in going, should we sell the house? We bid off more than we could chew. Don't let that be you. This is The Ramsey Show. Our scripture of the day, Psalms 3721. The wicked borrows but does not pay back, but the righteous is generous and gives. Benjamin Franklin said,

Creditors have better memories than debtors. Oh, some old school financial wisdom. Yeah, Ben Franklin, he was doing well for himself, I feel like. Benjamin Franklin. You know, the teeth, the leg, I don't know what else he had. I don't know what else he had going on, but he could afford it. The what? I don't know, did he have wooden teeth or something? That else he had going on, but he could afford it. The what? Did he have wooden teeth or something? That was George Washington.

Oh, dang it. Wasn't that George Washington? Guys, I'm not a historian. I'm not a geographer. I hate to call you out, George. What'd you hear? Don't kill me, but you didn't know who Margaret Thatcher was. Oh, yeah, yeah, yeah. Ken told me that, and I thought, oh, no, George the Iron Lady. I didn't know this was stuff i'm well then ken called me out for not knowing what a chain gang is in football i was like why would i don't know what that is thank you and you know football sort of i'm like guys i was busy i don't know having a life is that a thing that is it's the people who move the giant

markers oh but they call them a chain gang they had to have a cool name because it's not a very cool job i don't know guys this is why i stick to money questions i embarrass myself when i talk about historians and politicians and sports i stay away from it all i'll leave that to ken call the latest fact history wise then we'll get to the phones but casso yes found out he died in 1972 died in 1973 and rachel was like i I thought he was with Leonardo da Vinci. I thought he was part of the Renaissance. I had no idea. Wow.

And he just died in the 70s. Picasso. I was like, what? I thought all those guys were back with the Sistine Chapel. I don't know. I don't know. I'll just Google it if I need to know it. But until then, it doesn't sit in my brain.

Sorry. In the 70s. Picasso. I mean't know. I'll just Google it if I need to know it. But until then, it doesn't sit in my brain. Sorry. In the 70s? Picasso? I mean, crazy. Anyways, that's my fact. That just blew my mind. All right. Timeless.

Timeless. All right, let's get to the phones. We're better served there, Rachel, than talking about anything else. Ask us about 401ks. Let's see if we can help Timothy in Los Angeles. What's going on, Timothy? Hey, guys. Can you hear me? Yes, loud and

clear. Okay, awesome. Well, I try to describe my situation. So I got out of college in 2021 and just got married and I had my associates, went to work for the past two years and I'm currently making $20 an hour. It comes out to about, uh, like 37 grand a year after taxes and everything. Uh, we had a, we have one, a one year old daughter and, um, we didn't really have any debt, but then my wife's car broke down and we decided to buy her a car last year. It was like $20,000 cash value. Um, and then that car broke down and our warranty covered us to get a brand new engine on it. So, uh, we had that. And then I decided to start a business last July and, um,

I'm generating through that business after, like, in profit, I'm bringing in about half of my income that I make at my day job. Now, we did have about $8,000 in debt because of that, starting the whole business and everything, and then we just used our taxes to pay that back like substantially so now we only have about two grand in debt total um yeah well well besides the car the car is like we still are like twenty thousand dollars in the car so uh and yeah is your you have the only um income in the family right now?

Yes. I, my wife's a stay at home mom. And the final thing was I was planning on going back to college this fall and I get financial aid. So it'll probably be just as much as I'm making on my day job. But the only thing is we just got news and we're expecting twins. Whoa. Whoa.

Congratulations. Thank you. Wow. A lot going on here. Yeah, this is the thing. We live in a small studio in the back house of her mother's house. So it's already me, her, and our one-year-old daughter. Now we're expecting twins.

And previously we were pre-qualified to get a house. We actually live in Bakersfield. We were pre-qualified to get a house for about $150,000. But now, you know, with the car, we don't even know what we're going to do. Do you have any money in savings? We have nothing. We just started budgeting. I just started getting plugged in with the Ramsey show about two weeks ago. Well, there's an order for you to become a homeowner, and it's when you're debt-free with a fully funded emergency fund of three to six months of expenses, and you have a solid

down payment. But until then, I'm not going to get pre-qualified. Are you guys paying rent right now, Timothy? Or are you living there for free? No, her family, yeah, we're living there for free. Okay. Yeah. The big question is, can you afford to continue living in California off a $40,000 salary? Well, I mean, I'm not sure.

Like I said, I live in Bakersfield, so, I mean, it's a little bit lower living expenses in L.A. But what would it cost you to go rent somewhere that could fit your family right now with the twins? Well, small, small would be like $800 a month, and then a little bit bigger would be somewhere along to $1,300 a month. This business you started, so you made $14,000 last year because you made half of what you make normally. Yes. Well, actually, I just started last July. So now I'm averaging about $400 in sales a week, and take-home is $300 a week.

Okay. Yeah, after input and all that stuff. Okay. So about $15,000 in take-home is $300 a week. Okay. Yeah, after input and all that stuff. Okay. So about $15,000 in take-home from this business. Yeah. Do you see it scaling? It's growing substantially. It is.

Okay. It's scaling really fast. So the reality, Timothy, I think is you're going to have two jobs. You're going to have this job that you're growing, which is awesome, and hopefully it just skyrockets. I mean, that would be the hope and your day job and you you're going to be working both of those i think for for a period of time until the car's paid off and this two thousand dollar loan until you guys get a good emergency fund well no you know what there's twins in the picture so we're we're pausing

everything so honestly i would just stockpile cash at this point until the babies are here um and it's probably a high, is it twins high risk? I mean, like they're, you know. Can be. So I just, I would be. Yeah, they can be. Yeah. So all that to say, I would just be saving a crap ton.

I would just be putting so much away. Honestly, I mean, like that's, that's going to be your best bet right now. And then once the twins are here and everyone's good, then I would look at paying off this $2,000 business loan, paying off the car. I mean, the car is a lot of your world. Yeah. What's the car worth?

Well, see, it was $20,000 cash value, right? Well, the engine busted, and they put a brand new, right off the assembly line, a revised version of the engine. And it was about a brand new, right off the assembly line, a revised version of the engine. And it was about a $17,000 engine. But I went to see if we can – yeah, but I went to go see the – I mean, I did an online little quote, and it only came out to like $10,000 or something. So I don't know if I did it wrong, or maybe we should actually go into a dealer

to see what the price should be. But, I mean, after all that, my wife and I, we're willing to do what it takes to sell a car, but we're like, after all that, we just got a brand new Lincoln. Is it a quality, reliable car for the family and it fits all the kids? Yeah, it's a nice car. It's a Jeep Grand Cherokee EcoDiesel, and it's a really nice car. Okay. Well, for now, I would work to just pay that off in the dead snowball.

Once the twins are here, get the emergency fund in place, then you can think about going back to school and making sure you can cash flow that. But I don't think now is the time. No. Do you think that if I were able to grow the business large, because I grow, sell, and deliver microgreens, so I'm only spending about 12 hours a week doing all the labor. You're saying if I did this full-time, it could replace my income? Yes. That kind of thing. Right now, with your situation, it feels risky.

If you get the boat close to the dock later on, and you're like, oh my goodness, I could totally see how if I did this full-time, I could make more than I'm making in my... Because right now you're making your full-time salary plus the side money. If you jump to the side stuff, you're just going to replace your original income. Yeah, yeah. You're still better off right now financially with your situation. And I would work to go rent a place. Really your goal is, can I make $6,200 take home to afford the $1,300 a month in rent? And I would make the jump to go rent at that place. Okay. Hope that helps, Timothy. You got the road ahead of you, man. The twins alone, on top of the one-year-old, it's about to be a party. So wishing you guys the best in that. Also,

what a sweet blessing. That's exciting. That puts this hour of The Ramsey Show in the books. I'm George Camel, joined by Rachel Cruz this hour. Thank you to all the folks in the booth keeping the show going this hour. And you, America, will be back before you know it. Thank you.