The Ramsey Show - App - What Happens When Student Loan Payments Restart? (Hour 1)

Episode Date: July 5, 2023

Dr. John Delony & Jade Warshaw answer your questions and discuss:  "How can I help my friends with money?" How student loan repayment plans will affect retailers and people's budgets, from the blog: Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan, "Will we ever be able to afford a house?" from the blog: How Much House Can I Afford? "I feel hopeless about following the Baby Steps" Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Here's an EveryDollar deal just for our listeners: get a 14-day free trial PLUS $15 off your first year of premium. Click the link below and start budgeting today! www.everydollar.com/jade Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Ramsey Solutions Privacy Policy

МУЗЫКАЛЬНАЯ ЗАСТАВКА МУЗЫКАЛЬНАЯ ЗАСТАВКА Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's the Ramsey Show where we help people build wealth, do work that they love, and create incredible relationships. I'm John Deloney, joined by Jade Warshaw, and we are taking your calls on money and life and relationships, whatever you got going on. We're here to help. 888-825-5225. It's 888-825-5225. Jade, it's been a long time since we've been together on the show, man. How are you? I know. I've been on vacation, John.

How's it been? Great. Great. I had to remember what my job is here. I woke up. I was like, what do I do? Oh, yeah. It was good times. It was good times. We went to Fort Lauderdale Beach, got a lot of time in the sun. You know what I'm talking about? Came home. It was the 4th of July. And might I add, can I say something controversial before we get to the phone lines? Bring it on. We didn't bring the kids. Was it uncredible?

Yes. Do not bring your kids on vacation. It's not a vacation when you bring your kids. It's a trip. That's what I heard. I heard it's a trip when you take your kids. It's a trip. You got to just, every once in a while, just do a little something with your significant other. You know what I'm saying? Was it magic? i'm trying to imagine being in that space okay well let me let me just break it down because i know i i made a couple of posts from the road and i was telling them how like when we first got to the resort man it was so expensive i got like two waters and like these little bottles of champagne and he was like that'll be 68 dollars I was like stop it stop it right now I can't so you know I had to take the yeah I had

to take I had to take the waters off and get go with the Dasani go with Dasani yeah man but overall great trip great trip great trip great trip I went camping with my kids. Yeah. Oh, really? I should have known, John. You're an outdoorsy kind of guy. I'm just going to leave it at that. I'm going to go with your wisdom. You're not? Don't take the kids. Oh.

I like that. That's right. I did not take that. I took the kids. Let's go to Will in Denver. Hey, Will. What's up, brother? Nothing.

How are you guys doing? We're partying, man. What's up? How can we help um so my wife and i are that we've never gone through financial peace university kind of inadvertently we are going through the steps um the only debt we have is our mortgage um a lot of our peers and our family friends are having debt problems um And I think it's causing some stress in some marriages. I don't think that locally, in person, we really have any financial peace

university classes available. How does one, I would like to offer that to our community. How does one go about facilitating that? Wow. Well, number one, I just love your heart behind this. I love that you're, you know, looking at your community. You know, if you're rich, but nobody around you is rich, what does it matter? You know, you want everybody to be able to partake in what you've learned and what you know works. So I really, really love that.

Yeah, I would just suggest going to ramseysolutions.com slash peace and signing up to be a coordinator. And look, we are always looking for more coordinators because that work that you are going to do and that work that so many coordinators have done, I mean, that's what's changing lives, right? I mean, you got a hold of that information, even though you said you didn't like actually take the FPU class, it's the same information.

I think my wife read the book a decade ago. We have not been, as you guys say, gazelle intense. But we got there. Good. I think her and I should probably sign up and take an official class first. But from there. I mean, you could, but you don't necessarily have to. Here's what I would do, Will, is you may not need the money information or the insurance information,

but there's something about working in the messy lives of other people. And you'll hear stories. I think, and Jade, it is something you and i experience a lot where in our in our world where somebody has an experience a personal experience and they try to pass that off as expertise and so will you and your wife have the way it's happened for y'all the benefit of a class may not be learning the baby steps you may already pick all that stuff up the benefit of the class may be watching 15 or 20 different couples as they have had to navigate this

in different ways. And that, when you watch a collective group of people go through on the same path, that's the road to wisdom when you can start coming up with these universal answers, right? That aren't just how Will and his wife did it,

but it's how we've seen a bunch of couples do it. And that's the sign of, that's a really great coordinator that can do that for folks. And so just go to ramsey.com and look for the coordinator role. And that's something we could maybe facilitate through a local church here and offer it to the community. That's right. Yeah, you can, when you go onto the coordinator site, you can choose what type of class you want to do. So you can do an in-person class, you can do an online class, or you can do like a flex type class. And the flex basically just means, hey, you guys watch the video on your own, and then we get together to talk about it, whether it's in person or online. It sounds like you want to go like old school, we sit in the room together, we watch the video together. We learn together. And I just,

I love that. I think that both ways can be effective, but I got to say, I think that when everybody's in a room together, the energy's there. I just, I think that's next level right there. So. Will, let me catch you this. It's, it's ramsaysolutions.com.com slash FPU. ramsaysolutions.com slash FPU is the, is the site. And by the way, you can also, you can do it in a coffee shop. You can do it after hours at your workplace. People are starting to pick up these classes all over the country. And historically they've been done in Sunday school classes.

And as more and more churches have stopped doing Sunday school classes or they've rolled classes online or they have gone to streaming services, these classes are popping up in different organic spaces. And it's pretty rad to see a group of people get together after hours at the gym and do this class or folks do it after work together. So there's any number of places where you can do that, but I'm really grateful, ma'am. Oh, and hey, let me tell you one other thing. Let me tell you one other idea. Back when Sam and I first started hosting classes, if kind of like what you're saying with your neighbors and the folks in your community, we actually would just like hand tap people on the shoulder and say, hey, I'm hosting this class. I'd love if you were in it. And that way we kind of just, we picked 10,

10 folks, had them over to the house, you know, I'd make nachos or make a lasagna or whatever. And it was just such a cool, cool experience. So yeah, man, I'm excited for you. That's great. So there's one couple on my heart in particular that are good friends of us, and they've shared with us their financial struggles before, but I've just never felt like I can. I didn't feel like they were asking for advice. Like when my wife tells me she has a problem, she's not looking for me to solve it, she's looking for me to listen. And I feel like these folks were looking for us to listen.

Well, that'd be a great place. I love that, man. I think too many men especially run in and try to start solving things with their advice. But there's something else about an invitation. Yes, if I can make it available to them and invite them. That's right. You can invite them, and you're not shoving it down their throat, but it's, hey, here's an opportunity.

We're going to be there. Love for you to join us. Stay on the line. I'm going to send you a gift card for a free year of Financial Peace University that you can give to that family and tell them it's a gift from you to them and invite them to the class

and they can come participate and be a part of it. Thank you so much for your heart, brother. 888-825-5225. We're talking relationships, mental health, money, work, whatever you got, we're here for you. We'll be right back. Hey, you guys, health insurance costs are only moving one way and that way isn't down.

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and avoid miles of red tape. And CHM support goes far beyond meeting financial needs. They'll also help meet spiritual needs. Members become part of a family who will pray with them and for them when they experience a medical event. So listen, y'all, there's no better way to take care of health care costs. CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget at chministries.org slash budget. We are back. This is the Ramsey Show. I'm John Deloney, joined by Jade Warshaw.

We're taking your calls, 888-825-5225. It's 888-825-5225. So Jade, student loan repayments are all the talk of the town. I want to say this first. we were talking about this a little bit earlier i was surprised at the number of people that i i don't know how to say it in a nice way they they came after me and said well i hope you're happy oh i said what do you mean you hope i'm i'm happy and it was this very strong well we know what y'all stand for and you got what you wanted, and Ramsey's so excited. So I guess just between me and you and the people listening, I'm a fan of people who were taken advantage of having their loans forgiven. I don't have a problem with that.

I can't stomach it while they're also making loans the next semester. And so if you're going to fix the whole system, I'm in i was a part of that system i get it if you're going to piecemeal it as as political theater and then the very next and then the summer session one our summer session two people they could have gotten their loans forgiven july one and turned around and taken out new loans for summer session two and that's exactly what happened exactly so it's not none of this is is is is people being honest about solving a problem it's about it's about political theater garnering all around around around the campfire here so but there is going to be some big repercussions of this and so this this article comes out let's

talk about that. Yeah, it says the Supreme Court struck down President Biden's student loan forgiveness plan on Friday, which I'm sure you all know, which adds just another layer of uncertainty to those who are straddled with payments. And I'm just going to read this real quick. For more than three years, federal student loan borrowers have not had to make monthly payments. We know that.

And by the way, that costs taxpayers $5 billion per month. All right. You're not had to make monthly payments we know that and by the way that cost taxpayers five billion dollars per month all right you're not gonna i'll never mention that without mentioning that stat of how freaking expensive just the just the pause was forget getting to the actual forgiveness okay but the pandemic era pause is coming to an end this fall we know that setting up a financial shock for millions of Americans in the big name stores where they shop. So here's an interesting twist here. So we're seeing that as these student loans come back, John, everybody's looking at their budget going, yeah, yeah, yeah. Like I got to find this money somewhere, because again, what we know is for the past three years, you know, people had this pause and they had this extra money in their account.

And we know that they've replaced that the student loan debt with other types of debt, whether it's car loans, home mortgages, just live in life. You know what I'm saying? And so now coming, you know, payments which are going to resume August 30th, those payments are substantial for a lot of people. And now we're finding that retail stores are going to kind of take the hit because these folks ain't paying the money. It says the average monthly bill hovers between $200 and $300 per person, although it's even higher for some borrowers. Collectively, borrowers will resume paying about $10 billion a month. And the resumption of these payments will likely force households to cut back on spending in other areas, particularly retail. And I think that's right. Yeah, I do too. If you're a retailer and people have been

buying your goods and services on credit the last three years, there's a reckoning coming. And again, what I hope everyone listening to this, i i do have a heart i'm a retailer i have stuff i want to sell sure i've got a book coming out in october and i just keep looking at this going oh are you kidding me right but um i'm hoping that the consumer is the one looking at this and saying i've got a three-month ramp here where I can begin to make some hard choices, have hard conversations with my spouse, with my kids, start getting an extra job. Sell this car because there's going to be a bunch of cars on the market in September and October, November. That's right.

There's going to be homes on the market. So we rarely get 90 days or 120-day head start in life. That's right. And you've got that right now. You know what's coming. If you wait until October just to go, oh my God, then that's on you. I agree.

Like you've waited, right? There's so much time here. And this is kind of a funny article. It says a number of brands, people like American Eagle, Carter's, Crocs. I think that's funny. Nike, Gap. These folks are gonna be the ones

feeling the hit Victoria's Secret. And if they feel a hit, I think they'll be all right. I would rather people pull back on their spending, find that margin so that they can make their payments because let's not forget. And you know, guys, I'm always going to give you the facts so you can keep it in front of you. Don't forget before the pause, half of all borrowers were in default, which means they weren't able to make their payment. So that should tell us as a whole where we were back in 2019 before stuff got ratchet. And now that it is even more ratchet, don't expect, do you know what I'm saying? Like, don't expect that things are just going to magically be all right when we knew before that they weren't all right. You've got to actually make steps to make things better. And like this said, you know, $300 in your budget. A lot of folks,

you're scrambling around right now and I have a heart for you because I get it. And you're like, where's this money going to come from? It might be your car loan. It might be that hard step of like, man, I got this car. It's too much car. Trading it in and getting something less expensive because you can only side hustle for so long. Like most of us, this payment, it's going to follow us around for a couple of years. And how long do you really want to Instacart? You know what I'm saying? Exactly. Or it may be time to sit down. Again, you got 90 days. It may be time to sit down and say, is this the work I want to be doing? Is this the right community for us? We moved here in 2020. We tried to make a go of it. It's for us let's is it time to go back home

is it time to find another new community both you and i have moved for our careers that's life it's part of it right is it fun no do you is it cutting ties great no it's the worst but sometimes we have to do we got to do that's right and you want to know what john i'm gonna say something because you you started out the the conversation this way and I was talking to James, our producer, and he was like, you know, sometimes people think that you're excited that they didn't get forgiveness or that you're excited that people won't get forgiveness. And I'm like, no, that's not it at all. I just want people, I get upset when I see people stripped of their power or when they step out of their power or when they give their power to someone else. That bothers me.

And I get way more excited when there's an opportunity for people to gain their power back and for them to realize what they're capable of. And so if that ever came off that way, that's not what I want. I want you guys to know that I want you to win. I get what it feels like to be under student loans.

Look, when we had private loans, some of that interest was forgiven and it was the best thing that ever happened. I was like, oh God, thank you for giving us back this 30,000 in interest. So I get it. Private loans work a little differently than federal loans though. And it didn't come out in y'all's tax dollars. So that's just at the end of the day, I'm thinking about tax dollars. I'm thinking about how this money is spread around. I did not like the language free money, forgiveness, because it's not free. It's not free.

It cost everybody everything. It cost everybody everything. So that's where that comes across for me. Well, and both you and I have been through it, right? Yeah. Our houses,

you've paid off way more than us, but we paid off, we had commas, right? Yeah, come on. Come on with the commas. So again, we're two people that can speak from it.

We've been there. We know. We get it. Where you can't breathe and you got to live a certain way. And all of our friends are driving these things and living this way. And we're not. We've been there. Yeah.

Both of our families have been there. Put off having, I don't know about y'all. We took us a long time to have kids. All these things happen because of these student loans. But for me, there's a moment when, when like with my kids when i wasn't clear on some instructions and i go up and i got one kid climbing on the ceiling and one kid hanging out whatever and i finally just say okay i'm starting over i'm gonna be real real clear from this point forward and the the my belief in college and my belief in people getting educated post high school is strong.

I believe in it. My belief in my friends and family members and community members that were scientists and professors trying to make the world a better place. I believe in it. And I can't take any more calls from 24-year-olds who can't breathe. Okay. And 28-year-olds whose marriage has fallen apart. And so there has to be some way in the middle that we solve this problem. Yeah.

And if somebody comes in and says, hey, I've got this plan. Here's what it's going to look like. And we're going to start today and solve this big thing. I'm all about going up to the kids and being like, all right, clear the decks. That's right. But we're not even close. We're not even close. They got to stop making them. Full stop right now. If you want to solve the problem, you've got to stop creating it. You cannot solve a problem while simultaneously creating it. Period.

We're arguing about the type of blood transfusion to give while the doctor just keeps on cutting, right? While they just keep on cutting and cutting and cutting. Gotta stop the bleeding first, and then we can start looking at the damage and see what we can do about it. Agree. Oh, man.

888-825-5225. If you haven't canceled us, we'll be right back on The Ramsey Show. 888-825-5225. This is The Ramsey Show. I'm John Deloney, joined by Jade Warshaw. Let's go out to Arsalan in Queens, New York. What's up, Arsalan?

Hey, how you doing? We're doing great. How about you? Doing good, doing good. Well, me and my wife, we got married? We're doing great. How about you? Doing good, doing good. Well, me and my wife, we got married back in 2020 during COVID. And preceding that, we just have a beautiful, beautiful little daughter just arrived three months ago. We paid off all of our wedding debt that we had. So we currently owe $0 to anyone except for our car loan that we have.

Yep. Thank you. Thank you. Except for the car loan that we have, we do have a car loan. But besides that, we don't owe any money to anybody. How much is the car loan, Arsalan? The car loan is about I think $45,000 for a 74-month

term. Okay, hold on. Arsalan, you can't start a call saying, I don't owe anybody any money. That's like saying I only eat super healthy food except for Twinkies and Burger King and McDonald's and Taco Bell. Yeah, I'm contradicting

myself over there. How much do you make? Yeah, you're right. I make $105 a year with 15% annual bonus. My wife makes about $55 with with another 10 bonus for her so in queens it's a little bit above minimum wage basically yeah in queens based out of queens is a little bit above minimum wage so yeah well here's the thing right so we're currently renting right now and we're paying about two thousand dollars a month for a one-bedroom apartment and we don't mind moving out to the suburbs but in long island the houses are at like 600

we currently have about 25 000 saved up okay and we just want to know what we should do moving forward like should we just rent rent rent save up more or should we just take that money and just buy yourself a house now i even thought about buying myself a condo, but then the HOA fees here in Queens are like a thousand dollars a month and I don't want to throw money away like that. So what do you recommend that I do? Okay. This is really good. I'm glad that you're thinking about this. I'm glad that you, hey, I'm glad you got some money saved. That's great. You do have the 45,000 in loans. So can I just walk you through the principles here that

we would follow? And then you can decide if you like it or not. Okay, so buying a home is super important, right? Everybody wants a home. That's the American dream. We know it's a big part of building wealth. But on this show, we see time after time when people don't do it the right way, something that was supposed to end up a blessing turns into a burden. It turns into a headache. It turns into them having to sell a house that they really love to keep. And so I want to keep that from happening to you, especially in an expensive place like New York. So what I would say, first things first, A1, is let's get all this debt paid off. All right, let's get rid of this $45,000 car't want to go into home ownership saddled with debt because if anything happens you know your home is on the line right you got to be able to make

that payment so let's get clear of the debt now the way we would suggest clearing out that debt is this little three-step process here we would say have a thousand dollars saved first that's your emergent that's your like simple emergency fund right and so you've got twenty five thousand dollars saved so what i would suggest is taking twenty four thousand of that twenty five thousand and paying down this car get it half gone down the car and then pay off the rest of it you know working hard and using you know your income how quickly could you do that? We could do that within like at least two years. Okay. Maybe even less. I bet less.

My concern, yeah, my concern about that is, you know, when it comes down to cars, I feel like, let's say, let's say I pay off the car and then the next day, tomorrow, I get into a car accident, got a bit, right? Yeah. And if I get into a car accident and I lose out on the car and my insurance premium goes up and then also lose out on the money that I just paid off the car with. Whereas I have gap insurance

and like if God forbid something does happen to my car, I feel like gap insurance covers the remaining balance of the car and it pays off the financial. So your plan in life is to have a car payment for the rest of your life so that if you ever get in a car accident you're not out money am i understanding that correctly because if that's what you're saying arsalan i'm about to make you look silly here on the radio and i don't want to do that don't make me look silly now no

come on arsalan i think that's just you saying i don't want to come out of pocket to pay this off because at the end of the day you have insurance if something happens they're going to pay out yes you might not get the exact value i mean that's just part of it um but you're still going to end up in a better situation and you have the car paid off seven percent or eight percent against that 45 000 car over 72 months yeah for the privilege of something that's probably not gonna happen yeah you're you're paying for the car three times over so that you can avoid something that's not even something you need to avoid it doesn't make sense you know yeah that makes sense that makes sense i get i get where you're coming in from

so you recommend just pay off this car immediately. Get the debt cleaned up immediately, as quickly as possible. Take on extra work to do it. Then stack up that savings back up to $25,000. All right? Then, and only then, because you want to go into the home ownership, no debt, with three to six months saved. Okay?

And then we need to start talking about the real cost around home ownership. Because a lot of times we just talk about the down payment. And I'm like, no, there's more to it than that. When you go to buy a house, I always tell people, keep this acronym in your mind. You want a stacked deck, DEC. You need to be ready for a down payment, which could be, I don't know, about 5% to 10% for sure. I'd say 10% to 20%, yeah. I mean, that'd be nice. But I'm not

mad if he gets it between you know yeah as a 20 for a 600 000 house that's 120k look the reason we want you to have a lot because we want you to have instant equity and usually you need to get somewhere between at least above five percent because you don't want to be you know try to get it 10 to 20 then you want to you might have to do some earnest money, right? Sometimes they ask you to put like 1% to 3% down to say like, yes, I'm actually going to buy this house. And then you've got your closing costs. And let me put on top of that, okay?

Arsalan, I'm all about it too. I bought, my wife and I bought a house. It's incredible. We love it. We had it inspected. And then we had a couple of different aspects of it inspected by another professional in the three years we've owned it i've had to replace the roof an air conditioner we had to replace some water system and then this past weekend we had the electric guys out because

something kept tripping down in the basement and the guys told my wife and i quote you're gonna want to sit down before i tell you what actually is going on oh wow the cost is staggering cost of and maintenance right yeah it's just life happens man life happens and so um we want you to be ready yes here's the thing there's been seasons of my life when i would have thrown up at the number they gave us. I would have vomited. And then I would have tried to figure out how to get out of this house. In this case, because we followed this plan all the way through, it's annoying, pretty frustrating. And the argument my wife and I had was who had to call and schedule it. Not what car did we have to sell.

Does that make sense? Mm-hmm. not what car did we have to sell. Does that make sense? I guess what I'm afraid of is, I'm afraid of obviously dad, but I'm also afraid of the way, like let's say I pay the car off and I have money saved, but I'm paying rent every month and I feel like I'm just throwing money away

in a trash can. You're not. I get that, but you're not. My husband and I, we rented for 10 years. Me and my. You're not. I get that. I get that, but you're not. My husband and I, we rented for 10 years. Me and my wife have probably rented for five to 10 also.

Look, what you're saying is not, I get that. You do feel like it, but when you understand the intent behind it, if you understand the end point, the goal in mind,

and keep your eye on that, then it kind of puts the rest of it into perspective. It's like, no, I'm not throwing this money away. I'm doing something smart so that later I can, you know, so I can have the thing that I want. And you understand that there's some length to that.

And it's not just that decision to rent does not exist in a bubble, you know, apart from everything else. Right. So, Arsalan, let me ask you a hard question. Yeah. If buying a house meant leaving new york would you do it yeah absolutely i've been telling my my wife let's move to texas but she doesn't want to so well texas is a long way from new york but there's a lot of stops in between but i'm seeing more and more and more people say hey we want to have the

life we want over some magical geographical location. So if it means going to Texas, going to Kansas, going to Nashville, we're going to move and get the house that we want. We'll be right back. This is The Ramsey Show. I'm John Deloney, joined by Jade Warshaw. Listen, on this show, we talk to a lot of hurting people. And if you're like us, you live in a community, in a neighborhood where people are hurting, or you hear the news and you're beside yourself on either side of the aisle

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All right, let's go out to Charlotte, North Carolina and talk to the great and wonderful Margaret. What's up, Margaret? Hey, how are y'all today? We are partying. How about you? I'm great. Thanks. What's up? So I'm a single mom. I have two kids. The oldest is going off to college. I make about 130 grand a year and I just started a new job job so I have the potential to make a good bit more which is awesome um I have about forty thousand dollars in credit cards that I have a mortgage it's around 500 grand or it's around five hundred thousand dollars my payment is around 3200 my mom lives with me but she pays rent and um I've tried numerous times to do the baby steps but I feel like something always comes up there's always some kind of emergency and then there goes my emergency fund

and then there goes the credit card so I wanted to see if y'all would y'all suggest putting more in an emergency fund like $2,000 instead of $1,500 what do you i wouldn't um i i am curious what sorts of things are coming i have several questions but um okay so with the emergency fund you're getting the thousand dollars saved super fast right like 30 days max right it's not taking you forever in a day to get it saved right no? No, it's not. Okay. So when these emergencies that are popping up, what types of things are popping up? So a lot of times it can be medical bills or a car issue.

Like I had a tire blowout and then I realized it was time to get all new tires. So, you know, I do have a car loan. It's a low interest rate and low. Oh, I thought you said you only had credit card debt. I did. Sorry. Let me back up. Car loan as well. How much is that? It's in total, I think it's $18,000. Okay. So it's just the credit cards, the car payment, anything else, student loans, anything like that? No. Okay. Let me hop in here real quick and then Jay's going to take it. I have to say this. You had a tire explode

and then you realized that it was time to get new tires. Yeah. If you live with the new way of thinking that we was time to get new tires. Yes. If you live with the new way of thinking that we're trying to teach you, you can't afford new tires. You can only, and do you need them? Absolutely. Do you need me to rotate it again and see if they'll go through another few months until you can get crap paid off?

Yes. And next month, can you put it in the budget so you can just cash flow it because you make $130,000? Yes. Yes. And one tire at a time. It may be one, but see what I'm saying? Like if you have this idea that I can't afford it,

so I can't have it, that's the total soul change we're talking about here. Otherwise you're going to keep finding these little ticky tack emergencies and you're never going to get through with it. Sorry, Jade. No, John, you make an excellent point because what I was going to say to you margaret is with the emergency fund it

forces us to rethink what an emergency really is now your tire blows out on the interstate that's an emergency but do you have to buy all four tires at once no no you don't can you buy the one that you need and can you get a cheapo to get you through yes you can um some of the other things that pop up you've got to decide okay is there a way that i can cash flow this because we don't the goal is not to dip into the thousand dollars all the time you want to try to find a way that you can cash flow it that you can come up with some extra money that you can cut something out of your budget in order to make those things happen and my guess is that maybe you're calling something an emergency simply because it was unexpected but yeah if it's truly going to be an emergency simply because it was unexpected.

But if it's truly going to be an emergency, it's got to be something that's not only unexpected, but it's got to be absolutely necessary. And it's got to be, there's got to be a time sensitivity on it as well. So a medical bill, I would not go into my emergency fund to pay that. I would be like, Hey,

let's work out something, but I can't pay you today. Do you see what I'm saying? And I'll put up my budget for next month. Yeah. So let's try to get to the. Oh, go ahead. Go ahead.

So the medical bill, I'm diabetic. So, you know, if I get a three month, I have newer insurance. It's not as great as what I had before. If I go to get three month refills, then I might be spending four to five hundred dollars I see and so we got it we got to get that into the budget in the budget yeah to where it's not an emergency thing and I know that like you said your insurance is switching so maybe you didn't necessarily see that coming but that's what we're looking for and the bigger thing is with this, the bigger thing I want to find is where's the margin in your budget?

Because ideally with your debt, you're creating your budget every month and there's a certain amount of margin, hopefully at the end for you to put towards your debt snowball, which is baby step two. And so hopefully whenever these things pop up, you're able to go, well, hey, maybe instead of paying extra on this or paying extra on that, I got to put this in the budget now and I've got to cash flow it like that does that make sense yes definitely so let's try to do that as opposed to going to the emergency fund cash flow first and and rearrange the budget first and then and only then like I said it's got to be unexpected it's got to be unavoidable it's got to be all those things before you really dip into the emergency fund. And I think that

should help you. Aren't you doing the debt snowball? Yes. Okay. And you just keep getting knocked back. So yeah, I think that should be, I mean, does that sound like that's going to solve your problem? I want to make sure we're solving it for you. Yeah, it does. I think it just, it gets really discouraging when, you know and then I can't put that payment on the credit card debt because I feel like something unexpected came up. So it is something I need to plan for better. about three months for somebody to level out their budget when they start. And so there's an old counseling term from the great Irvin Yalom. It's this, everything is data. So it is frustrating, but you learn something. And so I'm just going to take that information. I'm going to apply it next month and I'm going to make a better run at it. And then you find out your insurance isn't as great. And this thing that you got for a hundred bucks at your last job now is going to cost you $400. Ah, that's the

worst, but it's just data. Now I got some more information. So next month, I'm going to make sure that when I have to buy this again, I've got that information there. Let me ask you a quick question. You said you got a kid going to college and you have one other kid and your mom is that it yes i have two dogs do they count i'm gonna ask you a naive question um could it be time to downsize house you got a five hundred thousand dollar home yeah and is your mom paying half of the is she paying half please tell me yes no so i actually actually have an apartment in the house. It has a mother-in-law suite. So she pays about a third and then I pay two thirds.

Now your two thirds, is it less than 25% of your take home pay? Hold on. Let me math that real quick. math that when you get off the phone with us because that could be your problem there for sure you got a lot of house for one kid a couple of dogs and your mother yes it may be time to begin to make some some uh home transitions there just something to think on just something to think on. And cut up these credit cards. Yeah, cut them up. And the second caller in a row that's like, hey, I only have this one debt, except for these other debts.

Yeah, that's true. You gotta take full ownership of your reality. Money that you owe to anyone for any reason is debt. That's right. That's right. Hey, I want to thank the guys in the booth. Thank you, America. We'll be right back on The Ramsey Show. 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

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