The Ramsey Show - App - Why Home Ownership Will Make You Wealthy (When You’re Ready) (Hour 2)

Episode Date: May 5, 2023

George Kamel & Rachel Cruze answer your questions and discuss:   "What should I do with inherited homes?" Why home ownership will make you wealthy (when you're ready), "Where should I put extra savings?" from the blog: What Is a High-Yield Savings Account and Do I Need One? "Should I pause retirement to refill the emergency fund?" Buying a fixer-upper vs. move-in-ready home.  Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Join a Personality-led FPU class. Click here! Enter The Ramsey Cash Giveaway for a chance at $3,000! https://bit.ly/TRSgvwy Shop our bestsellers during the $10 Sale! https://bit.ly/TRS10Sale 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 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 Pod's moving and storage studio, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, Ramsey Personality, co-host of Smart Money Happy Hour, and I happen to have the co-host of Smart Money Happy Hour with me, Rachel Cruz. 888-825-5225 is the number to call. You jump in. We'll talk about your life and your money. And on top of Smart Money Happy Hour, Rachel, I recently launched my own YouTube channel. That's right, George. So we're both YouTubers now. And it's killing it. You've done such a great job. Thank you.

The numbers are like fantastic. Well, the team that we have on this is incredible. The editors, the designers, the writers, they have worked so... Your set. Oh, the set is beautiful. Is amazing. Thank you.

Well done. It's no Rachel Cruze show set. No, it is nicer than the Rachel Cruze show set. Wow. And I tip my hat to you, George. Thank you. It's fantastic. Well, I'll have you on as a guest. Oh, thank you. I really appreciate that. Just right down the Rachel Cruze show set. Wow. And I tip my hat to you, George. Thank you. I think it's fantastic. Well, I'll have you on as a guest.

Oh, thank you. I really appreciate that. Just right down the road, down the hall from yours. Really appreciate that. Thank you. So go check it out. I think we've got about 10 videos out there and people are loving it. They're commenting on the editing, the humor.

We're taking the Ramsey principles to 2028 and we are living in the future. We are in the future. So many memes. It's a good time. Go check that out. All right. Brandy joins us up first in Charlottesville, Virginia. Brandy, welcome to The Ramsey Show. Hi, George. Hi, Rachel. Thanks for having me. It's a pleasure to speak with you today. Absolutely. How can we help? So I know Dave says that options are great, but right now I can't feel the same about that. I have three houses right now.

I lost my mom in 2001 and my dad in 2002, and in that I inherited two houses plus I have my own here. When my mom passed away, I became power of attorney for my grandmother. So that house that I inherited from my mom was actually hers and she had lifetime living rights in there, but I had to move her to a nursing home close to me. So she's no longer in that house and it's vacant. Um, so my question for you guys today is, um, should I sell both houses? Um, or should I sell one house and rent the other out for like additional income? Um, cause I do have a little bit of debt. I've been working on my smallest to largest. I just, I don't know what or how to make a good decision. You know, everybody wants to tell you,

oh, you should do this or you should do that. Like, I think I know, but I have so many feelings with both of these houses. Yeah, they're sentimental to you, I'm sure. Yeah. Yeah, for sure. That plays into this. Do you, I'm sure. Yeah. Yeah, for sure. That plays into this. Do they have mortgages on them at all?

So my dad's house does, and that's an hour away from me. My grandmother's house is six hours away. Okay. And that one's paid for? Yeah. Okay. And Brandy, where are you at financially? You said you have some debt.

How much consumer debt do you have? Let's see. I have a little over, let's see. So I have a boat at 31. I have my car at 6,800. So it's about 30, let's just round it up, 40,000. 40,000. Okay. Do you have any savings, any cash in the bank? I do. Okay. How much do you have?

Let's see. I have a high yield at 40,000. Okay. And I have my three to six months in that. And then I have a $15,000 just regular savings account. Okay. And last question. Sorry, we're gathering numbers to help you. No, you're good. And then the two houses, if they sold today, how much

would they be worth? So the house six hours away the assessment is 125 000 okay i don't really know like what i would put it on like what it should go for but around that okay and then the other house um it's assessed at about $250. And how much is owed on that? $92. $92, okay. Wow. Okay, well, here's the good news. You can pay off your consumer debt today without even worrying about what we're going to do with these homes. Yeah, I know. You've kind of done like baby step three, step one then baby step two and brandy when you called in i felt this sense that you were overwhelmed you're managing a lot right now you've been through a lot yes and so if i were in your shoes what i would want is simplicity because there's

just freedom and peace in simplicity and simplicity means means less payments. In fact, no payments would be ideal, wouldn't it? Yes. And so if you paid off your consumer debt, you would still have $15,000 in liquid cash, which is about half your emergency fund. So, and then listen to this, Brandy, and then what i would say part b to that if i were you um which i want to be sensitive because i can tell in your voice it's it's a hard topic to talk about but i i would i would probably i would sell the homes not probably i would um do you want to be a landlord because that one is six hours away and that's going to be a really that's just a we we never ever really recommend being a long distance landlord it's not it's just not feasible uh it adds way more stress to your

life than blessing and so i would sell that home um and then i honestly unless you wanted to be a landlord i would not i would not keep would not keep your that second home um your dad's home either. To George's point, when you cash all this out, George was writing down the numbers, so forgive me, I wasn't. But when you sell all of that, you have money in the bank, you're going to be able to pay off consumer debt, you're going to have a lot of cash available to you, Brandy, to be able to invest and possibly even pay off your current home. How much do you have in your current home? How much is owed? $246,000. Okay.

So, I mean, you can just, this is, I would see this as a continuation of their legacy. And it's so easy for us to put sentimental value in things, right? Homes or even actual tangible items. And I understand it, absolutely. But I also think that these are becoming more of a burden to you and more of a heaviness than a blessing and levity. And so I think a beautiful thing to do for their legacy is that their legacy is not wrapped up in their homes, right? That is true for anyone, right? That is here that our love and our memories and things are not, our relationships are not tied to actual things, even though things can symbolize that. It is still just stuff. And so I think there's a

really great, I think there's great progress that can be made for you, Brandy, from a stress standpoint, to I would sell those two homes, I'd pay off your consumer debt, put that cash, you may have enough. I'm looking at the numbers. I think if she sold both, she could clear her mortgage, the money she has in the bank, clear her consumer debt, which means she can be completely debt free with no payments in the world. I think that's a beautiful thing, Brandy. That's what we would do if we were in your shoes. And you're going to have to grieve these homes being sold.

But either way, someone living in that house, you're not going to like that either. You're going to go, don't, that's my debt. That's not your house. Yeah. That's my, don't do that. And so it's stressful either way. But I think there's less stress in having no payments in the world. So thank you for the call and trusting us with this question.

This is The Ramsey Show. So as a spender, there's nothing better than having extra cash on hand just to splurge a little, you know, have a little fun. So I'm really excited to announce our Ramsey Cash Giveaway is back. So this is your chance to win up to $500 or the $3,000 grand prize. So you guys, it's very easy to enter. All you have to do is go to ramseysolutions.com slash giveaway, and you can enter every day, every day to increase your chances for winning. Now there's no purchase necessary and you must be 18 or older to win. And we aren't stopping there. So we actually have an incredible sale going on and you know I love a good sale. So we are running our $10 sale. So you can get

the books and tools that you need to build wealth, find the career that you were made for, improve your mental health, and deepen your relationships. The $10 sale even includes all the questions for humans cards, the conversation cards from Dr. John Deloney and my book, Know Yourself, Know Your Money. And so this is a great sale. Make sure that you check it out. And these conversation cards are really fun that Dr. John Deloney did. So here's one, George. What's the most expensive mistake you've ever made? Oh, that's a fun one. Well, not fun. I mean, in hindsight, it's probably I mean, going $36,000 into student loan debt is probably just by the numbers, the most expensive financial mistake I've ever made. How about you? I don't know. I'm trying to think what we

what have we done that was like that was so stupid. I'm trying to think what we, what have we done that was like, that was so stupid. I'm trying to think what went wrong with like zeros on the end. I know. I know. Cause things coming to my head aren't like the most expensive, but we, we like paid way too much for like landscaping lines. Like, I feel like we've done things that we were like that. You just overspent on it. Yes. Yes. I'm trying to think, I'm trying to come up with it. It just makes you sick to your stomach. I know. So if you guys want to, again, check out any books or the conversation cards, go to ramseysolutions.com for the $10

sale. Make sure to check it out. Love it. Well, Rachel, the housing market has been a huge topic of discussion and millennials and Gen Z are feeling real defeated right now. If you're a renter out there and you're going, I want to own a home one day. And we got this article that was interesting because we've talked about home ownership as a part of your wealth building strategy. And USA Today published this headline, why it pays to buy a house. Homeowners become 40 times wealthier than renters in the past decade. And so it goes on to say, low-income homeowners, those earning no greater than 80% of the median income, built $98,900 in wealth, while the middle income and upper income, they accumulated $122,000 to $150,000 in wealth.

So that's a pretty shocking number. That's a big gap between those low-income to high-income homeowners. And it says over a long period of time, homeownership is a solid path towards building wealth, and it works in two ways. First, you have the advantage of home price appreciation. And second, it forces homeowners to save from monthly mortgage payments, which renters don't have. So I have a lot of, this is great for those that are homeowners. They're like, yes, this is awesome. And it was a huge part of what helped me become a net worth millionaire is home appreciation. We live in one of the most expensive areas of the nation.

I think it's the top 11 county or something in the country. And home ownership, that home appreciation really adds to your net worth. And so when you're sitting out there renting, it hurts to watch all that happen. And now not only are you seeing your friends become wealthy, but you're priced out. That's right. So what do you tell people when they go, Rachel, I really want to become a homeowner. It feels more impossible than ever. Yeah. I mean, I would say it is frustrating.

And I think we're all feeling that. I think, and again, those of you that are in the market to buy a home, you're really feeling that. But still at the end of the day, home ownership is, it is a long-term plan. That is something that you want to be part of your financial picture. I think everyone should, that should be a goal for everyone, but that doesn't mean you want to be part of your financial picture. I think that should be a goal for everyone, but that doesn't mean you need to go out and buy a home now. If you have tons of debt, if you have no savings, that home is gonna be a curse. I mean, it's gonna end up making you broker over time.

And in the present, it's gonna be stressful and that is not worth it. So getting yourself in a financial position where it is wise to then go and purchase the largest investment you probably will ever make, which is your home. Take the time. Be patient with it, even though I still want that to be part of your financial picture. So be out of debt. Have an emergency fund, the three to six months of expenses. Have a good down payment. I mean, if you're a first-time homebuyer, 5% is the lowest,

we would say. But even if you can get up to 20%, which people kind of like balk at us saying that, but hey, if you can save up a good down payment, that's going to help you in the long run. So again, it should be part of your goal, but it needs to be in the right order and not just go and just decide, I want to be a homeowner. Because we get calls every week on the show

with someone going, Rachel, I think I need to sell my house. Yes. We made a rash decision. We thought impulsively that we're wasting money on rent. We got to jump into a house. And they realized, oh my gosh, home ownership is wildly expensive.

Yeah, absolutely. So it's a great thing. And obviously this article shows it, right? That it's a great investment to do it. And I know it's frustrating to feel like you're throwing money away to rent. But if you're broke and you're living paycheck to paycheck, the last thing you're going to want is a home. It's your own home because everything then is on you. So it just creates a lot of stress. I saw a great quote that said,

rent is the most that you'll pay. A mortgage is the least that you'll pay. And it was showing that when you rent, you don't have to worry about all the other stuff. Property taxes going up, homeowners insurance going up, maintenance, repairs, all of those things that come with homeownership that make it wildly expensive. And so you can't just compare apples to apples, my mortgage payment versus my rent payment. That's a great point. Yep. So I feel for y'all out there, and I love the old timeless quote, the best time to plant a tree was 30 years ago. The next best time is today. And so if that's you, you're going, man, I wish I could have bought a house

when it was $7,000. I understand. I wish that too. And we bought our house years ago. In 1942, when houses were, you know. Yes. So I get it. When the boomers are like,

I don't understand. I could buy a house on a part-time job back in my day. That's frustrating, boomer. You're not helping. You're not helping when you say things like that. Houses are, I mean, on average now, what, 400 grand? And if you're in a high cost of living area. And then, and here's the deal too.

Wages have not grown up with all of this either. So like, there's just a, there's a reality of what we're living in. And I think that we can kind of not complain, complain. I guess we are. We can, we can be down and out. But you do look back when inflation was high in the 80s. Every generation has felt a downturn economically. And so for us, especially the millennials, whether you're mid-millennial or early millennial, this is really our first.

I mean, the recession was big, but for a lot of us, we were in college during that time. We're just entering the workforce. And so for us having families and, you know, having careers over a few years, this is the first big hit that we have felt. So it does hurt whether it's inflation, the housing market, all of it, we feel it. But every other generation has felt it too. Yeah. Because they've had their own too. Well, looking at the data, it was interesting. It was homes in the 1950s were about two times the average salary. Now the average home is six times the average salary. And so to your point, inflation has really hurt while wages haven't gone up fast enough. They're still as higher than they've ever been.

Now I will say though, square footage wise, smaller home on average. I was looking up my- So that's another thing, right? If you went and bought a smaller home, how would that be? But the average home in America now, square footage-wise, is huge compared to what they were in the 50s. I looked up my childhood home, which my parents still live in. It's less than a thousand square feet, according to the internet. I'm like, oh my gosh. We have family of four. And you don't remember it either, do you?

No. You don't remember it being that small. I walked through our childhood home, and I walked into the bathroom that all the kids shared. And I was like, and through high school, like, I mean like that's like where Denise and I would get ready for dance. I mean like, and it was tiny.

How did we survive? Tiny. And I just thought, but I never thought that. I mean like when you're in it, so. Now it's like, it doesn't have a double vanity.

So parents out there, you're not harming your children. You're not harming your children. Yes. If you don't have this massive so here's what that tells me all that reset your expectations maybe you get into a small condo or a townhome for now and you don't need a 4 000 square foot home for your first home so step into it slowly and you will get there and if you are looking to buy a home you got to work with a pro this is a big one rachel people make the mistake of going could do for sale by owner. I'm not going to use a professional. My uncle Larry just got his license. Do this the right way. That's right. And we have an entire network of Ramsey trusted

ELPs. Those are real estate pros in your area who can help you with this process. They sell a whole bunch of homes. They know how to strategize and get you the best deal. And if you're looking to sell, they can help with that as well. And they are marketing pros in that arena. So I feel for you guys out there who are renting, but renting is not a sin. You're doing the right thing. And debt is the biggest thing holding you back from getting that down payment. Because when you have payments up to your eyeballs, it's hard to save up a down payment. So get out of consumer debt, get the emergency fund, do this the right way, even if it's a five-year journey instead of a one-year journey. You'll be okay. This is The Ramsey Show.

This is The Ramsey Show. I'm Ramsey Personality, George Camel, joined by Rachel Cruz this hour. The number to call, 888-825-5225. You jump in, we'll talk life and money. John joins us up next in D.C. John, welcome to the show. Hey, hey, Rachel. Hey, John. How are y'all doing today? Doing well. How can we help? Yeah, so I'm 22 years old. I just finished college back about a year ago in May and I moved up to DC to start working. And I feel like I have quite a bit of disposable income and I really wanted to call in to figure out what I should be doing, right?

And should I be investing or saving up for a house in the next few years or, you know, I'm just kind of get some direction from you. Cool. So what's your financial picture look like? Typically, base is around 110 for my salary. I get a bonus of a few thousand and employer benefits that they tack on to stuff of about 10,000 on an annual basis. Other than that, I usually right now have about 12% of gross pay going into my Roth 401k, about 15% in the company stock purchase, and then about 24% goes to taxes. So after that, it's about 49% of gross pay I get to take home.

Cool. And what kind of debt do you have right now, if any? None. Cool. And how much is the total that you have liquid? In terms of stock investing? Yeah, non-retirement plus all of your liquid savings and checking. Probably about between 40, 45. Awesome. And your next goal is to get a house? I mean, ideally, you know, it definitely would,

it'd be nice, but I know interest rates are quite high right now. So maybe I was thinking save up even more and then hopefully things stabilize in a few years, but, you know, interest, sorry, properties always get more expensive. Well, you're in the D.C. area, so I imagine you're looking to pay a pretty penny even for a condo over there. Yeah. If anything, I'd try to wait and go back to Virginia or North Carolina where it's closer to family for me and buy there instead. Okay, so you won't be in D.C. for a long period of time, for the long term? I would say probably not more than two or three more years. Okay.

Yeah, well, if that's the case, then, John, I would not buy something, obviously, then. Two or three more years as you finish out your job there, whatever it is that's keeping you there. And then when you decide, I want to settle down in an area, that's when I would probably pull the trigger. And by that point, John, I mean, you'll have some great money saved up for a down payment at that point. Yeah, that's kind of the thought process I've been having. Yeah. So I would just put that savings on, if I were you, since you know it'll probably be two

to three years, I would just do a high yield savings account and put the cash there. And when it's time for the down payment to take it out versus putting it in the market, just because of it being such a short term, right, two to three years of a goal. Just make sure that you're not putting the market, the market's volatility. It's just, yeah, I mean, I don't know. I feel like it's always a little risky if you know within two to three years that you're going to be spending that money. Yeah. Well, in high yield savings accounts, the rates right now are so good. They're so good. That's so true. I'm jealous. Like when we were saving for our house, it was at, I think, 2% with some bonuses. And I was freaking out that we were getting 2% on a savings account. Now you can get 4% or higher. Yeah, it's crazy. So I would just sock it away there. Make sure you leave your three to six months emergency fund separate from the home down payment fund. So anything beyond that emergency fund becomes your down payment and set a goal for it of, hey, the house is probably going to be 700,000. I want to save up 200,000. You run the numbers, stick to a 15 year fixed. That's no more than a quarter of your after tax income. So you don't include your investments or your health care in that. Just after Uncle Sam takes his cut, what would be left over each month?

And take a quarter of that. Cool. I appreciate it, y'all. Thank you. Absolutely. Great job, John. 22 years old, crushing the game. I know. Well done. Wise beyond his years. Well done. All right, Rachel, it's time for our question of the day,

and it's brought to you by Neighborly, your hub for home services. If you're moving, you've got a long list of to-dos, but Neighborly has local pros like Housemaster, Five Star Painting, Window Genie, and Junk King to check items off that list. Visit neighborly.com today to schedule home service experts near you. And today's question comes from Charlene in Georgia.

I'm currently on the market for a new car a new to me car I stopped by the dealership and told the salesman the price that I wanted to spend on a car He quickly figured out that I was going to pay cash and he responded that he didn't have anything in my price range And he wanted to find it. He wanted me to finance at least Five thousand dollars for him to be able to help me out I declined his offer and And after I left,

he called me regarding a car he wanted me to see. So I got there as soon as I could. However, the car was sold just minutes before I got there. I spoke to several of my friends and they say that the sales rep gets a bigger commission if you finance a car. They said I will have a hard time at a dealership and should try a private sale. Is this true? Well, I can tell you anecdotally that it can be true. Like they experienced dealerships do make a lot of their money on financing and they can just refuse to sell you a car if they're scummy and go, oh, you're paying cash. Nevermind.

Or they go, oh, you're gonna have to pay an extra $3,000. That price was for folks who are financing. And so not all dealerships are created equal. I will say that. So I would try to find an independent dealership, a used car dealership versus one of these new car dealerships to try that. You could also go the private sale route. And either way, I'm going to do a pre-purchase inspection. It'll cost you about a hundred bucks. Go to the mechanic of your choosing, have them look it over. It's worth every penny to know that you're not about to get screwed. And here's the thing, when you go and tell them,

they say, how do you plan on paying today? That's always a question they ask up front to figure out if we're financing. So I don't think it's unethical to just go, I haven't decided yet. I don't know. And see how they, yeah. I'd say, I'd really like to land an out-the-door price before we talk about how I'm going to finance it. That's good. And so that's the key. The out-the-door price is what talk about how I'm going to finance it. That's good. So that's the key. The out-the-door price is what you're looking for.

And once they agree to that, then you're good. Then you can tell them, all right, I'm ready to close the deal. This is it. But until then, it can be dicey. Now, when we bought our last car, Whitney's car, we told him, he asked, and I was like, we're going to pay cash. He's like, okay, cool. And then we went through the transaction and it was the same price that was advertised online.

They didn't try to pull a fast one on us. I don't think I realized that maybe that's being naive, but I feel like every car that we've bought. You just pay the price. I think so. That was listed at. Yeah. I didn't know they, with cash.

I didn't know that if you're a cash purchaser, they will like jack up the price. Lately, they've been doing that with how crazy the car market's been, which is not cool. But we know that car dealerships make most of their money from financing. Lately, they've been doing that with how crazy the car market's been, which is not cool. But we know that car dealerships make most of their money from financing versus the spread on the car.

Of cash, yep, yep, yep. So it is frustrating out there, but it's not a deal breaker. I would just literally not go to that dealership and go, all right, I'm gonna take my business elsewhere. That's right. And the key here to George is cash.

Yes. Paying cash. And not a briefcase of cash because people have tried that. And I'm like, no, you don't want to take $20,000 in cold, hard cash. Yes. Paying cash. And not a briefcase of cash because people have tried that. And I'm like, no, you don't want to take $20,000 in cold hard cash. Yeah, yeah, yeah.

We're talking about just money you have in your bank. Yes, yes. And what's crazy is a lot of the times you can use a debit card if you clear it with your bank first that there's a large transaction coming.

You can also do a cashier's check or a money order. Yeah. And you can take that cashier's check and if the price ends up being a little more, you can cover the difference with cash or your debit card. Yep, absolutely. But it's the car loan part of our job. When we talk to people that have taken money, you know, they've taken out a loan to pay for a car. It is one of the more frustrating

debts, I think, because your car is going down in value and you're paying interest on something that is going down in value. And interest rates are sky high right now for cars. Yes, yes. It's wild. Especially used cars. Where you can pay cash. If you're going to be replacing your car,

save up and pay for it. It may not be the most beautiful car in the world. It may not be your favorite car, but at least you're paying cash for it. So it's so frustrating because to America, it's like, it's our thing. We love our cars. And it says something about us. We have this pride, this dignity in our cars. And I'm like, it's not worth the sleepless nights and the living paycheck to paycheck or where that $700, $800, $900 car payment every month could be going for

investing and actually letting that money work for you versus working for the bank. Absolutely. And people always come at us, Rachel, going, there's no such thing as a beater car. You can't find a car under $15,000. Yes, you can. Just go to any car, go to Auto Trader and then sort low to high within a 50 mile radius. And I promise you now, again, they're not going to be the most beautiful cars. It's probably going to be 10, 15 years old. It might have 100,000 miles. But guess what? Cars can go for like 300,000 or old. It might have 100,000 miles, but guess what? Cars can go for like 300,000 or more. To a Honda Civic, a Toyota Camry. Love a Civic. Love a Camry. I'm here for it, Rachel. Be smart. Don't go into debt for a car. I know it's a wild time and you think

you deserve that car, but I think you need to earn it and just drive right now. Drive like no one else until you can drive like no one else. That's how it goes. This is The Ramsey Show. I'm George Camel, joined by Rachel Cruz this hour. This is The Ramsey Show. Open phones at 888-825-5225. If you've been listening to this show and you're confused maybe about some of the lingo we use, we're talking about the baby steps and gazelle intensity. Well, our team has created a really great tool so that you can dive deeper. And if you just go to ramsaysolutions.com and hit the get started button, we will help you figure out the best next step for your financial journey based on exactly where you're at today. Just go to ramsaysolutions.com and click on get started.

Sandra joins us up next in Portland, Maine. Sandra, welcome to the show. Hi, George. Hi, Rachel. Thank you so much for taking my call. Absolutely. How can we help? Well, I just wanted to get your advice. Last year, my husband and I had to use some of our emergency funds to purchase a new car, well, a new-to-us car, and we've been investing and trying to replenish that emergency fund simultaneously, and it's taking us a little bit longer than we like. So my question is, in order for the process to go faster, we would stop the investing and just fully fund the emergency fund again.

But we're nervous doing that. We're a little older. We're 47. We just started investing a couple years ago. And we don't want to stop. We really enjoy it. So we just wanted to get your take on it. If you think it's a big deal stopping for what would be maybe four months, four to five months, or just trying to do both of them at the same time? Well, to answer your question, Sandra, no, it is not going to be a big deal if you guys pause for four to five months.

And in fact, if you guys had consumer debt, there's people your age that we tell to pause while they pay off debt, which could be a two-year journey. So this is very, you know, very short term. You are going to be totally fine. And I think it's more it's more into your benefit right now. And then for the next 15 years, just to have cash stashed away in an emergency fund, then your retirement right this moment. Right. So kind of even more of the present looking at taking care of that is going to be more beneficial to you to have cash available if something were to happen to you guys or your jobs or health or whatever it may be that you have that money versus it sitting in a 401k. So having some of that

emergency fund is really, it's really big. That's why we have it at Baby Step 3. So I would pause. But also I would be curious, you know, since it's just going to take you guys maybe four months, is there places in your budget that you can just cut and or maybe earn some extra income or just do something to do that quickly? Because even there's a level of it's just more annoyance of going to HR and going and having to pause your retirement, you know, like the logistics. I just wonder if there's something y'all can do in the next 30, 60 days just to get it funded really quickly. Oh, I'm sure. I'm sure we could go back to what we were doing in Baby Step 2. But as you know, that was very hard and we can do it and we would if... Well, I think that's what's causing y'all not to have the emergency fund though, Sandra. I think that you guys have, you're living like you're in Baby Steps 4, 5, and six, but you're not there yet. And so that intensity still,

I would push for that because you're technically still on baby step three. Again, not for long. So even take a month or two months and do your every dollar budget and be like, okay, what if we paused all of our subscriptions? What if we didn't go out to eat? Like, yeah, for 60 days, what if we just pulled everything back, put all that extra cash and then we can keep moving on? You know, it's going to just be a blip, but it's going to be you guys saying, oh man, we're going to have to be uncomfortable

for 60 days. Yeah. And here's the problem is people get comfortable when they're already investing and they still have some work to do on the debt or emergency fund side. So the reason I like pausing the investments is it will cause you to move faster because you've got a fire under you now to get back to investing

because of how much you love it. So I like having something that is fueling me to keep going. I think we need that as humans for our psyche. Otherwise, we just love the comfort of going, huh, we're fine, we're investing, we'll get the emergency fund when we get there, and then we're frustrated because we're not where we want to be. I'm curious, Sandra, are you guys on the more of the three month or the six month side that you're wanting to save for?

We save on the six month side. Okay. So you guys have what saved now? Three months? We have 13,000. So yeah, I think that's about half. It'll be about, okay. So about three months worth. Do you guys have kids? What kind of careers are you in? We do have children. One is already out of the house, and the other graduates in a month. Their college is already paid for. And as far as careers, we are in the same career we've been in for 30 years, so we're stable in our careers.

I mean, honestly, Sandra, you guys could just be good with three months. I'm not trying to get you out of this. You could just kind of add to it slowly and get there over time. I mean, like, I don't know. I would just, maybe you add a few thousand dollars more just for some buffer.

But I mean, we say three to six months and we say on the three month side, it's honestly you guys, it's people that have stable incomes that, I mean, your children are more grown and gone. You don't have like little ones running around it's honestly you guys it's people that have stable incomes uh that you know may i mean your children are more grown and gone you don't have like little ones uh running around that you're having to pay for daycare and all of that um so the more stable your life is is where you can lean more on that three months six month is more yeah you have a you know i i always feel like if you're

a young family with lots of kids if your income is commission-based and it could go up and down if you're in a field of work that you know maybe, maybe there's jobs, I don't know, it's a little bit more. Prone to layoffs. Yeah, I don't know. You know, you would lean more six months. So, you guys may be just okay with the three months, Sandra. I think that that's... What's your household income? About $130,000. Okay. And what's in the nest egg currently?

You mean in retirement? Yes. Well, we just started two years ago, so it's not a lot, but we have about 20,000 in our Roth. I'm sorry, we have about 20,000, and that includes our Roth and my husband's 401k. That's great. Cool. And you're going to still, I mean, you guys are still young. So you've got another, what, 15, 20 years of career to keep investing and keep moving.

And you're going to pay off the house and be able to invest even more then and do catch-up contributions. Yeah. Yeah. That's the plan. So I would map it out. Thank you so much. Yeah. I would look towards that future and you can use our investment calculator at ramseysolutions.com.

Get with a SmartVestor Pro on our website in your area, a financial advisor who can walk you through this and give you some peace. Because right now it just feels like we haven't been investing and we're not gonna be able to retire versus just putting it all on paper and going, if we just stay this path and follow these baby steps, what will happen? Yeah. And my guess is you're going to be baby steps millionaires. You'll be fine. And you'll be fine in retirement with a paid for house and probably a million bucks in the bank. That makes me feel good. Great job, Sandra. You're doing great. Should we try to take a quick one here, Rachel? All right, Tommy, let's get to them in Hartford, Connecticut. What's going on?

All right, I'll be quick for you. So here's the little lowdown. My wife and I make a household income of about $340,000. We just got married about three months ago and we're looking to purchase our first home. Awesome. Congratulations. Oh, thank you. Thank you. So my question would be, would you recommend buying a house for about $525,000, but we need some cosmetic updates and like some painting and just some, uh, some other minor tweaks, or would you recommend going into a paying a little bit more like 625 for a more move-in ready house that's more prepared for like a family? Um, I guess my question would be like, what would you suggest doing and what would be more valuable, uh, to resell in about seven to

10 years if we decided to maybe upgrade a home. Well, that's very dependent on the area specifically of those houses. How much do you guys have saved currently? Both in the same area. Same area. Okay. What's, so your income is 340. How much do you guys have saved currently for the down payment? Uh, we have in savings, we have about a hundred thousand. Okay. So my guess is if you're going to do a 15-year fixed, which is the only one I'd recommend, where the payments no more than 25% of after-tax income, how much down payment would you need on, let's say, that fixer-up?

You would need roughly $85,000 to $90,000 probably. Down payment? Oh, down payment. So probably like $140,000. Okay. So we're $40,000 away from the cheaper house. And then how much more to get the move-in ready house? That'd be about $170,000 most likely.

Okay. So there's the gap to me is what's the time difference between the two and which one do we want more? And are we willing to wait to save up the higher amount? Okay. I don't think there's a right or wrong here, Rachel. No, I don't. Yeah, I think it's whatever you guys want.

It's probably the difference with a few months making $340,000. Yeah, and honestly, I mean, usually your newer homes, there's less to do, less maintenance from a traditional sense. And we'll probably appreciate more. Yeah, so I would almost lean that if it's just a $30,000 difference for you guys to save. But I don't know if that's where I lean. But I think whatever, I mean, maybe the old house has character and you guys love that look.

And it's kind of just a preference. But make sure you do it with those parameters and you'll be all right. Thanks so much for the call. That puts this hour of The Ramsey Show in the books. Hey, it's George Camel. If you like what you heard in this episode and want to know more about getting started on the Ramsey Baby Steps,

go to ramseysolutions.com and click on the Get Started button. We'll help you figure out the best next step for you based on your specific situation. That's ramseysolutions.com and click Get Started.