The Ramsey Show - It’s Never Too Late To Change Your Life… Start TODAY

Episode Date: August 16, 2024

📱Finish today's episode for free in the Ramsey Network app. Jade Warshaw & George Kamel answer your questions and discuss: "I have $100K in debt and we're expecting a kid," "Should I finance a Rolex?" "How do I convince my wife to loosen the budget," Talk Nerdy to Me: What is Compound Interest? Budget Breakdown. Support Our Sponsors: Churchill: Get started at ChurchillMortgage.com Zander Insurance: Go to zander.com or call 800-356-4282 for a fast and easy quote today. The Wellness Company: urgentcarekit.com/ramsey for 15% off medical emergency kit Health Trust Financial: Discover Top Health Insurance Plans, All in One Place. BetterHelp: betterhelp.com/Delony to get 10% off your first month   Next Steps 📞 Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET or click here! 🏠 Find a Ramsey Trusted Real Estate Agent 💸Enter The Ramsey Cash Giveaway for a chance to win $10,000! 📚 Shop the $12 Sale to get life-changing tools to help you make real progress! 💵 Start your free budget today. Download the EveryDollar app! Listen to more from Ramsey Network 🎙️ The Ramsey Show   🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show 💸 The Ramsey Show Highlights 💰 George Kamel 💼 The Ken Coleman Show 📈 EntreLeadership Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

From the Ramsey Network, it's The Ramsey Show. I'm Jade Warshaw. Next to me is George Camel, and we help people build wealth, do work that they love, and create amazing relationships. And that's what we're going to do this hour. We're taking your calls live. If you want to call in, the number is 888-825-5225, and we'll get you on. All right, George, let's get into this.

You ready? I'm so ready. I'm very caffeinated. I will warn you. All right. I believe you. Straight to the phone lines where we've got Greg, who's in Nashville, Tennessee. What's going on, Greg?

Hey, I'm kind of in a pickle right now. So I've got a baby on the way, and I'm about $113,000 in debt. And I am kind of stuck right now, and I kind of need your expertise. When's the baby get here? It'll be this December. Oh, wow. Okay, right around the, just around the riverbed. I assume the baby get here? It'll be this December. Oh, wow. Okay. Right around the, just around the riverbed. I assume this is your first? That's correct. Okay. The fear in your

voice tells me you're like, oh boy. Okay. So you have 113,000 left on the house. It's a five-bedroom, three-bath house. The truck, I owe $35,000 left on it. The Razor, I owe $24,000. What's a Razor? It's a side-by-side. Oh, okay. Well, my next question was going to be what's a side-by-side but you guys seem to know so let's keep rolling it's one of these you know little you know little four-wheeler little kind of recreational vehicles okay keep going and what else and then just 10,000 and just personal loans but uh. But I was thinking about taking all the truck, the Razor, and the personal loans, combining them together, and just pulling out from the house to pay all of them off. What?

Let's run it back. I didn't know. Wait, Greg. Wait, Greg. I don't know what kind of Greg math you're trying to pull here, but there's a different way to do this. Why not just sell the Razor, sell the truck? Is it worth more than $35,000? Well, how... I don't... I would have to take... Well, how do I...

How would I be able to sell the truck if I don't have the title to it, though? Why don't you have the... The finance company. Yeah, well, once you sell it, you can do this all in one swoop. You go to the bank that holds the title, the lender, and you get the transaction done there. They write the check.

You immediately pay off the loan. They get the title. Do you know what the truck is worth, Greg? If you were to sell it? I don't know. It's like a 2014 F-350 Super Duty Lariat. It's a work truck. It's probably around the same price.

That's a real nice work truck. When I hear work truck, I think this thing can be a piece of crap as long as it gets the job done. You're driving a pavement princess. Yeah, I guess so. That's a sweet truck. So here's the deal. You got homework to do.

Find out how much the truck is worth. Do you have anything in savings right now? I've probably got about $6,000 maybe in savings. Perfect. So if you're underwater slightly, let's say the truck's worth $31,000, you owe $35,000, you have the money to cover the difference. Okay. What's the payment on the truck?

So they've got me at 19% on... What's the payment on the truck, Greg? $666. And they didn't get you. You signed the dotted line knowing full well it was a 19% interest rate. Yeah. Let's talk about the Razor. Do you have any idea what that might be worth if you were to sell it? I'm definitely probably going to get a hit on it.

I bought it right before I found out that we were having one. So it was $20,000 when I bought it, like $23,000. But it's a 2023, so I'm probably going to take a hit on it. It's a four-seater. Let's do the homework on that too, like George said. Find out about the truck. 2023. So it's, I'm probably going to take a hit on it. It's a four seater. Let's do the homework on that too. Like George said, find out about the truck, the truck. I'm pretty sure you're going to sell regardless. Um, even if you're upside down, okay. That you got to get out of that truck. Same thing with the razor. Here's the thing though. Um, I want to run back the whole scenario scenario here, the 113000, let's not include the house in that for

now. I don't know if you were working hard to pay that off before, but for right now, put a pin in that because that's further along the lines, further down the baby steps. So we don't need to even worry about that. The good news, and I want you to hear this, the good news is the majority of the debt that you have, it's as simple as you selling it off. And that is a blessing in your situation. And then all you have to do is come back in and worry about this $10,000 personal loan. Here's the deal. You've got a baby coming. And typically when we talk about baby step two and babies coming, we say, hey, put a

pause on and let's get the baby here. Let's get stack up as much money as you can. Let the baby come. Let everybody be healthy. And then when you feel like kind of that storm is over, then you can push play on everything that George and I just said. But right now, you've got $6,000 saved. Right now, I want you to stack up as much money as you can get your hands on. By the time January 30th comes, you're probably going to be ready to push play on this plan here to get rid of the truck, get rid of the razor. And to George's point, if you look it up and you find out that you're upside down, and it's more than the money you have saved, then you're marching down to the credit union and you're

getting a loan for the difference. And that way you have all the money that you need to give the bank for this vehicle. And so that's how that works works so don't take out for the house at all to pay them off and then don't don't dip into your equity at all that's not doing anything you're just moving debt around at that point are you able to make the payments every month or are you behind no i i've never been late to any payments what's your household income? In total, because I work three jobs, I can pull in probably about $100,000. Wonderful. A year.

And is your wife working currently? She is. She does work. She probably pulls in, I would say, about maybe $35,000 or so a year. Tell us per month, what do your checks look like every month when you bring them in? In total, I can pull in about $6,000 and her, I would say probably about $3,000 or $25,000 25 are you investing at all right now um i was gonna make the house a rental house at first no i mean are you investing into like a 401k or anything like that no no i don't have any of that set up okay do you want to know what i think happened greg i think that you guys are doing all right how old are you um i'm 23 yeah i think that you guys are doing all right. How old are you? I'm 23.

Yeah. I think that you guys are doing all right for 23. You're making over $100,000 a year and you're like, ding, ding. I can drive the truck that I want. I can get this little side by side that I want. And you kind of got caught up in the fact that you're actually financially like the income you're bringing in. You're doing really, really well.

It's just you didn't know better than to make these decisions. But now you do know better. You see that they're a drain on all that money that you're working so hard to pull in. And I hope that you see, you know, I hope this drills in the lesson from here on forward. We don't go into debt for the things we want. If we want it, we save up, we pay cash for it because it's not worth all this, is it? No, no no not at all it's stressful i know having a baby you're supposed to feel happy and have stars in your eyes and instead you're feeling the stress of a payment of a side by side so lesson learned yeah yeah but that baby's going to be worth all the sacrifice when you bring it into a house with

no debt with a great financial future we're looking out for you we want to give you a little gift it's going to be every dollar premium. It's going to help you along this journey, make a plan for all of your income, every single dollar. So hang on the line. We'll gift that to you as you have the baby on the way. Congratulations, guys. This is The Ramsey Show. Buying your first home is a big deal and sets the stage for your financial success. So work with a mortgage advisor you sets the stage for your financial success. So, work with a mortgage advisor you trust, not just some random website. Churchill Mortgage is Ramsey trusted because they help you avoid hidden traps and expertly guide you through every step.

Learn more at churchillmortgage.com. This is a paid advertisement. NMLS ID 1591. NMLS ConsumerAccess.org. Equal Housing Lender. 1749 Mallory Lane, Suite 100. Brentwood, Tennessee 37027. This is the Ramsey Show on the Ramsey Network. I'm Jade Warshaw joined by George Camel, bestselling author. George, way to go. Thank you. You're welcome. You know, I like to give props where props are due hey selling a house

the ramsey way makes home ownership a blessing instead of a burden i can attest to that the ramsey trusted program is the only way that you're going to find an agent that you trust that's going to keep you on track with what we teach here at ramsey you can get the best offer on your house or find the right house for you and here's the thing this is how this whole thing works if you're wondering jade why why do i need to do this The point is there's a lot of teachings here. And if you've been listening to us for a long time or a little while, if you're interested in the way we teach things, you want your real estate agent to understand that. Otherwise, they'll be leading you off track. So you want a Ramsey Trusted Pro. What happens is we're going to send you some of the top

agents that are in your area. These are people that we trust, but you get to review them. You get to interview them, and you get to decide which one ultimately that you want to work with. So you still have all the power here. Ramsey Trusted Agents, they have years and years of experience. They're going to help you make wise decisions. And I told you before, I can attest to that. I have a Ramsey Trusted Agent. She's great. Mandy Lenfesti. She helped us buy our house and she helped us do it the Ramsey way. That's what this is all about. So when it comes to pricing, marketing your house or choosing the right offer, you need a Ramsey trusted real estate agent.

Did I mention, guys, that it is for free? It's a free service. You can go to RamseySolutions.com slash agent. Love it. Let's go straight to the phone lines. Jacob is in Detroit, Michigan. How you doing, Jacob? I'm doing good. Yourself? I'm great. How can we help? So I'm thinking about financing a role. I'm 20. I'm employed, working full-time jobs, plus overtime. Basically, I'm single so like i'm debating i'm doing it interesting why wouldn't you just pay for it why would you put on payments um i just want to like put myself in a

bad spot overall i have a car that i pay for as well and an apartment i pay for monthly as well you have a car payment you're saying yep so you want to add another payment because that's going to help you win financially? Yeah, financially and kind of help like lose my credit. So the guy, I don't know if you heard this, the last hour a guy called in. His name was Greg. And he was really about to come unglued because he felt like he was doing well in life. He was a young cat just like you. And he started with one purchase

and then he went to another purchase. And before you knew it, he had over $100,000 in debt and he was calling us ready to tear his hair out. And so what you're about to embark on feels like the beginning of that same series of events. You hear what I'm saying? Yeah.

Go ahead, George. I'm just wondering what caused you to go, I need a $7,000 watch that I can't afford? Was it friends? Was it you see Instagram? Are you just into watches? Yeah, I'm into watches.

Okay, what's the most expensive watch you own right now? Probably my newest Apple watch. Okay, same here, bro. Same here. That's the most expensive watch I'm willing to pay for right now. How much is this Rolex? I was looking at one that's roughly around $8,900. Okay. Here's the deal. You are not in a place financially to buy this watch. Even if you had the money, I would tell you not to do this because you have other debt. I assume you have financial goals in life. Do you want to own a

home one day? Yes. Okay. I would rather see that as a priority versus the flex of a Rolex. Are you trying to impress someone? No, not really. I just want to own it for myself. It's my goal one day, like my dream to own one. Well, here's the thing. I love that goal. I just wanted to own it for myself. It's my goal one day, like my dream to own one. Well, here's the thing. I love that goal. I love that there's something that you're into. You like watches. There are certain things that I really like. Jade's into sneakers. I'm into sneakers. But there is part of this, I don't know if you've heard it before,

but we say it all the time. We say that you live like no one else, so later you can live like no one else. And the first live like no one else is all about doing the things in order to set yourself up financially. So in your case, it would be paying off this car debt and deciding, hey, I'm not going to go into debt again. And then from there, it's making all those choices so that at some point it might be when you're 25, you can turn around and buy this Rolex watch in cash. How much money are you making? At this point? 40,000 a year. Say it again. 40,000 a year say it again 40,000 a year I would say okay 40,000 a year you're just getting started and I think that that's the thing that I want

you to take away from this call you're just getting started the truth is like George said you don't make enough to buy this watch you really don't and it's too much of your world right now while you're carrying debt speak directly on your phone Jacob I want to make sure that we can we can hear you clearly I want to know how much total debt you have right now while you're carrying debt. Speak directly on your phone, Jacob. I want to make sure that we can hear you clearly. I want to know how much total debt you have right now. I'd say like $17,000 of my card. It's a brand new card. I mean, to do this, I just looked at the numbers. With tax, you're going to be spending 25% of your yearly income.

You make $40,000 a year. This thing's going to cost you ten thousand when it's all said and done that doesn't make any sense does it no not really that's all as long as you understand that going from this call i've done my job the goal jacob for you know when i was 20 i get it i wanted just nice stuff i thought i deserved it because i did all the things that you know my parents told me to do and society told me to do. And I went, all right, I'm an adult now. I got a real bona fide job. I'm going to get me some stuff. The problem is when you make decisions like this, where you finance things, the stuff has you. And so you got to decide, do I want to look wealthy

or do I want to be wealthy? And eventually life catches up where you just want to actually be wealthy and have freedom and margin and options. And you want to look wealthy you tend to just finance your life away until you have twelve hundred dollars in payments fifteen hundred bucks in payments on crap going down in value and so if you can learn this lesson now jacob you're going to be so wealthy you can have multiple rolexes one day but that day has not come we got to get our financial priorities in order and that's getting out of debt we need an fund for three to six months expenses. We need a down payment. That's going to set you up for success.

Yeah. Isn't it funny, George, the things that I wanted to buy when I was in debt, when I was around his age, 20, 21, 22, 23, the things that I thought, oh, God, I got to have that. You know, it's clothes and it's the newest thing. It's the newest Apple Watch, the newest iPhone, the newest whatever. At this stage in my life, it's the newest thing it's the newest apple watch the newest iphone the newest whatever at this stage in my life it's so funny now that i'm out of debt i can actually afford many of the things that i want to get i just don't care it's like it just evaporates this is the superpower jacob if you can stop caring what other people think you will win financially

that is the greatest superpower to just stop the comparisons and i know you're saying this is for me i want it for me but guess what the watch isn't just gonna sit it's gonna be on your wrist while you're out and everyone's go oh bro you're doing well for yourself they don't know that you got bills to pay you have a car payment a watch payment adding stress to your life and we found that debt does not is not a blessing in anyone's life. And it's not worth it to finance a car, a watch, a four by four razor, a Polaris, whatever it is. It's just not worth it. Yeah. It's interesting. Again, going back to that, live like no one else. So later you can live like no one else. I think sometimes, and it can be, I'm not saying it can't be this, but sometimes people walk the steps, the baby steps. And it's like, when I'm done with the baby steps, I'll be able to buy the Rolex and I'll be able to buy

like all these big major things. And I'm not saying you can't, because like you said, I like sneakers and sneakers can be expensive. But do you want to know, George, the things that I love the most? Guessing it's not sneakers. It's not sneakers.

I love going to the grocery store and buying expensive, like a juice that's kind of like ridiculously expensive. That's my thing. I want to load up and I don't even have to think about it. Whereas before I would have been like, I'm never going to pay $4.99 for that juice. And now I'm like, give me the $4.99 juice. Give me three of them. You ever see people like at Costco and the cart is like overflowing.

I'm like, dang, they're doing well. That's my new, like you're doing well. If you can fill up a cart at Costco. Fill up a cart at Costco. You feel you give zero about it. You go have a hot dog and it's that on that. Yeah. But when you're young, I get it.

Like nice stuff is more important to you. And as you get older, it becomes less and less important. Number one, you find better, you put better people around you who don't care about that stuff. And you start to have priorities. You got responsibilities and, you know, things matter less and you want more experiences and meaning and you know i think it's too you come out of your parents house right you it's like at that age you're coming out of college coming out of your parents house and you see all the things that they have and for you that equals success like i know i felt that it's like

okay they have a house they have two decent cars they you know seemingly they have a house full of furniture that's nice you know and it's like when house full of furniture. That's nice, you know? And it's like when you strike out on your own, you're trying to get that so fast. Yeah. It took him 25 years to get there or 35 years to get there.

Heck yeah. And you go, well, I want to shortcut that. Yeah. There are no shortcuts to wealth or meaning or happiness or joy, including the Rolex.

I'm not mad at Rolex. It's a beautiful watch and I hope Jacob gets one one day, but I hope he does it with cash after he's accomplished more important financial goals. That's true. That is so true. Yes, that's right. It's all about temporary sacrifice, short-term sacrifice for a long-term gain. That's what we're teaching here. This is The Ramsey Show. These days, it's not if your identity gets stolen, it's when. And the only ID theft protection plan I have ever recommended is from Zander Insurance. It helps real people with real-life situations.

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They cover all types of ID theft, and they even include up to $2 million in stolen funds protection. In the end, though, you need. They cover all types of ID theft, and they even include up to $2 million in stolen funds protection. In the end, though, you need an ally, someone on your side to take over the work and fix the problem. That's what Zander is all about. Go to Zander.com to learn more. Call 800-356-4282. This is The Ramsey Show. I'm Jade Warshaw. Next to me is George Camel. Hey, if you enjoy this show, we're so glad that you're here, first off.

We're so glad that you are listeners. Technically, y'all are the reason that me and George even have employment here. So there you have it. Because if it wasn't for you, there'd be no show, George. It's all about the people. It's very bleak when you look at it that way, isn't it? Yeah, it's kind of scary. So thank you all for listening and calling in.

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Thank you so much. We'll spare you the telethon if you do it this way. Yes. Remember those old PBS telethons? Oh, yeah. How could I forget? Maybe we should try it one day. I don't know.

I'm open to it. No, I don't want to do that. They had all the phones that they could answer. The booth is saying no, thank you. No telethon. Okay, let's go to Jack. He's in Boise, Idaho. What's going on, Jack?

Hi, Jade. Hi, George. Thank you for having me today. You bet. How can we help? So about a year ago, my wife and I finished the baby steps, paid off everything. I'm 60. She's 60 as well. We're worth about six and a half million dollars. Wow. Yeah, yeah. We were crazy blessed. Um, and then 5 million of that is in paid for income producing real estate.

We make about $200,000 a year net after everything. Nice. Um, just from real estate. So, uh, yeah. And we both work some, um,

yeah. So money is not an issue. Um, except kind of in our relationship, but we were paying this off. I, we gave we gave each of ourselves a $50 a month budget, spending money just for fun stuff, going out, coffee, whatever. Very tight. Now that it's done, I've got her to loosen that up on my side to $100 a month.

Whoa, living on the edge, Jack. I feel this is very tight. Like no one can breathe in this budget. Your budget's got skinny jeans on edge, Jack. I feel this is very tight. Like no one can breathe in this budget. Your budget's got skinny jeans on it, man. You can get coffee like twice, maybe an outing with a friend. Jack, Jack, Jack, Jack, why are you not loosening these purse strings? Looser. Because I'm getting tremendous pushback.

Tremendous pushback. My wife still thinks that I'm overspending at $100. She's like, I don't know why you're not happy with $50. How do we get past this? How do we get from the first no one else to the second no one else? That is a big shift to make. I think I saw her episode of Extreme Cheapskates. I think she was on that show.

Is she that person who's just super frugal, and this is how we got here, and I like it this way? She is. We're banking money for no reason. What are you doing with all the extra money? Because you're spending none of it. We're just investing it. It's just going into money markets temporarily. That's my question. I don't know. You've's just going into money markets temporarily. And then that's my question.

I don't know. You've got to give this money a goal. Let's spend some money. Do you take any trips? Or is this just daily spending? She doesn't like to do a lot. We travel a lot. We do a lot of stuff together. But it's kind of like, it's my personal.

It's that personal. It's like, hey, I want to go out for coffee. I want to go out and grab a bite with friends. It's that kind of stuff. Wow. It's the personal. It's that personal. It's like, hey, I want to go out for coffee. I want to go out and grab a bite with friends. It's that kind of stuff. Wow. It's the singular stuff. If you could have it your way, what would that line item be on the budget for Jack? It really, $400 or $500.

I mean, I'm not looking for thousands. I'm just looking for a little more freedom. So if you said to your wife today, I want to spend $500 a month for fun stuff, what would she say? She would look at me, she couldn't imagine why. Now, okay. So I think this is the conversation that needs to be had. Because what I want to first call out is, I think it is very normal for there to be things that, I mean, my husband is sitting out in the audience.

There are things that Sam would spend money on that I'm like, help me understand why you would ever even be interested to spend even a quarter on that. And then there's things that I would buy that he could never understand why I would spend money on that. So at the end of the day, this is about you guys' interests and being able to value each other's interests. And so she's saying, hey, $400, like that's a lot of turkey sandwiches. How many lunches are you going to? But you clearly are a very relational person. You like going out, you like seeing people, you like to do things over food or lunch or whatever. And that's just who you are. And I don't think that it's not to say that she has to go out and spend that money.

But I think having that conversation and saying, hey, we've worked very hard. This is a very small percentage of our world. I've heard Dave talk about ratios a lot and really kind of looking at it big picture and saying, hey, here's the percentage that we're saving. Here's the percentage that we're giving. We need to be really intentional also on the percentage that we are enjoying and spending for ourselves. And so I think that's the way the conversation has to start to evolve. And if you want to do anything else, you can play her this clip and say, hey,

these two people on the radio agree with me. Well, there's two things here I see, Jack. Number one, you have to get to the root of what's actually causing this kind of frustration she has. Is it just, I don't understand why you'd spend that, or is it truly a fear of scarcity of we're going to run out of money if you keep spending like you're in Congress? I think it's a fear thing. And I'm always like, you realize, I'm like, sorry, the $100 a month, I'm like, you know, do you have any months I could spend $100 a month

and never go through any real amount of money? I mean, we could go 1,000 years at $100 a month. I was like, do you have any months I could spend $100 a month and never go through any real amount of money? Do you have any, I mean, we could go a thousand years at $100 a month. I don't know the math would even impress her if you went, hey, listen, we're never going to run out of money. I've tried that because that's my bent. It's like, well, let's just do the math. That's why I think this is a

real, there's some like trauma here, maybe from childhood, the way she grew up, we didn't have money growing up, and now we have some, and if we spend it, we're going to go back to how that was. So, I mean, this might need a third party. She might benefit from going to counseling or therapy and connecting with our friends at BetterHelp to go, I want to get to the root of this because I don't want to live like this. I want to enjoy life and be more open-handed. And the other thing, Jack, I would recommend is as you guys sit down to the budget, force yourselves to spend more, to save more, and to give more. How does she feel about giving? So we give a lot. Okay. Way over 10%. Okay, good. Yeah, we give usually about 20%,

maybe a little bit more. And why is she comfortable with that? Well, she's not. I make her do it. Okay, interesting. So all she wants to do is save. Correct? Yeah, pretty much. She likes to travel. And why is she okay with travel but not coffee?

I don't know. That's where I'm going. Is it because it's us versus me? I am't know. And that's where I'm going. Is it because it's us versus me? I don't, I am not sure. It's just where, I think it's where she places her value. It sounds like it. She values experiences, not stuff and things and food. This is worth it. That's not worth it. And so I think it's really just, hey, we both have to be, we've both really worked hard. We both have to feel the reward of this. And I love that you feel

the reward of traveling and I love traveling with you but I really feel the reward in day-to-day life I just like being able to go and pick up lunch play golf with my buddies and it's no big deal and I'd love for it to reflect for both of those things to be reflected on the budget right now the traveling is reflected that's great I would love for let's just try it let's give it a trial period and I think you'll see it doesn't really affect our life much. And so that's probably the, that's the way I'd frame it up. George, what would you say?

I would agree on a ratio. Right now, if he spent 500 bucks a month, that's six grand. Out of their 200,000, that's just coming from the real estate. That's 3%. So if they just agreed, hey, we're going to agree to 3% of whatever our yearly income is, which is a tiny, it's not going to make a dent in our income. It's not going to make a dent in our investments. Would you be okay with 3%? I love that. And you know, a really great way to see that is on every dollar. When you open up every dollar, there's all the line items there, but they're divided by category. And so most of

most of us have like a house category. And it's like in that category is your rent or your mortgage or utilities, everything that has to do with the house. But then you might have a category that says like leisure or fun. And it might have things like saving for a trip or going to the movies or, you know, anything that you consider fun. And what's really great is every dollar splits it out and it will show you the percentage that you're spending. So if you ever have questions about, oh, my gosh, am I spending too much on food or am I spending too much on childcare? You can go over to the right side of the screen and you'll be able to see the percentage. And a lot of times it'll either put you at peace or you'll go, holy moly, I need to make some changes. Well, they got a flat tire because they're saving 90% of their income, but not as much giving, not as much spending. I think we

need to loosen up to be more well-rounded. Yes. Mrs. Jack, I don't know your name, but it's time to loosen the purse strings. Live a little. This is The Ramsey Show. You know my philosophy on planning and preparing. Being proactive is always better than being reactive. We have a provider we recommend that can help you stay prepared for

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Order 100% online in minutes, then fill out the brief questionnaire in your email, and your kit ships to your door. Visit UrgentCareKit.com slash Ramsey and use the promo code Ramsey for 15% off. That's promo code Ramsey at UrgentCareKit.com slash Ramsey for 15% off. That's promo code Ramsey at urgentcarekit.com slash Ramsey. This is the Ramsey Show on the Ramsey Network. I'm Jade Warshaw. Next to me is George Camel. And George, I just need you to do one thing. Hit me. Talk nerdy to me. Okay. If you don't know

what the heck Jade is talking about, we have done a long-running segment now. We've done at least two of them, which makes it long-running, where we talk nerdy to you. We explain what could be a complex financial topic, and we just hit you straight with exactly what you need to know to simplify it so that you can have a little financial prowess at your next dinner party and kind of drop some stats on them. Okay. So here's the one for today it's compound interest this is something we all like we hear about it we kind of understand it yeah but then i'll post on facebook and i'll be like hey if you invest this much a month from age this to this you'll have three million dollars and they go what how is that you haven't saved two million dollars i'm like like, you're right. I put in 200,000 and it turned into 2 million.

So we're going to explain the sort of science behind that. And speaking of science, Albert Einstein, I don't know that this is true that he actually said this, but he is quoted on the internet a whole lot. He is quoted. Compound interest is the eighth wonder of the world. Listen, I agree with him. When it's working in your favor, it's amazing.

When it's working against you on a student loan, only God can help you. That's right. So this is the secret for building wealth. When we talk about building wealth, baby step four, becoming net worth millionaires, compound growth is a key here. So this is when your money earns more money, and then that money earns even more money. So it works like a snowball, but instead of debt, you're collecting more as it goes down the hill. Give it to me in numbers. Okay. So let's say $1,000 and you earn 10%. So 10% of 1,000, 100 bucks. So after one year, you'd have 1,100, your 1,000 plus the extra 100 you made. Got you. But now think about this. You earn 10% the next year, but it's not on the original thousand. It's on the new balance.

And there's the difference. The balance now is $1,100, and you're going to earn 10% on that. And then it keeps... Which is another $110. And so you can see how it starts to snowball as not only did your principal make money, but your principal plus interest now made more interest. Wow. So that's the strategy here. And after 10 years, it would almost triple. So an easy way to think about this, it's called the

rule of 72. Okay. So if your money is making 10%, every 7.2 years, your money would double. Love it. So 1 million turns into 2 million if you had an average return of 10%. And we tell people that all the time when you have that lump sum sitting there, people call in and they want to know if they're going to have enough in retirement. I love being able to quote that because it's kind of like, oh man, I never thought of it like that. Absolutely. So we can walk through a great example of this. And if you're wondering what the, you know, rate of return is, where we're getting this number, we're not just, this is not like a wet finger in the air. This is the average return historically of the U.S. stock market is about

10 to 12 percent. You know, this is before inflation. So post inflation, it's probably closer to seven, eight, you know, nine percent. And it's worth noting there. A lot of times people make the mistake of looking at the stock market year by year. They go, instead of how are you making 12 percent? Jade mines at four percent this year. And we're going, that's the average over a long period of time.

Yeah. You're looking for the annualized rate of return, not just annual. So if it's negative 4% and then next year it's plus 20% and then it's 4% the next year, you average all of that out. That's right. All right. So let's look at a chart that really explains the power of this and the power of starting early.

We're going to look at two guys named Ben and Joey. So they both start invest. Ben starts investing at age 21. Okay. He's a young whippersnapper. He got out of college debt free. He's crushing it. He invests $2,400 a year.

Excellent. $200 a month. That's not a whole lot, but he stops contributing at age 30. So nine years, he contributes that $2,400 and the total amount he contributed was $21,600. Wow. Okay. Now what is his total when he turned 67? $2.1 million. Without ever

adding more? Without ever adding more. He stopped at 30. So he turned 21,000 into 2.1 million just by not touching it and let that snowball roll with compound growth. Now his buddy Joey, well, he didn't make as many wise financial decisions. He finally gets the ball rolling at age 30. Okay. He starts investing 2,400 a year, but this time he doesn't stop at 30. He keeps investing until he's 67. So 37 years. Wow. Of investing that same $2,400, he ends up contributing $88,000.

$88,800 to be exact. You would think, well, he's got to have more than Ben. He invested way more. No, no, no. Joey ends up with $1.2 million. Ooh, so time. Time was on my friend's side there. Almost a million dollar difference

because of that extra nine years Ben had his money compounding. So it's not necessarily about how much you contribute. It's really about how much time you let it sit. Yeah, each year it's compounding, compounding. In that crock pot. And that chart, if you're wondering where that came from, that's actually from our foundations and personal finance curriculum that we teach in half

of high schools across America. And this is the kind of stuff we wish we learned in school growing up, Jade. And now you can. Yeah. I think a lot, this is really important. I think a lot of people, they forget about compound interest. They're thinking about simple interest. They're thinking, you know, if it's a thousand dollars, you're always going to have interest on the original lump sum. And with compound interest, it's even better than that. It's always growing. So that's wonderful. Well, now to be clear, people go, well, Jade, if it's so important to get started early, then why do you tell people to pause investing until they're out of debt? Well, you know, at the end of the day, that time is usually negligible. And I always tell people

all the time, if you're messing around and playing around with the baby steps, you're going to screw yourself. Because if you say, yeah, I'm working the baby steps, I'm in baby step two, and then you play patty cake with it for the next seven, eight years. I'm trying to pay off some debt. I'm trying to invest. I'm trying to save for a house. You can't do seven things at once and do any of it well.

Yeah. And then you mess around and you put your stuff on hold for the next decade. Well, yeah, you just screwed yourself. But if you do it the way we teach, most people are out of debt, George, in two years or less. And so that's really negligible in order to have the full power of your income at your disposal so that you can invest 15 percent, which is far more. Most people are doing three or four. They're going, I'm going to get the match and I'm going to just put the rest in the back burner. That's right. That's not enough to retire with dignity. That's right. And so the way we teach it, not only are you getting your debt cleared off, but when you do finally start to invest,

you're investing far more than you would have. Therefore, you're going to make up the difference pretty quickly. And so this works. At the end of the day, people can question it, but there's 30 years of experience behind this. And I know, you know, I know, George, you work the baby steps. I work the baby steps. And the cool thing is, George, I was the person who had to wait seven and a half years, because it took us seven and a half years to pay off our debt. Then we turned around and saved three to six months, then we turned around and bought a house, then we started investing. And I can still tell you on this side of it, it still works. The principles still work. So you'll be good. And there's still time. So if you're

hearing this, you're going, well, that'd be nice. I'm not 21, Jade. Listen, I'm Joey. Joey is right here. There's still, you know, even if you let's take this example, you're 35 and you finally started investing. If you invest till 65, 500 bucks a month, that's six grand a year with an average 10% return. Exactly. They go, where am I going to find 500 bucks? That car payment looks a whole lot like 500 bucks. Pay that thing off or sell it. You'll free that money up. Well, from 35 to 65, 500 bucks a month, 10% return, 1.1 million.

Wow. How much did you actually contribute? 180 grand. So when you look at that, you go 80 to 90% of the growth was stuff you didn't even do. On that example, a million dollars was growth. Is that right? Almost. The growth was 950 in this example. Holy moly. And so you just, you know, look at these numbers. I'm using our investment calculator on our website and you guys can punch in your own numbers and start to have some hope that you can retire with dignity and you don't

have to wait on the next person in the White House or go, I'm scared of the stock market. I'm more scared of you not investing at all and retiring broke. So true. Yeah. And back to this, you know, these are all things that some of you are listening. You're like, I never, I just never heard this concept before. That's why it's so important. Foundations and personal finance. I was walking out of the building the other day, leaving work and a guy walked up to me. I think he told me his name was Jefferson. He was like, Hey Jade, I just want to tell you we're in baby step seven. We paid our house off. Now I'm looking at this dude.

I'm like, you look extra young. So I said, how old are you? He goes, I'm 31. Whoa. I said, 31. I said, I have to know more. He goes, Jade, I had foundations in personal finance as my curriculum in high school. And so I knew never to go into debt, never to go into student loan debt.

And so when I came out of college, which I paid for in cash, I just, I saved up three to six months. I did my down payment. You know, I started investing 15%, paid off the mortgage. And at 31, no mortgage. That's insane.

Insanity. But that's, that is the power of the things we teach. And here's the thing. If your kids don't get this through the curriculum, through the Ramsey curriculum, they're going to get it from TikTok. And TikTok and Instagram are not telling them to stay out of debt. They're telling them to get into debt. And somehow that's the key to building wealth. But we've seen in reality the exact opposite to be true.

So if you're interested, you can go to RamseyEducation.com and, you know, hassle schools your teachers your administration to go hey we got to get this curriculum in the school what are we teaching these kids show them how to budget so so important let me tell you you might be a little late to the game you might be joey i was late to the game and even if money didn't come from you even if you didn't come from money money can still come from you through your kids and changing your family tree. Preach. Do it, do it, do it. This is The Ramsey Show. Do you ever feel like you're finally making progress towards your goals only to get quickly distracted by something else in your feed? Well, that's why we created the Ramsey Network app, your single source for content that keeps you motivated.

The Ramsey Network app is designed to keep you laser focused on reaching your goals. Loaded with over 7,000 hours of Ramsey shows, this free app is the best place for uninterrupted content and no distractions. Plus, you can search specific questions to get more personalized content in seconds. So for the days you need some extra motivation, you'll have proven advice at your fingertips. It's time to get serious about your goals and shut out the distractions for good. Simply search Ramsey Network in the App Store or Google Play. If you're listening on a podcast, just click the link in the show notes to download our free Ramsey Network app today. From the Ramsey Network, you're listening to The Ramsey Show.

I'm Jade Warshaw. Next to me is George Camel. And here we help people build wealth, do work that they love, and create amazing relationships. And we do that with your calls. This is a live show, so be sure to give us a call and we'll talk about your life and your money. The number is simple 888-825-5225 that's the number that gets you in all right george let's get to the phone lines game on on and popping all right we got lee she's in columbus ohio what's going on lee

hi you guys are like my two favorites here i'm'm so excited. I cannot wait to tell Ken and John and Rachel and Dave. That's so kindly. Thank you. How can we help? Well, I think my question is actually pretty timely. I work in local government, so I'm in a pension. My husband and I are on baby steps four, five, and six newly, but I have always been required to put 10% of my money or my salary into a

pension. And now that I'm looking into it, I have the opportunity and I can only do this once. I cannot take it back to switch to a member 401k type of plan. So I just, you know, I can't roll over what's already in the pension or anything like that, but I'm just, I have, I mean, I've been in service for nine years and I love my job. I, so this isn't a matter of like staying at my job, but if I'm looking at retirement,

even 25 years from now, cause I'm 35, say at 60, is that enough time to still contribute my 10%? And then I matched it like 7, 7.5%. Oh, amazing. That's awesome. 100%. I would switch over to the 401k. Instantly. And the good news is, and George is going to go over a bunch of reasons,

but for me, you're going to get to choose the investments and you're going to have a better mix. And I think that for me is the thing. And by the way, I just want to call out, I want you investing 15% when the time comes, not 10. Oh, right. We can't contribute more than 10% in this particular plan, even the 401k. But I'm contributing above and beyond in a deferred compensation, like a 457. So that's where the other money would go. But the 10% is like what we're locked into required for... Is there a Roth option with the 401k or is

it just traditional? It is just traditional. Okay. Because your other option is a Roth IRA, as long as you're not above the income limits, and that can be a great place to start for some tax-free growth, and then you can do the rest in that traditional 401k. So I would invest up to the match? You said it's how much is the match? Seven and a half percent. Is that regardless of your investing?

Or is it up, you invest seven and a half and i have to do 10 no matter what they just happen to match up to seven and a half okay awesome now the 457 do you have to go to that next or can you go to a roth ira next oh i can yeah i can switch it to a roth ira that was just something i was contributing to an addition a while ago, but now that we're in four, five, six, I'm like, we have to look back at this. So now that I'm looking at other contributions, I can switch totally over to a Roth if I wanted. Yeah. I really like the idea of obviously you want to get the match, but to George's point, having that Roth there, we get calls all the time of people who are on into retirement age and they most of what they have are traditional accounts and they have these required minimum distributions and everything and it's like oh

my gosh they just wish that they had rolled it over into Roth style accounts earlier and so I think it's important to have the right mix of that going in and if you can start that earlier I think it's a great thing. Okay and then one more question I'm basically with building up so my i will be required to take you know once i retire i think retirement age it would be full benefits at 62 for the pension it is a payout per month since i have done nine years of service um at like 700 a month um if i were to wait till 67 it's up to 1300 a month. And I'm just like, there would be the option with the account value, which is about a hundred thousand. You can take a lump sum over. So the lump sum is 44,000 out the door, but I could roll it over.

Like if I ever left public service, which I don't intend to, but if I did, I could roll over the full account value, which is about a hundred,000 into an IRA at that point. So I don't know if I have that chance at retirement, but I'd rather do that. Yeah, as long as there's no penalty. When the age is right where you can do this without penalty, I would take the lump sum and invest that on your own. And that way, again, you have more control over it. It can pass down to your heirs because the problem with pensions is they die with you. And so there's one big benefit to moving it

over. And the other reason is, Lee, the average return on pensions is not great comparatively to what you could get in a 401k where you have the options. So pension plan might be 7% with the 401k might be 12% or more. And then again, when you die, you can pass it down to your heirs with the 401k with the pension, it'll die with you or maybe your spouse at a lower amount when you die, you can pass it down to your heirs with the 401k. With the pension, it'll die with you or maybe your spouse at a lower amount, you know, survivor benefits. And again, you own the 401k, the company owns the pension.

And how long does the money last? Well, it's your lifetime with the pension. And with the 401k, it's until the money is gone as you keep passing it down generationally. Oh yeah, so if the health of the business starts to go down, that could definitely affect your pension in a major way. Which with the government, it'll be here to stay. So I'm not as worried with a government pension just disappearing. But I do like the idea of you doing better on your own with more control and more say.

Very good. Very good. End of story. Good, good call. Thank you so much for that call. That was great. I didn't mean, I kind of cut her off a little bit. Sorry, Lee. She was probably saying something really cool. Lee, I love you. That was a mistake. That was a user error. Well, she can always call back for more. We love Lee.

She's like, I'm not coming back. She hung up on me. It was an accident. We love you. I love that. George, we get those calls all the time about pensions versus 401ks versus Roth IRAs versus IRAs versus... There's so many.

Appreviations. It's exhausting. Okay, so let's talk nerdy to the people and let's explain the best way to invest their money when they hit baby step four. Oh, that's good. Because we kind of talked around it. We talked around it.

So the easiest way is remember five words, match beats Roth beats traditional. So that's the strategy here. So if you have a match with your employer retirement plan, let's take that first because it's a 100% return. You put in 4%, they put in 4%. Yes. That's a win. Free money. Beyond that, Roth, that's just a tax treatment on the account. And it just means simply that you're paying taxes now so you don't have to pay the taxes later in retirement. Exactly. And then lastly, you have traditional, which means we're going to, you know, might get a tax advantage now, but we're going to pay taxes on that money later. That's right. It lowers your

taxable income now, but later on when you're in your retirement years, when you go to pull that money out, it's income, so you're paying taxes. And there's a big discussion and debate in the financial community amongst the nerds about Roth versus traditional and should you be doing Roth now versus... The truth is, if taxes stay the same and income stay the same, it would be an exact wash. But we're kind of hedging our bets going, my guess is taxes might be higher now than they are today. And we don't know what your income will be. Everyone says, well, Jay, in retirement, your income will go down. Maybe, but I don't want to have to limit how much I'm enjoying my investments because of tax reasons. So I love the idea. When you look up at 62, you've got a Roth IRA with $2 million. That's $2 million of after-tax

net money that you get to use without Uncle Sam ever getting his grubby hands out. I know that's right. I know that's right. And with all of that, you haven't actually invested yet. Those are just types of accounts and investing strategies. So how do we invest it, George? Well, mutual funds or index funds outside of retirement. That's a great way to do it. Giant groups of stocks. Yeah. George, I like the electronically traded funds. ETFs. Yeah. Exchange trade. Yeah. They're kind of like mutual funds that trade like stocks, which I don't love for that reason. Kind of gets you a little bit, ooh, should I jump in? Should I jump out?

Yes. Not a whole lot of reasons. Me saying that was me being them. Thank you for being them, Jade. You're just like the rest of the trolls. I thought you were so much better. Oh, my goodness. Thank you, George, for the crash course on investing.

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You're listening to The Ramsey Show. Thanks for being here. I'm Jade Warshaw. Next to me is bestselling author George Camel. Today's question of the day is brought to you by YRefi. If you're in over your head with private student loans and tired of getting calls from collection agencies, I know how that feels. You need YRefi.-Refi refinances defaulted private student loans that other places won't touch. And they give you a low fixed rate loan that's built for you. So go to Y-Refi.com slash Ramsey today. That's the letter Y-R-E-F-Y.com slash Ramsey. It may not be available in all states. Today's question comes from Peter in Wisconsin. My son let his home get to within 10 days of foreclosure before telling my wife and me that they were in trouble. He has $350,000 in equity. I could not let this happen, so I paid

the $35,000 that was owed, which made them current on their loan. I've explained to him and his wife they need to sell the house and get the equity out and start using the Ramsey plan to manage their money. Now they won't talk to me or my wife. Did I do the right thing in helping them out? Well, clearly not if it destroyed the relationship. I think it was well intended and a very sweet thing to do. But the problem is they didn't seem to ever ask for your help or your opinion in these matters. And it all has to do with

how you explained it were you like look at what you did you guys never should have been you know like that's different than explaining it in a better way now he seems like a wonderful person i think it's i think it's on them yeah you know they reacted this way because he said before telling my wife that they were in trouble so he came to him yeah 10 10 days before foreclosing this had clearly been going on for months this foreclosure doesn't happen after one month of payment and he goes hey we're in trouble so clearly he was looking for help by going to the parents letting them know about this problem and so i think truthfully there's a lot of shame and guilt here i think you're right and now it's it makes the relationship kind of like a business

transaction where you you come across like a lender. And now it's awkward because I need a daddy to swoop in and fix my mess. Well, they don't say that there is an interesting piece missing from this on whether or not the kids owe the thirty five thousand back to mom and dad. It doesn't sound like he he wants or needs the money. So if he said well when i asked for the money they stopped talking right that would make more sense yeah versus a gift of like hey listen i'm gonna get you guys out of this bind but you gotta please follow this plan i bet it was a well-intended situation yeah but my worry is if you didn't save them like they're gonna be right back in this mess and so exactly while i would love for them to follow the plan,

I think they clearly could not afford the mortgage. And so even getting them current on the loan doesn't solve their problem. That's why he's saying you guys need to sell the house, get the equity out, do this the right way. So my fear is they end up right back here and go, Dad, I'm in a bind again. We're behind three months on payments because they didn't actually change their habits. Yeah, I agree with you, George.

Matter of fact, James, I think we need to add a segment where we show up at the people's door who did the question of the day and we can ask them more questions about their question. Call into the show and maybe we can talk more through it. It's a very interesting situation. It is. But did I do the right thing in helping them out? I think it was a noble thing to do. It's what, you know, personally, I love my daughter.

If she was in a bind, I would do anything for her. 100%, yeah. But again, if she didn't ask for it, I don't know. But they asked. He came to them with a problem. My daughter knocks on my door and says, hey, we're on the brink of foreclosure. I'm going to do whatever I can to help them out

and then steer them to the plan. So I don't know that I could have done anything differently. Yeah. I mean, it's different. There's one thing. It's kind of like you don't want to be an enabler like if it was a situation where this has been going on for a long time and helping them would be in a sense giving a drunk a drink or it's very possible that they just had you know a slurry of really tough things happen and it just

resulted in this you know foreclosure situation and mom and dad were like listen we can help you know so more details are needed but George I and dad were like, listen, we can help, you know. So more details are needed. But George, I think you're exactly right. I would have been like, hey, I'll give you the 35, but you guys are going to go through Financial Peace University tomorrow. Yeah. Matter of fact, if we can send that to Peter to send to the son and daughter, we probably have his email, right, Producer James?

Yeah, we'll try to. We'll give that to them as a gift and see if we can get them on track. Because I want to help them for the rest of their life, not one time in a bind. Yeah, that's good. All right, we've got Anne in St. Cloud, Minnesota. What's going on, Anne? Hi, this is Anne. Thanks for taking the call today.

Sure. You bet. What's up? So my question for you is basically, should I quit my job? So a little bit of background. My husband and I, we got married, had a baby, and bought a house all in one year. I hear that baby. Hooting and hollering.

Yeah. He is going to be a little bit whiny in the background, so my apologies. Did you say you got married, bought a house, and had a baby all in how long? One year. Ooh, mama. Okay. And what's your current job? So I work as an administrator for a ministry.

And the problem is there is morally corrupt stuff going on with the leadership. Ugh. Yeah. It's so unfortunate. It was like a dream job when I took it. Um, and so good for our family. But now it's like, I kind of have no choice but to leave. Yeah. So what's next? We know you're leaving. We need to line something up. I don't want you just quitting and going, well, I'll just figure it out over the next four months. Yeah. What's the income you need to try to make up here?

Well, bare bones budget. My husband and I will be able to make it by without even dipping into our emergency fund. So that's the living off of his income. Yes, he can take overtime, which is super, super helpful. But it's not a way to live. Yeah. So what were you making? I was making about 3,800 a month. Okay. So we need to make up that income or at least most of it. And that's kind of the thing. My husband's really supportive. Um, but I don't know what my next step

is and my, I don't want to put my child in daycare, so I might look for some at-home admin work, but I'm really just not even sure where to start. Well, let's kind of start by looking at the financial picture so we can know what needs to be done. What baby step are you guys in? Do you have debt? Luckily, we're in baby steps four, five, and six.

Good. Okay. How much is in the emergency fund? We have about $36,000. Wow. Great. That's a big old emergency fund. Is that too much?

Well, it sounds like it's a lot more than six months based on what you've told me. Yeah. Both of our take-home pay is about $7,500 a month. Okay. all together. Okay, good. So you're looking more for help on the career side of what to do next for a job? I'm looking for that and just if I can afford to stay home with him too. So could I afford to be part-time?

Well, you just told us on a bare-bones budget you can get by, but that's if he works overtime. So it's not super sustainable. And he said that's no way to live. Right. So we need to get his income up or you need to work part time in order for this to make sense. So what would it look like? You know, you were doing the job in the ministry.

Is that something that you would want to do again at another ministry? You know, tell us more about what you feel like you're qualified to do and the work that you would want to do. I put her on hold with the baby yelling. You get her back jade let's see where is she line two sorry about that ann there it is that baby's got pipes can i just say she's rolling in here's what i think i'll just kind of give you the synopsis of what i think i think you guys need to get onto every dollar do you have every dollar we do okay then i think you guys need to get onto every dollar. Do you have every dollar? We do. Okay.

Then I think you guys need to get on there and figure out, okay, what amount of money, because it may not be a full $3,800, but what amount of money would take you out of that unsustainable place to where it's like, okay, we're not on bare bones. Husband's not having to work overtime all the time. And we can kind of live a life like this. And maybe it is $3,800. But then after that, it's all about you sitting down and going, okay, what can I do? What would I like to do? And then I'm getting on all the sites. I'm getting on Glassdoor. I'm looking to see what's available. I'm looking for work from home options. I'm looking for part-time options.

And I think at this point, you're just kind of pounding the pavement, as they say, and knocking on doors to get another job. And we can help you with that. Ken Coleman has a great book called Find the Work You're Wired to Do, because maybe this is the career path in the administrative space. Maybe it's not. So we're going to send you this resource. With that, you're going to get the Get Clear Career Assessment. Take that and then start talking to your friends and say, hey, does this line up all of this assessment stuff? Does this line up with who you know me to be, my personality, what I'm wired to do? And that might be a work from home admin job. It might be something else. And, you know, maybe you go make some crazy money and you go, I want to get a full-time nanny in house because I don't want to do daycare. You have the options, but we do

have to figure out the financial piece. Yeah. But the good news in this is because you guys did the right thing, it frees you up to now for you to be able to do the right thing with this job. You don't have to stay in a job where, you know, morality is being questioned or, you know, negative things are happening or even illegal things. I don't know what's going on over there, but you've got the emergency fund and you can get out and you can get another job. Hopefully that pays more.

This is The Ramsey Show. This show is sponsored by BetterHelp. This is the season for Halloween. It's October, we're wearing costumes and we're wearing masks. So if you haven't started planning your costume yet, get on it. And while you're thinking about it, I want you to be honest. A lot of us hide ourselves. We hide our true selves behind costumes and masks all the time.

We do this at work, we do this around our friends, we do this around our families. We even do this when we look at ourselves in the time. We do this at work. We do this around our friends. We do this around our families. We even do this when we look at ourselves in the mirror. I know because I've been there multiple times in my life and it's the worst. If you feel like you're stuck hiding behind masks and costumes all the time, if you find yourself hiding from your true self, I want you to consider talking with a therapist. Therapy is a place where you can be honest, where you can talk to somebody else and reflect and learn, and you can accept all the parts of yourself over time and start living an authentic life. Masks and costumes should be for Halloween parties, not for our emotions and our true selves. And if you're considering therapy, try calling my friends at BetterHelp. BetterHelp is 100% online therapy. You can talk with your

therapist anywhere, so it's convenient for you and your schedule. Just fill out a short online survey and you'll be matched with a licensed therapist. Plus, you can switch therapist at any time for no additional cost. Take off the costumes and take off the mask with BetterHelp. Visit betterhelp.com slash deloney to get 10% off your first month. That's BetterH-E-L-P.com slash Deloney. Hey guys, Rachel Cruz here. You know, some people think budgeting means they can't have any fun with money. And I know this because that was me. But the truth is, budgeting doesn't limit your freedom. It actually gives you freedom. A budget is simply telling your money where to go. And the best way to do this is with EveryDollar, my favorite budgeting app. It'll help you create a plan for your money that

fits your lifestyle. So whether it's a spontaneous date night or an epic Disney cruise, budget for some fun. Download EveryDollar for free today. You're listening to The Ramsey Show. Thanks for listening. Listen, guys, you need cash for listening listen guys you need cash I know that you need cash and so I've got just the solution for you the Ramsey cash giveaway is here we're trying to give you money yes Dave's money which is my favorite type of money and it's a lot ten thousand dollars cash that's the grand prize wow ten thousand it used to be like three thousand ten thousand dollars is a lot of money this is one of our biggest giveaways. Inflation hits the giveaway too. We're like, we got to up it. That's right. That's right. Accounted for inflation. I love that. Thank you, Dave. All right. If I had $10,000, I can already tell you right now, that's a vacation. For some of you that is paying off a student loan, for some of you that is going towards your three to six months of months of expenses all i know is ten thousand dollars is a bag george and if you get that it's it has the potential to really change where you are right now that's several full tanks of gas i mean there's a lot

you could do with ten thousand that's at least four stanley tumblers at least four it's amazing those things are so expensive so if you need ten thousand dollars if you could really use it you can enter go to ramsey solutions.com slash you could really use it, you can enter. Go to ramseysolutions.com slash giveaway. And here's the thing, you can enter every single day. And the more you enter, the more it increases your chances at winning. So do that now through August 31st. Not only that, George, but we're also having our $12 sale. So now's your chance to not only enter this cash giveaway, but you can also grab one of our best-selling books at a lower price. So whether you're trying to do better with your money,

whether you're trying to deal with your anxiety, whether you're trying to get your job to and your career to the next level, we've got books and products that will give you a plan, that will give you hope, and they're at a discount, $12. So guys, look no further. This is the assignment. Go to ramseysolutions.com slash store, and. Go to ramseysolutions.com slash store and then go to ramseysolutions.com slash giveaway to get your $10,000 entry. That's how this works.

Any other announcements, Jade, before we keep going? who like to listen to the Ramsey show, I want you to know that after this segment, the next two segments, we're going on to the app. So if you want to keep listening and finish the show for the day, then you need to head over to the Ramsey Network app. You can do that by going into the app store and downloading Ramsey Network app. You just search it in the little tab

and it'll pop up there. But if you're used to watching the entire show, that's where you go if you want to finish the show. And I'd really recommend that you do that because there's a lot of really cool things within that app that you can discover while you're there. And if you're listening on radio, you keep doing you. The show is going to continue on radio. This is for YouTube and podcast folks. That's right. And so again, there's two ways to get the app. You can click the show notes. They'll

have it there if you just like to click a link. Or if you're savvy, like I said, just go into the app store and you know google ramsey network you're extra savvy and you're watching right now there's a qr code on the screen if you know how to take a picture of that and go to the link that's right george that's good for the extra tech folks yeah and also i just let me just say for those of you who have submitted feedback on the app we've heard you and we are working to make the experience even better we're always working to make things better for you but really we're just getting started with this app and you all the time we're adding more cool features to it so this is just like rock with us on this keep rolling with us on this you know it's all going to be good don't

miss what's coming up next go to the app so you can watch the full show okay i'm off my soapbox jay's gonna bring it in the next hour. That's a tease right there. The call's coming up. They're bangers is all I'm saying. You don't want to miss it. All right, let's go to the phone lines. We've got Matthew in Dallas, Texas. What's going on, Matthew? Hey, how are you guys? Doing good. How are you? Doing well. Thank you. Hey, so I just recently sold my business.

Nice. Commercial landsca my business. Nice. It was a commercial landscaping company, yeah. How much? It was $300,000. Hey. That's a good payday. Cha-ching. Yeah, there's some business debt involved.

Oh. Did you pocket $300,000? It's not what I netted. Oh, what'd you net? Yeah, so after paying off the business debt, paying off some personal debt, I netted around $105,000. Okay. And so I still have the truck. I still have a truck that's in my name, but the new owner, because I'm going back to work for the same company that I had, that I owned.

Oh, wow. So you'll be an employee now instead of the owner. Exactly. Okay. Exactly. What's owed on the truck? So, yeah, so I owe $28,000 on the truck. Um, but he has given me a stipend of, uh, $500 a month to pay for the truck. So it, it doesn't fully offset the cost of the payment, but it almost does. It's about three-fourths. And would he pay you that $500 a month until the truck was paid off, or was there a limit on how long that would last? As long as I stay with the company, basically. But if you paid off the truck today, would you still get $500 a month for a stipend? I would. Okay. Absolutely. Great. Pay it off, man. Yeah, I would.

Yeah. So that's my question, I guess. So that's all we really owe. So I owe my truck, my wife's car is paid off. Our house is not paid off, but we have a ton of equity in our house. What do you owe on it? Just curious. $385 on our house. Okay. Any other debt? No, ma'am. Nope. Awesome. So you pay off the truck, you're left with 77. How much do you have in savings? That's all our money. My wife has about $28,000 in her 401k. So no other debt. That is our savings, but there's no other debt. Correct. Great. So what I would do is I would put away six months of expenses out of that 77 and the rest, you can start attacking the mortgage. If you have kids, you can start putting away some for college.

That really sets you up. Yeah, well, and I guess my other question too that is, though, is that I'm going to have some long-term capital gains, and that's my fear. So I'm like, well, if I pay off the truck, like I said, I owe 28 on it. If I pay it off, you know, and then I have to pay the capital gains, but I'm actually paying the capital gains on almost $300,000, and then plus, you know, whatever our income is. Are you working with a tax pro on this?

Yes, I am. So you'll know exactly what the number is, and so come tax time, you'll need to have that money set aside. I'm guessing the 77 is going to cover it. Yeah. You think I should wait to pay it off

until I find out what that number is on the tax? I mean, I'd pay it off ASAP if it's due. But if it's, you know, if it's just part of your April taxes.

When will you know? Well, I won't know until they do our taxes. So probably next year. Okay. So that'll be part of our 24 taxes. Okay. Yeah. So I won't know until they do our taxes, though, probably next year. Okay. So that'll be part of our 24 taxes. Okay. Yeah.

So I won't know until she starts doing the taxes for us. I wonder if they could do an estimate. I'm sure you can get an estimate from your tax pro now to go, I want to make sure I have enough set aside because I know there's going to be a big bill this year. Yeah. I'd look into that. But you all wouldn't have a problem paying off the duty you're not doing i mean you're following to the letter of the law yeah yeah okay so that's

why we're working with your tax credit to make sure to you guys oh it's awesome welcome to the crew man you're doing great what's what's your new income now as an employee um well it's 1400 net per week is what i'm making okay and is that similar to what you were making before as the owner, or is that a lot less? It's actually a little more because he owed me some commissions that I'd sold before I sold the company. Can I just ask, what made you sell the company? Did you sell it just to clear debt, or what was your— To get out of debt. Yeah.

Yep, that's exactly right, to get out of debt. Cool. Well, here's the good news. You know how to do it, and you could do it again debt-free one day if you wanted to. That's right. Yeah, at this time I would have a different plan for sure. Well, very, very good. Hopefully we helped you out. Thank you so much for the call. And George, you bring up a really good point. When it comes to things like this, if you need help with taxes, we have tax pros here. You can go to ramseysolutions.com slash trusted and there's all the services that we provide, but amongst those are tax pros.

And they follow the Ramsey plan. Yes. They're not going to steer you into go, well, you really should go buy this $100,000 truck for a write-off. They don't say that kind of crap. They're going to make sure that you're following the Ramsey plan, helping you stay out of debt, helping you avoid IRS back taxes. And that's a big one, especially for business owners. We tell them, hey, file quarterly estimated taxes. That that's a big one, especially for business owners. We tell them,

hey, file quarterly estimated taxes. That's right. Make your payments, set money aside every month, set 25% aside, whatever it is for you to make sure that you're covering that. Because IRS debt, we put it at the top of the debt snowball when we hear about it, because the IRS can screw up your life. They can garnish your wages. They can sue you. They can put you in prison. So we don't mess with that. That's so, so true. And you're right, George. The big point is those Ramsey trusted folks, they do follow it our way. Because before I worked here, I was just out. I'm out in the world. I'm looking for a tax pro. It's hard to find people who will align with the way that we teach and the values that you've said, okay, yeah, this is the way I want to live my life. But once we started using those pros, it made it so much easier because I don't have to explain it.

I don't have to explain to them the baby steps. I don't have to explain to them why I care about getting out of debt, why I don't want to utilize debt. It's just, it makes it so much simpler. So again, RamseySolutions.com slash trusted. That's where you want to go to get the help that you need with taxes, real estate, not theirs. Go to ramseysolutions.com slash smartvestor to get connected and get more confident about your plan. That's ramseysolutions.com slash smartvestor. Ramsey Solutions is a paid non-client promoter of participating pros. Learn more at ramseysolutions.com slash smartvestor ramsay solutions is a paid non-client promoter of participating pros learn more at ramsay solutions.com smart vestor you are listening to the ramsay show i'm jade

warshaw next to me is george camel we're taking your calls but not this segment this segment we have something fun planned um it's a budget review all the time we talk about every dollar it's the best budgeting app out there and so many of of you utilize EveryDollar, but you still have questions. You do it and then you're like, Jade, something's still not math and right with my money. Can you help me out? Maybe there's an area that I'm overlooking. And so that's what George and I are going to do this segment. I had a, basically it's a Google Doc, George. And I went onto social media and I said, hey, if you want me to review your budget, just fill out this Google Doc with all the right information.

I love it. I'll pick one of your budgets. And so we've got Janai and Skylar. I'll give you a quick synopsis. And really cool. They're actually on the phone line today. So it's Janai and Skylar, 35, 36 years old, a stay-at-home mom and an electrician. They're from utah uh they make sixty nine thousand dollars per year but they bring home about fifty six hundred per month uh did i get that right

skylar uh i've got oh wait oh okay i don't think that's these what are okay got it what are the odds that there's another skyler on the line i know which is super confusing that's crazy yeah janai hello welcome hi thanks for putting your business out there for the good of others to learn and grow yeah yeah that's great thanks for having me on so did i get the numbers right 50 you're bringing home about 5600 per month let's see if we can pull it up on the budget to see well i'm confused. Well, I'm confused because you make $69 a year. That's about take-home pay because $5,600 is $67,000 a year. Yeah, so we budget based on – it's kind of a tricky situation,

which is why I'm so interested in talking to you guys. We budget for him working a 50-hour week, which is right about $1,400 a week, which is the $5,600 take-home a month. So I don't know what it all is like before taxes and stuff. Oh, got it. Okay. Cool, cool, cool. But we end up making more because he works extra overtime when it's available and his job um since he's in construction and they're so desperate for men or you know so the 5600 is the lowest that you would bring in the lowest okay can we bring the budget up on the screen and take a look at it with you let's do it all right so you you may not be able to see this in real time but you can go back and watch it so we've got your

every dollar budget here we plugged it all in and we have your income at the top, $5,600, $1,400 a week. As we move down, we're going to go to giving. You're giving a little to the church, $201. Savings, we have school savings of $200. Tell me about that. Yeah, so he's still in trade school, and so we are just putting $50 every week, basically a sinking fund to cash flow tuition every semester. Yeah.

Love that. What about the emergency fund? I think, I think you told me that you had $1,000, but you had to dig into it recently. Yes. We had some dental, I had to get a crown last week. So we'll be able to rebuild that by the end of the month back to the thousand. Okay, excellent. Because you also told me that your biggest debt, your biggest goal is to pay off your debt. So you guys are baby step two people. So we'll kind of filter all of the information we give you through that idea of you'll at the end of 30 days, you'll have the emergency fund back and then it's game on on paying off the debt. So George, let's keep looking here. You got some car maintenance 100 bucks a month that's good

i'm happy with that and then we have the mortgage at 1650 yeah the first thing i thought is it's it's a little bit more than what we'd say the 25 rule i think that it's you know it's 250 more so i think that for you guys it's not on fire it's not on fire but just being aware of that will change the way you spend uh going forward so utilities everything like that looking good on here natural gas electricity internet nothing crazy here yeah fuel for the car now we have groceries at 750 is this just for you two um so we have a two-year-old and a nine-month-old Yes. Interesting plot twist. We didn't know that. Okay, great. So $7.50 for groceries, I'm not mad at. I will say with the restaurants, I try to cut that down. You know,

you've got kids. It's inevitable you're going to pop through a drive-thru or order a pizza some night. So maybe pop it down to $40. And make that like your emergency scenario. Crap hits the fan, but try to limit it to nothing. Try to go, can we avoid eating out while we're trying to get out of this debt? George, can you change it to 40? Let's see if it adjusts. Oh, this is fun. Yeah, let me change it to 40. Because as you see at the top of the budget, they've got $103.80 left over if they follow

this budget to a T. That's the margin right now. So the goal here, since you're trying to pay off debt, the goal is to get the margin higher. And look, already, I can't see it from here, George. We're at $243 now in margin because we brought the restaurant category down. So if we keep going, we have phone at $221.

Let's talk about that. Are you guys trying to pay off a phone within that? I think mine is on there. And then our streaming services are bundled in there as well. Oh, okay. So if there's a phone payment in there,

figure out what it is and pay it off this month. Like knock that out so that that bill becomes lower. And you can then switch carriers. I'm guessing you're with like a name brand carrier right now. Okay. I would switch to affordable carrier. Like I've got a Telo partner with me on my YouTube channel. It's $25 a month, Janai, for all of the Unlimited

Everything plan. So my wife is on that plan and she loves it for $25 a month. So that could shave a lot off of this category. And then of course, I'm going to personal. I love that you guys are thinking about fund money for the two of you, but in Baby Step 2, I don't think this is the phase for that. So if I were you, I'd knock that down to $50 between the two of you. During this phase, as much as it pains me to say, you guys are using the same down to 50 bucks between the two of you. During this phase, as much as it pains me to say, you guys are using the same shampoo, you're using the same body wash. That's what my husband and I did. And that's going to save you what- Look at this now. We have now a 493 bucks in margin.

That's excellent. So see what we're doing here, Janai? We're trying to go, where can we find more margin? And it becomes a fun game. So I think your your phone you could do better there that'll come down later let's keep going down to lifestyle we got union dues i'm assuming we have to pay the union dues yes i see a big one though that i'm i got questions on and that's xbox live who's playing xbox uh that one's non-negotiable uh-ohoh. Who's that for? That's for Skylar. Okay. That is his decompress. Can I ask a real question as a man with a baby? How does any father have time to play video games with a nine-month-old and a two-year-old?

Well, they go to bed early enough, and he is a night owl. Okay. He doesn't sleep, really, but that's his decompress. Okay. It's an $18 difference. It's in the grand scheme of things. Singularly, it doesn't make a huge deal, but if you have a lot of these little things, they do add up.

So we'll say, we'll call this your, your, your one freebie. Cause again, they do add up. So which means we're cutting Spotify. That's right. Spotify. Can we cut it? Can we go Spotify free Pandora? Can we sing in the shower?

I would say probably yes, but we also pay for, it's the family plans. We have siblings on it. Who cares? Tell them you're getting out of debt. Say hey guys. Wait, wait. If it's the family plan, then y'all they should be paying their fair share. Uh-huh. Just talk to your

family. Say hey guys, we're going down to bare bones. We're trying to pay off this debt for this season. We got to get out of this. We're listening to our music on YouTube. So let's move past that one right quick. Okay. George, before we go to the debt, one thing I did notice here, Janai,

is there's nothing for a cushion or miscellaneous. The catch-all category. And I kind of think that just to save your sanity. I'm going to add it just let's just add that on there because there's always something that pops up right it's like uh you know put another 50 bucks in there so we'll add that i like that so here's right now margin for the debt we're at 443 dollars um and of course now here's the debt We looked at this, and you've got... Three cards, a timeshare, a car loan, a student loan. I mean, this is eating up $1,108 per month.

And that's with a $10 student loan payment, which tells me you're on a program where you're paying nothing. Yep. Which is probably good for now. This is where our income, I kind of referenced earlier, is kind of funky because he works anywhere between 50 and 60 hours a week but his um the contractor that he works for it pays an incentive bonus of a hundred dollars a day okay for showing up for work that's amazing I want that that's excellent

yeah so before we run out of time I do want to tell you this before we run out of time. Right now, your margin is at 443. If he keeps getting these incentives and these bonuses, I want you to see if you can get that up to around a thousand dollars a month between the two of you combined, because I ran out, I ran out the numbers on you guys's debt snowball.

If you do it with the margin you have now, it's going to take you 35 months. But if you can find $1,000 in bonuses, side hustles, and anything extra to add to that, it cuts it by 13 months. So down to what? Less than two years? Yeah, 22 months. You can be completely debt-free. And so, Janai, thank you for letting us share this budget. I'm sorry we got, you know, busted on the time here. But the key here is side hustle. Get it up $1,000 and you're going to be on the debt-free screen in 22 months. This is The Ramsey Show. Hey, you're still here?

What are you doing? You do know that the rest of today's show is playing right now over on the Ramsey Network app, right? All you got to do to finish the episode is search Ramsey Network in the App Store, Google Play Store, or just click the link in the show notes to download the app for free. Yep, you heard me right, for free. Then right there on the home screen, you can watch the rest of today's show. Bada bing, bada boom. All right, I'm getting out of here. Enjoy. We'll see you on the app.