The Ramsey Show - App - Will I Live Paycheck-to-Paycheck Forever? (Hour 3)

Episode Date: June 4, 2024

from ramsey network this is the ramsey show i'm your host jude horshaw joined by george camel we're taking your calls all hour long, 888-825-5225 if you want to talk. Let's head straight to the phone lines, George. I'm ready to get into it. How about you? I'm ready. All right. We got Hannah from New York City, New York. What's going on, Hannah? Hi. I'm just wondering what you do when you sort of reach a point of being stagnant in your finances. We've paid off all of our debt, but we have two young kids. And, you know, we have an emergency fund.

We have three months of savings. But now we're just paycheck to paycheck paying for daycare. And it's just we have the potential to send our daughter for another year to daycare. And, um, it's just, we, we have the potential to send our daughter for another year to daycare because she's like so close to the cutoff date that she really needs another year before going to public kindergarten. Um, but we, I just like can't deal with the fact that we are barely making ends meet and we're just hanging on and can't meet any savings goals. So it sounds like you were able to do all the debt-free, all the savings before the kids came along, right? And before they went to daycare. Yeah, we were very lucky that our parents set us up with very little debt.

So we didn't have that far to go in terms of paying off the debt. So it was mostly saving. We saved for a house. We bought a house. Okay. And then we saved and we had three months of savings, which we had to add to when we had kids because our expenses went up. But, you know, after that, that's it.

We basically haven't saved since we had kids. Got it. And what's you guys' income? We make about $132,000 combined after taxes. Okay. In New York, New York. Okay. In like a super expensive area. How much are you paying for daycare? Can I ask? Yeah, we pay about $2,500 a month for both kids and it's going to go up next year to be like closer to $3,000, which is like the cheapest you can find in the area. Yeah, that's about right. No, I'm not faulting you on that. And how many more years of daycare will you be paying for? So my oldest would need one more

year if we were to hold her back. And then my other one, because she also is right up against the cutoff because we got pregnant just at the perfect time would be she would need another three years okay so you'll free up one of them after a year but then you still have another two years after that right exactly for my younger one well you know life happens in seasons and if you're unable to make giant headway on baby steps five and six until those seasons are over, that's okay. It's not ideal. But the key is, are you able to still invest 15% while cash flowing? We can't do 15%.

Right now, we're just doing whatever our company matches. We're just meeting with the company match. So for me, I invest 6%. They match 6%. And for my husband, it's 4% and he matched and they matched 4%. Well, what's the trajectory look like for your careers? Um, I mean, my income has gone up like 40% in the past three years. Um, it'll probably go up more, but I think I'm kind of reaching a little bit of a peak. Um,

there, um, um, my husband is in line for a promotion next year. Um, so we're hoping to see his income go up by 15% or so next year. Um, and you know, there's, there's no necessary like cap. We're mid-level right now, so we could excel more. Yeah. Um, what about your housing expenses? Um, our mortgage, including property taxes is to about $2,200 a month. Okay. That's reasonable for your income.

We got like a tiny, tiny, tiny house at below 3% mortgage. So we're lucky in that regard. We just have really high property taxes. Is there anything else that's standing out? I mean, obviously- You guys are bringing home 11 grand a month. Obviously 2,500 toward daycare, 2,200 for the mortgage,

but there's still a good amount of wiggle room here. Is it lifestyle? We had a ton of medical expenses this year year we had a ton of emergency medical expenses one of my kids is high needs so she gets like a lot of private therapy what's that cost a month it could be 800 to 1500 okay okay um so it's significant okay still working down the 11K, trying to figure out what's the high ticket item. Here's the key. We're trying to help you find some margins so you can invest that 15%, have some money left over to enjoy life. And part of that is figuring out ways you can spend less and figuring out ways to make more. Those are the only two ways to create margin.

So you can do this exercise on your own with your spouse and lay out that every dollar budget. We'll gift it to you, the premium version with all the fancy features. But as you list it out, the question you want to ask is, do we need this? And can we do better? Even if that's insurance, I helped a friend here at work. She has had crappy insurance from Progressive for the last 10 years. And I went, hey, reshop it with Xander. She saved 80 bucks a month instantly with better coverage. And so things things like that you may not be thinking about or if you get a big tax refund every year change your withholdings to get more on your paycheck right well part of it is we were under withheld this year so you owe taxes oh well we owe we paid it from our savings okay because

but we it was about seven thousand dollars so that came out of your emergency fund that came out of our yeah of our three months you know did you replenish it no that's what I was like I'm struggling to to find that room to replenish it and I'm nervous um yeah I think George is right I think this is you guys going through because you do make a good income and yeah, you have a couple of your mortgages in a really good spot, but plenty of people have, you know, two kids in daycare and with you guys' income, you should be able to make this happen. I think it's you guys going through and seeing what are we spending money on? What can we cut back on?

And George said it earlier, and it's very true. Sometimes you're just in an expensive season, and you guys get to decide if you want to. That's what my husband says, and I just can't accept it. Well, I do think that if you go through your budget, you're going to be able to find some money. I really do think that. And it's going to be up to you guys saying, is this a necessity? Do we need this right now? Can we cut back? And then it's up to you guys if you want to decide, is there a way that we can

bring in some supplementary income? And if we do, are we willing to do that for the next year until one of these kids, you know, graduates up to kindergarten? Right. So that it's just tough, you know, but I do think with your with your income, you're going to find that money. It's going to take doing some research in every category, even with your child, you know, but I do think with your, with your income, you're going to find that money. It's going to take doing some research in every category, even with your, your child, you know, needing that therapy. Are there more affordable alternatives that we can look into through our health insurance? There's a telehealth, are there other things that we can do? And that's going to take some digging, but I feel like you do, you know, six or seven things and it all adds up and you go, oh my gosh, we freed up a thousand bucks. Now we can invest 15% and live off the rest and still attack our goals. And I just know seasons can turn into patterns

and it turns into, this is just our life. And I don't want you guys to end up there five years from now where nothing's changed. Yeah, I agree. I agree. And again, once you're debt free, it really does take away all of those kind of ankle biters that eat away at your margin. And so for most of us, it's our rent and our mortgage. That's number one. If you have daycare costs, that's easily number two. And an ultra high cost of living area, like New York City. They're in a very high cost of living area. You have to make high six figures in order to live in these areas.

Yeah. It's just a part of it. Yeah. And so I just wonder what else is what else could be eating away? That's kind of maybe normal to them. But if they go over it with a fine-tooth comb, they'll go Oh, maybe this isn't so and I'm at such a nerd. I find it fun, but I have no hobbies And so I don't encourage that Okay Honest moment from George and I regret regret it this is the ramsey show hey you're listening to the ramsey show i'm jade warshaw joined by george camel author of

breaking free from broke i should say best-selling author because that's very very important well we gotta throw that in there you know you're you're in there too jade money's not a math problem we launched around the same time. Listen, George, I'm gonna give props where props are due. Yours is like a full

size, large orange book. It's very aggressive. Mine's a little floppier. But you know what? It's about the content.

It's about the content. All I'm saying is get your copy today, Breaking Free from Broke. It's popping off. Or you can watch

George on his world-renowned youtube channel we are having a good time yeah you guys are doing for children of all ages and even adults of all ages adults of all ages anybody can enjoy it it doesn't matter your station in life it's there i know that because the boomers comment and they let me know we don't appreciate the boomer jokes and i go this is the problem you're you're only making me want to make more they're setting me have some fun they're setting them up. You're knocking them down. I love it. Well, hey, if you want us to answer your questions about your life and your money, you can give us a call. The number is

888-825-5225 and we'll help you out. We got Jim. He's in San Antonio, Texas. What's going on, Jim, can you do us a favor and talk directly into your phone? We're having a hard time hearing you. It's a little crusty. I'm sorry. I thought I was. Is it better now? A little bit. Good enough for government work.

We'll keep it moving. Tell us again. So you got five vehicles. I'm a boomer, 60 plus, and I make $140 a year. I have five vehicles, three of which I'll be getting rid of. Currently, one vehicle has 35,000 I.O. One is, and the other two are paid off that I'm going to be getting rid of. And I'm on the plus side on everything except for the one that I'm going to keep.

And that's 65,000 I.O. on it. I just got it in December. 65,000 you owe on it? Yikes. What about the fifth one? I got four here. Yeah. Oh, it's an RV, actually. And I'm kind of half and half on that. I might owe a couple of thousand after it sells. Okay.

So it's no big deal. I have it. I have it. So what I want to do is buy a house in the next nine months to a year tops. So what should I do? Should I go with a current structure, you know, and already built? Or should I go with new construction? Which would be best in my scenario of being a boomer over 60? I don't know what you being a boomer has to do with it. Do you want a brand new build that's going to be a part-time job to keep up with and managing?

Or do you want to just be able to move in when you want to move? I'm going to move in when I move at my discretion. The thing is, I'm scared of new builds just because the quality isn't there like it used to be. They don't make them like they used to. And, I mean, you don't get as much for your money. I mean, when you're buying brand new, so much of what you're spending is on the fact that it's brand new, where you could get something that's pre-existing

and get a little bit more square footage, and it might have a little bit more years on it, but it really just depends on what you want. There's pros and cons with each, and you've gotten more negotiating power with an existing house. The new build, the pros there are the new build, you'll have a one-year home builder's warranty, which is nice. That's nice to have. And you have built-in time to save up. So if you say, I'm going to start building now, well, with a traditional build in a neighborhood, you can have the money when

you're ready to close. And so it kind of gives you a fixed price you lock in and some time to save. So there's some pros on the new build side. I don't think one is better than the other, but I think for your situation, I would just buy an existing home. Are you going to buy in the San Antonio area? Well, it'll be not in the city. I do not want to live in the city. Loud and clear. I hear you. I want to be living off the fat of the land. What are you thinking of spending? $250,000 maybe. I want to keep my mortgage payments under $2,000. Okay, what do you plan on putting down?

$20,000 down. Okay, and let's go back real quick to these cars because I mean, you almost had $100,000 in cars. So you said you had two of them were paid off. What are they worth combined? Okay. One of them is a motorcycle. It's worth about $8,000. Okay. I have a Dually, F-450 Dually. It's worth about $75,000 and I owe about $35,000.

Okay, it's worth $75,000, you owe $35,000. Okay. Okay. So the funny thing is I'm keeping the one that's probably not, I'm probably upside down in, but it's a specialty car and I'm going to hang on to it. Okay, so do you have a plan to pay off any remaining balances that exist? I'll do that as quick as I can. I've got to wait for the money to get there before I spend it.

I know that much. So you make $140,000. My concern is you're not going to be ready to buy in nine months, because here's the prerequisites to buying a house. You're going to need to get rid of all of your debt, which right now is over $100,000. Alright. And then you need a fully funded emergency fund, which looks like three to six months of savings. Then you need to save up a solid down payment. I have $16,000 in there right now. You got $16,000 aside from the $40,000,

right? $40,000. For the down payment? You said you're going to save up the 40k to put down yeah but once i sell the vehicles and acquire you know what i have over like for the truck i'll have about 25 000 so george is saying what you still need to pay off the other car loan the 35k the 65k for the rv you got to clean up the debt first. And then we kind of have a better foundation. Okay. Yeah, I wouldn't mind going that route, too. I agree. I agree. I want you to just have some freedom as you enter some golden years here and not be weighed down by a big mortgage and all these debts that hadn't been cleaned up.

You have a great income. Let's use it to clean up this debt fast, sell everything that you don't need, which is pretty much everything in your life right now, and just start fresh. Debt-free, emergency fund. And if it takes you another year and a half before you have debt freedom with an emergency fund and a down payment, I'm okay with that. I wouldn't be in such a rush to buy this house. And the insurance on all those vehicles is really killing me. Yeah, I bet. What do you actually need? Can you just live with one vehicle? Can you get rid of the RV, get rid of the motorcycle, get rid of all the cars except for one?

Yeah, the motorcycle's been paid off. I have another truck that my daughter is driving that is also paid off. So, you know, the ones that are not paid off, I to ration up so and but i do plan on getting rid of all of those it just feels like it's eating away your income whether they're paid off or not it is it is okay are you upside down and and all of them that aren't paid off it's because you said that the one that's 35k what's the situation on that what can you sell it for i can that's the uh duly that i can sell for well over 70 okay oh okay okay and then okay i see 35 000 on it i see i see well our parameter around you know things with motors and wheels is that shouldn't be more than half of your annual

income and right now you are way above that with this rv and the motorcycle and the truck and so that's why i'm saying if you want to keep just the truck and sell everything else, the motorcycle, the RV, whatever, then it would be okay to keep the truck. Otherwise, this truck has got to go. That's a lot of truck. And you can downgrade it. What are you hauling around over there with your dueling? What's your line of business?

I'm sorry? I am a construction quality manager. Ah. So are you using this for work, or do you have a different vehicle for work? No, I have a company vehicle. So technically, I have six vehicles. There we go. Oh, wait a second.

So you don't need this dually? This is just robbing you of your... No, no. I plan to sell the dually, y'all. Okay, good, good, good. Yes. Oh, absolutely. I don't need it anymore.

So what are you going to keep out of your five cars? Tell us which one you're keeping. You're keeping the $65,000 one, right? I'm keeping the Mustang Dark Horse. Yes, I am. And you're selling the RV? It's the old man in the sports car routine, yes. There we go.

What color is it? It is blue ember. It is beautiful. I'll look out for you on the outskirts of San Antonio if I see a guy going over the speed limit. At the red light? That's Jim. He did it. He paid off the debt. He's in that house. Oh, I love it. He's driving like

no one else. Six vehicles. That's just a lot to keep track of. I've had a hard time keeping track of all of them. If I got six kids, I won't remember their name. Let alone the cars and the insurance. Oh my gosh. And the payments and what you owe on it versus what it's worth. It's just a lot.

And it was draining his income. Everything's bigger in Texas. You know, even the car payments. I'd have to get a ladder to climb up into his dually. Tell you that much. This is The Ramsey Show. I'd pay good money for that. You're listening to The Ramsey Show.

Thanks for hanging out with us. I'm Jade Warshaw, joined by George Camel. We are taking your calls. We've been having a good time this show. So give us a call, 888-825-5225. Let's get into it. George, the 20th anniversary. It's here. Of what? Total money makeover. Can you believe it? We got to get it an anniversary gift. I know we do. What are you going to get it? What's the 20th anniversary? Like, you know, I was like metal paper. It's

like silver. Is it silver? Somebody knows. Put it in the comments. I'm Googling. I know you have to. It's like maybe it's bronze. It's pretty serious. But anyway, the Total Money Makeover, it's helped over 10 million people pay off debt and build wealth. I'm one of those people. George, you're one of those people. to change your finances. You can solve your hardest problem with the least complicated money book you've ever read. And it's so true. It's not complex. Anybody can read this and go, oh, I get it. Like you don't have to be a financial person or a math nerd. It is for regular everyday people.

You will understand it. There's not a bunch of lingo or jargon inside of it. An everyday person who doesn't know anything about money can read it and take next steps and feel very, very confident. The Total Money Makeover has updated and expanded the statistics because those change over time. Advice on mortgages, car loans, investing for retirement, paying for college, buy now, pay later. So it's updated in today's terms with today's stats and everything like that. And here's the thing that I'm most excited about. If you like audio books, Dave himself, the big eagle himself has re-recorded the Total Money

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and who've built wealth. 20 years worth of success stories, George. That's amazing. That's what's cheering you on. I love it. Also, I found out the gift for 20th anniversary. What is it? A traditional gift is China. Contemporary gift is platinum. China. Platinum. The gemstone is emerald. So I know what to get Dave now. An emerald ring? Just emerald the color. Yeah. Like what? Like a polo shirt? A gemstone emerald. Oh, but like in

a ring? Is that what you're getting? I guess I'll get Dave a ring. I don't know if he's a jewelry guy. He's not going to wear it. But we'll see. You know. We'll see. I'm proud of him. That's amazing. What a legacy to leave.

I am proud of him. That book is just still like, it stays at the top of the charts year after year. And it's because the content is truly transformational. Yeah. Still hits. So give it to someone if you've read it and it's changed your life. Yes. Which is almost all of us. All right.

Willie in Denver, Colorado. What's going on, buddy? Hi. How are you doing today? Doing good. How can we help? Yes. So I recently won a truck for they said the truck's value is forty two thousand dollars. And so I'm trying to make the decision on what I should do with the truck. Whenever I go to sell it, the best price I can get for a cash offer is $31,000. What? It's brand new? How'd you win it? Tell us more.

On a game show? I do remodel for work. And one of my suppliers opened a new store and they were giving away a truck if you showed up. And we showed up and we won. Wow. What kind of truck is it? Tell us. It's a 2024 Chevy Colorado LT.

The kicker to it is that it's only a two-wheel drive, so that's kind of why we're getting these low-ball offers as far as not getting close to the full value. But bright red, only had 25 miles on it when we picked it up. Wow. Yeah, the truck's great. So our debate is, should we picked it up. Wow. Yeah, the truck's great. So we're either, our debate is, should we keep it forever, you know,

and not worry about the depreciation on the truck? You know, my wife, she needs- Did you have to pay taxes on the winnings? Yeah, so we got to pay eight grand on, and that's why we thought about, you know, getting rid of that eight grand by trying to get an EV vehicle, but basically, long story short, for an EV vehicle, but basically long story short for an EV vehicle

that qualifies for the tax credits, we end up having to finance $10,000 per car that she has already paid off. And we're not really too hot on financing. So you don't want the truck, you want to sell it. It's really worth 31,000. You have to pay 8,000. And so you're really net out of this thing might be around 23. Exactly. So the way I look at it is we were blessed with $8,000. And so your really net out of this thing might be around $23,000. Exactly. So the way I look at it is we were blessed with $23,000 in cash. Yeah, that's free money. What vehicles do you have now? So right now I have a 2004 F-150 I use for work. We owe $10,000 on it. She has a Mazda 3. It probably has about six months to a year of life left in it. So that's kind of why we're like, should we just keep this truck forever? Because I mean, we're not really a new truck kind of people anyway, you know?

Well, take the 23 that you get after, you know, selling it, paying taxes and get her something. What's your household income? So together, we're probably going to make this year around $125,000, $135,000 before they put the value on the truck on it. Okay. And then you have $10,000 on the F-150. Any other debt? No, debt-free. So let's use the $23,000. We'll pay off the truck. That's $10,000. You have $13,000 13 left and get her something that she wants with that 13k okay that's a great idea sell the mazda 3 the mazda 3 is worth what a few thousand bucks yeah and that's what we're thinking about selling the mazda anyways and you know trying we're thinking about getting something new not new but you know used new to us yeah here's here's the

rule you're going to pay cash for whatever the car is. Don't put $13,000 down and let them finance the other $10,000 or $20,000. We're not playing that game. And didn't you say, you said your truck's a 2004, right? Yes, sir. Okay, how much life does it have left in it? I got you. How much life does it? It only has 50,000 miles on it, so I got over a pretty good deal. Wow. So, I mean, I'm going to try to make double payments on it this year. The goal is to try to pay it off this year anyway. Well, you will because you're going to use that $23 after selling to cover it.

So you'll be debt-free like that. And then whatever money you have left over after she buys a car goes toward your emergency fund, and let's start building that up. Okay. But that sets you up in a beautiful way. So congrats on the win. Yeah, thanks for the call. That's great.

I got to look into more truck giveaways. I know. I didn't know it was like that. I'm thinking he won the Price is Right or something. I've never won anything, George. Really? Like a prize. To be truthful, you don't make effort.

Wait, what? Yeah, how many giveaways have you entered, Jade? You don't just wake up one day and go, I won a thing. No, but I mean like. He showed up. He showed up. He showed up at the store. To win a contest is a big deal. I mean, I've done scratch-offs before back in the day.

Never won. I win things all the time because I put in the effort. It takes research. Yeah. You do. You got to have skill in the game. Tell them the story about your Jerry Seinfeld tickets. I told it to Ken on air.

Oh, okay. They don't tell it. Because you were razzing me about it. And long story short, instead of paying over MSRP for these tickets for 300 bucks or 400 bucks on StubHub, I ended up getting under face value for 11th row center. These are $300 tickets. I paid 120 bucks. I've been trying to convince George that he needs to live a little bit and loosen the purse strings. It's not about loosing the purse strings. I want to have an amazing experience and know that I got a good deal.

There's no greater dopamine rush from those two things combine. I saw some of the sketchy sites you were looking at in order to secure these tickets and some of the sleazy looking folks you were looking at. I know how to find a Twitter scam. You know, it's fine. When Ticketmaster was two words in the screenshot, I was like, block. This is not real. That's real talk. you got to watch out so don't let your moms do this because they don't have a keen eye for spotting the scans I guess I don't either I just I at this point in life I think I spent so many years George at this point I'm just chopping it up I think I spent so many years um scrimping and saving and coupon cutting and like doing all of that stuff that now I'm like, I don't,

I just don't have the patience to look for these kinds of deals. Well, I'm bougie frugals. Like I'll spend good money to get my dogs the dietary food they need. Yes. And I do that without batting an eyelash. But when it comes to your own entertainment. Yes. That's where I go.

That's where you draw the line. I got to find a deal. I'm strange. Okay. So what about restaurants? Restaurants. Will you spend money on a good meal i will but i'll also go the appetizers probably aren't worth it you know and see i feel that way about a cocktail like cocktail it's got to be really worth it it's really got to be because nashville y'all you don't know this there's a 15 liquor tax on top of the sales tax so that 14 cocktail

after tax liquor tax tip easily easily turns into $20. And that was like the cost of my entree. That's where the margins are for the restaurant. So unless it's like a cocktail bar where I know it's going to be an elevated experience. If I'm not sure about it, I just get a glass of wine. I get a club soda with lime and I'm like

it's, you know, $3. Recently I went to one of those places where you float in the tank. I've done one of those places where you float in the tank. I've done one of those. That? Okay, that's something. Sensory deprivation tank? That's worth it. I'm adding that to my budget.

That was, I felt like I left reality for a minute. Feels like you got a massage, but no one touched you. Yeah, well. George, that's the second time you've stumped me. Just right before the clock goes, I'm like, Jay, let me just throw this curveball at you. I know. This is the Ramsey Show. You're listening to The Ramsey Show, our scripture and quote of the day.

Psalms 119.66 says this, Teach me knowledge and good judgment, for I trust your commands. Then Mark Twain said, Good judgment comes from experience, and a lot of that comes from bad judgment. Look at that. Sometimes I feel like if you just say something in a complex way. It sounds. It becomes a quote. It becomes wisdom and wit.

An instant quote. Yeah. Twain, the man just had it. He had a knack for the tweet. He did. He knew how to frame it. There it is. All right.

If you want to talk to us, you can call us in. It's 888-825-5225, and we'll get to your call. In the meantime, we've got Phil who's in Boston, Massachusetts. What's going on, Phil? Hey, guys. Thank you for taking my call. You betcha. I have two homes.

My first home, it was my primary home before. I paid that off, purchased a second home that still has a remaining mortgage on it. That's the only debt I have. My question is, would it be beneficial for me to take a HELOC on a paid-off home that is the rental and pay off my mortgage and move my HELOC in first position? Feels like a lot of moving of debt around. You're just moving risk from one place to another. That HELOC's going to put your home at risk.

You said your primary home was paid off. How much are we talking about? So the mortgage list, $197. Okay. On the second home, and the first one's paid off. Yeah. So how did you pay off the first home? Baby steps.

I followed up the baby steps. Okay, then. Hear me out. What if you did the same thing on the second home? Wow. Okay. Groundbreaking. I am trying to do that.

What you're trying to do is shortcut your way by creating a more risky situation, and you're just moving the debt around. I don't understand how it helps you to create a HELOC payment that has a variable interest rate, but now this one's paid off. It's just whack-a-mole.

The baby steps worked for you, dude. It was successful. It did, it did. I'm trying to get a little faster. There it is. I can throw in more to the principal compared to the mortgage during the draw period. I can throw in more money at that principal and get that principal down faster than I would if I could just pay the mortgage and pay the high interest on that mortgage. What's your income?

Combined, the wife and I, we make about $180,000. Okay. So let's do some math. You guys are debt-free outside of this second home mortgage? Correct. You have an emergency fund? Seven months, yes. Wow.

Do you have any money outside of that that you could use? There's some. There's some money outside, yeah. Wow. Do you have any money outside of that that you could use? There's some. There's some money outside, yeah. Okay. How much? Are we talking $10,000 or $50,000? About $20,000. Okay.

So let's say you use the $20,000. That brings your second home mortgage down to $167,000? Yeah. Now you make $180,000. How much could you throw at the second mortgage extra on top of the principal making $180,000. How much could you throw at the second mortgage, extra, on top of the principal, making $180,000? I would probably throw a couple of thousand. Okay, there's one more detail. We're going to be having a baby coming in October.

Okay, that's great. Thank you. We are saving also for that. How much are you trying to save up? I don't want to throw Too much money on that. Well, you've got seven months of expenses. You have good health insurance, I assume? I do.

So as long as you have the out-of-pocket deductible, you'll be able to cash flow anything that comes your way. Is there something else regarding the baby that you were trying to save for? Because you basically have the money already. No. I'm not that guy who likes to save too much money and to predict for the unpredictable of the unpredictable. Then if you're that guy,

all the more reason to use cash money to pay off this mortgage. If you like to plan and predict for the unpredictable, because debt is the unpredictable. It is adding risk to the equation. So use that same logic on this side of it. Was this second home an investment property? So the first home was my primary home. Once I paid that off, there was a second home that I really liked

that came up in my market, and I purchased that one. That's the one that became my primary home, and the first home became the rental. Oh, so you're renting out your old primary. You're living in the second one that has the mortgage. Got it. So make it $180,000. You said you can throw, what, $3,000 a month

at the second mortgage? Yeah, we could throw about $2,000, $3,000 a year. Okay, so that's $36,000 a year. So you take your $167,000 because you're going to use the $20,000 to help pay it down, divide it by $36,000. You're talking about four years this thing's paid off. Yeah.

I don't think you would move much faster by doing the HELOC move because you're just now trying to pay off a debt over here instead of a debt over here. It's not going to lower the amount of debt. So I would focus over four years. You'll make more money too, right? Your incomes will increase. I think you just hate the fact that the renter is living in the paid off house.

Like that would make me feel some type of way as well to know that where I'm laying my head down has a mortgage on it. And this guy over here gets to sleep in the paid for house. That would make me feel some type of way. So here's the deal. If you hate the debt and you want it gone faster, put more towards it. And that might mean working more. It might mean slashing some expenses.

Because if you can put four grand a month toward it, that's $48,000 a year. Well, now we're talking. Because that means with the payment, you're done in three years. So I would set a goal and I would try to stick to it and get your wife on board. Say, hey, once this baby's here, we're going to really start attacking this mortgage because I want to create a different legacy for our family. I don't want this baby to no debt. I love that. Thanks for the call. You'll be there in no time. You're doing great, Phil.

Thanks for the call. That's a good one. Yeah, that would bother me. I'm like, this guy over here gets to be in the paid for house while I'm over here in the mortgage. But they made that choice. People fall for the trap of going, well, we'll pay off the home. And now we want to keep it instead of selling and just removing the equity. And so you just go back into debt. Yeah. Let's see if we can help Mark out real quick. He's in Portland, Oregon.

We're against the clock a little bit, Mark. What's going on? It is a dream come true to be able to ask a question live on The Ramsey Show. Wow. I am so honored to talk to you both. We are honored to have you, Mark. So the situation is this.

My wife and I just became debt-free, except for our house. Yay! We've been taking 20 years to do this. Wow. Wow. How much did you pay off real quick? Oh, probably over $100,000 over 20 years. Wow, okay.

That's a story right there. That's a story. And here's another one. So our furnace is about 18 years old, and it's certainly starting to show its age. Sometimes it'll come on and it won't go off until we flip the breaker. Last summer, we were really straining to keep the temperature in the house at a reasonable level. So you need to replace it? Probably in the next year or so.

So we are debt-free, and we don't want to go back into debt. But according to our research, it's going to cost about $12,000 to replace this thing. What do we do? Have you got multiple bids on it? Oh, yes. Okay. So by research, I mean, did you actually ask local folks who would fix it? Yeah, we've had three or four companies come in and it's all around the same price. 12K. Okay. Yeah. You got a year to save up, right? Hope so. How much can you save up every month now that you're debt free? How much margin do you guys have? We don't have much of a margin at all. We have a small business that we make about $44,000 a year. That's it? Between the two of you?

Between the two of us. Okay. And that's, okay, that's net? That's net. Okay. All right. What is the small business? Bookkeeping.

Okay. And how long have you guys been doing this? 18 years. And you've made 44K between the two of you for all those years? Well, not all the years. So it's grown over the years. And then recently we purchased another bookkeeping business that's jumped from 80 clients to over 200.

Okay. 200 clients and it's only making 44 net? What's happening? Yeah. Well, it's making over $100,000 a year, but the net is bringing it down to about 45. That's what you pay yourselves. Correct. So essentially you're telling us each of you make $22,000 a year net.

Something's not adding up with that. I'm wondering if one of you or both of you go just work as a bookkeeper somewhere or get a full-time job somewhere and make more, because the income is the problem here. It's just hard to live in your area making that much, even debt-free. And so here's the key with the furnace. We need to save up and pay cash for this when the time comes. And I'd rather have the money sooner than later, which means we got to put away a thousand bucks a month for 12 months, which means we need to have that kind of margin, which means we need to get our income up. Yeah. After 20 years, I want you guys to have made more than $44,000.

And you work too hard. $22,000 a piece. You don't make that much. You really do. And honestly, I'm just going to say for the client list that you said, something's off in those numbers. I don't know where the money,

how it's getting shifted. You need to charge more. You might need a bookkeeper to help you with your books. There's a thought. I hope not. All right. That does it for this hour.

This is The Ramsey show. We'll see you next time.