The Ramsey Show - App - Why a 40-Year Mortgage Is a Terrible Idea (Hour 2)

Episode Date: April 17, 2023

Dr. John Delony & George Kamel answer your questions and discuss: "Should I pay off my student loans or buy a house?" Why a 40-year mortgage is a terrible idea, "Should we sell my husband's car?" Pausing retirement to save for a house, "Which debt do I tackle first?" from the blog: How the Debt Snowball Method Works, "Should I stop paying off debt if I'm about to lose my job? from the blog: When to Pause Your Debt Snowball Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET 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 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the pods moving in storage studio, it's the Ramsey Show, where we help people build wealth, get out of debt, do work they love, and create incredible relationships. I'm John Deloney, joined here by my good friend George Camel and we are taking your calls on everything. Life, money, work, relationships, your mental health, whatever's going on in your life. 888-825-5225. Before we go to the phones, I want to get to the question of the day. The question of the day is brought to you by neighborly your hub for home

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Visit neighborly.com today for help with just about anything for your home. Today's question comes from Lacey in Indiana. She says, I have the opportunity to pay off my student loans if I save for one year. My other option is to buy a house. I know interest rates are high, but there's always the possibility of refinancing. There are also good tax benefits that come with owning property. If I pay off my student loans, though, I won't have enough money for a down payment on a house realistically for at least two years. So my question is, what do you think is the best long-term option in terms of financial success, buying a house or paying off my student loans? There's a part of her question I think solves all of this she states if i pay off my student loans

i won't have enough money for a down payment on a house realistically for at least two years let's just let's just take off the first part you don't have enough money for a down payment on a house ta-da you can rob peter to pay paul but you don't have enough money you don't have enough money you don't have enough money john why are't have enough money. You don't have enough money. John, why are you trying to hurt people's feelings? You're so out of touch. I'm just trying to tell the TRUTH. Listen, here's what's awesome. In two years, realistically, as you say,

you could buy a house. That's pretty awesome. That's really cool. In two years, you can buy a house. Rent. Rent and pay this off. Yeah. This is a non-question. And there's... I reject about like, well, I can feel the tone of justification here.

Like, well, John, the tax benefits. I'm like, ask a homeowner about all the amazing benefits they get and all the money savings of owning a home. Number one, you only get some benefits if you itemize, which almost nobody does anymore. And the whole like you get the interest, you can write it off, you itemize. So you're stepping over a dollar to pick up a quarter. I know. It's like going to the bank and being like, I'm going to give you guys $1,000. Will you all give me $35?

And they'll look at you and go, okay. That's how it works. You give your lender $10,000 in interest to get $2,000 from the IRS. And you're like, score. Got them. And it's a write-off. It's not like you get cash. They just deduct. Yeah. Anyway. Okay. Yeah. I'm going to play the slow game, Lacey, because that's how I found the best way to build wealth is. And Proverbs 13, 11 says,

wealth gained hastily will dwindle, but whoever gathers little by little will increase it. And moving slow is so underrated in today's world because it feels like life's going to pass me by, John. I won't be able to get that house two years from now, but two years is going to pass. And the question is, do you want to continue to be broke, paying payments while now having a mortgage, or would you rather be free and step into this thing with wisdom and patience and margin? Just solve for freedom. And the mortgage crisis, I mean, that's not a crisis, but just mortgages, you and I were talking off air. Just explain it.

What are they trying to do here? So people keep sending me these videos to rile me up. And the new trend now on TikTok is the 40-year mortgage. And so let me explain what this is. The 40-year mortgage. It's a 40-year mortgage. So you know about the 15. You love the 30.

But let me introduce you to the 40-year mortgage. It reminds me of The Office with Dwight and Michael where he says, a 30-year mortgage at Michael's age essentially means that he's buying a coffin. Now, if I were to buy my coffin, I'd get one with thicker walls. Great quote. So here's what's actually happening, John. The 40-year mortgage is not a thing you can even go do, which I'm really glad. I'm going to beg to differ because I saw it on Instagram.

So there you go. George is wrong. So this became a trend and became a big Google search. Really what this is, is it's for folks who are already, already had an FHA mortgage and they're on the brink of foreclosure. And so this is a loan modification that they can now use in order to avoid a short sale or foreclosure. This is an official kick the can.

It's for people who are so broke they're on the verge of bankruptcy. And they said, maybe in 10 years, your situation will improve. Yes. And so my worry is mortgage companies go, ooh, we can make more money off of this. We should offer it to normal people. Or some guy like me walks in and is like, hey, I want to only pay this much for my monthly payment.

How far can we go? And they're like, yeah, sure. Let's do another 10 years. So the Consumer Financial Protection Bureau, CFPB, as we call it in the biz. I saw that tattoo on your arm. Yeah, I'm a big fan. So they actually, it's not a qualified mortgage for them. They have set the rules for this and it's not a qualified mortgage because this is what led to the great recession in 2007 to 9. Subprime mortgages. People who couldn't afford houses went, well, if we do the 40-year, we can barely afford it. That's great.

And all of a sudden, the banks gave all these people mortgages who shouldn't have got them, and it created the bubble, and it popped. So all that to say, John, this is a nightmare, and if you didn't believe me, can I just share the numbers with you? Of course. So this article has a hypothetical loan, a $440,000 home with 13% down. So you have a loan for $383,000. On a 15-year fixed rate, about 6% right now,

you would have paid about $581,000 total cost. So that, I mean, that sucks. That's still a lot you paid in interest. But when you move to the 30-year mortgage, you will have paid $850,000 on that $383,000. That's the cost. On the 40-year mortgage, John, drumroll please, you would have paid over a million dollars for that loan that you took out

for $383,000. So the... It almost tripled. This will become a product because there's too much money to be made. Did you... I mean, look at these numbers. America, I'd like to announce... They made almost 700 grand on a loan for 383. Well, yeah, but they're going to have to wait 40 years to collect on it.

Well, you're buying a coffin. They don't seem too concerned. They're playing the long game, John. Listen, we have to get to a place where we are no longer fighting and scratching for wiggle room. And we're scratching for lower payments, John, because we need flexibility because inflation and what if. I want more to my life than wiggle room and flexibility. And, okay, I can afford that payment and that payment and that payment when I look at my total take home for the month. I want to unhook from the matrix completely.

I want to solve for freedom here. I want to get off this whole ride. I get off the whole ride. I don't think most people just walking through the day realize this weight that's on their chest. And they think that this is as deep as I can breathe. And they think this is as good as my sleep is ever going to be. And they think that just a couple more beers

and this is as good as it gets. And there's just so much more to life. And this just feels like someone who's can't breathe. And it's like, I'll give you a little sip of air through a straw every day for 10 more years. And we're going to high five you and call that life. I don't want that life. The key to a great life is not lower payments. It's no payments. No payments. That's true margin. That's freedom. Choose freedom every single time. Stop selling your soul for wiggle room. Choose freedom. This is The Ramsey Show. We'll be right back.

888-825-5225. It's 888-825-5225. It's 888-825-5225. I'm John Deloney, joined here by George Campbell, taking your calls on money and relationships, mental health, life, whatever you got, we're here. Let's go out to Courtney in Owensboro, Kentucky. What's up, Courtney? How we doing? Thank you so much for taking my call.

Of course. What's happening? My husband and I just started on Baby Step 2. He just recently accepted a position at another job, and they will be giving him a work vehicle. So my question is, should we sell his personal vehicle that he was using for his previous job as a work car and put it down on the debt? What's that car worth? About $3,000.

Okay. You don't owe anything on it? No. We only owe him my car. How much is left on that? $16,000. And that's all of your debt? Except the house. We have $75,000 on the house. Cool. What's your household income now with this new job? $54,000.

Okay. And he can use this company vehicle as long as he wants? As much as he wants? Yes. They're giving him gas card and everything. Wow. That's a sweet deal. Yeah. I mean, if you can sell that thing for three or more private party sale, clean it up nice, take some good photos, and use that towards the debt. That'll speed up this process by at least a few months, right? Yes, yes it would hey courtney. Can I plot twist? Okay What if you sold your car and you drove the three thousand dollar car?

Boom, what if tonight at dinner? You slid your keys across the table all dramatic-like. You got some real, real dramatic music. And you just said, honey, I'm all in too. You're going to drive this company car around. I'm going to drive your embarrassing car and I'll sell the $16,000 car. We'll be debt-free this weekend. Okay. My husband actually brought that up to me today, but it's my toy, so I'm afraid to get rid of it. It's emotional for you. What kind of car is it? It's a Toyota Camry, a 2019.

That's a sweet whip. Great car. It's a great car. But what's the payment on it? $300. Okay, so what if we sold it, and you took that $300, and you just started putting in the bank plus more, because you don't have any payments now, how quickly could you save up and pay for that

thing with cash later on down the road? I'm not sure. It shouldn't take too long though, I wouldn't think. And you've depreciated that $3,000 car out, so if you sell it this weekend for $3,000 or in a couple of years, you're probably going to get $3,000 for it, right? Right. People are happy to find a $3,000 for it, right? Right.

People are happy to find a $3,000 car. They say it doesn't exist when they call our show, so I know people would buy it in a heartbeat. I love the idea of you putting that on the table, and maybe it's no great coincidence that I mentioned it and your husband, and I bet it took, did it take him a long time to mention it too?

Did he do it all roundabout kind of way? I'm sorry? Did he circle the wag roundabout kind of way? I'm sorry. Did he circle the wagons? Was he kind of hem-hawing around it or did he just come out and say, hey, what if you sold your car? He just brought it up today as an idea. He didn't really beat around the bush about it too much. We're just really trying to, we're sick and tired of debt

and we're trying to get out of it as fast as we can. I love it. That's honestly what I would do. If I'm in that situation, my wife had a $3,000 car, and I had a $16,000 car, and that was all of our debt, I would try to sell that as quickly as possible and get out of it. That's a good move. Either way, mathematically, financially, you're okay. But again, you said to us that you're sick and tired of debt,

and it's probably another, what, 6 to 12 months before we can get rid of this car loan, even after selling the other car. Yeah, that's right. And so I love the idea of you guys being debt-free today. Yep. All right, let's go to Andrew in Fort Myers. What's up, Andrew? How's it going, guys?

A pleasure to talk to you. You too, man. We're partying. What's up? All right. So in 2022, I paused my retirement contributions in order to save cash for my wedding, which is actually less than three weeks away now. And I'm trying to determine my next step. So should I remain paused in my

retirement investings in order to save up for a down payment in two to three years? Or should I go back to investing in retirement after we get married? How old are you two? I'm 24 and my soon to be wife is 20. Cool. And what will your household income be, once you guys are married? It should be a little over 90. Okay. So there's a few ways to skin this cat. Some people go scorched earth and they go, two years, we're going to keep retirement paused and just save up that down payment.

Some people split the difference and get the employer match. The rest goes to the down payment. And some people just do 15%, anything left over, they do the down payment. But again, that would take longer, right? And so it really depends on the goal that you guys set together for when we need this house. Now, 20 and 24, you got so much time, it blows my mind. But also at 20 and 24, everyone around you is like, why are you throwing money away on rent? You guys need to be in a house. You're doing great. And so number one,

you got to turn those voices off and do what's right for you guys. And I love the idea of you guys getting started on investing while saving up. And if you need to make up the difference with extra jobs, side hustles, whatever you need to do, now's the time to do it. Yeah, and George, there's something about, Dave calls it flexing the muscle.

There's something about practice. Like even if it's a small amount and we're going to mostly save up for our down payment, I like the idea of just seeing that on your budget month after month, year after year, we give and we put in money into retirement. Even 25 bucks a month, we put money into retirement. It's just how we do it. My wife and I, who works here at Ramsey, when we save for our down payment, we both did 15% into our Roth 401k here at Ramsey.

We put that on autopilot and we just pretended like that money never existed and we learned to live on less. And then we went, how do we hit this down payment goal? And that will pay dividends in the future for sure. And I did side hustles. I did it a separate way. We went bananas, right? We stopped everything, but we went scorched earth and we got that down payment pretty quick before we rolled out.

So it's six and a half dozen and another. But what I don't want for Andrew or for any of us is to look up and suddenly you've put pause on retirement for two years, five years, seven years. If it's more than two years, you got to get started investing beyond that. Because what's going to happen, they're going to save up for down payment and then she's going to wind up pregnant.

And then they're going to, so there's always going to be a reason to not be investing, right? And just keep bouncing and bouncing and bouncing around. Yeah. George, when you look at young couples getting married and they're trying to save for a wedding, they're thinking, they've got these dreams of a house. They thinking about having kids, where do they start? Well, hopefully they start debt-free. That is the best way you can start off

any marriage. But having that vision together of what our life looks like, most couples don't take the time to do that. They take more time to plan the honeymoon than they do to plan their finances and their money. Or that one party, that one night. Yes. Goodness gracious. The amount of time and money we put into weddings, if we put that into our retirement goals, we would all be multi-millionaires because effort and intentionality went into it. So it takes getting on the same plan, the same vision, the same goals, the same communication with money, but having a goal right in front of you. What is the one-year goal? And then what's the 10-year one that's further out? That kept me and my wife real driven on the money plan. But if you've got

debt, you already have your priority right there for you. That's nice. We're getting rid of this debt as soon as the wedding's over. And you and your wife did a great job of setting that goal and then reverse engineering those behaviors all the way to the present and just i don't know you're an inspiration to me because i like to do it all at the same time and just get on and i just see you over there with a chisel and a hammer just dinking away at it and it and here's the thing i get to the finish line and i'm exhausted and i can't breathe and you just walk on by and you're like, hey, made it. I'll see you later. And you just keep walking.

And I'm like. Yeah, we were extra weird because we started off our marriage in such an amazing place because my wife has already worked here for years by that point. And so when you start your marriage off that way, we just pre-decided we're going to get a real modest home and pay it off real fast. And what would our life be like? And I didn't upgrade cars. upgrade cars it was two cult members getting married so y'all already very different but i drove that you know that old honda civic that was all beat up the bumpers hanging off dave's making fun of me and i said i'm not upgrading that car until i pay off the house right

and i upgraded after the house was but i did what i said i was going to do john but i always need to dangle that carrot otherwise i think we get kind of lazy as humans if that carrot isn't in front of us. Oh, man. In a good way. It's not I deserved it. I think that's the wrong mentality. When you get married, you start to go, well, we deserve. We work hard.

We're a married couple. I think usually it's a picture of marriage. Like when you're married, you all of a sudden just get a house that's fully furnished and all these cool things and like all the cool containers in the pantry and two dogs that are some doodle derivative or like yours. Yours don't even qualify as dogs. French bulldogs. But the mutants

that you have. But we just see it. We think marriage and we see this picture and it's just supposed to fill itself out and we don't take the time to realize, no, there's a bunch of steps along the way. Yeah. Do it slow. Do it the right way. Do it with cash. This is The Ramsey Show, 888-825-5225. We'll be right back. Welcome back to The Ramsey Show, 888-825-5225.

Let's go out to Steven in Staples, Minnesota. What's up, Steven? Hi, how are you? Outstanding. How are you? All doing well. Very good. What's up? So, my wife and I recently found your program and decided we want to get out of debt. We're on baby step two.

Welcome to the game, my man. Ended up in kind of an odd spot. We quit making payments on student loans since there wasn't interest and forbearance and started saving that money for a down payment on a home. And now we're looking to buy a home and sell the home that we currently have and pay off debt. And we're trying to figure out what order to do it in and how we should utilize our assets. So in your mind, does this debt just not exist? We're like, we're just going to move on with our life. We're just going to let us sit over there. No, we actually saved up enough to pay it off lump sum. We just made the payments to ourselves.

What's left on the loans? Green interest. $106,000. Whoa, and you have that in cash today? Yeah, and then I've got a balloon payment on a piece of property for about $30,000 coming up. Do you have that in cash too? Yes. How much cash do you have?

I don't know. About $140,000. So $140,000 would wipe out your student loans and the balloon payment, and then you're done. You're completely debt-free, but you're back to square one when it comes to a future home. Correct. Other than the equity in your home, how much do you have in your home? Between 250 and 300. Would that work as a down payment if you sold? Well, that's where I'm getting nervous because my wife actually found a house she liked,

and we have a purchase agreement. Oh my gosh. Steven, what are you doing? So this would be 20%, a little over 20% down on the home for a down payment. And then we could sell what we have and use the equity to pay off debt. Please don't do that. Please don't do that, Steven. Think about it this way. We were told to get a bridge loan. Don't, don't, don't do that. Or... Please don't do that, Stephen. Think about it this way. Yeah, we were told to get a bridge loan. Don't, don't, don't. Who are you getting advice from currently?

Our banker. Ah, there it is. Yes. What are banks in the business of doing? Giving out loans. Their product is money, and they sell them to people like you. And you're like, oh, okay. You have $140,000 in the bank, and somebody's convinced you to borrow more money.

Just think about that for a second. The other thing, after very little learning about your program, I was wondering if it'd be wise to liquidate some assets. What do you got? Then I could sell a couple vehicles. Yes. Or a boat. I would sell all the toys you're not using.

Do you need them? Well, I like to use them. Needs a strong word. How many cars do you have? I think seven total. Oh, my gosh. Steven, what do you do for a living? Please tell me you run a tiny used car dealership.

No, I'm technically I just work for cash on the side and do whatever my wife tells me. I was about to say, do you sell drugs? And I think that's what you just answered. Like, what do you do? I'm a stay-at-home parent. Okay, gotcha. What is your household?

What's your wife do? I'm not sure. She's an OBGYN. Okay. Awesome. I mean, I think that... She leaves in the middle of the night a lot. Yeah, I was going to say,

I think the title of her job would clarify what she does, but that's cool. So listen, let's re-look at this a whole other way, okay? I want you to take a huge deep breath and hold it as is as deep as you can i want you to hold it for a count of two okay take a big deep breath yeah got it one two now exhale it and then i want you to consciously drop your shoulders pull your elbows down and drop your shoulders for a second. Okay?

Now. Yeah. I want you to imagine you don't owe anybody anything. And you're in your same house. And you're a quarter of a million dollars in equity up on it. You don't owe anybody anything. You're somehow scraping by with four cars instead of seven. If you only use the boat once a year, you've considered selling it,

and you can rent one on the once a year you actually go out on it. Or maybe you're like my father-in-law who's on the boat more than he's on dry land, and so maybe that's just your thing. The goal here, you're so overcomplicated all of the stuff with the math and the somersaults and the bridge loans and the what about this is, and we're going to use this equity, we're going to move it over here, you're so overcomplicated all of this stuff with the math and the somersaults and the bridge loans and the what about this is, and we're going to use this equity, we're going to move it over here, but I'm going to take this money and sell it over here. And you're just solving for chaos and more chaos and more chaos. And the whole purpose of this program is to solve for peace, is to help people live peaceful, non-chaotic lives.

Your wife lives a chaotic life. You, as the person taking care of that home, life is stressful enough, man. And to just start lighting fires just to watch things burn just doesn't make a lot of sense in this day and age. Do you get what I'm trying to say? Yep. That's the approach.

So that's why Dave will tell you what I'll tell you. This is way more psychology than it is mathematics. Because somebody can make a case. Go ahead. That makes a lot of sense. And what I'm trying to understand, so we're moving to this house. She took a new job in a new town. Okay. And trying to keep everything,

or trying to calm everything down to get the house and not have PMI and how we can do all this. How much is this house you just bought? It's over a million dollars, isn't it? Uh, 470. If you have 250,000 in equity, you said you're only going to have 20% down. Yep, but we won't be able to get the equity out until after we've sold. So we'll have two mortgages for a couple months. With the balloon payment coming up and the student loans on the horizon. Yep. And maintenance and insurance on 17 toys.

I'm stressed out just thinking about it. I know. I literally have hemorrhoids right now just talking to you. So, I'm a man of simplicity. Yeah, I do. So, I'm just like, what gets me to the most simplest life the fastest? And that is to just napalm this thing, go, what can I sell that I really won't miss that I can always get later when I've cleared this mess up?

And that means I'm paying off the student loans. I'm getting rid of the balloon payment with cash. That leaves me with what, six grand? Going to restock my emergency fund. And if I want to do that faster, I'm selling a bunch of toys to do it. Then I'm going to sell the house. And whatever equity we have will dictate the kind of house we get. That's simple to me.

I can breathe thinking about that. And you might only be able to put down 18% or 14% and you don't have that PMI thing. And that's just going to be a sucker tax that you pay because you did all these things out of order. But I would love to see this. I would love to see you and your wife sit down and just maybe for the first time ever, dream for a second about the life y'all want to create. It's real easy to go to med school and then you're like, well, I'll stay at home. And that ball just gets rolling downhill.

And all of a sudden, your life is just a series of trying to catch up with whatever decisions being made in real time. And as the old saying goes, if you don't know where you're going, you're sure to end up there. You're just going to find yourself in some place, in some town with a new job and a new house, and you're going to have two mortgages and you're going to have 17 cars and a pony and a frog, like all these things, right? I'd love to see you and your wife sit down and say, hey, what kind of world do we want to build for ourselves? Now that we're moving, now that you're taking a new job, what if we paused for a second and just said okay what kind of planet do we want to inhabit

and does that planet have seven cars does it have two bass boats and does it have all these jet skis and all the stuff see what i'm saying yes absolutely does it sound does it sound appealing or do we just sound like two boring old men? Oh, no, it absolutely sounds appealing. And I think that you're entirely right that getting going too fast and allowing the stress, the cloud vision in this situation is what's causing the issues. Now, make no mistake, the next few months are going to be stressful regardless.

If you go cleaning up your cars and taking pictures of them and having people come in to look at them, it's going to be anxious. Paying off your student loans today. Imagine this for the next few months, whenever they say Biden has a new announcement about student loans, you can just change the channel because you don't care because you don't owe anybody anything. Who cares? I took the loans out. I can pay them back. I'm not going to wait for the government to pay something back that I signed my name to. I'm just going to pay them off. What if you just had peace? Solve for freedom, my man. This is The Ramsey Show. All right, tomorrow is tax day. And about one-fourth of you wait to file your taxes until the last couple of weeks. So if you planned on doing it tonight or tomorrow because you live for the thrill of cutting it close to deadline.

That sounds like you, John, in other parts of your life. Dude, I like to get my taxes done like January 2nd, man. That's why I said in other parts. Always hassle. Yeah, every other part of my life, I'm like flying hot. That's right. It's time to get your butts in gear. Let's get this thing done. More people have ended up with a tax bill this year, so it's more important than ever to file on time. If you owe taxes, but you don't file on time, you could be penalized, meaning you pay Uncle Sam fees and interest on top of your taxes. I've never met anybody that said, man, I think I'm just going to pay more. So don't. Don't put off your taxes anymore. You don't have time for that. And with the right tax software,

you can still file quickly and easily. For tax software that's on your side, check out Ramsey Smart Tax. It's a low cost option that doesn't hit you with any surprise fees or offers to put you in debt. Get your taxes done now so you can stop worrying about it. Go to ramseysolutions.com slash smart tax and save up to 70% when you switch from other software. That's ramseysolutions.com slash smart tax. John, that reminds me, I made this post the other day, and it got picked up on social by a crypto newsletter that has a quarter million subscribers, and a buddy of mine sent it to me.

He's like, dude, you're featured in this, and I thought it would be fun to read this social post together. Let's do it. So I'm going to play the part of the IRS, and you are the American taxpayer. You ready? Good. Hey, John, you owe us money.

It's called taxes. Well, how much? Oh, you'll figure it out. Oh, okay. So I just, you owe us money. It's called taxes. Well, how much? Oh, you'll figure it out. Oh, okay. So I just pay you what I think is right? Oh, no. We know exactly how much, but you have to guess. Oh.

Well, what if I'm wrong? Fees, maybe jail. We'll see. End scene. End scene. So that's how it feels for most people. And it can be really confusing. And it's why we recommend get the stuff done early so that you know if you're going to owe or not.

You have time to save. If you know if you're going to get a refund. And if you know, I got to work with a tax pro because it's super complicated. And, of course, our Ramsey Smart Tax software makes it easy enough that even John Deloney can do it himself. Which you've been known to do. Yeah, a couple years I used this stuff. It was great. It reminds me of when your mom or dad calls you in and says,

do you have something you need to tell me? It's a trap. Just tell me what you know that I did. I feel like that's entrapment. Does that count? It's not really what entrapment is, but it's fun to say it out loud. That's what kids say.

It's like gaslighting. We just started using it as a blanket term for everything. And everyone's a narcissist. You're gaslighting me. And you're a narcissist. No, I just think you're dumb. All right. That's what kids say. It's like gaslighting. We just started using that as a blanket term for everything. And everyone's a narcissist. You're gaslighting me. And you're a narcissist. No, I just think you're dumb. Alright, let's go to Zach in Harrisburg. What's up, Zach? Not much. I have a question. I was

just informed the other day at work that the plant will be closing down. I'm a machinist by trade. Oh, man. My base, yeah, I know. My base salary is around $56,000. Last year, I know. Um, my base salary is around 56,000. Uh, last year I made 70 something because of all the overtime I work. Um,

uh, long and short of it. I'm about $9,000 in debt between a personal loan and two credit cards. Um, I'm on baby step two. I have a thousand dollars in savings right now. Um, I also need a new roof on my house. The quote that I got was 12 to 15. I can do it myself for around five, which I will. Um, but my question is, do I stop doing the debt snowball and do I stack money and

get ready for the rainy day that I know that's coming in a year from now? Or do I continue to pay the $9,000 in debt down and cash flow the roof and then save as much as possible and get a part-time job to get me through and have a nest egg for whenever the plant closes down and they start layoffs. What's keeping you at the plant? So like if Dave came in and said, hey, in one year we're closing up Ramsey Solutions, I would immediately start looking for the next place I was going to go. So how do they have you tied in there for the next year? The severance package.

So you have to stay for the next 12 months. Tell me about it. So basically the severance packages, it's a year and a half, it's one and a half weeks for every year of service I've been there, will be six years. So I look at nine weeks pay, and I'm not going to be able to find a job around here making the same amount of money that I am now. So for right now, I'm cool with making, you know, what I make hourly. And then I only work weekends. So I work 36 hours a week. I bring home around $1,500 every two weeks.

And all during the week, I have the potential to get a part-time job. But hold on one second. And all during the week, I had the potential to get a part-time job. But hold on one second. Do you come from money? Are you the first person in your family to make $70,000 a year? I don't know. You don't know? I don't know. Both of my parents, my adopted parents, have passed away.

Okay. So the way you're talking about your predicament and your situation, it sounds a lot like me, to be honest with you. And I got great parents. We just didn't talk about money very much. Money was really a source of stress, and so I didn't know. And when you don't know, you either, like George talks about a lot on the George Campbell Show, you either get into all these crazy traps

like buying crypto and all kind of weird stuff, or you just get in this strange survival. I'm just going to take one more step and one more step and one more step. And so I want you to recognize the scope of what's happened. You're probably going to have to move. You're probably going to no longer have just weekends,

and you may have a six-day-a-week job or a five-day-a-week job. Like your life is – Yeah, I'm completely fine with that. Cool. So what I would suggest is begin to imagine or not only just imagine, dig in with both hands and feet, and you are not a guy that's scared of hard work. That's in your DNA.

That's who you are. Where do you want to move? Where do you want to live? What kind of life do you want to have? Because the changes have been thrust upon you, and what I'm guessing, if you move to the right town and the right community and the right work situation, you're going to be able to make this magical nine weeks.

They dangle this stuff over, but if you actually just do the math on it, it's often less than a signing bonus you're going to get to go work in another community. And you're going to be able to do it earlier, get your life set up, and go ahead and move on with your life. Okay. I also have a mortgage. Okay.

So are you just going to wait until the year is up and be like, oh, man, I got a mortgage? Are you going to sell your house? Because they've given you a year notice. Yeah. So here's the deal. There is a storm coming, but it's not tomorrow. So if the news said, hey, there's a storm coming 12 months from now, I'm not going to pretend like a storm is coming tomorrow.

What I am going to do is start preparing so that when that storm comes, I'm ready. And so looking at these numbers, you got $9K in debt, you said. You need $5K to cash flow the roof and do it yourself. And we looking at these numbers, you got 9K in debt. You said you need 5K to cash flow the roof and do it yourself. And we need to fully fund the emergency fund. That would be my A1 over the next 12 months. I have 4,200 in the employee stock purchasing program also. Okay. So I'm going to use that and cash it out as soon as I can when you're fully vested. And that's going to help this process. But looking at the numbers, you need about 25, 30K in the next 12 months. So you divide that out. We need $2,500 a month to make this plan

work. And whatever side jobs I need to do to get that kind of margin, whatever I need to do to lower my expenses, that's my plan. So we're paying off the $9,000. We're going to cash flow the roof. We're going to get the emergency fund. And in 12 months, when they give you that severance plan, you go, all right, I'm going to sell the house. I'm going to move. And I already have a job lined up. Or you call a buddy in whatever community you want to think about moving to or whatever job you want to do. And you start having those conversations in the evening and on the weekends.

Hey, do you guys need somebody? Here's what it's going to take financially. Here's what it's going to cost. Or maybe you want to get out of being a machinist altogether. You want to do something else. You've got a year to get trained up and certified to do something else and if you find the right job in four months then sell your house and throw up a deuces and walk out right brush your shoulders off and move they're closing the factory on you see what i'm saying

okay yeah the severance plan isn't sweet enough that it's worth pausing your life if they said we're going to give you fifty thousand dollars if you, well then okay, I'll stay for a year. But man, right now you're going to put a lot of equity into that house build a new roof on it and then turn around and sell it because you're going to have to leave your community because you're not going to take half of a pay cut, right? Yeah.

Are your days in Harrisburg numbered? I mean, do you believe that? Oh yeah, definitely. I mean, do you believe that? Oh, yeah, definitely. I mean, the plant is going to close. But there are no machinist jobs in Harrisburg, Pennsylvania, other than this plant. Yeah, there are plenty of plants around here.

That's what I'm saying. I don't have to sell the house. I can go elsewhere, work in another factory that's within 10 miles. Let's start doing the homework on that. Let's get on that one. Excellent, excellent, my man. This is The Ramsey Show. We'll be right back just after this.

Hey, George Camel here. If you love the show and you want a deeper dive on your money journey, we've got a weekly newsletter that gives you helpful articles and tips on following the Ramsey way. Just go to RamseySolutions.com today to sign up for the newsletter. Again, that's RamseySolutions.com to sign up for our weekly newsletter.