The Ramsey Show - App - Your Net Worth Matters, Your FICO Score Doesn’t (Hour 1)

Episode Date: September 14, 2023

Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Jade Walsh, our Ramsey personality, is my co-host today. Thank you for joining us, America. We're going to talk about your life right in front of you. Talk about you right in front of you. The phone number is 888-825-5225.

You jump in and we'll talk. Michael is going to start this hour. He's in Dallas. Hey, Michael, how are you? I'm good, Dave. How are you guys doing? Better than we deserve. What's up?

Nothing. So I'm in an interesting predicament. I've incurred about 60K worth of debt trying to survive a lawsuit. I started a company with four gentlemen down in Austin. Things were going well. This started right at the beginning of COVID and we progressed for about three years. Towards the end, there were some, let's say, vision differences. And me and my partner ended up selling the company out of Houston. And two of the other gentlemen, our CTO and our CRO, basically stole all of our intellectual property. And the problem lies, I have about,

um, roughly about a $250,000 stake, um, that I'm, I'm kind of chasing trying to figure out what I should do and whether or not I should, I should give up and call it quits. Um, but things have come basically sucked me dry, and I'm getting kind of desperate. So, yeah, I was hoping to get some guidance. Well, I don't borrow money, and I hate your position because this kind of stuff, I'm a redneck. It makes me mad.

I want to fight to the death. Yeah. And yet you simply don't have a war chest yeah and yeah you could go you could go another sixty thousand dollars in four years in debt and still never see any of this yeah because about the only thing we're all sure about the court system is that it sucks yeah i mean even if you're right it sucks it takes forever and a lot of money to prove you're right and so no one ends up winning as you figured out but the lawyers yeah even when you win you lose and and the other opposing party uh one of the gentlemen his wife

is a lawyer she's actually a partner at a firm so they've been very successful at just burying us in every which way they can yeah they're just kicking the can down the road dragging it out and make it trying to starve you out it's not a bad strategy on their part actually but yeah yeah that's why we hired him i mean you said your stake in this is $250,000. Maybe. Maybe. So that's essentially what my payout would be. But because they have stolen the intellectual property and done a split off company, the company who bought us pretty much put a pause on it until everything is resolved, because that's what they paid for. And through just a number of loopholes I won't bore you with, they've basically been able to pull all of the, I guess, most relevant information and the most critical things that we would need.

And, you know, they're really just kind of holding it at this point just to hurt us or harm us. So they're not competing with you with the IP yet, but they've undone your sale by holding the IP. Correct. Yeah, they have the inclination, like they're starting a company that's supposed to do something similar. The company that you're sold to, do they have deep pockets?

They do, yes. I'd cut a deal with them. Go to them and let them fight it and tell them you'll deduct the legal fees from the stake that they owe you. Yeah. They owe you. Yeah. They owe you $250 if you win, right? If you don't win, the company that bought this has got nothing. Yeah. Because they've got a competitor in the marketplace,

and they don't even have access to the IP right now, you're telling me. Correct. Yeah. So they've got to win or their sale is bad and what they're doing is they're saying we're not going to pay you the 250 until you give us what we bought which included the ip right correct yeah if i'm that company and you came to me i'll go knock them in the nose because i got the money and i did this deal to start with so in other words they owe you 250 if they spend 150 on this uh to get it you're gonna get 100 yeah the more you're gonna get otherwise we we have a number of investors i'm probably the

smallest split of that the total sale of the company was 10 million dollars yeah well i would go to some of them then and do the same thing yeah and just go guys i'm out i can't i can't do it anymore i i can't i'm not financing this on a credit card this is stupid i can't i i'm not i don't have big enough war chest to stay in the fight you know i reached my end so i i'll give you if you'll give me credit towards it or or i'll even discount my share um and then you you know take my share of the legal fees out of it and pay me out if you win good luck i'll be happy to sign it over to you on that basis. Yeah. Yeah. Well, the,

the, the issue too is I'm, I'm probably the smallest fish in this entire equation. I'm only 28. Most of these people are 40, just, you know, longer careers,

a little bit more of a war chest. Like you said, yeah. My only concern is one, if that were to be the case, I were to get some sort of payout and then they end up losing. Right. Then you won't get of payout, and then they end up losing, right? Then you won't get a payout.

Yeah. They're taking the chance then, not you. That's why you would discount your share. Okay. So if one of the other investors said, okay, we're going to continue the fight, you can't, and we'll continue it on your behalf. We're going to take your pro rata portion of the future legal fees out of your share, and we're also going to discount your share since you're not in the fight anymore.

That'd be a deal for you. And it's not a bad deal for them because you're tapping out either way. Because if you tap out and do nothing and they go win, you're going to get the full thing. So it's a better deal for them if you offer to let them continue the fight on your behalf and you give them credit for that that's a better deal for them how many because there's like 10 or 15 people playing in this you're saying yeah yeah this is not this is a complicated mess yeah wow go. Some people's children. Yeah. Man. Yeah, that sounds very, very, very stressful.

There's a lot of money at stake there. You just can't stay in it, Michael. You've got to find a sugar daddy to keep you in the deal. Yeah, well, yeah, because if he tries to do this, he'll mess around and spend all his stake on lawyer's fees. He won't even. Even then, at least he wins, but he gets nothing. That's what I'm saying. He won't even get anything for it. If he goes $250,000 in debt and then loses oh then he's

yeah double completely screwed yeah you know so you just got to stop michael you got to stop but i would sell out my part to somebody the buyer or the other investors or somebody at a discount yeah um in today or if they want to give you cash, that'd be awesome. Or better yet, I would discount it and offer to have them reduce the amount by my share of the attorney's fees going forward, my 115th or whatever that ends up being. Like you said, you're in an untenable situation. This is why we don't believe in partnerships around here, boys and girls. The only ship that won't sail is a partnership. This is The Ramsey Show. Hey, you guys, health insurance

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and, of course, on anxiety and all the other things that Dr. John Deloney talks about. So we're going to be talking about every area of your life in one way or another. It's a day-long or day-and-a-half-long adventure. It is a blast. It's a lot of fun. If you're in the Chicagoland area, we'll be on the Willow Creek campus utilizing their sanctuary to do the event, and we'd love to have you. We've got some tickets left.

Check it out at ramsesey solutions.com slash events also uh you should know that the first two hours on saturday morning we have decided we're going to live stream that free and that'll be uh a little bit from me but mostly jade and george's talk george camel's talk and jade's talk about how you can break free from money stress and create the debt-free future you deserve. So if you want to hear a free money talk from Jade and George, just tune in by free live stream. Go to RamseySolutions.com slash live. Drop in your email.

We'll send you the link on Saturday morning. You can watch that live and be about an hour, a little more than an hour's worth of content total there for that whole thing. So we'd love to have you guys come in and join us. If you're not able to be in the Chicago area, if you're going to be in the Chicago area, you don't want to miss this, these smart conferences. You know, when you leave a smart conference, you're smart! There you go. That's good. Our question of the day comes from Neighborly, your hub for home services.

They are your one place to find reliable hvac plumbing and electrical providers near you brands like air serve mr reuter and mr electric have professionals ready to help stop wasting time scrolling through pages of results just go to neighborly.com they'll help you they're good people they are and today's question comes from david in oklahoma says, my wife and I have started Financial Peace University. Way to go. We're on baby step two and we have some questions. Currently, we have four vehicle payments and I recently lost my job. We're living off my wife's salary and unemployment payments. We keep hearing about people selling

their vehicles and buying cheap cars. How is this done when you're upside down? Very good. We are upside down on all four vehicles and we want to know how to downsize. We are thinking about surrendering the motorcycles, but that will end up costing us around 16K after we sell them. Any help would be great as we are determined to get debt free. Okay. So I actually have a list that they've given me here so they've got her truck which is 852 dollars good god a month by the way they've got her oh no i'm sorry that was his truck they've got her suv for 677 a month and then they've got two motorcycles one's 555 the other one's 408 now he doesn't tell me how far upside down they are i'm

gonna assume he thinks he's 16 on the motorcycles yeah wrong well why do you think he's wrong well because he thinks that that if he said if that they're going to give him full price in a repo if you do a voluntary repo and you take people the keys they sell your crap on a repo lot oh yeah you're right he said surrendering don't do that don't do that if they sell it on a repo lot they sell it for below wholesale at a repo price and they sue you for the difference and it ain't gonna be 16 dude it's gonna be 25 if you do that so you don't you don't surrender you don't do a voluntary repossession they may take them at some point if you can't get up right up on the payments but but don't surrender. You don't do a voluntary repossession. They may take them at some point if you can't get right up on the payments. But don't ever voluntarily because you lose control of the sale price.

And then you've got to work out a settlement for the difference, the deficit balance. So no-no on the surrender row. Yeah, definitely try to sell them. Now, these cars, yeah, $852, $677. That's incredibly too high for car payments. I don't know how far upside down they are again, but the idea here is how quickly can you get some cash stacked up? All right.

So what I'm doing is if I'm you is I know you're on Baby Step 2, but I would pause Baby Step 2 for a second so I could stack up all the money you need to get out of this deal. Because essentially this is part of Baby Step 2. So if you've got a lot of your margin going out to extra payments, stop doing that and start stacking up as much cash as you can. And since you're in Baby Step 2, hopefully that means that you're working overtime. I know you lost your job, but right now, now is not the time to wait for your dream job to come along right now. Get any jobs you can, right? While you fill in the gap, right?

And take all that money. You can drive because you got a lot of things to drive. That's true. Look, delivery service is out the wazoo. Put the kids on the motorcycle to deliver pizzas. So you got three things you can do when you're upside down. One is stack cash and cover the difference. So you got a truck that's, you know, let's just, I can't even get past this truck.

I know, 852. It just makes me want to puke. But her SUV, okay, 677. So she owes 60,000 bucks on the SUV. And when they look it up, it's worth 50. I'm making those numbers up. So let's say that means your $10,000 upside down. How do you cover that?

Well, one, you stack ten thousand dollars and then you put that with the money with the buyer that the buyer has at 50 and you've got 60 now you pay off the suv and they send you the title and you give it to the buyer that's one way second way is borrow the difference that's a good idea from your local credit union or for god God's sakes, $852? If you borrow the difference on a credit card, you're still come out. Yeah. Okay? You're already $8 bazillion in debt.

Even if your credit is shot. Now you're just $1 bazillion in debt. Yeah. And now you're truckless. Oh, well. Yeah. It kind of goes along with being clueless. Yeah.

Even if your credit is shot and you can't get a good rate from a credit union just still dump it on a credit card it's still debt you're just moving the debt around all right and then the third thing is a modification of that if your truck loan or motorcycle loans are with your local lender your local credit union your local credit union, your local bank, go sit down with them in person and say, hi, I'm unemployed. You're getting ready to get a truck back. You want it? I don't think you do.

Turns out this SUV, we owe $60,000 on it with you guys. It's worth $ you need to help us get out of this so you don't get stung this is you talking to your credit union or bank manager in person not on the phone and for god's sakes not by email yeah go sit down and look them in the eye in person. And what we want you to do, Mr. Bank Manager, is allow us to sign the note for the difference when it sells. So we're going to put the SUV up for sale for $52,000. It's going to sell for $50,000. And we're going to come in here and we're going to sign an unsecured note for $10,000. Because you already have an unsecured note for $10,000 because you have a $60,000 loan on a $50,000 asset. So you are already $10,000 unsecured.

All we're doing with this transaction is admitting it and lowering our debt by five-sixths. Therefore, we have a higher probability of actually paying you because we can survive. And so you talk them into converting the upside down portion into an unsecured note which by the way it's already where they are they're already unsecured for that amount yeah and you can do that if you go in person and present this logic to them plus you're you know you're a bankruptcy looking for a place to happen right now

and in which case they get a whole bunch of new trucks sitting in their driveway at the bank and they're going to get nothing. Yeah. Because they sue you for the deficit. You get nothing in bankruptcy on the deficit. Zero. They do. And something tells me, I don't know, I could be wrong, David, in Oklahoma,

but something tells me with these trucks and vehicles, you've got more stuff laying around to get rid of. You've got riding mowers. You think he collects toys? He's got riding mowers. He's got a Peloton. There's some stuff that can be sold and liquidated for a bunch of stuff a bunch of stuff look at everything don't tell me you have a tractor i'll kill you just don't tell me just don't tell me right now sell dave choosing violence just sell the tractor no i mean i know this guy because i

was this guy yeah i mean i'm just a boy that collects toys yeah and the problem with a boy that collects toys is we collect payments with them if we're broke people do they have a golf cart too uh they might have a golf cart so man yeah that that yeah there's they for sure have a zero turn that's six thousand bucks for sure i was shocked i didn't know that a lawn mower cost that much i didn't know dave lawnmower cost that much. I didn't know, Dave, until I saw him sitting out there. And I was like, wait a second, you've got to be kidding. There's a lot of lawnmowers that are nicer and more expensive than my first three cars. They have, because none of my first three cars had Bluetooth, I'm just saying. The tractor has Bluetooth? The ZeroTrend has Bluetooth? Oh, definitely. What? Wow. Because you have to listen to your tunes while you take 10 minutes to mow your yard.

She thinks my tractor's sick. That's what y'all are listening to. There you go. That's it. No, she don't. She thinks you're broke. Because you are. Sorry, Jason.

Aldine. Yeah, there we go. This is The Ramsey Show. Jade Warshaw, Ramsey Personality, is my co-host today. Derek is in San Diego. Hi, Derek. How are you? I'm doing well, Mr. Ramsey.

How about yourself, sir? Better than I deserve. What's up? Glad to hear. Glad to hear. Basically, I wanted to discuss my current situation with saving money. I'm 28 years old. I make about $105,000 at my current role and another $25,000 in side work through flipping items. And I am saving about $3,000 to $4,000 every month after all my expenses. I don't have like a car loan or anything of that nature.

And sometimes I worry that, you know, maybe I'm not enjoying life as much as I would like because I'm just so focused on saving money and budgeting and calculating my net worth every two weeks. So I just wanted to get your guidance on when you really decide and how you can tell, you know, that you need to start enjoying life more with the money that you save. One more time, you've got $25,000 coming in on a side hustle. What's your core income? My W-2 every year is $105,000. Okay.

So you're making like $130,000 with your side hustle. Correct. And you're saving like $4,000 a month. Okay, cool. Yes, yes. I think that's great. You know, one of the reasons that we walk through the baby steps is it kind of gives you guidance for each area of your life. And then it also, not only the guidance, but it gives you the permissions

to do what you want to do with your money. So in your case, if you have no debt, right? You have no debt at all of any kind. No, I don't have. I have a car that's 18 years old. Do you have any debt of any kind? None. None at all? No student loan? My father is taking care of that.

That's an agreement we had. How much is the student loan? It's $16,000 000 whose whose name is it in it's uh in my father's and mine if it if it's in your father's and yours it's either a parent plus loan in his name or it's in your name i believe that it technically is in my name yeah i think technically it is if it's in your name, you got to pay that. Kind of like you're in debt. Yeah, I paid off.

Like technically. Okay. So how much money do you have saved? How much money do you have stocked aside? Well, saved right now, I have about $130,000. How much is your student loan? $16,000. About $16,000. Good.

Pay it off today. Pay it off today. Okay. Now, your savings, where is it? Is it just sitting in a high-yield savings account? I have some in some Vanguard accounts and then also 401k and about $60,000 in two bank accounts. Okay.

So the $60,000 that's in the two bank accounts, pull some of the $16,000 to pay off the loan. How much credit card debt do you have? None. I just use debit. I've been following you for a long time. Okay. Sort of, yeah. So then you understand the baby steps.

So are you already investing 15% or more? Yes, more than that. Okay. Where do you live? Are you renting? Are you owning? I currently rent. Okay.

So now that's what I was saying before, we're using the baby steps to figure out what we should be doing, how we should be spending. So at this point, if I'm you, instead of overfunding the 15%, I'd probably start focusing on a down payment because at some point you're going to want to stop renting. You're going to want to have control over that biggest line item on your budget, right? You don't want to rent forever. Rent is going up. It's always fluctuating right so if i were you instead of doing over 15 i would stop that cut it at 15 and then i would take your extra margin put some of it to a down payment right that's baby step 3b and then you get to decide how intense you want to

be about this right you can decide if you're going to just go hard in the paint or if you want to pull back it's like you know what i'm young i got you know it doesn't have to be that intense at this point does that make sense yeah you're you're running on gazelle intensity and now that your student loan is paid off you don't have to do that so here's what i would do i pay your student loan off your dad has promised to pay it i heard you loud and clear he can pay you back if he wants to pay it he can pay you but i don't want this in your pay you back. If he wants to pay it, he can pay you. But I don't want this in your name anymore. I want it gone.

So you pay it off today. So your $105,000 in savings has been reduced by $16,000. We'll take a portion of that and allocate it to your emergency fund of three to six months of expenses. The rest of that you can allocate as a down payment. Now, back to your question, when do you enjoy life? Now, you need to budget some fun in your budget. All you enjoy life uh now now you need to budget some fun in your budget all you do safe and you need to have some fun in your budget and you need to have some generosity in your budget that you don't have to you need to be helping some other people

right you make 130 000 a year you're 20 something years old you don't have any debt yeah you ought to have you ought to have some fun and you ought to save some and invest some and you ought to have some generosity you ought you ought to save some and invest some, and you ought to have some generosity. You ought to always have all three things in your budget once you're at your stage, okay? So for the rest of your life, like, Derek, when Sharon and I get a check-in from a publisher or something these days, it's extra money. We have a formula. We apply to it, okay? We take out, you know, 40 10 for tie that leaves 50 now then um

after that uh um because rich people pay all the taxes man when you said 40 let me help you with that okay but anyway but aside from that the um so then we apply the put the other 50 goes to three things and we have a set percentage for more fun, more generosity, and more investing out of that other 50, okay? Like one of my friends does that. He puts 30 in investing, increases his lifestyle by five, and puts 15 into extra generosity, and that gets you to your 50, okay? So you work it out, but my point is not necessarily the percentages or even that you you to your 50 okay so you know you work it out but my point is not necessarily

the percentages or even that you have to have a formula for it but you ought to always have all three in there absolutely and if you have all three in there then you've got a pretty good balanced life because once you're out of debt other than the house which you are today because you just paid off your student loan if you really follow us now and then you have your emergency funds set aside once your best baby step three yeah you go from intense now and then you have your emergency funds set aside. Once your best baby step three. Yeah. You go from intense, which is what you've been living to intentional. Intentional means we're investing some additional generosity and additional fun.

Yeah, that's good. Yeah. And you can. So if you've been wanting to upgrade the dot, dot, dot. The car. That's the fun. Because his car is old. Yeah. Okay. You got it. You're driving a beater. Then, yeah, let's let's upgrade the dot dot dot the car that's the fun because his car is old yeah okay you got it you're driving a beater then yeah let's let's upgrade the car and you probably have the money to do

that above your emergency fund even after you pay off the student loan today yeah he will because he had at least 60 000 sitting at 104 oh that's right but some of it i think was invested oh well but it wasn't invested in iras he said 401k oh okay we don't touch that yeah don't touch the 401k okay okay that's good yeah but either way either way still still going to end up being the same thing so good question sir good question thank you for joining us so guys um the the things that we teach they're're everywhere. I mean, you go through Financial Peace University, you get a detailed line-by-line thing of, okay, make sure what you guys talked about on the live stream the other night, you and Rachel, make sure you don't have a $3,000 tax refund.

Right. Okay, adjust that. That's one of the things we teach. Make sure you're not sitting on whole life life insurance. Make sure you're not sitting on investments that are non-retirement while you're sitting on debt on the other side. That's right. Cash that down to a thousand000 and get it all clean.

You know, start throwing it at your debt. Make sure you're working your debt snowball smallest to largest balance. That's right. Interest rate doesn't matter. Make sure you're on a written budget and in agreement with your spouse. You know, there's about eight or ten things like that that you do that you go through. If you say you're following us, then you're really doing it. That's right.

You're doing the baby steps. The baby steps say when you're in one through three temporarily stop all investing while you're in baby step two getting out of debt and while you're getting your emergency fund built but here's the thing all investing not just down i sort of did i sort of follow you you can't you're either doing your thing or you're doing our thing okay so this stuff works but to the but every time you dial back one of these eight or 10 things and don't do that,

you slow your butt down. I don't care, but it just slows you down. It's a prescription. When you go to the doctor and they say, you're sick, here's what you need,

and they write it out for you and you take it and cash it in, you don't go and choose. I'm going to take that one. I'm not going to take that one. You know what? Don't give me that medicine. Give me this one. If you do that, you'll not going to take that one. You know what? Don't give me that medicine. Give me this one.

If you do that, you'll get sick and you could die. You know, the number I read this the other day. What book was I reading? I guess it was Jordan Peterson's book. I was asking Deloney about this. I couldn't believe it. The number of people that go to the doctor and the doctor gives them a prescription that never fill it.

Yeah, I know. And then the number of people that fill the prescription and don't take a a prescription that never fill it yeah i know and then the number of people that fill the prescription and don't take a stinking come on man you're messing with your health i mean so what was the point what i went to the healer to do nothing that he said that's dumber than crap i do not understand i hate doctors i don't i mean i like doctors but i don't want to go see one okay people die over but I don't want to go see one. Okay. People die over there. I don't want to go see them. But I mean, I want to. But if I'm going to go, I'm going to do what the guy said.

Take the medicine. I mean, I do not understand. Yeah. Okay. So, yeah, do this stuff exactly. Not because it doesn't affect me. We don't make more money if you do. Just, it's good for you.

Jade Walsh, all Ramsey personality is my co-host today. Thank you for being with us. Melissa is in Mobile, Alabama. Hi, Melissa. How are you? I'm better than I deserve, Mr. Ramsey, and I bet you're just the same. Just the same, yeah. How are things in L.A.?

Well, A.L., but yes. Lower Alabama, come on. So I actually just have two quick questions. One, I'm curious what a good ratio is between home value and net worth and then secondly i kind of become the uh person in my family that people go to for advice so to help myself be a little bit more efficient should i just start purchasing ramsey plus for all of them well that would break our heart we would hate it that's funny call up we might get you a bulk deal um um the ratio will change as your net worth goes up that's not a set ratio here's here's my point um what we found

among millionaires the typical millionaire when we studied the 10 000 of them for the baby steps millionaires book um was that the typical person from one to five million dollar net worth they oftentimes sounded like we've got a million and a half dollar net worth and we have a five hundred thousand dollar paid for house and about a million dollars in our 401ks and roth ira so about a third of their net worth was in their home when they reached that level as you increase your net worth your home should be a smaller percentage so if you have a hundred million dollar net worth you wouldn't necessarily want to you would you would not want a 33 million dollar house okay if you had a hundred million dollar net worth that would be inappropriate see so one-third doesn't apply

then right and if you go down and you say okay i got a five hundred thousand dollar net worth that would be inappropriate see so one-third doesn't apply then right and if you go down and you say okay i got a five hundred thousand dollar net worth well a lot of times there you're going to find the house to be about half of it a paid for a paid for house okay so if two hundred fifty thousand dollar house two hundred fifty thousand dollars in mutual funds in their 401ks at five hundred thousand would be fairly normal. But the point is there's not an exact, but it does shift the further up the net worth goes. My home is a very small percentage of my net worth these days, but I'm really blessed. I mean, the buildings we're sitting in are worth $600 million. So, you know, that's certainly my home is a small or much small percentage of that.

So that it would be absurd for Sharon and I to do that. So so if you were at the point of and I'm asking this question because, Melissa, I don't know where you're going with this. But if you're at the point where like maybe maybe I'm looking to retire, but your home is the greater portion of your net worth and you know your your assets your investments are not then maybe you think about downsizing your home so you can liquidate some of that money yeah you might because the home is you know if you're sitting there with a five million dollar net worth and a four million dollar house a lot of your net worth is not earning an income then right and unless you plan on reversing you had a million dollar house 34 i'm sorry two point i'm 34 2.2 million dollar net worth i have a 500 000 people house today that's perfect and i just kind

of feel like if i want that's perfect to upgrade one day i just don't know what you can upgrade you could upgrade you can you know but i but i would upgrade it at a 2.2 to a half no i wouldn't i wouldn't go that far okay you can but i mean every dot you know the high because that is a uh at this point your home is yes it's an asset but it is a consumption because it's not producing income so out of the 2.2 every dollar that's in the house is not income producing so the fewer dollars in the house, and right now you've got about 1.7 that is producing income, right? And your 500 isn't. But if you went up, you know, to 700, 800,000, that wouldn't be out of line at all. And also your net worth is going to be increasing while this happens.

Way to go. You killed it at 34 years old. I know, that's right. You're a studette, girl. You you're amazing how'd you do that uh just i don't know just the same thing the same thing i'm pretty boring i'm pretty boring there you go well i mean you don't you have a life i mean did you just invested and stayed out of debt tell me what you did i don't put words in your mouth. Yes, sir.

I mean, to be fair, I was never in Baby Step 2, so I'm kind of a fraud. No, you're not. You're just smart. No, that means you have good parents. You can go kiss your mama. She helped you. I mean, your family had common sense. They kept you out of debt.

Yes, sir. Instead of telling you to buy purses people can't pronounce okay and it just goes to show what a difference it makes when you avoid debt your entire life as opposed to what i did and what so many people did which they got into debt and then had dig themselves out then they had to start what's your income it's about 300,000 what do you do i'm an engineer yeah number one number one uh career field in the millionaire study the one that occurred the most often second was accounting third was teacher so yeah yeah so you you fit all the math you fit all the math except you're a little bit ahead like way ahead you're amazing well done kiddo really good very cool talking to you yeah you're gonna do fine you're not gonna make a dumb decision here but um it's a good discussion because net worth is there's a number that you can look at to tell if you're winning with money

the fico score is not a number that you can tell you're winning with money the fico score is not a number that you can tell you're winning with money because you could you can get you can your boss could walk in today and give you a raise of a million dollars a year and your fico score doesn't change a dime yeah that's yeah that's true it's like uh the fico score is have you ever gone dave to a restaurant and the food looks really good like it looks good on the outside and then eat it, and it doesn't taste anything like what you were hoping it would taste like. Kind of like those hotels in the Bahamas, the website doesn't look anything like it.

Yes. Yes, it's a catfish. And that's what the credit score is. I've got an 840. The credit score is the financial catfish. I never. That's it. I've been trying to figure this out for 30 years. You got it. You heard it here first, America. that's it you heard it here first out for 30 years you got it

you heard it here first america that's it the fico score is the financial catfish the credit card is the financial cigarette that's right it's going to end up being the worst thing that you ever did but back when you were young all the cool kids did it right oh my gosh that's exactly what it is it's a kids did it. I love it. Oh, my gosh. I love it. That's exactly what it is. It's a complete lie. It's a complete lie.

It's been Photoshopped to look like you better than you is. That's right. Because you don't look nothing like that. Oh, no. I'm just saying. Yeah, so the credit score is 100% derived from your interaction with debt. The algorithm that Fair Isaac developed, which is the organization that creates the FICO score, says that every element of the creation,

the mathematical creation of your, has something to do with debt. Yeah. You know, how much debt, the type of debt. Are you late on your debt? Did you pay off your debt early? All these elements run into your credit score the if you had a 25 million dollar net worth and zero debt for six months your credit score would be zero that's a trip so your net worth

what melissa's doing is the way to measure it the real way what's the opposite of a catfish a bass a real fish a real fish not a fake fish a beauty queen that's right that's right your net worth is your beauty queen and your fico score is a catfish it's fake winning it's fake beauty it isn't really there yeah it's an it's an avatar yeah so good we can really do stuff with this. We can. This is a good place right here. Yeah, the Internet's good for something after all. There you go. Great analogy. So Melissa, at 34 years old, $2.2 million net worth, inherited nothing, is giving away Ramsey Plus, which is Financial Peace University and Every Dollar Together.

That's what that is. She's giving that away in bulk to her family when they ask her financial advice because they very wisely come to her at 34 years old with a $300,000 income and a $2.2 million net worth, 100% debt-free, $500,000 of it in her house. They very wisely ask her advice. We always tell you, if your broke friends are making fun of your financial plan, you're right on track. Yeah, that's true. But if you're rich, Melissa is telling you you're doing good.

Now, Melissa tells you you did good. Let me just tell you, she knows what good looks like. Well, she doesn't have to give advice. She just lives advice and they see it. And then they just saddle up. They just see it. Can we buy you a cup of coffee and tell us how you did that? That's the fruit.

The fruit doesn't lie. That's it, yeah. It's very attractive to win. It is. As opposed to fake win. That's right. Catfishing. Catfishing. The real deal. Noodling. Oh my gosh.

This is The Ramsey Show. Hey, what's up guys? It's Jade. Look, if you like what you heard in this episode and want to know more about getting started on the Ramsey Baby Steps, go to RamseySolutions.com and click the Get Started button. We'll help you figure out the best next step for you based on your specific situation. That's RamseySolutions.com and click Get Started.