The Ramsey Show - App - You Have to Protect Your Budget When Building a House (Hour 2)

Episode Date: August 16, 2019

Chris Hogan, Rachel Cruze, Home Buying, Retirement   Tools to get you started: Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE   Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studio, this is the Dave Ramsey Show, where America hangs out to have a conversation about your life and your money. And sitting in for Dave, I'm Chris Hogan. I'm excited to be with you. But guess what, America? I'm also joined in studio by national bestselling author, Rachel Cruz. Rachel, how are you? Chris Hogan.

Thanks for letting me join. Oh, it's like the co-pilot of the hour. Yes. Co-pilot. Thank you. Yes. You're still in charge. I'm not confused.

I need to get that. I'm not confused. I need to record that and just walk around playing it in the office. How are you? I'm doing great. Are you are you? I'm doing great. Are you feeling good? I'm feeling good. Okay.

Hit the 30-week mark of pregnancy in August, which is hot. It's a bit. It's hot outside. It is hot outside. No, but I'm feeling good. Yeah, a lot of fun stuff going on, and yeah, it's been good. Fantastic. Now, are you still in filming the Rachel Cruze show?

Yes. So we are in full production of that. And actually, I'll be taking maternity leave, obviously, after having the baby. So we're pre-recording a bunch of shows just to still have fresh content and all of that. So it will continue on. New episodes will still be released, even though I'm not in the office. So it's been good. And this last one, you may know this but we pick up the

audio from the video version of the show and created a podcast and so i'll go in and do extra teaching and stuff around that for the podcast and this last one hits the highest number we've had of all podcasts in the shortest amount of time uh this last episode which was all about credit cards and so it's a touchy subject people are very offended when you talk about not having a credit card were they really oh gosh well we always get pushed back i mean that's like the one area because mathematically you know you look at a car loan and you're like yeah mathematically that's stupid because it goes down in value but you're paying interest like you can you can work your way around different types of debt but credit

cards specifically it's the touchy one so we head on. We actually did a two-part episode on the subject in total. So that's the most recent one. You're telling me you got tough on this topic. We did. Okay. And it was fascinating because, you know, you pull all of the numbers and the stats from what everyone says. Okay, well, I get the airline miles and I get the points.

And we took the average of the average consumer and what they actually use, which is the average person doesn't even use the points. Right. You know that. That's right. But you take it and you look and you say, okay, how much money do they have to spend in order to get this stuff? And it's just ridiculous. I mean, you just look at the math side of it.

And so that was a fun kind of experiment we did. That is fantastic. So where can people go to find out about the Rachel Cruz show as well as your podcast? Yes. Well, podcasts anywhere, podcasts, you listen. And then the show is YouTube and Facebook. Fantastic.

And go learn all that by going to RachelCruz.com. Yes, you can do that as well. Fantastic, America. So listen, go check it out. Rachel and I, she has a lot of fun, but she tricked me

into doing something on her show. Not long ago. Yes. And I want you to go over and check it out. All I'm going to say long ago. Yes. And I want you to go over and check it out. All I'm going to say is Helium.

Okay? Helium and Chris Hogan's voice. Hogan went to normal voice with Helium. And it was the most fantastic, one of the most fantastic moments of my life. Yeah, I don't want to talk

about it anymore. But you can go over there and find out more about it. He gave financial advice just with a voice that is not the Chris Hogan voice. And it was fantastic. It's kind of scary.

So America, listen, if you've got a question about money, I want you to call us. Rachel and I are here to talk with you. That number to call is 888-825-5225. Again, that's 888-825-5225. Or find us on social. You can find me at ChrisHogan360, or you can find her at RachelCruz.

Okay, I'm going to get back to the phone here, Rachel. We've got Tiffany on the line. Tiffany, how can I help you? Hi, it's an honor to talk to you, too. Well, thank you. It's an honor to hear from you. Thanks for calling in. How can we help you?

So, our current situation is I guess I'm trying to figure out if my husband and myself are being wise and maybe gain some insight on how to negotiate with a builder on lowering the house cost in order to pay for the home in cash. Oh. So, I am 37. My husband is 39. We have two kids, a three-year-old and a one-year-old. We currently live in a paid-for home and have for approximately two years. So we are completely debt-free. Fantastic. We've been investing and we've been saving a lot of money to put down on our new property, which we've found a builder and we signed a lot agreement already

and put some money down on the lot. The original cost of the home, of course, was a little bit lower, and now as we're looking at what we'd ultimately want, I think it might be about $20,000 over what we will have available in cash. Okay, Tiffany, tell me this. Let's get into the numbers. How much have you all saved toward this project? So we currently have $281,000 saved. Okay. With the sale of our current home, I would estimate that we would end up with an additional $255,000. In addition to that, we have some mutual funds that are outside of our investments that we could take out around $10,000. And then my husband also does some side work where he repairs small engines so we have

income from that it's not steady so it's hard to say how much we will be able to earn what is your household income tiffany um we make 6200 a month after we paid for insurance. Okay. So tell me this. How big was the house you all are currently living in? It's about $1,400 up and down. So Tiffany, I'm curious. The $20,000 extra that you're doing, is that because you've gotten into this process? And is it the square footage that's making it more expensive? Is it the finishes you're wanting? Like what is adding to the cost? So what's adding to the cost is we are expanding

the garage and we're doing this partially for my husband's side business that he has. He needs space and we will be losing a shed because of the HOA in the area that we're going to be in. It is an attached garage, so structurally we would have to do it now. I don't think it would be a wise choice to add on to later. The other thing would be doing a maintenance-free deck as opposed to a feeder deck, which is more expensive. I am willing to wait on that, but our builder has told us that if we do it now, it's quite a bit cheaper than if we were to wait three months or six months to do it. All right.

So I don't know if it's worth paying extra later. Tiffany, tell me this. The new home, how much bigger is it going to be than your existing home? I'm actually not exactly sure on the square footage, but it's quite a bit bigger. We're getting our three bedrooms upstairs for our kids. So what's your question? So do you have any advice on how to negotiate with a builder to maybe get a lower price? Okay.

Or do you know when you build, is it pretty standard that they do not negotiate? Okay. Well, I'll tell you what. I want you to hold tight. We're going to go to commercial break here. We're going to come back and we're going to dig into this. And Rachel and I are going to kind of give you some guidance on what you can do and what you can't do. Because you have to have your eyes wide open so you can make the smartest decision.

This is The Dave Ramsey Show. One question I get asked all the time is, do I need life insurance? Listen, the whole point of life insurance is to replace your income for someone who counts on you. So if you have a spouse or you have kids, yes, you need term life insurance. It's the only way to protect them until you're out of debt and have built up your wealth. You're only digging a deeper hole if you waste money on cash value plans since it robs you of the ability to make real progress. And that's why I send you to Zander Insurance, and I have for 20 years. That's where I get all my insurance, and they only offer the plans I recommend.

It is not expensive. It's not complicated. And Zander will be there as your guide every step of the way. Visit Zander.com or call 800-356-4282. You need to get this taken care of. I can give you the advice, and I can tell you where to go, but it's really up to you to take that important step to get your family protected. That's zander.com or 800-356-4282.

Hello America, you are listening to The Dave Ramsey Show. And before we went to break, we were talking with Tiffany. And Tiffany was asking a question about buying a home and building with cash. Tiffany, are you still there? I am. Fantastic. And so, Rachel, as you hear this, what are some advice you have for her? Sure.

Well, Tiffany, I i mean you're twenty thousand dollars over the what you said from the agreements and so whenever you go into the building process and actually my husband and i are in the middle of it right now we're building a home chris has built a home so like you're talking to the right people we know exactly what it feels like um but i would say i mean the rule of thumb is it's always more expensive and takes longer than what you think. And so realizing that you're over, it probably doesn't come as a shock to you, I would assume. And so my thing would be, we always say that our one type of debt that we're okay with you taking out is a mortgage. So if you did take out a small loan that you'd pay off quickly, again, we're not going to yell at you for that because that's the mortgage.

But to make it a goal to cash flow it, I would still push you towards that. Because what that's going to do is you're going to have to figure out your needs versus your wants in this home. And with a fine-tooth comb, go back through all of the specs, look at the budget, see the areas that you can cut or the things that you can cut that you can add back in. Like my husband and I, we went through this. Like when we got our final price, we were like, okay, we can't afford that. So we have to go and like cut some things. But it was things we were able to cut that we could put it back in later. And even if it costs a little bit more, we were willing to do that so that the cashflow was still there. Yeah. And I agree. And I think it's also one of those things, Rachel, where you have to be careful

of getting yourself caught up in the timing, meaning oftentimes you can't expect for the builder to protect your budget, right? You have to be the person that draws that line in the sand that says, hey, we're not going to do this or we're going to wait on that. And it's okay to wait. Remember, ultimately, you're trying to get more square footage. You're trying to have more space for the family. So what I say is don't major in minors. I don't care if the doorknob came from Istanbul or whatever. I just need the door to open. And so I think it's really being aware of that and being able to move on.

So, yes, you can negotiate some things, but some things you can't. But ultimately, you have to protect your budget. It's important. That's exactly right. All right. Let's get back to the phones. I've got Chase on the line. Chase, but ultimately you have to protect your budget. It's important. That's exactly right. All right, let's get back to the phones. I've got Chase on the line. Chase, how are you? I'm doing well.

How are you guys doing today? Doing great. Thanks for calling in. Yeah, what's on your mind? Well, thanks for taking my call. I am 27, my wife is 29, and she is five months pregnant with twin boys, and we are starting a family. Oh, congratulations.

Very excited for it. Her parents, my parents, everybody's excited to be grandparents. They have already started buying and sending stuff. Hearing it's so much stuff. Chase, are these your first kids? These are our first kids. We are starting out, and we are going to have twin boys. So I guess go big or go home.

That's right. Good for you. That's awesome. But we're trying to get our house in order for everything. We still have about $21,480. Well, exactly $21,480 in debt. And while we've been lucky enough that since we've got married for the three years, we've been able to take a chisel to most of our debt. I'm to the point, kids are expensive. I don't believe what the USDA, I think they overestimate the price to raise a child. But anyway, it's going to be, it's expensive to raise a family. And I'm ready to take a sledgehammer to the debt and kind of get our house in a little bit more order. Okay, Chase, tell us this.

This $21,480, what is it owed on? $8,500 is owned on a utility tractor that we use for our small independent ranch. $1,400 is owed on her car, her SUV, or it's our second vehicle, but we say it's her car even though it's our car. She still has about $6,500 on student loans, and the last just a little bit over $5,000 is on the final payment for a set of corrals that we built out behind our house. Okay. Tell me this.

What's the household income? Our individual salaries, I make $84,000 a year as a feed manager at the feed lot here in Greeley. She makes $42,000 roughly a year as a feed manager at the feedlot here in Greeley. She makes $42,000 roughly a year as an administrative assistant at her dad's counting practice. And we have a small herd, hobby herd of cattle on some of our land to keep our land ag-dempt. And that grosses about $21,840 a year, or $910 per sold calf. But we have $15,600 tied up in development fees throughout the year, food, water, and maintenance debt fees and things on that herd.

Okay. So Chase, what's your question for us? What's the quickest way to get rid of this debt and what really habits do we need to change once children get here so that we don't go into debt and that we keep our house in order and that we can actually provide for our kids? I mean, I don't want to spoil them, but I do want to make sure to be responsible and do the right thing by my kids as what my parents did for me. Okay. All right. Rachel, what's your advice for it? Well, Chase, I'm feeling your urgency, which is fantastic. But I'm going to have you hold your horses just for a little bit.

Because whenever you are expecting a baby, we always say to pause the debt snowball and save up cash. So stay current with all the bills. Continue to pay the minimum payments. But start piling up cash. And I would say especially for you guys because it's your first and you have no idea, labor, delivery, all of that, what's going to happen. And I think with twins, it's a high risk pregnancy, I think. So all that to say, there's complications that happen sometimes with whether you have twins or just even a baby. So we want to make sure that mom and baby are good and healthy and you have the cash available there if something were to happen now once you

guys are home everything's good you can take that savings and just throw it right at the debt and continue down the debt snowball but you you do want to pause and wait and then i would say to your the second part of your question yeah you're exactly right i mean whatever figure i don't even know what the usda says about raising kids. Oh, I know. It's something ridiculous. Yeah, and so babies are only as expensive as you make them out to be. So you can buy the cheapest stroller, or you can buy the most Cadillac version of strollers that costs thousands of dollars. You could buy a crib off Craigslist, or you can go expensive.

The price range is so huge, and you get to dictate what you want and so i'm telling you on the third baby this poor this poor kid's gonna have like nothing because we're like it didn't take a lot to like have a baby it really doesn't and so all the stuff that is out there yes go get you go get some nice things for the baby but it does not have to be as crazy as what people spend and all the, can I just say crap, all the crap you get when you get a baby. There's so much stuff. And then take advantage, I would say, of the grandparents who are excited and say, hey,

here are the things we really need. And if you really do want to help us, instead of just buying us a bunch of stuff we don't need for the baby, can you help direct and help pay for these kind of things if you do want to help us as the grandparents? So that would be my advice. Yeah, I would tell you this. I mean, you want to go into this with your eyes wide open. Like anything else, kids can be very expensive.

You all need to store up some sleep is what you need to do. You got twins coming. It's two of them. You need to sleep a lot. Like, just take a nap. Like, get off the phone right now and go lay down. You need to get ready. But be aware.

Be smart. Be very, very right now and go lay down. You need to get ready. But be aware. Be smart. Be very, very intentional with what you're doing. You don't want to go into any more debt. Don't try to rationalize needing the most expensive stroller or anything. Like Rachel was saying, you have to be very, very careful. But I like that mindset of as you do get home and everything's

okay, you can now start to attack that debt snowball and get those things out of your life. The ATV, it sounds like you guys are using that out on the farm. I'd be intentional. The paying off the car, that's something you can definitely do. The student loan, as well as the corral. So don't try to rationalize any more debt for this situation.

You want to be aware of what's going on and aware of where you are. But again, kids change the game. It causes you to get more in tune to kind of where you are because you do want to be able to provide for them. So I would agree. Just be intentional. Some real life conversations you all need to have is what's going to happen after the kids are born. Is your wife going to back to work or are you guys utilizing daycare. These are the kinds of discussions you want to have. And that's where it gets expensive. And it can get expensive. And this is a conversation for you and your wife.

This is not something you're inviting the grandparents to be a part of or people to have an opinion. No, people can have opinions. They just don't have a vote. You all make the decisions inside your home. And so I would encourage you. You all have that talk. Get on the same page and know,

hey, this is what we're doing. This is the direction we want to go. And once those kids get here, I want you all to stay really, really focused. You've got two little boys that are counting on you. And so it can get you moving. I've seen new parents get more focused on the debt snowball, get more intentional, move it a lot faster. You know why? Because you're motivated. And that's a good thing. This is The Dave Ramsey Show. Hello, America. You are listening to The Dave Ramsey Show. I'm Chris Hogan filling in for Dave. And I'm also joined by a special guest.

Rachel Cruz has joined me this hour, and she's diving in and giving her information and advice as well. You doing all right? I'm doing great. All right. This is fun. I like co-hosting with you. We have a good time. Yes.

Yes, we do. It's fun. We do have a lot of fun. Okay, Rachel, I'm going to social media. I've got a question for you. Oh, yes. Bonnie, I have had questions from Twitter, Facebook, but Bonnie comes to you. She had this question specifically for you from YouTube, and she says, oh, this is directly

to you, Rachel. Rachel, can you explain to me why you and your dad encourage joining accounts? I like having my money, and i want my husband to have his own too oh joining accounts when you're married yes this is a this is a number one thing that we say for married couples is you have to combine your accounts you have to be one and that's true with your budget and that's true tactically speaking when it comes to your accounts. You have to be one. And that's true with your budget. And that's true, tactically speaking, when it comes to your accounts. And that is because you are one in every aspect of your life when you're married, and that includes your money. And so there's kind of the logistical ease of having just one account because you're paying bills out of it,

you're budgeting out of it. But also what it does is it forces unity and it forces communication that you're not running in two separate lanes. When you are functioning out of it. But also what it does is it forces unity and it forces communication that you're not running in two separate lanes. When you are functioning out of one account, you're going to be talking about things a whole lot more. And Bonnie, you said I like having my own money. You say this all the time. Change your pronouns. It's not my money. It's

our money. And that has to be your attitude in marriage in general, but especially with your money. But listen, girl, you get a line item in your budget called Bonnie. I have a Rachel line item. Winston has a line item. Your husband should have a line item. And it's there. You don't lose your uniqueness and who you are and what you love to spend money on. It's still there. But you have a line item and says, okay, here's Rachel. So when I go to Target, I don't feel like I'm texting Winston like, I'm going to buy $6 mascara. No, I just just spend the money if I want to get my nails done I just

spend the money it's out of the Rachel category and so Bonnie you get your own category you still have the freedom to spend but you guys are agreeing on the amount and it's just being communicated and seen by each other and so I really would recommend getting every dollar that has like been the biggest deal it really has i mean every dollar is like the best we've got a couple out here in the lobby they just high-fived you know what i know you guys are doing the budget and working together uh rachel i got one question for you do you and winston have the same amount in this line item we do but who spends their line item by the 15th me Me. And I'm always like, dang it.

Yeah, there's no doubt in my mind. And then I'm like, Winston, can I have some of the money on your line item? If I was Winston, I'd be like, stay in your area. He never spends any of his. It kills me. I'm like, how do you not spend money, Winston? You do. You want to budget together.

You want to get on the same page and just be in agreement. And so that's why. And let me say this too, Hogan. When you are married and you're working together with your money, and you're having goals, you're achieving them together, even the goal of just the monthly budget. And it's like, yes, we've hit the monthly budget. We didn't go over in categories. We stayed within it. When you start working as a team and you both have an input, you both have a say, it's so much more enjoyable. It really is. And even like we said in the last segment, but once I were building this

house and like, this has been one of the biggest goals we've had for a few years of our marriage. And now it's coming to an end. And like, I can't tell. We're like giddy just about the new house. But the fact like we did it, like we set a goal together and we did it. And like nothing feels better in marriage than when you're working as a team. And just those small little steps of even just combining your account. it's reinforcing that. And the great thing, too, is that you get to create a life you love together. Like, money's a tool to help you get there. So, like, what kind of life do you guys want and work together at it?

No, it's so true. So, thank you, Bonnie, for that question. All right, I'm back to the phones. I've got Brian on the line. Brian, how can we help you? Hey, Chris. Hey, Rachel. How are you guys?

Doing great. Fantastic, Rachel. How are you guys? Doing great. Fantastic, my friend. Good. Hey, I'm wondering if you can help me out with a retirement planning question. Okay. So my wife and I met with a financial planner kind of just to get a different perspective. And one of the things that she offered up as part of our potential transfer of our current retirement funds was a variable annuity. Okay. And I've heard varying things on that. And just curious, your perspective,

if variable annuities are a good thing or stay away from them, what would your answer be on that? Okay. First, tell me this, my friend, where are you all on the baby steps? Baby step two. We've got about $4,500 left, and then we're done with that one. Okay, fantastic. And how much do you all currently have saved toward retirement? About $390,000. Okay, $390,000.

And what's your ages? I'm 55. My wife is 58. Okay, got you. And when you went to go talk to this financial planner, what were you looking for? What were the questions you were asking? Just really, well, part of it is I have a pension that I can start taking. So I wanted to look at where exactly to invest that in and how we should do that.

And then it kind of just led into looking and considering moving from one current investment firm or with potentially to this location. Okay, gotcha. Well, here's the deal. And looking at that with variable annuities, I'm going to give you kind of the pro as well as a con. A pro is utilizing a variable annuity. It allows you to be able to invest into growth stock mutual funds inside of that. So that's a positive. A con is the fees. And so you need to be aware of the expenses and the fees that are going to come inside of that. Remember, too often times people look, and annuities were a thing of the past where people were looking for protection of the money. They weren't necessarily looking for growth. They were looking for something that could sit there, be

stable, and give them a set amount of money each and every month. Think of it being like a CD of the investing world. So you and I know that we need money to be able to grow because of inflation. The cost of things go up. So we want to grow our money. So I would look at and kind of begin with the end in mind. You all right now, you've got about 390,000 toward your retirement dreams and you're trying to grow that. And so you need growth. I don't necessarily need it to just

sit there and just relax. I need it to grow. So I want you to go talk to a SmartVestor pro. You can go to DaveRamsey.com and click on SmartVestor and get information and really begin to continue to have the conversation. You want to invest in the products and tools that are going to help you get to where you want to go. So thank you so much, Brian, for that call. You know, Rachel, I don't think people understand, you know, having the financial world, there's so many acronyms, there's so many terms, all these things. I don't think people understand how valuable it is to go have a conversation with someone that has the heart of a teacher. Oh, absolutely. I mean, the investing side of personal finance to me, and I feel like I could speak for a lot of people, it's the most intimidating part. It's all these

words that you're trying to figure out. Okay, and if I move that fund here, are you penalized? Are you not? What are the fees? What's the best vehicle to put my money in? I mean, it's just, there's a lot of moving parts to this part of your financial life. And so sitting down with someone that breathes this stuff in and out every single day, like they live for it. And I can tell you our smart investor pro, like he's obsessed with all this, like he loves it.

And so when you get someone that like, man, this is like their passion, this is what they love to do, they're going to be willing to help you and sit down and tell you. And I would say too, do not be afraid to ask questions like it can be intimidating walking into some building with sitting some you know man or woman that you don't know behind a desk and they have a suit on and it's like it can be a very intimidating situation but ask questions

don't just be a bobblehead like sit there and just and even if you feel stupid and maybe say it out loud be be like, okay, I feel dumb. I feel like I should know this, but tell me what this is. Explain it to me. And so, getting that because you want to be able to know exactly what you're putting your money into and you want that to... It changes

the game. And for the smart investor pros, the people that we've vetted that are in this, they are not judging you. No. No. That is not. A lot of people think they're going to the principal's office, right? And they're going to talk to someone that's going to tell them what they should have done and this and this.

No. It's the hope office. They're trying to help you reach your hopes and your dreams so you can do the stuff you want to do. So, go. And if they are not good, get out of there. And let us know. Like if they're mean.

Yeah. Especially a smart investor pro. Oh, yeah, yeah. But if you go see someone in this area and you don't like them, then leave. You can do that too. You really can.

Yeah, if they're a SmartVestor Pro, you let us know ASAP. And they're fantastic. They are. They're all great. They have the heart of a teacher. All right, let's get back here to the phones once we come back from the break.

If you've got a question, want to hear from you, you can find us on social at ChrisOgan360 or at RachelCruz. We want to hear from you, you can find us on social at ChrisHogan360 or at RachelCruz. We want to hear from you. This is The Dave Ramsey Show. Hello America, Hello, America. You are listening to The Dave Ramsey Show.

I'm Chris Hogan filling in for Dave, and I'm joined in studio this hour by national bestselling author Rachel Cruz. Rachel's got a dynamic show on the video channel that you definitely need to check out by going to RachelCruz.com. Learn more about it. You can find out what she made me do. It is, all I'm going to say is it's helium related. It's something people have asked me to do for years. And finally, I do it. Oh, I think you did it.

I did it on my show. On your show. Absolutely. Thank you. Thank you for that gift. You are like that little sister i never had and didn't want and didn't want you i say that i'm like no it is so true it is so true but america we're here for you if you've got questions we want to hear from you call us

the number to call is 888-825-5225 again that's 888-825-5225 all right uh we are going to go to on the phone i've've got a gentleman, Todd on the line. Todd, how can we help you? Hi, thank you for taking my call today. Yes.

Uh, my wife and I, um, a couple of years back, we followed a Dave Ranty principles and we actually paid off about $60,000 in debt. Fantastic. With that,

we have other family members who saw that. And, uh, we have, uh, our grandparents here um who they're in a situation and they're asking us for advice and some suggestions so we went through looked at all their debt looked at all their income and expenses and their situation is

uh is a pretty crazy and so we wanted to see based on what little information i can give you um to see what you would suggest so basically basically, they're in a situation in their house where they can't afford their bills. They come up $1,500 short every month, even just from paying bills. They don't have any extra money. And they are older. They are retired and everything. And what our plan was and what we're thinking of doing is selling the house. But the problem is, in order to sell the house, there is an E-line on the house that went to collections, and we have the collections company coming after them.

We're working to try and settle that for a lump sum for a lot less than the balance. But the problem is, no one that we know has the cash to pay that lump sum. The lump sum would be about a third of the original balance. Once we are able to pay that off to the collections, then the plan would be to sell the house and then use the equity in our house to pay all of their debts off. And they would be left with a good amount of, with a livable amount of cash that they can use to go rent something. And so my question for you today would be, should we possibly, once we get in writing from the collections company of the lump sum that we would use to pay off this E-line that went to collections.

Should we take out a loan somewhere just to quickly pay that since no one has the cash? And then when we sell the house, use the proceeds from the house to pay everything off, including that extra loan that was taken out to pay off the collections. Right. Todd, tell me this. How have they been existing if they're $1,500 over budget each and every month? How have they been doing this they're $1,500 over budget each and every month? How have they been doing this? Living off of credit cards.

Okay. So we went through, and they have about $101,000 of consumer debt. That does not include their mortgage on the house nor the E-line that went to collections. How much is this E-line, this credit line? How much is it? It's about $150,000. Okay. And how much do they owe on the home?

About $140,000. And what do you think that home is worth? The home is worth, so the home needs a lot of work, but we are looking on Zillow and it says it's worth between $4,000 and $420,000-ish, but the problem is they had put the house up for sale a while back, which we found out. And when the collections can be heard about that, the collections company was trying to come after them for the full amount of on the heat line instead of taking this. So we're kind of like, what should we do? What do you suggest?

Well, I think here's the deal. This is this is an extremely emotional type situation and can be volatile. And we all come to you here shortly. But I think it's important to talk through and really understand that at the root of all of this, what you have is you have people that have a spending problem. And regardless of age or stage, what they need to do is really understand the breadth of this situation. This is a mess. And so regardless of what you do, if they don't change the behaviors, it's going to continue.

They'll just not have a home and continue with this debt. So I love that you all have definitely connected with them and are talking with them about this scenario. But mapping out the options and solutions, it's got to be something that they see, and it's got to be something that they're willing to do. I don't see you all riding in like a white knight to try to solve this. I don't think it gets to the root of the problem. Yeah, that's right. I mean, going down and understanding that they're planning, this is what got them there. And like Chris just said, the habits that they've formed is what's causing this.

And so really going to that issue, going to the behavior side is going to be so, so important to talk to them and then to figure out, okay, how are they going to keep surviving? Like even if you go take out a small loan, right, and sell the house, the collections, all of that gets cleared up because you have two tracks, like you were saying, and either one you could go down.

But at the end of the day, once all the debt is paid off from the equity of the home, where are they still going to sit? Like how are they going to be? And so going to the root of the problem, once all the debt is paid off from the equity of the home, where are they still going to sit? Like, how are they going to be? And so going to the root of the problem. Yeah, it's really important. So I think you all continue to talk with them. I may even suggest that you get them connected to a financial coach.

You can go to DaveRamsey.com and click on financial coaching. That way they can talk to someone and really drill into this. And as far as the credit line is concerned, you're absolutely right. This thing, if it's not in writing, then it's a collection account. It's just something that they're just trying to find out how much you might be able to pay. So if it's not put in writing, it's not real. So if this company is telling you they're willing to take X dollar amount, have them

put that in writing and send it to you. They can send it to you via certified mail or they can send it overnight. If you don't get it in writing, it's not real. But looking at the debts based on the credit line, what the balance owed on the mortgage, $100,000 in consumer debt. You look at this and less realtor fees, you may net out at zero if this home sells for that. So this is not only the tactical things that you can do to help, but also strategically, this is going to boil down into habits. And they've got to understand that there's an issue and there's a problem and something has to change. I would encourage you to tell them

about Financial Peace University. This is where they can drill in and dig in and start to understand what can they do to help change things from where they are right now. All right, I'm back to the phones. I've got Ashley on the line. Ashley, how are you? Hi, I'm good. How are you? Oh, we're great. How can we help you today?

Okay, so my fiance has worked at his job for about three years now. And at first, they promised him a management position, and that didn't end up happening. And recently, within the last two months, they promised him a sales position, which he did get in writing. Um, but I think it was contingent on one of his coworkers retiring. She quit, she quit within the last two weeks and he, you know, he was next in line to get that position and they hired somebody else. So we're trying to get a mortgage within the next nine months. We don't know if he should just put up with what they're putting him through through this job or if he should try to find a different job.

But we don't know if we'll be able to get a mortgage with only that nine months' worth of employment from that employer if he does get a new one. You know what I mean? Right. Tell me this. How much do you all owe on under debts? We only have about $5,000 worth of debt. Okay.

And whose debt is that, Ashley? Yours or his? Okay, I should split that up. He has about $2,000. I have about $3,000. Okay. All right. When are you guys getting married?

When's the wedding? We've been engaged for like five years. We kind of did it backwards. We had our son first. No. I mean, so there's not a date for the wedding? No, not a date yet. Okay.

Why? Just because we're planning on buying a house first. I know that's probably not the best idea, but we live in his grandma's house right now. We're renting from her. Ashley, y'all are basically married. I mean, do you realize that? Seriously, you have a kid together. You've lived together.

Go down to the courthouse. Make it done. Do it. Get married. And unless you're not wanting to, then I'd say there's some other red flags and I wouldn't go get a mortgage together if you're to the point that you guys can't just go get married like go do it and then and then we never really like thought about it we were just kind of you know living life and going through the motions kind of thing go this weekend yeah I mean because you're basically married I mean you're living together for five years and you have a kid together I mean

your family's there and so at that point I say, hey, the commitment needs to happen. Right. And if it can't happen, then you pump the brakes and there definitely doesn't need to be a house in the conversation. And here's the deal. Yeah. A mortgage is too big of a decision for you to be dabbling around in. And with this job, he needs to go find a company that's going to value him. And if you guys need to pause on this mortgage, which you do need to, you've got some debts you've got to clean up.

Yeah, before that. You've got to get serious and get focused. And get your emergency fund in. That's exactly right. Well, listen, I want to thank James Childs, associate producer Kelly Daniel. I want to thank you, Rachel Cruz, for joining us. And I want to thank you, America. This has been The Dave Ramsey Show. show.

This is James Childs, producer of The Dave Ramsey Show. Did you know you can now listen to The Dave Ramsey Show on Pandora and Spotify? For all the ways to watch and listen, check out our show page at DaveRamsey.com slash show.