The Ramsey Show - The Baby Steps Break You out of the Paycheck-to-Paycheck Cycle

Episode Date: February 7, 2025

📈 Are you on track with the Baby Steps? Get a Free Personalized Plan George Kamel & Dr. John Delony answer your questions and discuss: "I can’t convince my girl friend to get off credit cards," "My dad is pressuring me to take out a car loan," "How do I stop living paycheck-to-paycheck?," "My girlfriend has $470k in students loans and is asking me if there's going to be a proposal soon..." "Should I pay for a house that isn't in my name?" Support Our Sponsors: 🌱 Get 10% off your first month of BetterHelp ◎ Get 10% off Byrna product bundles and more! 🏥 Learn more about Christian Healthcare Ministries 🏡 Get started today with Churchill Mortgage 🔒 Get 20% off when you join DeleteMe 🏦 Go to FAIRWINDS Credit Union for an exclusive account bundle! 🥗 Save 15% on your first Field of Greens order with code RAMSEY ⛨ Find top Health Insurance Plans at Health Trust Financial 💸 To find out more about student loan refinancing, check out Laurel Road 💻 Visit NetSuite today to learn more 🗂️ Use promo code RAMSEY for 18% off at The Nokbox 💵 Learn more about Timothy Plan 🏛 Get started with YRefy or call 844-2-RAMSEY 🔐 Visit Zander Insurance for your free instant quote today! Next Steps 📱 Watch the full episode for free in the Ramsey Network app. 📞 Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET or click here! 💼 Connect with a RamseyTrusted tax pro for help with payroll and more 💵 Start your free budget today. Download the EveryDollar app! ☂️Get trusted insurance coverage that fits your budget. 💪 Invest with confidence! Get tickets to Investing Essentials 🪑 Check out Front Row Seat with Ken Coleman! Listen to more from Ramsey Network 🎙️ The Ramsey Show   🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show 💸 The Ramsey Show Highlights 💰 George Kamel 🪑 Front Row Seat with Ken Coleman 📈 EntreLeadership Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

From Ramsey Network, this is The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, joined by my good friend Dr Dr. John Deloney, and we're taking your calls at triple eight, eight two five, five two two five. Call us up and we'll help you take the right next step for your life and your money. Hunter's gonna kick us off in Calgary, Canada. What's going on, Hunter, how can we help?

Hey, so I believe in the Ramsey method. Saved up a good amount of money, I wanna buy a house. I have this girl, like I believe in the Ramsey method. I saved up a good amount of money. I want to buy a house. I have this girl, like I want to marry her, but she doesn't believe in... She believes in like credit cards and I don't want credit cards. Because that's what you guys teach. How can I convince her? She thinks that like you can't rent a place or you can't get a house

and I'll try to explain her. Otherwise, what do you guys think? How have you tried to explain it like role play it with me how have you tried to teach your girlfriend or to talk to your girlfriend about the way she thinks about a problem is wrong? Well I just I don't know I try to go soft like you guys do I don't know I I'm like, well, this served me well. The Ramsey Method served me well. I saved up over like $120,000. I'm only 22 years old. I think, yeah, I think it's just less risk. But so you are making, I don't want to over gender this. Okay. You're doing it exactly the way I would have done it at 22. Which is, I would have sat down with a spreadsheet

and said, look how old I am, look how much money I am. And by the way, can I just, George and I high five you? You're doing incredibly well. Well, I told you, man. 99% of Americans don't have as much money as you have in the checking account. That's because he's in Canada. Yeah, oh Canada, there you go.

On behalf of Americans, they don't have that much money either, but so you're doing a great job there. But I think getting beneath that is the only way I've heard and or seen it be successful. Which is I don't want like you first hand know the turmoil that's been going on in the Canadian government over the last few years, right? The last few days. Of course, yeah. Yeah. To your girlfriend, I'm nervous and scared about any entity, the government, a bank, a car dealership, anybody owning me and you. Okay, that's a good way to put it.

This is about safety. This is about, I want to have a family with you and I want us to control our destiny. I don't want a bank to tell us that you can't stay home with the kids I don't want a government to tell us that we have to leave our house I want us to be completely free and that's that's a different conversation than the ROI Come George and I get calls all over the the world about well, I've got a 2.7% mortgage, but a 5% I don't care. I'm gonna start with freedom. I don't want anyone to own my family.

Yeah. And if she says, screw you, you know how good of a deal we can get on a suburban, then y'all have a deeper relationship challenge, right? Huge one, yeah. And Hunter, I cover in my book, Breaking Free from Broke, I went through every single thing I've ever heard about using credit cards and I debunked it,

not with just opinions, but with facts, with research, with my experience, with hundreds of others. And so I'm gonna send you a copy of Breaking Free from Broke and here's what I would do. Hey, as part of our future together, I wanna make sure we're aligned with money because I know that money fights and money problems are one of the leading causes of divorce

and I want this relationship to succeed. Would you be willing to read this book with me about personal finance or listen to the audio book? Would she say yes? I think so, yeah. Because then it's not you telling her, it's, hey, what do you think about that chapter? That was interesting.

Like how he was talking about how you can rent a car without a debit card and the steps you need to take to buy a house without a credit score. And then it starts a conversation instead of you telling her how it's gonna be. And I think that will help this go better. Awesome, thank you. This is for you dude,

but it's also for everybody listening. It's really important that a future husband and wife, a current, you know, like just a partnership, right? Two people who are married. Their values are aligned, but dude, beliefs will change all over the place. My wife and I believe different things, right? That's why we read different books, listen to podcasts.

I want my beliefs to always be challenged and always be changing. And it gives us stuff to talk about when we go on dates, but our values are aligned. And so maybe a fun exercise for y'all too is like, going into marriage, by the way, they'll change over time, but going in, what do we value? And if you start with, as for me and my house,

I'm really gonna value being free. Nobody's gonna tell me what I have to do. I'm gonna be able to control my destiny and I want me and my wife to share that. Who can disagree with that, right? No, it's true. It's a good way to put it. And then she'll give you some values.

And then from there, you can get into the belief stuff. And belief is where the fun fights and the fun, no ways, and the fun like, oh, you changed my mind. That's the beauty of relationships that I love. George and I believe different things. He believes that there's a Sasquatch. I don't think there is, but he does, right? And so that's awesome, but both of us value

like hanging out as friends. And so that value is gonna override any silly beliefs either one of us have, right? Okay, that's awesome. Values are different than beliefs. And so good for you. And tell me your age again and how much you have saved up. I'm 22 and I have over

120,000 saved up and I'm making over six figures and what do you do man do you like dispose of bodies what do you do? I'm a heavy duty mechanic. Close enough. Hold on you can't make that kind of money doing heavy duty machinery stuff you have can only make that kind of money if you're a physician, is that true? No. You just gotta work hard, put your time in, yeah. Do you go to college or trade school? Yeah, I went to trade school. How much was it?

Uh, maybe, I don't know, $8,000, whole tuition. That's pretty sweet ROI. You paid cash for it, no debt? Yeah, cash, all cash. Oh my goodness. Hunter, you're making a whole bunch of listeners, like debt? Yeah, cash, all cash. Oh my goodness. Hunter, you're making a whole bunch of listeners, like millions of people, very uncomfortable. I hope so. Because right now they're watching a lot of news thinking that everyone else is going to save their problems.

And then there's guys like you, it's like 8,000 bucks, game on. Good for you, brother. I'm proud of you, dude. Thanks for the call. It's an honor that I got to talk to you today. I like, man. There's an angry parent listening. He was like, I just sent my kid to four years of college. It's 200 grand for a sociology. Oh my gosh, what do we do?

What did we do? Hunter's making 100 grand. And there's also millions of fathers of 22 year old daughters who are like, no, no, Hunter, before you marry her, here's my daughter's number, right? You mean you're going to be a person of integrity and you're number, right? You mean you're gonna be a person of integrity and you're gonna work real hard and you're committed to a household of freedom

for the rest of your life. Amazing. I like making a bet with this girlfriend going, hey, let me be wrong. Cut up the cards, let's live our life and let me be wrong if we end up hitting a wall because of this issue. Okay, that can be a fun.

So we're gonna put, I'm gonna put 5, thousand of my one hundred twenty five thousand in an account. If we ever go to get an apartment and we don't have a place to live because we don't have a credit score, that five thousand bucks is we're going to put it in the budget that month as spendathon. Per spending money. That's right.

That's a fun game to play. That could be. I love that. Well, Hunter, hang on the line. I'm going to send you a copy of the book Breaking Free from Broke and in there, specifically the credit cards chapter and the credit score chapter, those two will unlock a whole lot for you and your girlfriend about how to live outside

of the system. That's why I wrote it John, I wanted people to buck the system entirely because they go, I hear this, well George you can't live life without, you're so out of touch that you think you need a credit score and a credit card to live your life. I'm like, you're out of touch thinking this is the only way to live. You've been so brainwashed. And can we say, can everybody just recognize? It's not so much about living outside the system right now.

The system, as we know it, is being taken apart, brick by brick, dismantled right in front of us. So you're going to be on a different train. I want to be on a train that I'm driving, not that I get thrown in the back of because there was no other options. Right? That's right. John's good. It'll be driving for you. It's going to be an autonomous vehicle, John. Will you actually be driving? I'm going to keep my old truck just for that reason. With a stick shift. This is the Ramsey Show. There's a time in your life and in the baby steps for renting, but you don't want to do

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Welcome back to the Ramsey Show. I'm George Campbell, joined by bestselling author, Dr. John Bologna, taking your calls at triple eight, eight two five, five two two five. To Canada, again we go. To Toronto, Noah joins us there. What's going on Noah? Hi, how are you guys?

Doing well. How can we help? So, I'm 21 years old. I know I'm pretty much next to nothing about finance. And right now, currently, I'm sharing the vehicle with my mother. And over the next couple of years, I'd like to stock away some cash and buying my own car. And, um, the car I want to buy will be worth a resale value of roughly 15,000. By the time I want to buy it. Um,

my parents suggest that I take it alone on this car instead of paying upfront with cash, which, um, I mean, I've been listening to the show for a little bit, but it's even just on my basic instinct doesn't really seem totally right. I mean, if I have the cash and if it doesn't swap my net worth, then I don't see why I shouldn't just pay upfront for it. And they're, uh, basically they're argument to why I should do this is they claim that the interest that I'd be paying on the car loan would be less than the interest that I would gain through some sort of stock market portfolio with the

rest of the cash. Got it. So they're saying, hey, you could leverage that money in the stock market instead of sinking it into a car. Yeah. So I- And I'm wondering- George is the finance guy.

I'm wondering what you can tell them. But George knows way more about numbers and money than I do. Yeah. So I- And I'm wondering- George is the finance guy. I'm wondering what you think about that. George knows way more about numbers and money than I do. My first response to that is, maybe, right? So maybe, like just number for number. So if you get a car at 7%, maybe you can put it in the market and get 8%. So maybe. But that evaluation doesn't take into consideration that the value of that car

goes down every day. And so it doesn't factor depreciation. So you're paying money back on something that's worth less and less every single day. Do you get what I'm saying? So you're trading one thing for another, but if you don't factor in the depreciation cost of that used car, then you're not taking in the entire financial picture. Right. And there are no guarantees in the stock market. And I don't know what they're invested in

and what's going on in Canada, but I'll tell you here in the US, we don't know what the future holds. And there's a guaranteed return when you pay cash for that car, instead of going, all right, I spent 15 grand and in the end, I paid 20 with interest and now the car's only worth 10 by the time I pay it off.

That's the reality of the math of how cars work. And therefore, cars are one of the dumbest things to go into debt for because they're continually going down in value while you pay interest on it. And the market return may be lower. So I think a couple years ago, I'm trying to remember off top of my head, but I think my whole thing went down 17%. Last year it was up 24% or something like that. That's cool if I'm looking at a 50 year play, right?

Or if I've got this stuff in the market for 30 years, if I'm holding a four year car note, that's horrifying because the one consistent that never changes is that car payment is due every month. No matter what. You get what I'm saying? So it sounds to me, tell me if I'm wrong, your parents just want to stop sharing a car with you. I mean, it's kind of just, the car was actually my idea, like the save for my own car.

It's just the car we're sharing, or at least the one I'm sharing with my mother is quite old. And by the time I'd be getting this other car, that car will probably be about 20 or so years old. Why did she pay off her car? Did they pay cash for theirs? Uh, I, I actually don't know.

Might be something to ask them. If it's such a good idea, why aren't they doing it? They should be taking out as many car loans as they can get and putting it into the stock market. By beating the market. Right. I know that the car that my father bought when I was very young, I know he took out a loan

on that one, but the most recent one he bought, he paid fully cash for. What a dumb idea that was. He could have been leveraging that in the stock market, Noah. Do you see where I'm going with this? It's okay to be misaligned with your parents. This is why I'm confused. Don't be confused. Here's this, your mom and dad have whatever algorithm

they've worked out. They think it's the best, and they're probably trying to love you in the best way they know how. It's all good. They're not bad people. They're not bad people. The reality is the best thing I can tell you is at my house in George Campbell's house in Dave's house and our in Jade's house, we write a check for cars. Almost always, unless you're Dave, almost always used

cars. And it gives you, if it gives you any solace, I still disagree with my father to this day, anytime we talk about money. So this is just the thing of life you're gonna have to get used to. Me and my father do not talk about money anymore. We just laugh it off and go, oh, thanks dad, I'm good, I'm good.

But the truth is Noah, you can do this on your own and you're a grown man who probably will soon move out and have his own life, right? Of course. And they don't pay your bills. And so they're not gonna get a vote in your financial choices. And so you gotta do what is in your gut

is the best thing for your financial future. And you know too much to go into debt at this point. And so the next goal is how do I save up really quickly to get a car I can afford in cash? How long will that take? Okay. It's gonna take you about two years, you said? Oh, you were actually asking.

Oh, yeah, it'll take about two years, yeah. Are you living at home? If I, yeah, I am. What do you make a year? I could sit per year, I'm not totally sure. I mean, I'm about to be hired for a landscaping company that pays about 22 per hour, which is roughly, I guess, $5,200 per month before taxes and pension deductions and all that. So you could have a car in five months.

Yeah, I don't like this two-year plan where you're saving, you know, five, six hundred bucks a month. You should be able to save up, you know, a grand a month and knock this thing out within a year. No, I don't like this two year plan where you're saving five, 600 bucks a month. You should be able to save up a grand a month and knock this thing out within a year. No, absolutely. I guess, I mean, yeah, you're absolutely right. I guess I'm just not too much of an rush to get a whole separate vehicle.

You know what I mean? I guess. Well, the longer you're tethered to mom's vehicle, the longer this is gonna get played out where you're tethered to mom's vehicle, the longer this is going to get played out where you're just intertwined with family finances. I'd love to see out on your own and that's going to give you a sense of independence, maturity, and I've just seen it too often where growth is stunted when you stay at home for too long when you don't need to.

You're right. Yeah. So even if you get three roommates, you grow up fast when you're living with three dudes. All right? You start to learn some things and it prepares you for marriage. And it boosts your immune system too because a house full of guys is disgusting. Absolutely.

Just kind of as a general rule. I'll tell you, my mom was just in town, Noah, I revert to a child, right? She's like, no, I'll get the dishes, I'll fold the laundry. There's just a piece of you that turns into a child when mommy and daddy are there. And so I think it's gonna really help you financially,

spiritually, emotionally, mentally to move on and do your own thing sooner rather than later. I agree. But good gut instincts brother, you're on your way. I love it. That's awesome. That's big. So John, this comes up a lot. There's a rub between, there's a thing this other person believes and they're projecting it on to me and I love this person, I respect this person, and it's easy to say, well, just have a boundaries conversation and tell them to kick rocks and pound sand. But the reality is these are your parents.

These are your loved ones. Right. Can I tell you what I think is so what's happening? Our culture has told us if you have a disagreement with someone, you have to hate them. If somebody believes strongly about debt and you believe strongly about borrowing money, then inherently we have to hate each other. If you vote differently, if you wanna go to this church

and I wanna go to this church, we have to hate each other. And that's so nonsense. The whole, I know he's from Toronto, the whole American exchange, the whole idea of the United States is, you believe this, I believe this, and we're gonna figure out a way that we can both live together and move forward. So, man, people like your parents, most of the time there are evil actors out there, and there's morons out there. Most of the time a mom and her dad sits down and gives their kid what they think is the next best right step for them.

Period. So you don't have to hate them, and you don't have to do everything that they say all the time especially when you're a grown-up. Now if you're 22 and you still live in mommy's house and you're borrowing mommy's car then you're gonna do what mommy says and if mommy says be home at 1030 at night because I'm uncomfortable with those what's going on out on these streets because I watch tons of news then you have a choice be home at 1030 or move out right but that's the world we're in so godly dude if you can make peace with people who just have different thoughts than you and then go do what's the next right

move especially I love what he said my guts are telling me this is the wrong thing follow your guts man just it's just the wrong move and apparently multiple this is plural guts. Yeah. I thought you had one, but I love that John has multiple. That's the kind of man he is. Yeah. And he's got guts. And hashtag biology and science.

Hashtag microbiome. We'll look into that later. Hey, more of your calls coming up. 888-825-5225. This is the Ramsey Show. What does the future hold for business? Ask nine experts and you'll get 10 different answers. Economic growth or recession, business taxes will go up

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speaking of what's next download the CFO's guide to AI and machine learning at netsuite.com slash Ramsey it's free at netsuite.com slash Ramsey at netsuite.com slash Ramsey. Welcome back to The Ramsey Show. I'm George Kamel here with Dr. John Delaney. One of the best things to do for your finances is to have a really good tax pro in your corner that you can trust. They'll help advise you on the best moves to make for your situation or for your small business, especially if you've had some big life

changes in the past year. So do what John and I do. Go to Ramseyysolutions.com slash tax pro to find CPAs and enrolled agents in your area that have been vetted by the Ramsey team. Take the stress out of it. All right, Tyler is up next down the road here in Nashville, Tennessee.

What's going on Tyler? Hey, how's it going? Good, how are you? Oh, I'm doing all right. But starting off, so I'm a 22 year old in Nashville currently, I'm originally from Indiana. I am living paycheck to paycheck as of right now, but I have every now and then I get like a little bit

spare some money to put aside, and I'm trying to start my own two businesses. So my main question is, should I put that money aside and put it towards the businesses or should I invest it in something else to get me and my old lady a house? Considering I have no credit card debt, I have no debt to my name,

I have always paid cash for everything. I'm just trying to figure out what I should do. Well, you started off the call by saying you're paycheck to paycheck. So it doesn't sound like you're coming from a place of strength, ready to start a business or buy a house. So we've got to look at what's going on underneath here that's causing you to have no margin

at the end of the month. Okay. So what is your take home pay every month? Roughly about $1,200, I'd say, at the job that I'm at currently. My old job I made more, but I'm going back to that job at the end of this year. I'm going back to Indiana to go to that job. Okay, what will you be making then?

Roughly, I mean I made 1,200 a week, so I'll be making roughly 5,000 a month at that job. So why did your income get cut? You were making four times what you were. So the job that I took down here, it's actually the same job, it's a traffic flagging position. I'm not making as much money and it's not union based. So it's not like a laboring job, I guess.

Yeah, but you're working full time and making 300 bucks a week? Roughly, yeah. I mean, I'm not making much and I don't know why. Well, is it an hourly job or is there salary? It's hourly. Okay. So what are you making per hour? Roughly 1850. Okay, something's not tracking here because that's closer to a forty thousand dollar Salary, so you should be taking home closer to twenty five hundred a month instead of twelve hundred

Yeah, exactly. That's what I'm saying. Have you looked at your checks? See what's going on? I'm actually in the current. I'm in the currents of doing that right now. OK. And then I'll talk to my company. Right now is not the time to start businesses or buy a house. You're in a season of life where things

are changing pretty rapidly. And so I would be looking for stability. And starting a business, there's very little stability. And there's a lot of startup costs. there's a lot of risk in that. Right now, do you have any savings? Currently, no, I do not because I had to use it to pay for bills whenever they came around because I ran into an issue. Okay, so your A1 is to get some savings. You said you have no debt to your name whatsoever. Yeah, no, I mean I'm paying a trailer, but it's not under credit.

I have no credit at all. I don't have a credit line. I've always paid for cash. So you owe on this trailer. How much do you owe and to who? Roughly 1,600 through a trailer dealership. Okay. It's, I mean, I already made it.

I think it was like a $200 down payment. My first payment comes out next month. So if there's a payment involved, it's debt. Okay. Regardless of lines of credit or whatever. So we need to make sure the definitions are clear here because that's now your A1. With every future paycheck,

beyond your basic bills, necessities, you gotta throw money at that thing, get it knocked out within a month or two. Okay. Then beyond that, let's get a fully funded emergency fund, three to six months of expenses. For you that might mean 10 grand right now.

And that's going to take getting your income up because this should not take a year or two to get 10 grand saved up. Do you agree? Yeah, I got you. Then beyond that, we can talk about investing for the future and retirement accounts, saving up for a house, starting a business.

That's when you would do that. Once you have a financial foundation of no debt and a fully funded emergency fund. Okay. So you've got your work cut out for you. I love the dream of getting these businesses started up and investing for the future, but we gotta, we gotta pay for the past before we can build for the future

and get some foundation under us. Cause here's what happens. You try to start these businesses, one emergency happens. You're looking to align a credit to save the day. And that's gonna rob you from your future. So I appreciate the call, man. We're rooting for you and best of luck getting that income up and with the move, a lot going on.

Alan is up next in Orlando. What's going on, Alan? How can we help? Hi, thanks for taking my call. Sure, how can John and I help? Sure. Yeah, so I'm age 31 and currently married, no kids yet, but that's coming up around the corner, maybe a year out.

I'm currently on baby step four, been saving for retirement and had a luck of fortune or strike a fortune. The past year I've been investing in a brokerage account for 401k and that's a grown actually to just shy of a million dollars in the span of a year. Whoa. Really, really lucky. What are you invested in? COVID recovery and some technology growth. And I was very fortunate there. So how much did you put into these single stocks? Two years ago, it was about 50 or 60K.

So you turned 50K into a million dollars? Just about. In a year? There's two years. Wow you and Nancy Pelosi are really great stock trades man, good for you. You have a friend who like had coffee, he's like I'm thinking of starting this company called Open AI, you got 50 grand so congratulations dude, that's awesome. So what's your question today? So being on BabySet 4 and having this locked in a 401k account, I'm trying to understand how can I use this to looking forward ahead to BabySet 5 and 6. It is still, you know, it's in a 401k account.

I understand mathematically it makes sense to keep it in there, but psychologically, using that net worth towards some freedom, I'm curious on your thoughts there, what makes sense, when it makes sense to tap that resource. Well, if you feel like that 401k, it's super volatile right now if you are invested in single stocks versus mutual funds. So is it in single stocks?

It was, and I've diversified that out to kind of lock in. Okay, so you rebalanced and you got out of single stocks and into some bigger funds. Correct. Okay. So I would not touch this money because I don't like paying the government anything more than I have to pay. And if you pull money out before that 59 and a half

threshold, you are in a world of hurt. You're gonna be paying probably upwards of 35, 40% for the Pledge of Reviews and the like. So, Alan, I wanna ask George a question on your behalf. So if Alan had called the day before he sold those single stocks and spread it out, would you have told him, sell the single stocks and hold some money back and just stick it

in a brokerage account for buying a house and whatnot? Well, he did this all within his 401k in a retirement account. That's what I mean. If he had done it in a brokerage account for buying a house and whatnot? Well, he did this all within his 401k. That's what I mean. In a retirement account. If he had done it in a brokerage account, that would be a totally different story if it was in a non-retirement account. So the fact that it's locked up now,

that means it's gonna have those massive tax penalties. Exactly. Attached to, okay. So for the future, Alan, if you, I mean, I would still invest 15% of whatever your household income is into retirement accounts. And do you have, you said you have a house? I do have a house.

Okay, what's left on the mortgage? About 230K. Okay, and what is your household income? Ironically about 230K as well. Amazing. Okay, so Alan, I'm gonna ask another question to George on your behalf. So basically he scratched a lottery ticket and won.

And he took all that money and dropped it in a 401k. He has a million dollars in retirement. It's gonna double every seven years-ish. Would it be okay for him to pause retirement for a year and a half and pay off his house? You could at this rate. Because you're so far ahead. Yeah, I mean, at this point,

that 401k is gonna grow without you if you never put a diamond. I would still add to it. But to John's point, if you were like, hey, I wanna just knock this thing out, I want freedom faster. It sounds like you're wanting to potentially retire early or do some kind of encore career at an earlier age.

Is that right? Yeah, it would be phenomenal, absolutely. Yep. Okay. So at that point, you know, if you've got 15% invested of your amazing income, that would be, let me crunch the numbers here, 34 grand a year, which is enough to max out a 401k and an IRA, right?

So anything beyond that, I would just start dumping in a brokerage account and paying the house off with, and that'll set you up to probably have, you know, the freedom you desire by the time you're 40 with this level of income. How old are you again, Alan? 31. Yeah, so as the guy on the back end of my 40s, here's what I'm hearing. By 33, you can have a paid for house, more than a million dollars in retirement, and a brand new spouse.

That's a huge win. You're way ahead of the game, my brother. Congratulations. Way to go. You and Nancy Pelosi, man, they're doing something, John. I don't know how. Maybe Allen's been following her stock. I thought I had a good year last year.

I did not have that year. We need to be in Congress or Allen. That's the only options to build wealth fast. This is The Ramsey Show. You know how when you go against what society thinks is quote normal, like avoiding debt, it feels weird at first? Well, I'm here to tell you that is okay. I want you to be weird if that means you're being intentional, including how you budget. And one way to be intentional about how you spend your health care dollars is with Christian health care ministries.

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to find out more. That's chministries.org slash budget. Welcome back to the Ramsey Show. I'm George Campbell joined by Dr. John Delaney, open phones at 888-825-5225. From time to time, love to hear from real-life Baby Steps millionaires to see how did they do it, can it still be done in America today, and we found just the folks. And that is Jefferson and Rachel in Twin Cities, Minnesota. How are you guys? Hi, how are ya? We're doing great. Thanks for sharing your story with us. Of course.

Is Rachel on the line too? She's not. We just had our second son so she's taking care of the baby right now. Congrats. That's amazing. Figures Jefferson, she's taking care of the baby and you're talking on the phone with your friends. Figures. Figures. She is listening. I'm playing.

Okay. Tell us y'all's net worth. One and twenty thousand. So right over that mark just hit the threshold. That's incredible. Okay, what is that? I made up of Yeah, so it's about four hundred thousand of real estate. We actually just paid off our house in October of last year Way to go. Yeah, and thank you Yeah October of last year. Way to go. Yeah. And thank you. Yeah. And then we have about 500,000 in just investments, like different types of retirement funds, and then about 100,000 as split into other assets, like 50,000 in cash for emergency funds, but then cars and other other things like that as well. Incredible. How old are you two? We're 33. Both of us are 33. Oh, my goodness. You guys are too young to be this wealthy.

That's incredible. What's your household income? Thank you. So last year was one of our best years. We just made $330,000. Wow. And what was your worst year? It was right out of college, about a little less than $80,000.

Incredible. What do you do for a living? Yeah, I'm a sales rep for a software company and my wife is a stay at home mom, but she also has her master's degree in marriage and family therapy. Oh, John's going to love that. So she's a real counselor. That's awesome. Okay. Did you get a college degree? Four year? I did. Yep. What was it in?

Mine was in business finance. Okay. Do you remember your GPA? Yeah, mine was about 3.3. Okay, and your wife? She's got her masters and she's got a 4.0 in her masters. I had a feeling. And she's got a 3.4. I was like, I bet hers is gonna be sky high.

It's very smart, okay. She's a smart one, so. I love it, so you're 33 years old. When did you really begin to focus on this stuff? Did you catch it? Were you with financial peace babies? Or was this when you were at a college, you found out about the Ramsey Way?

Yeah, so it's funny. It's always been a focus of mine, but we weren't really super intentional about it until about two years ago when our first son was born and my wife stopped working and things got really tight. We had a car payment, we had the house and all of these different things. And my wife and I, we found Ramsey while we were going through church and we got really intentional. We combined everything, we paid off our car quickly, and then we got really intentional. We combined everything. We paid off our car quickly.

And then we got really diligently focused on paying off the house. And we paid off about 270,000 in two years. Just really focused on intensity of making sure that we got that house payment done. So if we wanna have more kids and my wife wants to stay at home, we've got that flexibility to do so.

You were solving for freedom as John Delaney would say. Okay, so what was your mortgage interest rate? It was about 3.5%. Wait a minute, you can't pay that off Jefferson, that's against the law or something. Yeah, we've heard it all. We've heard it from a lot of coworkers, friends saying, you know, you're crazy for doing that, but the peace that we have, you know, now that we have our second son here

and we don't have to worry about things, we can just choose to do whatever we wanna do with our money and, you know, choose to do whatever we wanna do with our life, it brings a lot of peace to us. Wow. So even though, you'll never have a 3.5% interest rate again on that mortgage, you're gonna be stuck

with a 0% rate with no payment for the rest of your life. You blew it. And when you spend $30,000 a year in interest income, you're not gonna be able to deduct $12,000 off of your taxes. Do your friends talk to you like that? Do you have people in your life who think you're crazy for doing all of this and following the Ramsey Plan? Absolutely, absolutely.

We do. What do you tell them? But we also, well, we just tell them the piece that we have about having a pay for house, being able to make decisions about what we want our life to look like in the future just brings us so much joy and that it's not about the, like it's about the money, much joy and that it's not about the, like it's about the money of course, but it's not about the interest rate,

it's not about that tax deduction, it's about the peace that comes with our house and the ability to make the decisions that we wanna make for our family. Beautifully said. And you've been doing this for a while as far, you know, you've been investing for a long time, just half a million in retirement accounts at 33

is really impressive. So you guys were doing a bunch of things at once, it sounds like. You had some debt, you were trying to invest, you were trying to save, you got the house, you weren't aggressive about paying it off, but you started on the Ramsey way with some focused intensity and you went,

man, what could we do if we just really focus and hunker down for two years? Couldn't have said it better myself. Okay, I'm just making sure I'm hearing that right. I love it. Did you inherit any of this money? We got a small gift from my parents to help pay for the down payment of the house.

It was like 20, 30K, but that's it. So mathematically, that didn't cause you to become a millionaire, but it did help you get a foot in the door in the housing market. And I'm sure this house is appreciated in value. Yes. What did you buy it for?

We bought it in 2019. $325. And it's worth over $400? $420. Yeah. Way to go. And now what's next? You're 33, you get your whole life ahead of you, you're in Baby Step 7, what does the

future hold? You know, the world's kind of our oyster. I mean, we got a second kid, so right now we're focusing on sleeping is the biggest thing. But other than that, you know, we want to maybe get another house one day, but we'll pay for cash for that and, you know, just continue to grow our wealth and save for our kids and save for our future. And we're just, we're excited for the future now that we're not paying for, you know, our past decisions. We get to focus on the future now.

All right, Jefferson, I kind of smiled, George smiled. George has a baby in his house, but I want to double click on that. Beneath the smile, there's some real seriousness to what you just said. Without a doubt, the number one conversation I have with couples who have a toddler in the house is downstream effects of one or both of the parents not being able to sleep.

And this idea that you all get to create this, whatever you want your world to look like because you don't owe anybody anything. That's so profound and the ripple effects through your kids, through that toddler who's not going to have a mom who's super anxious all the time, not going to have a dad whose head's 500 different directions, he can be present in his own house. That is ultimate change your family tree kind of stuff, man. Like congratulations on that. That's really, that sounds fun.

Like we're focusing on sleep, but dude, that's also a huge deal. That's amazing. Yeah Yeah, we're this our second kid is a lot different to our first kid just because we do have a paid-for house And and things are much more peaceful here. So we're loving it Well, my second kid was a human hurricane compared to my first kid. So how hot are you guys? Oh I love it. Can I ask what you guys drive? Give us the year making model. Yep, I drive a 2017 Ford F-150, bought that used and my wife drives a 2017 Honda Accord and we might be getting her a 2020 little SUV here soon, but they both use cars. Amazing. So if you guys wanted to know, listening out there,

what do actual millionaires drive? It looks a lot like an eight year old reasonable car. I mean, and that's what we saw in the millionaire study, Jefferson, is most millionaires are driving a Honda, Toyota, a Ford, and they bought it used. It's four years old, 41,000 miles on average. And so you guys are right there.

And at a very young age, most people don't reach millionaire status until 49, is what we found. So you guys, it tells me you're way ahead of the pack. You're going to build generational wealth and I can't wait to see what you guys do with it. We appreciate it. We appreciate the random show.

We listen all the time. We love you guys. So we appreciate it. Thank you for the advice. You're an inspiration. Tell your wife we love her. We're thinking of her and congratulations. Get off the phone, quit talking to your friends

and go help your wife. Go help your wife. Jeez. John, here's what I want. I want a sleep study comparing those who have debt and those who are debt-free. Yes, and I want that. Can we do that?

Yes, absolutely. Can you commission this? You have power. So I have no power, but any researcher out there, grad student who wants to do that study, I promise you I'll make you famous. I'll put it on this show. Results either way, up or down, I'll call it out.

You can reach out to us and I'll put you and the study on air. All right, let's go researchers. I can almost guarantee you that we know how this will end. My hypothesis would be if you don't owe anybody any money, you sleep pretty good. You're doing better. Your brain chemistry, synapses are firing up there in a good way. We like to see. Hey, this has been the Ramsey Show.

Thanks for joining us. Hey, what's up guys? It's Jade Warsha. And look, if there's anybody who knows student loan debt is a problem, it's me. My husband and I had $280,000 of it, but we were able to dig ourselves out and you can too. If your student loan payment and interest rate are burying you, refinancing could be

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where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, joined by Dr. John Deloney, and we're taking your calls at 888-825-5225. John is going to kick us off this hour in San Diego, California. What's going on, John? Hello. Hey. Hi, how you doing? We're doing great. How can, John? Hello. Hey.

Hi, how you doing? We're doing great. How can we help? Hi. So my name is John. My girlfriend moved from Atlanta to San Diego, moved in with me, and she has about $472,000 in debt from med school.

And she's wondering if there's going to be a proposal as well before she moved, I had told her that I was a bit concerned with the debt and, uh, that we had to figure that out before things moved forward. And, um, yeah, long story short, she's moved over and we've been living together for about six months. And she- So she wants you to propose, she's like, hey, when are you gonna pop the question?

And you're like, hey, when are you gonna get rid of the half million dollar in loans that you got? Hold on, but even before that, she was like, hey, I wanna move in. And you're like, I've got some reservations about you only half a million dollars and Then you just made it sound like she just showed up at your house No, we we were dating or we've been dating for

About two years now long distance because she was going to school finishing up school So as she was getting ready to finish she was like, okay, so I'm getting ready to finish and you know like what's going on so I told her you know like I mean I don't mind you moving over but I know where this is gonna go once you move over here and I would rather have a concrete plan that's actual so that probably would have been a better conversation before you were sitting on her couch that's in your living room. But here you are. So what are you going to do? Well, that's what I'm trying to get help with. Well, she already moved in so like, what are you going to do? You gonna kick her out? I'm not going to kick her out, but you know, like just having a question getting asked like every, I don't know, once a month or every three weeks.

What's her urgency for you to propose? Well, most of her friends are married, you know, like getting along with a life, with their lives and she's just wanted to know what not to do. Now you're playing house, so she's like, hey, can we make this a home? I feel like, you know, we've already committed to each other in this way. Why aren't you proposing? So I'm trying to see from her perspective. And I also know in this show, I've never told someone not to get married to someone

because of their debt load. Now I would tell them to pause if we're not aligned in how we're gonna deal with the debt. So is that the part that worries you? Has she said, I'm not worried about it, pay it off when I can. What's her plan? Yeah, so what worries me is, okay,

she's a physician and she got a job a consultant job where she only works four days a week and she works out of the four days a week she works like four hours a day or five hours a day okay so can we cut to it dude? Like you feel over water because you don't respect the woman that you thought you were gonna marry. She's not who you thought she was gonna be. I just feel concerned that she isn't taking it as serious as it is. Okay so get beneath that. She's not who you thought she was. And you made a huge step by inviting her

to move across the country into your home. And on a day-to-day basis, living this thing out, you realize she's not who I thought she was. When it comes to work ethic, when it comes to the- When it comes to work ethic, especially, to this work when it comes to work ethic especially yes but also what does that mean that means that she doesn't have a full picture of this the state of emergency that she's in because she owes a half a million dollars and she does she just wants to get married and just pretend like I will be fine you won't be fine you have a million

dollars in a non-dischargeable loan, right? She keeps telling me that you know she knows other people, other physicians that have just as much debt and they're able to live their life. I know but as a guy who's sat with physicians who are on the brink of losing everything and if you look at the suicide rates and you look at the mental health challenges I don't give a crap. That's like going to a cancer ward and being like, yeah, but look, everyone else is sick. I still don't want to have cancer. I don't want to be sick. And so it doesn't matter. That's

a weird way to anesthetize the pain of reality, which is she has a half a million dollars, but she's not on the phone. We can't help her. I can help you. And I think you have to be honest about, I don't know that I respect this woman anymore. And I'm not gonna judge you right, wrong, or indifferent. You get to respect who you want to respect. But that plays into, can I love this person? What happens when we have a kid and she just decides fill in the blank? Everyone else does X, Y, and Z for a kid. What happens when it comes to the kid's car? We can't afford this car. Everyone else has given their kid a BMW, right?

That might be the rest of your life. And I think you're wise to listen to your innate alarm systems that like, whoa, something's not whole here. But what's not fair for her is you're not being honest with her. You're trying to be annoyed that she keeps hitting you up to get married, get married, get married, and you're not

sitting down saying, I don't know if I can marry you, because we're so far from being aligned on things like integrity, character, respect, my fear of owing other people money, etc. Do you get what I'm saying? Yeah, well I've brought it up to her and she keeps telling me that she's working on it and she's, you know, like possibly looking to get a different job and. What does she make now? About the same, like 150. And what do you make?

About 150. And do you have any debt? I do not. Do you own your place or do you rent? I rent. Okay. So as part of this that you worked so hard to avoid debt, to create this life for yourself, to build this work ethic, and now you're tethered to someone

who doesn't align in that way? Yes. Have you said, I don't want to have a household where other people decide what we do every day? I want to have a household where other people decide what we do every day. I want to be free I've told her that I don't feel comfortable with the debt. Okay, and she has said I don't care what you think when you're gonna marry me Well, not verbally but she keeps on telling me that you know, like there are other physicians and her field that owe just as much or even more. She's going to spend her whole life comparing hers to others. That is a red flag in and of itself

that I think you need to address with her. Everything so far has been, well, her friends are all getting married and her physician friends all have debt. And she's not even a physician, so that doesn't even hold. But but here's the thing either good man either make the choice in your mind I'm not gonna leave her we're gonna get married and the two of us making $300,000 a year gonna spend the next 24 to 36 months paying off this debt like crazy or we're gonna have a harder conversation about values and we may have to part ways because our values are so deeply unaligned.

But what you're doing right now is you're playing ping-pong in your own mind and you're making yourself bananas and you are worth having a peaceful life. So have the hard real honest conversation underneath it all. Talk about values and then you have to have your or what statement. What are you going to do if she says I'm not doing that? That's your call brother. Have you gotten one of those texts recently claiming to be the USPS with some sketchy link to update your address? It's annoying and a little terrifying. And you probably think to yourself, I should do something about this. But where do you even start? Well, as your nerdy friend who does the research for you

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makes your computer shoot confetti when you're done. Okay. Not that last part, but Ramsey smart tax does make filing easy and doesn't make your bank account cry. Ramsey smart tax is a hundred percent accurate software that's honest about its pricing and is backed by a company who's been in the business for over fifty years. So go to ramsysolutions.com slash smart tax to take advantage of early bird pricing and stress free filing. That's ramsysolutions.com slash smart tax. Welcome back to the Ramsey show. I'm George Campbell here with Dr. John Deloney. Hey, you do not wanna miss our two night virtual event, Investing Essentials, hosted by Dave Ramsey

and yours truly. Investing can be overwhelming and confusing and it's not something that you can understand or learn in a 60 second social media post as you're scrolling. So at this virtual event, we're gonna walk you through how to maximize your retirement plans, how to pick mutual funds, how to get the most out of your money,

invest with confidence. Plus it's the only place to get Dave's personal playbook on real estate investing, explaining how Dave made hundreds of millions in property investments. And this is not just a flex on Dave's part showing you, here's how much money I have. This isn't breaking down the formulas he uses

to make sure that he's getting the best returns on the properties, how he's sourcing his deals, and we're answering all of your questions at the same time. So if you want to get clarity on how to invest with confidence, how to start building wealth, join us for Investing Essentials, March 4th and 5th. It's virtual. You can join from home. Tickets start at $1.99. Get yours today at ramsysolutions.com slash events, or click the link in the show notes if you're tuning in on podcast or YouTube. Let's get to the phones. Alec is in West Palm Beach. What's up Alec? Hey there. How you doing?

Good. How are you? Good. I'm doing good. Me and my wife are here. We're just calling because we have we're we're only my wife's 23. I'm 24. We moved down to just we're just north of West Palm Beach. We moved here six months ago and we're currently renting. I rent about 2,500 bucks a month for just a standard, you know, through that too bad. We have a, we have a two year, two and a half year old daughter. And what our question is, is, you know, we,

we really want to buy a house and the housing market's so crazy down here in Florida, you know, so it's hard to, hard to afford a house, just, the housing market's so crazy down here in Florida, you know, so it's hard to, hard to afford a house, just even a basic house, like what we have right now or, uh, on a, on my income where, cause I'm, I'm just a carpenter. I make about, you know, 40 to 60,000 a year, you know, depending on how it goes. And, you know, I'm basically, and my wife's stay at home mom, but right now she's going to school so then she can, in about nine months, she'll be working too. But basically it's like, I'm just basically just getting by, you know, making ends meet,

get paying the bills and then, you know, just whatever we have left over is what we have and a few hundred bucks, you know, at the end of the day. But on the other side of things, my wife, she was in a pretty serious court trial thing for about eight years, and she finally won it. And she got about a half a million dollars from it. And we have it invested. We have it invested right now with the financial advisor, because we didn't want to squander it. You know, it's a good steward. We want to be good stewards of our money that the Lord blessed us with. And, uh, just trying to do things the right way and all. And, but right now we, we found a house that's $50,000 under the, under any comp. It's a three,

it's a three, two 1500 square feet, you know, a nice, nice, beautiful curve of peel. And you know, it needs a little bit of update. And on the inside, it was a one-owner house, and the people passed away, you know, grandma and grandpa type of thing. And I'm worried that me and my wife are looking... What'd you say? What's the cost? It's 314.

Okay. So you have the money in cash from this court settlement? Yeah. And we have 516 right now in the account. We have 80,000 liquid and we can pull out the 315 by the time closing in. So we have the house under contract right now. However, I keep hearing from like my dad,

my dad keeps telling us to pay cash for the house, like pay cash, pay it off, don't take out a loan. But then like our financial advisor who's doing the investing for us and a few other people are like, well, why don't you just take out a loan and you don't got any liability. So do you know why?

Because your financial advisor gets a pay cut if you cash out of that portfolio. Do you understand why they would be a little more likely and biased to get you to wanna keep that money invested? Not saying they're a bad person. That's just the reality of what's going on here. I'll go one step further. You need to get a new financial advisor

because that's an advisor that's not looking out for you because I can't think of a better thing I'd want for my son or my mom and my dad. And so both sides of my question than a paid for house that nobody can take from them. Yeah, we're going to be the first ones in our family since our grandparents have a home that we own. And that makes me want like, I want to hug your dad.

The only reason why they own it is because they, you know, they paid the 30 years of mortgage and they slid through it. Like that's the only reason why they own that house. I want to hug your father because he gave you the right advice. Son don't ever owe anybody money. I've he's probably spent his whole life having to make payments on stuff and he sees an opportunity for his son to be free. And I'm not, I'm not implying dude, my smart Vestor pro, when I was had money in a high yield savings account, I had money in a,

what up with him him and he said, hey, take this and go pay off your house because I have a financial advisor who is invested in me doing what's best for me and my family, not for making himself rich. I'd get a new guy. I'd go to Ramsey Solutions Smart Vestor Pro, go check that out and get with somebody else, man, because this guy's looking out for him, number one, you number two. And that- Well, he's saying like, oh, you know, he's like,

oh, you'll make about 15 to 20% on your 500,000 wall. But we're looking at it like- First of all, any advisor- Is he investing in cocaine? What's he making 20%? Any advisor saying you're gonna get 15 to 20% in this account is lying to your face. No good advice. Every advisor would be like, hey, here's been the historical return.

We don't know what the future holds. Not you're gonna make 20 percent if you just leave it. That gives me hemorrhoids on your behalf, Alec. Pull it out. Pull it out. All right, thanks. I'm looking at it like... Go buy your house in cash. Yeah, that's what we want to do and I'm glad you guys are all about it too because you know we're like we're looking at it like if we if we pay cash for the house with all our total bills at the end of the day if we pay cash you know insurance are not we're not gonna have to get insurance because we don't have a loan. I know but you live in Florida you should get insurance.

You need insurance. That's a non-negotiable. Put that in the budget dude. Can I do some math for you though? That's about a thousand bucks a month and then the loan would be you know two thousand dollars a month and then you know and then we're just looking at like it just keeps adding on if you take out any kind of loan right but if we we don't take out a loan our bills would be about eight hundred dollars a month you know., and then you can start putting money into retirement savings, you can be insanely generous to that exhausted waitress that's bringing y'all dinner when y'all went late

that one night. Like, it changes how you do everything. Exactly, that's how we're looking at it. I'm glad you guys are saying that. Because I was just, you know, you try to. You try to pray and try to get as much information from God as you can, but sometimes you just got to kind of make the leap. I think this is our golden opportunity because we're still going to have about 200,000 left over. If we put $5,000 into the property, it's done. We don't need to, like, it's just little things. Like, you know, take the carpet out, paint the walls.

That's all we need to do. Oh, yeah, easy, easy. So let me give you some solace here that you're doing the right thing. You are very young. You said you're 23 and 24. Yeah. You'll still have 200,000 invested.

Let's say you just took half of what you're paying in rent, 1250 a month, right? And you put that in an investment account now that you're completely debt-free with tons of margin, right? Yeah. From 23 to 63, if you just did that, you would likely have $18 million in that one account. If you never add it, just 1250 a month, even if you get a raise, just keep doing 1250,

18 million from 23 to 63, and that's a 10% return on average. So I just want to give you some solace. That's great. You have plenty of time to build wealth. You're not 68 going, should I rob my entire nest egg to pay cash for a home? So this situation gives me a lot of peace that you are now freeing up your income for the rest of your life. And you're not desperate for that next job. You can do the work

you love and you don't need to go make six figures. You can be a, and when you said, here's what bothered me, Alec, you said, I'm just a carpenter, just a lowly car. Like I need to knock the Eeyore spirit out of you. Jesus was one of those too, dude. You're in good company. Thanks, guys. You do good work. You know, I try to follow his footsteps the best I can and help people out and stuff. And,

you know, it's just tough living in Florida, man. Prices are so high and we're like, we're looking at it like, why am I paying, why am I working? Guess what? This gives you freedom. You can like move one day to wherever you want and pay cash. Yeah, and by the way, yeah, you don't have to live there either. It's been fun.

Y'all are young and it's been cool living by the beach. And now maybe you move, take that $500,000 and get yourself a four bedroom, three bath house that you don't have to move from when you start having kids and it's gonna cost you 300 grand in another state somewhere but y'all can do whatever you want to because you don't have a house paying. Go build a table for your new house man you've earned it and get a new financial advisor Ramsey Solutions Smart Vestor Pros go check them out.

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or for a more personal touch, give them a call at 800-356-4282. Hey guys, Rachel Cruz here. All right, I'm about to say what everyone already knows, but budgeting is a good thing to do. Now actually starting, well, is a good thing to do. Now actually starting, well that's where people freeze up. And you guys, it doesn't have to be that way.

With the Every Dollar Budgeting app, getting started is super easy and so is sticking to it. You can set up your first budget in less time than it takes to go through the Chick-fil-A drive-through. It's fast. And the best part, with unlimited budget categories, you can customize it to fit your life. Grocery runs, coffee runs, or planning your next family trip. Whatever you have going on, every dollar helps you see exactly what's

happening with your money. You'll know what's coming in, what's going out, and what's left over for some fun. Because let's be real, you need some fun in your budget. Every dollar keeps budgeting simple and stress free just the way you want it. So go download the app for free and get started today. Again, go download every dollar today. Welcome back to The Ramsey Show. Open phones at triple 8, 825-5225. The Ramsey Show question of the day is brought to you by WIREFI. WIREFI refinances defaulted private student loans, which are different than federal student loans.

WIREFI refinances your defaulted private student loan and builds a custom loan based on your ability to pay. So kick your private student loan debt out of your life by going to wirefi.com slash Ramsey. That's the letter Y, R-E-F-Y dot com slash Ramsey, may not be available in all states. All right, today's question comes from Travis in Utah. Travis writes, I'm about to purchase a new home and have well over 50% saved for my down payment.

Should I use all of it for the down payment or keep a portion out to add to my retirement investing? I can afford to put less down and still make the monthly payments. Oy, oy, oy. Well, the answer is easy. retirement investing. I can afford to put less down and still make the monthly payments. Oy, oy, oy. Well, the answer is easy. I'll tell you what I would do and what I did, which is put as much down as possible. And we put down, John, I believe for our first town home when my wife and I were married, we put down 45%. So close to what he's doing. No regrets. What ended up happening was we paid off the mortgage way sooner within a few years

because we had a smaller mortgage with a much lower payment, which means we had margin to throw at the principal. So by doing that, we ended up freeing up our mortgage payment way sooner and we had the ability to invest that payment at a very young age. So I would encourage Travis to do the same

and not see it as one thing or another, should I put this in the equity of the home or in the stock market, I see this as a hedge going, hey, if I can get rid of this mortgage faster, it's gonna allow me to invest more for the long term. And the only question I would have for Travis is a huge temptation I had, especially getting going, and that is I look at all of the money I have

saved including my emergency fund, including anything in a high yield savings account that might be for colleges, not in a 529 and money for a house. And so it's so easy to look at a $300,000 house and between all those accounts that have 150 grand saved, I'm going to put all that in there. So my only hesitation would be, this is 50% saved for down payment above. You still keep your emergency fund. You still got cash there.

You still go ahead and cash, put cash aside for how much it's gonna cost to move, because you're gonna hire movers to come over and help you do all that kind of stuff. Save a little money to get your electricity turned on, because some people want a month's advance. Like all those things add up. Furniture.

Furniture. Furniture, like whatever those things are. Selling costs. And then put everything else on there, right? And so go ahead and go into that with your eyes wide open. Yeah, homeownership is more expensive than you think. And so having a lower payment, all that does is give you more margin

to cover it without breaking a sweat. You just kind of yawn and move on instead of, oh my gosh, we're already at the limit with this mortgage payment, now we have to replace the HVAC. You don't need thatwn and move on instead of, oh my gosh, we're already at the limit with this mortgage payment, now we have to replace the HVAC. You don't need that in your life. There's no need to. You have the money, you've done so well.

And my guess is he's young enough that he's gonna have plenty of time to build wealth, have compound growth on his side, and invest that 15%. And then, once the house is paid off, invest even more, 20, 30, 40, 50% of your income if you want. So, great question though. I would put down as much as possible.

As Dave says, the best plan is the 100% down plan. But he knows that will get him lambasted in today's culture. People are going, Dave, you know how much a house is in today's? Yes, he does. He does. He's just saying it's the best plan is to avoid debt. But if you're going to do it, 15 year fixed rate mortgage, make sure that payment is no more than a quarter of your take home pay. All right, CJ is up next in New Orleans. What's going on, CJ?

Hey guys, thanks for having me. So I'm just wondering, what can I do to break the cycle of getting out of debt and into debt? As someone who's kind of young, but has a pretty high income and kind of comes in waves and cycles, I can't get out of the habit. How much do you make? So last year I came out pretty tacked about $255. Wow. How old are you? 29.

Goodness, that is mind blowing. What do you do? I'm a commercial wholesale insurance broker. How old are you? 29. Goodness, that is mind blowing. What do you do? I'm a commercial wholesale insurance broker. And you're really good at it, apparently. I'm pretty decent, yeah. How much debt do you have? So I have about 330 in a home,

46 in a car, and 35 student loans, and six in cards. And what? What was the last one? It's still six in cards, like the credit cards. Oh, in credit card debt, okay, cool. So tell me how a guy making 255 is still looking to lenders

when he has the Bank of CJ available? What caused you to turn to debt? Because you have the income. I mean, you're making, what, $15,000, $16,000 a month take home pay? Well, my base, well, last year my base was only about $90,000 and then I had a bulk of that was by annual... Commission?... bonuses that I got, yeah. Okay. 90 and then the bulk of that was Biannual Commission

That I got yeah, okay Part of it I usually step back about 50% of my expenses coming for my bills and everything for the next month I put that aside so that half of my actual paycheck is going towards bills month I put that aside so that half of my actual paycheck is going towards bills and then the other half is coming from what I set aside and then the other part of my paycheck I kind of just send it. So what would you say if you were going to list the top three things this money is disappearing into, what would you list them as?

Food and going out. So you're living life as a 29 year old, going out to eat all the time. Is this, is there pressure, outside pressure from friends or is it just, nah, I want to get takeout again, another Uber Eats, who cares? Yeah, let's do it. All the above, especially Uber Eats. Okay. And you've been doing this, all of this on a credit card?

Not all of it. It's kind of just jumps, you know, if I have to have the cash, I'll use the cash. But, you know, if I'm in a crunch, I'm like, well, the card is right here. So can I tell you what I did that really helped me? I cut up the cards and I closed the accounts and I froze my credit.

And if you do those, here's what's gonna happen. You're gonna stop borrowing money. It will freeze you. You're not gonna be able to open up new lines of credit. And so right now we have to stop the bleeding. That's step number one. You asked me how to get out of the cycle. You got to just stop the behavior that's getting you into the cycle

and keeping you there. Because the truth is, you got less than 100 grand in consumer debt. You make 255. I'm guessing you have some money in savings. A little. How much? Since we're at the end of the six month period of me having bills and everything split,

maybe closer to like five or six. Five or six thousand? Yeah. Okay. So once you have a thousand dollar starter emergency fund, I would use the rest of the savings and knock out these credit cards and call it done and close the accounts, sayonara. That leaves you with a car loan and a student loan.

If you wanna keep the car, your income can support it because is this your only vehicle, only thing with wheels and motors? That's my truck. Okay. It's a nice truck, you make amazing money, so I'm not gonna tell you you have to sell it, but if you're really going,

hey, I wanna burn the ships and restart, you could sell that thing if it's just too much car for you. But that, I mean, you're gonna get out of this thing if you just go, I'm gonna get on a budget. I'm bringing in 15 grand on average. When I get these big bonuses that come in, I'm gonna throw all of it at the debt. What if you just told yourself this,

I'm not gonna even see this money. It goes through the account and it goes to the lender. Could you do that? Maybe. Maybe is what gets us in debt again. The absolutely that's where you need that level of fire. Let me ask you this. Why did you call CJ?

There's something in your guts. Why did you call? The stress of it. That's it. You know, because every six months, you know, right before I get the windfall of the bonus, you know, I think it comes to that, to February. It's like, oh, wow, I'm scratching by, let's wait till the end of February, get that.

All right, can I ask, this is a personal question. This is a personal question. Did you grow up with money? No. When you say no, do you mean, was money a big struggle for you? Yeah, it was a single-w and there you go the middle of nowhere So let me think it

This is this I didn't grow up in a single wide and we grew up in a small house in a suburb in North Houston Right, so I did not have that level, but I just remember money was so tight It was such an anxious thing all the time in The story that I told myself was when I make a certain dollar amount, everything will be okay, including how I feel about myself. And what you're finding is the Uber Eats, the not budgeting, you make a ton of money and you don't want the, quote unquote, hassle of having to think through it all.

And I get that sentiment. That's the story you've been telling yourself your whole life. And what I wanna tell you is, bro, I want you to have peace and I want you to have freedom. That's what we're solving for here, not another Uber Eats night. Hang on the line, we're gonna send you

Financial Peace University and every dollar premium to get you going. You make way too much money to be this stressed. And we're gonna set you free if you'll just follow through, my brother. Thank you so much for the call. You spend hours researching before making a major purchase like a home or car, but it's also a good idea to put in the work searching for the right insurance coverage. To protect your biggest assets, I recommend using Ramsey Trusted Pros. Whether you're looking for car, home,

or any other type of insurance, Ramsey Trusted providers have been coached and vetted to serve you like we would. Find what you need at ramseysolutions.com slash insurance. Welcome back to the Ramsey Show. I'm George Campbell joined by Dr. John Deloney. Hey, are you staying on track with the baby steps? Well, we made a way for you to find out. You can take a quick quiz to check your progress and receive a personalized plan just for you.

Simply head to the show notes on this episode, click on the link titled, Are You On Track With Baby Steps? And complete the quiz. Timothy is up next in Oklahoma City. What's going on, Timothy? How are y'all? Doing well.

How can we help today? So me and my wife have been married for a year now. We're on baby step two. We're tackling her student loans. And then about three years ago, I bought a house from my aunt and uncle and they were in some tax problems. They couldn't sign the house over to me.

Oh no. So no payments. Oh no. I know. But so we've got two years left until they can sign the house over to me, deed it over to me. And I will right now, currently I still owe them 60,000 and I'm just curious if, if I should sock that money away after I'm done paying student loans off and then just keep it in a bank and then that way two years from now

I can just, you know, deal's done, I don't have to take a mortgage out or should I go into investing after we pay off student loans? Oh boy, I'm still stuck on the fact that you didn't buy a house, you thought you bought a house, what was the legal process for you to buy a house

that couldn't even go into your name? Well, it wasn't on my- It's a handshake agreement? Yeah, pretty much. Oh my God, is there anything in writing? Yeah, we did write something out that we all signed. This whole thing just worries me. I mean, what if they don't get out of this mess?

And you've been paying on a property that you have no claim to? So the way I justify it to myself is... Hey, can I just say right now, hold on, before you even speak. Really low rent. Good for you. High five to you for saying it like that. The story I'm telling myself is this, so at least we're operating in reality.

Good on you. Okay, so what were you saying? So just know that there might be a scenario where you go, hey, at least we had cheap rent while we stayed here, but it's not ours. That's what I'll have to tell myself is something bad. All right. If, Hey, your, your, your glasses are not rose colored. So fair enough. So in two years you make the last payment and you own this thing out, right? No. So in two years, so they had to go to court with the IRS, the IRS, that fine, we're going to forgive everything. You cannot make any extra money for five years.

So three years, and this was three years ago. So they had this house. I said, okay, well I need a house. Uh, we came, we agreed on a price and I gave them some money down and then I pay them a monthly payment. And at that five year mark, the agreement is either I'll take out a mortgage to finish paying what I owe, or I'll have the money or whatever it takes, and then they can deed it over to me.

I thought they couldn't get extra money. Isn't this down payment and you paying them rent considered extra money? Breaking the law. We'll break it up. Cash money. Oh, under the table. Sure.

Oh, that makes it George. Okay. Hey, it's just a national radio show. What do I know? Okay. So what is your question, Timothy? If I should sock what I owe them away into a savings account so when the day comes that they can beat the house to me, I could just pay them off or should I be investing and then take out a mortgage? You're talking about not paying them anymore. No, I would still make the monthly payment, but just put extra away every month.

But how much do you have left on the student loans? When are you guys going to be completely debt-free? About seven months. And then how much longer to get a fully funded emergency fund? That would take about another three to four months. Okay, so let's call it a year. One year from now, you guys are completely debt free with an emergency fund.

That puts us in baby step four when we can begin investing. I would begin investing 15% while making rent. Any money beyond that, you can sock away to try to lower the loan that you'll have when you do take this house over. Okay. But I would just take a small loan out. You guys are gonna knock it out quick.

And so I'm not concerned about that, but I wouldn't hang on to the student loans and pile up money to make this transaction happen. Okay. I could have all of the money in about 25 months. That includes student loans and the house, all in 25 months. So you're saying you could get out of debt,

get the emergency fund and save up the 60K by the time this transaction's ready? Yeah, I think so, yeah. We save about five thousand, well we pay about five thousand a month now towards student loans. Okay, well once you free up the payment, that'll help even more.

So I like this plan, I would have a goal to go, hey, by the time they're ready to make this deal happen, we have the money to buy it from them. Are you buying it at a deal or is this market value based on all the rent you paid? So we agreed at 105, I had a real turnout a few months ago and they put it at 248. Is what it's actually worth. And the money you put in with the rent down payment

plus the 60 will be 105? Yes, sir. Okay, so two things here, I have to say this. I think you may be complicit in tax fraud. So I have to just say don't do that. But you're doing it anyway. I just feel compelled to tell you. Like if this whole ship goes down or the government finds out they've been making side money on this deal and they take the house, you're gonna be in a mess. Or if they know... Anyway, so that's number one.

Number two, I hear a secondary question, should you just let them continue to be your bank after this, God no. The second they can take, the second you can, I would take out a mortgage and end this relationship, the business relationship with my aunt and uncle. Okay. And then deal with a bank because it's already so sketched. And again, I don't want to talk bad about people who aren't in the room, right? But you've got a couple who was so bad off they had to enter into agreement with, they're so bad with their finances and that they had to enter

into an agreement with the US government and the government their finances, and that they had to enter into an agreement with the US government, and the government said, you can't make any extra money. And then they're doing something shady under the table with their nephew. And letting go of their house for less than half of market value. The best predictor of future behavior is past behavior.

And so I've got a couple here who's not good with money, who kinda does things under the table. If they don't sit down the month before you clear this and say, hey, the house is worth 240 now, we're gonna up the cost of this thing, I would be stunned. Now, I have no problem being wrong, but my goodness, man, you are dancing with the devil. And I would wanna end that as soon as possible,

let them go back to being aunt and uncle as soon as humanly possible. That's, yeah. A is in P. Full situation gives me the heebie-jeebies. All right. Yeah. Let's see if we can help Sarah out real quick. Sarah, get right to the question.

We're up against the clock. Yeah, so thank you for taking my call. I have been an FPU coach for the last few years and my sister opened up to me about her financial struggles. Last year I've been helping her work through the baby steps. She's paid about 10K off now and has 50 still to go. But today, she was served with papers being sued by one of the banks for not paying off her balance.

So I assume nothing really has changed. We're still going to have to negotiate with them, settle eventually, but wanted to get y'all's advice before I pass it along to her. So was she behind on payments for a significant amount of time? What happened? Yeah, so by the time she came to me, she had already stopped paying her minimum payments, so we assumed that one was going to go to collections and we figured we would settle with the collections company and then that's where she, you know, we didn't have at the time the wiggle room in her budget to pay the minimum payment that they wanted her to so now that's where they're coming to her and requesting that full sum again.

How much is it? About $22,000. What kind of debt? Credit cards. All credit cards. Okay. And is this all one credit card with one lender? The $22,000 is one credit card, one lender.

She does have a debt consolidation loan and then she has two other credit cards. And is she able to stay current on all of her other debts? Is the only one in collections? She has three that have gone to collections, including that one, the credit card. Okay. I would put these collections at the top of the list to deal with. I honestly doubt they're going to negotiate with you since they're such fresh debts. They may not take, you know, pennies on the dollar for this. You can help her by just being a support for her, but she's gonna have to fight this thing and fight the behavior that got her into this mess. Yeah. So if you can avoid going through court and try to find some kind of settlement agreement,

a payment plan, whatever it may be, I would go that route to avoid this escalating. But there's nothing much else you can do if it's already if they already have a judgment against her. Right. Does she need to lawyer up at this point or can she settle that herself? My guess is they just they're sending a threatening letter basically. If it's the first one she's got unless she's got been served papers they're just sending her a threat letter. Yeah I don't know that it's worth hiring a lawyer to deal with this because she owes the money and if they have proof of that she's gonna owe the money. There's not really a way around this to where she's gonna get out Scott free She's got the cash she can settle it but short of that then yeah It's begging for a stack up as much cash as she can and see if they'll take it. This is the Ramsey show The right questions are the key to unlock personal and professional potential. That means if you're not where you want to be, you are not asking the right questions.

I'm Ken Coleman and this is what my new show Front Row Seat is all about. Over my career, I've had the distinct privilege to interview successful people from all walks of life and to coach over 10,000 professionals who wanted more. What sets successful people apart is a never-ending desire to learn and grow. Each week I'll be joined by industry leaders and world-class experts to have a conversation about how to get better, move up, and lead well in work and life. But the best part of this show is you get to be a part of the conversation. Live in studio, we'll have a group of professionals just like you who have the power to ask questions

and steer the discussion in real time. It's an opportunity to get real answers to real questions, like how to make the right decisions, have hard conversations, live a balanced life, and discover your next steps to grow. Join us every Tuesday for conversations that are guaranteed to surprise, challenge, and inspire you. Check out Front Row Seat wherever you get your podcasts.