The Ramsey Show - App - Why Real Estate Investing Is Not “Passive Income” (Hour 1)

Episode Date: October 6, 2022

George Kamel & Rachel Cruze discuss: Buying a house in the current market, Selling a car to get out of debt, How much money is enough to retire on, Graham Stephan's trashed rental property (and why "passive income" is a myth), Paying off student loans, What to do with company stocks when you leave the company. 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/3nInETX 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

Девочка-пай Live from the headquarters of Ramsey Solutions, broadcasting from the pods moving and storage studios, this is The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm George Campbell, joined this hour by the Rachel Cruz, and we are here to take your calls, America. The number is 888-825-5225. The number again is 888-825-5225. You call up, we'll talk about budgeting and debt and how to stop keeping up with the Joneses and what's going on with this housing market. We are here for you. And Rachel, today is a momentous day because we just released a brand new episode of our new podcast, Smart Money Happy Hour.

We should clink the glasses right there. We should. Here, George, do it. This is what you'll hear at the intro of that podcast. This is Smart Money Happy Hour. That was a sad one. It was not great. Not great. Not great. It didn't really work. But you know, we tried. You know what today's episode is, Rachel?

It is... Disney adults. All about Disney adults. Disney trauma and how they priced out the middle class. Those of you who have been to Disney lately, you know exactly what we're talking about. It's gotten very expensive. We have a shameless testimony from a real life Disney adult on our team. I know. We pulled her shameless testimony from a real life Disney adult on our team.

And we pulled her in halfway through the recording. I share my personal Disney trauma, which I unpacked live. It was almost like live therapy, Rachel. Thanks for being there with me. It was really good. I'm glad I could ask the questions to get to the heart of the issue, George, for you. You dug in. No, but it's a fun podcast. If you haven't listened to it, make sure you do and subscribe because we just bring real life things that are happening and how it involves your money. So we've enjoyed it. That was the goal. I know.

And people have said that it is the show the Ramsey Network has been missing. Wow. I've seen that a few times. That's very kind. Yes. So I'm not going to- Thanks to producer James for leaving that review. We appreciate him.

No, we've loved seeing the reviews and the people just want that casual conversation that feels like they're hanging out with friends. It's not stuffy. We're just having a good time. Very authentic. Yep. Probably the most authentic version. Not a lot of editing.

Almost too little editing. I kind of wish they'd edit out parts where I screwed up, but hey, that's part of the entertainment. Love it. All right, let's get to the phones. Amanda joins us up first in Charlotte, North Carolina. Amanda, welcome to the show. Hey, good afternoon. How's it going? Pretty great, pretty great. Yeah, so I just have a question

looking for like some reassurance or maybe not so much of reassurance regarding purchasing a home next month. My husband is a regular listener of you guys, and he's recently pulled me in, and we've become like big fans together. And I'm like, well, maybe we just need to reach out and get their input, their take, if we're making the right decision on this. So do you feel like financially this is unwise right now?

So I think, so I haven't had any doubts or anything leading up to this until we started listening to y'all's podcast. Our advice. And now you're like, oh no. Yeah. Maybe, maybe, maybe we should revisit this. Well, hit us with some numbers here. Yeah. So let me start by saying that this will be our second home. We sold our first house. It was three beds, two baths for a good profit earlier this year in March. Sorry, around in April. So we bought it in March 2020.

Great interest rate for $305,000, and we sold it for $500,000 this past April. So that was a pretty good return, yes. The reason that we decided to sell is because we need, we don't have children yet. We're in our early twenties and we needed more space to grow into, especially since those three beds and from our initial house really turned, one was taken away to become an office because now we both since COVID work remotely. Um, so we need office space. Um, and then also our family, they all live like out of town. So whenever they visit, it's not going to be like, Hey,

I'm here for a few hours. See you. Bye. It's going to be an overnight type of thing, you know? So we wanted to say it's presentable, comfortable. Um, and yeah, to just grow into. So, um, you guys have debt on that no we don't you know we don't we don't have any debt and you're renting all my student loans all right yes so currently yeah so we've been renting since we uh sold back in april the house that we're building should be finished um next month we have 22 $225,000 in savings. Our take-home income after taxes is about $8930.

And we have good credit. We also invest each week in stocks. So I feel like we're pretty financially sound right now. But going into the TALs, we locked in our mortgage rate. Mortgage rates right now but uh going into the house you know we locked in our mortgage rate mortgage rate right now rates right now are crazy um we when we first bought in 2020 we had like a three percent you know first time home buyers down uh now our mortgage rate is 5.125 i know that we can refinance like next year you know when the time comes, but that rate is higher. What's the house cost?

The new one. Comparatively. The house cost is $615,000. Okay. And how much are you going to put down of the $225,000? Yes. Well, we've already put down $34,000 earlier this year, and we're planning to put down an additional $180,000 from savings.

And our monthly payment would be total, not just principal, but total would be $2635. And that's on a 30-year or 15? 30. Okay. Well, I mean, you're asking us for advice. It seems like this train has left the station. Has it? I'm not sure. You can't back out now. I just want to make sure. Well, contractually, are you able to?

The thing is, is that. Yeah. What's stressing you out, Amanda? Amanda, what's. We're okay. Mm-hmm. Okay. What's making you question everything?

Because this is such a, like, a large amount of money that we currently have in savings. And, like, the world is just crazy. And I just want to make sure that this is like a good investment to the home or if we should and they're like I know like the debt not the debt but is there like a ratio you guys use for like your yes I crunched the numbers for you it's about 30 percent of your take-home pay but that's on a 30 year if it was on a 15 year which is the only mortgage we'd ever recommend it would be much higher so it is a lot of your take-home pay. Hopefully your incomes go up. You're also not on fire. This is not going to tank you guys. It's just going to be hard to

have margin to do other things like invest 15% of your income into retirement and save for college and pay off the house early. And so, so far, a lot of your discussion has been emotionally charged and there's not enough room, but we don't have kids yet. But when we do, when the parents are coming, they can't get a hotel. We got to we got it's just been a lot of just emotional chaos instead of logical so that's my biggest pushback is not you didn't need a house it was just the reasons you jumped into this sure yeah that's that's fair yeah yeah so go on well and amanda where you guys are at we had a call yesterday that similar thing they were building interest rate got too crazy. Now they can't afford the house.

I mean, it's like this whole thing. So yeah, the numbers are kind of tight. I mean, for you guys, for what we would normally say, yeah, this is a smart move. You're a little bit above that. I would still keep three to, I would put six months in your emergency fund out of that $225,000. Keep six months aside just to give you some more peace of mind. Hopefully, your incomes will come up to meet this. But also, Amanda, at the end of the day, yes, your home is a huge financial investment. It's a huge purchase. But if you guys get a year into this and you're like, God, we got to get out, you can always sell it.

I mean, it's not ideal, but you're not attached to everything in life. And so maybe it's even got equity since you guys have been building. But, yeah, your reasoning's why to do it. But, hey, you can enjoy it. That's true. Well, you know, the house is not on fire, and it's not done being built yet, so keep saving and try to pay this thing off as quickly as possible. This is The Ramsey Show give us a call 888-825-5225 well I feel like right now is the time of year when it's make or break when it comes to our goals.

We had a reset when school started again, but we're headed into a holiday season. And let's be real, it gets hard to stay motivated. And we all have goals, whether it's to find a better job, make more money, pay off some debt, build stronger relationships. And it can be hard to keep that momentum going. But here's the good news. Coming up in a couple of weeks, we have one of our biggest events, Smart Conference. We're headed to Dallas, Texas for a day-long jam-packed event where you're going to get advice from leading experts on money, personal growth, career, mental health, and your marriage. You're going to leave with all the knowledge and motivation you

need to reach your goals and live the life you want. People come from all over the country to join us for this event. So join me and the rest of the Ramsey personalities, Dave Ramsey, Dr. John Deloney, Ken Coleman, Christina Ellis, Rachel Cruz, and get a plan for your money, your relationships, your career, and yourself, your personal growth. So join us live, in person, October 22nd. Get your passes before they sell out

at ramseysolutions.com slash events. Cody joins us up next in Atlanta, Georgia. Cody, welcome to The Ramsey Show. Thank you. How are you guys doing? Doing great. How can we help? Hey, I'm trying to find out whether or not I need to pretty much sell my car. I played the credit card game pretty stupidly, racked up, you know, good chunk, has paid it all off, have about $8,000 in cash left, have another in total between me and my wife, $7,000 in student loans. And combined, we make

about 80. And we just had a kid about four months ago. And we owe, thank you, thank you, we owe about $25,000 on a brand new 2022. Wow. What car is it? Chevy Equinox. Okay. And what's your total debt? All I heard was the student loans in there.

Nothing. We don't own a house. The car is our only debt. Oh, the car is the only debt. Okay, you had mentioned student loans, but I guess you said you paid that off? No, we had $7,000 in student loans. We paid off all the credit cards. Okay, let's just quick definition of debt.

Owing anything to anyone for any reason. Is there any other debt you want to tell us about? I think he said it. I think he said $7,000 in student loans. Yeah, but then I said, is that it? He said it's just a car. That's all I get. I'm sticking up for you, Cody. Okay, Cody. I'm just trying to get my ducks in a row here. So, we got $7,000 in student loans, $25,000 on the car, and you're wondering if you should sell the car to get out of all this debt. I feel like I'm asking a stupid question. No, there's no stupid questions. No, you're not at all.

I want to get my details straight so we can help you. Yeah, so... What's the car worth? That's the loan, trade-in value. What I owe on the loan is what it's worth now. Okay, so it's equal. It's worth $25, you owe $25. Correct. It would be

a loss for me. I'm just wondering, especially in today's market, especially since we have, besides the student loans, we have no other debt. But we also want to save up for a house, so it's kind of like, okay, what do we do?

Especially, we've even thought about selling a car and not having a car. We both work from home. We're like, if there's an emergency, call 911. No, Cody. Y'all have a kid. So this is your only car?

Yes. Oh, yeah. No, we need a car. I would, yeah. I'm going to put a car up there with like at least one. At least one. Now you have $8,000 in the bank,

you said, right? Correct. So for me, Cody, the rule of thumb always is if you can't pay off your car in 18 to 24 months, you need to sell it. Do you think you guys can pay off $25,000 in debt in a year, two year and a half? We probably could, but we want to do it sooner. Okay, so that's my question so you could keep the car yeah and you guys could pay it off you know total two years would be the the most but maybe if you could do it in a year year and a half but if you don't want to go through the pain of all of that

yeah you have an asset right there that you can trade in take some of the savings you guys would get a a beater it would not be a great car but you're talking about selling the car anyway so i don't think you're too concerned with it uh and then and then throw some money at the student loan get that paid off then then save back up to pay for a car so all of that would be the route you would go versus just decreasing your lifestyle dramatically um to pay it off but you're going to be decreasing your lifestyle anyways, Cody, to, uh, to get some money to,

you know, get that beater and to pay off your student loans and then to save up for another car if you want to replace the beater. So, yeah. So to recap, Cody, what would we do today?

If you decide I'm going to sell this car, sell the car for 25, the loan's gone. Now take maybe 7,000 of the8,000 you have in the bank, go get yourself a reliable used car, and then you're at baby step two, paying off those $7,000 in student loans, and you can do that much more quickly, right? We're talking a few months.

Correct, yeah. So it speeds up the process by a year and a half. Yep. Which I think excites you more at this point, which is great. Yeah, well, especially because we don't have a ton in retirement or 401k, which, you know. Yep. Almost our 30s kind of scares us a little.

Well, you got time, man. You guys are still young. You got this. So I think you know what to do. Anytime someone's willing to sell the car, I'm like, all right, that's a hard emotional place to get to. And if willing to sell the car, I'm like, all right, that's a hard emotional place to get to.

And if it speeds up the journey, because the journey's tough, two years of really sacrificing versus- For a car, yeah. A car is a reversible decision in some points because you can just get rid of it. I can't sell my student loans. I can't sell the piece of paper and get money back. So that is the nice thing about that. But we're wishing you the best, Cody.

Mike joins us up next in Hartford, Connecticut. Mike, welcome to The Ramsey Show. Hey, thank you for having me. Sure. How can we help today? So basically, I'm in a little bit of a different situation than I usually hear on here, but I'm 28 years old. I make plenty of money. I save probably 40- plus percent of my income every

month. What I'm trying to figure out is when can I stop working? I mean, even if I had to get a part-time job or whatever, when do I have enough to retire? I mean, I do the math and it's like, I won't be, I'll be like 50, I'll be 55 before I can actually walk away. Well, it depends on your lifestyle, of course. And so it just depends on how much do you need to live on per year. And then we can back that out and say, how much do we need to have in our nest egg in order to withdraw that much per year and not run out? So do you have those numbers?

I could probably have everything paid off, and I could probably comfortably live on, say, $60,000 a year. 60? I could probably have everything paid off in the next60,000 a year. $60,000? I could probably have everything paid off in the next 10 years or so. House and everything? Do you have any other debt? I have a house, I have a car, and those are my two pieces of debt. Okay. Well, one thing is, our plan teaches to do 15% of your income into retirement once you have all your debt paid off and your emergency fund,

and it sounds like right now you're going all in on investing. Yeah. Yeah. Instead of the debt paying off. So you're saying like other than maybe my 401k, you're saying instead of investing at all, pay off that house as quickly as possible? Exactly. Up to 15%, Mike. So we'd say even pause everything, pay off the car, all your consumer debt needs to be gone, save up some cash on the side, which you've done for about three to six months of expenses, and then save 15% of your income into retirement. And then there's like the, you know, the whole fire movement, George, about, you know, retiring early and all of that. And so yeah, retirement,

we always say it's a number, it's not an age. And so you may get to a point, Mike, that you're like, man, I'm going to keep investing 40% of my income or something, you know, after my house is paid off, you want to pay off the house and then maybe you go crazy and invest a ton and you can retire early depending on if the numbers work out. Um, I just know from age 28 to age 58, your standard of living is probably going to look different. So you probably have 60 in your head, but between now and then life's probably going to happen. Maybe you'll get married. Maybe you have kids, you have to pay for college. I mean, stuff just happens. And so the whole fire

movement of that whole, you know, um, retiring early is it's cool because it's like, Hey, let's just like save a ton, not live a lot of our, on our lifestyle so that we can quit work and we can enjoy life and all that. So there's a great motivators for that. And I think it's a really cool idea. I also just think that things change so much during that time. So I just wouldn't, I wouldn't rush into it, but I would have from how you're talking, Mike, I feel like you would be able to retire early, but running the numbers to know what you're going to live off of, but knowing that that's probably going to change too. That intentionality at 28, we'll get you there. And we have a great calculator. Go to ramseysolutions.com, click on free tools, check out our retirement calculator. You can plug in

all your numbers and figure out exactly when you can have that dream retirement. It may look like 1.5 million. And so now we can reverse engineer it and go, all right, how soon can we get there in that nest egg? But it all involves getting out of debt and staying out of debt. Thanks for the call, Mike. Appreciate it. This is The Ramsey Show. I'm Ramsey personality, George Camel, joined today by Rachel Cruz. We are co-hosts of The Ramsey Show, but also co-hosts of the newest show on The Ramsey Network, Smart Money Happy Hour. Be sure to check that out wherever you listen to podcasts. It's a fun, casual conversation about money, pop culture,

entertainment. There's a lot of laughter, a lot of stories that you would never hear on a show like this. This is a family show here on The Ramsey show. Things go off the rails in Smart Money Happy Hour. It's a good time. It is fun. It's enjoyable. So check that out. So Rachel, we hear a lot in social media about this passive income. Yes. The kids have heard about this now. Buzzword. They're clamoring for this passive income where you just wake up and money shows up in your bank account. And it's just there. It sounds great, really. That sounds wonderful. But we know that passive income, especially when it comes to real estate, because that's one of the most touted. Some of the most touted advice on social media is the best passive income is real estate. And you know, we love real estate around here when done the

right way. Yeah, not this nothing down real estate and just get whoever you can in the door and start collecting checks. It's never that simple. Nope. And our friend Graham Stephan, who has been on the show recently, one of the biggest personal finance YouTubers out there, he's big into real estate. That's how he made his millions. He's a super young guy, maybe a year or two younger than us. And he posted a video on his YouTube channel titled, My Tenant Just Trashed My House. And we've got a video of what the inside of that house looks like. So if you're watching on YouTube, you can peruse that. But we'll give you the play-by-play. It's not pretty.

It looks like a college dorm room tenant. Oh, look at that. Just crap everywhere. Kitchen's destroyed. He's walking through pointing everything out. And so these people just moved out? Is that what the story? I hope to God they don't live there anymore.

I'm guessing they were evicted. Look at all of that stuff in the closet. Oh. It looks like a hoarder nightmare situation. I'm wondering if they moved out and then they left all of this in the rental and they're like, see ya. Oh, it's so gross. That's what happened, James is saying. Yeah, James is agreeing.

Oh, man. That's a lot of work. in the rental and they're like see ya that's what happened james is saying james is agreeing oh man this is a lot of work the dark reality of passive income everywhere stuff all in every cabinet oh poor every door oh you know what's extra sad this was a long-term tenant of his 10 years he never raised the rent because they were such a good tenant up until they apparently weren't well until they left slash didn't because they left all their crap behind. The nightmare just continues. Just stuff everywhere. I mean, the amount of clean, he's going to need a cleanup crew just to deal with this mess. Yes. Well, you take the security deposit if you ever got one 10 years ago.

That's for sure. That will start to cover it. Keep that. So the advice around real estate investing, ours sounds insane, and it's pay cash for your investment properties because you're not factoring in risk. Yep. And the hope is I'm going to put nothing down and I'm going to charge them more rent than the mortgage is worth. I'm going to take the spread and I'm going to make $5,000 a year, $10,000 a year, right?

That's usually the margins when people call into the show after they've done everything. After all of their expenses, you're not making a full-time income from one property. That's right. So yeah. So starting off small and, you know, obviously this market looks a whole lot different and it's hard to get a good deal, but always mostly the, for me buying real estate, when you go into invest into it the money's made at the sale like you like when you buy a property that's where the equity should be you should be able to get a deal on that such a good deal you didn't pay market rate no so you already have automatic equity um yeah and start small and again i know this was in a different world but even

for for winston uh and myself my husband and i when we we bought a condo it was in short sale in Nashville over in Nippers Corner area if you know where that is the um Old Hickory Boulevard and uh I don't know but you Nashville people know and yeah we bought it in short sale and I mean it was a few tens of thousands of dollars back then it wasn't a lot and it was kind of it was nasty. So we had to go in and kind of fix it up. And we rented it and kept it for about eight years and got so much equity and ended up selling it to help pay for the house that we built. And it was, it was, it was a great, it was a great experience, mostly because we paid cash.

We got a deal on sale. We didn't go big, right? It was just a condo, but it was in a growing part of Nashville. It wasn't really in a hot area, but it was in a growing area. And then we were able to use that asset later for our primary residence when we wanted to build

and helped use that to fund it. So all that to say, it can be done well if you start small. It doesn't have to be big and grand. And right now it's probably not the market to find a great deal. There might be some foreclosures and short sales coming up, but as of now, it's probably not a great market to get a great deal. Yeah. And a lot of people are looking into what's called house hacking, which is not really a hack. You just buy a house and then someone else lives there too,

and they help cover the mortgage. So it's not a new concept. You just buy a house and then someone else lives there too. Yeah. And they help cover the mortgage. So it's not a new concept. And you've seen a lot of people want to buy duplexes and triplexes. And live in one. Live in one and rent the others out. But guess what? You're not the first one to think of that. And so they're actually in really high demand, which means people are going to be willing

to pay more than you are to get that property, which means you're not getting a deal. So it's always, it sounds better in theory and on paper than it is in reality. And you're not thinking about, well, what if the HVAC goes out? And also I have an HVAC too, I've got to worry about. So you better have, that house has to have its own emergency fund to cover those repairs. And you better have good landlord insurance to cover more than just the property. There's a lot of risk involved that that can help cover. And on top of that, you can't guarantee there's going to be a renter. No. And you can't guarantee they're going to pay and take care of your property. And we saw this with COVID. There's a moratorium on evictions. Yeah. So you could just not pay a rent and the landlord can't do

anything about it. Yes. So yeah, there's, you know, again, we love real estate when it comes to investing. I think it's a really smart thing. I think when you're to the point that you're diversifying more than just retirement accounts, I think it's great. I mean, because it goes up in value. It's a great, I mean, it is a great investment, but it's just you want to move a whole lot slower, 10 times slower than what the culture is saying right now. The culture is like, get in. It's not a big deal.

And then if you have your primary mortgage and now this mortgage, and then someone doesn't pay and then the HOA comes in. I mean, it's just, it can be a disaster. And it's a part-time job. I mean, if you have tenants, like you're at their beck and call if something happens as the landlord. And so you just have to know all of that going in. So it's a lot of work and a lot of dedication. It's worth it if you do it the right way. But that's the problem is it seems like everyone's fast tracking it and you're adding risk when you go into debt for it. And even paying a cut to a property management company, it's still not passive. There's still work to be done. There's still a lot of communication back and forth and you got to keep your eye on these properties. I've got family friends that didn't do their due diligence when screening tenants, and they didn't have a bank account, and they stopped paying rent, and then they can't evict

them, and then they've set up drug rooms in there. Stop it. You just don't know what these tenants are doing. It's a true story, Rachel. That's all I can disclose at this time. Oh, no. But Graham's video is about 10 minutes long, but we just wanted to play you his quick takeaway at the end of this horrific situation.

Let's see that clip. I gotta say, even with a management company, owning a rental property is not truly passive income, and it requires a consistent amount of work if you're expected to be successful at it. There you go. That sums it up. All in a nutshell.

That sums it up. Thank you so much, Graham, and congrats on all the success he's had in the real estate world. Not with your current house, though. Sorry about that. Even when you think you're a great tenant, and we want to believe the best of's had in the real estate world. Not with your current house though. Sorry about that. Even when you think they're a great tenant. And we want to believe the best of people as landlords.

There's great tenants out there. We tell you people, everyone listening, rent if you have debt and all that. So I think renting is great. And there are great tenants out there. But no one treats it as well as you are. No. It's not their house. For sure.

They don't live there. It's just like a rental car. You know when we travel in a rental car, you just can, I don't know, rental cars, you gotta just. Rachel just throwing wrappers in the back. You just drive it like you wouldn't drive your own. And your minivan has no goldfish on the floor. You keep that thing clean.

Spick and span. Wow. Spick and span. Well, there you go. If you want to get into real estate, by the way, this is the time and place to do it. You got to be completely debt free, home and everything, and then save up cash and buy it, that investment property. And I know that's, you're like, George, that's a 10 year, it may be a 10 year journey, but guess what? Your risk is so minimal comparatively to having a giant

mortgage and you've got to make that payment every month that mortgage lender, whether or not your tenant pays you or not. So that's a scary situation to be in. So do this wisely and don't just blindly follow some guy on TikTok who's doing the BRRRR method and we're just going to buy with nothing down and then we're going to refinance it, do the cash out and put that on the next one. It sounds so fancy and in reality reality it's how a lot of people go broke and stay broke so don't do this stuff do it the slow way be a crock pot in a world full of microwaves because it only takes one extra second in that in that microwave rachel for that popcorn to burn and everyone thinks my popcorn's not gonna burn no no no mine's good to go never know don't do it crock pot it

rachel did this this this week with chili. Turned out great, didn't it? So good. All day. There you go, America. This is The Ramsey Show. I'm George Camel, host of the Fine Print and Entree Leadership Podcast, joined by Rachel Cruz, host of The Rachel Cruz Show. And we are both co-hosts of this show and Smart Money Happy Hour.

And we're excited to take your calls, 888-825-5225. Valerie joins us up next in San Antonio. Valerie, welcome to the show. Hi, thank you. Hey, how can we help today? Hey, I just have a kind of, I'm hoping to quit question. Me and my husband have about six student loans. And when we did an IDR repayment, it gave us a zero payment because of our family size to our income. And so this was before the, you know, forbearance. So I'm just wondering, we have them in order from lowest to largest,

but we also have a car payment beyond those. And since if we're paying on them, we're not gaining any traction, I'm just wondering, do we still keep that going even though we're not gaining any momentum? Excuse me, because there's no minimum payment. Well, the problem with these programs is that they are not a blessing. Just because it's zero dollars doesn't mean that that interest isn't causing that to balloon. And so I would, if I'm you, I'm getting out of this program so that I can put as much on these loans as I can. Can you get out? Okay. Yeah, we can. And it's not a problem to do that. I just wanted to make

sure that that was the right thing to do per se. Yeah. Honestly, from what I've found looking into this, you're talking about income-based repayment programs for those listening. And it sounds great in theory because it's based on your income. But the problem is you're not even touching the principal. You're just scraping by trying to get the interest. And what happens is that $60,000 loan becomes an $80,000 loan. And now we're going, how am I going to ever get out of this thing? How much do you guys make, Valerie? It's like right over $100,000.

Okay. And you have six student loans total you said right yes at the time that we had done the idr we weren't making that but like our family size grew and also our income has grown um which has been a blessing but we haven't really made any progress on the student loans since then and we've been paying everything else off and so now we're at the point to start the student loans those are the next in the snowball um but i didn't know since it you know shows our payment is zero do we still go ahead and attack that first yeah i would i would say what george said i would go ahead and just get out of that program so that you're making

minimum payments on everything and you're at least staying current and you're not letting yeah you're making minimum payments on everything and you're at least staying current and you're not letting, yeah, you're paying on the principal and you're not letting, you know, this interest just absolutely accrue. Like you're staying up to date with them. And then that way, when you get to each one, you've been paying all along, which is going to help the debt snowball go that much faster. Okay, great. That's what I needed to know. Thank you so much for your help. I really appreciate it. Yeah, absolutely. Thank you. Thanks, great. That's what I needed to know. Thank you so much for your help. I really appreciate it. Yeah, absolutely. Thank you. Thanks, Valerie. Yeah, that income-based repayment, it really grinds my gears, Rachel.

I'm sorry. Well, and it sounds good. I mean, like, you know, the idea behind it, I guess, is good. But then it ends up, yeah, with people, and it's like you're not even touching the interest. And some of them, they're not even touching the principal if you're doing what her example was. And it's like, oh, man, it's going to be so much more in the interest. And some of them, they're only touching the principal if you're doing what her example was. And it's like, oh man, it's going to be so much more in the end. If you're in that, get out as soon as you can and attack this debt. It's not going anywhere and it's only going to grow and it's going to become more unmanageable. And it's going to be scarier and scarier as that

thing grows. Amy joins us up next in Atlanta. Amy, welcome to the show. Hi, thanks for taking my call. I just have a question really quick. I currently work for a private tech company. I have stock options that are fully vested but not exercised and they're worth about $100,000 pre-tax. The company is currently in the process of creating an internal marketplace where the employees can buy and sell stock, but I'm considering a job change. So I'm not sure what I should do with my stock if I leave the company. What do you want to do? Do you have an angle you're going, I'd like to do this? Well, I'm thinking about selling all of it because I don't know, I won't be plugged into the company, so I won't know the health of the

business if I leave. And if they go under, then I lose all of that money. But I also don't know if they take off and go public, I might be losing out on millions of dollars. There's always the what if. And I used to, when I was like 18, I worked at the Apple store and so I got the employee stock purchase program and so I had some Apple stocks and I sold a bunch to help my debt-free journey

and now looking back, you're like, what if I held on to those and 15 years later, it would have been, you know, so there're like, what if I held on to those? And 15 years later, it would have been that. So there's always the what ifs. But I think about what's going to set me free tomorrow and set me up down the road. And hanging on to these, I don't think it's going to do that for you. So even if you weren't leaving the company, I would tell you to sell any vested stocks. Are you getting a discount?

Is this an employee stock purchase program situation? Yes. Yes, a deep discount. So you take that discount and then you sell it and you make your profit and then you go invest that in something a lot less volatile to where you're not going to lose sleep as you watch the company go up and down and up and down. Yeah, it's just putting on your eggs in one basket type mentality, Amy, versus we just love diversification.

And so there's less risk because your money is spread around. And with company stock, it is so easy just to go one track. But then what's scary, obviously, is like the ultimate, right? Enron or something happens. And it's like, oh, my gosh, all that. So there's just not a lot of risk when you just do kind of, you know, a boring mutual fund. I'd say boring, but it's the truth. It may not be as exciting.

But, yeah, I would dissolve the stocks if I were you. Do you have any financial goals? Do you have debt you want to pay off? Oh my goodness. Student loans. Student loans for days. How many student loans? What's the number?

What's the number on the student loans? $125. Is that all of your debt? No. My other debt's minimal. My truck's like $10,000. Yeah. I don't have much and I don't have credit card debt.

It's just the student loans. So think about going from 135 down to 35 tomorrow. Now, obviously you've got to set aside money for taxes. So it's going to be, you know, you're going to have more than that in loans, but that's going to set you up in an incredible way to get rid of all this debt. It's $800 a month for my student loan payment. So that would be really nice to get rid of that. My gosh. Yeah, absolutely. For sure. Well, I would see this as a gift, Amy. I mean, it's awesome. It can help jumpstart the debt-free journey for you. Absolutely. And don't look back. That's what I was thinking. I just wanted to make sure. Yes. Don't look back with regret, regardless of what this company does. And if it goes public and it goes Zoom, Zoom, you just go, good for them. And I'm debt-free,

and I'm happy too. There you go. Matthew joins us up next in Las Vegas. Matthew, welcome to the show. Thank you so much, sir. Appreciate it. How are you guys? We're doing great. How can we help today? So I am 31 years old.

I've been at my place of work for most of my adult life since I was 21. I work in health care out here in Las Vegas. I was recently offered a opportunity to pretty much almost double my income. A little bit of backstory is, I mean, why I stayed at this company that I'm at for so long. It's 10 to 15 minutes away.

I'm comfortable. This new opportunity would be almost, I want to say 45 minutes away. Um, it is at a, a place that, um, kind of cares about their employees more than where I'm at right now. Um, my biggest concern is I'm afraid to make the jump because I've been at this place so long. And so I kind of feel like, if you want to use an analogy, like a lion that the cage door is wide open, but he's too afraid to walk out that cage door to see what's on the other side, just because I've been at this place so long. So I'm calling you guys. I'm trying to get advice. I just had my first interview today. They made it seem that they're going to press forward in the hiring process. I should also add that I am newly married. My wife is very excited about this.

But again, it is a big commute, a new hospital setting. And so I guess I'm just afraid. Yeah. And Matthew, let me validate that feeling, though, because anytime we change anything in our lives, anything, and especially a job change, which is a big change that affects your entire day,

it's going to feel scary, Matthew, like it is because we are just, when we're comfortable in something, it's predictable. We know what's going to happen. And so that fear is very real and very valid.

Now, do we let that be the motivator for how we make decisions? No. And this 45-minute commute, hey, listen to a few podcasts. You're not going two hours away. 45 minutes, double your income. It's a great work environment, better than the one currently. Matthew, do it. Do it today, man. If you get the job, take it. And guess what? You can always move closer to work. It's amazing. And you're going to make mistakes, Matthew, and that's okay too. Okay? Learning curve. It's okay. But you're going to make mistakes, Matthew, and that's okay too. Okay, learning curve. It's okay. But don't let that fear dictate your decision making.

That puts this hour of The Ramsey Show in the books. Do you love a good day, Brandt? Want to see the latest Ramsey Show videos going viral? Check out your favorite moments from the Ramsey Show on YouTube. Go watch and subscribe to the Ramsey Show channel on YouTube.