The Ramsey Show - Stop Starting Over and Break the Cycle for Good

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Starting point is 00:00:34 So we're here to help you transform your life from the Ramsey Network in the Fairwinds Credit Union. studio. This is The Ramsey Show. And I am Rachel Cruz hosting this hour with Good Friend and my other co-host is Smart Running Happy Hour, George Camel. Excited to be with you. Always fun, George. New hairdo, by the way. If you're watching on YouTube, I want to call it out. The extensions are gone if you've been following the journey of Rachel's hair. We chop the hair. I change my hair every six months. So yeah, this is the new and approved. We'll see. I look the same as I did four years ago. George hasn't changed a man of consistency.

Starting point is 00:01:08 Always predictable George Camel. Yeah, give us a call at AAA 825-5-2-2-25, because our advice is as predictable as George Camel's looks. There we go. There you go. Full circle. All right, let's go to Hannah in New York City. Hi, Hannah. Welcome to the show.

Starting point is 00:01:24 Hi, Rachel and George, thanks for having me. Absolutely. How can we help? Okay, so my question is, how can I keep my husband dedicated to paying off this debt with me, where we are back at Baby Step 1 for the fourth time now, and he is. is overwhelmed and wants to separate finances. Oh, wow. Man.

Starting point is 00:01:45 What's caused you guys to be on it the fourth time? What's happened? Yeah, we've had a lot of bad luck. I'm just going to wrap it by her a timeline for you here. We got engaged in 2019. That's when we started this journey, started paying off. We had no major, major debt. It was some credit card debt, student loans, nothing major.

Starting point is 00:02:07 At that same time, we found out that his mom stole his identity. and it was mainly student loans in his name that he did not know existed, that he was getting the refund checks back to her. So that kind of muffled things up, but we were working towards it. 2020 came COVID. We got married that year, but we canceled our wedding. We kept working at it. 2021, I got pregnant with our daughter, and we lost our jobs because of COVID.

Starting point is 00:02:39 it was really hard here. We had to move because our landlord died, and then from there, we kind of wiped out our savings for the first time, and we had to start over at Baby Step 1. Okay. So it's been started over four times over the last eight years. So it feels like every other year you're going backwards.

Starting point is 00:03:04 Okay. And is that the main reason of him wanting to separate finances? Because maybe decisions you guys, made in the midst of some of this he doesn't agree with? So it's more so that he has a really bad ADHD. He wants to be able to focus on, he works in sales and he wants to be able to focus on his work and not have to worry about like the bank account being too low or anything like that because it's basically we were hit with something every year and it's just kind of recess

Starting point is 00:03:33 and I'm throwing all the extra money at paying off those debt. and now he's trying to focus fully, and he's saying that if we share a bank account, that it's too confusing for him because he gets overwhelmed because he doesn't know what's going and what's coming out. And we've tried every app, every spreadsheet, everything, and it just seems like nothing's working. And he thinks the solution is just to work on two different pages is his solution.

Starting point is 00:04:02 Yeah. He thinks that's going to make this go better for everybody, for you to do this on your eye. That he can't concentrate on one account. Yeah, the fact that he says is ADHD so he wants to focus. I'm like, well, those things are just already not working together. Okay, so Hannah, how much debt do you guys have? So currently we have, we fell back into credit card debt about two years ago.

Starting point is 00:04:26 We have $15,000 just about on that. And then we just have my student loan debt left, which is $23,000. Okay, and how much do you guys make a year? Our take home is $7,500. And then on top of that, he will get commission and bonuses. Where do those go? Right now, he just started a new job because he was laid off two months ago and then went right into a new job. So he worked it out that he will get a bonus at six months and a bonus at 12 months.

Starting point is 00:05:02 That's going to be $10,000. And then he's also looking at getting a settlement from his last job because he was laid off while he was on paid family leave because our son was born. And he's negotiating that, but that's looking to be about $10,000, too. I want to throw that at the debt. And he wants to have that as kind of like an extra nest egg to give him more security. It's going to disappear just like it has every single other time. So here's the napkin math, Hannah, just to give you some clarity. If you knock this out in 12 months, that's a little over $3,000 a month,

Starting point is 00:05:36 which means you guys live off $4,500 plus the extra, the bonuses, all of that. Can you guys do that? It's a little tight because we live in New York. Our rent is a little bit over $3,000. That includes all our utilities and everything in it. Are you working, Hannah, at all? Yeah, I work from home and stay home with our kids. Okay, how much do you bring in a month?

Starting point is 00:06:00 home about a thousand a paycheck, but that's after my insurance and everything. How much are you, how many paychecks? Do you get two paychecks a month? Are you paid weekly? Two paychecks a month. And that's on top of the 7500 or is that combined? No, that's included in it. So his base is 70,000 and then I get the 2,000 and then he'll get commission on bonuses. Got it. Okay. So 7500 plus is what we're working with. Have you guys tried every dollar, our budgeting app yet? Oh, we did a while ago. Okay. I think we need to restart this process with a whole different mindset. That we are doing this together. We are going to cut up the credit cards. We're going to freeze our credit because so far you've given yourself every opportunity to take a shortcut to go backwards.

Starting point is 00:06:46 And so if you make the only path forwards, you will move forward. Yeah. I mean, I mean... That's kind of where I'm at where I just kind of want to throw everything at this and get it over with because I feel like we're paying about a thousand, well, I know. know that we're paying over $1,000 a month at credit cards every single month, and I just want to get it over with. Okay. So the fact that you guys, because I mean, if you're saying what you're saying is true, and if you're as, you know, hard bent on like, hey, we're not, we're not going into debt

Starting point is 00:07:19 anymore. Even if an emergency comes up, the thing about taking debt off the tables, it forces you to be creative in your options. And so it forces you then to say, what else has to be true for us to, you. move forward in this emergency. So if that's where you're at and that's not where he is and what he's wanting to do with money is so different to the point of wanting separate finances, then at that point you guys just are not aligned, Hannah. I mean, you and your husbands are at this point. This now becomes a marriage problem, not as much a money problem. It's not the budget's

Starting point is 00:07:51 fault. I agree. I agree. Have you guys ever gone? Have you, have you, have you, have you seen anybody? Have you You guys brought in a third party at all? This is difficult, too. We were seeing kind of like an ADHD therapist for his ADHD because a lot of it stems from that. Does he have medication at all? Yeah, he's on medication for it. It's a very severe case. Okay.

Starting point is 00:08:20 I don't know what else to do about it. Like, it's just very hard for him. What I would do, what you can control is the safeguards you can put in place so that you can't make any more mistakes, that you can't go backwards. And that's why I'm telling you, if you cut up the cards, you don't own a credit card, you can't go into credit card debt. If you freeze your credit, you can't go into more debt. So if we really stop that, it'll help. And it sounds like you guys need new patterns in your marriage because his ADD, ADHD,

Starting point is 00:08:45 it's affecting you is what it's sounding like more than just the money. It sounds like it's kind of coming. So you guys may need some more guardrails and processes of which you make decisions within your marriage and new communication styles almost in general. and then that will actually bleed over to the money thing. So I'm glad you guys are seeing someone at some level, but still engage your marriage, because when that heals, the money stuff will follow.

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Starting point is 00:10:18 $25 forever requires customers to remain active on Boost Mobile Unlimited Plan. Up next we have Savannah in Sacramento, California. Hi, Savannah. Welcome to the show. Hi there. Hello, hello. How can we help? So I'm a mom of two little girls, and I work two full-time jobs.

Starting point is 00:10:53 And I go to school full time, and I'm in about $37,000 of debt, and that includes my car and everything. And I'm stuck in like this loop of like cash advances and everything. And so when I get paid, I feel like I have nothing. And it goes by so quickly. And I just don't know how to get out of this. Like I want to get my debt, you know, back to zero and not have to worry about any of this anymore. Yeah, absolutely. Are you single, Savannah?

Starting point is 00:11:21 Yes. Okay. And you have your two girls. How old are they? I have a seven-year-old and a two-year-old. Oh, wow. Okay. And you said you're working two jobs. Is there one that's full-time and then one is part-time? Are they both part-time? No, they're both full-time. I work both of them at the same exact time. One's remote and one's in office, and I just do both at the same time. Whoa, and you're in school full-time? Yes, and I'm in school full-time. How many hours in a day do you have? Do you have more than us? How are you doing this?

Starting point is 00:11:54 No, I know, it's crazy. It really is crazy. I just, one of my jobs is a little more laid back, and so I'm able to do my other, you know, because I do customer support on one side, and I do property management on the other, and I've just been really blessed with my property management one. So what's your income? I've been able to make it work. I bring home about $6,500 a month to maybe $7,000. It just depends because sometimes I get, you know, like lease bonuses for the property management one. So give or take, it's about $6,500, $7,000 a month. And what's causing you to go in the hole every month and turn to these cash advance apps?

Starting point is 00:12:32 I think it was just a cycle because I just got this second job maybe two months ago. So I think it was a cycle with my other job that whenever I'd get paid, like, it just wasn't enough. Like I have my, you know, my rent, my bills, daycare. Like I drive a lot, so gas is expensive. And I just got stuck in these, and then also my credit cards, you know, I have these minimum payments that I have to, you know, keep up with. So I just feel like I don't have enough ever. And so now I just, I need to get out of this, like, cash advance, whatever, you know. Have you felt different the last two months, considering you just added a full part-time job?

Starting point is 00:13:12 I'm sorry, a full-time job. Have you felt any relief in it at all or where that money's going? You know, it's funny you say that because everyone asked me that. And no, I don't even feel that there, that I've even made any more money. How much extra are you making per month now with this job versus in January? I would say it's about an extra $2,500 a month. Okay. Are you on a super strict budget?

Starting point is 00:13:41 No. Okay. that might be our problem, Savannah, honestly, because... I think so. Because what you described, you should feel a immense amount of relief with $2,500 extra. And the fact that it's just slipping... It disappeared. Yep, it's going somewhere.

Starting point is 00:14:01 And I'm not saying you're being irresponsible or anything like that. But I think there is something about having a plan for this money, because if there is no plan, then it is going to just disappear. Someone else will have a plan for it, like the cash advance apps or DoorDash or whoever. They want your money. And so you need to want it more than they do. Yep. So what we teach Savannah as a zero-based budget.

Starting point is 00:14:23 So every single month before the month begins, you're going to look at the month ahead and say, you know, in this case, it will be June. Which we're toward the end of May. This is actually going to be a great experiment. And just as a little side note, we will get you every dollar premium for a year. Well, that's our gift to you because with every dollar premium, you're able to be able to to attach your bank account to it and you're going to cut up the credit cards. There's no more swiping. They're going to be gone. You're going to just use your bank debit card and you're going to create a zero-based budget within every dollar. And every dollar, that's the way the app is designed.

Starting point is 00:14:57 Some people do budgets, you know, like a 50, 30, like people have like different philosophies around budgeting. But we have found the zero-based budget is one of the most effective because what you do is you take your income and then under that you're going to list on everything you spend money on it. And again, in every dollar, there's going to be some pre-categories that everyone has, right? Rent or your mortgage or lights, electricity cable, whatever. So you can add, subtract some of these categories. But the goal is for that $7,000 every month has a plan. And you know exactly where it's going, including debt, including extra on the debt,

Starting point is 00:15:34 because you're looking at your food category and you're like, I'm only spending, I'm making this up, 500 bucks a month on food. Like, that's it. me and the two girls, like, that's all we're spending. And we're going to have to get creative. And it's going to be beans and rice, rice and beans, peanut butter and jelly, ramen noodles. Like, we want nutrition, but that may come a year later when we have our money under control. You know what I'm saying? Like, genuinely, it is like stripping down to everything. And you're going to be cutting your lifestyle. Because when you do the budget, you're going to, it's going to be very revealing

Starting point is 00:16:02 of this is, this is where all my money's going. And there's going to be category, Savannah. You're going to get pissed. And you're going to be like, get this out. No, we're cutting that subscription. we're not doing this because it starts to actually visually show you, like, here's some freed up money, and here it is that's going to be tackling the debt. That's where that margin's going to go. And so that would be my number one for sure. And then George obviously starting to pay off some of these still with the debt snowball, even though the payday options are in there, which are terrible and terrible interest rates and all of that. But talk to us about your debt, Savannah. How much, if you break it all down, what's all the capital? categories of the debt? So most, I mean, most of its credit cards. I go $7,000 on my car,

Starting point is 00:16:46 but that one I make sure I pay that every single month or, you know, but what made me honestly reach out is my, one of my credit cards, I got a letter from an attorney that they were going to try to, you know, sue me for the money. And I'm like, you know, what do I do? So all these credit cards, they're all maxed out to about $5,000. And then I have one that I share with actually my dad and that one's maxed out to 10,000 and it's not his fault. It's my fault. So I just, it's a lot. You know, I need to get these credit cards under control. For sure. Yeah. And so cutting them up and them not even being an option is going to be your first bet. But then you can also, if they have gone into collections, there are some great options with actually calling them and negotiating your debt.

Starting point is 00:17:34 And there's actually some resources, George. We're going to hook you up, Savannah. Hang on the line. We'll hook you up with guardian litigation. They're a partner advisor, they're a nationwide law firm, and they help people exactly in your shoes to make sure that you're not getting bullied and harassed. And they can actually help you settle these debts for what you can pay. And so we'll hook you up with that. You can go to guardian lit.com slash Ramsey, but we'll make sure that when you're off the line, our team connects you to those good people. And that's part of the solution. And the rest is how do we debt snowball these things, you know, delete the cash advance apps and go, like Rachel said, we're going to get creative. debt is no longer an option because we're not going to be able to get out of debt if we go into it.

Starting point is 00:18:14 And so that's going to be your hard line with the budget. That's going to be your hard line with spending less and making more. Clearly, you're doing a good job making more, but you're finding out there's a ceiling to that. We have to learn how to spend less too in order to create that margin. Right. Yeah. Yeah. And don't let the credit card companies scare you, Savannah. I mean, if anything, if they are in collection, honestly, it's more an advantage for you because what happens is they end up selling the debt to another company, and then they call you the collections company, and then they end up selling it next week to another company.

Starting point is 00:18:48 I mean, it's just a disaster, that whole industry. And they're going to try to freak you out, that they're going to sue you, they're going to garnish your wage. They'll just talk it up. And honestly, if it isn't collections, that gives you the power to negotiate. Now, if you have the money, people listening out there, that's not in Savannah's case. If you have the money to pay your credit cards off, you pay them off.

Starting point is 00:19:05 But when you're in a case like you, Savannah, where you're like, I don't have the money to pay, then when they go into collections, then again, it's a little bit to your advantage because you maybe actually be able to negotiate. And depending on how deep it is, I mean, sometimes pennies on the dollar. So you, so, but yeah, but that company, that law firm will be able to help you. Yeah, they're amazing. And then I just want to encourage you, Savannah, you're a single mom and any single parent out there just in general, rather, you know, you have your finances in order or you're stressed

Starting point is 00:19:34 about them. that in itself is exhausting. Like, that is so hard, so hard. And you are doing an incredible job, setting up a life for your girls. I mean, you're going to be doing the grunt work for the next probably two years to get yourself out of this. But Savannah, when we talk about changing your family tree on this show, that's what it's about. That's your why. It's fighting for these girls so that you guys have peace and control over your money.

Starting point is 00:19:57 And you're a hero to say, I'm going to strap on that cape and I'm going to take this journey. So we're here for you. Stay on the line, though. we're going to hook you up with everything we've talked about. And call us back, Savannah, if you need anything. When you've worked hard to buy a car the right way, you paid cash with no payments hanging over your head. The last thing you want is to worry about it every time you drive it. That's why we trust Christian Brothers Automotive as the official auto repair partner of the Ramsey Show.

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Starting point is 00:22:45 How can we help? I'm doing great. So my name is Jordan. I'm from San Diego, California. I'm 24 years old, and my current income is about $120,000 a year. The reason I'm calling you guys today is, it feels like my entire life.

Starting point is 00:23:02 People have always sold me. go to college, get a good job, make a lot of money, and everything else will follow. I think I've done a pretty good job at getting to that point now, but it seems like the more time goes on and the more money I make, the life I always imagine myself having keeps going further and further and further at a reach. The reason I say that is, as I said, I live in Southern California in San Diego. I look for houses in San Diego, too far out of my reach. I make a broader circle and I go further. And no matter how far ago, it still feels like houses, a mortgage is going to cost me around $3,500 to $4,000 a month, which with my income doesn't sound so bad. But I think I've

Starting point is 00:23:44 finished most of the steps I want to in life. And the next thing I want to do is start a family and have kids and focus on that. And it just feels so out of reach for me to keep contributing to my savings accounts, to pay off a mortgage, to be able to support my wife while she stays home. to take care of kids and make sure that they have some sort of support going to school. And I don't really know if I'm doing something wrong or if there's something I could do differently. Here's what you've done wrong, Jordan. You've assumed that you have five years left to live and that you must accomplish all of this in the next five years or else. So all you need is patience.

Starting point is 00:24:21 You're doing so well at 24, far better than I was. And yes, you have a high-cost living area. But there's no rulebook that says if you don't own a house in San Diego by 25, you screwed it up, man. And so release yourself from the guilt and from the lies that you were told, that if you just do all of these things, your life's going to be great. Those people meant well for you, but they don't live your life. And so I would just be very patient, go, you're crushing it. Let's learn to live on lesson we make, put money and savings, and then do this for the next six years, and then call us and see where you're at.

Starting point is 00:24:55 Okay, I appreciate that. Something I did want to ask, I'm currently putting money into my work. TSP, I work for the government, so we have a savings plan. I put money into my personal investment account that I'm saving. And I feel like, obviously, I'm extremely grateful for the job that I have, and I know a lot of people are in a much worse situation than me. But I feel there's a lot of things I don't do, because I'm just so addicted to saving my money.

Starting point is 00:25:21 I'm so afraid of bad debt. Do you have any debt? I have a $7,000 remaining on my car note. Okay. So other than that, are you working on paying that off? Yeah, I just paid off. I think it's too 90 a month, and it's easier for me to just pay it off. How much do you have in savings?

Starting point is 00:25:41 I currently have in my individual investment account, I have around $20,000 in savings. Liquid cash in my savings account, I have $5,000. And then I have personal Roth IRA with 25. And then like I said, my TSP has another 25 in it. Great. Well, you're doing great on the investment side. I would just have some focus with your financial goals. And right now, my singular focus would be getting out of debt. The next focus is to have a liquid emergency fund of three to six months of expenses. And as a young single guy, this is also the best time because you have no other responsibilities, no one else to answer to. It's just you and your own goals. So you can actually make a lot of traction right now until you meet that wonderful person, start a family. Maybe they'll be working too. Your income's going to grow over that time. And so all you're seeing right now, now is this little tiny snapshot of your life right now. And then you see these very big goals far away.

Starting point is 00:26:33 And I think you're closer than you realize. Yeah. And I don't think you're comparing your life to reality either, Jordan. So you either have expectations that you should be, you know, where you should be at 34 and you're 24. Yeah. Or you're seeing people on social media or your friends are talking, whatever it is and what's being painted in front of you is probably not the full picture either. And so if you are in your early 20s making six figures, no debt. So I'm going to count that for you because I want you to pay off your car tonight with some of the savings. Okay, just be done with the car. And then you have cash, you know, saved.

Starting point is 00:27:09 You have investments. Like everything that you're doing, you are doing it well. And the hard thing about building wealth the right way is that it takes time and patience. It's not going to be as flashy as the people you see on TikTok that are like, I bought 18 VR. RBOs or VERBO, whatever they call, or, you know, Airbnbs and like, you know what I mean? Like you're going to see and I make one million a month. They're like, what all the crazy stuff you see, majority of the time, number one is not even true or number two, they've built their entire financial life on a house of cards.

Starting point is 00:27:39 So slow and steady wins the race. And it's not going to be flashy. It's not going to be exciting. But it is going to be solid. And it's going to be all yours because you're not going to be borrowing money to do any, to do any wealth building. It's going to be you actually making decisions. about your life. And so that's what I would encourage you, that I think what you're wanting is not

Starting point is 00:27:59 bad or wrong, but I think feeling like a failure because you don't have it right now to George's point at 24, we just want to like, be like, Jordan, you're good. You're doing great. You're doing great. I think one of the reasons I'm so overwhelmed now is because I have, I have, happy to say, I've already met the love of my life. We're talking about marriage. Oh, great. Talking about kids. Yes. I don't have a ring. I don't have a wedding. I don't have a honeymoon, which is obviously I'm not playing on spending an extravagant amount on it, right? I can't imagine bringing kids into the world until I feel ready, which the feeling of being ready is different. You'll never feel ready.

Starting point is 00:28:35 Everyone tells you that. Not emotionally, not financially. The best thing you can do is be debt-free with an emergency fund and be aligned with your spouse on your goals, financially, spiritually, all of that. That's the best thing you can do to be ready. Other than that, don't wait until you have a certain amount in your investment account to have a kid. No. And go ahead and get married, Jordan. If you guys know, do it. What's holding you back right now? Is it finances? I'm so afraid of not having money.

Starting point is 00:29:05 How did you grow up, Jordan? I grew up. So my dad is the hardest working guy I know. He doesn't have a retirement. He doesn't have anything. That's your fear. That's another thing. That's your fear. And I'm just, yeah, I'm so worried. Like, I love my dad, but I want the opposite of that. I want the idea where I know. the bills are going to get paid. That's why I love my job.

Starting point is 00:29:25 Everyone talks about owning a business. I love having a union. I love having a stable paycheck. I love having investments made into my account automatically. There's no other way to rather do it. Yep. There's just the idea of me, like you're telling me to pay off to $7,000, right, which I know is a great idea.

Starting point is 00:29:42 The idea of me losing $7,000 in cash and it goes into my car, I know it's a good idea, but it feels wrong because in my head, if I don't save, I feel like I'm fed. Right, because at that point from where your psychology is, is that saving is the only thing you should do with money. And out of good reason, because you're looking at your parents, you're like, holy crap, they have nothing. They're not going to, they work so hard, but now they have nothing to show for it at retirement. But here's the deal, Jordan. There's two other parts of money that you have to engage in to have a holistic, healthy financial picture. Giving and spending.

Starting point is 00:30:21 Okay? So you may go through seasons where you're going to be saving more. Maybe you and your soon to be fiancé, soon to be wife, you're saving up for that down payment on a home. And you guys are really like, hey, we're going to pull back on lifestyle to really get that down payment. That's great. But over the course of your life, Jordan, if you have this mentality, the rest of your life, that's where money can become an idol.

Starting point is 00:30:42 You will hold on to it so tightly and have this sense of security that this is going to be your answer. And then you're going to look up and realize, oh, my gosh, I have wasted my whole life. because fear has driven my financial decisions, not a healthy balance of all of this. So I think the budget is your answer. Budget for the fun stuff, budget for some giving, and budget for the saving.

Starting point is 00:31:03 Yes. And realize I'm young, I got a lot of time on my hands. You're doing so good. Hey, and Jordan, go on Ramsey Solutions.com and pull up the investment calculator and put in what you have right now with investments at 24. And just do the math. If you never put another dime in,

Starting point is 00:31:18 what you'll have at retirement? 40 years from now. Compound growth. You're going to be doing great. Even where you are now, you're doing great, Jordan. So, chill, relax, enjoy the ride. You know, one of the first things I discovered working in the financial world is how absolutely devastating it is when the breadwinner of a family dies. And there's too little life insurance or none at all. Grieving families are suddenly left behind, scrambling to pay bills and trying to make ends meet. I also discovered that there are a lot of rip-offs in the life insurance world.

Starting point is 00:32:03 like that whole life crap posing as an investment opportunity. What you need is level term life insurance, usually 10 to 12 times your income, which is the smartest, most affordable way to protect your family. The key is finding an independent broker who represents a ton of companies and works for you, not for the insurance company. This is exactly what my friend Jeff Zander

Starting point is 00:32:26 and his team at Zander Insurance are all about. They shopped the term life companies to find you the best options and they've been around for over 95 years. So you know they'll be there when you need them. Zander is the real deal. And that's why they've handled all my personal insurance for over 25 years. I trust them and you can too.

Starting point is 00:32:48 Visit zander.com. For instant online quotes or for a more personal touch, give them a call at 800-356-42-82. Well, George, when it comes to investing, where we were talking about just the previous segment of how powerful time is. And even if you just do the boring stuff, time is on your side.

Starting point is 00:33:28 So the earlier you can start the better off you're going to be. Yeah. And the first milestones are really hard. And then it's like a hockey stick with compound growth. So getting to that first 100,000 invested is such a marathon. And then from a million to two million, you sort of blink and you're there if you do it the right way. So I want to take Jordan's numbers,

Starting point is 00:33:47 who was on the call with us, he made $120,000 a year, and he felt like it just wasn't enough. He was behind. He can't accomplish his goals. So he was like hoarding money to invest and couldn't enjoy any of it. And I just wanted to show the audience at home, even if he never invested another dime, where his investments would be. Okay. To help with the scarcity mindset that he was experiencing. So he's currently 24.

Starting point is 00:34:10 We're going to pull up the screen here if you're watching on YouTube or Spotify or the Ramsey Network app. So 24 years old, let's go to 64. So it's a 40-year career. And he currently has, he said 25K in a Roth, 25K in the TSP. So we'll call that 50K, and he's never going to add another dime. So how much will you contribute monthly? Zero. And I'm using the Ramsey Investment calculator.

Starting point is 00:34:32 We'll put a link in the show notes to plug your own numbers in. Annual return, I'm going to go with 10%. Now, in the last, since 1950, the S&P 500, which is the top 500 companies in America, have returned about 11.8%. So 10% is very realistic. Let's do both. Let's do both. We'll go conservative 10. And then Rachel will be the optimist, glass half full gal.

Starting point is 00:34:51 Always more. All right. I'm going to hit calculate $2.68 million. Oh, Jordan. At 64. If he never adds a dime, which knowing him. Basically 2.7, see me rounding up again. Now, at 12%, you were looking at 5.9 million.

Starting point is 00:35:05 Five. That's a two. That's pretty wild. Six million dollars, Jordan. That 2% over 40 years really adds to it. I hope he hears this. But let's go back and let's say. If you never do another thing.

Starting point is 00:35:14 Isn't that wild? Never do another thing. And look, the contributions, he didn't contribute anything but the 50. And it turned into that just by leaving it alone. So if you could imagine continuing to invest 15% of your income. 15% of his 120 grand, that's $1,500 a month from 24 to 64. Let's see what happens if he continues this. $12 million at 10% rate of return, Jordan.

Starting point is 00:35:36 There you go, Jordan. So if, and that's if you never get a raise and your spouse never works. That's right. Yeah, yeah, that's a good point. So let us free you. Enjoy some of the money because you're going to get to 12. million and go, should have went on a vacation probably, that probably would have been a good idea. I got a lot of money now and don't have enough time to spend it.

Starting point is 00:35:54 Some furniture that we actually like enjoy and want to pick out. You know what I mean? Like there's, it's okay. Well, that's what happens. We, you know, we talk about this book, Die Was Zero, which we don't agree with everything in the book. But the concept is do not wait until you're 70 or 80 or at the point where you pass away to then hand your kids a million bucks when they don't need it in their 60s. That's right. That's right. Use it. Enjoy it while you're alive. And even giving them Some, too, right? But while you're alive, actually be engaged to your money.

Starting point is 00:36:20 Give people like Jordan a leg up to be able to buy a house in San Diego at 24 if you're that boomer. That's right. There you go. Some encouragement that you don't have to retire broke and the younger you are, the more every dollar counts. Yes. Because it has more time for compound growth. We hear that all the time. People are like, why did I not start this earlier?

Starting point is 00:36:36 Why did I not get out of debt? You know what I mean? Start the whole babysat process earlier. Why didn't I start when I was four years old? I would have an extra 20 years. Not George. But that's the idea. The best time to play.

Starting point is 00:36:45 The next best time is today. Start where you are. We all wish we could have started earlier. That's right. All right, let's go to Oklahoma City, and we have Lindsay on the line. Hi, Lindsay, welcome to the show. Hi. How are you guys?

Starting point is 00:37:00 Hi, we're doing great. How can we help today? I had a question. I have a credit collection services bill in the amount of $1,000 and $1,035. and I'm about $70,000 in debt, or $77,000 in debt. And I was just curious, I tried calling them earlier to see if they could make a settlement for $400 and they denied it. And I was just taking Dave's advice to do that. And so I was just curious what you guys would do.

Starting point is 00:37:41 How old is the debt? as of April 17th. Oh, so it's like a month. Yeah. Okay, yeah. A fresh debt like that, they're not going to be as willing to settle as one that has been sitting for three or four years. Because they kind of see the writing on the wall. They'll be lucky to get anything out of this debt.

Starting point is 00:38:01 And so not that I would wait on purpose to pay this off, but the reason they're not going to take, you know, $400 on $1,000 debt is because it's only a month old. Yeah. Yeah, if it was a year or two, that's when you can really. really negotiate. What do you have, Lindsay? Do you have extra margin every month that you're trying to pay off debt? Yeah, for sure. I mean, I've got a lot.

Starting point is 00:38:26 I'm just trying to figure out where you put your money. Yes. Okay, so let us know. So you have that $1,000 bill. And then what's the other $77,000? What kind of debt? Well, $70,000 of it is my car. $70,000 is just in your car?

Starting point is 00:38:42 That's one car? Yeah. How much do you make a year? Well, 225 base. Okay. And then plus commission. Okay. So last year I made 270.

Starting point is 00:38:55 Okay. Okay. Well, that's not completely out of proportion just for an income standpoint. I was nervous. You're going to say you make 75. We get that call sometimes. But all of your problems are solved if you just sold the car, right? Yeah.

Starting point is 00:39:07 Yeah. How do you have a credit in collections making 270 a year? Well, because I'm not very good at, I'm very good at my job and I'm not very good at taking care of everything else. Okay, from like a detail standpoint and getting everything paid. Yeah, I have a problem with details. Okay, so you do have $1,000 to pay this debt, though. I do. Okay, okay.

Starting point is 00:39:32 Well, so then I wouldn't negotiate. It's not worth the brain calories to try to negotiate and fight at this point. Be done. And then what's the other $7,000? credit card debt and like, oh, some credit card debt and then a little bit of like, oh, I put something on a furniture plan. But I'm just trying to figure out how to spend my money. And I was just curious what you guys thought because Dave always talked about, you know, you guys can call a credit corrections company and, you know, offer 30 percent.

Starting point is 00:40:05 And I offered more than that and they didn't settle. But they also, yeah. And if they have any insight into it. your income as well, they're not going to be settling with you either. I didn't know if they did or not. Okay, yeah. So, well, so I would say, Lindsay, I would, I would start to put some parameters in place, some identity statements, if you will, about who you are with money.

Starting point is 00:40:34 Okay, so you, if I were to, like, wave a wand, I would want you to say, I'm a person that doesn't borrow money. I don't need to borrow money because I'm a really hard. worker. I'm very smart and I can make a lot of money and I am. That's that's part of who I am. That's part of you, Lindsay. Also, details are not my strength, but I am a person who works at my weaknesses, especially when my weaknesses are costing me all this money. Like the amount of interest you're paying Lindsay on credit cards when you make $270,000, it should be like, that is wild. What do you do for work? I'm curious. Sorry, you broke up.

Starting point is 00:41:11 I'm a lighting sales for commercial. A lighting sales. Rep? Yeah. I imagine that involves some details, right? You got to know the customers, know the products. Too many.

Starting point is 00:41:22 We represent like 208 different manufacturers right now. Sounds like you know some details. And so I think what's happened is we've been lackadaisical with our money because we can sort of out-earn our stupidity. But the problem here is not

Starting point is 00:41:34 settling a thousand dollar debt. The problem here is you're going to make $1,000 at work today. If you make $220,000 a year, that's about every workday you have in a year. So let's take advantage. of this amazing income and go, I'm cutting up the cards. I'm only going to use money I have in the bank.

Starting point is 00:41:49 I'm going to sell this car just because I know it was a mistake. I'm going to purchase something in cash, and I'm going to be a kind of person who can save up for that. And guess what? Your next few paychecks, you could buy a used car that is wonderful that will get you from A to B without any debt attached to it. So you would suggest buying something else. I mean, obviously I know it was kind of a dumb decision, right? What kind of car is this? America wants to know. It's a Defender 130. Oh, so you knew the details there. You didn't just walk up and say, I'll take any old car you got. So here's what she wants to know. The hardest part is going to be swallowing your pride and selling that car and buying something that is not a Defender 130 brand new. Yeah. Or if you can pay this off in a

Starting point is 00:42:35 year, Lindsay, I would be okay with you keeping it, but you actually have to do a plan and say I'm putting all of this extra money towards paying off debt. So you're going to live on nothing. That's like $6,000 a month just going to the car. Everything is going to be going to this car. If you're unwilling to do that, it needs to be sold tomorrow. Hey, George Camel here, let me pull back the curtain on something you may not know. If you're in debt and collectors are threatening lawsuits, the worst thing you can do is ignore it. That's exactly what they're counting on, because when you do nothing, they can take you to court. And if you don't respond, they can win by default and even get access to your bank account. And that's why I tell people about Guardian litigation group.

Starting point is 00:43:24 Guardian litigation is not another debt relief company with some bait and switch tactic and empty promises. They're an actual law firm with real attorneys. And from day one, you get an attorney who represents you. They step in when collectors are trying to push you around and they handle it. So instead of panicking, you've got a plan for peace of mind. So if you're backed into a corner and facing imminent legal action, don't stick your head in the sand.

Starting point is 00:43:47 Ignoring it will make it worse. And Guardian litigation is who you contact when it gets what. worse. So go to guardianlit.com slash Ramsey. That's guardian l-it.com slash Ramsey. Attorney advertising, results may vary and no specific outcome is guaranteed. Welcome back to The Ramsey Show in the Fairwinds Credit Union Studio. I am Rachel Cruz hosting this hour with good friend and co-hosts the Smart Money Happy Hour, George Camel. We are answering your question. So give us a call at AAA 825-5-2-2-25. And we do this show every day from one to four central time so you can come and visit us. We are just south of Nashville and

Starting point is 00:44:30 Franklin. We got a full house today here on Memorial Day weekend. And it's yeah, it's always fun, and it's always fun we get to see people and interact and say hi, sometimes lonely here behind the class. This glass box of emotion we find ourselves in. But when y'all are out there, we appreciate it. And George, we actually went on the road and did the show live in front of a bigger audience than once sitting out there. A couple hundred people was awesome. And it was so fun. We did these like. Four cities in April. Yeah, we did these like small kind of theaters around, some in Southern California. We were in Orlando.

Starting point is 00:45:01 Where were you? Charlotte, Denver, Phoenix. There we go. In An Anaheim area. Already blacked out from April. To be specific. Orlando was last fall. Orlando was last fall, yeah.

Starting point is 00:45:11 I can't keep up. It's been a wild ride for Rachel. Yeah, May has been something. But there were some great moments and the team did a great job with these events and the video side of it. Yes. And you get to see the emotion on their faces, the laughter. The tears, the awkward debates with their spouse standing next to them.

Starting point is 00:45:27 That's right. Yeah. So make sure to check those episodes out, you guys. I think we have three out of the four that are out. And so you can check them out on the channel. And yeah, it was just kind of a fun different way to do the Ramsey show. But we loved it. Love to be in there.

Starting point is 00:45:39 All right. Let's go to Atlanta, Georgia. And we have Catherine on the line. Hi, Catherine. Welcome to the show. Hi. Thank you. Yes, absolutely.

Starting point is 00:45:48 Thanks for calling in. How can we help? Several years ago, my mother-in-law, moved in with me and my husband. And she's been living with us since then. And despite the mother-in-law stereotypes out there, she's actually been fabulous. But while she watches our kids and started that four years ago, she doesn't pay anything for, like, room and board. She has helped a lot with, like, household items and things like that.

Starting point is 00:46:16 But when you think of the whole scope of it, I'm like, oh, that's a lot of money. And I don't know if that's something we should ask her, my husband's, siblings to help contribute to or even my mother-in-law herself. To contribute to like paying rent and for utilities. Is that what you mean specifically? Yeah, like toward, yeah, like essentially like room and board. We do pay a lot of like the food too, like pretty much everyday like necessities. And it's expected on her part?

Starting point is 00:46:47 I guess that would be it, yeah. Expected not to pay, you mean? Yeah, it's expected that she doesn't pay and that you guys get all the groceries. And just because of child care, how often is she watching the kids? She watches the kids. So it's been one kid every day or when I was working full time for four years. And then I just had a child. So it's going to be a four-year-old and a little baby.

Starting point is 00:47:10 And then it will be five days a week. Okay. And you're not paying her for that. Correct, yeah. I feel like you guys are getting a deal out of this, not her. Because what you would pay for someone to watch those kids, I mean, you're talking about a nanny, a live-in nanny situation. I mean, you pay a full salary, you know, 40, 50 grand a year for that person.

Starting point is 00:47:32 So you're not paying that. So I think she's probably earning her keep if you ask me. Yeah, that makes sense. And was anything established early on of, you know, whose decision was it for her to live with you guys? It really was me and my husband's joint decision. She was in an abusive marriage. So we essentially got her out of her house for safety reasons. And then she got divorced.

Starting point is 00:48:00 And I was like, you stay here, like as long as you need. And even if you want to stay, stay, that's fine. And that's just what it turned into for like a year and a half. And then I had my son and things just stayed the same. Okay. So I do wonder if there's any level of you, Catherine, having a low level, you sound very pleasant and peaceful. But a low level of frustration that an urgent thing needed to be done. And I think you guys made the right decision, right?

Starting point is 00:48:25 I think if anyone was in that position and their mom was, you know, in a dangerous situation, come life. But then the fact that there was no, that that act now has become the rest of your life, as you see it, because there's no other conversation of her leaving. So I think that's probably more of the problem that I would be, I would think for myself, Catherine, you know, pretty intently of like, hey, what do I want my life in my household to look like in the next four or five? years. Is it that you're going to be working full time and until these kiddos go off to kindergarten, you're going to need help? And actually, it's a gift that she's there. But when that time comes, maybe, you know, she can find her own place or maybe it's in 12 months that that happens. I don't know

Starting point is 00:49:08 what that looks like for you and what you're desiring, but I would find that. And then in a very kind way, obviously, you know, bring that up to your husband and be like, hey, I'm having this feeling. Can we just, can we talk about it? Because it just feels like it's like ambiguous. And that ambiguity is causing probably some level of like, oh, crap, this is now forever. Should she be paying towards the mortgage? Because she's living here. She's a roommate. Yeah, yeah, yeah.

Starting point is 00:49:36 And I think that just was never established because you sort of all stumbled into this situation and you all love each other. And it all made sense. And now you're going, we probably should have some level of boundaries here about what this looks like. What is the responsibilities for everybody. Just what the plan is. Because she might also get resentful and go, wait, I just realized. I'm not getting paid for this. This is crazy.

Starting point is 00:49:56 And I'm watching two kids five days a week. And she can't create her own financial independence at all from you all. You know what I mean? Because she, you know, I don't, you know, I don't know how anyone's thinking or feeling. But I think starting those conversations, and again, nothing's on fire. But when this drags out another 12 months, I would, I would not want that to happen without some conversations of just the plan. Hey, what are we desiring? What are we wanting?

Starting point is 00:50:21 What's the plan going forward? That makes sense. Ambiguity does make me anxious. Yep. And that's fair. I think that's... Yeah. Yeah. And I don't think that's mean of you or... You don't even mean that you're a bad daughter-in-law or, you know, anything like that. But especially when you start mixing, you know, families and living situations when it's not talked about and established and expectations and desires and wants and fears, all of that. is pushed out on the table and talked about, it can get messy really quickly. And some people do it well. I think we had a call maybe this week even about that, George, when I was on with you

Starting point is 00:51:00 on Monday. There's ways to do it well. But it takes a lot of communication on the front end, and it takes healthy people on every side of it. That's the other part. Yes. And Catherine, you know, opening that conversation may end up in resulting possibly of her saying, you know what, I want to create a life for myself and get some independence, which may mean she moves out and gets a job and you got to figure out, you know, child care stuff. I got, you know, I don't know what that means, but I think being true to yourself and what you guys wants is going to be the most important long term. There's a saying around here at Ramsey, to be unclear is to be unkind. That's right. So it's actually the nicest thing you can do is to communicate with clarity,

Starting point is 00:51:42 even if you go, oh, that didn't feel good in the moment, but at least we all know where we stand. There's no ambiguity. Okay, that quote's good. And then what does Deloney say about resentment versus Oh, shoot. Oh, no. Sorry, Deloney. Do we remember? Choose guilt over resentment. Yeah, that's it.

Starting point is 00:51:58 Choose guilt over resentment. So you're going to feel guilty. Maybe trying to have this conversation. You feel bad about it. But you'd rather have that emotion than resentment build over the next couple years. That's a poison. Hey, you guys, did you know that there are thousands of data brokers whose entire business is collecting and selling personal information? Things like your home address, your phone number, and even your.

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Starting point is 00:53:51 So take back control of your privacy. Go to join deleteme.com slash Ramsey and get 20% off your annual plan. That's join deleteme.com slash Ramsey. All right, Woody is in Atlanta, Georgia. Hi, welcome to the show. Hello, how are you guys doing? Hi, we're doing great. How can we help?

Starting point is 00:54:30 So my wife and I, we've been married for a long time, and we started Financial PC University around 2007 before we got married at Jonesboro First Baptist Church. And so we followed the baby steps pretty much. We're 40 and 41 now, and I've noticed that I can't seem to switch it off anymore because I'm constantly just thinking about saving, and investing and we actually have a pension at our workplace.

Starting point is 00:55:01 And I've noticed that our 401K and a 457 and stuff like that have actually reached to like $1.2 million already. Wow. Yes, definitely gotten to the point where am I really enjoying the money that I'm saving? It's almost like I get anxiety when I spend on free of those things, but I will give money away to people when they need it for certain things. It's almost like I don't get enjoyment out of just spending money. And I'm not sure what, you know, my plan is because, like, we only have really,

Starting point is 00:55:35 because my wife is a teacher and I'm in public safety. So we retire pretty early, like at 52 years old. So we got about 11, 10 years left to really work. And it's going to be about $150,000 a year just for the pension alone. So you're basically saying we're good on the investment side. How do I unlock this spending side? Because even when I do spend, I don't enjoy it. Right.

Starting point is 00:55:59 Yeah, because, I mean, we paid off our debts. You got a mortgage? No, we paid off our house. We followed all the baby steps. Golly. Well done, you guys. As a teacher and what did you say you did? Public safety.

Starting point is 00:56:13 Okay, yes. Well done, you guys. That's amazing. So you did it and now what? What's your wife like with money? She just, she really, she sticks to the plan that I just kind of go, hey, we need to just do this. And she just kind of steps back and just allows me to invest and just do whatever. And then, you know, we go on vacations.

Starting point is 00:56:37 We enjoy just hanging out with each other. But we live very, I guess minimally, because we really don't spend that much money on just random things anymore. Sure. Yeah. Is there things you want to do, but you can't get yourself to do it? Experiences, things. Well, I've always interested in the fire movement, just, you know, because public safety is one of those things where I can't just lead work because things may happen that I need to be there for. So, you know, I deal with emergency management.

Starting point is 00:57:04 So it's pretty much for a whole county. So it's not something I could just leave and go on vacation. So I guess my big thing right now is just focus on like financial independent and retire early, but we're there. So you want to go on more vacations, but you can't do to your role? Yeah. If I could snap my fingers. That's where I'm going, where would you put your money

Starting point is 00:57:24 if I snap my fingers today? Is it a hobby? Is it a thing? Is it upgrading the car? Is it, you know, buying back your time? You guys are doing things you don't want to do? Probably buying back time.

Starting point is 00:57:35 I mean, that's pretty much what I focus on. I've noticed that that's all I kind of think about right now is like, hmm, can I actually retire early? Because, I mean, our house is, you're not even part of the net worth. I don't even count the house as part of our net worth. Sure. Do you guys have kids, Woody?

Starting point is 00:57:49 investments. Yes, ma'am. I have a three-year-old, and we've already funded his 529. I believe you, Woody. I believe you. You have been, yes. You've funded your grandkids. You've got an A-plus plus for the financial beast university graduate. You won, Woody. You won the prize. Okay, so, you know, when I think about Woody a lot when it comes to spending is a couple of things. One, you want to have that muscle built, right? Because, you know, Like you said, you're going to just end up hoarding, not enjoying anything. And part of the gift and the blessing of being diligent is that you reap what you sew. And you guys have sewed really well, right?

Starting point is 00:58:31 You've put in a lot of patience and wisdom and sacrifice. And so now you're going to have the ability to do some really fun things in life, but you won't be able to have fun with those things if you don't enjoy letting go of some of this money. So that's one thought. And then Arthur Brooks, who we just love so much, he talks about there's five things you can do with money, and four of them will actually bring you a level of happiness, okay? One, generosity, which you already mentioned in this call, which I love that about you.

Starting point is 00:59:00 So yes, always looking at ways to be generous. That actually has a level of happiness in your life. One of them is buying your time back, just what George said. So are there things, conveniences in life with having a three-year-old that maybe your wife's like, hey, I would love grocery delivery. I don't want to go to the grocery anymore. let's do that or let's have someone come clean the house. Like I don't know what that looks like for you guys,

Starting point is 00:59:22 but what are things you can spend money on to actually get your time back or your wife's time back and do something productive with that time, he says. The third is to spend it on experiences with people you love. So find, if you can find the time, I hear that your job is very taxing in that way. But if there are moments of reprieve that you can say, no, I can't get PTO here. Go enjoy those and take your, you know, take your son, take another

Starting point is 00:59:52 couple with you guys that you love, or I don't know what that looks like, but go and have some experiences with people you love. And then the fourth is actually saving. You actually do get a level of happiness by saving because there's progress and you've been doing that. And then the fifth thing you can do with money, it's not a bad thing. You just won't bring you happiness. It's just buying stuff. So, but again, there's a little bit of me that kind of wants you just to buy some stuff. in your budget every month. Have a line item. I would force that line item.

Starting point is 01:00:20 That's the one thing you have to do in the budget is spend on this thing. And it can be as tactical. Like my husband and I, we will spend differently. Okay, I will spend on probably cheaper stuff, but more stuff. She's a quantity gal.

Starting point is 01:00:33 Winston's a quality guy. So Winston be like, let's upgrade the water hose or whatever it is. And he's like, there's a purpose to it. It's tactical. But he's like, let's go buy a nice one.

Starting point is 01:00:42 Like, that's where he'll spend. But find things that you can spend money on throughout the month because that will help you let go of some of this because it will money can control you it can control you on one end if you're broke and you have no money right there's a level of control there because you're stressed out all the time but it also on the other end of the spectrum can have the control where you have this false sense of deep security and opening your hand and letting some money go kind of counteracts that so what has been a future

Starting point is 01:01:14 Woody is now a bug. That's the problem. The feature was, man, you're so good at living a lesson you make, so good at saving, and now that you made it, it is a bug that we need to debug. I do buy random stuff. I do buy random stuff. I mean, we got two Teslas. I mean, I literally bought two back to

Starting point is 01:01:30 back, and then I was like, well, those are paid off, so I think giving away my money at this point is going to be what, to my family members and stuff, I think it's going to be the best bet because we put away a good bit of money into vacation too now. And so I just, it's kind of hard for me to shut it off because if money's just sitting

Starting point is 01:01:51 around in the bank or something, I feel like I'm not getting a lot of interest off of it. So I end up just investing it. And that's all I seem to do with just standing money. Yeah. And I think that's okay too. I mean, my husband and I, that, I mean, we'll get to a place where we have a high yield savings account. We'll put some money in. And then we'll look up and we're like, okay, you know, there's some money in there and it's just sitting there. We could invest that. And so we'll take, some of that money and put it back into investment. So I think that rhythm is not bad. And what it sounds like what you just said gives me some level of relief. Maybe you're doing better than you think you are. Yeah, I think some therapy would be the next good purchase to go, what's underneath all the

Starting point is 01:02:29 scarcity mindset? How do I kind of unlock this abundance mindset now that I actually have it? Nothing is on fire. And yet I always feel like something's on fire. That might be part of your wiring. I mean, you're in public safety, you're always like waiting for the other shoe to drop. That might be part of it. My parents came from a communist country, so that probably had a lot of do with it. Oh, yeah. Where'd you come from? Well, I was from Vietnam.

Starting point is 01:02:53 My mom, like, we stayed Vietnam after the war and everything. Yes. I mean, I was a little kid, but it was just like years after. And we, like, lived really poor. So I guess that I can't switch it off. My brother's the same way. Yeah. Which makes sense, right, when you can connect those dots.

Starting point is 01:03:10 like you're not crazy, right? I mean, what you've lived through an experience, you're like, there's no way I want to go back to that. But again, that's a good motivator to get you to a place of security and safety with money, which is what's happened. So now not still depending on that same wiring as what's going to be key. So rewiring some of that and having some peace with your money and enjoyment. Definitely will be the thing to be working on. Hey guys, health care is one of the biggest stress points in your budget. It's confusing, and most of the time it feels completely out of your control. But there is a better way to handle it. Christian health care ministries isn't health insurance. It's a health cost-sharing ministry where Christians share each other's medical bills. And it's not a new idea. T.HM has been around since 1981. It's predictable and proven. And they've shared over $13 billion in medical bills for their members. Plus, you get more flexibility. There are no network restrictions, and you don't have to wait for open enrollment.

Starting point is 01:04:44 Now, let's talk about how CHM helps your budget, because programs start at just $15 a month, and many families save hundreds of dollars a month compared to traditional options. So if you are tired of feeling stuck, check out Christian Healthcare Ministries. Right now, CHM is offering new members a 50% credit towards their first month of membership. go to CHministries.org slash budget and use promo code Ramsey. That's CHministries.org slash budget and use promo code Ramsey. Today's question of the day is brought to you by YREFI. If you've been turned away by other lenders because your private student loans are out of control,

Starting point is 01:05:42 Y refi may still be able to help. So they specialize in refinancing options built specifically for borrowers in that situation. Go to Y-Refi.com slash Ramsey. That's the letter Y-R-E-F-Y dot com slash Ramsey. May not be available in all states. Today's question comes from Grayson in Maine. I'm having trouble with Baby Step 2. I've saved the $1,000 emergency fund but can't seem to make any headway on paying off our debt. I have three daughters under 13.

Starting point is 01:06:12 It's difficult for me to go fully scorched earth when I want to still give them a decent childhood and provide the things they need. How can I stop feeling stuck? what a good dad the dad guilt it's real wow okay so that i think there's a the issue here is we are pinning getting out of debt and not spending money to bad childhood and i think you can have a great childhood and not buy your way into it and getting out of debt doesn't take their entire childhood it may take two three years um but not their entire childhood and I mean, I say this about my kids. I don't know if you feel like this, George.

Starting point is 01:06:55 Really what they want is you. And you playing with them, being involved in their lives, doing things not necessarily that costs money, but just spending time with them being around them. There is something to that that I think we gloss over and think they just need more stuff and just keep pushing that agenda when at the end of the day, yeah, do teenagers want stuff? Absolutely. you're not saying that, but truly the priority of who, what is being built within them and their character is really going to come from you in the time spent with them.

Starting point is 01:07:28 Well, and if you're in debt the whole time they're going through childhood, you're not going to be fully present. You're going to be stressed. There's going to be financial burdens that will take you away from letting you enjoy them as children. And so I think a short time of sacrifice for long-term gain, especially as they enter their teenage years, which is when things really get expensive. You know, they're going to start wanting, there's clothes, there's prom, there's all the activities, the sports, college funding, all of that, you're going to be able to do so much easier without this debt in your life. So some of this is just not feeling the dad guilt that you're doing a bad job and some of it is going short season. And your parenting might look

Starting point is 01:08:06 different than other people's parenting in that season. And that's okay too, right? So and so maybe do an X, Y, and Z with their kids. And you're not because you are putting that money towards getting out of debt, again, which is not forever. It's not their entire childhood. They're going to promise, promise, they're going to be okay. All right, let's go to Eunice in L.A. Hi, welcome to the show. Hello, very nice to hear your voice, guys.

Starting point is 01:08:31 Oh, well, thank you. You as well. Thanks for calling. How can we help? So I've been in USA for almost four years. My background is about like meat shops, businesses. back in my country from my family. And when I came here, I started working with somebody that he owns a retail store

Starting point is 01:08:54 in a good location. And right now, he's going to retire. So he was offered for me the store for $300K,000. And I was, I have like $50,000 to give it to him as a down payment. So I'm thinking, the question. is I'm thinking if I go ahead and buy the store, I mean, buy the business, or go and take that $50,000 and open my own shop. So that's my question. Okay. Would you be able to open your own shop with $50,000 or were you going to plan on borrowing money as well to do that?

Starting point is 01:09:40 Yeah, I do have a friend that he can borrow for me like another $75,000. without our interest. Okay. Unis, I think it's a terrible idea to borrow any type of money for anything, and especially when it comes to small businesses, and especially in the food industry. That's the number one industry that ends up closing its doors, and then people end up owing so much.

Starting point is 01:10:12 And not because you're not great at what you do, it just is what it is. And so when you add debt to the picture, you add on stress, you add on a lot of risk, and you add in levels of decisions that you make in order for the business, in order to pay the payment. That may not be great decisions long term for the business. So there is something about the peace of mind and moving slowly and moving with the speed of cash to grow something that doesn't lock you into a small business loan or worse, owing your friends. money that he's going to get for you.

Starting point is 01:10:47 And then when the, if something happens and then the shop closes up, now you owe your friend money. And it may take, you know, four or five years to pay that off. And so staying ahead financially is not going backwards and going into debt. Okay. What's the net profit of the business every year? Like 120. Okay.

Starting point is 01:11:12 Okay. So they're basically valuing it at a little under three times that, at 300,000. Yeah. Okay. Have you talked to him about a potential agreement where you basically pay him income out of the profits until he hits a certain amount? We were thinking about it. Yeah. That's a much safer way to do this. And the only way I would do it is this sort of sweat equity agreement where you pay him a certain amount of the profits. Maybe it's a certain amount, a certain percentage, until you hit $300,000. And at that point, he's cut off. And it's almost like you, yeah, you're paying for it as you go versus going, getting a $300,000 loan and then having the bank be the one that's, you know, in charge of it all. Because with this other agreement, you have not borrowed money at that point under your name. Right. But actually, he's offered for me like $300K under his loan. So I'm going to pay like a seller finance method.

Starting point is 01:12:19 Yeah, but that's a very different situation than you paying him out of a percentage of profits. Let's say 25% of profits to him until it's paid back. You see what I mean? Because then if the profits aren't there, you're not on the hook. And so I would have a business attorney draft this up to avoid you carrying all of this risk. Okay. So if you look at 25%, you're talking 30 grand a year. So it'd be 10 years to fully pay him back. Now, you guys might agree on a different percentage. Maybe it's 40%. So he gets paid in less than 10%. 10 years. But this idea that you're going to take on a quarter million dollar debt, hoping this all works out perfectly is just you're jumping off a cliff. Yes, right. Yep. So, yeah, saying away from any debt situation, and if you can, yeah, create some kind of agreement with what George was saying, that's what we would recommend. So thanks for the call. George, we have a question from Facebook. And Natalie asks, we are planning an out-of-state move and we'll be paying off our debt with the sale of our home.

Starting point is 01:13:23 This feels like we are cheating on the plan. So how can we make sure that we feel the pinch and don't go back into poor money habits? Wow. That's very self-aware. So they're going, hey, we'll knock out the debt with the sale of the home, but we know we sort of shortcutted it and it worked out. That's right. But our behavior hasn't necessarily changed. How do we make sure it's changed?

Starting point is 01:13:46 I mean, that's the honor system at that point. But one way to know that is, have you actually been budgeting? Are you living on less than you make? Is there margin every month? Have you shut down all of your debt accounts, including your credit cards? Yep. Have you frozen your credit so you can't get back into debt even if you wanted to? That tells me that the behavior's changed.

Starting point is 01:14:09 Yes. If there's any kind of friction you can put into place is going to be huge. And especially on the debt side and just like what you're saying, George, closing accounts, you and your husband saying, hey, together we are agreeing we are not borrowing money. So there's going to be no avenue for debt. So we're going to get rid of the credit cards. We're getting rid of this or that. And start living on a budget. So start practicing living on less than you make now. And that will create the habit. So pain is a great teacher. And people that have a lot of pain and sacrifices, they go through baby step two. They're like, I'm done. When I'm done,

Starting point is 01:14:43 I'm done. You touch the hot stove, you're not going back. But if you bypass the hot stove, You may not have learned the lesson. That's right. But I think you can still do it. We see people do it. But I think it's very wise that you're cautious about this. Prove to yourself that you are worthy of trust when it comes to finances. And over time, you will become that person.

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Starting point is 01:16:58 and choose the right one to work with. So find a local Ramsey trusted real estate pro for free at Ramsey Solutions.com slash agent or click the link in the description if you're listening on YouTube or podcast. All right. Let's go to Sylvia in Seattle. Hey, welcome to the show. Hey, thank you for taking my call. Absolutely. I am interested in your thoughts on paying off my mortgage as a whole in one payment or splitting up in two years to reduce the amount of tax burden I would have to pay with a large sum. Where is the tax burden coming from?

Starting point is 01:17:36 Are you selling off assets? Well, no, I'm just saying my income tax is if I pay $150,000, $130,000 in one sum, that will take me into a higher tax bracket, where if I split the amount in $50,000 to $50,000 per year, then that keeps me in the lowest tax bracket. I'm retired. I'm 73 years old. I have Social Security in my 401K. The funds to pay for the mortgage would come out of my 401K.

Starting point is 01:18:06 Oh, so you pull it out of the 401K, that's traditional and therefore increase your income tax. Got it. Okay. How much do you have in the 401K? about 600,000. And how much are you going to pull out to pay off the home? It's $129,000 right now. Do you have any other assets?

Starting point is 01:18:26 Well, I have $3 million in property. Oh, nice. And those are all paid for? Everything's paid for by my house. My husband died in 2018, and I got on to the Dave Ramsey, program and paid off my debts about $300,000. And then I got breast cancer. Wow, well done.

Starting point is 01:18:51 You've been through a lot. Yeah. That's been a tough couple of years. So how much do you, did you run the numbers and do you know exactly how much extra you'll be paying because of the tax bracket if you paid it off all in one lump sum? Well, my income is $60,000 a year. so I can pay off about 40,000 safely, 50,000 safely and keep me in a lower tax bracket, the lowest tax bracket for my state.

Starting point is 01:19:24 Okay. I mean, I wouldn't wait because of the taxes. I would calculate it and go, okay, I know it's going to be an extra, let's say, $10,000 total in what I actually will owe the IRS. And I'm okay with that for the idea of being completely debt-free, not paying any more interest, on my mortgage and having that peace of mind. And so that's kind of the trade-off here. But I also wonder if there's a different way to do this. And I'm wondering if you would maybe sell one of the properties, pay off your mortgage, and sock away the rest in an investment account to sort of

Starting point is 01:19:57 diversify your portfolio anyways. That is a thought. The kids have interest in the housing properties and they're resistant, not wanting me to sell it because it's a vacation property that's worth about $250,000 that would easily pay it off. What are the other properties? The other property is timberland. I live in a rural area and I grow timber. Oh, wow. That's cool.

Starting point is 01:20:27 Last year we logged $100,000. Brought in $100,000 for six acres of timber. Where did that money go? That money went into a kind of an emergency fund, and I've been using that to do home repairs and, you know, roof, put a new roof on my house. Could you sell more of that? Not for another four years.

Starting point is 01:20:53 Okay. We have a plan, you know, we have it planned out because the timber market is very, it's a crop, you know, it's like gold. It goes up and down. And right now, right now with the political climate, the American woods are not. you know, lumber is not doing well. Okay.

Starting point is 01:21:14 As well as it could. Yeah, well, I don't think you're in any kind of trouble. So if you decided to do this over two years or something, I mean, I think you're going to be fine either way. So it would just be the peace of mind that you just have personally to say it's worth paying a little extra and the penalty of the extra taxes just to know that I'm done, that I'm done. And I can just live my life and I have to worry about it. And for a lot of people, it's kind of worth it.

Starting point is 01:21:41 And especially because you're going to be fine. And because you have these other properties that if something ever got in trouble, you could sell. That essentially is your nest egg at this point because you'll have, you know, little over half a million left in that retirement account, which is awesome. But the real value here is those three million of properties. That's right. So that's why I asked, if you can offload a little bit of that, maybe you're least favorites, but it sounds like it's mostly land plus the vacation home. Right, right. All right. Let's go to Sophie in Austin.

Starting point is 01:22:09 Hi, Sophie. Welcome to the show. Hi, how are you? Hi, we're doing great. How can we help? Okay, so my husband and I have been together for about 16 years. We're about in debt, $26,000 in medical debt. He currently is not working and hasn't had a paycheck since before December.

Starting point is 01:22:33 I only make part-time income. So you're breaking up on us. Sophie, can you speak directly into your phone? So I heard 26K in medical debt. He hasn't worked since December. You're working part-time. What are you making? Well, part-time I make about 120 a day, depending on how many days I can work.

Starting point is 01:23:00 What does that turn into a month? It just depends. Sometimes it's 600 a month. Sometimes it's less than that. Come August, I'll be making $2,600 a month. Okay. How are you guys paying bills right now? Well, I don't know. I paid all of the month of May. I found out, like, I was just, so my husband left. She went to a different state and just kind of left me and the kids here. It's like he kind of just threw a bomb and we're taking care of it on our own.

Starting point is 01:23:36 My parents have helped, but. Oh, wow. Okay. So your marriage is falling apart. He's left. Yeah. Is he wanting a divorce? Like, is he going to be going through some proceedings? We've tossed it around. It's definitely in consideration. Why did he leave?

Starting point is 01:23:59 He said that he left to go work with some friends, but he's been gone about a month now, and he's only sent us maybe about $700 since he's been gone, and that has basically not covered much of anything. So I've had to lean on the parents. Do you know said friends? I know the friends, yeah. And they're there really working. Yeah, they say that they're working.

Starting point is 01:24:30 Okay. Well, I mean, at this point, he should just come home and work because he can do a, you know, minimum wage job and make more than this. Yeah, and before he left, I practically begged him to stay. And it's like, you can work here. You don't need to go work there. I think our priorities are different, and I get that we're both stressed or both overwhelmed, but his tendency to leave is very much a pattern, and I'm at the point where I'm like, should the kids and I just call it quick, just move out and file for divorce and start fresh and sell everything. Do you guys own the home?

Starting point is 01:25:11 If I'm being honest, we do own the home, but the problem is, since he's been gone, and I've been having to deal with all these finances, everything's in his name. My names are on anything. And so I can't actually sell anything to help. And I don't have, all I have is $1,600. I opened up my own bank account and moved my paycheck over there. And that's all I have.

Starting point is 01:25:36 And that's not enough to move out. No, no, it's not. It's, gosh, Sophie, I'm so, I'm so sorry. So, I mean, I would make one last, last ditch effort and saying if you don't, I mean, it's kind of an ultimatum. If you don't come home and us, and us work on this marriage together, then yeah, you probably will be looking at a at a future where you're not together. And that will be his choice, Sophie.

Starting point is 01:26:03 That's his choice to do that. And then in that case, yeah, you need some good family and community around. Stable income. Yep. And you'll have to go through the proceedings. And then he will probably have to pay and, you know, go through that. We split and we'll get there when we get there. But again, the prayer and the hope is that it's reconciled.

Starting point is 01:26:19 And you have to be able to, and I would give him that option, but he has to choose. Welcome back to The Ramsey Show. I am Rachel Cruz hosting with George Camel. We are answering your question. So give us a call at AAA 825-5-2-2-25. We're talking about your life and your money. All right, kicking us off. This hour is Jason in Jackson.

Starting point is 01:26:54 That's a tongue twister. Yeah. Hey, Jason. Welcome to the show. Hey, how are you all? Hi, we're doing great. How can we help today? So I'm basically contemplating if it's a good decision to go back to school and accrue about $65,000 to $80,000 worth of debt.

Starting point is 01:27:11 Okay. Now, I would be going back part-time, so I'd be remaining a full-time worker during this. All right. What are you going to school for? Civil engineering. Nice. It's a good field. What are you doing now?

Starting point is 01:27:24 I have an associates and AutoCAD. technology. Okay. So you're kind of adjacent to the civil engineering world now and what you do? Yes, sir. Yes, sir. I pretty much do it. I just don't have the degree for it. What are you making? I make around $62,000 a year. That's a pretty good income to not have a four-year degree. Yeah, and I would be increasing it to about 82. If you had the degree. Yes, sir. Okay, so we're going to spend 80 to make 20 more. take you four years to break even. That's without interest and without the payments. I'm trying to figure out how we can cash flow this thing because I love the goal. Yeah, for sure. Are you working for a company right now that you would probably stay at if you had this other degree? Yes, and that's a big thing

Starting point is 01:28:14 pushing this. My topout right now, my current position isn't all that much compared to what it could be if I do go get that four-year degree. Okay. And I would be increasing my topout from 77 to 112. Okay, okay. And the company now, have you talked to their HR department? Is there any benefits of any level of tuition that's paid if you choose to stay to work with them? So right now that's a gray area hasn't happened in the past. Okay. Definitely not something to rely on. Okay. But so what makes it gray and not just like, no, that's not an option. Did they kind of open a door because of a conversation you had with them? Possibly, but nothing's guaranteed as of right now. Okay. And what college have you gotten accepted into?

Starting point is 01:29:04 Oregon State University, which is the only college in the United States that offers this program online. There's no other civil engineering programs that are online in the country? None that are ABET accredited. Oh, interesting. So they can charge what they want for it, it sounds like. Pretty much. How many years is this program? Um, so you can, the max you can go on it is 10, so they don't require you to be very aggressive at it.

Starting point is 01:29:31 But I'm guessing I'll be doing it since I'm, I'll be part time. Probably, it'll probably take me about six years. Oh, wow. I don't love that. It's already going to take forever to get there. And then it's going to take you another, another whole bunch of time to pay it off. That's right. Yeah.

Starting point is 01:29:52 It doesn't sound like a great plan, not only for, from the debt aspect, but also the timeline aspect. So I'm just wondering, is there, there's no colleges in Jackson or near Jackson or in your state? To do it locally cheaper. To do this at all. Yeah. There is, but it's in person. And, you know, that would take away from my current income.

Starting point is 01:30:16 And I do have deals, which would be the only reason I couldn't do that. For sure. What would that, what does that option look like? I'm just curious. Would it take you two years to complete or is it four? It would be probably about four, yes, ma'am. Okay. And do they offer any tracks of having classes at night

Starting point is 01:30:37 that if you did go work full-time and then you were a student? No, ma'am. You would have to be during the day? Yes, ma'am. Okay. Yeah, I don't know. I mean, yeah, Jason, I just, in good faith, I couldn't tell you. And, I mean, the jump in income is, it's good, right?

Starting point is 01:30:57 But it's not double, right, what you would make. And if it takes you six years to complete and then actually, I mean, you won't see that money for. Yeah, I'm wondering, can you just stack cash for two years and then pursue this? Potentially, and as of right now, I'm on track to be debt free in about five years. How much debt do you have? 58,000. What kind of debt is that? So I have about 20,000 in a vehicle and then another 35 in a house.

Starting point is 01:31:30 Oh, on a mortgage? Yes. Wow, how is it so low? So y'all aren't going to like this, but it's a mobile home. It was a very temporary fix to a problem. That was my fear. That was having. Okay.

Starting point is 01:31:45 So this thing's like going down in value. Yes, yes, that is. What is it worth today? About 64, I had it appraised last year. And what's the car worth? The car is worth, let's see, and that's on two vehicles. One is on, I think it's worth 18 last I checked, and the other one's 16. Why do you have two vehicles?

Starting point is 01:32:10 So one of them is a, it's a side-by-side. Y'all will consider that a vehicle, right? I consider it a toy that is in the way of you pursuing your dream. One is a toy then yes. And you won't have time to do that if you're pursuing school and working full time, right? That is right, which is mainly just used around the house and all that. Can we do some math together? You're ready for this, Jason? You're telling me you got 20K worth of these car loans and the toy. They're worth 34 total, right? Yes, sir. So you could profit 14 off of that. You could profit about 29 from your mobile home if you sold it. You tracking with me? Yes, sir. That gives you. That gives

Starting point is 01:32:50 you $43,000 and you go rent somewhere and use that $43,000 to start cash flowing this degree and you save up the other 20 over the next couple of years because you'll be debt-free. You freed up those payments. Now we can save that cash. Yes, sir. I think we just found the answer. I don't think you like it, but that's what I would do if I was in your shoes. And a heartbeat.

Starting point is 01:33:13 Because everything in your life right now is going down in value and you owe payments on it. So what if you rented for a season, worked on this degree, and finished it even sooner. Yeah, finished it in four years versus six because you work your butt off, doing it online. And yeah. Save a couple hundred bucks a month to cash flow the final years, and you're there.

Starting point is 01:33:33 Okay, okay. The only problem is in the small town that I am from. There is not very many rental options. I bet you can find something, Jason. Nobody would be willing to rent a room to you? They would. It's just extremely high from what I've seen in the past, which is why I went with the mobile home.

Starting point is 01:33:50 option. What's high? Um, I think last time I looked, uh, I tried to find the cheapest. It feels about $800 to run a mobile home. No, no, no. We're not talking about renting a mobile home, renting an apartment. Oh, an apartment? Or a house or a room in a house with roommates. So they're looking for a roommate. Let's just take mobile homes off the table. Okay. Yeah, I haven't looked at that market at all, really. Okay. So that's probably what I would do. Yes. Because you're bringing home over four grand a month right now? Yes, sir. So let's keep that rent to no more than $1,000 a month.

Starting point is 01:34:25 Yes, sir. And you'll be better off than being underwater in this mobile home in a couple years, and it's worth nothing. And Jason, too, your income can continue to go up. You said the ceiling was around 75, I think you said. So you still, through these next four years while you're in school, and you're going to go to school, cash flowing at the way George just laid it out, your income's going to continue to go up. So, yes, I think it's a great move to do it. But you would have to cash flow, which means you're going to have to make some big decisions. You work your butt off for your money, but your money's never going to return the favor if all you do is hope for the best.

Starting point is 01:35:30 If you're ready to learn how to make your money work for you, check out the SmartVestor program. SmartVestor can help you find advisors who specialize in retirement planning, charitable giving, advanced investing strategies, and more. Whatever your goals, your pro will take the time to explain your options. so you never have to invest in anything you don't understand. Head to Ramsey Solutions.com slash SmartVester to get connected. Ramsey Solutions is a paid non-client promoter of participating pros. Learn more at Ramsey Solutions.com slash smartvester. So Ask Ramsey is our free AI tool that is built and trained on proven Ramsey principles.

Starting point is 01:36:26 And we now have so many people and they're asking questions, George, so we can actually start to see some trends of questions people are asking. fun. It's like being able to see people's Google searches. Yes, I know. It's financial. But there's a lot around insurance and investing. And so one of the main questions is, how do I know how much house I can afford based on my salary and financial situation? So again, insurance and investing was asked a lot, but I just saw here the most asked question is around buying a home. So the core rule here is that your monthly mortgage payments should

Starting point is 01:37:02 never exceed 25% of your monthly take-home pay. And that 25% will include your principal, interest, property taxes, homeowners insurance, PMI, HOA fees, all of that is included in that 25%. And why we say that a fourth of your take-home pay is so that it frees up the rest of your money. 75% of the money that you have then can be going towards debt. If you have consumer debt, you can be using it for investing or saving. And so what happens is people can quickly get into a home and it's 50% of their take-home pay and they just don't have a lot left when it comes to even just food, right? And paying basic bills. It's a burden instead of a blessing. That's right. So that's why it's conservative. It's so that you have more money left over to

Starting point is 01:37:47 pay off the mortgage early, invest for college, go on vacation, upgrade the car. So you actually have a life instead of just a house. So Ask Ramsey is a great tool. Can help you determine how much house you can afford based on your specific financial situation. Go check it out for yourself. Ask your question today. Go to Ramsey Solutions.com or click the link in the description if you're on podcast or YouTube. Yeah, it's a – have you gone on it a lot, George? Oh, I use it a lot. It's fun.

Starting point is 01:38:11 It's my only friend is I just chat with Ask Ramsey because it'll talk back to me. And it talks to you. Gives you some encouragement, maybe. It's the only one who wants to nerd out with me. Like, let's crunch some numbers. Are you wondering about this? So are always my follow-up. I love the follow-ups of like, have you thought about this?

Starting point is 01:38:25 Oh, yeah. Show me more. Tell me more. We love it. All right. let's go to Mary in Tulsa, Oklahoma. Hi, Mary. Welcome to the show. Hi, thank you so much for taking my call. Absolutely. How can we help? Well, I am $178,000 in debt and probably another $20,000 will be added to that by the end of the year. I make about 125 a year between 120 and 125. And I'm kind of

Starting point is 01:38:58 wondering that the problem is is my monthly cash flow. So it's getting, getting ahead as it stands. I'm an LLC, and I am not currently taking out enough for taxes, and that just keeps adding every year. So I'm wondering if it's time to consider bankruptcy. No. Wow. Okay. Good. For a thousand reasons, but number one, you're not going to be able to discharge the IRS debt in bankruptcy. How much you own taxes? Oh goodness, I owe 46,000 in back taxes, and I have yet to file 2025, which will be the most likely additional 20,000 by the end of the year. Oh, that's where that 20 came from. Okay. Did that 46 count in your 178, that number you gave us?

Starting point is 01:39:46 Yes. Okay. What's the other debt? So the other debt is 100,000, well, about 96,000 in student loans. and then I have probably $35,000 in credit card debt. I'm paying $2,500 a month right now on credit cards, $500 to a debt relief program, which would only take about $20,000. So since bankruptcy is not an option,

Starting point is 01:40:15 I'm wondering, should I throw my money at my credit cards that the debt relief would not take and increase my monthly cash inflow, or do I just need to crunch it and focus on taxes? Well, the IRS always gets moved to the front of your debt snowball. So unless, which I don't know if you can, if you want to go try to get a loan for that 46, pay off the IRS, and then you just owe a credit union and said the IRS, it's probably a better deal. And if that's the case, then you'll just put that in your debt snowball. The issue is that debt relief company tanked your credit.

Starting point is 01:40:53 So I don't know if anyone's going to give you a dollar at this point because that's how these companies work. They tell you to stop paying on the debts, give us that money instead, collections comes after you, and they try to settle with collections. Yes. So have you talked to the IRS yet? I'm probably five months in. I haven't. I'm on a payment plan with film. That's what I wanted to know.

Starting point is 01:41:15 So I'm good with that. but it's the now taking out current taxes to not get more in debt. Yeah, that's right. Yeah, you need to start paying your quarterlies, especially here in 2026, Mary. Have you done that already? Like, have you set that up for this calendar year? No, I'm taking out, my CPA takes out monthly payroll and they take out taxes there. But they did not do that in 2025?

Starting point is 01:41:43 No, huh? No. I did, just not enough. And which is why I've not filed yet because I was kind of shocked at how much I owed in 2024, even with my write-offs. So I've just not filed yet because I know I'm going to owe more in, and I can't pay right now. How long have you had a CPA?

Starting point is 01:42:07 Two years, three years. And they didn't catch any of this? No, they kind of send me an email, and they're like, let us know, when you want to do payroll, so I'll just say, hey, let's do 2,000 payroll, or let's do $3,000, or whatever I was able to submit in billing, because I'm really bad about getting all my billing submitted. And that's kind of it. I'm not really even sure how much I need to be keeping out. That's where I'm going. Do you need to fire your CPA? I know. It sounds horrible. What are they even doing for you? They're giving you zero advice. They're not telling you to withhold

Starting point is 01:42:42 enough for taxes and pay your estimates. We're giving you more tax advice than your CPA has. Okay. Based on what you told us. I don't know, but... How much are you making a year, Mary? 125, you said that, I'm sorry. Yeah, 125, okay. What kind of business is this?

Starting point is 01:43:00 I'm a mental health therapist and I'm an LLC, so I contract. Okay. Well, you're not going to bankrupt on the student loans or the IRS, so this is a moot point anyways, and I wouldn't tell you to file anyways. You can clean this up, but it's going to take a lot of focus and it's going to take some time. time. Are you able to pick up extra clients, Mary, and work more? I am. I'm really working at my max right now. I'm working about six days a week, and I'm a single mother, so I don't want to take that extra time from my child. Okay. Yeah, well, there's going to, you know, I'm glad you're working that much. That's encouraging because the income is going to be the thing that's going to

Starting point is 01:43:44 matter probably the most in the situation. But yeah, it's going to take, yeah, it's going to take you a four to five years to kind of clean all this up. You're going to be throwing thousands at the debt every month and extra more than just the minimum payments. Otherwise, this is going to be a 10 to 20 year journey. Are you on a really tight budget, Mary? Yes, I am. I mean, I keep myself on a tight budget. Good. How much margin do you have per month to throw a debt? I have, after everything, all necessities I have $1,400 a month left. I currently pay about $360 a month out of pocket for counseling, and if need be, I can forego that for a little bit.

Starting point is 01:44:26 Pause that for maybe a year or something if you need to. Yeah. Okay. Yeah, because I think the goal would be, gosh, even $2,000 a month, it's still going to be. Yeah, because you're going to have about $200,000 to clean up, and so if you factor in, you know, $24,000 a year, that's still 83 months at two grand a month being thrown out of the debts.

Starting point is 01:44:48 Now, you're throwing a lot of the debts already. You said you had $2,500 in credit card payments plus the IRS, plus the student loans. What do all those payments add up to a month? Oh, goodness. Let's see. The IRS is $700. The credit is $2,500, and then the student loans are $1,000. Okay, so $4,200 is already out the door every time you get paid.

Starting point is 01:45:11 And my guess is you probably take home around $1,500. seven grand a month if you factor in taxes? On the low end, I bring home about 10 before taxes. Okay. When you start factoring after taxes, I think what got us into hot water is forgetting that taxes are a part of the game. So if you make that seven, start paying those taxes, it will help. And the positive thing, Mary, is as you start paying off that lowest, even the credit card,

Starting point is 01:45:35 that's going to free up a couple hundred bucks a month to keep throwing at that. That's where the debt snowball momentum really happens. But, yeah, you got a marathon ahead of you, Mary. but you can do this. You can do it. Dave Ramsey here. Most people stay stuck with their money because they're not paying attention to it.

Starting point is 01:46:12 Most people are living paycheck to paycheck, stressed out and broke. Don't be most people. You work way too hard to be broke and feel broke, and you deserve to have something to show for it. That's why we built the Every Dollar Budget app. It gives you a personalized plan for your money that shows you how to free up extra money every month,

Starting point is 01:46:33 and use it to beat debt and build lasting wealth. Plus, you get real coaches guiding you through your plan step by step. Look, most people hearing this will just keep hoping something changes, but not you. You're ready to make change happen, starting now. Go download every dollar in the app store or Google Play and start for free today. One of the best parts of our job is when we get to hear from people and their stories of how they are winning. We just got this great review from Every Dollar or Every Dollar app. A fan said, just being able to use Every Dollar and see all the extra we had every single month was very motivating.

Starting point is 01:47:30 We'd have thousands of extra dollars and we can just throw it at the mortgage. Absolutely amazing. Well, if you guys want to take control of your money and find some extra margin, make sure to start every dollar for free. And you can do that in the App Store or Google Play. All right, let's go to Brittany and Raleigh. Hi, Brittany. Welcome to the show. Hi, thank you for taking my call. Absolutely. How can we help?

Starting point is 01:47:54 So we are currently on Baby Step 2, me and my husband, and we have a little over $100,000 in debt. We have personal loans, a credit card, and a truck payment. So my question is, which one do we start with? I know the Baby Set 2 calls for the lowest amount, but one of our loans has a lien on my car with it. So would that be where we start since it's such like a high risk loan? Or should we start with the credit card, which is the lowest amount? What kind of loan is this? Is it a title loan or is that a personal loan secured against the title, like from a credit union?

Starting point is 01:48:33 It's a personal loan. Okay. Yeah. How much is that? It's 18,000 now. And what's your other debts? What do they amount to? We have a credit card that's 13,000.

Starting point is 01:48:47 a truck that's 36,000, a 401k loan for 15, and another personal loan for 28,000. Okay. What's the truck worth? Well, looking on Kelly Bluebook, it's worth between like 22 and 25. And do you guys have anything in liquid cash right now in the bank? We have our $1,000 emergency fund. How much do you guys make a year, Brittany? Well, I'm a stay-at-home mom currently.

Starting point is 01:49:19 I do go back to work during the summer at like a preschool. My husband, he makes roughly 90 to 95,000. And he made more, and we recently moved, and he took an unknown pay cut. So he was making more, and it was helping with the debt. You said an unknown pay cut? Yes. Like he didn't know that he would be making less? Yes, it was the same company and the same job position.

Starting point is 01:49:44 but his job runs on like the routes and stuff. He delivers food for a living. And when he runs routes, he gets paid for certain things, and it doesn't pay as much where we move to. And he didn't know that ahead of time when he was, you know, signing the paperwork? No. Hmm. Well, you got 100K in debt and about 100 to pay off.

Starting point is 01:50:09 The goal would be to get out from under this truck. What's the payment on that thing? 6.20 a month. Mm-hmm. And what about the personal loan? Against the car. The one with the... Against the car, it's $4.80 a month.

Starting point is 01:50:23 Wow. So right there, you'd free up a nice chunk of change if we got rid of both of those. Just get rid of that. What's the smallest debt that's up next based on the balance? The smallest debt that is up next would be the credit card and it's at $13,000.

Starting point is 01:50:38 And that's all on one credit card? Yes, it's a bank credit card. Okay. What were y'all using it for? Well, it's Max currently. But it was just used for groceries, gas, just kind of making up for the loss of income that he had when we moved. We moved about a year ago. So you spent, okay. So every month.

Starting point is 01:51:01 As well, what was that used for? Which one? The lien on the car. One was for our old house where we lived. We used it to do renovations and fixing it up. And when we sold it, we didn't sell it for what we wanted to to be able to pay that one back. And then the other one was for moving cost

Starting point is 01:51:22 and just catching up on everything. What caused you guys to move? Well, it was kind of free choice move. We decided that we wanted to and the job. We do move for work as well. You moved for work, but you get paid less? Yeah. Yeah, it was unexpected, though.

Starting point is 01:51:41 Like, he was told that he would be making about the same amount as he did. And then when we got moved and everything settled in, it just kind of lowered. It's not a huge significant amount, but it's definitely enough to notice. Like a thousand bucks a month? Yeah, around that, yeah. Which is what you guys are used to living on, which caused the $13,000 in credit card debt, $1,000 a month that you lost. Are you guys in the hole every month right now, or do you have enough to cover all the bills and debt payments and have anything left over?

Starting point is 01:52:11 We have somewhat left over. I'd say we have between like 3 and 500 left over every month. Okay. So the goal now is to do a detailed budget and to find all the money we can in this $95,000 income and then some. That might mean he's working a second job and you're picking up more work

Starting point is 01:52:29 and you guys tag team and he high-fives you on the way in and you go to work. Because right now we need a couple of thousand dollars a month to throw at this debt. Yes. That's the only way out I mean And again, getting out of that truck

Starting point is 01:52:42 Is going to be a real blessing If you can find the amount you're underwater on About 10 grand and then sell it Do you guys have any other vehicle you could use right now? No That's your one car You only have one car? Well, there's a car with my lien on it

Starting point is 01:52:55 And then the truck payment In the truck So we had two vehicles That both doesn't One has a lien and one's a loan for a car Right, but if you got rid of the truck And you took it down from 36,000 to 10,000 And you were a one-car family

Starting point is 01:53:08 for a bit. That would be, you could do that. Okay. I mean, yeah. I mean, are you both on the same page that this is just crazy and you're never, ever, ever, ever going to touch dead again? Yes. Do you both feel that? He feels that too? Yes. Okay. Yeah. So, I mean, this is going to be a, this will be a journey, Brittany, but it's going

Starting point is 01:53:29 to create a lot of sacrifice for you guys, meaning like that, like that kind of thing, right? You're taken from 36 to 10, right? and that's a sacrifice, but for one year, two years, until maybe we save up some cash on the side and buy a crappy $5,000 car for him, like that's what it's going to be. You know, so like there has to be something drastic that changes from a lifestyle perspective and an income perspective. And it's going to cause you guys to be really, really uncomfortable. And it's going to be hard.

Starting point is 01:54:00 It's going to be really hard. But it's doable. That's the wild thing, is that you guys may look up and be like, okay, maybe he can actually work longer and pick up some more routes and bring in an extra two grand a month. And then Brittany on the weekends, you're working somewhere, you know, bringing in two grand a month. And that's an extra four grand. Just, you know what I'm saying? Like it's these these opportunities, but it costs time. It costs energy. You guys are going to be really tired. But it's not your whole lives. It is going to be for a season of your life, probably two to three years.

Starting point is 01:54:34 But then you look on the other end of this, George, and it's like, okay, we did it. But the only way out is that. That's the hard thing. I wish there was an easy button. Well, you tried those easy buttons, and there were shortcuts into more debt. And so now we got to do it the hard way, which is make more, spend less, use the margin to knock out the next smallest debt and the next smallest debt. So, no, the lien doesn't need to go to the top of the debt snowball.

Starting point is 01:54:56 You just need to put these all in the debt snowball and attack the little one with a vengeance and cut your lifestyle down to nothing. And the good thing is, too, you know, like once that, credit card because I'm sure the interest rate is 25, 28 percent, who knows, you know, once that's paid off, you know, the interest and the payment, right, is freed up. So that's a, that's a couple, you know, hopefully 100 bucks, right, that you keep throwing at the other debt. And so you'll start to get some momentum, but it's going to be a, it's going to be a trip around the sun, George. It's a stark reminder. It's so easy to go into debt in America today. At every corner,

Starting point is 01:55:32 You can rob the 401K, get the personal loan, max out the credit card, get a lien against your card, even if it's paid off. And then it's so hard to get out. Take a little bit of an income, you know, setback, and you just fill it in with the credit card, and you just keep on moving. I mean, you see how it happens, right? The problem is, even when you make more, it doesn't necessarily mean that you're going to save more. No. Or have more because your lifestyle creeps up with it. That's right.

Starting point is 01:55:57 And we find that a third of people making six figures, it's even edging up to about half now, our paycheck to paycheck. Yeah. And here's a good example. You guys are making great money well above the average household income in America, and there's not much to show for it because of all these debt payments. So that would give me some anger and urgency to get out of this once and for all. For your family, for those kids, for your future. You guys are worth that. So find whatever income you can, cut whatever expenses you can, and get on the same page and get on a plan to go, never again. Hey, do you ever get to Memorial Day weekend and wonder, how is it almost? June. Summer's almost here. Why do I feel like I'm in the same spot? This weekend, you can grab

Starting point is 01:57:10 two hardcover books and assessments for 20 bucks. And that matters because summer chaos is about to ramp up and you want to keep your focus. Kids out of school, trips, Fourth of July party, before it all gets wild, grab the books and tools that help you stay on track. So when it all hits, you are still on track. Two for 20. Go to Ramsey Solutions.com slash store. of the day comes from Deuteronomy 818. Remember the Lord your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your ancestors as it is today. Zig Ziglar said, rich people have small TVs and big libraries, and poor people have small

Starting point is 01:58:10 libraries and big TVs. Sick burn from Zig. There you go. What you value? But do you remember? And he was a big in the 80s and 90s world. Do you remember those big screen? The old school TVs?

Starting point is 01:58:28 The old school big TVs. It's a gigantic box. I don't even know how you got it into your house. They looked like there were 2,000 pounds. I know. Oh, man. Too good. All right.

Starting point is 01:58:37 Let's head to Noah in Springfield, Missouri. Hi, Noah. Welcome to the show. Hi, thank you all for taking a call. Absolutely. How can we help? Well, I'm 19, and I'm looking at buying a house at the end of the year, and I just wanted to see what you guys would do in my situation. Well, nice. Why are you wanting to buy?

Starting point is 01:58:59 Well, I'm thinking $200,000 is the max that I can buy. I have $34.5 grand saved up. I make another $8,000 that's based pay minus my month's expenses by the end of November. The big bulk of my money is R&CDs. They are expired until the end of November. I got credit score of 741. Okay. What kind of consumer debt do you have, Noah?

Starting point is 01:59:31 None. Zero debt. Amazing. What are you making a year? Or you said $8K a month is what you're bringing home? You said that's how much you can add to the down payment fund? Yeah. So I'll make that.

Starting point is 01:59:44 I'll make another $8K. and five, six months. What do you make a month? What's your after-tax income monthly? 21 or 2200. That's what you make per month? Yes. So you're making like 24 a year take-home?

Starting point is 02:00:04 No, it's 41 grand a year. Okay. So you're talking, I'm just confused on the math. Okay. I budget for get paid by. monthly, so $1,100 a paycheck-based pay. And that's two times a month? Yes.

Starting point is 02:00:24 Okay. So that is $2,200 a month. Yeah, did you get a big tax refund? No. Well, here's our housing parameter, Noah, just so you understand, we recommend the mortgage payment be no more than a quarter of your after-tax monthly income on a 15-year fixed-rate mortgage. So I just crunch the numbers here for you on our mortgage calculator, a $200,000.

Starting point is 02:00:46 $2,000 home with $42,000 down on a 15-year fix, you're looking at about $1,700 out of your $2,200. Okay. So that is, you're going to be poor. You're going to have $200 left over to basically fund everything else in your life. So you're not ready to buy a home, and I don't think you're in desperate need of a home. Are you living with family right now or renting? I'm not free to a family right now. Okay.

Starting point is 02:01:13 I would work on your income. That's going to be your greatest wealth building tool. It's going to give you the ability to buy a home one day and afford the mortgage payment. But right now, you should be focused on how can I make more in my career? Okay. Yeah, because that monthly payment's going to be kind of your make or break, Noah, just on what you really can afford. And if you keep saving up a big down payment, that'll be great because hopefully you'll continue to get raises, you know, over the next few years. And I wouldn't, and I wouldn't rush into the housing market.

Starting point is 02:01:43 And when you're ready to buy a home, that's going to be a great time. But it may be in another three to four years. And that's okay. And you can rent in the meantime or where you are. And when the CDs expire, I would take them out of CDs, and I would put them in a high-yield savings account. Our friends at Fairwin's Credit Union is a great, that's a great place to open an account.

Starting point is 02:02:04 You can get a free-checking account, and they have a great high-yield savings option, too. And so I would put my money in there versus a CD. and yeah, and just keep piling money, because you do want a fully funded emergency fund as well on top of your down payment, so some of that $34,000 can be set aside as an emergency fund.

Starting point is 02:02:24 And just continue. Yeah, I mean, I would say I love the motivation that you have, NOAA, and where you are financially is amazing. Like, the fact you have no debt, the fact you have $34,000 saved, and you have a goal that you're working towards for this home, like all of this is so great.

Starting point is 02:02:40 And so I would say I just, I wouldn't be as urgent as maybe you are and give yourself a little bit of time to get that income up. Okay, so just rent in the meantime? Yeah, just rent or keep living with family. I mean, you're 19. I would just focus on what can I do to grow this career, grow this income so I can speed up this process. Yep. But you're on the right path. Well done.

Starting point is 02:03:01 All right, let's go to Nathan in Rochester, New York. Hi, Nathan. Welcome to the show. Hi, thank you for having me. Absolutely. How can we help? So about nine months ago, I bought a truck for about $29,000. I sat down a routine with everything again.

Starting point is 02:03:19 I still owe $29,000 on it and I'm making my payments every month, and I need help trying to figure out how to get out of this situation. What's the interest rate? 14%. Well, that'll do it. Ouch. The interest payment you're making is probably as much as your monthly payment, so they're just washing each other out.

Starting point is 02:03:39 How much can you sell it for, Nathan? I just got it quoted for 17.5. Why is it so low? Did you roll over negative equity? No, I did not. Was it for a trade-in or a personal sale? And where did you get it quoted? I was at a local dealership. I was just trying to figure out what I could get it for and they evaluated at 17-5. Who's they? The dealership?

Starting point is 02:04:05 Yeah, the dealership, yes. Well, that's the worst place to get it valued. I would look at the private party value on Kelly Blue Book because there is no way a $29,000 car, nine months later is worth $17,000. No, it should be more like 22-ish probably. Now, obviously you got screwed on this deal, so they may have sold you a $17,000 car for $29,000 for all I know. I'm especially charging you 14% interest. Was your credit just shot? No, I don't wonder exactly what it was, but it was around the high 780s.

Starting point is 02:04:35 How did you get a 14% in? I mean, I just don't understand. that. Yeah, I don't. Do you have any other debt? Like everything? No, I do not. It's that.

Starting point is 02:04:47 So when I bought the truck, I was at my job, I was making $28 an hour. And then at the end of, the beginning of this year, my whole company got let go. And I've taken a almost $7 pay cut at my current job. What are you making now? The base salary. Right around $21.62 an hour. Okay, so about $44. 45,000 a year probably?

Starting point is 02:05:11 Correct. Okay. Well, this truck needs to go. And so you might need to save up the amount you're under water on just to get rid of it, and that would still be worth it. And you go get you a beater car to get you from A to B in the meantime until you can save up and buy something used in cash. But there's no other way to get out of the payments.

Starting point is 02:05:31 That plus all like the insurance. Because I'm 21, my insurance is around $300 a month. Yeah, that's expensive for a young guy. A lot of risk for the insurance company. Yeah, and with all with the gas and everything at the end of every month, I'm scrunching at the pennies to try and make money. If your credit score is still good, I'd go down to your local credit union and see if they can give you a loan for the difference you're underwater on, but still try to get top dollar

Starting point is 02:05:54 for it. That might be private party. That might be like a carve-on or a car max, but just see how small you can make that gap you're underwater on, get a loan for the difference plus some to get you a beter car from A to B, and you'll be out of this thing and be able to save up. And your payments are going to be. it's going to, you're going to feel the difference of what you're doing now and it's not making a dent, right, versus a, I don't know, a $12,000 loan from the, you know, that you pay off the difference and then go get, go get a beat or car for a season. It'll have a lower interest rate. Yes. For sure. And yeah. What's your payment right now? I'm paying $586 a month. Ouch, plus the $300 in interest. So you're going to be. And it's not even doing a dent to the loan. That just hurts.

Starting point is 02:06:36 Well, you're probably paying $586 in interest. So every month it's just, it's not moving the needle on the balance. And so that's the issue. I looked at the loan. I think it was like $11.14 a day on interest. Ouch. Yeah. And Nathan, remember this rule of thumb, too,

Starting point is 02:06:54 that what you have in motors and wheels should be no more than half of your annual take-home pay. And you exceeded that, getting a $30,000 truck while making $45,000 a year. So keep those vehicles below that so that you don't get stuck in the situation again. Thanks for the call. Thanks to everyone in the booth.

Starting point is 02:07:14 George, thanks for a great show. And thank you, America. And remember, there's ultimately only one way to financial peace. And that's to walk daily with the Prince of Peace, Christ Jesus.

The Ramsey Show - Stop Starting Over and Break the Cycle for Good

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