The Ramsey Show - Building Wealth Requires the Courage to Make Unpopular Decisions

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Starting point is 00:00:34 I'm George Camel here with Jay Warshaw. your calls at AAA 825-5-225. Jump in. We'll have a conversation about your life and your money. Anika kicks us off in Toronto. What's going on, Anika? Hi. So we're a little family of three, my husband and I and my 10-month-old son. And we're hoping to buy a place in the next six months to a year. We're just not sure if now is the right time. I'll give you a little bit of background. So we have saved up a $100,000. $175,000 down payment. Our household income is $70,000 a year.

Starting point is 00:01:13 And in our city, we could buy a place and have all of our monthly payments under 25% of our income with the 15-year immortalization period. But it would be a condo or a townhome. And we've been advised by realtors that they're not likely to hold their value as well. And since we kind of want to use it as a stepping stone, only lived there for three to five years, we just we don't want to lose money on it so we're wondering if it makes more sense to wait save up a little bit more and buy a better place from the start did your realtor give you a reason why they believe that condos or townhomes don't hold their value yeah so it's particularly in

Starting point is 00:01:53 our city apparently they like overbuilt condos and so there's kind of excess supply at the moment and just in recent years, they haven't seen the same appreciation as other properties. So I think there's a difference between not seeing the same appreciation and it going down in value. If I heard that information, my first thought, George, would be, okay, I need to be sure that I don't overspend on this, that what I'm buying is truly market value, that I'm not getting emotionally attached and accidentally, you know, paying more than I should for that particular condo or townhouse. That would be my first thought. And then I'd want to pull some hard facts and see, okay, what are, what is the appreciation rate?

Starting point is 00:02:36 Is it appreciating? Because as long as it's going up, I'm fine with that as if I can get something that I can actually afford versus taking someone's word for it and it's sounding more anecdotal, you know, they well, these things, you know, they lose value because it's, those are two very different statements, a loss of value versus a slower appreciation rate. Okay. Now, are there other neighborhoods that maybe are more desirable that you guys could look at for a condo or town home?

Starting point is 00:03:03 Not within our price range. Okay, so give me a price point that you're currently looking at, and what would sort of the next step up be? Yeah, so we're kind of looking in the $250,000 to $300,000 range, and that just depends on the HOA fees. So, yeah, within that range. How quickly can you guys save up? I'm impressed you guys saved up $175,000 making $70. Agree? How'd you do that?

Starting point is 00:03:29 Well, we saved most of that before we were married, and we kind of both, like, we're living at home by working. We can save about $25,000 a year. Okay. That's great. It would take us two years to kind of save up enough enough for the next level, if that makes sense. Yeah. The issue I see is just the goalpost keeps moving, and the home prices could change dramatically in the next two years. We just don't know what the future holds.

Starting point is 00:03:58 so I would hate for you guys to save up 50 grand over two years, and then that same house is now 50 grand more. And it was a wash. Yeah, and another thing I should have actually mentioned is our current rent is actually 31% of our income, and it's almost impossible to find something cheaper than we're already paying. I think that your real estate agent put a little bit of fear in your heart, and if I were in your shoes,

Starting point is 00:04:24 if you buy what you can afford and you buy it on good principles, and with good sense, the 25% rule, 15-year fixed-rate mortgage, right? All of those things, I think that you're going to get into that condo or townhome and be glad that you did it. You're going to be back down to 25% as opposed to 31%. And you don't know what the market is going to look like, you know, five years from now, six years from now whenever you're ready to sell it. So as long as you're making a good purchase, you're not overspending, you don't feel like you're being, do you know what I'm saying? The price is, you know, you're going back and forth in a bidding more.

Starting point is 00:04:57 as long as those things are true, I would go forward with this because I agree with George, waiting. You're just going to price yourself out and the goalpost is going to continue to move. Yeah. Okay. Thank you so much. Yeah. I'll tell you this, Anika, my first two homes were town homes and I have zero regrets. The first one appreciated it. I think I probably made 50 grand, 40 grand on that one. The second one was hundreds of thousands because we bought it in 2019 pre-pandemic and then sold in 22. and so we went from like 300 to 500 plus. And part of that is we did our homework and made sure that we were buying in a neighborhood that people wanted to live in. And if you do it that way, there's an Anika out there who wants to live in that neighborhood in the future.

Starting point is 00:05:40 And the townhome is what they can afford. So if I'm in your shoes, I'm going to go ahead and do it. The insurance is also going to be cheaper. I don't know if the real estate agent is just more pro single family home or if they are trying to push your budget further than you can take it. but I would make the right choice for you guys right now and not wait. You know, I don't know if this is true, George, but I could see how a townhome in a normal residential area would appreciate slower than a single family home.

Starting point is 00:06:09 Just because there's a smaller yard, there's less you can do with it, maybe there's less upgrades. Like I could see how that would be the case, not in a negative way, just in the type of property that it is. I don't know that that's true, but I could see how somebody would say that, but that wouldn't deter me. They're different types of properties.

Starting point is 00:06:26 Are you going to do it, Anika? People want to know. I think so. I mean, we really want to be homeowners and we're prepared for sort of all the unexpected things that come with that. That's prepared as we can be. Do you have an emergency fund on top of the down payment? Yeah, it has about $19,000, didn't it?

Starting point is 00:06:44 I like that. Awesome. You guys are crushing it. I'm so proud of you guys. You know, you hear horror stories about Canada and the housing prices and everything's so unaffordable. And you see a family. who is doing really well, making 70 grand.

Starting point is 00:06:57 They got a six-figure down payment. They don't have any debt. They're doing it the right way. And that means this decision is going to come with a lot of peace. Well, it looks like they sacrificed to win on the front end. They lived at home. They both were working. It sounds like extra hours.

Starting point is 00:07:11 And then that allowed her. It sounds like to stay home with a little one and go down to one income. Man. So just doing your work first, like doing your work on the front end, I think is the moral of the story here. Yes. And, you know, people always say, say, well, I want this to be my forever home. And I'm going, hey, you're forever homes with Jesus,

Starting point is 00:07:27 because that home it's going to wear down, you're going to sell it, you're going to move, life's going to happen. And so I hate putting that much pressure on a home purchase to be like, this has to be a 70 here move. Listen, I think people do that so that they can say yes to things that they're not quite ready for. Like, you know, more money and more square footage. Good reminder for the housing parameters. Here's the smartest way to buy a house. Number one, be completely consumer debt free. before you jump into home ownership, because it's only going to get more expensive. Number two, you better have an emergency fund because a house comes with emergencies.

Starting point is 00:08:01 That's sort of part of the deal. And then number three, you have a strong down payment. And that's the hardest part today is how do you save up 20, 30, 50, 100 plus grand? It takes time. And so if you're in your 20s going, I'll never own a home, just know that the average homeowner is now 38 to 40 years old before they own their first home. So you have time. There's no state law. there's no constitutional amendment that says you have to own home by 30 or else you're a failure.

Starting point is 00:08:26 So don't believe the lie from society, from TikTok, from your parents. You buy a house when you're financially ready and not a moment sooner. Otherwise, that home is going to be a burden instead of a blessing. When you take your vehicle to the shop, you want to know it will get fixed right. Christian Brothers Automotives, digital vehicle inspections, give you confidence because you see exactly what their technicians see. and every repair is backed by their nice difference warranty, three years or 36,000 miles. Schedule your service today and get 10% off your visit at CBAC.com slash Ramsey or click the link in the description. 10% off, up to a $250 value. See store for details.

Starting point is 00:09:48 James is in Spokane up next. James, welcome to the Ramsey show. Good afternoon or good morning, wherever you're at. Appreciate that. What's going on with you? Well, I'm 50 years old. I have no debt. I plan on retiring in 20 years, but yet I have no retirement savings, and I need to start that, well, 25 years ago, but that's not the point. Yeah, the best time to plant the tree was 25 years ago, right? The next best time is today. So are you ready to invest now? You're calling because you're going, all right, I'm ready. I'm out of debt now. Do you have an emergency fund?

Starting point is 00:10:29 Yeah, almost 30 Gs. Awesome. I love that. What's your income? Depends on how many jobs I work. Well, what is it today? Right now, it's about 86. And that's fairly normal.

Starting point is 00:10:44 Is that without a bunch of overtime and extra gigs? Or does that include some of that? I work contracts for telecommunications, so it depends. Okay. What is sustainable for you? What would you say is a sustainable income per year? 72. Okay. I'm going to go 75. Let's say you're really hustling. That's a little over 11 grand a year if you're investing 15% of your income, which is what we recommend. Once you're out of debt, once you have the emergency fund, 15%. Do you have a mortgage? Yes.

Starting point is 00:11:18 Okay. How much is left on that? I think to 35. Okay. Is it just you or is there a wife or kids or anybody else in the house? the cat well you need that yeah there you go you know I'm listening to George

Starting point is 00:11:39 ask you these questions and I'm hearing the answers and I certainly don't think it's too late by any stretch of the imagination I liked what you said first off when your income was in the 80s I think you said 86,000 I think that if you can push it to that limit

Starting point is 00:11:52 that's going to be good for you that's a good grind for you and if you do that and you're investing 15% that's around $1,000, $1,100,000 a month that's going straight into retirement. And if you do that for the next 20 years, age 50 to age 70, and I'm going to put you at an 11% annualized rate of return. I mean, you're getting close. You're $930,000. That's almost a million bucks.

Starting point is 00:12:18 Well, that's up to take a trip here or there. You do, but you should be able to do both. And think about that. If you had no mortgage payment at that point, because 20 years from now, you're going to for sure have your house paid off. You'll have almost a million bucks in this nest egg. And if it's in a raw. account, it's going to be tax-free. So that's like net income. And let's explain a little bit how George and I are arriving at that, because I think we're saying a lot to you in one sentence. The way we teach it, there's a series of baby steps. And where you're at, because you've got the 30,000 saved, you're at baby step four, five, and six, which you do at the same time. Baby step four is you

Starting point is 00:12:54 invest 15% of your income, which we have you doing. And if you have kids college, you can put away for that. You don't have that. But also at the same time, any extra money that you have, you're throwing it at your mortgage. So that's why we're assuming, hey, you can invest the 15% and you can throw a little extra on your mortgage. Yes, for sure in 20 years, that bad boy is going to be paid off. And so that's how we're arriving at those numbers and that that way of thinking. Will you have any other sources of income at 70? Better than Social Security now. Okay. So you have Social Security plus this million dollar nest egg. So that's sort of your game plan of, okay, what do my expenses need to be in order to

Starting point is 00:13:35 survive that for a, let's say, a 20 plus year retirement, right? If you retire at 70. Correct. And if you really think about it, you know, let's round up and say instead of 930,000, let's just, let's put it at a million for a nice round number. If you're used to making 85, if we're thinking, hey, this is a 10 or 11 percent rate of return, you should thoughtfully be able to pull off 10 percent and not touch the nest egg, right? If you wanted to account for inflation and take 4 percent and maybe take 6 percent, out, you'd be very close, suspiciously close to what you're used to bringing in now, and you'd be doing that without a mortgage payment. Now, obviously, 20 years will pass. We don't know what the

Starting point is 00:14:15 cost of living will be. But that's kind of, that's the quick, I'll say napkin math, which is what George would say. So, you know, at 6% you're talking out of a million, you know, pulling 60 grand a year, five grand a month. Can you live off of that plus a little Social Security if it's still here 20 years from now? That's the question. That's what I'm, well, and that's what I'm afraid of to is that Social Security will not be around when I turn 70. Now, the big question for me is, is 11% realistic. 11% is realistic. If you look at the annualized rate of returns, they're falling right in between 10 to 11% if you look back since the inception. Yeah, I mean, if you look at 1950 to today,

Starting point is 00:14:55 11.8% is what you'd find from the S&P 500. That's just tracking the top 500 companies in the U.S. stock market. So it is realistic. Now, you've got to factor in inflation of what will a million dollars buy you at that point? Exactly. Lord only knows we can do a rough calculation of three or four percent, and that's where we're getting this six, six, seven percent number for you to, as your sort of withdrawal rate. But the point is going back to your initial question is, you know, I don't have anything saved. I can tell you a million bucks is a lot better than a goose egg.

Starting point is 00:15:25 It's better than where we are now. So you should have a lot of peace around that. And think about this. If you get that house paid off in the next 10 years, let's say, well, you got another 10 years where you can start maxing everything out. You can invest way more than 15%. Let's say you doubled it, and now you're investing $2,000 a month. And you have catch-up contributions as well, you know, now that you're 50. And so I would definitely take advantage of all of that. But the key right now is just stick to 15%, try to throw extra at the mortgage, keep your expenses really low,

Starting point is 00:15:53 keep working on that income, and you're going to be okay. Well, head down there. I really appreciate the advice. Absolutely. And if you need help with this, you want to map out some projections, get some more detailed information about what to invest in, what accounts go first. You can reach out to a smart vester pro at ramsysolutions.com, and those are investment professionals that can help you with this wealth-building journey. But it's a good encouragement, Jay, to anybody who feels like they got a late start, which is pretty much anybody who's, you know, 30 or older,

Starting point is 00:16:24 is like, man, I wish I knew this stuff sooner. Honestly, even the folks who call in who are killing it, even they feel like they should have more or should do better. and I think it's just one of those things because there are a lot of unknowns when we project 30 years, 20 years into the future, I mean, are we all going to be riding cars in the air?

Starting point is 00:16:42 Are we, is there, will college still exist? Will social security still exist? We'll have a little crater on the moon we can live in. That'll be fun. I know. We don't know. Maybe the Lord will beam us all up. I've seen left behind. I think that's how it works. Your clothes are just there.

Starting point is 00:16:58 Perfectly folded on the bed. All right, Aaron is in Minneapolis up next. What's going on? on, Aaron. Hey, good guys. How are you? Great. What's your question today? So, we just purchased our first house with my wife. Yeah. So we only had one car because my wife was very close to her work.

Starting point is 00:17:21 She was just walking. And now we need a second car. We saved some money around like $4,000 for a second car. for a second car, but now I'm considering maybe taking a few grand from our emergency fund and adding that money on top of what we have and get a better car. How much is in the emergency fund? Approximately 30,000. And how many months of expenses does that account for? Give or take six months.

Starting point is 00:17:55 Okay. And how much would you be taking from the fund? approximately 3,000, 3 to 4,000. Great. So we're really going down to like a five-month emergency fund temporarily to fund this car purchase. I'm okay with that, as long as we work on rebuilding. I just wouldn't go below a three or four-month emergency fund if you're going to take that money out. I'd like to earmark my savings to go, right, this is the emergency fund, this is the car fund. But because you guys are stacked right now and you do need this car and you're trying to avoid a car payment,

Starting point is 00:18:26 I'm totally good with you taking four grand, five grand out of there, buying yourself a $9,000 car. Okay, so because my wife's lost concern, like, we already have $4,000 for a car. Why not just use that? And I was like, maybe we can't get a nicer car if we add a little bit more money on top of that. I think this is a question of how conservative or how un-conservative you want to be. If you had the ability to wait and save up and cash flow, I would do that. But if you're like, hey, I don't want to put any more money into fixing this car, I love George's idea. Yeah. I mean, if you're in, you know, crippling debt and you got $4,000 to your name, that's the car you can afford.

Starting point is 00:19:07 That's right. You guys are, you're out of debt. You got the emergency fund. You got $30K. Let's use some of that to buy a little bit nicer car. We can always upgrade the car later. We can always stack back up the emergency fund. So nothing's on fire here. Congrats on the home and the impending car purchase. Very exciting. Hey, George Camel here. A few years ago, someone stole my identity. And let me tell you, that is not a quick fix. It takes hours on the phone, piles of paperwork, and a whole lot of stress trying to untangle the mess. And even after that, there's this nagging paranoia because your information is already out there. And the truth is, you can do all the right

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Starting point is 00:20:43 Back to the phone lines we go. We've got John who's in Reno, Nevada, forever reminding me of Sister Act. What's going on? John, how can we help? Yeah, hi. If I have a question, right now my daughter's not speaking to me because, you know, there was comments that I said about me not putting myself in debt for her to go to college. I never said I wouldn't help her.

Starting point is 00:21:09 It's just, you know, I don't want to put my family to endanger for putting me in the loan. So then after that, I mean, it's been probably now a year and three months. that she hasn't talked to me. And I guess my question is, I make about $185,000. I have $45,000 in debt. I still want to help her, but I just don't know how to do this or how to even explain it to her. It just, you know, it just got pretty ugly. Can I ask a question? I feel like for whatever reason I'm making an assumption and I don't want to make it if I'm wrong. Is your wife involved or is this a, is it just you and her or is there a wife involved? Tell me, tell me more about your family situation. So, yeah, so me and my wife are willing to help out, right? And the only thing is just one of the things that we don't try to do is

Starting point is 00:22:06 put ourselves in loans. Understood. I just wanted to make sure I understood the family dynamic. When did this conversation start? I'm curious, was it, because this is like, we know that eventually someone might go to college. And then the word... It was June 20, 25. That's when you started the conversation. Yeah. Okay.

Starting point is 00:22:25 And when is college supposed to begin? Well, she actually graduated this year, and she decided to go out of state in college to. Okay. And you guys never had this conversation? We had the conversation a couple years back, but her mom, and what I'm not with her mom.

Starting point is 00:22:46 mom. That's what I was trying to understand. Yeah, I guess they'd never give me type of information or anything, you know, like to be able to clear things out. They're just like, oh, you need to pay for this. And then in that same conversation, they were like, oh, well, can you at least help for the car? And I was like, what car are we buying? So there was never really any type of information given to me other than just little bits and pieces. And they just expected me to do it right there and then. Okay. Understood. That's the family dynamic I was trying to. I had a sense that something there was a separation or, you know, your wife is not in the house. Here's what I think is happening and I could be wrong, but just by the way that you're saying

Starting point is 00:23:27 your words, it sounds more like you're talking more about what you're not going to do versus talking about what you are going to do. And I would be leading the conversation with exactly what I'm going to do to help. And I think if you do that, then it will cause them to hang out there as well and remember that from the conversation. For example, if she says, but daddy, I want to go to this school. And the only way I'm going to go is going to, I need a $30,000 loan. And you say, I'm not taking no $30,000 loan, right? That's not going to work.

Starting point is 00:23:58 But if she says, but daddy, I want to go to this college and you say, honey, I'm going to give you $15,000 for college. It's up to you to figure out which school you can go to where that money will go the furthest. Here are my suggestions. Do you see what I'm saying? Yeah, let me tell. that's a very different conversation. Now you've never said no. You've never said no. You've just said,

Starting point is 00:24:19 here's what I'm saying yes to. And I think that that would go a long way because if what's happening is true, which is they're having a bunch of side conversations and they're, you know, marinating on this and maybe inflating it beyond what you've said, your best protection is to be able to say over and over, I'm giving her the 15,000. I'm giving her the 15,000. I've said I would pay, you know, up to this point for this particular school. So if you're being accused of not caring, show that you care by saying, here's a school that works. It's in my budget. If we all pool our money, we can do it like this, right? Let's solve the problem versus everybody talking about what we can't do. Yeah. And that I did try, but their thing is like, no, she needs to go here. That's what she wants to do. And that's what she's

Starting point is 00:25:04 going to do. And at that point, I was like, hey, well, I'm not going to be able to do that, especially it's out of state. And then you have to pay out of state fees too. So are you not helping at all financially right now? Yeah. So what I did was just, you know, I put myself in child support and all that stuff. So I've been paying all that child support.

Starting point is 00:25:25 And that's pretty much a, and whenever she comes through, she came to the house before, you know, she had her own room, her own place to be. And I had, you know, told her like, hey, if you need anything, you know, come to talk to dad. Well, not anything. Yeah, like, whoa, what I meant like when it came to school, you know, let me know and we'll

Starting point is 00:25:47 talk, but I don't need to be talking to your mom because it's just become such a toxic. Well, that's what I want to know. What is the relationship with mom versus you on her? And how long has it been like that? So, yeah, so it's been 18 years. I never married her. So I have my own family. with my wife.

Starting point is 00:26:08 Yeah, so yeah, with my wife, I never married her. So I never been with her ever, ever since my kid was born. So this has just kind of been, for lack of a better word, like baby mama drama for 18 years, back and forth, back and forth. Okay, that makes a lot more sense. Yeah, and the moment that I put, I'm sorry. I want to clarify just to get down to brass tax. We understand you're not going into debt. I would not, I would agree with you.

Starting point is 00:26:34 And I think George would too. we're not going into debt. I'm not signing a Parent Plus loan. I'm not going to recommend for her to go into debt. How much money do you plan to give her every month or every semester for college? What's the number that you have in your head? That I don't have. But I mean, I could come up with the number. That's what we need. Could that restart this relationship? I think if you going to her and saying, hey, I have really screwed this up and I'm so sorry. There was a lack of clarity. I did not communicate well, I communicated too late, and that's on me. What I do want to do is restart this conversation and create a plan for you to go to college debt-free. And here's how much I can do

Starting point is 00:27:17 right now, based on my financial situation. Would that get her to perk up? I'm hoping, yeah. Because there's so much deeper here, there's a lot of relational issues. This money thing is just like one baby symptom of years and years of broken relationships. And I think she's now seen. seeing this as, man, this guy hasn't been there for me relationally, and he's not even here for me financially. Well, yeah, and that's how it seems, right? And the thing is that we always, I've always been there for her. She's stayed with me, like I told you guys, like, every weekend and stuff like that.

Starting point is 00:27:52 I made sure that I went to the courts, got child support on myself, and then made sure that I had visitation with her because I knew that we're going to try to pull her away. So I made myself, you know, available for her. It sounds like there's everything that manipulates. There's two conflicting family dynamics. You've got a family over here who we're at no debt family. And then there's a family on this end for her that's like, hey, whatever it takes, we're going to do it. And she's caught in the middle of that is what it sounds like.

Starting point is 00:28:23 I agree with George wholeheartedly. If you come to her, because I'm going to tell you like this, my dad said to me, I'm not, when I said, I want to go to the school and I need a loan, he said, I'm not doing student loans. He said to me straight up, he was like, you better get a scholarship. You better be good at sports because I'm not taking out no student loans is what he said. And I was like, okay, you know, and I remember at the time feeling away about it because you know, you're 18, you're 17, you're 16, you're young. But on this side, I'm like, oh, thank goodness. I'm really glad that he didn't ensnere both of us. You know, I went on and I was hard headed and took out some loans. But at least it wasn't a parent plus loan and at least I didn't

Starting point is 00:29:02 ensnare him in it. So I think on the flip side, like longer down the line, she's going to appreciate that. But if you do what George said and you humble yourself and apologize for not starting this conversation earlier as the adult, she is, that's going to do something to her on the inside because parents don't apologize to children enough for the mistakes that they make. And so please, please do that. And don't do it in the heat of the, of the, you know, the next conversation. You go first, call her up and get, hey, can I take you out to lunch? Can I take you out to dinner? Sit her down and go, I messed up. And here's how I did it. And I think that's going to change the whole landscape from this going forward. Yeah, no. I agree. Cool, cool, cool. Man, well, it's a great wake-up call to all

Starting point is 00:29:49 the parents out there. Do not start this conversation as your child is touring schools. Start this conversation at 12, at 14, at 15. So there's no surprises. Your kid knows exactly where you stand. hey, I will cover four years at an in-state school. That's right. That's what I'm willing to cover. And if you can't, if you don't have the money, that's okay. As long as you have set the expectation, I don't have the money for college. You're going to have to get a job.

Starting point is 00:30:13 You're going to have to do work stay. You're going to have to go to community college. As long as you set the expectation, that's all we can really ask of you. If you're waiting for rates to drop before you buy a home, here's what nobody tells you. When rates fall, every buyer who's been sitting on the sidelines makes their move. at the same time you do. That means more competition, higher prices, bidding wars, all that. That's why I tell people to talk to Churchill mortgage before they do anything else. Churchill gives you a strategy so you're not at the mercy of the market. They can show you what

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Starting point is 00:31:57 Hey, yeah, how are you all today? Doing great. What's up with you? Awesome. Doing all right, except I am in a little bit of a tight spot. In the past year, I've gone through a divorce, had to move out, and just a lot of financial issues have popped up. And I have a debt collector chasing me for a loan that was defaulted on during all that. and I have a small amount of cash and I'm only netting $410 a month after bills and expenses. And I was just wondering or just needing some direction on what to do with the cash. It's the best deal with the debt collectors because it's just weighing on me.

Starting point is 00:32:40 And I'm afraid of eventually being sued. How much is the debt that you have with collections? It's 9800. Okay, 9800. How old is it? Personal. personal loan. Okay. Yeah, and how old is that? A couple years. Okay. It's been in default for a couple years. How long has it been in collections, I mean? About a year. About a year? Okay. And so you've got

Starting point is 00:33:08 $410 dollars in margin every month after everything is accounted for? Yes. And this is the only debt, or is there other debts to speak of? There are other debts. That's just the only one in the collections. Tell us about the other debts so we can think through all of it. Okay. The largest debt that I have is my car loan, and it's $38,000, and then $35,000 in student loans. Those are in deferment right now. And then $12,600 in personal loans. And then, of course, the $8,900 in collections.

Starting point is 00:33:48 And then my smallest debt is $2,300. in credit cards. And this is after the divorce has been settled. This is what was allotted to you. Yes. Okay. Yeah, you know, as far as the collections, you can start putting aside some cash to try to settle that,

Starting point is 00:34:07 and I'd try to settle it for maybe 25% of the amount. And in the meantime, because you're going to need that money in cash, you're not going to be able to settle it if you don't have the numbers in cash. So I would work towards that. And in the meantime, I think something that could really help you free up some cash immediately is taking a look at this car payment. It's $38,000. Tell us what you bring in a year and a month.

Starting point is 00:34:32 Tell us both of those numbers. Okay. In a year, I net 47,500. And then my monthly net is a $3960. Okay. So hearing those numbers, I mean, George, I look at that and immediately I say, you cannot have a $38,000 car. It is just too much of your world,

Starting point is 00:34:54 of your yearly income tied up in a vehicle, something that's going down in value. Did you roll over negative equity? Yes. Okay, so this car is worth what, 10, 15, 20 grand? Probably 20. Okay. So you're 18 grand underwater on that,

Starting point is 00:35:12 and the only way out is to come up with that amount, either with savings or through personal loan at a credit union. I doubt they will give that to you due to your debt and collections and your credit's probably shot from all this, right? Yeah, I've worked it back up to like $690. Okay. I think I heard you say you had some cash saved. How much? Uh, $2,700. So you've got $2,700 in cash saved. If I were you, I'd probably be looking to get some sort of a personal loan, credit union loan, whatever I can for the $18,000 to get out of this car loan. And then, I would take the $2,700, put a little more with it, and probably buy a $5,000, you know,

Starting point is 00:35:53 beater car that'll get you from point A to point B. And that's going to save you on this car payment, because what are you paying per month for this $38,000 car? $7.29. 729, exactly. And so if I were in your shoes, I'd rather have, you know, a debt for $18,000 versus one for $38,000. Right. And now you've got over $1,000 in margin every month if you do that. Well, I drive an hour to work both ways.

Starting point is 00:36:22 So that's definitely what I wanted to do because my transmission went out in my truck last year, and it was going to cost me $12,000 to fix it. So that's why I had to get another vehicle and roll over negative equity. But I was like, because I've been listening to you guys for about a year, and I knew that was what I should do, but I was concerned that if I bought one, that was a beater per se. The hour drive? Yeah, I'd be stuck on the side of the interstate.

Starting point is 00:36:53 Well, we can try to pick something that, you know, is road tested because you can find things out there that are old and still doing well. I mean, I can tell you right now, the car that, one of the cars that I have is my old Cadillac SRX, it's worth $1,500, but it drives. There's no problems with it. And if, you know, if I were to sell you that car, you'd have zero problems driving an hour there and an hour back. So they're out there.

Starting point is 00:37:16 I think the way to do that is ask a. around, ask around town, ask around your church, who's selling a vehicle, one where you can really know the background on it. But I would- You know Facebook marketplace? I mean, just something with fuel efficiency, because you're driving that thing to the ground anyways. Yeah. And so let's buy it when it already has the most depreciation hit on it. What's the making model of your current vehicle? It's a 2024-Rav-4. Okay. We can be honest, Ben. We're friends by now. Lord knows you didn't need a 2024 RAV-4 to go from A to B an hour. That could have been 2014 and done the same thing. Now, I understand that you're worried about the issues. You have the trauma from the transmission going

Starting point is 00:37:55 out and sort of like, well, I need the newest, most reliable vehicle. But the truth is, some of these new cars are even less reliable than they used to be. And they got all the technology now. So if something goes wrong, the repairs can be real expensive. So I would be looking to get out of that because that will save you the most money per month, and that will allow you to then save up and settle with the creditor. How close are they to suing you? What have they told you? Well, the credit's been sold three times or the debt, excuse me, and with the last debt collector,

Starting point is 00:38:29 I had gotten an agreement with them twice to pay $6,000 in a lump sum, and they would just change the terms each time I would call back, and they would never put it in writing, and they always wanted my bank account information, and I knew listening to you all to not do that. So then they wound up selling the debt again, and I haven't begun working with the new debt collector, but they sent me a letter last week, so I'll have to write them and go through all that again. I mean, you're going to have to hound them almost as much as they hound you in order to get this done, and the truth is, because I've done it, you call one agent, there's nothing in their brain, and they can't get it done. You've got to call nine times to talk.

Starting point is 00:39:11 to the right person who understands the process, who will do it right, right? So this is going to be a full-time job for you, but I do think it's worth it. It's going to be worth the hassle in order to settle that debt for a significant amount less. Now, let's talk about the student loans. You said that they're deferred.

Starting point is 00:39:27 I want to know, do you know, are these federal loans, are they unsubsidized or are they subsidized? Because I need to understand if these are continuing to accrue interest while you wait. They are accruing interest. Okay. If you can, I would stop

Starting point is 00:39:41 that and pay minimum payments because I want you to at least do your best to cause these to not grow over time. It sounds like you have the margin to be able to do that. But what this is going to take, and this is the part that is not the fun part, if you want to make some major headway in this debt, you're going to have to pick up more hours, overtime, side hustle. We've got to get this up from $47,000 a year because, I mean, you just don't have the margin to make this work. Would you agree? Yes. So let's brainstorm some of the things that you can do does your job offer overtime? I mean, you're driving an hour to do this job.

Starting point is 00:40:19 Hopefully we can get some extra hours. I'm salaried. I'm a manager. I was thinking, though, there are some smaller where the little town where I live, there are some smaller like retail businesses where I could possibly pick up, you know, 15 hours a week. Yes, I love that. Just on the side. And do you have shared custody?

Starting point is 00:40:41 to stay in this area currently? Not necessarily. I work with my church in the area, but as far as no, I didn't have kids or anything like that. Okay. So I'm just wondering, can you move just closer? Instead of driving an hour, can it be 10 minutes and you pay the same in rent or cheaper? The rent would be quite a bit higher just because I work in Birmingham. Oh, got it. So you're heading into the city. Uh-huh. Okay. Well, as long as we're getting a side hustle that's worth your time and not something where you're making pennies, I mean, we need to capitalize on time and money right now. And if you do those things, the things that George and I said, getting rid of this car, taking those student loans off to ferment and really hone in on here, you can get this debt paid off and you can clean up this situation.

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Starting point is 00:42:43 That's worldwatch. dot news slash Ramsey. Welcome back to the Ramsey show in the Fairwinds Credit Union Studio. I'm George Camel with Jade Warshaw. We're taking your calls at AAA 825-5-2-2-25. Riley joins us in St. Louis up next. What's going on, Riley? Hey, can you hear me okay?

Starting point is 00:43:10 You sound great. Okay. So, George and Jade, my question is, so I just graduated pharmacy school. Woo-hoo! I have, thank you. My husband and I together, this is the only debt we have is my student loans. I have $132,000, which is the principal, and it is a federal unsubsidized. I have $16,000 that accrued in interest while I was going through school and was unable to pay those off.

Starting point is 00:43:40 So I'm sitting right at, right under $150,000. I do have a job lined up. I haven't met with HR to discuss exactly what my pay is going to be, so I can't pinpoint point that, but I do want to knock out those loans as fast as possible. But with that, my husband and I, we have the baby fever very strongly, and we are thrilled to start a family, but at the same time, I do want to get a little acclimated to my job, and we want to get some of this tackled, but when would you guys say is a good time to kind of start going to that next step once I get some of these loans tackled?

Starting point is 00:44:22 So here's what I'll say on the matter, and I'll allow you to take from it what you will, because I can't stress enough that this is a personal decision for you to make, but also there are some very real things to consider. So how old are you guys, first off? I'm 24. He's 26. Okay. And this is the only debt there is? Yes, ma'am. Okay. So I'll start with a couple of points for you to consider. First off, you have to think about your career and the unknown of how you'll feel when you have a child. Okay.

Starting point is 00:44:59 When my husband and I were in your shoes, that was the thing I thought. It's like, okay, if I have a kid, I'm saying right now I want to keep working, but I really don't know how I'm going to feel when that baby gets in my arms. And so what you can do today to prepare yourself for that and to have that option is everything, right? you want to what people want out of life more than anything else is they just want to have the option so paying off this debt first gives you the option so that's something to consider i'm not saying you have to but it does give you the the option of saying you know what i paid off my debt i can afford to pull back if i want to uh from my pharmacy hours whatever so that's thing one to think through um and then thinking through okay what would our life look like if we did go down to one income so having clear

Starting point is 00:45:47 thought processes on that today when you're kind of in a cold brain mindset versus later on when you're like, you know, heated and you think you know what you want, thinking through that today is so, so important. The number three thing that I will tell you is children are expensive. And they add things. They add priorities. They add things to your margin that you're like, dang it, I want to use that margin to pay off debt. Now I have to think about things like cribs. and there's choices that you're going to want to make. So I'm just being your buddy and putting that out there. If you want to have a baby tomorrow, you can.

Starting point is 00:46:22 I'm never going to take that away from you. But I also will say for Sam and I, and you guys is debt as less, for Sam and I, we really thought through that and thought, you know, for us, we want to clean up this debt first. We've got plenty of time. And for us, it was worth it to do that. It was from a value standpoint. And so I like to share both sides of that equation, again, being very clear that it's

Starting point is 00:46:44 your option. I'm not going to say you can't have kids until you pay off debt, but I do want you to think through it. You're not in this situation, but so many people call in. And the reason that they're struggling is they kept having kids instead of focusing on the matter at hand. And I think we can do a better job of family planning in a lot of situations. And we have the ability to do that. So you should. Okay.

Starting point is 00:47:09 That's my spiel. What are you thinking? So I have the my job is lined up. I have met with HR to discuss pay. But what I do know is that it's considered, so it's hospital pharmacy. It's considered part time, but I have the ability to pick up so many hours to where I'm easily going to work 40 hours a week, which is because if I do get to the point to where I want to pull back, it seems like I'm going to have the ability. Obviously, that's not 100% a given forever because things change.

Starting point is 00:47:46 New employees can get added on, but that's where I'm at right now, and I've been assured that by management there. My husband is doing pretty well with his job. So my thought is that I would agree. So he makes 80, he's he salaried at 86,000 right now. He's a civil engineer, and he's in the process of doing a, test to become a level two, which is considered a promotion. I wish I could describe it better.

Starting point is 00:48:19 All I care about is he's getting a pay bump if this goes through. A very, very nice pay bump. Like he'll be making six figures? Yes, sir. Great. That's some good debt payoff money right there. And I assume you'll be making decent money as a pharmacist, one would hope. If at 30 hours a week, I'd be making just under six figures.

Starting point is 00:48:41 So with picking up the extra hours, I'll be making over six figures. Right. So let's picture a world where you guys are making $200,000. You're aggressively attacking this debt, and we're taking care of a baby. Can you guys handle that? No, that's a loaded question. It's hard because I know. What's the total of your student loan payments?

Starting point is 00:49:02 What does that add up to? The total of what I would be paying off. Yeah. What's the total payments you need to make? to satisfy those minimum payments currently? So that's the other tricky part when I was kind of doing my exit loan counseling through FAFSA. I didn't, it was hard for me to kind of enter in what I needed to put

Starting point is 00:49:27 because I didn't, like it was asking what my salary was going to be and it was like, well, I don't know. Are you an income-driven repayment? I do not want to do that. Okay, good. I've had plenty of people encourage me to do the public service loan for, Yeah, you don't need to do it. Yeah, I don't want to do that.

Starting point is 00:49:44 Your homework is to figure out what these payments will actually add up to as part of your monthly budget, what your current bills are, and then see where you guys are at. And that will give you a very clear picture of how quickly you're going to pay off this debt, what adding a baby into the mix would do, how much margin are you going to need to cover, you know, formula, wipes, wipes, diapers, all that stuff. And that'll give you a better next step. How are you guys living? Riley, where do you guys, are you renting? What do you have? We are renting. Our rent is $9.75 a month.

Starting point is 00:50:20 And that is, and then our internet, and then we pay internet and electric. Love that. That's a good price for you. Very reasonable. What was your question? And then, so my question was I had talked to, we had, we had a financial advisor, like, come during our exit week of pharmacy school. And I asked her a question.

Starting point is 00:50:41 and I know it's just one person, so I love that I'm getting a second input. But I'd let her know that I wanted to pay these loans off as soon as possible. So I said, should I max out what that payment's going to be with my loan servicer? And she said, no, don't do that. Do what you're comfortable with because you can always pay excess on top in case anything or to happen. Because my husband and I also do have about $50,000. Yeah, I would say whatever they, Whatever they, you know, they're going to take your income into account and whatever your payment is, that's fine.

Starting point is 00:51:16 Don't try to make it less intentionally. Your goal is to pay it off. So in that way, she was right. Put as much extra, as much margin as you can find on top of that minimum payment to go directly to the principal. Okay, George, we hear from so many people that are trying to live out to the Ramsey plan, right? They're getting out of debt and everything. But the hard thing is there's not many banks out there that actually support the way we teach people to handle money. Yeah, most banks, they don't want you to win with money.

Starting point is 00:51:53 So they charge a bunch of nuisance fees. There's all this fine print. And worst of all, they are pushing debt products at you nonstop. Yes, but the good thing is, is that fair wins isn't like most banks. They're not like the other guys. They're not like the other guys. Yeah, they are not pushing debt. And they actually want you to win with the baby steps.

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Starting point is 00:53:29 What's going on, Matt? How can we help today? With a go and George and Jade. I'm glad to get on the show. Glad to have you. My question is whether it's responsible use of funds to start up a side hustle, even though I'm not totally sure what the path to profitability on it is overall. What is this side hustle?

Starting point is 00:53:56 So it is a, I previously had a business doing something similar. It's a mobile, bicycle, and a e-bike repair. A pretty popular metro area for it. Yeah, Portland is the mecca for that. Yeah, right. And I work for a company that does that presently. So I previously started the business doing that and eventually grew that into a brick-and-water location. and then sold it.

Starting point is 00:54:24 So I have background in it. I know what I'm doing. I know what the cost. It would cost me probably about 30 grand to start it up. But. For a mobile repair business? What are you, are you needing like a van that has specialty equipment?

Starting point is 00:54:38 Yeah. Yeah. So that would be like if I had my wish list. Everything was like exactly how I wanted good branding, just running start basically. Okay. Do it for a lot less. But this would be like if I could do everything I wanted to do,

Starting point is 00:54:52 that's what it would cost. Why do you want to do it as a side hustle if you already know you have had success doing it as a business? Are you just thinking that you'll start small and build it up? What are you, what's your end goal? Basically, I mean, the way I look at it is that the mobile option is not a hugely profitable enterprise in itself, but it's a great ramp to getting into a brick and mortar location, building a brand, things like that. But why did you let it go the first time?

Starting point is 00:55:27 I didn't want to live where I was living. I wanted to move out of that area. Be closely in my family. I'm originally from here. And like I said, I mean, I did sell the business eventually. So it worked out in the long run. But I did have times where I was like, do I just want to be the bike repair on a bus guy? Like, not really.

Starting point is 00:55:50 So you know how to do the business? The only thing that's changed is location. Pretty much, yes. Do you have the money to start it again? Do you have the cash? I have well more than enough. Yes, I do. How much do you have?

Starting point is 00:56:09 I have about $4.80 in total. And I think I'm going to owe probably, so the sale of the business I heard last year. So I'm going to owe about probably like $50,000 in taxes, maybe even more. Okay. So let's call it $400. you have for some play money here, and you're wondering to try to take a portion of this and try to start this business.

Starting point is 00:56:31 And you said you work for a company that currently does this? Yes, but I only work weekends. I'm not making very much right now, so I have insight into, like, their metrics and how well they do in the area. And they're a mobile repair business? They are, yes. Well, they do it is. Yeah, if I'm the business, I'm going, dude, this is a conflict of interest here if we're going to be our competition.

Starting point is 00:56:53 Oh, absolutely. I would have to quit. I probably shouldn't even be calling you guys right now on a national show because if they heard, I got it. So you're not trying to do both at the same time. Oh, God, no. I would basically give them my two weeks and say, look, sorry, I think I want to go independent. How quickly can you be profitable? I mean, that's the thing. It's like, and let me, I'm sorry, let me, I don't know for sure. Let me, let me restate. How quickly can you make a wage that is enough for you to live on and start recouping the 30,000 that you invested. Let me put it like that.

Starting point is 00:57:30 I think with the right branding and, you know, a good, good run rate off the ground. I think I can get going pretty quickly. I think I could be breaking even within a couple months of having it running. And then, you know, depending on how, depending on how much time I want to put into it, you know, maybe I could recoup my cost if I was really grinding, you know, within six months or so. I love that. Tell us about your family. That's basically like it's a full time.

Starting point is 00:58:02 It's a full time thing, you know. I love that for you. Who else is a part of this? Do you have a wife, kids? Who else is going to be affected? I have no, no independence. It's just me. And yeah, so I'm pretty much, you know, free to do as I please.

Starting point is 00:58:21 Would you use your savings to float your bills until this thing gets off the ground? Yeah, and that's why, I mean, I know a lot of this sounds like, kind of like, okay, have the money, have the business plan and all that. Like, why even call? I just, to me, it feels a little bit strange to be like knowingly, you know, dipping into my savings a certain amount. It's like I can't work that much. I can't work another side thing. Sure. But you're telling us you'd go 40 plus hours a week into this business if you started to.

Starting point is 00:58:51 tomorrow? I feasibly could, you know, if I built, I think I could build up a client base quickly. But it's like, I guess the other thing is best case scenario, best case full time, fully booked. Right. I'd maybe make like 50 grand, you know, profit after everything. Can you live off of that?

Starting point is 00:59:15 Can you live off of that? Yeah, probably. Yeah, I'm pretty frugal. I think for you, Matt, I think what you're looking for is. some boundaries on this. I think that would make you feel a little bit better. And so if I were in your shoes, I'd probably sit down and say, okay, I know I've got 400,000. That's a nice payday from this other business, but I don't want to get sloppy. And so if I say that I'm going to invest 30,000 in this, I'm going to be very detailed on what that 30,000 is going to go towards. And then I'm

Starting point is 00:59:43 going to be very detailed on what I'm going to live off of from the savings and have a very clear timeline. If I get six months into this and I'm not profitable, I'm not paying myself 50,000 from this, then here's what I'm going to do next. You've got to give yourself an on-ramp, like a go-no-go. If I get here and things aren't going, then I'm going to stop because I'm not, or I'm going to stop going at this rate or I'm going to pick up a part-time job or whatever that thing is that you're not just draining off of this nest egg. I think you have to have a clear amount of money that's like, I'm going to spend $30,000 on the business and I'm going to live off

Starting point is 01:00:22 $40,000 for the next year and that's where it stops. I'm 70 in. Do you see what I'm saying? And I think that'll give you not only peace, but it'll give you a timeline like, I got a hustle and I got a flow. Because if you're just vibing, you're going to call back three years from now and say,

Starting point is 01:00:38 hey, I blew 400 grand trying to start a business and living off my savings and it didn't work. What do I do now? And that's a much different problem to have than to call it quits. at 70 all in and still have 3.30 left over to survive and go get a different full-time job somewhere and say, hey, I tried. If this is really your dream, you're doing it with cash. You're not going to go into debt for it. You've done this before with success.

Starting point is 01:01:02 Yeah, you earned the right to do it. But my only hesitation is, if 50Ks you're sealing forever, this kind of sucks. They want to start a business because you can do better than you could elsewhere. Yeah, exactly. I'm like, is this really a career? It's a labor of love. I love to do it. Is it a career? Well, are you trying to exit from it again? Or is this something you want? Like, is the end goal, hey, I exited well the first time I'm going to do that again? Or is the goal, this is where I work for the rest of my life? Those are two different in goals. Yeah. Yeah. Now, that's a great question. And it's kind of murky. I think I got lucky the first time with the exit that's not common in this type of business. There's no guarantee that would happen again. So just being realistic about that, you know, those end. points is kind of, you know, something to beware of that you're working for now. What do they make? Yeah, I mean, is the owner making more than 50 grand in profit? Well, so they, the truck, a truck does about 120 in top line revenue. And I think they,

Starting point is 01:02:10 they gross about a 50% margin. That's where I get that 50 from. Got it. But you said that you can go from having a truck to going to brick and mortar. So if you were, were going to brick and mortar, what do you think that you'd be, you know, what would be your revenue and what do you think you could pay yourself? Hard to say on that because the market is so crowded here and that's actually why I don't want to go brick and mortar. I think the mobile is like more flexible, easier startup cost. So I mean, brick and mortar like just for reference, like we did in my last order. Our best year was 2024. We did just shy of a million and I think we made like 115 on that, like, had pretty...

Starting point is 01:02:51 Yeah, there's much more overhead with that. Yeah, I mean, I would go for it. Just know you're kind of signing up for a food truck instead of a restaurant, and that's the end game, is you run a food truck forever, but in the bike world. And that's okay if you can make peace with that. If you're behind on your bills, doing more of the same isn't going to fix it. You need a different plan. And that's why I tell people about Guardian Litigation Group.

Starting point is 01:03:24 If you've missed payments, if collectors are calling non-sense, stop or if you're getting letters about legal action, that's your signal. And it's where a lot of people wait too long because the longer you wait, the fewer options you usually have. And once it turns into a lawsuit, things can get more expensive and more complicated fast. Guardian litigation is a law firm, not a call center. From day one, you are assigned an attorney who represents you. So if a creditor moves forward, you're not caught off guard and you're not hit with. surprise legal fees. Guardian litigation only gets paid when the debt is negotiated and the client accepts the settlement offer. This is about stepping in early while you still have leverage. Don't

Starting point is 01:04:09 ignore the problem. Take control of it. Go to Guardianlit.com slash Ramsey right now. That's guardian l-it.com slash Ramsey. Attorney advertising. Results may vary and no specific outcome is guaranteed. Ask Ramsey is our free AI tool that is built and trained on proven Ramsey principles. And today we're to break down the most asked questions of the week. There were some questions around estate planning, tracking expenses, buying a car, but the number one question was around retirement investing. I love that. What should I consider when deciding between different retirement accounts like IRAs, 401Ks, and Roth accounts? Good question. So here's kind of our order of operation when it comes to investing. You've heard to say it before. 401Ks, 403Bs, up to the employer match.

Starting point is 01:05:12 So that's great. Match beats Roth beach traditional is kind of the way that we say it. So the explanation there is we love free money, right? A match is free money. This is money from your employer. It's an instant 100% return. I wouldn't leave that money on the table. If you get a 4% match, so you put in 4%, let's say that's $1,000, they're going to put in another $1,000.

Starting point is 01:05:33 Yeah, free cash. So we start with the match. If you don't have that available to you or if you do, the next place would be the Roth IRA. We love the Roth. In 2026, you can contribute up to $7,500 a year. Obviously, for catch-up, that's $8,600. The Roth is the rock star of retirement accounts. You pay the taxes now your money grows and then comes out completely tax-free like the laundry. We love to see it. And then let's say you haven't hit $15 yet. Let's say you make $100,000. $15,000. 15% is $15,000. You haven't quite hit that between the match and maxing out of Roth IRA. Well, then you just go back to your traditional accounts like that, traditional accounts like that, traditional. 401k until you hit 15%. Yeah, I love that. And a lot of people ask the question, and we kind of hit this. What's better, Jade and George, do we do Roth? Do we do traditional? Is one better? If it's up to me, always choose Roth. Always. Here's why. Traditional, do you get the tax break now? But later, you have to pay taxes on everything, including your errors. So if they inherit that money and it's

Starting point is 01:06:33 traditional money, they're on the hook for that too. With IRAs, there's required minimum distributions. What will the tax rate be at the time you retire and start to withdraw? Yeah, that could be very scary. Good point. So Roth, go ahead and pay those taxes now, enjoy that tax-free growth, and then have those tax-free withdrawals forever. That's nice. It's just nice to know when I'm finally retired after working hard my whole life, the government is going to get their grubby hands on that money at least. I love that. I love that. Go check out, Ask Ramsey.

Starting point is 01:07:03 Can help you figure out how much of your income should go into each of these different types of accounts based on your current situation. You can ask your question today at Ramsey Solutions.com. or click the link in the description if you're on YouTube or podcast. All right, we're out to Jacksonville, Florida up next. Kirsten joins us there. What's going on? Hi. So I'm getting married in 15 days. And we're combining our accounts once we get married. And we're basically trying to figure out kind of how to get the baby steps going

Starting point is 01:07:35 so we can save to buy a house. And we're wanting to know how much we should save to buy a house and all of that fun stuff. exciting times for you guys. Okay. Do you know what your incomes will be once you're married? Yes. So he makes about $48,000 a year right now, and I make $40,000 a year right now. Okay. So $88K is what we're working with. Do you guys have any debt going into this marriage? So the only debt we have is two credit cards, and the credit cards total $1,600. Oh, great. And so that will get paid off very quickly, if not before the honeymoon. Yeah, no, we're planning to pay it once we combine the accounts.

Starting point is 01:08:12 Great. And do either of you have savings currently? Yeah, so together right now without paying off the debt, we have $11,700 in savings. Okay, and that's everything. So that's going to be sort of your starter emergency fund. Let's take out $1,600, let's call it $10K in your emergency fund right now. So that's going to be step two. Step one, pay off all consumer debt. Step two, we're going to then move on to kind of filling up that emergency fund to three to six months of our new household expenses. Yes, sir. And then we can start saving up the down payment. So your question is how much to save?

Starting point is 01:08:49 Yeah, kind of. Because like, so once the bills are all totaled up with like food, gas, all that stuff, we're going to be spending $3,100 a month. That includes rent? That includes rent. Okay, great. So you're going to be renting for a while. Yes.

Starting point is 01:09:04 And once we pay off the debt, it actually subtracts $250. So I guess technically it's going to be 20, 2850 or something like that. Okay. A month. So you guys will be bringing home. You said $88,000 will be the gross household income? That is correct. Okay.

Starting point is 01:09:22 So after taxes, can we call it $5,500 somewhere around there? Yes. All right. So minus your, let's call it $3,000 and expenses, you'll have $2,500 left over that you could save for that down payment. Okay. Yes, sir. And that is $30,000. year. Yes. So now we know it's kind of like what house are we wanting to buy and at what point do we

Starting point is 01:09:45 have enough down payment to get the mortgage payment to 25% or less of our aftertax income. Right. And we're kind of on the like fritz of we don't know if we want to buy land first and then possibly pay that off and then get a house put on it or we should just buy a house first. I would do the math first and let the numbers speak to your soul because what you're hoping for, if you just kind of think with the numbers that you have today, okay, making, you know, 56, 5,500 a month, that payment's going to have to be 1,400 bucks at the savings rate that George said, which was, I think, 30,000 a year. What would that look like on a, you know, the houses that we're thinking would suit us? So have you done any looking whatsoever size for what you guys

Starting point is 01:10:32 are looking for size-wise, bedroom-wise, do you know what the cost would be? Yeah, so at minimum, we would need at least to start out a two-bedroom, and one bath. And that's because we also have a surprise on the way. Love that. Oh, love that. Yes. Yes. And so that would be pretty minimal, so we can probably find something that's like anywhere from two to two-fifty. Okay. So George is plugging that in. That was exactly my math. I was like, man, if they get $200,000 house, you put $60,000 down. That's two years of saving up, right, aggressively. You could get a 15-year fixed rate mortgage where the payment's about $1,400. And that would give you guys a whole lot of piece and margin. Because what's your rent right now? Well, it's $1,34. Exactly. So you'd

Starting point is 01:11:21 still have about $2,500 in margin every month to invest, to help cover the expenses for the baby, all of these things. That's the goal here. So it looks like you're going to be renting for another two or so years and aggressively saving up. But that would be the price point. Obviously, the goalpost may move a little because two years from now, that same house might be 230, 240. So the goal is let's get the income up. Let's keep saving. Are you going to be putting the baby in daycare? So no, I'm not. And that was also something is I have talked to my boss and he's going to allow me to continue working and he's going to be able to let me work at home. Wow. That's great.

Starting point is 01:12:03 Yes. That's work on top of work. Yes. And so the big thing was that I didn't know if I would be able to keep the amount of hours I'm working currently because it's like you just never know how it is when you get to have a baby. So it might lessen just a little bit. But he is also in the process of possibly getting a raised at his job, which will open up the possibility of like getting a 401K and all of that stuff too. Well, what you're talking about, I think, is a very smart place to be mentally, and that's for anybody listening. If you're in a situation where both spouses are currently working and you're thinking about buying a house and you know there's children on the way, you know children at some point will be part of the equation, the best thing that you can think about is what will life look like if we were to go down to one income, even if it's just temporarily, even if it's for a couple of years while the baby is in arms, right? and making sure that whatever house you purchase can weather that storm and it's never going to be too big of a percentage of your income that you don't have the option to stay home if you wanted it if you wanted to right it's not the dream home if it crushes your dream of staying home because the mortgage is so high and so you got to be thinking long term when it comes to the biggest purchase of your life and you know you guys have a couple of years before we're here so let's just be really diligent about getting our income up keeping the expenses low working on saving up that down payment. I would just put it in a good high-yield savings account. If you don't have one already, you can jump on to fairwinds.org slash Ramsey. They have an awesome smart bundle that includes that

Starting point is 01:13:36 account and just start socking away and get ready for this wedding. Fifteen days. Exciting stuff. She seems pretty calm, cool, collected for getting married in 15 days. I know. I guess all the details have been ironed out at that point. I know. It's that baby. It's giving her calm. This show is sponsored by BetterHelp. I know a lot of you out there are trying to keep it together all the time. You show up to work, you pay the bills, you smile at the right times, but then no one sees you snap at your spouse, or lie awake all night running through everything you'd wish you'd done differently during the day. Just because you're functioning doesn't mean you're okay. Talking to someone else is a great way to process what's happening in your life and get to the root of your challenges.

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Starting point is 01:15:30 help.com slash ramsay. Welcome back to the Ramsey show. I'm George Camel here with Jade Warshaw. We're taking your calls at AAA 825-5-2-2-25. We got a lot of questions about buying a home. We just had one about how much to save for a down payment. And the truth is, buying or selling your home is a big decision. A lot of zero is on the end. And with so much conflicting housing market news, it can be hard to know what's going on. So we're here to make those. latest trends, easy to understand. And we know mortgage rates still volatile right now, but remember, rates will always rise and fall. What matters most is finding a home you can actually afford today. Only your financial readiness should drive your decision on one to buy, not rates.

Starting point is 01:16:24 Median home prices went up to about $425,000 last month, which is typical for a spring market as we head into the summer. Prices are lower than this time last year, and homes are taking a bit longer to sell, not like the olden days where it was like day one, 17 offers. Now, there are some markets that that's still happening, but overall, it's slowed down. So that's good news if you're ready to buy and looking for a better deal. And if you want to learn about the latest housing market trends, see weekly mortgage rate updates, get free tools to help you buy yourself with confidence, head to ramsysolutions.com slash market or click the link in the show notes if you're listening on podcast or YouTube. Sarah is in Cleveland up next. Sarah, welcome to the Ramsey show.

Starting point is 01:17:04 Hi. Hi, everyone. How are you this afternoon? Doing great. What's your question today? I'm just wondering where me and my husband should invest our money. Okay. Tell us more. So we make a combined about 375,000. We have about 500,000 in our 401Ks. I have, we both have Ross. We're debt-free. We're debt-free. We have a index life insurance policy. We each have one that we were kind of talked into. Oh, boy. Who hated you enough to sell that to you? Oh, okay. What family friend, old college roommate? Who was it? You don't

Starting point is 01:17:52 have to give names, but I know it's someone close to you. Yeah. So I kind of, we're on the seven-year plan, and so on our last year of paying that off. Paying that off. Because every year we're contributing so much for seven years so that we can max out. This is bad, huh? Yeah, like a max-funded IUL policy? Yes, yeah, that's exactly what we each have one. Man, you made someone so rich. They are just counting the dollar bills right now as you're on this call.

Starting point is 01:18:27 Okay, well, tell us more. Okay, we also, we have two annuities. Oh, boy. Is this the same person? that sold you this? Yeah. Yeah. Goodness gracious.

Starting point is 01:18:40 Okay, so this was an insurance salesman in sheep's, Wolf's clothing here is what happened. This was not a financial advisor. So every year we kind of go to him and we have more money. So now we are going to have another chunk of money. And I, me and my husband were talking, like, before we just do this, let's get some advice. So I thought I would call in and see what should we do with our money. Obviously, I'm not making the right decision. Well, you're doing, I'm trying to put myself in your headspace.

Starting point is 01:19:08 My guess is you're maxing out 401Ks. You're maxing out Roth IRAs, and you're just looking for someplace else to park money, right? Yes. Okay. And this guy's like, I've got just the thing for you. Do you have term life insurance in place? Through our work we do. Okay, you're going to need more than that.

Starting point is 01:19:28 I assume that's probably like a year worth in there. Yeah, probably. So I would get it on your own. It's always wise to have term life insurance outside of your employer because if anything changes, you could lose that. And so I would get 10 to 12 times your household income of each your incomes in a term life policy 15, 20, 25 years max. And you can jump on to zander.com and get that done today. Start that process and apply. And once you have that in place, now we can cancel these IUL policies and get out of these annuities. That is your best bet as much as there's going to be a sunk cost for. fallacy here, and as much as this guy is going to try to talk you off that ledge. Okay. He's going to make this sound like it is the worst financial decision you could ever make is to stop working with him and being in these insurance products. Okay.

Starting point is 01:20:20 I was fearful you would say that. Okay. But think about it. I mean, what have they sold you so far? Investments? No, they've sold you insurance products that are marketed as investments. That's a red flag. And if you looked at the rate of return, there's no way it was even close

Starting point is 01:20:37 to what you could have made if you had just invested it even just in an index fund. I mean, the market has over doubled in the past seven years. And you told me you're on year seven. If you had just parked that much money, all those premiums you put in, if you just parked that in an index fund, it would have doubled. So has your money doubled in those seven years? No. That's another tell. So this is sadly the current state of the, I'm going to put financial advising world in big air quotes. Sure. Because it's really just wealth strategists, insurance agents who sell these products,

Starting point is 01:21:11 and they make it sound like it's a smart investment. Well, it's the closest thing. They don't have the securities license to sell actual mutual funds or actual security. So I'm so sorry, Sarah. The good news is you guys make so much money. You're doing so well on your wealth building journey. And this will just be a blip along the way. Or you go, oh, man, remember we fell for that stupid tax when

Starting point is 01:21:34 Like I sold us all those crappy policies. Okay. So where should we? What should I do then? The good news is if you took this money, okay, you're in your 30s. If you took this money and parked it in a brokerage account and just like George said, even if you just parked it in a normal index fund, I'm guessing you have about 15%, let's just say, $4,600 bucks a month for the next, I mean, you're going to be at $13 million if you did this

Starting point is 01:22:01 from today until age 60. And that's not including the 500,000 you already have invested, by the way, because that's going to continue to grow as well. So this is just an easy, non-sexy, I set it and forget it, and it just grows and multiplies, and I come out looking like the hero with $13 million. Okay. How easy is that? That's awesome. What should I, like just, I have, fidelity has our 401 case. Love that.

Starting point is 01:22:30 So anything that's employer-related, you can handle that. anything outside of that, I would contact a smart vester pro, and you can jump on to ramsysclutions.com and get in touch. They will not sell you an IUL policy. They will not sell you an annuity just because they can make higher commissions from it. They're going to do the right thing with the heart of a teacher to help you understand what you're investing in, and that's the power of working with someone trustworthy. And sadly, you were kind of swindled into this. And it happens to the best of us. It happens to a lot, especially high earners, because they go, well, this is, they told me this is what the wealthy do.

Starting point is 01:23:06 Yeah. So I thought I should do that. Now, another place you could invest if you have access, a high deductible, your insurance, I'm sorry, your health insurance, if you have a high deductible plan, you could do something through there. Yeah, do you have a health savings account through a high deductible plan? No. No.

Starting point is 01:23:27 Okay. So you have more of traditional insurance policy for health? For health, yes. Okay. Well, if you ever did switch to a high deductible health plan, you would have access to a health savings account, and you can actually invest inside of that, just like you would an IRA, and it's a great, there's triple tax benefits in that. There's tax benefits all around it, and so that's a great way to invest as well. But here's the general

Starting point is 01:23:50 blueprint for anybody who is a high earner, investing does look different. So of course, the 401K is a great bet. Absolutely. There is no income limits to investing in a 401k and maxing that out. And then you still have access to invest in a Roth IRA, even if your income is high. and there's a version called a backdoor Roth IRA. The way that works is you fund a traditional IRA with after-tax dollars and then immediately convert it over to Roth. So it's that simple. That's a great way to fully fund two backdoor Roth IRAs. Again, the health savings account has some awesome investment strategies within that.

Starting point is 01:24:26 And then if you've exhausted all of those sort of tax-advantaged plans, then you can move on to just a non-retirement taxable brokerage account and invest in index funds. And that can also kind of become a bridge account you can use to retire earlier than 59.5 if you so choose. Yes, indeed. So that's exactly the blueprint for a high earner and, you know, everyone hopes to get there. That's a great aspirational goal to be making $2,000, $400,000. Yes, it is. Great problem to have. But unfortunately, along the way, as you build wealth, there will be traps.

Starting point is 01:25:01 There will be wolves. There will be people who are trying to make a commission off of you. and you got to be aware. You got to play defense while you're playing offense. And part of that is seeing those red flags, becoming educated, always pausing. And if your gut tells you, something doesn't feel right about this. He was really pushing that product hard. You got to listen to your gut.

Starting point is 01:25:19 Let me go ahead and do some Google in here. Recall the Ramsey Show and get their take on this. Because we got no skin in the game other than helping you build wealth. When you're in the baby steps, every expense deserves a second look. And health care is one of the biggest. That's why I recommend Christian health care ministries. CHM is a health cost-sharing ministry and their programs start at just $150 a month. A lot of families find CHM gives them more room in the budget, and it's why members say they're better with CHM.

Starting point is 01:25:56 Right now, new members can get a 50% credit towards their first month. Go to CHMinestries.org slash budget and use promo code Ramsey. Welcome back to The Ramsey Show in the Fairwinds Credit Union Studio. I'm George Camel, joined by Jade Warshaw. The number to call is AAA 825-5-2-2-25 if you want to jump into the conversation with your money question. Amanda is in Sacramento up next. What's going on, Amanda? Hi, guys, thanks for taking my call.

Starting point is 01:26:34 Sure. I tried to back out here before I got on the line because I feel like I'm in just a different financial situation and some of the other callers. That's okay. I'm glad you didn't back out. Yeah. Yeah. I was assured that I belong. on here. Absolutely, you do. We've heard it all.

Starting point is 01:26:52 So I, yeah, well, thank you. So I'm trying to decide. I think I know what to do, but I'd love your guys' advice. I'm in a situation where I just broke up with my ex, the father of my children, so I'm a single mom. And since 2024, I've been paying the mortgage on the house that we're staying in. I have a, so divorce agreement that's been, you know, signed by the judge and the court that says that this house is basically mine. If I sell it, I get the profits. All of it. I can stay here.

Starting point is 01:27:26 Yeah. So my ex took an equity loan out on the home before he made that agreement. So I have to pay a $500 equity loan and a wonderful mortgage payment of $1,100, which is so reasonable. Yeah. And so this house was my family home. And my dad, before he passed away, let, I say us. It's actually my ex because it all went in his name by the home. And we got a good like 3% interest rate on it.

Starting point is 01:27:57 So I'm in a place where even though it's a challenge for me to handle it all by myself, I couldn't really get rent for any cheaper than $1,600 for myself and my two children. So I'm in a place where I've gotten a couple payments behind and I used credit cards about $8,000 worth of credit cards. to pay bills for a few months, and I'm $2,000 behind on the mortgage. And my income is variable. I work as an associate marriage and family therapist. So I make a decent income that I deal with a lot of cancellations and then recently health issues. What do you make as the counselor?

Starting point is 01:28:37 I make $65 an hour. And that's, you know, because I'm still under supervision. So I only make a portion of the hourly rate, which is about 150 an hour. But you're saying that. It's hard to get 40 hours when people constantly back out. Yes. And there's no cancellation fee? Unfortunately, no, because I work with partnership clients.

Starting point is 01:29:06 So that's a Medi-Cal division of Medi-Cal, and we can't charge the clients anything. So on an average week, if you had to say like on an average week, how many? hours, like paid hours, do you think you work? So I shoot for 20, which is considered full-time for therapy because I'm a trauma therapist, and after about six hours a day, I start to like almost fall asleep in session. So that's about as much as I can handle. It is. And what do you bring home from there? And so what I've actually been bringing home is closer to $3,000 a month. My last couple, paychecks have actually been under 1,500. I get paid by monthly.

Starting point is 01:29:52 And so that's, you know, just barely enough to cover the bills. I do get $800 for child support. And so that's a bit of a buffer. So if we were to build your budget today, we'd build it on $3,800 a month? Yes. Okay. Yes. Because that's, yeah, that's baseline what I bring home.

Starting point is 01:30:10 Okay. Sorry for that kind of, I just needed to get those numbers. If there's anything else you want to keep going, you can Go ahead and keep going on. Yeah, no, go ahead. I think that we could probably work with that as far as what you guys made advice. Great. So that's about 42% of your take-home pay is getting eaten up by this mortgage, which is a lot,

Starting point is 01:30:29 but nothing's on fire so far if we can work consistently. Do you have any other debts? I do have school debt. How much is that? It's 128,000, but I haven't started getting charged for it. I'm on like an income-based payment. Okay. So the interest on that is staggering, but I'm not being charged for it yet.

Starting point is 01:30:58 It's not the interest is no, it's not accruing while you're on your income-driven payment. It is accruing. Oh, it is accruing. So this could be $150,000 in student loan debt in no time. Easily. What's the payment? What's the minimum payment to stop it from? being deferred?

Starting point is 01:31:16 Oh, like to cover the interest? Is that what you're asking? Are you paying anything on it right now? Is there any monthly payment due? Okay. No. If you were to sign up to go ahead and pay it. Get out of the income driven of the payment.

Starting point is 01:31:30 What would your payment be? What would the payment be? From what I understand from my colleagues, it would be between $700 and $1,000. Okay. All right. That's a hidden cost we haven't accounted for. Yeah, yeah. Any other debt? A lot of that just gets eaten up in interest. Yeah, sure. So I have a car. Yes, $23,000 on a car loan that I pay $400 a month for. Okay. No medical debt. So $8,000 in credit card debt. And yeah, $2,000 that I'm still paying for a car that broke down.

Starting point is 01:32:11 Okay. Okay. So. Okay. So. We're looking at about 160 grand in consumer debt. Okay. What is the house worth? 280,000. Just looked that up while I was waiting. And what's left on the mortgage balance? I think it's 156,000.

Starting point is 01:32:33 Okay. Okay. And there's $50,000 equity loan that would have to be paid out of that. All right. So that's probably you, if, I'm just going. going through the other scenario, let's say you did sell, and you paid off the mortgage, paid off the equity loan, paid the fees, you know, the closing costs, all of that, you're probably going to net close to $50,000.

Starting point is 01:32:55 Exactly. Which then you could use. You could clean up the car loan, both car loans and the credit card debt with that and start attacking some of the student loans, which would help. I mean, you'd free up some payments along the way there. Yes. And then you could tackle the student loan debt. Now the issue is where are we going to live and how are we going to afford rent?

Starting point is 01:33:16 So that's another issue. What is keeping you right now in Sacramento? So I'm actually a couple hours north and I'm in just a very affordable situation. So a rental for me to get a two-bedroom really small apartment would be about $1,600 a month where I met. So we can keep our housing costs about where they are with less maintenance, repairs, risk, And more cash. And more cash. Yes.

Starting point is 01:33:44 So that feels like, it feels like a good move for you long term. And it's a fresh start. It's because of all the other variables that we've now added to the picture. If you didn't have any other debt and we could fix this with just your income, I'd go, hey, let's keep it. But right now, I don't see a path out to start even paying on these student loans until we solve some of these other issues. Right. I think you have to view this instead of viewing it as kind of what you were saying earlier, which I have such a great interest rate.

Starting point is 01:34:13 You know, I got the house. I was left, you know, you've got to view this as I get the opportunity to have a fresh start. That way it doesn't feel like so much of a loss or it doesn't feel like you're going backwards because you're truly not. You're going in the right direction. You're building something completely new for your life, for yourself, for your children. And I think having a brand new place to call home to do that from is actually going to do your soul good. Yeah, clearing some of this debt will free you mentally, emotionally, spiritually on top of

Starting point is 01:34:42 financially. You've heard from me and the Ramsey personalities for years, but nothing beats actually getting together in person. That's why we created the Live Like No One Else Cruise. For seven days, we're vacationing with you and 2,500 Ramsey people in the Western Caribbean with live shows, us, new content, us, and more. If you're on Baby Step 4 or beyond, come spend the week with us next March. Choose your cabin. at Ramsey Solutions.com slash events or click the link in the show notes. Today's Ramsey show question of the day

Starting point is 01:35:47 is brought to you by Y-R-R-R-R-E-F-E-F-Lones. Defaulted private student loans can derail your money plans, but Y-R-R-E-F-I-E-F-E-LORsExplore options designed to get them on track again. Learn more at Y-R-R-E-F-Y.com slash Ramsey. That's the letter Y, R-E-F-Y-R-E-F-Y-M-E-A. may not be available in all states. Okay, today's question comes from Brady in Colorado.

Starting point is 01:36:07 He says, my brother and dad are pressuring me to go into debt to buy the new swatch x ap is a i think the x is like a buy okay swatch by ap pocket watch uh which can be around fifteen hundred dollars how do i tell them i'm in baby step two and would rather pay off my debt instead of adding more to it they say it's an investment and will increase in value for resale purposes so it's it's not dumb to get one. I'm trying to be different because normal is broke. How do I keep a relationship with my family if they don't support my decisions around debt? So I'll let me start by saying, this is hilarious. Let me start by saying sometimes, because you know, we do a question of the day

Starting point is 01:36:53 every, every show. And sometimes I'll look ahead and read the question and and, and but I like surprising myself sometimes because sometimes he came in fresh on this one. Yeah, I did. And, you know, Brady, the answer to your question is how do you tell them no? You simply say no. Okay, I got to believe you're over 18 at least, over 21 maybe even. If they're pressing to take on debt, it's not a seven-year-old. Yeah, but I'm just saying the point is you're an adult and you have the ability to say respectfully to your elders, no, I'm not going to do that. And honestly, just saying it like that, there's no disrespect there and you don't need to qualify it honestly in any If you want to say, no, I'm not going to do that because I'm paying off debt, you can, but you really don't even need to do that, especially if you know they don't have the same views on debt as you.

Starting point is 01:37:46 Because if you do qualify it with that, knowing they don't have the same views, the next thing you're going to be having is an argument or some sort of, you know, confrontation on why to pay off debt, why you don't need to pay. And it's like, I don't even want to deal with all of that. It's okay to simply say, I'm not going to spend my money on that this time. move on I love it I just love the part where he says how do I keep a relationship with my family if they don't that's crazy if they end the relationship because you didn't buy a a buzzy watch that could go up in value what type of people are these I don't understand what this relationship was to begin with and if they love this so much why don't they buy it all the things to feel pure pressure about I wouldn't expect a pocket watch I think like you know getting offered drugs in high school not like

Starting point is 01:38:30 yeah yeah dare to didn't teach me about the pressure I'd feel from people wanted me to go into debt for pocket watches. I just love that his brother and dad, they're like ganging up on him. If they love it so much, they think it's such a great investment. Why aren't they buying them all up? Yeah, or maybe they'd buy one for you and just gift it to you because, you know, you need to have one so bad. How about this? Let them buy it. You can buy it off of them for a higher price if you love it one day. Yeah. And they can make their money. So the bigger, the bigger topic here is the idea that when you when you hang out with Ramsey for long enough and you've decided you know what what these what these

Starting point is 01:39:06 knuckleheads are talking about that kind of makes sense to me right this idea of paying off debt living on less than you make uh the borrower a slave to the lender sacrificing to win delayed gratification this is countercultural yes controversial yes behavior all of this when you sign up for that you have to know that everybody's not going to agree with it and that's okay uh you've got to know that people are going to have questions and that's okay. And I want to say that when you subscribe to this and you actually start doing it, people are going to have questions and they are going to say, oh, like, your life looks different.

Starting point is 01:39:41 They're going to notice it. You can't do the things that we teach George without people noticing it. So if you thought you were going to do it and fly under the radar, George and I are just here to tell you that's not really possible because you're creating a radical change in your life and you cannot create a radical change without it showing. And that's a very, very good thing. Absolutely. It's good that you're seeing this, Brady.

Starting point is 01:40:01 It will offend people if you don't go with the stream. When you go upstream, it offends them. Because I think while you think you're better than us, Jade, because you're plant-based, that's offensive to me. As someone who enjoys eating red meat. It's like, dude, live your life, bro, you know? But there's some reason, like if you, let's say you drink alcohol, a friend who doesn't. You go, hey, man, have a drink.

Starting point is 01:40:22 They go, now I'm good. They go, why? They must know exactly why. They want to pressure you into it because you don't. It's just like people have their own values, their own principles. Let me give you a hot take. Can I give you?

Starting point is 01:40:32 My hot take on that is when the things that you just said, money, maybe drinking, maybe your diet, when people feel the need to press in that type of way, which is kind of more like a negative kind of way, I think that it's usually because you've held up a mirror in front of their face. And so when you're doing, for example, we'll keep it to money. When you're doing the Ramsey principles and you're doing what I'm going to call financially, responsible behavior. And you say to, you know, these Jimbroni's, Brady's, you know, brother and dad, when you get around them and you say, hey, I'm paying off debt, I don't want to buy a pocket

Starting point is 01:41:10 watch instead of them going and taking a moment to reflect and go, oh, wow, I've never done something like that or I've never prioritized debt like that or that, you know, or just going, oh, okay, you know, maybe you don't have to have this crazy reaction. Instead, they look at themselves and go, oh, in many ways, and this can happen subconsciously, in many ways, that's far more responsible than the things I'm doing over here. And so rather than reckon with that in the moment, they create a controversy out of it. And they create an argument out of it.

Starting point is 01:41:36 And they start judging you and projecting onto you instead of just going, huh, what a responsible thing this guy who's likely younger than me is doing. And it happens all the time. It's like, I can tell you, you start doing well with your money. You start paying off debt. Your lifestyle starts to look different. You go around folks that you've been hanging out around your whole. life. And suddenly it's like they have a little bit of haterade, you know, going through their veins.

Starting point is 01:42:03 And it's like, well, where did that happen? It's because you're holding up a mirror. And you're going, I started doing these actions that are hard to do. But I stuck with it. And maybe in the beginning, you were the one laughing at me for budgeting. And now you're actually seeing it working. And instead of congratulating, you're hating. And if that's you, if you're a hater out there, you need to stop. You need to look at people and get curious about what it is that they're doing instead of judging them. If somebody's driving the car you wish you drove, if somebody's out of the student loan debt that you're still in, if somebody cut up the credit card that you're still ringing up,

Starting point is 01:42:37 by now, pay later, and Dora Dash on, ask them how they did it. Stop hating on them. It's a bad look and you need to stop. Jade really just told them, check yourself before you wreck yourself. I got upset there for a minute. Some pent up rage in there.

Starting point is 01:42:50 I'm sorry. If you wrong, Jade, I'd be running right. I'd be fleeing the country. country right now. I love you guys, but I'm just telling you the truth. There's my empathy. Yeah. Having worked here now for 13 years, I've heard all the flack and all the judgments. And I go, you know what? They don't pay my bills and therefore they don't get a vote. It's that simple. You want to buy me a watch? Great. But you're not going to push me to go into debt

Starting point is 01:43:16 to buy something. I didn't want to buy in the first place. You know what's an investment? An investment. I love that, George. Investing into the stock market in a mutual fund. Buying a watch. is a cute hobby and if it pays off for you, good for you. Yeah, yeah. I mean, you love shoes. I love shoes. You and your husband, Sam, big shoe people, I can't imagine what your closet looks like. I'm nervous to even, would be nervous to even say.

Starting point is 01:43:40 You guys would say you're kind of hobbyist collectors. Yes. There's a good portion of money tied up in those shoes. But you're not doing it as, boy, oh boy, this is our retirement plan. No. And you earn the right to do it when, to take your phrase, when you eat your vegetables first, then later on you can do the dessert. And it's true.

Starting point is 01:43:57 When you walk through the baby steps, you pay off your debt, you do your emergency fun. You do all these things that, again, make you responsibly a financially responsible adult. Then you get to do the fun things. When he's done paying off his debt and he gets everything set up, I hope he buys as many pocket watches as his budget allows, you know? But today's just not the day to do it. And that's the crux of what we teach. Delayed gratification.

Starting point is 01:44:19 If you can sacrifice now so you don't have to later. Because guess what? You go into debt for a watch. You're going to be making payments on. interest. Well, you're going to sacrifice later with those payments robbing your income and potentially this watch not going up in value and they're going to sell it out of loss. And not to be too psychological about this, but I think we've all experienced when we bought something before we could truly afford it. And that item speaks to you. When you buy the car that you couldn't afford and

Starting point is 01:44:46 you've got that $1,200 or $850 payment, every time you get in the car, it's reminding you how big of a portion of your budget this is. I'm the thing that's keeping you from investing. I'm the thing that's keeping you from having kids going to college without student loans. I'm the thing keeping you from retiring when you want. They talk to you. So buy it when you can afford it. And then when your things speak to you,

Starting point is 01:45:09 they just tell you what a great person you are. That's right. I like my wealth invisible. And that's hard for a lot of people to grasp who are material, who want to be a little showier with their cars and their watches. So no thanks, Jebrates. Whether you're a small business owner or an individual, doing your taxes is not fun. It's like an algebra test where if you get anything wrong, the IRS can make you pay with actual money.

Starting point is 01:45:37 But if you work with a Ramsey Trusted Tax Pro, you don't have to be a tax whiz because they are. They know taxes like the back of their hand, which makes filing super easy. So work with a Ramsey Trusted Tax Pro and get back to doing what you love, which probably isn't taxes. Visit Ramsey Solutions.com slash Tax Pro and fill out the referral form to get connected to a Ramsey trusted tax pro. today. One of our favorite things is when people share their stories of how they are winning with money. We got this great review for every dollar I want to share with you guys. Here it is. Just being able to use every dollar and see all the extra we had every single month was super motivating. We'd have thousands of dollars extra and just throw it on the mortgage. Boom. That's what happens.

Starting point is 01:46:31 The budget is not this boring static app to make you feel good about the numbers. It's for real life. It's to knock out those payments to get rid of the mortgage, to fund the vacation or the car upgrade. It reflects your real life. So if you want to check it out for yourself, you want to take control of your money, you want to live like no one else. Start every dollar for free today. Just go to the app store or Google Play. Let me coin a new phrase. You know how there's folks out in the space. They don't like the term budgeting. Yeah. And so they'll say like intentional spending plan. That's my favorite one. It's so funny. I got one for you. Okay. Cost maxing. Oh, that's good.

Starting point is 01:47:09 What do you think? I think that's going to be, I'm going to search TikTok for that Gen Z trend. I like it. Cost maxing. It's like I care about my time. I care about my money. I make sure that I have a plan. I don't care what.

Starting point is 01:47:22 It's got a vibe to it. It's got a cost maxing. It's like, what are you doing with your money? I'm cost maxing. Get on it, Gen Z. Make it happen. You heard it here first. Or she'll come after you.

Starting point is 01:47:32 She's feisty this hour. All right. Lauren is up next in Kansas City. What's going on, Lauren? Hi, how are you all doing today? Doing great. Okay, so I have recently paid off a credit card and am prepared to close the account. However, my mom and my husband don't think it's a good idea for me to close it.

Starting point is 01:47:54 My husband thinks that it will negatively impact my credit score, and then my mom's excuse is you never know when an emergency will come up. So how do I convince them that closing the credit cards as we pay them off is the right move? Well, first off, the only person's opinion that matters here is the husband. Right. It's okay for you to be thinking about what he thinks. But mom, when did she enter the chat? Do you generally take advice from them and live by it?

Starting point is 01:48:24 No, not. I mean, no, I'm definitely my own person. But it would be nice to have my husband on board. Yes, I agree with that. It sounds like you guys weren't aligned to begin with on just money, values, and principles. That is correct. So now this is just a sort of a symptom of a deeper issue, which is fine. We can still deal with that. But he needs to be willing to see your side. And it sounds like he's already pre-decided that he's not changing his mind, that a credit card is a necessary tool in today's America.

Starting point is 01:48:54 Right. So that was the case. And then a few days ago when I, when I, when they, you're all people reached out to me to discuss my question on the show, I started going over the numbers with. him and he's like oh well we can pay off all of that oh by such and such date and I'm like oh okay that's good right I'll like okay but then in my back of my head it's like okay I'll believe it when I see it kind of thing how long you've been married um eight years eight years is this the first time that this has been a goal or has it been a goal before and you guys just never got traction um it's been a goal before and we've never gotten traction and it's been your idea both of our ideas, I just was more intense about it. Why do you think that is?

Starting point is 01:49:43 If you could guess, is it he just doesn't want to get uncomfortable? Is it he doesn't believe the numbers? What part, what facet of it stops him? I think it's just, you know, how a lot of people are controversial about the Dave Ramsey, you know, pay cash for everything. And I think that that's what he's more apprehensive about. So in his mind, at some point you're going to need to use. You're going to need to borrow money at some point.

Starting point is 01:50:10 We will for a mortgage. We currently rent, but I don't have any interest in buying a house until we pay off our debt that we have now. True. But if he's thinking now we're getting down to the nitty gritty, because if we can understand, okay, him paying off the debt's not the issue for him. For him, the issue is if we pay off everything and close the accounts, that means we can't build a credit score. If we can't build a credit score, that means we can't buy a house. I think that's what's happening in his brain.

Starting point is 01:50:37 Right. Okay. So we just need to debunk that, George, and we can win this battle. So do you guys have any other accounts open outside of these credit cards? Any debt accounts? Yeah. So I have a student loan. That one is just under $2,500. Okay. Anything else? We have two vehicles, and that's what our biggest debt is, is our two vehicles. What's left on those? They're $78,000. Goodness gracious.

Starting point is 01:51:08 Together? That's for, yeah, together. What's your household income? Um, two, fifteen. I'm so glad there was a two in the start of that number. I was about to lose it. Okay, this is, yeah. This is a solvable problem.

Starting point is 01:51:24 He wants to buy a house, right? Is that his stated main financial goal? I think eventually he just doesn't really seem any, like he's not super driven to purchase a house right now. I would like to buy a house. Actually, and we might even consider purchasing the house that we're renting right now. But see, that's where I think if you guys were aligned on a goal, then the how will be so much easier. Because if you said, hey, our stated goal is we want to buy a house in two years. That's the goal, three years.

Starting point is 01:51:53 What's the best way to get there? Well, getting rid of these car payments would really help us save up more in free-up payments so that we have margin to afford the mortgage, right? This is common sense. So as far as the credit score thing goes, in my book, Breaking Free from Bro. I wrote it for guys like your husband to show them our side of the story with data, with humor, in a very logical way, walking through what life is like without a credit score, how to navigate the system, even how to get a mortgage without a credit score, which by the way, Jade and I have both done. And it wasn't that impressive.

Starting point is 01:52:24 I listen to you guys talk about it. So I'm like trying to explain to them like, no, we don't need a credit score to do this. We can do manual underwriting. And they're like, what? And I'm like, yeah, they talk about it all the time. So let us explain it again for those watching and so you can play this back for your husband. And we can explain it just in case you left something out. It'll make more sense. Oh, yeah, I've got my notebook ready.

Starting point is 01:52:45 Okay. So manual underwriting, it allows you to get a home loan, but they're looking at other things. Instead of looking at your credit score, they're looking at other lines of credit. Okay. They're looking for things like a phone bill. You can use insurance payments, electric company payments, all of those things. the thing you do have to show, though, is 12 months of documented rental history. So those are the trade lines that they're looking for instead of looking at just your credit score. So basically on-time payments on all of those things will prove to them that you are a sort of less risky borrower.

Starting point is 01:53:20 Yeah. So 12 months of documented rental history is what you need. 12 months of other trade lines, like I said, things like cell phones, utilities, insurance. And also they want to see your income for the last 12 months, all right? and pay stubs for, you know, at least 30 days is what they're going to want to see. If you're self-employed, they might also ask for your tax returns. But that's it.

Starting point is 01:53:41 That's the only difference. And if it makes, what's your husband's name? You can make up a name if you want. It's Jay. So tell Jay, this is what it is. And both Jade and George have done it. And the only reason, here's the thing, you do have to do a little bit of due diligence. Every mortgage company doesn't do manual underwriting, but Churchill mortgage does.

Starting point is 01:54:01 and you can pop on their website and make sure that, you know, there's somebody in your area that can, you know, help you out and guarantee that's going to be the case. And so that's probably the only reason he hasn't heard of it because most people do have credit scores and most people, but the truth is there's other options. And you need to know what all of your options are. And it's just something that's not talked about as much because most people honestly just aren't in the position to take advantage of it. Right. Lauren, I'm going to send you a copy of my book, Breaking Free from Broke. We'll get you the audiobook version as well. You and your husband, listen to that, read that.

Starting point is 01:54:35 There's two chapters you got to check out. The credit card chapter, that's chapter two, the credit score chapter as well. If you read both of those, it will give you guys the common language now to move forward and then decide what your goals are. But the reality is I'm not convinced he cares that much about these financial goals if we're in crippling debt and not really doing much about it. You guys have out-earned a lot of these decisions so far. But you should be making way more progress for a couple making a couple making a over $200,000 a year, I want to see you making progress toward that home and not just, well, one day, let's get on paper. Two years from now, we're going to have $100,000 saved up.

Starting point is 01:55:10 And if monetary, like looking at the numbers, like George's said doesn't work, go to the emotional route, say, what do you want? Instead of thinking goals based on numbers, think, what do I want to feel? Do I want to feel free? Do I want to feel peace? Do I want to get rid of the shame that I feel every time I swipe our debit card, the shame that I feel, every time that I look at our bank account, the shame that I feel when I think of the money that we haven't saved yet, right? Go the emotional route. You might be able to connect there if you're not able to connect on the dollars and cents just yet. People ask me all the time. George, what's your number one money saving hack? I'm glad you

Starting point is 01:56:04 asked. Nothing makes me happier than helping another frugal friend. So here's the hack. Get on a budget. Seriously, how are you supposed to save money if you don't know how much you're spending in the first place? And that's what makes you're making. the every dollar budgeting app a game changer. With every dollar, you'll get a clear picture of your spending, and from there, it's easy to see where you can get more intentional, cut back, and save more money. How much money are we talking? Well, the average every dollar budgeter frees up $395 in their very first budget. And if you ask me, I think you're way above average. So, why are you still listening to me? Go download every dollar for free and start saving more money right now.

Starting point is 01:56:53 Our scripture of the day, Philippians 4.6. Do not be anxious about anything. but in everything by prayer and supplication with Thanksgiving, let your requests be made known to God. Mark Twain said, I've had a lot of worries in my life, most of which never happened. That's a good way to sum up the wasteful use of energy on anxiety. Just future things that probably won't happen. Agreed. Cross that bridge when we get there. All right, Pauline is in Los Angeles up next.

Starting point is 01:57:24 What's going on, Pauline? Hi, guys. Thanks for taking my call. Absolutely. I'm calling to ask about if the money my parents are planning on giving as inheritance, which is about $4 million total and property and money, should go to just me and my sister, or if we should split it up,

Starting point is 01:57:43 or if they should split it up four ways between my sister and I and my two children, who are currently, one's 18, one's 23. So my parents are... Go ahead. Yeah, my parents are open to doing whatever we want, I'm trying to figure out the best arrangement from a financial standpoint for myself. I'm a financial strength standpoint for myself. And also from a family dynamics point of view with respect to future family cohesion and respect and interaction.

Starting point is 01:58:10 My sister is married. She does not have kids. And she and her husband are generally big savers with good paying jobs. And she doesn't tell me how much she has. I think it's likely in the millions. She doesn't have a problem with my parents splitting the inheritance four ways. So instead of getting $2 million, she would get one? Exactly.

Starting point is 01:58:32 And so her plan is to divide her and her husband's money in the future when she gives her into, you know, when they pass on between his nephew and my two kids equally and then say, you know, give 10% to a special needs family member. But whose parents themselves are also well off. But I've lived my life a good amount of hardship. a lot of challenges in my life, including a lot of medical stuff. So medical and education bills, and we rented in a high cost of living area for my kids' school, we didn't save as much as they did. And I want to stop you real quick. I want to stop you real quick. The money that is available, the $4 million, what I don't want you to do is say, my life was like this and my sister's life was like this, therefore I'm more entitled to this. I don't want you to say that.

Starting point is 01:59:25 I'm not saying that. I'm just kind of trying to paint the picture of like, so my husband and I saved less than they did because we didn't have kids. Sure, but all those are your choices. All those are your choices. We need to look at this like clearly and just go, what's fair? Because the truth is you're both siblings and you're both your parents' children, right? So it's like, okay, we're on equal ground from that point forward. And I think that's the fairest way to look at it because everybody will have made choices.

Starting point is 01:59:55 in their life to get them to a certain point. You see what I'm saying? And neither of you are disrespectful or irresponsible. So as long as we know that that's true, I think we have to look at you guys as totally even. Fair enough? Yes. Yes. So, you know, she's fine with, you know, my kids getting the money

Starting point is 02:00:14 and splitting it four ways. And so I'm kind of, you know, and I'm happy. I'm fine with that too for the kids, more kids, more of the money to come to me and my kids. but I'm kind of trying to think about the consequences of that as I see it. And also think about consequences that I'm not seeing right now. Would it go into a trust for the kids? I imagine it would go into a trust for them and then my parents would put in

Starting point is 02:00:37 the rules that they would want for when the grandkids can access that. But, you know, it's still a million dollars less for me and my sister. And so, I mean, ultimately it's going to end up like all this delayed gratification that I've already done to save money. We've saved about $1.8 million so far, my husband and I. Way to go. I have to do more to late. Thanks.

Starting point is 02:00:59 I mean, it could have been a lot more, but medical expenses, education bills, all of that, you know, kept us from doing that. But, you know, I don't own my home. I don't, you know, I don't have drive a nice car. Here's the thing. What? Here's the thing. I don't think that you should be making this decision. I think your parents should make this decision.

Starting point is 02:01:18 And then I think they should inform you. They are asking us. And I think it's unfair of them to put that pressure on you to decide. Because it just creates a real weird family dynamic. Well, everybody's cool with it, though. But they are today. They are today. But if something changes, I don't know.

Starting point is 02:01:37 And I'm not projecting anything negative. All I'm simply saying is that's how everybody feels today. If something were to change and somebody's opinion were to change, let's say your sister, their situation changed, somebody lost a job. They came on a hard time, right? Suddenly, a decision that should have been your mom and dads to say, here's the way it is. Now it becomes your fault. And now they're looking at you going, well, can we have access back to some of that money because this happened and that happened?

Starting point is 02:02:05 So there's a cleanliness. I suppose, but they've saved millions. They've already, I mean, she won't tell me how much you saved, but they don't have care. Who cares so much? But here's the thing, Pauline, by the time you guys pass away, you're going to have a $4 million inheritance to give to your kids. Right? Yeah. I think your parents should decide this.

Starting point is 02:02:25 You think it'll only be $4 million? I'm hoping it'll be more. It'll be more. I'm just saying, like, let's not start. Well, they have more. They save more. So maybe it feels more fair. I would just go, you know what?

Starting point is 02:02:34 Guys, it's your decision. What I don't want to do is give an 18-year-old a million dollars if they should pass away tomorrow. So if you choose to give them the money, please make sure, you know, if you say to them, hey, if you decide to give the kids money, we're grateful. But if you could just make sure the trust doesn't hit until, I don't know, age 30, whatever. You can say, hey, you can use this much for education at 25. They have access to 25% of it. They can use this much for a down payment on a house.

Starting point is 02:02:58 And a good estate planning attorney will walk you guys through the right way to structure it so that it doesn't destroy their lives. That's the goal here. But let the final word come from mom and dad and make sure the whole family knows that. The way this needs to happen is everybody needs to be in a room. Your sister, I don't know how old your kids are. If they're too young, they don't need to be there. but you and your sister and your mom and dad and your mom and dad need to be the adults and the grownups and saying we have four million dollars and here's what's going to be done with it and here's why we made this decision and it all needs to come from them that way once they're off this earth there's none of that coming back on you or your family or your kids because the truth is you just don't know what can happen and i agree with george they never should have put you in this decision to decide when it had the ability to pull away from your sister and what their family also um could have receive. Okay, that actually does make me feel a little better. So I could probably just say,

Starting point is 02:03:55 listen, this would be my preference, but you guys do what you want to do, and then she could give her preference, and then they can decide. Yep, yep. You guys could all sit down with an estate planning attorney. You guys can have a sit down meeting with an estate planning attorney and go, hey, what would happen if we did this? Let's walk out this scenario. Okay, what would happen if we did this? What are the tax implications? What have you seen work well for families? I would just get more information before making this decision. And I think your parents right now probably haven't thought a whole lot about it. And then just go, hey, whatever the kids want, fine. I don't think it's malicious. But I think it's a lot, I can tell that you feel this pressure bubbling up. It's like a

Starting point is 02:04:29 pressure cooker right now of what you think you should do. I was more worried about, like, if the kids get a million each when they're 30 or whatever, that I'm going to have less money than to be like the matriarch of the family and give them the things I dreamed about giving them, Let's all go on a fabulous trip. You can do that. I'm going to buy you guys this stuff. Here's the thing. Because I'll have less money.

Starting point is 02:04:49 Just think about it this way. If you never got this inheritance from your family, let's say your parents ended up needing it or used it all. Would you still be okay? Yeah. Could you still take them on that trip? Yeah, I could. I just have to find ways to save it. It wouldn't be a lavish lifestyle that I'd be living here longer.

Starting point is 02:05:04 I mean, you guys already have a $2 million net worth, right? I suppose. How old are you? How old are you? I'm behind. 46. Okay. You're 46 with $2 million.

Starting point is 02:05:15 You were in like the top 1%. I don't know who told you you're behind. I know you feel like I think you have baggage and guilt from the mistakes you made in the past. But Pauline, you're doing so good. And by the way, who said it had to be split equally four ways? I mean, if they did ask your opinion, what if it was, you know, two million to you, a million to your sister and, you know, 500 and 500 to your, you know, does it have to be four ways? There's a lot of questions that can be asked. But either way, if they want to know some of your thoughts, I'm fine with them asking some of your thoughts, but they need to,

Starting point is 02:05:47 the ones that totally decide. And yeah. This should be a blessing, not a burden. They made it a burden when they tossed it over to her. Yeah, that's the thing. You know, when it comes to inheritance and family, it just things get so tense. There's so many zeros on the end.

Starting point is 02:06:01 There's so much pressure to do it the right way. Well, then she's forced to ask herself, well, who deserves what? And that's a horrible, like, now she's asking herself questions and making comparisons she probably never wanted to make in order to try to figure this out. That's not her job.

Starting point is 02:06:15 And, I mean, they could live another 20 years. I don't know how old they are, the state of their health. And so you've got to think, if this never happens, if they use the money because there's a health crisis, they're in a long-term, you know, stay somewhere. You got to think about that too. So never plan on it, but let's at least be thoughtful in the way we do it. And that's where a good estate planning attorney comes into play.

The Ramsey Show - Building Wealth Requires the Courage to Make Unpopular Decisions

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