The Ramsey Show - The Best Return Isn’t Always Money

Starting point is 00:00:01 A Medicare plan that worked last year might cost you more next year. Let chapter check your options for free. Askchapter.org slash Ramsey. Brought to you by the every dollar app. Start budgeting for free today. Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studio, this is the Ramsey Show.

Starting point is 00:00:36 I'm George Campbell, joined by Dr. John Deloney, and we're taking your calls for the next couple of hours. You can call this number, AAA 825-5-2-2-5. You jump into the conversation. David is in Indianapolis to kick us off. What's going on, David? How can we help? Hey, first off, big fans. John Deloney, I've listened to so much your stuff.

Starting point is 00:00:57 George, love your YouTube channel. It's great. Thank you. So, yeah, so I have an interesting situation. So me and my wife following the baby steps paid off approximately $60,000 in the past, you know, seven months or so. Wow. Well, I guess, I'm sorry, really the last two years, if you include everything.

Starting point is 00:01:17 And it's been great. On the flip side, my brother has not done that, and they got themselves into some financial trouble, and my parents have ended up giving them $80,000. And so it kind of feels like every time they get in trouble, they are using my parents to try to get out of it. and my parents keep letting them do this. And meanwhile, it feels like we're being punished because we're over here doing our own thing, paying off our debt and do it the right way. Can I rephrase this and you tell me if I'm right?

Starting point is 00:01:53 Okay, go ahead. Your brother is the prodigal son and dad threw him a party and said here's a big old check, but even though you've been misbehaving. And you're out here doing your homework and eating your vegetables getting jack squat. And there's a little bit of resentment bubbling up. that's that's exactly right that's very similar how are you how are you being punished well i guess at the end of the day it feels like we aren't receiving the same kind of treatment that you're you're a hundred percent not no question like like no question about it you're not getting 80 thousand dollar checks in the mail no question but how are you being punished i guess i guess we wouldn't it

Starting point is 00:02:40 to call it a punishment is not right. It would just be unequal treatment. So let me take one step deeper. How are you a victim here? Because here's what I'm hearing. I'm hearing a man who looked himself in the mirror, got on board, him, his wife got together, and y'all conquered a really seemingly impossible thing together for two years.

Starting point is 00:03:01 And you've changed the life of you and your wife. You've changed the life of any kids that will come along the way. Yeah. Like how are you being wronged here? You're right. And we're stoked about that. And I think in that perspective, we don't feel wrong, but we feel some resentment towards my brother for continuing to take advantage of my parents. It's not your brother. Your brother's going to brother. He's doing his thing. You're mad at your mom and your dad. Yeah. Direct that where it goes. You've been mad at your brother for years. This isn't new. You're upset that your parents are contributing. to him not making wise financial choices.

Starting point is 00:03:43 But here's the problem. They didn't call and ask you. And so you projecting yourself into their heart and mind, into their money, into their decisions is, it sounds crazy. It's a choice that you're making on a minute by minute basis to be miserable in your own skin. Right? And dude, listen, I completely understand the frustration.

Starting point is 00:04:04 Like, you're not, you're not out to lunch. Your frustration is right. I get it. and I'm not going to let that into my home because the home that me and my wife are building is full of laughter and warmth and freedom and joy and all the making out we want to do like we've created this thing right and I'm not going to I'm not going to I'm not going to let something I'm just not going to I'm going to stop at the door like a vampire I'm not going to welcome it in and have you sat down with your folks I have I've had mentioned any conversations with them. Okay. Do you have, have you had the conversation

Starting point is 00:04:41 where you feel at peace having said what you, like, believe? Yes and no, it just feels like they don't listen a lot of the times. Okay.

Starting point is 00:04:53 Are they ever, are they ever going to change their mind? Are there, is there ever a conversation you can have and they're going to go? God, dude, you know what?

Starting point is 00:05:00 You're right? We're not helping. And by the way, here's $50,000. You think that's ever going to happen? I hope so. No, no, no.

Starting point is 00:05:07 I don't think that's going to happen. Okay. So, again, And you're right to be frustrated. You're right to be upset. And it may even be contributing to like a, I can tell you, it's probably going to continue to negatively impact your brother

Starting point is 00:05:21 because he's not going to develop the skills and the muscle that you and your wife have developed, right? And you've exercised, like you've a person to character, you've looked at people in the eye, you've come to them, you've said, here's the problem, here's what I'm frustrated with. And they've looked at you through their actions and said, I don't really care what you say. We're going to do what we're going to do. And so then to pick that cinder block up every day and keep carrying it to the point of resentment, man, at some point that choice becomes yours.

Starting point is 00:05:50 And I would suggest, man, you've worked so freaking hard to bring peace into your home. Leave that cinder block out in the street, man. Don't bring that inside. And here's the thing. What you don't know is, and again, I'm making this up. At the end of the day, we all make up stories. We're storytellers. That's who we are.

Starting point is 00:06:06 The story you're making up is they're going to drain them. themselves, your brother's a bottomless pit of bad choices, and you're going to end up with nothing. That's a story you're making up. It could be true. It might probably be true. You could also wake up every day telling yourself the story. They've put my money aside, my inheritance aside, and they're going to do right by us later. And I'm going to live in that kind of freedom and peace. Yeah, that makes sense. And one of those stories that you make up will kill you, And one of those stories will give you life. Yeah.

Starting point is 00:06:39 Do you believe your parents love you? I do. Absolutely. Okay. If that's the case, then love is not a finite pie where he got 90% and you got less now. It just looks different for different people. And they see a guy hurting out here and they're giving a hungry guy a sandwich. And you're like, I got to go to the grocery store and make my own sandwiches.

Starting point is 00:06:59 And you're like, you're right. They lowered the hoop for him while you've been training in the backyard shooting hoops and you're thinking that's not fair. But the truth is, you're a better basketball player. That's great. You've earned it. You've got the blood, sweat, and tears to prove it, and you're going to be just fine without any help from your parents. And that's one of the most powerful gifts you've given yourselves,

Starting point is 00:07:17 is not needing other people, not relying on other people financially. But it does stay. Yeah. Hear me say it does sting. And you're right to feel that way, and I would feel the exact same way if I was in your shoes. I would be calling this show complaining to John. So in case you can't feel it, David, George and I are so on your team. we're talking to ourselves as we talk to you okay well i appreciate that i really do and it makes

Starting point is 00:07:41 sense everything you guys have said is as makes sense i think we're just gonna we're just gonna try to leave it up the door we're gonna keep doing our thing and uh yeah we'll just here's what i want you to do okay i want you to write your parents a letter and i want your wife to write your parents a letter god help you never send this letter and i want y'all to read each other the letter okay and have that moment of grief and sadness, and then let's agree, we've set our peace to ourselves, to each other, we've shared what's on our hearts and minds together,

Starting point is 00:08:12 we've told my parents to their face, what we think is right and wrong, and they have said, we don't care, we're the parents, and it's our money, and we're going to go about having the greatest life we can have. That would be my path, man. That's you controlling what you can control,

Starting point is 00:08:24 which is you. This brings it back to one of the greatest life conundrums that life isn't fair. In our minds, we think it should be, If I do X, Y, Z, I should get X, Y, Z. And it's not a clean formula like that. It should. It just isn't. It's just not.

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Starting point is 00:09:29 you need to have 10 to 12 times your income in life insurance. Now, and most people are. surprised by how affordable term life really is. Even if you're not in perfect health. Look, I understand the hesitation since most insurance companies make it more of a hassle than it needs to be. Not at Zander Insurance. They're not an insurance company. They're a broker that works for you. That means they'll shop and compare the top term life companies to find the most competitive options on the coverage for your family. For almost 30 years, I've recommended Zander for straight answers, competitive rates, and coverage that actually protects your family.

Starting point is 00:10:09 Call 800-356-4282 or go to zander.com for a quick and easy quote. That's zander.com. Welcome back to the Ramsey Show. I'm here with Dr. John Deloney taking your calls. Robert is up next in Biloxi, Mississippi. What's going on, Robert? Yes, sir. me and my son run a auto restoration shop.

Starting point is 00:10:45 We build classic cars. Cool. And yeah, it kind of, it used to be. We are behind right now by about, I guess, $25,000, $30,000. What do you mean by behind? Let me think. I guess you could say we started out if you're not charging enough, and then it, I guess, turned into Robin Peter to pay Paul. But, I mean, are you 30 grand, y'all are in the hole to repair the cars already in your bay?

Starting point is 00:11:18 Or are you losing that much money like a month? Or did you take out a loan for 30 grand? No, we're behind to finish the cars that are already in the shop. Oh, okay. And what it's costing you versus what you're charging, there's a net loss of 30 grand. Yes, sir. Got it. So we're from a position, I guess we're fighting from a behind position right now.

Starting point is 00:11:41 What started out is not charging enough, but that problem has been corrected. But it just feels like we're never going to catch up. Has that negatively impacted future business deals? Yes, because now they're taking too long. So obviously, the calls have slowed down because they're like, man, they've had my car, you know, wow, you know. Is it just you two doing all of this work? No, sir. We do have three full-time people.

Starting point is 00:12:10 Okay. So what is the, what's the monthly hemorrhage on top of this? So we're bringing, I guess right now we're bringing in about 12, 12-2, and it's costing us around 10, 10, 10, 7 to do that 12-2. Yikes. Do you have any debt? It's going to take forever to catch that up. No, sir. So there's no debt attached to the business or in your personal life?

Starting point is 00:12:44 No, sir. Can I throw a couple of things at you as a complete idiot when it comes to this stuff? Absolutely. What does it look like? So I can imagine, the only corollary I have is guitars. I like fancy guitars. And I don't have super fancy ones, but I like guys who work on super fancy guitars. There's a couple of guys in the building here that are legends in that world.

Starting point is 00:13:07 And like, I understand that once you position yourself as we are classic car restorers, I would imagine, same as I only work on high-end guitars, if that market dried up, it would feel like I was losing something to then go change pickups and cheap guitars. But I know this. I know that I, there's a guy here in town that will come to the office and pick my truck up and drive it back to his shop and change the oil on it. and bring it back here. And I pay him well to do that because it lets me be with my daughter more, right?

Starting point is 00:13:39 Are there things like that that y'all could scramble for the next six months and do concierge's oil changes, go fix tires, go do beyond call 24-7 that would allow y'all to play catch-up while you do while the heartbeat of what y'all love to do, which is restore classic cars, which by the way I love, but that business isn't holding water right now. I'm afraid in an effort to hang on to your dream, you're going to have to close the whole thing. Yes, sir. You got what I'm saying. Is that possible?

Starting point is 00:14:07 Do you all have a way to scratch and claw and do other things? I'm sure we probably do, which I did. I guess didn't get, I guess, to my complete question, too, if you don't mind. Yeah, go for it. I do have, I guess, my retirement, me and my wife have been putting money into for years. I have the money there to repair it. and I didn't know if, one, I should take that money out to get it caught up and then, you know, potentially pay that back one day even though it's paying myself back. But I would have to dip into my retirement fund, but I could fix it doing that.

Starting point is 00:14:48 How old are I am? 50. Oh, boy. So you're basically going to take a loan out for 35% interest is what you're doing by doing that. after penalties in taxes, you'll be taking a 35% loan while unplugging all that growth. I didn't consider that. So the stock market has doubled in the last five years. So if you had 100 grand sitting in there and you took it all out, you would have had 200 grand.

Starting point is 00:15:13 Now you have zero. And so that's the two main concerns is it's a really expensive loan, plus you're unplugging all the future growth. And now you're going to retire broke. So it's not worth the shortcut at this juncture. So here's what I would do is look at the timeline. When do you actually need to make up the gap? Is this two months, six months? I would say by the end of the year, so that puts us at what, three?

Starting point is 00:15:39 Good. So now we have some facts. We have three months to come up with $25 or $30,000. And that can come from liquid savings. That can come from future income. That can come from selling things. So I would sit down. Do you do all the books in the business or does someone control the finances?

Starting point is 00:15:55 My son does. We're partners in the business, and he kind of handles that. So let's have a come to Jesus creative meeting where we go, these are the options we have. We can liquidate things that are easily liquidated, like assets, vehicles, whatever it may be. We can use cash and savings. We can sell other things or we can scratch up some new income. Based on all that, how do we do that within three months? That's the goal.

Starting point is 00:16:18 Have you all done that yet? No, sir. Okay. I think that conversation will be sobering on either end of the barbell. Either you guys will have a fire lit under your butt and you'll be like, oh, we see a pretty, a pretty clear path or you're going to realize this the business as y'all dreamt it is no longer exists and you all need to make some other harder decisions you get you what i'm saying yes sir and going by this my only other question i feel like i probably already know the answer to now um was i just but i haven't

Starting point is 00:16:49 wrote down so i'm going to say it is um we are in a uh bad location and would it be worth going into retirement to get a better location with a larger building to try to further build a business once this is handled. You're saying dip into retirement to move locations? And to a larger one that would give us more, I guess, eye traffic. We have absolutely no traffic where we are now. We just do word of mouth, which actually was doing well so they started taking too long. But anyway, a larger building and better location.

Starting point is 00:17:25 Obviously, we would tell you the same answer is don't take a 35% loan from yourself, plup minus future growth for a business. The bigger issue is, like your business as you describe it is failing. You all make $1,800 a month in net profit. And the failure will just be worse than a newer, nicer location that has more expenses. Yeah, it's not going to speed up your, like your return rate on your cars. It's not, I mean, like, you haven't solved any of your business problems. Once you're thriving and you've got a handle on all this and you can cash flow the move,

Starting point is 00:17:55 absolutely do it. But right now, you're trying to solve one problem with a bad solution. Which is, if we move, everything will be fixed. I don't think that's the case.

Starting point is 00:18:05 And I'll tell you this, the mechanic that I trust and use on all my cars is in a way out of the way location. But that dude's reputation is so stirl. I could care less where he is, man. Like you see, it seems like that kind of work is

Starting point is 00:18:22 like a 10-minute oil change. I can imagine. and you need to catch somebody's eye on a street corner. I mean, they're dropping the car once and picking it up once, right? The work you're doing is destination work. Yeah. Okay. Is there anything you can back out of that would free up some of this money you're behind on?

Starting point is 00:18:37 That's what I was wondering. Can you go have a really... I would have to look at that. That's a very good question. I honestly don't have the answer to now, so I don't want a lot to you. Do they sign an agreement when they drop the car with you? Most of the time, not. I'm in a small southern town, and most everything is done on, you know,

Starting point is 00:18:55 Good old boy handshakes. It might be that you end up with some egg on your face, but you have to go talk to two or three gentlemen whose car's been sitting in your shop untouched for four or five months and say, I'm not going to get to it. I can't do it. I'm sorry. And they may get upset with you and whatever, but that's just you, that may solve all of this problem for you.

Starting point is 00:19:15 But I think you and your son need to have a bigger conversation about the systemic challenges in your business because it's, even if all cylinders are firing, you're making 12 grand and spending, 10 and a half. That's just not a sustainable business. Do you guys have any savings right now? Well, the business or personal? No, sir. Okay. Do you have a wife? I will say, yes, sir, she work outside the home? Thank goodness she does. Yes, sir. Okay. Well, we might need to look at some other sources of income and maybe you even go out and do something you're really good at and make

Starting point is 00:19:50 really good hourly money doing it in the meantime, even if it means letting go with some clients to try to climb out of this. We're hoping for the best for you, man. Hey, George Camel here. Listen, if you're behind on debt payments and drowning in debt, I already know what you're thinking. I can't afford a lawyer to help. And honestly, that's exactly what creditors are counting on. But here's what most people don't know. Guardian Litigation Group doesn't work like a traditional law firm. There's no massive retainer. There's no hourly billing that costs more than the debt itself. Guardian is a law firm built specifically for people in default behind on payments or staring down bankruptcy. And their

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Starting point is 00:21:42 Welcome back to the Ramsey show. John, there was a, in the dark corner of the personal finance YouTube internet. Where you live? There was a firestorm. And here's why. Graham Stefan, who I love. Real estate investor, personal finance YouTuber. We've been friends for a while. Yeah, he's a great. I love him. We've collared a lot. A lot of Graham fans out there. And some people found Ramsey threw him and found Graham through us. And he recently posted this video. One day ago, million views. I paid off my 2.875% mortgage.

Starting point is 00:22:12 Dot, dot, dot, Dave Ramsey was right. Graham! Which is a great title. Because famously, while Graham agrees with a lot of our teachings, and he's one of the most frugal people I know, he makes me look like a real big spender. I always dreamed of having a segment on my show called The Spend Off between you versus Graham. It would have been awesome.

Starting point is 00:22:31 It would have been awesome. So Graham posted this video, and it was 16 minutes of him basically saying what I have been telling him every time I've been hanging out with them, what Dave Ramsey told him, which is, yeah, but you kind of just pay it off because the peace of mind is worth it. It's a weight off your shoulders. Life isn't about arbitrage in the spread. You're not taking into account risk. And it was 16 minutes of just, it sounded like we had infiltrated him. It was inception. All right.

Starting point is 00:22:59 Maybe. Well, you know, why don't we roll the, we'll roll a 60. second version, a little montage, if you will, so you can get a taste for what happened in this video. All right. After years of telling people not to pay off low interest rate debt and arbitrage your money in the markets to make more money instead, I'm starting to think that maybe I was wrong. I never thought I would say this, but for the first time ever, kind of started to think that maybe Dave Ramsey has a point.

Starting point is 00:23:25 Even though everything was on auto payment, I never accounted for the fact that every single mortgage became its own mini ecosystem of thinking. Honestly, I didn't even think this would be a thing until I started selling off my real estate. I'm talking the ones with 2.875% mortgages fixed for 30 years. And once those were sold, it just felt like an odd sigh of relief. It was as though something was taking up mental space in my head that I didn't even know existed until it was gone. That is why when it comes to the final piece of paying off your loan, It really just comes down to freedom. I'm just going to slow clap that one.

Starting point is 00:24:05 No, hold on. I have to say this. That's the first time I've seen this, and you're telling me about this, like, I cannot, dude, I bet you didn't say this coming. I'm getting choked up. Here's why. Graham is somebody who I just love hanging out with,

Starting point is 00:24:21 but also I have high respect for. But also, Graham has a whole bunch, like people follow him because he's brilliant and he's smart and he's got very clear ideas on how. and he lives what he preaches, which is rare these days. The world will shift and the world that my kids are inheriting, that your kids are inheriting, will change when people have the courage to say, I was doing this, I had a lived experience, magic words, I was wrong,

Starting point is 00:24:50 and here's what I'm doing now. And dude, just like, I applaud Graham for that level of character is, that gives me a little slid. of hope in this world on fire we live in for the world my kids are growing up in. Like, bravo, brother. That's awesome. Well, I got a real treat for you, John, because we have Graham on the line right now, on video. Graham.

Starting point is 00:25:12 What's going on, Graham? What's up, brother? Good. I wouldn't have said nice things if I knew I was on. Yeah. You knew I was on the entire time. You're like talking me on. I wasn't going to say nice things.

Starting point is 00:25:24 I'm like, my ear. And I'm like, man. How are you, man? I'm doing good. Awesome, dude. I got to know, this was not an April Fool's prank. You actually paid off your primary mortgage. So this started with some rental properties that I had and I kept them for years because all of them were locked at like 2.8% to 3.3. And I kept them because I didn't want to give up that mortgage.

Starting point is 00:25:52 Because to me, the mortgage was everything. If inflation is, you know, 3 to 5%, assuming they're not lying about those numbers. It could be way higher than that. It's free money. And I started selling off these properties and oh my gosh, it never hit me until I looked at the debt category, just go down. I was like, wait a second. This is just a weird weight off my chest, even though they were all cash flowing. They all did fine. It was just something for me that was just a bit of a sigh of relief that it just felt good to see that number go down. And then I asked on Twitter, And I sent you this link that I asked if anyone regretted paying off their mortgage early, even the people with low interest.

Starting point is 00:26:37 And I want to say 98% of people, not a single one was like, yeah, I have regrets. Everybody was like, yeah, I know I could have made more money in the markets. But just the feeling of having it paid off home, it just gave me a little more confidence, a little pep in the step. Maybe a couple inches taller. I love it. Man, that's huge. Because we've argued about this for years, I feel like.

Starting point is 00:27:01 Anytime I've been on ice coffee hour, you've been on our show, we usually get into a debate about arbitrage and spreads. And I'm always like, man, it's more than about a spreadsheet. It's about living your life and risk and peace. And you guys were such, like, math logic people that I felt like I couldn't get through to you. So what finally did it? It wasn't me. Was it Dave Ramsey himself? No, it was really just paying off those rental properties.

Starting point is 00:27:27 The feeling. It was the feeling of doing that and then realizing, oh, my gosh, it's just like, I've gone to this arbitrage my entire life to like, not nickel and dime, but like, oh, if I could make an extra dollar over here and I could do this and move this. Like, I would do it because I always just look at the numbers. I'm like, the numbers make sense. But when I started to get that peace of mind of just like, eh, you know, maybe I'm not going to make as much money, but you know what?

Starting point is 00:27:56 It's simpler. I don't have to think about it. It frees up some space for me to focus on something else. I'm not so stressed out all the time. It's just, that's a feeling that I never really appreciated until I want to say this last year. And it all started oddly enough because I had this rental property where it made sense for, it's so dumb.

Starting point is 00:28:17 But I calculated that I could take a pledged asset line at like four point something percent and build out this basically guest house. And I was able to make like a 15% cash on cash return on none of my own money. And I thought, well, man, this makes sense. I should do this. And it was the worst nine months of my life dealing with construction in Los Angeles. And then I realized what? Oh my God.

Starting point is 00:28:42 For what? For what? I get to borrow this money over here and do this over here to make an extra. It was like 14 grand a year that I thought was, oh, that's going to be free. It was awful. The amount of stress and headache that went into, I lost so much more money than I ever would have gained in years just from lost opportunity costs because my mind was not fully present. And that's what I realized.

Starting point is 00:29:07 You know what? I've taken this too far. And I think there's a value to simplicity and peace of mind that I never calculated until that experience. Beautiful. So what would you tell someone? Because we get these calls often on the show of I'm confused. Why should I pay this off when I can make more in the market?

Starting point is 00:29:24 market, what would you tell those people out there who are hanging on to those low interest rate mortgages going, I could pay it off, I could pay extra, but I just feel like there's better opportunities. The thing is, mathematically, I do think that there are better opportunities at it. I mean, again, when you look at the numbers, it doesn't make sense on a primary residence, low interest rate mortgage, if you're taking the deduction on top of that, like, my gosh, that mathematically pencils out. I would say for me, there is a quality of life improvement, but that doesn't also mean that you

Starting point is 00:29:59 can't, you should be building also up an emergency fund. You should be maxing out retirement accounts. You should be investing. I don't like, I wouldn't take down the emergency fund and not invest for the sake of paying it out of mortgage. But I do think there's a value of peace of mind that comes with just having it paid off as long as it's not done at the detriment to everything else. And when I cited these surveys, by the way, it said that one of the biggest quality of life and improvements was also cash on hand. Yeah. And so not having like zero emergency fund, but you have a paid off house.

Starting point is 00:30:32 It's having cash on the side led to more peace of mind than even having a paid off property. So I think there's something to be said about that. Yeah. Beautiful. And otherwise, I think, you know, peace of mind, you got to calculate that. Hey, bravo, brother. Thanks for hanging out with us.

Starting point is 00:30:47 Not because you follow the Ramsey plant, but Bravo for for choosing peace. That's awesome, man. And like respect, man, big time respect. We'll see you, Graham. All right, I'm going to end with this comment. I left on the video, John, which is my work on this earth is done. I've done it. I've evangelized the Ramsey plan successfully, even if it's subconsciously.

Starting point is 00:31:06 I love that guy. And glad Graham's a friend. And way to go, being debt-free, man. This show is sponsored by BetterHelp. A lot of you are just trying to keep it together all the time. You show up to work. You pay the bills mostly on time. You smile at all the right times.

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Starting point is 00:33:13 or Google Play. John is in DC up next. What's going on, John? Welcome to the show. Hi. Thank you guys very much. I appreciate you taking my call. I have a bit of a weird situation for you guys. So about this time last year, I was wrongfully terminated for my union job. My union is fighting it on my behalf, but they've also advised for me to take legal action. I do have concrete evidence that proves the termination was wrongful. But going into debt to retain a lawyer is something I'm very skeptical about, considering I just got out of debt. recently and going back in it seems scary and daunting.

Starting point is 00:33:58 Yeah, I've got some ideas. What happened? What happened in your job, man? I was long story short. I was off duty on my own, on my day off, on my personal time. I went out to check out a museum that interested, like a museum place, outdoor museum that interests me. And I was about a week.

Starting point is 00:34:22 week later, I get called into the boss's office, find out I was accused of something that I didn't do and there was no proof of it. And yeah, that's the short of it. Hmm. Is, I don't know, D.C.'s laws, is it a right-to-work state? So, I don't believe so, but. It's not a state, obviously, but right-to-work territory? Right. Right. But I'm also a union number. So it's a contractual violation as well. I don't know enough about unions. Why isn't the union, I would think part of the dues you pay in is that they represent you in wrongful termination? They are to the extent that they can, but I work in a unique industry that has laws, different sets of laws governing how this kind of stuff is handled.

Starting point is 00:35:18 So it makes it a little bit like the union can, the union is helping me. fight it from their perspectives, but from a legal perspective, that's not something that they can touch. I guess, call me ignorant. I don't understand what's the point of a union. I thought there was for this exact moment, was collective bargaining in to help you, like, fight the man. And they're like, right, man picks a fight with you. And they're like, all right, man, good luck. We'll get them. Like that is. So I'm trying, without trying to, without getting into too much specifics, um, I work for the railroad, and that's kind of governed under the Railway Labor Act, which kind of dictates that employment matters have to be dealt with through binding arbitration,

Starting point is 00:36:02 but you can still, you know, sue in certain cases. Okay. I have one of those cases to sue that I can sue. What's the ideal outcome? Is it a big check or reinstatement in your job? Reinstatement with back pay and a big check. How many years are you in? Uh, eight.

Starting point is 00:36:24 Okay. So, you've already paid in a lot. Why, why do you need to pay a lawyer, a retainer? Why aren't this, why aren't you hiring a contingency lawyer? If this is a strong case, they'll take that and take part of the settlement. I haven't found one that's willing to take it on a contingency basis yet. Hmm. Is that because they don't think you have a strong case or because you haven't found an attorney that works on contingency?

Starting point is 00:36:45 Because like personal injury, it's usually contingency. So you're not going to pay the lawyer up front. If they think you have a case, they'll go, cool, we'll take 40, percent of whatever the settlement is. Right. And I haven't found that in this situation yet. I'm still looking, but one law office was like, yeah, we think, you know, they were like, yeah, you were railroaded.

Starting point is 00:37:06 There's no doubt about it. But we don't see a way forward for us to take this case right now without, you know, you paying a $30,000 retainer. No, we're not doing that. You know, 300 something an hour. It's going to add insult to injury. If you pay these lawyers and nothing comes of it. And it's been two years.

Starting point is 00:37:25 Now you're 60 grand in the hole. So please do not go into debt for this. Do you have any savings right now? Yes, I do. As a matter of fact, I have a rainy day fund of about $60,000 in my checking account. I do work part-time, so I do have some money coming in. But with what I was quoted, what I was quoted by the firm that's not taking my case, it seems like that's my

Starting point is 00:37:51 because they said no one's going to take this on contingency well of course they're going to tell you that because they want your retainer right but but but listen you got to understand like they're in business

Starting point is 00:38:03 and if they're looking at what you laid out in front of them and they don't think they can make money off of it on the back end they're going to demand it on the front end right it's kind of like what people call the show and they have questions about like hey my bank won't loan me this money so I want to go somewhere else and it's like

Starting point is 00:38:17 hold on the bank is in the business of loaning money. If they have said, I can't give you anymore, that's like you need to look in the mirror because you've got some challenges there because that's their whole business, right? And so I'm wondering if the rage and the anger and the way you were treated, all that stuff is right and good, but that your case isn't as strong as you think it is, or maybe it's not as strong as you want it to be. And that very well could be. And maybe I've been asking the lawyers the wrong questions or explaining it the wrong way, because I have other things on top of the wrongful termination, so maybe I was just explaining myself wrong, but...

Starting point is 00:38:54 I would reach out to a couple of other ones. Here's the overall fear, John. I don't want this vengeance to cost you your peace and your emergency fund, because you can go broke trying to prove you were wronged, and you will lose either way. And so I would much rather you let the union fight, you do what you can do to move on and go, that really was awful and learn a lesson from it, whatever comes of that. and then move on and not let this live in your head rent free on top of draining your emergency fund because we got a lot of calls in the show John where people they hire the lawyers and it's been years now

Starting point is 00:39:26 and it was over you know divorce and now they are 60 grand in over two years and they're like when do I throw in the towel right and that becomes a hard sunk cost fallacy issue and and if they want that kind of retainer which is a significant retainer plus an hourly rate which fair that's that's they can do their business however they want to you're going up against like a monster in a railroad company they've got deep pockets and so you're you're it's it's david versus goliath here and if you have again if if you've got a a law firm that sees a clear path towards oh my gosh we're going to get a big check at the back into this they'll line up for you um i i i hate to say this because i like i I don't like injustice. It drives me bananas. And I don't like disempowerment. It makes me, that's why I do this job. And also, I've learned the hard way through lots of scars, lots of hurt relationships, lots of sleepless nights that sometimes the bravest, most powerful thing I can do is quietly walk away. And so that's for whatever that's worth, man. Have your heartbroken, be upset with injustice, learn any lesson you can take from this.

Starting point is 00:40:42 and go get a job where you can sleep on a regular schedule, which you can't do, or you can have holidays on a regular schedule, which you can't do in your old job. And that big my recommendation, man. If someone won't take this on contingency and the union won't do their, like, won't fight for you on your behalf, man, that's a, that's a, that's a, it's hard to row a boat upstream with one, with, if you're the only rower, right? And this, I just don't want this legal problem to also. turn into a financial problem. And that's what often happens when we finance our way through it.

Starting point is 00:41:17 And now you've got all this injustice plus the sunk cause fallacy. And now you're like, I got to see this through. Yeah. And that can just burn you up. Yeah. And so that's the scariest part, John. So I'm so sorry you're going through this. I know a lot of people are getting laid off right now. And there's a similar feeling of that level of, you know, betrayal, of hurt of I jumped on a Zoom call with 200 people. And the CEO just said, yeah, you're all done today. And it jumps off. this is just like stone cowardice so you have every right to be angry to feel hurt but don't let that cause you to make terrible financial decisions that you're going to have to clean up for years to come and don't let blind rage or this this this this phrase that like man it's become part of our culture

Starting point is 00:42:00 you owe me um they might they might they actually might but don't let that carrot dangle out in front of you and keep you from reality which is i got to go get two jobs today because i don't have an income anymore. I got to go throw boxes at this place and then go make coffee at night because I need a paycheck coming in. And by the way, bravo to you for setting yourself up, paying all your debts off, having a killer emergency fund. And I hate to say it like this for just this moment when life happens to you. For a time such as this, man, you're in the driver's seat. Yeah. Way to go, John. Running a business is hard enough. The tools you use to run it should make your job easier. Too many business owners spend more time fighting their software than selling their

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Starting point is 00:43:50 Shopify.com slash Ramsey. Welcome back to the Ramsey show in the Fairwinds Credit Union Studio. I'm George here with Dr. John Deloney taking your calls at 3-8-25-5-2-2-25. George is in Kansas City up next. Love the name. What's going on, man? Hey, good to talk to you guys. I'm looking for some good counsel here. Can't promise that. Well, I'm hoping I can get some guys to cancel, but I started my job about a year ago, and it's motivated me to pay off all my debt, and now I'm in Baby Step 3. And this job that I'm at is very overtime dependent, which means I've only been able to take four days off in the last year.

Starting point is 00:44:39 And every time I take time off, unless it coincides with the holiday, which I have to work holidays, then I can't really take time off. Otherwise, I'll take a big hit in my paycheck. Whoa, what do you do? Yeah, what's the job, brother? I'm a trash truck driver. Okay. And it's 361 days a year? I think you probably get like Thanksgiving and Christmas off.

Starting point is 00:45:03 That's about it. Like Labor Day, you had to work Labor Day. You know, New Year's Eve, got to work New Year's Eve, you know. Do you have to do this or is this, like, do you have a regular schedule and then you work overtime because you're trying to pay stuff off and get ahead financially? Overtime is kind of like mandatory. Like, it's an unspoken rule. Like, if you don't do it, you'll probably get canned or they'll find a reason they can to you. Okay.

Starting point is 00:45:23 What do you make doing this? What's your normal pay and then what's the overtime pay? All right. So my normal pay is $23 an hour, which comes out to, I don't know, like $980. I can't remember exactly. But overtime is $353. And I work anywhere from, anywhere from 10 to 15 hours of overtime, which probably turns out of 30 hours. overtime in a month.

Starting point is 00:45:49 Okay. So that's banking you an extra, like, a couple grand? Yeah, I mean, I'm making good money, more money than I've made in a long time, you know, and I'm moving forward, but I don't want to stop even if, even if at the cost of me, you know. Well, what's the end game? Let's say you get through baby step three. You've got a fully funded emergency fund. And now you're just a guy working 361 days a year.

Starting point is 00:46:12 Okay. So this is all for the family. Like, I want to, we've been living in the same apartment for like the last. 10, 11 years and my wife has been dreaming of a house. And I really want to be able to do that for her and for me and the family. So that's our goal is to be in a house and, you know, follow us up so we can be babysat billionaires, you know? How, yeah. And dude, we obviously, we support you 100%.

Starting point is 00:46:35 And also, I don't want your kids at your early funeral reading off your, your debt payoff spreadsheet. I want them telling stories about funny, silly things at times they had with their dad. Right? Yeah, today is the first day I've taken off in like months. And I only took the day off because it coincided with a holiday. So that would hurt my pay less. And we just got done fishing. And we're about to eat some lunch.

Starting point is 00:47:03 It's awesome. So like, how close are you to these goals? How much debt do you have? All right. So I have no debt. And I have about four grand saved. And I need about 17 grand. to make this emergency six-month emergence fund, and I'm the only one working.

Starting point is 00:47:20 So I followed your AI, and it said I need it six months instead of three months, and then I need to save the down payment, which is going to try to be within 25%, which is about, I forget what this is. I think it's like seven grand, maybe? I can't remember. That can't be right. No, not seven grand. You mean like 70?

Starting point is 00:47:41 Probably not. Probably 70 grand. For a down payment? Yeah. What's the house going to cost? Oh, we're trying to stay within 25% of my paycheck. Oh, okay. You're talking $7,000.

Starting point is 00:47:53 Is your take-home pay? As a down payment for that, as for the house. Okay. Because, like, if a house costs $200,000, $10% down would be $20,000. Oh, yeah, we're not going anywhere of that. Okay. So what does a house cost you here? It's way cheaper.

Starting point is 00:48:10 So for us, we were looking at a house a little bit, and it was like $100,000, and it needed some work. And 25, it would come up to about $700 for a month. Wow. We're really trying to stay even lower than that if we can and build it up over time versus get into this housing and get through a sticky financially. We'd rather put some work into it and make it worth something.

Starting point is 00:48:33 Okay, but you can't put any work into it. Yeah, we don't want to be a house poor either. That's why we're trying to find. I get that, but I want you to be honest with yourself. Are you going to do it on the full? Four days off a year you get? Are you going to fix the roof and the air conditioner and the chimney? I don't know because I'd like to think I'm like my parents.

Starting point is 00:48:52 My parents were foreigners and they were go-getters. And I'd like to think some of that rubbed off on me. It clearly has, bro. You're working hard. You got the work ethic down. We just don't want you to sign up for something that you think is a blessing and it turns out to be a burden. I'd rather you save up some money and buy $150,000 house that doesn't need as much work on it. and put a little bit more down, and that's more realistic.

Starting point is 00:49:17 And then you and your wife be about asking, what kind of job can I have where I can also be a husband and a father? Because the job you have doesn't allow for that. And I think there's a season, and it's pretty amazing what you're doing. Like, I'm going to sacrifice these few years to give my family a different life. That's noble, brother. It's just not, it can't be indefinite. So right now what you're telling me is you make about, let's say, 47, 48K,

Starting point is 00:49:43 and then with overtime, it's another 10 grand or so. Man, I must have misled you guys badly. No, in my numbers, I make about 70,000 a year with overtime. Good. So 70 grand a year, and you want to be doing this in the long run? I do not want to be doing this because I can't find a way to get out overtime. So that's what I'm trying to get at is I want to build you a great life, not just get you out of baby step three. So that's what I would also be looking at is, yes, let's get to baby step three and maybe the down payment.

Starting point is 00:50:15 but I don't see you doing this two years from now. So what baby steps allow you to do is have the freedom and margin to actually go pursue the thing you want to do and the brain power and financial ability to do it. So I would start dreaming of what is that next career for you if it's not in waste management, where you can still make 70, 80, 90 grand. I feel so torn because, oh, man, like literally,

Starting point is 00:50:41 and I hate to do this, but me and the wife both felt led by the Lord to do this, and everything worked out. And I don't know if this is the time to move, if there's a time to move or if I'm supposed to stay here too, because I've been put here and I've been using it as an opportunity to do the gospel, to give the word of God to people too. But it pays the bills, and I get to reach people too. And I don't know.

Starting point is 00:51:05 We get to do that too in our jobs. So I don't want you to have the fallacy that this is it. And the Lord said I can never do anything else. I found that this is just me personally, that the Lord often works when I'm working, when I'm doing something active, when I'm searching for that thing versus just sitting around going,

Starting point is 00:51:18 well, if something falls in my lap, maybe I'll pursue it. And so I don't want you to stop dreaming either because this is a grind. And like John said, I don't want you to have an early funeral. I don't think that's what the Lord intended. It also is a pretty cool moment

Starting point is 00:51:32 for your kids to see their dad hustle and grind to change their future. And it's pretty cool to see like your husband, I mean, your wife gets to see you say, I'm going to put it all in the line for three years so that you can have

Starting point is 00:51:45 we can have the life that you've been dreaming of. That's awesome. That's amazing. And it might be that your dream job comes along and you're going to have to take a pay cut for it for a season. That sounds hard. Yeah, but if you don't owe anybody any money and you have a fully funded emergency fund and you have a $700 a month house payment,

Starting point is 00:52:02 you've set yourself up for exactly that moment. You say, no, I'm good. I don't need the overtime. They go, well, you're fired. And you go, okay, have a good day, guys. We'll miss you. Yeah. It's that simple.

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Starting point is 00:53:42 dot news slash Ramsey and use promo code Ramsey to get started. The Ramsey offer includes your first full month free on top of the standard seven-day trial. That's worldwatch. dot news slash Ramsey. Roy is up next in Bend, Oregon. What's going on, Roy? Hey guys. How are you guys doing this afternoon?

Starting point is 00:54:13 Doing well. How can we help? Well, I'm about $320,000 in debt. I'm a small business owner. and I'm struggling to pay my estimated quarterly taxes, and I'm still spending when I shouldn't be, and just could use some advice and use some help. Man.

Starting point is 00:54:30 Well, at least we're self-aware here. Is the 320 all-business debt, or is it other consumer debt? Only about 37,000, 38,000 of that is on equipment loan. The rest is actually all personal. With, I've used personal debt for the business since it's open, but the only thing actually in the business name is equipment loan for about $37,000, and the rest is all personal.

Starting point is 00:54:53 Okay, break down some of the other loans for me. So we have roughly about $4,000, buy now, pay later type of accounts. We have about $58,000 in vehicle loans, about $99,000 in tax debt, $24,000 in personal loans, slash consumer loans, $52,000 in credit cards, about $5,000 in medical, and I owe my parents about $50,000. $15,000 between the two of them. Goodness gracious. It'd be a shorter list of who you don't go.

Starting point is 00:55:25 And a $20,000 student loan on our name as well. Okay. Wow. So you're saying we, who's the accomplice to these crimes? Well, 95% me, about 5% of my wife. She doesn't really contribute to the bet besides things from before we were married. There's a student loan she has in her name. Okay.

Starting point is 00:55:45 On a scale of 1 to 11, how badly are you guys actually wanting to get that a because that helps me navigate how to walk you through this. So badly that yesterday had an hour and a half consultation with a bankruptcy attorney. And all my stomach was not thinking this is not the way out. Like this is just a band-aid for this problem we're having. Well, I'm glad you called us because I'm going to steer you away from bankruptcy. I think you guys can get out of this. And it's not going to be fun, but it'll be more fun than dealing with bankruptcy for the next decade of your life.

Starting point is 00:56:19 I agree. I totally agree. So tell me about these cars. What are they actually worth? One car is a suburban. It's a 20-21 suburban. It's worth about 45, 46 we sold at Private Party. We owe about 55 on it.

Starting point is 00:56:37 Your 10 grand underwater. Yeah, we've been a little on negative equity over for a few years, and we finally landed on that one. And then we have an older Mazda that I got rid of a $37,000 auto loan earlier this year and got a way smaller loan, which I know I shouldn't have, but I got into like a $4,000 little Maza pickup. So we owe about, about $3,000 left on that. Okay, so that one's pretty much a wash. Yeah. So the suburban is the one that's killing you right now. Because you said you had 58 in Card debt. So you owe 55 plus a three? Yes, sir. Okay. Man, well, what's your

Starting point is 00:57:15 income right now. I do pretty well. I net after my business expenses and everything, we net between 175 and 200 a year. Good. And that's all through the business? Yeah, all through the business. It's all one income. Okay.

Starting point is 00:57:31 So is the business thriving, you just weren't paying taxes, or is the business having its own struggles? It's a trucking business, so I'm coming up on three years in business, and it was doing pretty well. I mean, I did pretty well in 24, had no tax bill, 25. Running off 24, didn't realize that I thought I would be, you know, a few grand here or there, but I owed about 50 grand last year, and that kind of hit my pocket, and I've already had,

Starting point is 00:57:56 I heard taxes from 23. I was paying on two, so that taxed at this almost doubled last year. And then, I mean, the business is doing well. I mean, I know fuel prices aren't the greatest right now, and it's a little tough rider, but, you know, I'm still, we're still rolling, we're still making money. Could you guys live without the suburban right now and go down to one car, or are you going to need something else?

Starting point is 00:58:13 We're definitely giving you something else. We have three kids at home. Okay. Because I think getting rid of that car will give you some breathing room, because what's the payment on that thing? About $8.50. All right. So that frees up a nice chunk of the budget and brings you down to $265 in debt. Now, we're going to need the amount you're underwater on plus enough to get you another car to get from A to B with the kids.

Starting point is 00:58:34 Yes, sir. So that might be your A1 to clear one of the biggest debts, followed by the IRS debt. You want to get rid of that one ASAP. Have you talked to them? or you want a payment plan with them? Yeah, it's both the state I live in. It's both the state of Oregon and federal. And yeah, I'm on a payment plan with Oregon,

Starting point is 00:58:50 and I'm trying to figure, trying to finalize things with the federal IRS to get on a payment plan. But since it's over that $50,000 threshold, it's a little bit more paperwork to do, it sounds like. Yeah. Well, is your wife on board fully that we're going to have a couple of years of deep sacrifice and life is going to look different, and we're going to say no to every single thing?

Starting point is 00:59:10 I think so. I'm still struggling with spending. We just came back from a vacation that we couldn't afford. How are you spending? Like on a credit card? No, pretty much cash loan. You know, we cash, I put about $1,000 onto an a firm count for our hotel, and we cash for our rest of our, I just spent cash for our vacation.

Starting point is 00:59:30 Well, here's one thing I want you to do. Cut all access to anything that could cause you to make a bad financial decision, which means I'm deleting my account with a firm. I'm cutting up my credit cards and closing the accounts. I'm going to change the login and give it to a trusted friend to Amazon Prime. Wherever you see yourself spending, you definitely don't need to be spending, it's gone. And even switch to cash envelopes for a while for your physical in-person shopping. Okay.

Starting point is 00:59:57 If you're willing to do that, it tells me you're willing to get out of this debt and you'll actually do it. Because if you can make 175 and live off of 100 and throw 75 at the debt, we can be done with this thing in under four years. That's a napkin math. Now, can you scale this business at all? it look like to make $200, $250,000 in the line of work you're in? Once I'm done with my, I think once I'm done with this equipment alone, I'll be able to, you know, be able to save a little bit more. Yeah, I was paying a gentleman, I was paying a gentleman the first couple months of this year,

Starting point is 01:00:28 a really high dollar amount a month in payment. I finally refinance the equipment into my name, and I was, I started saving about $4,000 of it. Granted, that extra $4,000 a month I've been saving has been going right back into my maintenance of this vehicle, but, you know, I, right now. Now we're doing about, it's about $7,000 a month in debt payments is what we have on our. Goodness gracious. On our name.

Starting point is 01:00:47 Yes, sir. Well, and here's my concern, brother. Like, you've got a job that you're making good top line on. But if you're bringing in 175, are you, you're independent, right? Yes, sir. So take 35% off the top. So if you bring in 175, you're only making 113. And then you put in fuel costs and you put in maintenance costs.

Starting point is 01:01:12 And just minimum payments are $84,000 a year of your net income to service your debts. Like, so you've got a business that you're running that makes a good big number at the top. But it's not, but you're living, you're living above that number. But I just want to be sobering because you could go make $65,000 at a hardware store as a manager. Yeah. Right. And so once you do the true honest to goodness. math on your business and what it costs to run this business, I don't think you're making

Starting point is 01:01:48 near 175. I think it probably feels really, really good to tell people you're making 175, 200. I mean, that would light me up too, but man, that's not what you're bringing home every month. Well, I know in the last six months, we've grossed right about in 196. We had about 111 in expenses, and we've netted about 84,000. Okay, but... All business expenses, so...

Starting point is 01:02:14 Does that include your tax? Withdrawing 35% for tax? That's not paying my estimate of $4,000 a month in tax. Okay, then you have to start thinking about that differently because you have not made $84,000 because the problem is you and your wife together, imagine we could go ahead and spend $100. Yeah. And you haven't made 84. You've made closer to 55.

Starting point is 01:02:35 Yeah. Right? And you can't pay $7,000 in debt payments on $55,000. bucks a year. No, not even close. That's tough to raise three kids on $55,000 a year as a sole provider. Yes, sure it is. So why are you wanting to get out of debt now?

Starting point is 01:02:54 What was the impetus for this? I'm almost 32 years old. I started this debt journey right out of high school pretty much 19 years old buying my first pickup. And I mean, this debt's been eating me alive for years. I've been a follower of this show for a few years. I've tried different budgets and different apps. How old are your kids? Facebooks.

Starting point is 01:03:12 two, five, and ten. Wow. Man, if I were you, I would have a come to Jesus' conversation with my wife tonight, and I would get really angry, because I don't think you're angry enough yet. I want you out of debt more than you do right now. I'm willing to go squirted earth and sell everything in sight. And so if you're willing to do that, you can climb out of this. Please do not pursue bankruptcy. We're going to hang on the line.

Starting point is 01:03:34 We're going to give you our every dollar premium budgeting app. Tonight's night, you lay it all on the table, and you and your wife, you're going to go, we're in this thing together. The next four years is going to be hell, but we're going to get through it. Hey, what's up, guys? It's Jade Warshot. Now, I know a little something about saving money. While my husband and I were paying off over $460,000 in debt, we went over every expense in our budget to find ways to cut back. Nothing got a free pass, including our phones.

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Starting point is 01:05:40 personalities, myself included, Dr. John Deloney. John, we had a great time doing a comedy night last year. I don't know if they're going to let us do it again. It kind of was off the rails. It was awesome. It was a pack theater late at night. It was a blast. Yeah, they'll let us run it back.

Starting point is 01:05:54 You get all the fun Ramsey content, which we make sure to make it fun and nerdy, because for some reason people still want like deep dive investing content. Like, guys, you're multi-millionaires. Relax. You're on a good time. But they want it. We're going to do the world's largest debt-free scream, new wealth-building teachings from Dave. We're going to have live tapings of your favorite Ramsey shows and so much more.

Starting point is 01:06:14 So check it out if you're baby step four and up, meaning you're debt-free. You've got an emergency fund. You're budgeting and paying cash for this thing. We'd love for you to join us to celebrate the hard work you've done on this wealth-building journey. Click the link in the show notes or go to Ramsey Solutions.com slash events to book your cabin. Already working on my base, Tan, John. I'll get there. I don't know what that means.

Starting point is 01:06:34 Mike is in Los Angeles up next. What's going on, Mike? Hey, how's it going, guys? So I have a question. I have about $170,000 in my 401k with my company. I'm planning to stop working, retire from that company in about nine years. And they just switched, or I should say they just began to offer a Roth portion of the plan. So basically, I can start contributing.

Starting point is 01:07:08 now moving forward to a Roth IRA, uh, or a Roth. Yeah, Roth 401k. A Roth 401k. Got it. Um, and, uh, and so I'm wondering without killing myself tax wise, because obviously this is a tax deferred what I've been doing. Um, how much should I contribute to the Roth portion? How much do you make advice on that?

Starting point is 01:07:36 I make about, say, from that job, about 60,000. Okay. I would just go all Roth, and you don't need to worry about the traditional money right now, unless you have a paid-for home and you're in Baby Step 7. Are you there? No. No, I'm not there. So once you hit Baby Step 7, you can start to do some conversions from the traditional side to the Roth side

Starting point is 01:07:59 and pay taxes on that money so that it grows tax-free for the rest of your life. But we call that a Baby Step 7 item because the, the most of the money. money you would spend on that taxes is far better off being used to fund college education savings and the home payoff extra on the mortgage. So what I would do is just start all the future contributions to the Roth side. So you're not going to get the tax deduction for it, but that money's going to grow tax-free. And you'll basically just have two piles in nine years when you retire, and then you can decide how much to convert and when from the traditional side over to Roth. Okay. So what is the converting mean?

Starting point is 01:08:36 Converting just means to move the traditional, since you haven't paid taxes on it, the government says, hey, if you want to move this to a tax-free version, you're going to have to pay the taxes on that amount of money. So it's basically going to add to your taxable income for that year. So let's say your effective tax rate is, I don't know, 15% and you move over $100,000 from traditional to Roth, then that would be $15,000 added to your taxable income for that year. Right. So it's really the same as if I'm saying I'm drawing on it, you know, in retirement, I'm going to pay taxes on it when I would draw it. Exactly. So the big debate is, well, what's the tax rate going to be nine years from now or 20 years from now when you retire? And the truth is nobody knows. So I like to control the variables now instead of, you know, some people say, well, I'll do traditional now because what if tax rates go down and it's actually a better bet for me? I think it's a lot of brain calories to burn. You're going to pay the tax man either way. And so, the best time to pay it is when you have low income years, gap years, retirement years, or you're in Baby Step 7 and you have that extra cash on the side to pay the taxes. The key is you don't want to pay the taxes from the account itself. You want to use money outside of the account to pay the taxes. You don't want to unplug all that growth. Okay.

Starting point is 01:09:51 So the strategy we have around here, Mike, to make it clear, this helped me focus in on the filter to use when investing any amount of money. Match beats Roth. beats traditional. So do you have a match through your employer? They do match. It's not dollar for dollar and there's profit sharing. So I'm not sure exactly how it works, but... Is it like 50% up to a certain amount or one of those? I'm not really sure what it is. I just know it's not dollar for dollar, but they do match and they do profit sharing. But I'm contributing 12% of my salary to my retirement. Okay. I would bump that up to 15% if you're

Starting point is 01:10:30 your debt free with an emergency fund. Okay. So that's going to be nine grand a year, split up across every one of your paychecks. So I would just dial that up to 15 percent, so that nine years from now, you have that extra 3 percent going for you from then to nine years from now plus all the future growth. And we found 15 percent is not a magic number per se, but it's enough to get you going to build a serious nest egg while having enough to live your life, save for vacations, upgrade the car, you know, save for college for the kids, pay off the house early, all of that. So it's a good balance. Thanks for the question. I just had a question, George.

Starting point is 01:11:04 I don't know if I'll have an answer. What do you got? So let's say that gentleman, he's making 60 grand now. Let's say in nine years he's making 250. And he's moved tax brackets. Would he pay, when he converts, would he pay all that conversion tax under his current tax rate? Or would he be able to go back and say, I was only making this much money. So I pay 15% on this conversion. It's wherever you happen to be.

Starting point is 01:11:32 It's the year you convert it. Whatever your income is when you file on your taxes. Okay. So if you're married filing jointly and the government says, hey, you made 200 grand. So you're in a, I don't know what the numbers are. It's adding to that number. Okay.

Starting point is 01:11:44 And so now the good thing to note is your marginal tax rate is very different from your effective tax rate because people get spooked by this. They go, well, I don't want to make more money because it's going to bump me up in tax brackets. No, you pay this month, you know, 12% up to this amount. And then 15% up to this amount. What's the cut off? I'm making it up, completely making it up. If it's 250 and suddenly you make 260 one year, all 260 is not taxed at that bracket, just whatever's over the $10,000 would be taxed at that high bracket. So it's a graduated tax bracket. So I don't want people to get spooked

Starting point is 01:12:14 by this. And generally, your effective tax rate is so much lower than the marginal. So if you're in the 37% bracket, you know, you get spooked by that. Your actual effective tax rate was probably more like 28 to 30%. And so it's a good thing to note, don't get too spooked by the taxes. on this, but it is a baby step seven item in general to do any kind of conversions from traditional to Roth. But man, Roth is a game changer because then you're going, the government never has to take taxes. You don't have the required minimum distributions because with traditional, the government says, hey, you haven't paid taxes yet. So when you turn 73, they start knocking on your door going, hey, bud, we're going to need some of that money. And so you have to start

Starting point is 01:12:51 withdrawing so that they can get their taxes out. With Roth, you already paid them. So they got nothing on you. And it's a great feeling to go. That $2 million in a Roth 401k is like net income. Yeah. That's a game changer. So if you really want to beat inflation, yeah. And think about inheriting. Your kids get to inherit tax-free money. Yeah. Instead of going, man, we love John, but he left us with a hefty tax bill with that inheritance. Thanks, Dad. Thanks, Dad. So it's a great sort of baby step seven goal to get as much in Roth as you can as you get older. But it's a good thing to work with a smart vestor pro on if you want to connect with one at ramsysolutions.com, they can walk you through the timing of that, what the best strategy is, so that we can at least

Starting point is 01:13:31 keep your tax bill as low as possible. I don't want to give, you know, Caesar more than I need to. Yeah, yeah, yeah. And make no mistake, whether you're in Baby Step 7 or not, like, writing that check for the conversion, that'll hurt. It'll sting. You won't like it. It won't feel good. Just prepare yourself for that. And it's not going to be like, all right, all my money's in Roth. You're going to be like, do you know the check I just wrote to convert? Oh, well, my wife did this because she worked at Ramsey for nine years. So when she left, we rolled it over to roll over IRAs and a big chunk was in traditional because she had the employer match, which is on the traditional side.

Starting point is 01:14:02 And because there's something called the super nerdy called the pro rata rule, you can't do a backdoor Roth IRA if you have any money sitting in the traditional side. So we had to convert the whole thing all at once. And boy, oh boy, I got to pay Uncle Sam a nice chunk of change for the pleasure. But now it's yours. It's all sitting in a Roth IRA. Yeah, yeah, it's all yours. You know, a couple hundred grand from her hard-earned money here at Ramsey.

Starting point is 01:14:27 So way to go. And that employer match, I just looked at my account, John, 30% of my entire balance was just the employer match. So you may think, well, it's only a couple percentage points. That adds up as a compound. So thanks Dave Ramsey. Appreciate your HR. They don't get a shout out very often. If you're shopping online and these days, everybody does, data brokers are out there right now,

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Starting point is 01:16:35 No, it's a metaphor, guys. I was going to say yes. You can, and people do it. I love burritos. And I enjoy getting those posts. People send me, like, they've like dolled it up, and it actually looks amazing. Or add some protein to it if you're John, because, you know, you don't get those muscles eating just rice. Yeah, but beans, beans are a good source of protein. All right. All right, Doc, thank you for that. Well, here's some ways you can do that. What we're talking about here is cutting your lifestyle down to the absolute bare minimum

Starting point is 01:17:01 and being very frugal to create as much margin as possible, freeing up every possible dollar to throw at your debt snowball or build your emergency fund. So here's what rice and beans really looks like. This could mean canceling all of your subscriptions, which could free up 200 bucks a month for some of you. Eating at home instead of restaurants. That's the main thing it means, which is we're not going to go out to fancy restaurants.

Starting point is 01:17:22 We're not going to be door dashing. We're going to be meal prepping rice and beans every day for lunch so that we can free up a couple hundred bucks a week, just doing that alone. Driving an older paid off car. We're not going to upgrade. We're not going to have all these luxuries like vacations. We're skipping those. We're selling things we don't need.

Starting point is 01:17:38 We're going to pick up extra worker side gigs. So the spirit is temporary, intense sacrifice, not permanent lifestyle cutting. We want you to live like no one else. So later, you can live like no one else. So get your questions answered. It's crushing it. to the point where I'm nervous that we're out of a job, John, because it is giving people really good answers.

Starting point is 01:17:57 It's conversational. It'll actually fire back questions at you to go deeper and get into your specific number. So check it out. Ramsey Solutions.com. It's called Ask Ramsey or click the link in the description if you're on podcast or YouTube. I want to point at one thing.

Starting point is 01:18:11 We have a, like for the last few years during the summer, we have college kids that will live with us at the house and who are working in town here at Nashville. The young man that lived with us this summer on Sunday, the first Sunday he was there, he's like, hey, can I take the kitchen over for a few hours in the afternoon? We're like, of course. I did that dude put on headphones and got a old school cookbook and made this amazing meal and then had these glass, Pyrex things and made meals a hoax. And I was like, what are you doing? And he's like, meal prep, man.

Starting point is 01:18:48 and he said it as though like I'm washing my clothes and every week and then a few times in the summer some of his buddies came over and they all just hung out and they were laughing and being goofy but they're all meal prepping and I thought A this

Starting point is 01:19:04 this kid's turned it into an art project and it's fun and also I can't imagine how healthy the food he was making it was astonishing but also he knows what's going into it yes and how much money that kid saved and it was I was like oh that's easy it is. It's literally that easy. It took a few hours on a Sunday afternoon,

Starting point is 01:19:22 made it a fun thing with him as friends, and then they had healthy meals all week. And it was, it was like, it was inspiring to me the old man, like, oh, that's how simple meal prep actually is. Just to put it on the calendar and just go do it. And I can make it as fun or as miserable as I wish.

Starting point is 01:19:38 But man, so it's a thing, people like, I can't do that. You can't. You absolutely can't. And even if you don't like enjoy, like, I'm not a cook. You know what's fun? Having money. Not being broke forever. wondering where it went and I check your bank statement. I'm like, a lot of DoorDash and Chipotle on here. What's going on, man?

Starting point is 01:19:54 So it's a great thing to do. It inspired me to eat at home more. I just love that young people are getting back into meal prepping. They're acting like it's some little house on the prairie thing that's brand new that you can do. And I'm fine. Whatever trend you want to make it. I was all about it. It was awesome. Fantastic.

Starting point is 01:20:07 All right. Che is in Chicago up next. What's going on? Chey, how can we help today? Hey, my question was just very simple and to the point. Should I be contributing more to my house? told or are we okay where we are? A little summary of it is I've been a stay-at-home mom for about 11 years during a very small period of that. I did find a full-time job, but it required family

Starting point is 01:20:32 to come and watch my children at like 5 a.m. to get them to school because I had to be there at 6. And that only lasted a couple years. The family ended up having some health issues, and so I ended up quitting my job and going to subbing at a local school district. But my husband has held it down, and he's never complained one way or another. He thinks it's awesome that I stay home and that I sub at the school. I'm involved in the school and our children's lives and just make it work. We make about $90,000 annually, like gross income, and we're on baby steps three. My only hesitation honestly, and I guess what I want to know as far as contributing more is we're making the steps work.

Starting point is 01:21:19 It's just a slow process. So you want to get through baby step three faster? Is that the ultimate goal? I'm just worried, like, are we behind in retirement or are we behind in baby step three? Should we be making it there quicker? Should we be concerned with him working and me not working? Like, my kids are in school, but I don't have. before school care or after school care.

Starting point is 01:21:42 Got it. So how long is it taking you to get through Baby Step 3? We're right around the two-month mark, and I want to say that we started this right around like March, maybe. And you have two months of expenses saved? Yes. Okay, and that's taken, I mean, we're already in September here as we record this. So it's taking you a good bit to get that two months.

Starting point is 01:22:07 You're telling me to get to six months, we need two more chunks of this, which could be another year? Well, now that we don't have, like, the debt, and we, once, like, we got down with Baby Step 2, we have put, like, money into, like, other things. We had some, like, car expenses come up, so, like, we just cash flowed that. So, like, not all of our money was going towards, like, savings. So there's been a couple of setbacks. But generally, here's the parameter. We generally see people do Baby Step 3 and get that fully funded emergency fund in about

Starting point is 01:22:36 six to 12 months max. So if it's taking you longer than that, that's just, it's not a, you're behind, you're a terrible person. It's just, all right, if that's the average, how do we get closer to that number versus it taking 18 months after already getting out of debt to get the emergency fund? So the question then becomes, well, what can we do to get there? Making more might be part of the plan. But it might also be, can we cut 300 bucks of expenses? Because we're getting a little bit lazy now that we're out of debt. We got a little too comfortable. We've got to keep our foot on the pedal. So I would be looking at the whole picture. And as part of that, hey, if we could get this done in three months or six months, what would that take? It would

Starting point is 01:23:13 take $1,000 more per month. Who's willing to do what? How do we get there in the best way? Can I challenge you on something, Che? Yeah. I don't want you, you, you can do what you want, right? I don't want you, it pains me to hear you say the words, ask the question, should I contribute more? Because I want, when you say it like that, when you ask it like that, you've put a dollar amount on the word contribute. You're contributing an extraordinary amount to your household. And I would even go farther to say you're probably the anchor point that allows your husband to repel off the side and go earn the money that he earns. And so if you and him decide, hey, we want to expedite this like George was saying, it's less about should I contribute more. I want you to change the language to should I contribute or could I contribute differently for a finite period of time?

Starting point is 01:24:16 Yeah, that's true. I definitely think George is correct in that way that we definitely took our foot off the gas pedal once baby step two was done. And I mean, some of it really was like we did have some things that came up that. But instead of like going back into debt, we just started cash flowing like from month to month. But I think we did kind of get lazy in that aspect. And it is hard though. Like, I don't know. It's so hard.

Starting point is 01:24:41 It's so hard. I contribute to the household because I don't have a problem doing inside work or outside work. I don't have a problem scheduling the things or paying the things or doing any of it. It's just I don't know. Like sometimes you wish you could help more financially. and you kind of overlook even the small things you do in household. Totally. Totally. And the, you're in what I call the American mom guilt factory. There's no way you can win, right? Like if you've got young kids, you should be staying at home more or you should be working more. And there's really no way to win.

Starting point is 01:25:16 And so the path forward is almost always opt out of the what should I be doing? Like, what does this Instagram account say I should be doing? What does this Instagram account say I should be doing? what is this mom of a friend's grandma's kid saying I should be doing? And you and your husband say, what kind of life do we want to build together? And how quickly do we want to get these things done? And then y'all get to decide which levers you pull moving forward. Sounds like you got some fun homework, Chey. We're going to sit down tonight, look at the budget and go, okay, what are all the levers we can pull?

Starting point is 01:25:49 And then what is my part of that? And you might find there is a part. You might be working a couple more hours a week. But don't do it out of guilt. Do it because we agreed this is the best. path forward. Welcome back to the Ramsey Show in the Fairwinds Credit Union Studio. Sam is in Halifax, Canada.

Starting point is 01:26:22 What's going on, Sam? Hey, I'm a 24 years old. I have $78,000 and change in debt. I've been budgeting since 2025 since I got my first job after graduation. Cool. But my Excel sheet tells me that I'm supposed to have the money left over at the end of the month, but I'm just not finding anything. I'm just a lot of debt that's daunting on me.

Starting point is 01:26:45 Yeah, what kind of debt is? the 78? 52,000 out of that even, I just checked today, are student loans, and the 19,400 is a car loan. All right, what do you do for work? The project manager for construction.

Starting point is 01:27:01 Great. What do you make? Take home, 41,000 and change. Okay, so that's after taxes. So you're bringing home a little under $4,000 a month. Exactly. $790 at my

Starting point is 01:27:15 account every week. What does the sort of career path look like in this world? Are you wanting to be in construction or are you just wanting to be in project management? Project management has been my passion. Construction, I kind of just got into it with high school jobs and stuff like that. So that kind of merged together. This is my first job after her university. So I'm just starting off. I know the salary is quite low in my area from what anybody else makes, but everybody wants a least five to six years of experience before you can make it to that 90,000 or $100,000 range that everyone's posting about. Yeah, I'm glad you got your foot in the door, and I'm glad you're doing a budget. That's fantastic. But you're saying, based on what should be on paper,

Starting point is 01:27:57 it's not there. And that's largely due to some spending happening outside of what's on the paper. That's correct. So I would be looking at your bank statement as this source of truth to go, okay, where were the leaks this month? Was I, you know, eating out too much? Are some of my bills higher than I actually have budgeted for? I need to adjust them because electricity is not $40 a month like I hoped it would be. That's where I would start to reconcile what you budgeted for and what the actual numbers are. And that will help you at least get some control over the controllables. fee so i did that exact thing for last month just before i got on the call here um my expected or projected leftover was supposed to be 543 and 89 cents last month and i actually ended up with

Starting point is 01:28:47 three hundred and eighty seven dollars left over okay so i know i'm saving money i know i'm putting the actual versus projected versus actual in my sheet i've been doing that at a monthly basis because i just don't go in weekly other than when I'm trying to put in, like, you know, every time I travel for work, I get a little bit of a bonus for travel that goes directly into a car payment or the next oil change or whatever. Sure. I'm doing that periodically. I'm just, like, with these monthly payments here and the debt that I've got, it's just,

Starting point is 01:29:14 I don't know, I'm not sure how to kind of put all the money together instead of wasting it somewhere else into where I should pay. And I know I've tried these snowball calculator AI online, but I'm just not sure how to tackle that, really. Well, what I don't want you to do to do. do is focus on the nickel because you stepped over the dollar. So let's let's focus on some big wins versus hey, I'm focused on trying to dial in this $100 that I'm trying to figure out where it went. I would rather you be going, how do I create enough side hustle income that I'm bringing in an extra

Starting point is 01:29:44 thousand dollars a month? Or I'm getting a roommate to cut my rent and utilities in half, which is going to add an extra $500 towards my debt snowball. Those are the big moves I want you to make because even putting $200, towards your debts every month, it's going to take forever to pay this off. Yeah. And I can tell you're a math guy. You're real sharp.

Starting point is 01:30:05 So you know the math of, if I can put $1,000 a month towards this, we might have some traction. So that's the question mark, is how do we bring in more? For me, 24, I was in your exact shoes. I had $40,000 in debt instead of 78, but I was making less than what you were making,

Starting point is 01:30:20 and I just took on about five side hustles. And then whatever the one was the most, lucrative, I double down on that and tried to use my time more wisely. You would tell you something wild, Sam? My wife and I, for maybe nine months, rented a room from a woman in our community. That helped to save rent. I was married, dude. We lived in a 900 square foot, like one bedroom. I mean, it was a tiniest little place. We sold our house and moved into a dorm one time. And this is before living expenses exploded like they have. And so at 24, the more, the more sacrifice you're willing to take on now.

Starting point is 01:31:03 I mean, that's kind of my next point. I did end up getting a roommate about two years ago just before I got this job. Obviously, I came out of school pretty much broke with a huge debt. I started off at 64, so in Canada we get about six months of, I guess, grace. So just, just from October till September now, I've paid off $14,000 into that because I was making extra payments before all my other loans went up. Good for you, man. Good for you. What's your car worth? If I were to sell it today, going to a dealership, I've been sold $13,000 to $14,000. Well, the dealership's going to give you the lowest price known to man. If you sold this thing,

Starting point is 01:31:45 private party, took some good photos, what do you think you could get for it? looking online probably $1,000, $2,000 more than that, just off a Facebook marketplace I'm seeing. Okay, so you might be underwater by a couple of grand. I'm just wondering, this car, it's not quite half your income, which is kind of our parameter, no more than half your income tied up with things with wheels and motors. But man, in your entry-level stage of life, getting rid of a $20,000 car and freeing up that payment would give you some breathing room. What's the payment on that? Yeah.

Starting point is 01:32:16 A month, 551. Okay. So you told me that you have about, if you're lucky, $500 to your name at the end of the month. Right. So we get rid of this car, we can double that margin instantly. But that means we've got to save up the difference that we owe. Let's say, you know, you owe 19 and it's worth 16. You need to come up with three grand just to clear the title and sell it,

Starting point is 01:32:39 plus enough to get you a used car, something to get you from A to B. Yeah, just to work really because, you know, project management, I don't have a company truck yet that's been in the talks, but that just keeps getting pushed. And that would change your life. I mean, honestly, when I first, the reason I took this job was because it was keeping me in the same, I guess, the little city that I went to school in. And it was my industries and the truck was promised, but some reshuffling with the fleets happened. And my name wasn't actually in that draw because I hadn't spent a whole year at this company yet. So now I've got to wait for that next run, wherever the other project manager gets a truck.

Starting point is 01:33:17 Yeah. Well, in the meantime, you might be driving the worst-looking car in the entire parking lot at work. And I'm okay with that, because in construction, who really cares? Nobody. The dude with the lifted truck is usually the most insecure. So you'll be just fine getting one with a little rust on it.

Starting point is 01:33:33 I have a lifted truck, George. Exactly. I was trying to side-eye John secretly. He does have a big scary truck. But Sam, the key here is, if you're willing to live like no one else right now, you will be living like no one else so much earlier than your peers. And I know at your age, it's easy to compare.

Starting point is 01:33:47 The guy, the next cube over is also 24, and he already has a house. And you're like, dude, I am so far behind. I want to live this lifestyle, but I also want to pay off the debt. So if you can just focus on one thing, which is your debt right now, and just do that debt snowball and create as much margin as possible and keep that up consistently, you're going to be in good shape. I would love to see you out of this entire debt in two years, which you know, 40 grand a year. question here. That's more than, that's as much as you're taking home in a year. So it sounds like you need a side hustle working an extra 20, 30 hours a week, making an extra 40 grand take home in order to knock this out. And if you get rid of that car, it'll help you tremendously.

Starting point is 01:34:28 So those are some practical things. I'm going to send you a copy of my book, Breaking Free from Broca, to walk you through this whole thing, the whole chapter called Margin's Breathing Room that I want you to read specifically. So hang on the line. We will send it all the way over the border. I hope it gets you. I don't know what, what the borders like these days. 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.

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Starting point is 01:36:11 who have your best interests at heart. So go to Ramsey Solutions.com slash coverage to find the type of insurance you're looking for and connect with a Ramsey trusted agent. Marisol is in Sacramento up next. What's going on? Hi, thank you so much for taking my call. I was calling in, yeah, I was calling in for some advice. I'm in a different stage in my life.

Starting point is 01:36:34 I'm about to graduate dental hygiene school in about two months. Nice. And I'll have about, I'll have about $90,000 in student loans. But I'm also engaged. me and my fiance want to plan our wedding and get a house. And so we've been saving, but we're trying to figure out what to prioritize. Priority for me would be to get married before we move in together, but we don't know if we should rent until we pay off all our loans or buy a house.

Starting point is 01:37:03 So just wanting some advice. You have 90,000 in dental hygiena school? Yeah. So I had to move to the town where I'm going to school. so I had to pull out extra loans for housing and bills and all of that, plus the school itself. Oh, wow. Ouchies. Okay.

Starting point is 01:37:24 What are you going to be making? Yeah, what's a dental hygienist to make in Sacramento? So in my area, between 65 an hour to 80 an hour, just depending on being a first. $80 an hour? You're talking a dental hygienist in Sacramento is making $165. thousand dollars a year? Yes. That is insane.

Starting point is 01:37:50 Dude, see if there's any openings where you work. Yeah, I mean, I'm going to take you at your word. You seem like a very honest person, but my mind is blown because what I know of dental hygienicists is you probably make 50, 60 grand, maybe 70 over time. Oh, yeah, no. So it's actually really in demand at the moment. And there's a lot to it, too, to the career. Oh, no question.

Starting point is 01:38:13 Wow. Okay. Well, I hope you're making that much. What does your fiancé make? So my fiancé is HR manager at a hospital. He makes about $85,000 right now. Great. Well, I love the idea of you guys getting married before you move in together. I would not buy a house. We've got a mess to clean up with the student loans and any other debts you guys have. Does he have debts as well? He does. So he has about $9,000 left of his student loans.

Starting point is 01:38:41 the interest rate for him isn't too bad. I'm more worried about the interest rate on my loan because it's about 16%. Ouch. Are these private student loans? It is a private student loan. Man. Well, I'm not sure that you're going to be able to refinance those into a cheaper interest, but the good news is with your incomes combined once you're married,

Starting point is 01:39:07 you're going to knock these debts out so fast. The interests won't have time to even... ding you. Yeah, that was the plan to hopefully refinance and pay it off aggressively. But we also want to have a nice wedding. I've kind of come to terms with the fact that I don't think we're going to be able to have like a big traditional wedding and might have to be something small. Not if you're paying for it.

Starting point is 01:39:33 Is family involved? Are they willing to chip in? Not really. We don't really come from a lot of wealth. So it'd be mostly us. Okay. Because something you could do that we often encourage is you go down to the courthouse, you get married officially, you move in, you start your life together, combine your incomes,

Starting point is 01:39:51 rent for a while, knock out all of your debts, you can do the debt snowball method together, which means it's going to get down a lot faster. And then later on down the road, maybe a year or two from now, we budget for an awesome party. That's one way to do it. Marisol, I want you to check out our friends at YREFI. It's the letter Y-R-E-F-Y.com and they specialize in walking through private student loan messes like you're in and looking at potential, like, can you refinance this mess? Can I say something to you that's going to sound harsh, but I'm on your team? Yes, please.

Starting point is 01:40:32 Okay. Getting $90,000 in private student loans to fund apartments and a dental hygiene. degree was a pretty, you dug yourself a pretty messy hole. Okay. And what I don't want you to do is to say, okay, I don't want you to look at this projected amount of money that somebody told you you're going to make upon graduation. Start counting that as earned income already. And then by an apartment, buy a house, plan a wedding based on imaginary. Because the one real thing you have in your life is a $90,000 hole. Okay?

Starting point is 01:41:14 And so let's approach this completely the other way, which is there's a possibility that me and my new husband combined are going to make, what, $2.5, almost a quarter million dollars. If we get a one-bedroom apartment as cheap as possible and we put every bit of extra money we have, we can owe nobody any money by the end of the first year of being married. We can go scorched earth and never owe anybody. anything ever again. And then we make a quarter million dollars together and we can do whatever we want whenever we want. But that would take you saying I'm going, I have this vision of this life I want to live and it sounds like I don't want to put words in your mouth, but you're coming from a tough

Starting point is 01:41:57 background and you want like you see this carrot at the end that says $150,000 $160,000 a year. It's going to be awesome. Like don't spend that until you have it in an account and make sure you clean up the past messes before you start creating new ones. You get what I'm saying? You have a chance to change your entire family tree if you'll buckle down for one year.

Starting point is 01:42:21 Yeah, and I think that was one of the biggest things I had to come to terms with is not following what everyone's doing, having these huge weddings, having so much debt but just really attacking my loan. I do also want to ask, I have

Starting point is 01:42:37 about $11,000 save, because we were planning for the wedding. Should I put all that into my loan after I graduate? All about $1,000 could go towards those debts and free up a couple of payments. Because I'm guessing you have some smaller student loans in there, or is it all one giant big loan? It's one giant big loan, but it gets split into two because it's per academic year. Got it. Okay, so you have like $2, $45,000 loans essentially.

Starting point is 01:43:08 Exactly, yeah. Yeah. I think if you do that, it'll put a stake in the ground saying, I'm serious about this. I think if you don't, you guys will be comfortable for a while. And you go, well, I'd rather, you know what, we could see, we probably need some emergency savings. We probably need to upgrade the car. There's always going to be something you'd rather spend that money on than paying off debt. And, Marisol, you both did not come from money. Is that, is that, is that, is that right? Yeah, exactly. We'd be the first ones in the family, you know, that went to college, graduated or getting, like, actual careers.

Starting point is 01:43:37 So I want you to expect this, okay? People will come out of the woodwork asking you for things. People will expect you to go above and beyond because you're the one who made it. And I honor that and I actually love being able to take care of people. But you have to, you've dug yourself a hole in the greatest way you can love everyone else who's going to reach out to you over the next 5, 10, 15, 25, 30 years. is to make sure you and your husband are anchored into, like, you all have taken care of yourselves so that you can take care of other folks. And that means you're going to have a, you're going to have just several years of saying

Starting point is 01:44:18 no a lot to yourself, to old friends, to cousins you haven't talked to in years, to his family, like, you all are going to have that, why are you driving that car? You told me you were making this much money? Yeah, I'm playing a different game. Why are y'all living in this tiny one-bedroom apartment? You told me you're making this money. Yep. we are playing a totally different game.

Starting point is 01:44:40 Like it's going to have to be a, like almost a, it's a psychological and emotional shift, but it's almost a spiritual shift. You all are going to have to decide we are opting out of the game that everybody else is playing because we want to have this thing called freedom forever. Yeah, yeah.

Starting point is 01:44:54 And I think I'm okay with not worrying about too much what other people think. It's just, you know, when you've seen, you know, you see people get their careers, they buy their house right away, They get married. It's just a very different vision than I had originally envisioned. What you don't see is those people are broke.

Starting point is 01:45:13 And they can't breathe at night. Or they had a ton of family help, and you didn't know that. And so you got to run your own race because otherwise running someone else's race, the finish line will always move. So put the blinders on, get rid of this debt within a year, save up the emergency fund, and you will have so much more peace when you finally buy that house. Hey, guys, Dave Ramsey here. Every day on this show, we help people work through real money problems.

Starting point is 01:45:55 and figure out what to do next. Now, you can get that same kind of help any time with Ask Ramsey. Ask your money question and get answers built on Ramsey principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to Ramsey Solutions.com and try Ask Ramsey today. That's Ramsey Solutions.com.

Starting point is 01:46:25 The Ramsey Show question of the day is sponsored by Y Refi. If your private student loan payments are out of control, you may feel like you're out of options. Why Refi was built for borrowers in difficult situations and helps explore refinancing options that fit real-life budgets. Visit yrefi.com slash Ramsey may not be available in all states. Today's question comes from Carl in Missouri. Carl writes, I am retired with a yearly income of approximately $20,000 from Social Security. Is it okay that my emergency fund only has $500 in it so I can pay off my debt quicker? I currently only have $2,000 left on my credit cards.

Starting point is 01:47:17 Oh my gosh. I just, I'm so sad for Carl right now. Retired with a yearly income of 20 grand. So the average Social Security payment, John, is about $2,000 right now. So he's making below average, and this is all of his income. Sounds like he has nothing in retirement, no savings. He's got an emergency fund of $500. He's saying, is this okay to not even bring it up to a thousand so I can get my debt paid off quicker?

Starting point is 01:47:42 He's got two grand left. I don't know how he even has any margin to pay off that credit card debt based on the interest rate on those cards and how much he can throw at. I hope he can knock it out. You can keep it at 500. I would still bump it up to 1,000 because what I don't want is for you to have a $700 car repair. Then I would deplete your emergency fund and you go back into debt. You can't hardly sneeze for $500 anymore. Exactly.

Starting point is 01:48:05 So $1,000 is our bare minimum. And this is a tough question because, Carl, I don't know if you're 63 and you just retired or I don't know if you're 93. And so if you're 63, if you're 73, man, I would I recommend you get a side hustle and see if you could go crank out that $2,000 over the next few months. And it might be delivering. That might be, I don't know what your abilities are and your capabilities are at this point. But is there a way you could earn a little bit of extra money just in all of it goes to paying off these credit cards? I'm just worried, Carl, I mean, the $1,000 emergency fund is so thin as it is. I mean, it's designed to like, to be scary.

Starting point is 01:48:52 So light a fire under you. Yeah, 500 bucks, man, is just, I mean, you can't walk into a dentist for $500. You can't do anything for $500. And so that makes me nervous for you. I've got two parents who are recently retired. Like, that would make me very nervous for them. They only have $500 in cash if they needed something. That's just a recipe for having to go back in debt.

Starting point is 01:49:13 Even if it takes you an extra month or two to pay off the credit cards, having that extra $500 and that emergency fund will give you a whole lot of peace along the way. Yeah, yeah. Thanks for the question. Corey is in Tampa, Florida up next. Corey, welcome to The Ramsey Show. Hey, guys. Thanks for having me.

Starting point is 01:49:30 Um, question revolves around me and my wife trying to be part of the eating too much out problem. Uh, we, we want to open up a restaurant. That'll solve it. That'll definitely solve it. We, we've spent the last 20 months getting out of baby step two and we will be finished up with baby step two by the end of this month. Awesome. And looking, and looking to be finished with baby step three by a decision. of this year.

Starting point is 01:50:02 Okay. So we're really just trying to see what would be the best way to go about potentially opening up a restaurant following the baby steps with the reality being that the restaurant's going to cost a lot of money to open. Yeah, well, my gut says you don't have the money and probably won't have the money to cash flow this thing. Not for a number of years without selling the house and using the equity from the house. Dear Lord, please don't do that. Can you promise me you're not going to do that? More than likely, we'll not do that. So when it comes to business, it goes beyond the baby steps. Obviously, we want you to be debt-free with an emergency fund and be investing for your future to build wealth for your family. When it comes to business, we have a, I'll send you Dave's book, How to Build a Business you love.

Starting point is 01:50:53 that's going to really walk you through the process. But the main tenant of Dave Ramsey and businesses is do it with cash. Move at the speed of cash, which is so hard for entrepreneurs because all they want to do is move forward, get it done, scale it. And often that means they're taking on a whole bunch of debt and risk to do it. And restaurants are one of the riskiest industries to start a business in. And you probably know that. The failure rate on these things is pretty high. How old are you, Corey?

Starting point is 01:51:22 I'm 33. 33. So, dude, you and I are both. We're six years removed. I mean, just six years ago, people were lawfully prohibited from entering into a restaurant. Right. And that, you know what I mean? And if you have the, the build out debt payment plus the rental payment plus the staff, I mean, it's just, you have a lived experience of this going. sideways in a pretty big way. And that's, that's, that's different than the regular fail rate of just somebody opening up a restaurant. What kind of restaurant is this? Um, we haven't nailed down the exact concept completely. This, this plan would not be taking life for another, you know, three to five years. We, we, we don't want to do it haphazardly. We, we had a man. If I was on Shark Tank right now, I would send you out of the room. That was the worst pitch for a guy who was like, I have this big vision for a restaurant. What do you guys sell? Food mostly. Like, all right. Great. I do, I do have the

Starting point is 01:52:30 concept. It's primarily going to be a local seafood and meat retail with a counter live fire. There we go. Dining experience. See, now I'm picturing this thing. I'm excited. Yeah. I want to go visit Tampa. That's got of places, man. That sounds awesome. Okay. So question number one, are you in the hospitality field already? Yes. Both me and my life has managed rest. for a decade plus each. Okay, so you know how this rolls. Okay.

Starting point is 01:52:57 Because I'm wondering if you can work from the inside out versus starting one, can you work your way up to the point where they want to hand you the business because you're the best person to take it over or you buy them out? Not with the concept that I have in mind. There's really not anything 100% like it. I am kind of capped out on my growth currently at my current position, as is my wife. What do you guys make? I'm currently making 65 or 60, sorry, 765 plus bonuses a year salary and my wife makes 69 plus bonuses as well.

Starting point is 01:53:34 Awesome. We're averaging about 155 total pre-taxes. Fantastic. So my question for y'all is, it's going to sound like a high school football coach, but it really comes down to how bad you all want this. What are you all willing to sacrifice for this dream three years from now, five years from now? Is it one of y'all stepping out of the job you have to go make more money, maybe doing something you don't love that might be adjacent so that we can earn money faster? Is it like, y'all just have to ask you, do we work more hours? You all have to ask yourselves, how big of a dream?

Starting point is 01:54:10 How much do we want this dream? How bad do we want it in three years, five years, ten years? The problem that we have with that is we do have two small children, five and seven. and we have sacrificed very hard over the last 20 months to pay off the 110K and debt that we were at. I don't want to put this burden on my children as well through their entire childhood. Got it. Got it. So you're going to have to pick your burden.

Starting point is 01:54:38 Yeah. Do you want your kids growing up in a household that owes $700,000 in construction and remodeling debt on a restaurant? with two parents that are chronically stressed for how thin those margins are. And there's one storm there in Tampa. There's one beef issue and the price is up. Like, do you want that burden or the burden of we worked really, we kept working more hours so that we could do this thing with as least risk as possible? Or the burden of mom and dad have this dream and it's going to, it's, it might not even happen

Starting point is 01:55:17 until y'all are out of the house. It might be 20 years from now. Yeah, for sure. I mean, that's definitely something that we considered. And I apologize if I came off incorrectly, it was never my intention to take on 700. Oh, no, no, I'm just, bro, I'm making up numbers. Court, I'm making up numbers. I'm being sensational for the radio.

Starting point is 01:55:36 No, I understood. I, but also, George and I talk to guys who do that all the time. If I'm in your shoes, my plan would be how do I get into local farmers markets? How do I then step it up and do a food truck? then that becomes so popular, so successful, people are clamoring for a brick-and-mortar location. That's the right way to do it. That's how you go slow. That's you make it sustainable.

Starting point is 01:55:58 So hang on the line, I'm going to gift you Dave's book, How to Build a Business you love, so that you don't fall flat on your face. Because I love this idea, and I hope John and I can one day visit and get some free seafood on the house for our great advice. People ask me all the time. George, what's your number one money-saving hack? I'm glad you asked. Nothing makes me happier than helping another frugal friend. So here's the hack.

Starting point is 01:56:38 get on a budget. Seriously, how are you supposed to save money if you don't know how much you're spending in the first place? And that's what makes the every dollar budgeting app a game changer. With every dollar, you'll get a clear picture of your spending, and from there, it's easy to see where you can get more intentional,

Starting point is 01:56:53 cut back, and save more money. How much money are we talking? Well, the average every dollar budgeter frees up $395 in their very first budget. And if you ask me, I think you're way above average. So, why are you still listening to me? Go download every dollar for free, and start saving more money right now.

Starting point is 01:57:16 Our scripture of the day, Philippians 412. I know what it is to be a need and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well-fed or hungry, whether living in plenty or in want. Bob Marley said money is numbers and numbers never end. If it takes money to be happy, your search for happiness will never end. Heather is in Portland, Oregon up next. What's going on, Heather?

Starting point is 01:57:45 Hi, yeah, thanks for having me. Sure. What's your question today? Yeah, my husband and I are considering me becoming a stay-at-home mom. However, I am the higher earner between the two of us. So that would be just quite the cash crunch for our family. So I just want to call and get your guys' perspective into the situation. What are the two numbers? As far as our income, I make about one.

Starting point is 01:58:15 105, and he makes about $85. Okay. So is it, I mean, the higher earner thing, if you were making like $600 and he was making $60, I would be like, ooh, this is very lopsided. So the real question is, can you guys live on $85,000? Yeah. Have you done the budget? Yes, we have.

Starting point is 01:58:36 It would be tight. Have you pretended to do this in real life where you go, all right, my income, I'm not, we're not even going to, we're going to move it out of checking, and we're just going to live off of his paychecks this month. That's a great way to test it out. Yeah, we haven't done that just with, because we're paying for child care right now, and that's a big portion of, you know,

Starting point is 01:58:55 where my income goes. So that's something we should probably give a try. And maybe just pay your child care out of your check and keep that as simple as possible. And you can subtract it on paper knowing the child care expense won't be there, but all other things considered, did his, let's call it, $5,000, or take home a month, cover all the bills with enough margin to still breathe and eat and upgrade

Starting point is 01:59:20 the cars and go on vacation. And it's easy for me to make this a math problem. Like, it's just a math problem. But also, if you are like, have it deep into your spirit, I want to stay at home, then that's a, that's a different reorienting question for you and your husband. Because it might mean, like, hey, I want this to be a priority. This is a big deal to me. And he might say, okay, then I'm going to go get a new job.

Starting point is 01:59:44 where I can make more money. Right? But it's being honest about all the things going on in your heart and mind. We need to move somewhere cheaper, which means it's not as nice. The schools aren't as great. Whatever it may be, there's going to be compromises here to make if you're saying, hey, it's going to be tight, but we can do it. So are you guys debt-free with an emergency fund? Yes.

Starting point is 02:00:05 Awesome. Okay. So that's your homework. I would budget tonight based off of his income. You can take out the child care and then try that out for a month. And if it feels good and you guys think you can do it, then go for it. And here's what I found. People who their value is, I want to stay home no matter what, they figure it out. They make the sacrifices needed. But you can't have the cake and eat it too. That's where people mess up where they go, well, I want to stay home.

Starting point is 02:00:27 But also, I still want all of our lifestyle as well. That's where you go south. So if you guys are committed to remaining debt free, making any sacrifices needed, knowing me being at home is the priority, then everything else can fall by the wayside. You cover your four walls, you go on less vacations, you upgrade the cars less frequently, and you stop carrying what people think. Would you guys ever consider lowering retirement contributions while we're trying to work it out? You're saying go from 15% down to 10%? For example? Sure. I wouldn't.

Starting point is 02:01:02 If it requires that, that tells me that it's too tight right now and other levers need to move. But I would not sacrifice the retirement in Baby Step 4 in order to make this happen. Okay. So as long as you can, the goal is, if you can continue the baby steps with the income that you have, you can definitely stay home. You have the green light for me. And again, you can do what you want. You can stay home and not do any retirement and go into debt.

Starting point is 02:01:27 But I want the best for you guys on your wealth building journey to have peace and a nice nest egg and to change your family tree. Do you want to stay home, Heather? Or do you like your job? Well, yeah, I do want to stay home. Yeah, that's the rub here. I would do it. And this is something that my wife and I dealt with when she retired here from Ramsey after nine years. She was making great money at the top of her game and it still was worth it to her. And not once did she say, man, it would have been nice to still have that income. And for some people, grieving all the work you put into that career and the money we're making, it's really hard to let that go. So I don't know. Forget the money part. The identity. I'm an accomplished professional. The social life alone. Getting to shower. Adults. Yeah, exactly. Oh, man. Well, wishing you to the best, Heather. It sounds like this is definitely possible. We just got to crunch some numbers and try it out. And I think you're going to find that it is well worth it. Alexis is in Los Angeles up next. What's going on, Alexis? Hi, how are you? Good. How can we help today? My question is, I was, I just got married about two and a half years ago. But at the last year and a half, it's been very, very rocky to the point now where my husband,

Starting point is 02:02:39 and has told he just put a deposit on a place to rent. He told me he's going to file for a divorce. But he said he will give us a chance if I make him a primary beneficiary to my trust, to my retirement account and put him on the house, which is in my name as my sole and separate property. Just a quick backstory. we came into this marriage for a blended family, but we don't have children together.

Starting point is 02:03:13 This is, you know, his second, my third marriage. And I came in with a lot of assets. And now, you know, with everything going on, he's telling me he'll stay because it shows unity if I put him on everything and make him the primary beneficiary of all of my assets. Currently, everything is, you know, in a trust

Starting point is 02:03:36 that my daughter would one day inherit as a 14 year old daughter. I'm not working anymore. I left my job a couple of months ago with his agreement when we were doing okay. You know, we agreed to that. And now that he is filing for a divorce, he also said that once he moves out, which is in a few weeks, he's also not going to help me pay any of the bills at the house that I have to take care of all of it on my own and I can just pull money from my retirement. Okay, but this is a huge mess and we're not going to be able to solve all of it.

Starting point is 02:04:10 Yeah. Okay. But the way you painted the picture for me is I have all this stuff. I'm not putting his name on any of it. This is mine. This is mine before. This is mine now. And I'm moving the trust for your daughter to the side.

Starting point is 02:04:24 Okay. That's a different, it's a whole different issue. Okay. In my house, my life, we're getting married. We're going to have two separate lives here that you're not going to be a part of. he got that message. And then he's like, fine, I'm going to go live my life then. And then you're like, well, you say you were going to pay for stuff.

Starting point is 02:04:46 So it sounds like he finally said, I get it. We're never going to come together and say, this is our home. This is our cars. This is our retirement. This is our future together. I'm going to always be living in your world. And so I'm going to go back to the way it was before and have my own world again. Because that's basically how I live in.

Starting point is 02:05:06 way. And you see what I'm saying? And so the trust is a whole other issue. If he's, if he's trying to hold you hostage for a trust for your daughter, that's a whole separate issue. Well, that's the thing that we are already married. We got married already. I know, I know y'all are legally married. I'm saying y'all have, you should have put him on your house when he moved in because it's y'all's house now. Right. And that part, I actually told him, you know, I don't have an issue doing that. I can put him on the house. Um, but when it came to like the retirement and the retirement is actually written out as, I don't know how you, what the terminology is, but it is part of my trust,

Starting point is 02:05:47 which my daughter is set to inherit one day. But I don't think. He wants to be mean the beneficiary and to be able to distribute how he, he says that I need to be able to trust him to, if anything would happen to me, to distribute everything amongst my daughter and his children, you know, the way that he finds fit. I think you've both weaponized money in this relationship. Yeah, I think money is the alarm system here. It's not the true issue. It's all about trust and control underneath, and he doesn't feel like he's a part of this,

Starting point is 02:06:23 and now he's using that against you in a hostage negotiation. And so all of it is toxic. If I was the referee, I'm going flags all around on both teams, 10-yard penalties. None of this is healthy, and I think this is going to require some deep marriage counseling. both are actually wanting to solve it. And if, yeah, figuring out a way that we are going to build our life together. And we do have to take precautions in blended families to make sure previous assets are for our kids. That's all that is right and good.

Starting point is 02:06:50 But I promise this is playing out in 50 other areas of your marriage, not just in the money. Thanks for the call, Alexis. That puts this hour of the Ramsey show in the books. 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 - The Best Return Isn’t Always Money

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