The Ramsey Show - The Right Financial Decision Starts With Understanding the Problem

Starting point is 00:00:02 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. I'm George Camel, joined by Jade Warshaw, and we're taking your calls at Triple 8-8-25-5-2-25. You can't tweet it in, you can't call it in. Well, you can't... Sometimes we do take the social ones. That is true. And you can leave us a voicemail, but that's less fun.

Starting point is 00:00:39 So call in live. We've got some open phone lines here, AAA 825-5-2-2-25. Tani is in Bismarck, North Dakota to kick us off. What's going on, Tani? Hi, thanks for taking my call. Sure. So basically, my whole world imploded on me recently. Oh, no.

Starting point is 00:00:57 I found out that my husband, we've been together for 15, married just over 10. We have two boys. that he's been cheating on me. For at least two years physically online, who knows how long. But we, again, we have two boys and all of our assets are combined. We have no debt except for our house. Well, so I thought, because another layer to it is he has been hiding a significant amount of credit card debt. Yeah, I bet.

Starting point is 00:01:36 having this relationship on the side is costing him. Yeah, yeah. Yeah. And so I'm trying to figure out how to move forward with not only that credit card debt. It doesn't have my name on it, but we're married. So I'm responsible for it too. And then what do I do with that? I think if I'm the judge, I'm going to go, well, you're an innocent spouse.

Starting point is 00:02:00 And he's taken on this credit card debt as part of the judgment. What are you going to do next? I don't know. Have you spoken to an attorney yet, Tony? Not yet. Not yet. I think that might be my first order of business. Day by day.

Starting point is 00:02:18 Yeah, I would see what, you know, in every state has different laws, but I just want to make sure that there's no rash decisions here out of fear or anger that could hurt you later on. And so I think talking to an attorney going, hey, what can I do and should I do legally to protect myself? during this awful season that you're going to find yourself in cleaning up this mess. Yeah. Have you guys talked to each other? How did you find out about all this? Well, I had lost my phone, basically, and he was sleeping, and so I grabbed his phone, and I saw Snapchat, a suspicious-looking Snapchat, and I kind of led me to snooping in his phone.

Starting point is 00:02:58 First time I've ever done that in 15 years. Wow. Yeah. How old are you guys? It's rough. 33. Wow. I'm sorry this is happening. This is devastating. I mean, I can't imagine waking up in your shoes. So just the fact that you're trying to keep it together, you know, good on you. How old are the boys? They are 10 and 6.

Starting point is 00:03:20 I'm so sorry. Do they know about this? They don't know the details. They just know mom and dad are going through some things and dad moved out. Okay. But we're trying to keep it as civil as possible. I think I have all the reason to be the crazy one, but I don't, that's just going to make things worse. I think my first order of business would be, like I said, I find an attorney. I'd ask in my circle of friends and who do we know, who, you know, who did Jeff use for his divorce? You know, asking your circle of friends and find somebody recommended an attorney that you can speak with.

Starting point is 00:03:59 And then the next thing is I'd be looking for a counselor and I'd be speaking with a counselor. And I'd also ask, what do you think about the kids? What's the best way for me to approach this with the children? Just to make sure everything's being handled with as much care. I think you're probably doing a fantastic job. But just to make sure everything's being handled with the most intentionality that we can muster up. And then from there, it's about letting the, you know, your attorney kind of guide these proceedings and guide, okay, how do we bring up divorce, what's the best? Because I think that if you, and it's not to say that anything has to

Starting point is 00:04:35 get muddy or ugly, but I think if you're going to try, because I see on my screen, you're asking how do I sell my house? The answer is right now, you're not. I wouldn't try to do anything with moving money, selling assets. I just wouldn't do that until speaking to an attorney. Okay. Are you paying the mortgage yourself right now? Or is he helping? What's going on there? Yeah, he's helping. Like, he basically just started his own account and then he's just splitting his paycheck 50-50 to go into the joint account for bills and stuff. Okay. Okay, good.

Starting point is 00:05:09 So he's got a mind that he wants to keep taking care of the kids. He's not completely just skip out. He's not going to, like, drain the account and flee the state? No. Okay. No. I think he knows he's the one that really screwed up here and he's not going to do anything to make it any worse for himself. Well, that's good.

Starting point is 00:05:27 And both of your names are on the deed of the house? Yes. Okay. And is he down to sell this house? Would he be cooperative in that to sign the paperwork needed? I think so, but we have so much renovating to do with the house before we could really make a good gain on it. Okay.

Starting point is 00:05:46 How much equity do you have right now? We have about 100 equity in it now. Okay. And do you work outside the home? Yes. Okay. What do you make? I make about 85.

Starting point is 00:06:00 Fantastic. So what I would be doing, Tani, is just trying to forecast what the future might look like with this new chapter for you and these boys going, hey, if I am on my own six months from now, what is life going to look like financially? And I would start to craft a budget around that and start seeing, hey, what would rent be if we sold the house and I rented somewhere? What kind of place would I need? How much would that cost? can I afford all of this without needing any income from him. Now, maybe there's going to be child support, alimony. I don't know the full story, but I would sort of try to create this independent island

Starting point is 00:06:36 in case this thing doesn't go well. Yeah. But there's no easy way to deal with the situation other than taking it one step at a time. So I would make a list of all the things I need to do to get it out of your head. Because right now, everything is swirling, everything is emotional. You're going to have moments where you just need to lay down. So don't feel like you need to do this alone and don't feel like you need to figure it all out day one. That's what I've been trying to do.

Starting point is 00:07:03 The first day, I'm like, we're screwed. We're not going to make it through this. I'm going to be homeless. Well, I like George's idea because it is going to help out. And just to put even a little bit more on that, what I would do tonight, and we can help you walk through a little of this. I would just list out all the assets, list everything out and just split it in half for now and say, okay, if there's this much debt, I'm going to assume that I'm on the hook for half of that, half the assets, and then kind of do that net worth equation and decide, okay, what's left? And then from there, that'll kind of give you, because I've heard Dave say this, and I believe it's true.

Starting point is 00:07:37 When there's no knowledge, your brain just kind of makes things up and fills in the gaps and you start freaking out and wigging out. So as much as we can pull some hard numbers and hard facts, that's going to help give you some peace, even if it's not pretty, it's still going to give you peace because you actually know the answer. So I would do that tonight. And then along with that budget, what are you bringing home? 5,700 a month. Is that about right? Well, I pay all the health insurance and... So that comes directly out of your check.

Starting point is 00:08:06 So whatever your take-home amount is, plug that into every dollar. We're going to give you that for free, at least for the next year, just to help you see and start planning out. Go online and go, how much does a two-bedroom apartment cost? And just start to answer some of these questions. that are floating around in your head. I promise it's not going to be fun, but it will give you peace. Yeah, we always say that divorce turns a marriage into a business transaction. And so now it's just how do we do this as cleanly as possible without affecting the kids

Starting point is 00:08:35 and not dragging them into this mess that was created. I'm so sorry, Tani. We are rooting for you to get through this. Hey, this is Dr. John Deloney. I take my sleep seriously because better sleep means better health. And if you've been losing sleep or waking up sore because you've got to, some old thin, gross mattress that wasn't designed with you in mind, it's time to make a change. I love Helix mattresses. They make mattresses for real individual people. Whether you're a side

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Starting point is 00:09:48 Go to helixleep.com slash Ramsey and save up to 30% off mattresses with their Helix Labor Day offer. That's 30% off exclusively at helixleep.com slash Ramsey. With Helix, better sleep starts right now. Chris is in San Diego up next. Chris, what's going on? Hey, how's it going, guys? Good.

Starting point is 00:10:22 Doing well. How can we help today? Yeah, so I've recently been having some trouble. So I recently had, like, I would consider her a low-maintenance girlfriend at the time. She was pretty easy on the budget. But as things have gone, like, increasingly, you know, a little more serious, you know, my budget has kind of expanded on every dollar app. So, like, for example.

Starting point is 00:10:45 Yeah. So, I was just. just going to ask, like, how do you guys, you know, account for those things? Because, like, now I'm, like, every month I'm, like, having to, like, siphon off other categories. Like, my restaurant budget now is just her at a lot of budget at this point. Like, I'm, you know, I'm just trying to do extra things for her. So how is this, like, explain to a start to finish? Is she texting you, like, hey, we're going out to eat tonight? It's a little less of that and more of, like, I've somehow got tricked into, like, paying for

Starting point is 00:11:11 extra things. So, like, she had the final week. So she was, like, very tired. So I was, like, just buying her coffee every day. Well, was that on your volition or was she asking for it? It's my volition. Okay. Because I don't want to dog her and be like, wow, she's terrible. It sounds like you just feel this pressure to spend. Yeah, tell us what type of money you're spending on her on a weekly basis.

Starting point is 00:11:36 Like, we go to a dinner and the dinner is $90. And then I spend coffee on her and I probably get her five coffees a week. That's, you know, $69. I don't know how much coffee is. But give us some ballparks here. Yeah, sure. So I think every month has been a little different. Just like this month has been like a birthday and then final. So it's been a little more sense. What'd you get her for a birthday? A small package. How much? Roughly around 450 to 500. Yay. Wow. Okay. Now here's the problem, Chris. You just set the tone and the bar. Yeah, you sure did. It's got to be at least 500 bucks worth. You set the bar early, my friend. It's not flowers and chocolate next time.

Starting point is 00:12:17 Yeah, I kind of got a little screwed over here. We started dating around Christmas time, so I kind of had to get a Christmas gift. So that kind of put me in the hole a little bit, too. Okay. So I will start out by saying this because I want you to know who you're dealing with here. I believe in wooing and I believe in like whining and dining. I do believe that. I love that as part of courtship.

Starting point is 00:12:39 So there's part of me that I feel like you're just doing everything right. It costs money to have a girlfriend, just like it costs money. money to have some of the other things you enjoy having. So there's part of this that I do think there's, you know, there's a toll here. Now, the question is, is it bothering you because you're in debt and you need that money to pay off debt? Or why is it bothering you that you're shelling out this money? Tell us about your financial situation. Yeah, sure. So she's the one who brought me on to the Ramsey stuff. So for me, I think it's a mixture of like I'm trying to be like, you know, I got a budget for her, but like this month I just blew right through it right for the birthday.

Starting point is 00:13:20 So I don't have that much debt. I think I have, according to here, I mean, outside of the mortgage is about 35,000 in debt. But I do have a CD that's about 100,000. Oh. I won't be able to access it until August or July, but the plan was to use that to pay off the debt and then start investing a little more aggressively. But that's the plan, but I was just trying to figure out like my budget like has been just changing every month, like some months are lower than the others, some much or higher, and also just trying to balance that with everything. Well, you're, you set the budget. You're the boss of the budget.

Starting point is 00:13:52 And so it's your job to say, all right, I'm going to spend $200 for this birthday and no more. And then you figure out how to do that. But instead, you're going, well, I really want to get the spot package. Is it too impress her? I mean, it doesn't sound like she has crazy expensive taste and you're just trying to appease her. Yeah, I think for me, it's, yeah, I'm trying to appease for sure. it's not so much expensive taste, but I guess the way her schedule works out, we don't have as much time to spend. So it kind of makes it a little more sense to go a little extra step.

Starting point is 00:14:23 So you're trying to buy her love since you can't do it with your physical presence. I don't think there's anything wrong with you saying, like I said, I love whining and dining, but I also love a budget and I love financial goals. I think if she's a good match for you, you should be able to say to her, I love being able to take you out. I love being a gentleman. I like being able to, you know, practice chivalry and pick up the bill. That being said, my budget is kind of limited. I just want you to know so that if there's something that maybe we're used to us doing and we don't do it that week, that's the reason why. It's not that I'm not into you anymore. It's just I got to pay off my debt. And I think you should be able to say that at this stage in the relationship and it be received because she probably

Starting point is 00:15:07 has things, at least she should, on her end, that are. similar financially. Like, yes, I'd like to do my financial goals too. So I think another human being should be able to understand that type of statement. What a fun question, Chris. Thank you for that. And you do, by the way. Once that CD lets him in, he needs to pay off that debt with the quickness. And I would look into what the actual penalty is, because if it's a nothing burger and you're just missing out on some interest, I would pay off that debt today. Yeah, because sometimes it really isn't anything. It just kind of stops. Other times there might be a withdrawal penalty there. There's different rules on that. So I'd look into that. But, but,

Starting point is 00:15:40 But I think if she turned you on to the Ramsey plan, it's an easier conversation. You go, hey, listen, I've been whining and dying and I realize I've been blown through my budget every month. I've got to get this thing under control. Date nights might look a little bit different for the next year as I clean this up. Can I tell you a real life story? Okay. Is this going to be good? Maybe.

Starting point is 00:15:58 You got that smile of like mischief. It's just a memory that I see in my mind right now. When I first met Sam, my husband, he lived in a townhouse, obviously, alone, and he was shown me around his house for the first time. and I was struck because he just had a pile of cash that he kept, he just savings. He just had, he had a lot of things in piles. Literally stacked on a table? Papers and piles. Yeah.

Starting point is 00:16:21 No, no, no. It was in his closet. It was just stacked up money. And let me just tell you, Sam definitely wooed me. He whined and dined me. And I can actually see the stack of cash going down, down, down. As he continued to date you. Yeah, yeah, yeah.

Starting point is 00:16:36 It's so funny. And then he finally did propose. He proposed six months. into dating. And by then, he needed to get a paper route because he'd gone through his savings. And so he had to get a paper route to buy my engagement. Did he not know about a savings account?

Starting point is 00:16:52 Listen, did we know anything back then? But he's not like a $70,000 old man with tin cans in his backyard. That's funny. All right. I got a razz him for that next time. I know you should. All right. Justin is in Simi Valley, California up next.

Starting point is 00:17:04 What's going on, Justin? Hey, guys. How you doing? Thanks for taking my call. Appreciate it. Absolutely. How can Jade and I help? I'm super excited to talk to you guys.

Starting point is 00:17:13 So my wife and I are about to be on Baby Step 4, which I'd love to share how we did that. We're both educators and contribute to CalSTERS. We're contributing to our 403B as well as the CalSTERS through work, which equals about 10%. Once we get to Baby Step 4, do we bump up our 403B contributions, invest more in mutual funds, open up a loss. I'm just kind of excited about getting to Baby Step 4, and what do I do want to get there? I really love that question,

Starting point is 00:17:48 and just for the listening audience, Baby Step 4 is the Baby Step. After you've paid off your debt, after you've saved up three to six months of expenses, where you get to invest 15% of your gross income. That is the amount before taxes, before insurance, before all that good stuff comes out. And to answer your question,

Starting point is 00:18:04 yeah, and Baby Step 4, I would bump that up to 15%. and if you're already maxing out the 403B at the 10% I would move to a Roth IRA but if your 403B isn't Roth and if there's no match I would do the Roth first

Starting point is 00:18:22 and I would go to those funds first and max that out then go over to the 403B if you can't I don't know if you have a match in the 403B no it's not a match it's just whatever we put into it okay and then is there a Roth option for the 403B have you looked into that there isn't so I was with a previous school district and I took that 403B and I was able to convert that to a Roth because I separated from them.

Starting point is 00:18:45 So my company was able to do that, but not able to do that on a day to day. So it's just a straight 403. I'm not able to open a Roth. So if there's no Roth option and no match, I would go straight to the Roth IRA first and fund that. And if you still haven't hit 15%, then go back to that 403B and contribute there. Oh, that sounds perfect. I'd love to share with you guys just how we got here. Do you have to spend for that?

Starting point is 00:19:09 I got 20 seconds. Okay, so I told a money makeover in 2025. Put it away, thought Dave was way too strict. In 2026, I went back to it. I sold my car, bought a car cash. We paid off $53,000 in debt. We have a rental house that we're selling into escrow now. Once that goes through, we're wiped out and into baby stuff for it.

Starting point is 00:19:30 Whoa. Yeah. Way to go, man. These are teachers, educators. Educators. And it's the number three career path for millionaires. That's right. In our millionaire study, we love to see it.

Starting point is 00:19:41 So it's about what you do with the income, not making a high six-figure salary because those people are generally broke. The teachers, they got control of this money. Way to go. One of the biggest mistakes homebuyers make is talking to a realtor and shopping for houses before understanding their real budget. And that's how you end up falling in love with a house you can't afford and trapping yourself in a bigger. payment than you can handle. That's why you should talk to Churchill mortgage first. Churchill shows you what you can actually afford, not just what a bank will approve. And with their certified home buyer program, your financing is completely secured before you shop. So

Starting point is 00:20:35 you won't miss out on your dream home while you're waiting for pre-approval. I've recommended Churchill for 30 years because they help you buy a home the Ramsey way. So here's your plan. Contact Churchill. Know your numbers. And then when you find the perfect house, you're ready. Go to Churchillmortgage.com slash Ramsey offer for a special offer only for Ramsey fans. That's Churchillmortgage.com slash Ramsey offer or click the link in the description. Welcome back to the Ramsey show. Right before the break, we were talking to a fella who was asking, hey, how do I invest with Baby Step 4? And I've got a 4 to 3B through my employer and the Roth and the match. a lot. We were throwing out lingo left and right. And so we thought we'd just take a moment to help

Starting point is 00:21:29 explain some of this in layman's terms because it is confusing and it can be overwhelming. And I don't want that to stop anybody from building wealth. Yeah, that's right. And we teach over here, obviously, Baby Step 4. I told you guys the last segment. And we say when you do start doing Baby Step 4, you're investing 15%. We like for you to start with an employee sponsored account. So if you just have, you know, a regular 9 to 5, W2, it's usually a 401k with teachers. We see 4.0. three B's military has something different, but most professions have their version of a 401k. And that's just literally the section of the tax code that says you can have an employer-sponsored retirement plan. So section 401, subsection K. Yes. That's it. And then from there, there's

Starting point is 00:22:11 different tax treatments on it. So we've got the traditional that we talk about all the time. And that's just saying, hey, you are adding money into this account before you've paid money, before you've paid taxes on that money. It's pre-taxed dollars. And people go, okay, great, that's one option. And then there's the Roth option that we talk about that we tend to favor because this is the option where this is after tax dollars. You've already paid the taxes on this money. We love that because when the time comes later on in life after retirement, when you want to pull that money out, you don't have to pay taxes because you've already paid them. Yeah, think about your take home pay.

Starting point is 00:22:47 The government already took their cut. So I'm using my take home pay to fund this retirement account. And Uncle Sam says, all right, you paid us once. You don't have to pay us again. Yes. Great. So if there's $2 million in a Roth 401k, that's like $2 million of net income. Yes.

Starting point is 00:23:00 Because you're not paying tax on that. And that's great, especially if we're talking about leaving that money to errors and things like that. That's also so, so important. You mentioned the match earlier. We asked him, do you have a match from your employer? We can talk about that, George. Yeah, so we say match beats Roth beats traditional for a very simple reason. Match is an instant return on your money.

Starting point is 00:23:18 So at Ramsey, you know, if I invest 4%, Ramsey's going to give me 4% to match that. So I just got 100% return right there. Yep. Now, some might say we do 50% up to a certain amount. So it might be different based on your employer, but many employers have a match. So we always tell people, we'll take that first when you're ready to invest, then go to the Roth options because you're going to have that tax-free growth. That's right. And then move on traditional if you haven't hit that 15% mark yet.

Starting point is 00:23:45 And the last thing I'll say about this, Jada, is people message me and they go, I'm so confused. Is it 15% of my income or our income? And I say both. It doesn't matter. So Jade and Sam are investing. Jade invests 15% of her income. Sam invests 15% of his income. Yeah.

Starting point is 00:24:01 How much of their household income are they investing? 15%. Ding, ding, ding. Because people go, well, I'm doing 7.5. She's doing 7.5. I'm like, no, no, no. That's just 7.5 total of the whole pie. No.

Starting point is 00:24:13 So all the money together, 15%, 15% of his, 15% of yours, 15%. Again, if you don't have an employer-sponsored plan or you don't have a Roth option, you can always open a Roth IRA. And that is just a non-employer retirement plan that anybody can open as long as they have earned income. Yes. Your 17-year-old working at Burger King can open up a Roth IRA. That's right.

Starting point is 00:24:37 And start investing there. And the limit for this year is $7,500. So that's why we said if you fill that up and you still haven't at 15% of your household income, then go back to traditional options. And if you make too much, there's contribution limits for the Roth IRA. That's right. You can look into a backdoor Roth IRA,

Starting point is 00:24:53 which sounds, you know, it's not that sneaky. It's a very legal loophole to where you just, you basically fund an after-tax traditional IRA and then immediately convert it over to Roth. Yeah, I like that. And while we're here, let's just hit on what happens if you have a 401K connected to your job, you leave your job, and now that 401k is sitting there. We had a call about that yesterday, George. Yeah, so we always tell people, you don't want to see that money,

Starting point is 00:25:18 because if you do, you're going to have some taxes and penalties and fees attached to it because it looks like an early withdrawal in the eyes of the IRS. Right. Let's hit that real quick. Obviously, if you've invested this money, it's expected to be there until 59.5, which is like legal retirement age. So if you pull it out early, it's an early withdrawal. You're going to get hit with that penalty plus 10% just for pulling that bad boy out. So what you want to look into is a direct rollover IRA.

Starting point is 00:25:45 And what that means is the money is moving from your traditional 401K directly over to a traditional IRA. It never sees the light of day. You want to keep the flavors the same. So if it's a Roth 401K, move it to a Roth IRA. Direct rollover is what you want. Make sure that you've checked that box before you just send money to your bank account and then go, oh my gosh, I didn't know what I just did.

Starting point is 00:26:07 That's a hard one to undo. All right. So there was our investing 101 in about four minutes. We did our best. All right. Mike is in Salt Lake City up next. What's going on, Mike? Hey there.

Starting point is 00:26:20 Thanks for taking my call. Sure. So I'm just finding myself in a situation here. I've been taking the steps towards starting my own business doing carpentry work and other construction jobs for the last couple years. And we decided to purchase a home this spring and in our area about an hour from Salt Lake. There's a lot of opportunity for me in construction. There's a lot of not a lot of affordable homes. So we bought a home on the edge of our budget and we're paying about $3,800 a month for our mortgage.

Starting point is 00:26:59 And I've calculated the rest of our expenses at about $3,000 after health insurance and gas and everything like that. We currently have $15,000 in securities-backed line of credit against my index funds that value $105,000. otherwise we're debt-free and I was curious also we have a baby coming in December here so just yeah just kind of seeing if you guys think it's the right time for me to jump into this business and kind of just getting a little overwhelmed with our overhead right now I don't want to sell the house I'm not ready to think about that just because we do have some runway. What's your take home pay?

Starting point is 00:27:52 It's going to be hard. What's that? What's your take home pay every month? My take home pay was about $70,000 a year before I left my, before I started doing more of my own work. And now it ranges from about $1,500 a week. So $7,000, what's that, $4,500 or $6,000 a month to about $10,000 a month. depending on the month.

Starting point is 00:28:21 And is your wife working outside the home? Does she plan on staying home after the baby's here? What's the plan there? She does work outside of the home. She makes about 1,200 biweekly, 2,400 a month, and commutes about 30 minutes. And I think between child care and the commute and the opportunity cost of her being able to be home

Starting point is 00:28:42 to keep our expenses down, I think it's best that she doesn't work once the baby's here, because I don't think we're going to end up keeping much of her income after child care. What does she think about that? She's back and forth. She loves her independence. She's also excited to take care of the baby.

Starting point is 00:29:04 And I think we're kind of talking about, you know, let's look at three, four years of you staying home. And then we can revisit that. And are you telling me that you're currently self-employed with this business? I am currently self-employed with this business. I can go back. So what do you mean jump into it? Sounds like you already did. That's what I'm confused about too. What's that mean to you?

Starting point is 00:29:27 So I can go back to my employer as a 1099 subcontractor and make my $70,000 per year. So you're saying, do I do this, is it a safety thing? Like, do I do the safe thing of making the 70,000 with the employer? Or do I keep doing my thing making $6,000 to $10,000 a month, even though it's more risky? Do I have that right? Right. That's kind of where I'm at right now. What makes it more risky? Just the fact that I may not be able to find work for myself and that... Well, right now, based on what you said, if you make $6,000 in a month and it's just you, you can't cover your monthly expenses. So this house is too much of your income. Even at $10,000, it's still close to 40% of your take-home pay on your best month. And so I don't know that this house is a...

Starting point is 00:30:20 good long-term option for you. If you guys want this life where she stays at home, I'm self-employed doing this business and covering, you know, all the insurance. So that's the tactical numbers you need to crunch and figure out. If you can sustainably make 12 grand a month, 13 grand a month with this business, I would consider it. But I would probably go get that full-time job again and do this on the side until you have a clear path to doing it on your own full-time.

Starting point is 00:30:44 Just a lot of risk here. Hey, I want to talk to you for a second about love and not love like in Titanic or something. I mean responsible love, the kind of love that moves you to take care of the people closest to you. And one of the most important ways to show that kind of love is by having term life insurance. If you have anyone depending on you, a spouse, kids, anyone, you need term life insurance. Term life insurance gives your family real protection if the unthinkable happens so they can spend their time grieving and not worrying about how the bills are going to get paid. Zander is a broker who works for you, shopping the top companies to find the right coverage options for your needs and your budget. In many cases, there are options available with no medical exam and instant approval.

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Starting point is 00:32:40 slash agent or click the link in the description if you're on YouTube or podcast. Sharon is in Houston, Texas up next. What's going on, Sharon? Hi, good morning. How are you? Doing well. So I was calling basically just to see. So right now I owe $52,000, me and my husband owe $52,000 to my card that we got in August.

Starting point is 00:33:05 We have about $40,000 in our bank account saved. We started saving pretty aggressively back in December, and we're about to have a baby in July. My husband makes about $10,000 a month, and I'm a travel nurse, so sometimes I work, sometimes I don't. But my question is, should we get rid of my car payment or should we keep my car payment? because my husband owes about $3,800 to his truck, which we were planning to pay off within the next two weeks, about $3,000 to a furniture payment, and about $13,000 to land that we're paying on.

Starting point is 00:33:45 Land? But we want to know if we should, yes, land, property. We want to know if we should get rid of my car or if we should keep my car. I don't like my car. It was an impulsive buy. What kind of car is this? It's a 2025 Honda pilot.

Starting point is 00:34:03 I wouldn't say it was an impulsive buy. I actually wrecked and totaled out my Grand Jeep Cherokee that was paid off in July, and we were trying to carry up and get out of the rental, and it ended up having a better interest rate than a used car. So that's how they got you. We'll give you a lower interest rate. If you buy brand new on a $52,000 loan, he said, what a deal. I'll take it.

Starting point is 00:34:26 I mean, I can tell you. It was about 60,000, so we paid it down some, but it's still very expensive. That hurts my soul. Okay. What's the car worth today? So we quartered it with Carbana because we thought about selling it to them. It's about $43,000. That's how much they'll give us for it.

Starting point is 00:34:44 Okay. But we still owe $52,000. Uh-huh, uh-huh. So, okay, so we're upside down there. Not too much to scare me. I think we can get out of that. And I would, by the way, if you want to get out of that. You guys have the cash.

Starting point is 00:34:57 you can pay the $9,000, $10,000 difference and even have a little bit left over to get yourself, like, buy yourself a cash car, maybe $10,000 or $12 since you're trying to get out of debt. I know you've got a baby on the way. So hold that, hold everything that I'm telling you to the side because I know you have a baby. The way we would teach to get out of this debt is by snowballing it, listing it smallest to largest, and paying minimum payments on everything in the meantime. So it sounds like the smallest. here is the furniture. So I'd hypothetically knock that one out first with any extra money after

Starting point is 00:35:34 paying the minimums. Then I'd move on to the truck. Then I'd move on to the land and do it that way. However, there's a baby coming in July. So we always talk about stork mode here on the baby steps where you can hit pause to stack up cash. Now, you guys already have the cash stacked up. So that changes the advice here. So now it's how much can we use to pay off the day? debt without putting us in jeopardy to make sure we're okay until baby and mom are home safe. And so Jade's right, and that debt snowballing these bottom few, you could do that with less than 20 grand from your 40, which frees up those payments and gets rid of those debts, and then maybe pause until babies here and then decide what to do with the car.

Starting point is 00:36:18 Right. I think we were, I think we really wanted to kind of get rid of the car because the car payment is $955 a month. Yikes. You know what? We can afford it. I'm just thinking about the question is, what car are you going to get on the other side of that? Well, we were planning for me to just drive my husband's truck because he drives, he works pipeline, and he is always in his work truck. He's never, his truck has been in another state for four months.

Starting point is 00:36:44 So you can live on, you can be a one car family for a while? Yeah, because he hasn't driven his truck in about four months. It's been in another state, so. I'll be honest with you. I would get out of that car right away because it, knocks your debt in the debt snowball from 52,000 down to 9,000. So then that order would be the furniture, the truck, the loan, the upside down difference, although I guess you could do that in cash, and then the land.

Starting point is 00:37:10 Right. And I would also shop around to see how much you could get for that car. You may want to check CarMax, a few local dealerships, private party, to see if you can be less underwater. So you're not eating as much of this. And then if you can live on that, be a one car family for what. while you just freed up a thousand bucks. Absolutely. These other debts will get paid off real fast.

Starting point is 00:37:30 Because you're not having to dip into savings to get something for you to drive right away. Exactly. Yeah, I like that plan. Now, let's talk about the stork mode thing a little bit because you do want to consider that. You need to make sure that you've got a nice chunk of money sitting there. And I'm not mad at, if you want to wait until the baby comes to do all of this because

Starting point is 00:37:51 it makes you feel better, I'm not mad at that. A rule of them that I kind of have is I want to make sure that I have. have the out-of-pocket max saved. Like, that's what I want to make sure I have. Just in case you stay in the hospital a little longer, just in case there's any complication, God forbid, that you have the money there because that's really the most that you're going to come out of pocket. And then you might want to do some calculations on, I don't know, George, meals.

Starting point is 00:38:13 Like, that first couple weeks can be tough. So just making sure that you've got a nice cushion of money there just in case is really, really important. Nobody's cooking for at least a month. So you've got to factor that in. Hopefully there's a good meal train. going. Get on the old choo-choo. Yeah, the math, Sharon says that if you paid off all of your debt today, the underwater amount plus the other debts, that's 29 grand out of your 40. So you'd still

Starting point is 00:38:36 be left with 11 grand plus another month or two to save out of your great income. So you guys might decide, hey, we can do this all right now and take the stress off. That's right. So that when this baby arrives into this world, we are debt free. Wouldn't that feel good? That would feel good. So it's a risk tolerance thing because either way, all the debt's getting paid off in the next, you know, 50 days. So the question is, when do you want to do it based on your comfort level and all of the variables that we haven't even talked about? So I would sit down with your husband tonight and figure that out and decide a plan that works for you guys. But my guess is you could probably stack up another 10 grand before the baby's here. Right, yeah, because I'm actually traveling at the

Starting point is 00:39:15 moment right now. Oh, great. So based on the next couple of paychecks, think, okay, what are these next paychecks going to be until, you know, I head into the hospital, I have this baby? And if you can make it work, I love the idea of you guys becoming completely debt-free and getting rid of this payment, because next month, that $9.55 stays with you instead of going to Honda lending. That's a nice feeling. $1,000 car payment. That makes me want to throw up. I'm glad it's going to be out of your life.

Starting point is 00:39:41 All right. Jessica is in Detroit up next. What's going on, Jessica? Hi. My husband and I are on Baby Step 2 and plan to be moving into Baby Step 4 around this time next year. I own my own company and have learned that my business can contribute up to 25% untaxed of my salary into a solo 401k. Yeah. Yeah, I'd like to know where this fits into the baby step and how do I know if I should prioritize that contribution over taking owner's draws to pay down the mortgage on our home?

Starting point is 00:40:16 I love this question. Okay, good. I'm unclear on the best way to categorize these revenues. I have to make the choice between funneling it through payroll, taking it as owner's draws, or making it employer contributions into my personal retirement. Yeah, I think right now, because you have the debt, you're doing owner's draws and you're doing payroll, right? That's what my husband and I did. There's probably a limit on how many draws you can take, and then the rest is payroll, and you can get with your tax person or your bookkeeper on that.

Starting point is 00:40:50 And, yeah, it sucks because if you're taking more, payroll than you want, right, just to be able to pay off personal debt. So I would do that. And then the 25%, which is fabulous for that solo 401K, that falls under Baby Step 4. That's you investing. And so that's where that falls under. Now, I wouldn't go over 15% until you've gotten through the baby steps. And then, yeah, if you wanted to go up to that full 25% limit, you could.

Starting point is 00:41:18 But it all fits within the parameters of the baby steps for a reason. And it's because we want you to be paying off your house. So once you've gotten up to 15%, you can do the rest through payroll. I don't know if you work from your home or not, but there's a certain amount that you can pull from the business to put towards your mortgage as well. So yeah, get with a tax professional, get with your CPA, and definitely do that. Yeah, so the key is it sounds great to invest right now, but we have some debt to clean up. So let's wait. One year from now, you've got your eye on the prize.

Starting point is 00:41:48 You're going to be investing 15% there. Let's knock out the mortgage. and in no time you'll be investing that full 25% and you guys will be building some serious wealth for the rest of your life. When you take your car to the shop, you're probably thinking two things. How much is this going to cost me

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Starting point is 00:43:10 10% off, up to a $250 value. See Store for details. Welcome back to The Ramsey Show in the Fairwinds Credit Union Studio. I'm George Camel here with Jade Warshaw. Open phones at AAA 825-5-2-2-25. If you want to jump into the conversation about your life and your money.

Starting point is 00:43:34 Jacob is in Springfield, Illinois up next. Hey, Jacob. Hey, how's going? Great. How can we help him? day. Yeah, so my wife and I were basically just trying to figure out how to navigate rising costs and everything while still trying to put money aside for the future and for retirement, but also just other savings goals and just trying to figure out how can we navigate this while

Starting point is 00:44:05 everything seems to be just keep rising out of control. Where do you feel like in your home, Where do you feel like you guys are feeling it the most? Is it groceries? Is it gas? Are you trying to buy a house? Like tell us tell us the top three pain points that you feel like you're feeling it? So it so are our two biggest expenses obviously are gonna be housing and child care But then the third is right is actually kind of a tie between groceries and a gas Okay, good to know okay, so let's get into the nitty gritties. What do you guys do for? living and what do you earn? So I'm in insurance service and then my wife she's working in a clinic so we're basically combined we're right about a hundred and 110,000 a year gross. Okay, cool. And do you have any debt right now? The only debt we have is our mortgage

Starting point is 00:45:05 and we have a small, about $200 left to pay off on our credit card. Okay. And that was just due to a monthly, not a monthly, a couple of medical bills that we just wanted to split those payments not to earn our budget. How much do you have in savings right now for your emergency fund and anything else? So emergency fund, we have about three or four months of expenses. We're right about that $20,000 range.

Starting point is 00:45:33 Okay. Okay. So I think in those ways, I feel like you guys are in a pretty good spot. I guess the biggest question is how much is your mortgage payment every month? It's about 1325. So, I mean, it's probably about that 21 percent, I think. Yeah, excellent. Great.

Starting point is 00:45:52 So it's got to be child care then. How many kids do you guys have, and what are you paying for child care every month? So we just have one child. She's 18 months, and we're paying right about. that would be 13. Okay. Yeah, 1,300 a month. I mean, that is definitely it.

Starting point is 00:46:13 I mean, you're usually somewhere between 13 and 1,500, especially for a younger baby. Are you guys investing 15% right now? We are not. So I'm putting money into a Roth IRA, and then wife is putting about, I think it's about 5% of her paycheck into a 4 or 3. So I see, oh, how much into the 403?

Starting point is 00:46:37 I think about 5% of her paycheck. Well, I can tell you, I mean, I'm looking at the biggest ticket items, your mortgage daycare, that's eating up 2,600 of, I'm guessing you're bringing home around $7,100 a month. How much are you bringing home? So after taxes and after deductions like insurance and health care all up stuff, We're right about $6,400 a month. Okay. So I still think there's something missing here. Have you guys done a detailed budget to figure out where the rest of the money's going?

Starting point is 00:47:13 Because even if you were spending a bunch on groceries and gas, there's still a couple grand left over. So, yeah, actually, I mean, yeah, I was just doing the budget before we hopped on. And, I mean, looking through our paychecks, it's in our, I mean, it costs. I think it was about, I want to say about $150, $180 per pay period for health care for, because it's under, because mine's by myself and then wife covers herself and our daughter for. So yours doesn't come out. Okay, so hers is coming out of the pay. So that's the $6,400 a month. That already covered hers.

Starting point is 00:48:01 and then yours is another 300 a month. Is that what you're telling me? So, no, for my health care, it's like I want to say, about 150 a month. Oh, okay. So that's not the problem either. Here's what I, this is what I think. I think you guys don't have a detailed budget. And I think, and this is no implication, this is no judgment.

Starting point is 00:48:23 I think you guys have a young baby. I think you've come off of, you know, when you have your first child, it's major life change. You're doing a lot of things out of convenience. you're doing a lot of things out of learning what a new life rhythm feels like. And my guess is there's just a lot of spending that can be cleaned up. And I'm not saying that some of it hasn't been necessary. You have a new baby. So you buy new gadgets and new things and conveniences to make life easier.

Starting point is 00:48:51 You pick up dinner more often. Those sorts of things. And my guess is that if we give you every dollar and you really use your bank statements to kind of do what I would recommend is do last month's budget, budget, go look at your bank statement and plug it all in, and you're going to go, oh, crap, you're going to see how much in the red you were, and then do this month's budget, and in real time, start making those adjustments. And I think, George, that they're going to find a couple of thousand dollars there. Based on my estimation, there should be like two grand left over. And so the last question is, what are you actually saving for? Because you're saying you're

Starting point is 00:49:26 have a hard time continuing to save. Is that for the emergency fund? Is that investing? Is that trying to pay off the mortgage? What is the goal? So we actually do use every dollar you're talking to the nerd. Okay. Yeah.

Starting point is 00:49:41 Well, what do you think is going on there? You see the line out of it in front of you. Tell us. How much is actually left over when you do your every dollar budget? What's the margin right now? So right now it's about, I mean, grand last month was rough just because we had five weeks to pay for in daycare. Yeah, that'll get you.

Starting point is 00:49:59 It's right about, it's right about 800 a month. So our savings goals we have, we have to just, we have a kind of a home improvements savings account. We have emergency fund. I'm just basically just trying to keep up with it a couple, like a hundred or so here or there. But the other two big thing that we're trying to focus on is the, saving for a new car to try to pay that in cash.

Starting point is 00:50:30 And you have sinking funds for all those things? There's a sinking fund for savings, sinking. Okay, so that's where the money's going, which in that case, I'm not mad at that. So that's why there's 800 left over after all of that? Right. So we have that. So we contribute to those seeking funds at the end of the month when we, after we see where our margins at.

Starting point is 00:50:50 So for the car, a vacation fund that we just have kind of just, to keep as like a safety net for if we want to do a vacation in the next year or so. I think that's great. Jacob, I think what you're doing is exactly right. The only thing that I would tweak in what you said is I wouldn't wait until the end of the month to decide that. I would plan that when the month begins because the money you have is the money you have. You're both. It sounds like on salary.

Starting point is 00:51:20 So if you know, we are taking home $6,400, make the plan on purpose. This is how much we're spending. This is how much we're putting in the vacation sinking fund. This is how much we're putting in the car. Do it at the beginning because if you don't, you'll let yourself go over on DoorDash. You'll let yourself go over on, you know, some of the frivolous things. And then just say, well, that's okay. We're just not going to put as much in the car fund.

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Starting point is 00:53:03 And right now, you can try NetSuite Next for free. If your revenue is at least seven figures, go to NetSuite. NetSuite.aI slash Ramsey. That's netsuite. dot AI slash Ramsey. Sarah is in Sarasota up next. What's going on, Sarah? Hi.

Starting point is 00:53:35 Thank you so much for taking my call. Sure. So I had a question. So we bought our home in 2022. We bought it for $535,000. And there's a lot of equity in it now. We think it's worth about $750. and I should be coming into a settlement in the next six months.

Starting point is 00:53:57 I just talked to my attorney today, and I think I'm going to be receiving about $250,000. And my husband really wants to sell her home, take the equity and the money from the settlement and buy a home outright so we don't have a mortgage and we just have a little bit more freedom in our budget. But to be honest, it doesn't really buy a lot of house around here anymore. and I like our neighborhood and, you know, we are kind of tight month to month.

Starting point is 00:54:27 And I was thinking maybe we take the $200,000. We have kind of a smaller emergency fund. So I was thinking that we put $50,000 in an emergency fund and $200 down on our mortgage, which we have $397,000 left on it. So I was thinking about doing that, but I wanted to get from you guys what you thought was a better idea. Cool. So you guys, do you have any debt right now outside of that mortgage? No. Okay, so you're thinking, hey, let's stay in the house. Let's use $200 grand to throw at the $397.

Starting point is 00:55:01 That brings it down to about $200,000 in a mortgage, and then would you do a recast to get the payment lower? That was going to be my other question. Do we do that, or we just kind of continue to white knuckle it and try to pay it down faster or we do a recast? Well, what's your current mortgage payment? Now, it's $3,600, including the HOA and the CDC and insurance taxes and everything. I think the actual mortgage is only like $2,500. But, I mean, we live in a plan, you know, an HOA community. And there's also questions that probably is going to go up over time. So it's the community development fee.

Starting point is 00:55:41 And I think our taxes should remain stable because we're homesteaded. Yeah. What's your take home pay every month? I think it's around $9,300 a month. Okay. But that's kind of variable. We made $206,000 last year, but my husband got a bonus and I got a bunch of commission. But we're guaranteed $9,300 a month that I made about an extra $30 last year in commissioning bonuses.

Starting point is 00:56:07 I was going to say, making over $200, you should be bringing more home. So I would look into that because I'm going, made $3,600 all in for your house, your housing, payments for all the HOAs and things. That's a lot of your take-home pay right now. So you are feeling the pinch. But with the recast, it could lower it, which would help. But again, if you can just keep paying what you're paying and not pay for the recast, you'd be fine to just keep knocking through that mortgage. And if you guys did that, you'd probably be done with this thing in what? Maybe two or three years? The mortgage? Yeah, could you do that? I think that would be a little bit hard for us. So we have one child still in day.

Starting point is 00:56:47 care. Oh, that's a mortgage payment right there. For sure. Yeah, it is. And I also, we have quite a bit of medical expenses. So I just went through kind of a really hard challenging time health-wise. And the treatment that I'm doing right now is not covered by insurance. And I'm spending about $700 a month on that.

Starting point is 00:57:11 That could be another reason why the recast is good for you because obviously for anybody listening when you do a recast you're throwing the lump sum at the mortgage and it's just recast at that new principled amount it doesn't change the terms it doesn't change the length of the loan but your payment is going to be lower everything stays the same but the payments now calculated on the new balance the new balance and yeah so your your payment would be lower and that would free up a lot of margin especially if you're saying you've got medical things to pay for um there could be something there but i do i would caution on this because it doesn't change the length of the loan you do want to find ways to be more intentional about paying it off since it is a lower monthly balance

Starting point is 00:57:50 monthly payment i should yeah so that's where i'm going man if you guys make 200 and you can live off of let's say 80 to 100 and throw the rest of the mortgage that's where i'm going hey you could pay this off in three years but if you're saying there's a lot of other expenses right now that's okay you guys are in a tough season i mean you got one in child care you're dealing with the health issues i would focus on that right now there's no urgency to knock out this mortgage as far you know nothing's on fire here you guys are doing great. So I would take care of you right now. And when the time is right, you do this move and bringing that mortgage payment down will give you some breathing room for sure. But I wouldn't downsize into a house that you guys hate just to be mortgage-free.

Starting point is 00:58:30 No, I wouldn't do that either because you're not going to enjoy it. I want to live like no one else. Right. You think we can find a place that we can be happy in. Like we don't have a pool. We could afford a pool in some of these different areas, a little bit more land. We'd be closer to schools. Also, the schools that we're known for are, like, really far away from middle school and high school. So I think he's thinking long-term, and I get all the reasons why, but, I mean, we've been in this neighborhood for four years now, and I really, we have a big, beautiful home

Starting point is 00:59:02 that we have a lot of equity in, and we're very lucky. I mean, I think to get in into this neighborhood when we did, I mean, a new house here construction with everything we have would probably be close to a million dollars. So I feel like it was a really good investment. And I want to stay here, but things are really tight. So the other day it just came up. He wanted to do some more sports activities for my son over the summer, and it was going to be $400.

Starting point is 00:59:28 Like we had just paid, like, for a camp. We found, like, a county camp that was very reasonable in price. We had just paid for that and a bunch of other expenses. And he's like, I hate that things are so tight all the time. It's a value. question. You guys haven't aligned on that of what's important to us and what are we actually going to put in the budget. And that should be a reflection of the life you guys want.

Starting point is 00:59:51 And because you are talking about a mortgage, you do need to look long term because you don't want to make a short-term decision and change a long-term asset like a mortgage. So you need to be thinking through, okay, the sports thing is that just for this summer? How many summers do we see them wanting to participate in things like that? and really think through how long certain variables are actually going to be part of the equation. And just have some really intentional time set aside to dig through this before you make a major choice, I would say. Thanks for the call. Yeah. Appreciate that, Sarah.

Starting point is 01:00:25 Good luck with this and the health issues especially. Yeah. Kyle's up next in Louisville, Kentucky. What's going on, Kyle? Hey there. Thanks for taking my call. I am 45, my wife, 43. We have three kids, a daughter that's 15, a 14-year-old boy that has profound autism, and we have a 10-year-old boy.

Starting point is 01:00:48 My question is whether I should keep a survivorship policy that I have in place, that the sole beneficiary is a special needs trust that we set up for our son, who's likely to be with my wife and I, you know, for his lifetime. So I know that Dave is not a big fan of a lot of these universal life policies, but wanted to get your all's thoughts on how I should think about that from a special needs planning mentality. How much is that? What's the premium on that? The premium is only about 1,300 a year. Definitely not anything that's, you know, breaking the bank. You know, it's something that we plan for every year. the death benefit would be $500,000 in the event that both me and my wife died. And that would go straight to the Special Needs Trust? That's correct.

Starting point is 01:01:47 And in addition to that, I have a term life policy that is about 10 times my base salary. My wife is a stay-at-home mom, and we also have a term life policy on her as well. Okay. That's good. Is there anything else in the special needs trust besides those three pieces? No, not currently. And the term life policies don't pay to the trust immediately. You know, that would go to my wife or if she were to pass away, that would go to me and then would likely go to our other kids.

Starting point is 01:02:22 The trust is there to fund, you know, any trustee or any caregiver that might take on, you know, our son. Yeah. I mean, if you guys are debt-free, you're investing well, $1,300 a year is a small price to pay for some peace of mind right now. I agree. And if you want a second opinion, I would definitely get with an estate planning attorney, a smart vester pro at ramsysolutions.com, because special needs trust and having a special needs child, you want to make sure that all the eyes are dotted and the T's are crossed

Starting point is 01:02:52 to take care of them if something were to happen to you guys. So you're doing a great job, man. I can't imagine what you guys are dealing with three kids and the special needs kid. That's a lot to manage at your age and your mid-40s trying to hold down the fort. Keep it up. Hey guys, it's Rachel Cruz. If you're working the baby steps, every major expense deserves a second look. And health care is one of the biggest expenses in most families' budgets.

Starting point is 01:03:27 And that is why I recommend that you check out Christian health care ministries. CHM isn't insurance. It's a health cost-sharing ministry. That means members help pay one another's medical bills. and they've been serving Christians since 1981. CHM programs start at just $115 a month. And here's why that matters. If you are paying more than you need to for health care,

Starting point is 01:03:51 that money could be going toward paying off debt, building your emergency fund, or reaching your next financial goal. And your monthly cost isn't based on your medical history or where you live. Y'all, a lot of families find CHM gives them more room in the budget. That's why so many members say they're better,

Starting point is 01:04:09 with CHM. And right now, new members can receive a 50% credit towards their first month of membership. Go to CHMistries.org slash budget and use promo code Ramsey. That's CHMistries.org slash budget and promo code Ramsey. Today's question of the day is brought to you by YREFI. If you've been turned away by other lenders because your private student loans are out of control, YREFI may still be able to help. They specialize in refinancing options built specifically for borrowers. in that situation. Go to Yerefi.com slash Ramsey. That's the letter Y, R-E-F-Y dot com slash Ramsey may not be available in all states.

Starting point is 01:05:00 All righty. Today's question comes from Hudson and Utah. It says I'm 17 years old and I run a music marketing business using Spotify playlists. I've been running this business for just about a year and a half now. The business has taken off and I have secured several deals worth up to 25,000 and have gotten to work with very large artists. My parents are hard set on me going to college, but they are not paying for it. So all tuition and expenses would be on me. I have about 30,000 in the bank, a car worth 15,000, which I bought with cash, and zero debt. Do I go to college and pursue a business or finance degree? Take a gap year to try to scale my business, or skip college completely.

Starting point is 01:05:47 Man, I just love this question because it really does... I like things, George, that kind of like butt up against norms and allow you to do your own thing because there is no rule that says when you leave high school, you must go to college. There is no rule that says that

Starting point is 01:06:04 and I know a lot of parents probably hate me saying that especially if their children are listening, but it's true. That's not always the smartest path. And so if we have three choose your own adventures here, go immediately to college, which is very easy, George, for somebody to say, go spend your money on this. They're not the ones paying for it. He doesn't, I mean, he's got 30,000, but he maybe doesn't want to spend his money that way. He's doing something entrepreneurial that's doing well for himself right now.

Starting point is 01:06:32 I like that. And so my thought here, I'm just going to, and I want to hear your opinion too, George. Ruffle some feathers. I know what's coming. My opinion is, college is always going to be there. It's always going to be there. And I know there is something to like momentum. Like when you're,

Starting point is 01:06:48 you don't want to just take a gap year and not know anything, right? But this guy, he's got a clear path. It's like, okay, there's momentum going in one direction. Follow the momentum. Your entrepreneurial business on Spotify is taking off. I love you doing it. If for some reason it putters out and you find yourself like, okay, the reason it's puttering out is because I just don't have the information or skills I need to grow it.

Starting point is 01:07:09 Well, then you might look at, okay, what are some of the things I need to learn? is it a university path? Is it a certification path? Do I need to go shadow and, you know, do some sort of internship path? So many options there. George, what say you? Well, as a guy who took a gap year, I went to school for a year, took a gap year, pursued music. Love that. I was in a band, worked at the Apple Store. Everything you think about me, looking at me is true. So I would never tell them not to do that. I mean, here's the funny thing. people send their kids to colleges with prestigious music programs hoping one day they'll start a business like Hudson did at 17. And just not to be whatever, but the school is already behind.

Starting point is 01:07:49 The education is already behind what people are doing right now. Your professor doesn't know what Spotify is most likely. So I would go, hey, I'm going to pursue this. I'm going to see where it leads. And worst case, if you go, man, I am at a wall. I hit a wall. I don't know where to go from here. I think a business degree would help or a finance degree would help.

Starting point is 01:08:06 help, then go for it. But do it because you're passionate about it and not because mom and dad told you to. I don't think that college is a place to search for what you want to do. I don't. I don't think you should search for $80,000. For most parents, it's just a safe place to find that. And so they go, well, I'd rather my kid there than out in the real world. But you're paying for every semester and every change of major and every change of, I just think that we can be more efficient. 100%. I always joke that if you want your kid to be cultured, send them to Europe for a year instead of to college. I can tell you as a person.

Starting point is 01:08:40 It'll be cheaper and they'll have a better time and come back a different person. I agree with that wholeheartedly, George. As a person who worked on ships right out of college, traveling the world will do more for you than a lot, a lot of things. I'll tell you that. I love it. Way to go, Hudson. Yeah, like that.

Starting point is 01:08:54 I'm proud of you, man. I mean, I don't want your parents mad at me. They're already mad at you, but I'd say mom and dad, unless you're foot in the bill, I'm going to just pursue this business. And let's add this. Maybe he has to move out of it. 18 because of it because mom and dad have one opinion and he has another that's okay too and you can afford it if this business keeps up way to go jason is in chicago up next what's going on jason

Starting point is 01:09:16 hey how you doing great what's your question today uh so i have a 2026 uh hana and it's 25 000 left on the vehicle i have 23 000 um i'm close to paying an offer but i was wondering i don't know i'll get paranoid when I don't want to pay it off right away because then I have nothing in my bank. Would you recommend just pay off right away? Or, I mean, I could build it back up pretty quickly, but like, no emergency. It's 532. And what's your next paycheck? What's my next paycheck?

Starting point is 01:09:55 Yeah. 21, 22. Okay, so we're talking two paychecks from now. You'd have enough to pay off the car and still have a thousand bucks left over in savings? Yeah. And you'll be freed up of that 532 for the rest of your life. So how quickly could you save it back with 532 extra in your pocket every month? I can probably give it like a couple months.

Starting point is 01:10:19 I'd be in a decent spot. I would do that. I think you have your answer. Because what I do is I split my check in half. Half of it goes a savings, half of it goes to bills and go from there. Okay, so 50% of your take-home pay is going to that savings account that has $20. 23 in it? Yep.

Starting point is 01:10:37 Way to go. I mean, if you keep that up once you're debt free, you're going to be right as rain, my friend. So I would definitely do that. I mean, if you look at our baby steps, baby step one is a $1,000 starter emergency fund, which means if you have more than that, it's going to go towards baby step two, which is pay off all of your consumer debt. So is this all the debt to your name?

Starting point is 01:10:54 Is this $25,000 car loan? Yep. Man, I would pay it off and not look back. But again, don't do it until you have that $1,000 buffer on top of the money to pay it off. So we're talking about a month from now Roughly That's it Alright

Starting point is 01:11:12 I would not be scared my friend And listen if you have an emergency come up You hit pause and you cover the emergency And then you hit play and move forward again But awesome Are you a single guy, young guy? I'm not single But yeah I'm young

Starting point is 01:11:25 Is your wife working outside the home? Yes Okay So we have two incomes on top of this Yes What do you guys bring it home every year or every month? Probably she's bringing, oh, month.

Starting point is 01:11:39 I don't, I mean, she's my girlfriend, so. Oh, okay. Well, that's a different story. Okay. Different story, yeah. Then it doesn't, then the advice stands. Forget her. It does not concern her.

Starting point is 01:11:50 Not her business. Just kidding. Appreciate that, Jason. That's a fun one. That is. I want to talk about the car loan epidemic, Jade, because I just saw the headlines that they've now surpassed student loans in national debt.

Starting point is 01:12:03 Oh, boy. What's the number? $1.68 trillion. Oh, wow, that is surpassing. In auto loan debt. The average payment is now $750 for a new car. That's painful. And in the high 500s for a used car.

Starting point is 01:12:17 Yes. And it just shocks me that people are still out here buying a brand new car, which depreciates 10%. The moment you drive it off the lot, 60% within the first five years. Yeah. On average. While you pay interest and it goes down to value. I think the most compelling argument here is when you synthesize the data out there on car payments, who has car payments, you can derive that of working adults, like adults that are of working age, over 50% of them have car payments.

Starting point is 01:12:50 Then when you stack that up against to the percentage of people who are living paycheck to paycheck, and then when you stack that up against the amount of people who feel like I won't be prepared for retirement or I don't have enough money in retirement, the numbers are so close. that you go, oh, it really is true that the car payment is keeping middle class broke and unable to cross over that line to wealth. It's very interesting. And then the hardest part is we can justify it. I mean, you talk to the callers, they got brand new cars. And I go, why did you need a brand new car? Well, safety and reliability.

Starting point is 01:13:24 I go, okay, so two years from now, you've got a used car. Is it still safe and reliable? Yeah. Yeah, it is. And the truth is, new cars, you know, know if you look at all the technology and things that can go wrong, they're not as reliable. Some of these used cars without all the bells and whistles are actually safer in a lot of ways and less prone to meeting all these repairs.

Starting point is 01:13:46 So what I do is research the make model year for known issues that come up with this car. Don't buy one. Oh, it's got the CV transmission issue in that Nissan. Great. Let's avoid that specific model for those years and find something we can buy in cash until we can upgrade in cash. And if you stair step it that way, you are guaranteed to build wealth. Agreed. Instead of trading in one payment for another. Most people spend years changing their money habits, but never think twice about how their bank

Starting point is 01:14:32 probably works against their values with nuisance fees and endless debt products. If you're being weird by sticking to the baby steps, you deserve a bank that helps with that. That's why Ramsey partnered with Fair Wins Credit Union. They built the smart bundle specifically for Ramsey listeners, not for everybody else. And it includes up to 10 high yield savings accounts so you can set up different funds for different needs and goals. And now they've introduced the Live Like No One Else debit card. The original debt is normal, be weird debit card, is still available too. And every time you reach into your wallet, your card is a daily reminder that you follow a different path.

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Starting point is 01:16:25 Marie's in San Jose up next. What's going on, Marie? Hi. So three years ago, I went to the emergency room. because of a cold. And I'm not from this country. I had no idea how high deductibles worked. I had insurance at the time.

Starting point is 01:16:41 And while I was there, I signed up a paper that the amount would be around $720, but I was hit with the bill of $4,700. And the insurance paid $1,700, and I still have a $3,000 bill to pay. I think that's just of trages, and I really don't want to pay this bill. I didn't pay. So you went to collections and the collections company sent me a bill with the same amount, but with my name wrong in it. I was wondering if I can skip this payment.

Starting point is 01:17:14 Okay. So when you went to the hospital, did you stay over or was it just a quick ER visit? Tell us, did you think that you were just going into an urgent care? Tell us what happened. Did you stay over? No, I didn't. It was a few hours. There was a lot of people.

Starting point is 01:17:34 There were a lot of people in there. Was it the emergency room? I took a pill in like a like an Advil. Like they gave me a nodville. And that was the whole treatment. You know, it was like a short time. I mean, it could be faster. But, you know, for what he was, it took a long time.

Starting point is 01:17:51 But it was a cold. I had a cold. Did you get an item my statement? Did you get them to print you out a statement of each line by line item? So I call them. And I complained about the price because I couldn't believe when I saw the price. And I asked for an itemized. They didn't send me the itemized.

Starting point is 01:18:08 They never sent me the itemized. Hmm. I would, if I'm in your shoes, send a written dispute to the collection agency and to the original hospital. I can tell you this. I don't think you're going to get out of it because of a typo of your name. No, that's not going to do it. Is yours. You can get a debt validation letter.

Starting point is 01:18:25 You know, you can send them that, but they're going to validate it and go, there's a typo in your name, but the debt is yours. I'm surprised if you saw the portion that the insurance paid, but you couldn't see the information. Do you see what I'm saying? I would keep fighting for that. I'm like, no, show me. How old is this debt? Three years. Oh, wow.

Starting point is 01:18:46 Yipes. Well, you can still try to get all that information, and at this point, they're going to be willing to settle. Do you have any money? I do. I do, yeah. Okay, so this is more out of principle. You're just angry at the American health care system. Absolutely.

Starting point is 01:19:00 Join the club. You can probably settle this for a quarter of the amount and be done with it. Do you think a quarter of the original amount that I signed for? Because they told me I would go to be $700 and they talked to $47. I mean, you can talk to the collection company and say, listen, I was told it'd be $700. I've got that. That's all I have. If you'll take that as paid in full in writing and don't give them access to your checking account, then you call it good.

Starting point is 01:19:27 And see what they say. They might go, now we can't do $700. we can do a thousand. It's probably worth it for you to not deal with the hassle at this point and just go, all right, I'm angry, but you've been angry for three years now. Yeah. So I want you to just be free of this. And when you settle it, just know, because I've had to do this,

Starting point is 01:19:44 you might have to call several times to get somebody with a brain who will actually know the policy that they can settle it. The first three people might say, we can't settle this. You owe $3,000. Just hang up and call the next person until you get somebody with some brain. brain cells. And have you talked to the insurance company to understand why they didn't cover more or what your actual insurance was? I didn't call the insurance company. What I understood is that I had a high deductible. And I, at this point, I had no idea, at that point, I had no idea how this

Starting point is 01:20:16 worked in the United States. I had no idea of this scam that insurances are in this country. So I, yeah, I sincerely didn't understand. I couldn't believe. I thought I was going to have to pay the whole thing. But the, the, What pieces me off is the 700 jumps to 4,700. Sure. Yeah, that is the confusing part. That's the part I would at least get the info on and through the itemized bill and some of the validation of this debt. And I would be talking to everybody.

Starting point is 01:20:41 I'd be going to the insurance company, to the hospital, to the collection agency and really get to the bottom of this before you ask for that settlement. Just so you know, the typo in my name is not really just a typo. It's like a whole name. They put a wrong name. Like they put the first name correctly and they put a second name and then they put my last name. So do you think there's a confusion of accounts? Do you genuinely think they have your account confused with someone else? You know, it is possible.

Starting point is 01:21:12 I never thought about it, but now that you're saying that, I mean, it could be. That's where sending that debt validation letter would really help. Say, hey, this isn't even my debt. This isn't my name. I don't know. I didn't get these services. So that's the part you can fight. And I would.

Starting point is 01:21:29 But again, it's been three years. And so you might be limited in your options because of the age of this. So worst case, if you fought the good fight, I would just try to settle if it really is your debt. And if not, keep fighting, Marie. Yeah, see if it's connected to your social security number, that's usually a great place to start. And pull your credit report and see what pulls up on there. Because if it's not your credit report, you got to wonder. You got to wonder.

Starting point is 01:21:52 Is it really your debt? Listen, two Maria's could have come in on the same night with, similar last names and similar symptoms. Well, it's funny is we just took a call from Maria, and now we've got Maria. Maria, was it your debt? Hey, are you with us? I think you're calling on me. I am.

Starting point is 01:22:10 Can you hear me? Yes, how are you doing? Hi. I'm well, thank you. How are you? Good. What's your question today? Good.

Starting point is 01:22:18 So I have a subtle debate question. My husband and I are on baby step two, and we are debating. whether or not to pay off kind of like our fifth or six loan amount debt to free up a huge monthly payment. Oh, tell us more. How much would you be paying off if you jumped the line and paid off the fifth smallest debt? What's the amount of the debt and what's the monthly amount? It's $3,59107, and the monthly payment is $4705.

Starting point is 01:22:55 Okay. And what's the smallest debt right now? How much is it total and what's the monthly payment? It is $2,000 total and there's no monthly payment because it was a friend from church that lent money to help pay for a car repair. Ooh, listen. I don't want that paid first. Yes. Like, aside from the rules for a second, I would 100% pay the friend.

Starting point is 01:23:19 That's a relationship tied to that. Right. How much money do you guys have right now to pay if you threw money at debt? Um, right this minute we, like, it's, it's about four to six thousand. I was pregnant. So we were like bankrolling and then several things went wrong. We also ended up in the hospital. So we have money to throw at debt. But we're waiting and we're just kind of like holding. My husband just started working again and we're still waiting for the financial assistance application. to be answered to find out like how much of it is, are they going to like charitable right at all? Yeah, what's your own word for. Or like what they're going to do.

Starting point is 01:24:06 Okay. Okay. So let's imagine perfect world. We'll call it good for a grand. Yeah. We want to make sure we have it. Yeah. So let's say you have five grand to throw at your debts.

Starting point is 01:24:15 If you did the debt snowball, how many debts would that knock out? Uh, so that would be one, two, it would get into three. Okay. Which is the $2,000? $2,000. Yeah, so it'd be one for 2000, one for 2014, which is a credit card, and then one for $2,800, which is a past due bill, and also doesn't have a monthly minimum. Okay. I still like the debt snowball option because you're going to be up against that one soon enough, the $35.91.

Starting point is 01:24:46 If it was like $1,200 or something, it might be worth it if you have the lump sum. But I think either way, if you map this out on paper, you're probably going to get to the same destination. destination and a similar amount of time. Yeah, and because this particular loan goes down by 47105 per month, so we've been having this conversation for many, many, many months. And at this point, it's gone from like 10 grand or 8 grand to like 35. I can tell you this, Maria, I would, I do care about relationships when you owe people money. And I do care about knocking those out fast. I think there's worse things you could do than to pay the 3,500 first. But I'm a person who I like following the rules.

Starting point is 01:25:31 I think when you set a standard to follow a process, you will follow it. Welcome back to the Ramsey Show in the Fairwinds Credit Union Studio. I'm George Camel, joined by Jade Warshae this hour, taking your calls at AAA 825, 5-225. Julie is in Indianapolis up next. Julie, welcome to the Ramsey Show. Hey, thank you for having me. Absolutely. How can we help today?

Starting point is 01:26:07 I'm wondering if I should pursue public service loan forgiveness or if I should try to pay off my student loans. What are you doing for work? I work at a university. Doing what kind of role? I'm a pharmacist. Okay. And what are you making? $115,000 a year, starting when my job starts next month.

Starting point is 01:26:35 Okay. And how much student loan debt do you have? 164,000. Okay. So the term on that is this idea that if I follow the payment structure that they put in place, sometimes there's other things attached to it, then after a while these loans can be forgiven. The only problem that I have with this, like, I would love for everybody to have some form of, you know, pay out on something. Oh, you didn't have to pay the debt. That's great. But the, the

Starting point is 01:27:10 problem with this is the success rate is so very low. I mean, we're talking one to one percent to five percent of people even have their loans forgiven. That is just terrible. I mean, that is just a terrible success rate. So what a horrible idea to pour a decade of time into something and never see it, you know, it never come to fruition. When if you applied the full force of your income, that's only going to go up from $115,000 to paying off $164,000 as a single person with no kids. Do you see what I'm saying? I think that you could pay this off in more than half the time, don't you?

Starting point is 01:27:55 Of waiting around for the forgiveness? Yeah. Do you know why the success rate is so low? Um, there's a lot of reasons. So a lot of it is paperwork being filed in completely, um, incompetent government is the headline. Yes. Incompetent government, whoever's working and checking things behind the scenes. There's just so much of it that you might not even be able to control here. And so that's, we're talking like three presidents from now. And I don't know if you've seen even with this administration, they're already starting to change the rules of what qualify, what employers can and can't qualify. And so, because. Because of that, it just scares me for you to sign up for a 10-year clock, make all of these payments, minimum payments, while interest accrues and then still possibly be on the hook while locking yourself into a certain job or a certain type of employer when you could go make more in the private sector. I mean, what if you went to go work for a big private sector company making double? Yeah, that would be really difficult, given my job. I pretty much have to work at the university, but I hear what you're saying.

Starting point is 01:29:02 So right now I make $50,000 a year. Like I said, next month I'm transitioning jobs. I'll be making $1.15 a year. How do I then allocate? Like what should my percentages be my income? What should I be saving? What should I be putting towards the loan? Well, let me clarify something first.

Starting point is 01:29:20 Are you working for the university because they're a qualified employer for the public service loan forgiveness? No, I work in academia. I do research and stuff. So I pretty much will always have to work for a university. Because you're on the research side of things. Just double checking that. Okay.

Starting point is 01:29:37 So your question was, how much will you have to put towards this to pay it off? Yeah. Okay. Well, let's look at some real numbers to get this a fair timeline for you. So where are you living right now? Like, what are you bringing home and what are you paying for rent? I pay $1,800 in rent. and then that will be against the $115,000 income.

Starting point is 01:30:03 Okay, and you haven't received the income, right? That's not until next month? Correct. Next month is when I start that income. Okay, so let's pretend you'll be bringing in around $7,200 a month. I think that's a fair place to start. Tax is considered. Okay, so $1,800 and rent, what other expenses have you taken into account that maybe we should think about?

Starting point is 01:30:28 I mean, I have pets, so obviously, like, food and stuff, groceries, but I don't have any car payment. No other debt. Yeah, no other credit cards, nothing like that. Good. I mean, the napkin math is telling me you could probably knock this out in four and a half to five years. Yeah. If you're bringing home seven and you can throw three at the debt every month. Which I think you can.

Starting point is 01:30:52 And live on four. That's very reasonable. And so the key is, this is all we're doing is we're focused on this debt. and we're not, you know, investing, going on vacation, upgrading the cars. This debt is going to be your singular focus for a couple of years. But this short, sacrificial time is going to free you up for the rest of your life. So how old are you today? 26.

Starting point is 01:31:15 Love it. Can you imagine by 30 years old you're completely debt-free, making mid-six figures, if not worth? That would be amazing. That's the dream for most people. And so what I don't want is for you to now be 36 and go, oh my gosh, this whole thing fell apart. And now I'm still on the hook. Now you're really frustrated. It's so much regret.

Starting point is 01:31:35 I like to feel like I'm in control of my life. And I'm not mad at people who got the public student loan forgiveness. But the thing is, it was also created for the person making $38,000 who is going to have a real hard time climbing out of it. And so in your situation with as much as you make, it's a very solvable problem for you to just knock this debt out. making $1.15 plus. Okay. Thank you very much. I appreciate the encouragement.

Starting point is 01:32:02 I feel better about this. Yeah, and if you look at that timeline and you don't like it, you still feel like it's too long, that's another place where you can take matters into your own hands and say, okay, maybe I'm working overtime, maybe I'm picking up side hustles, maybe I'm getting a roommate, all of these things that are going to add to your income and add to the amount that you can throw out this debt every single month, the more the merrier. I like this plan. All right.

Starting point is 01:32:25 Orleans up next. What's going on, Laura? Hi, how are you all today? Doing great. That's your question. Great. My question is this. I am just about 62 years old. I just due to my past, not making the financial decisions and being married at the time and no longer married, I have about 190,000 in debt that I accrued and took over from my divorce. And in retirement, only, have $329,000. Okay. What kind of debt's the 190? I am.

Starting point is 01:33:04 Some, I had a SBA loan where I used that, most of that was to pay off debt that we had had from a marriage due to some real estate difficulties. And so I was able to get a loan to pay off some of that debt, most of all that debt. and at a lower interest rate. So the other debt is my car, I have a $550 a month, car note for a car. I owe about $28,000 on that. Hey, Laura, hang on the line. I'm going to carry you over into this next segment because I want to break this

Starting point is 01:33:45 down with you and give you some hope that you can still retire with dignity. Even at 62 with a bunch of debt, not enough in retirement. let's walk you through a plan where you leave feeling confident. So hang on the line. We'll be right back to explore that situation. You work your butt off for your money, but your money's never going to return the favor if all you do is hope for the best.

Starting point is 01:34:38 If you're ready to learn how to make your money work for you, check out the SmartVestor program. SmartVester can help you find advisors who specialize in retirement planning, charitable giving, advanced investing strategies, and more. Whatever your goals, your pro will take the time to explain your options, so you never have to invest in anything you don't understand. Head to ramsysolutions.com slash smartvester to get connected.

Starting point is 01:35:05 Ramsey Solutions is a paid non-client promoter of participating pros. Learn more at ramsysolutions.com slash smartvester. All right, we're going to be joined by Laura. Before the break, we were talking to her. She's $62,000 in debt. She's got $329,000 in retirement. Let's see if we can help her out. Laura, are you still with us? Yes, I am.

Starting point is 01:35:37 Okay. So you were breaking down your debts for us. You got a car loan. That's $5.50 a month. You have this SBA loan. Any other debts in that $190? I have a boat loan that is about $40,000. Yes. Whose boat is that? I own with a person. It's my boat and another friend of mine that we are trying to sell. Okay. Is both your name on it on the, on the loan?

Starting point is 01:36:06 It's under, no, it's under my name. Okay, just your name. That's good. Do you have any money saved besides retirement? Not, not really, not anything to speak of. Tell us the amount because it's something. It's probably $5,000. Okay, great.

Starting point is 01:36:21 $5,000 saved. And what do you bring in every month for work from work? I make about $32,000 a month growth. Okay, good. Great. That helps the situation greatly. Now, how much do you actually have left over? If you went real serious, I'm going to cut all my expenses.

Starting point is 01:36:40 I'm selling the car, selling the boat. How much could you realistically throw at this debt out of that $32,000? Obviously, that's gross. So are you bringing home, you know, $22, and then you've got a bunch of debt payments? Right. Yes. So that's probably about, I'd say, with all my expenses, about $10,000 with expenses. Okay, so you got about 12 left over.

Starting point is 01:37:05 Yes. That you could throw with these debts. That's great. And what's the car worth if you sold it and what's the loan on it? I owe about 28. I've only had it probably a year and a half, so it probably would at least break even, if not maybe sell it at 30. Okay. And then the boat, what is that worth?

Starting point is 01:37:25 The boat, I would probably, it probably is about 120. maybe 140,000, and I owe 90 on it. Oh, I thought you said 40 is owed on the boat. Okay, so you owe 90, but it's worth 140. That's a nice boat. Yes. Okay, and you think you could get 140, because that could clear a whole lot and give you some profit back to knock out, you could knock out the car and keep it if you wanted to.

Starting point is 01:37:51 Right. And then the SBA loan is the giant one, right? That just one big debt. Right. And couldn't you throw 10 or 12,000 a month at that and knock that out? in almost two, that's what I'm trying to do. Because I really want to get rid of that.

Starting point is 01:38:06 Right now I've been putting about 5,500 into my retirement. And so I don't know if I should put less into that and pay more to the debt. Yes. I would. I would stop those contributions all together and put it all towards a debt. Because if you can put, if you said 10 to 12, if you could bump that up to 15 by really cutting back your lifestyle, I mean, gosh. You could knock that out so quickly and then you could put that same amount into retirement.

Starting point is 01:38:38 Right. Because is the SBA loan like $70,000? It's, well, $95,000. I thought I heard you say $190,000. Did I get something wrong? Well, that's with the boat. Oh, that's everything together. Okay, great.

Starting point is 01:38:55 Right. Even better. Okay. So think about it this way. If you just had the SBA loan of $90,000 and you threw $15 out of a month, you'd be done in six months. Perfect. So think about that. You sell the boat. You could profit, you're telling me 50 grand, which would knock out the car completely and still leave you with another 20 grand to throw at the SBA loan. Now we're down to 70 grand, right? Correct. So four and a

Starting point is 01:39:19 half months, you throw 15 at that SBA loan and four and a half months you're completely debt-free if you pause retirement. So what we're talking about is not pausing retirement forever. We're talking four and a half months, you pause retirement, get to a place where you have some financial foundation, no debt, get yourself an emergency fund, and then think about how much you could sock away in your investments. If you had no debt making 32 grand a month. Okay. So this is, you're going to be just fine. Okay. And I haven't only did 329 in my retirement. Well, if you turn around and if you do what George said and then you take the 10,000 that you were throwing at the debt, even just 10,000 of it and you put that away every month. If you put 17

Starting point is 01:40:03 away every month into investments, that's 200 grand a year. That's crazy. That's just your contribution. That's not even the compound growth over the next 10 or 20 years. So, Laura, I'm telling you, if you get focused and you follow these baby steps, knock out consumer debt, that's it. It's all you're doing. Get the emergency fund of three to six months in place. That's all you're doing. Then baby step four is 15% of your income. And if you don't have a mortgage, if you're completely debt-free, then you can bump that up to 25, 30, 40, 50% of your income to catch back up on retirement. So very solvable problem because of your amazing income. Get focus and call us back when you're debt free.

Starting point is 01:40:38 We'll celebrate with you. Michael is up next in Stillwater, Oklahoma. What's going on, Michael? Oh, just working away. I feel you. How can we help today? So a few months ago, my wife and I decided to get a house built, and so we just signed a contract a little over a month ago to start that process,

Starting point is 01:41:03 and they started on it. And then, so within a year of that, they told us when we'll have to get our traditional mortgage and we'll need a down payment at that time. And then a few weeks ago, she got diagnosed with cancer. Oh. And they're going to have to amputate her right leg. Oh. And she's not going to be able to work for six months, give or take. so that takes away a large majority of our income, and I don't know how we're going to be.

Starting point is 01:41:39 As far as monthly bills, my job should be able to hopefully sustain everything, but I don't see how we're going to have money for a down payment now. And then the other thing is our house won't actually be complete either, because in that loan, I told them not to worry. about drilling well for a water, I was going to pay for it out of pocket and then not to worry about running electricity because I've got a friend who's an electrician and I was going to pay for that out of pocket and get a deal. But now I don't know the well would have been about 10,000 electric's a couple thousand and then about 60,000 for the house down payment, which we I don't

Starting point is 01:42:26 see how we're going to be able to make that work now. Yeah. How much debt are you currently in? About 50,000. Is that the construction loan? No, nope. That is a car and student loans and a tractor. Okay. What are you in for the construction loan so far? The total cost at the end will be $304,000. That'll be the total cost. Okay.

Starting point is 01:43:01 And where are we at? this process. You said you're under contract. Is there a way you can negotiate a stop with the, with the builder on this? Not that I'm aware of. I talked to them a little bit and they basically told me we're screwed. So they gave me, when we started the process, they gave us a backup plan, which is very possible, I guess, at this point. And it is a, the full loan mortgage, it's a 30-year mortgage at a 10% interest rate. Ouch. Which just sounds absolutely terrible to me.

Starting point is 01:43:38 And what was the down payment they needed from you? What I was going to do is go through another company for the mortgage. We wanted to do like a 15-year mortgage. Okay. And now we're kind of out of options from what I can see. I really don't want to spend, you know, a million dollars on this house after interest and stuff. Yeah, I mean, there's a lot of dominoes here that are going to fall. Yeah.

Starting point is 01:44:12 So I would be trying to do anything I can to get out of this deal. And even if that's going to cost you some, it's still cheaper than what's on the other side of this. So I would be talking to maybe a real estate attorney to see what the heck did you sign? What will they be willing to negotiate if there's an amendment to the agreement to maybe even just pause this build or get out of it completely. Can you pay them 10 grand to call it good and you sell the lot? I don't know what all those details will be. Maybe you can pause if nothing really big has started yet.

Starting point is 01:44:43 Maybe you can pause and sell the plot and somebody else can pick up where you left off. I'm not sure. That's a best case scenario. Otherwise, you're going to be working your tail off. And I would be selling this car and tractor and getting out of as much debt as you can in the meantime. Because we don't know what the future holds. but man, we are rooting for you guys and praying for your wife. Hey guys, Dave Ramsey here.

Starting point is 01:45:15 Every day on this show, we help people work through real money problems and figure out what to do next. Now, you can get that same kind of help anytime 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 ramsysolutions.com.

Starting point is 01:45:49 In the lobby of Ramsey Solutions on the debt-free stage, we have Chad and Michelle. How are you guys? Great. We're doing great. Thanks for joining us. You brought the debt-free t-shirts to match. Love it. And your Ramsey blue.

Starting point is 01:46:14 That's fantastic. How much debt did you guys pay off? $268,9333. Wow. Nice. Love it. And where are you guys from? Bristol, Vermont. Love it. And what kind of debt was the 268?

Starting point is 01:46:26 Credit cards, car loan, tractor loan. Mortgage. Mortgage. I knew it was coming. You can't just sneak that in there, Chad. I knew it. Oh, wow. That's great. Fantastic. Okay, 268, and how long did that take you guys? Five years. Wow.

Starting point is 01:46:44 That's impressive. And what was the range of income? It was 90 and we ended at about 140. So you obviously paid off the consumer debt, student loans, tractor, all that. And then you just decided, you know, we're just going to go right on through. Did you keep that same intensity? Well, we kept the same intensity for a while. What happened? It sounds like something changed.

Starting point is 01:47:07 Go ahead. Well, the gazelle intensity started off pretty well, gazelle intensity. She was certainly going off the start of it. I was kind of more like a laying down gazelle to start. with and then I finally got up and I was keeping up with her. Wow. So you were the reluctant spouse? I was. I was, I was, yeah, I'm the spender and she's the nerd and it took a while for me to get on board but once I started going to the classes and seeing what the outcome would be. It's like yeah.

Starting point is 01:47:40 Was that the turning point for you was going to Financial Peace University with her? That's correct. How did you even, how did you convince him, Michelle to actually go to the class? Every spouse wants to know. How do I get this? this gazelle to get up off the grass. Well, this started in 2019. I was doing our bills thinking I was like had a budget in my brain. And I was like, I don't know how we're doing this. I mean, I just don't know how we're doing this.

Starting point is 01:48:05 And our youngest was graduating that year. And I was like, we have no money for her for college. Wow. And I was like, that's it. I got to do something. And in 2019, we had done a school trip. and we're actually went to Kentucky to run the Kentucky Derby Marathon. And on the way there, I saw a billboard with financial peace on it.

Starting point is 01:48:28 And I was like, hi, I wonder what that is. And I didn't think anything about it. And then in December, I saw our local front porch forum had a advertisement for a financial peace class. And I was like, okay, this is a sign. So serendipitous. Yeah. So I took it and my oldest daughter was going to go with me, and she kind of bailed on me. And so Chad felt guilty.

Starting point is 01:48:47 really is right. So the second week of class, I end up going, and then we went through the rest of them. And this was during COVID, so we had two in-person classes and then we were all remote. That was all remote. I remember that. I was hosting a class at that point, and we started together, and then we ended up going remote. That's so funny. Right.

Starting point is 01:49:07 Wow. Okay. So it was a slow start, but then things ramped up, and it sounds like your income went up. What do you guys do for work? I'm a paralegal. I'm a mechanical assembler. Fantastic. So what happened to the income over those five years?

Starting point is 01:49:19 Was it just natural promotions and raises? Yes. And I worked a lot. Wow, absolutely. Very, very cool. So the house has paid off. What's been the hardest part through this journey? Once you guys really understood what it's going to take to make it happen, you get focused, you get intense.

Starting point is 01:49:34 What became the hardest part day in and day out? Patience. For me, sticking to the budget and not getting the wants. Yes. You know, so there's the needs. You've got to have those. Yeah, what were those sacrifices for you, Chad, that you were like, I can't spend money on this for the foreseeable future until we're out.

Starting point is 01:49:54 You know, if for some reason I thought I needed a new pair of running shoes, just can't go out and buy a pair of running shoes. Either you budget for the next month or you may do with what you have. There's one thing I didn't sacrifice. My beer budget was always in there every month. Beer budget remains intact. Don't mess with the beer budget. That's correct.

Starting point is 01:50:12 That's what's keeping Chad going right now, okay? That's hilarious. Okay, so what's the house worth? 530, around 530. Awesome. And how much do you guys have in your nest egg in retirement accounts? 1.4. Oh, my gosh. Oh, I love it. Babysups millionaires. That is why. So you guys did a really good job investing your whole life, but you were also kind of collecting debt and being normal along the way. That was the smart thing we did was invested in our retirement. Yeah, you don't get to 1.4 million accidentally. And you guys still have a long life to live, which means that money is going to double, triple quadruple.

Starting point is 01:50:45 We're hoping so. Wow. So it'll at least double. Well, I mean, every seven years, if the stock market's about 10% average, every seven years it'll double. And you guys could live a good, what, at least 30, 40 more years, right? Well, we're a lot older than you think we are. You guys look 48 as the crow flies. It's all the marathon running.

Starting point is 01:51:05 Chad looks older. I will say that. He's got to Dave Ramsey look to him. Thank you. I'll take that as a compliment. Well, he's younger. I robbed the cradles. Wow.

Starting point is 01:51:13 Okay. So you guys are far past Baby Steps Millionaires, but now you're doing things intentionally. Did you have any cheerleaders along the way? Our two daughters. We're our cheerleaders. Wow. And you brought them here with you. Did they learn along the way?

Starting point is 01:51:28 Because, I mean, they're older now. They saw Mom and Dad do this journey. They were older when we started. Did they think you guys were crazy or were they on board? I probably think they were crazy. I believe that to be true. They thought you were crazy before, though, it sounds like. So nothing changed.

Starting point is 01:51:44 Yes, but just more poor. we had to say no to them a lot. Well, yeah, because you said the college was the crux of this whole thing. So how did that end up? Tell us the end of the story. What did you end up doing? Well, we actually sold a, we had to undo some of the stupid that we could. Yeah.

Starting point is 01:51:59 So we had bought a piece of property, of course, on a home equity loan. Man. And so we sold that. Yeah. And that money helped pay for her first year of college. Good. Worth it. Good.

Starting point is 01:52:10 Very much worth it. And you want to bring them on stage? Yes. And tell us their names and ages? This one is Sydney and she is 25. Awesome. This one is Ariana and she is 30. Oh, wow.

Starting point is 01:52:23 And a family tree change just like that. And so did their inheritance. That changed too. They didn't know that number until now. Uh-oh. They're like, what? Mom and Dad are loaded. Well, the good news is you got a lot of time to enjoy it.

Starting point is 01:52:38 And, you know, the character traits are passed down now, sacrifice, perseverance, patience. And Chad now gets to spend a little more in the, beer budget, I would imagine. That's still pretty tight. Okay. I love this so much. So what's next for you guys? You're in Baby Step 7, the house is paid for.

Starting point is 01:52:56 What are you looking forward to in life? Well, traveling more. We've run marathons, so I have four more states left. And so that's the next two years is to pay pay. Are you going to do one in every state? We've done. I've got four more left. Holy smoke.

Starting point is 01:53:10 And what are the last four states? Idaho, Minnesota. Wyoming and Colorado. Holy cow, that is amazing. Wow, so inspiring. You're only like 46 ahead of me, so I'm going to catch up one of these days. That's incredible. Oh, my goodness. You guys are excellent.

Starting point is 01:53:30 What do you tell people the key to becoming debt-free is? How do we become like Chad and Michelle? My theory is you need to stick to the budget. You make a budget every month and you stick to it. And it works, because to start with, I was a non-believer, but I'm a believer now. I want to sing it so bad. I'm a believer There it is

Starting point is 01:53:49 All right How about you Michelle What was the key for you? I think the biggest The first step to me was admitting there was a problem And then you know Then the budget

Starting point is 01:53:59 Working as a team And getting both of us on board I mean if he wasn't on board I would have tried to do it Sure But it made it so much easier And simpler with him being on board Just sheer grit

Starting point is 01:54:08 But you probably would have been very resentful Along the way And he would have felt Guilty Oh my goodness Working together is a different story I would have to double the beer budget. Oh, man.

Starting point is 01:54:18 We have this no button, so we use the no button a lot. Hit it for us. What does it sound like? There's different ones, but they sound like Dave. I've seen this before. Yeah. Oh, is it actually Dave Ramsey? It just sounds like Dave.

Starting point is 01:54:30 It just sounds like Dave. I think it is. That's fantastic. That's his side job rewarding. So I heard that a lot. I'd ask her a question, and she said she hit the button a lot. Well, you said no for five years, and you get to say yes for the rest of your life because of the position you put yourselves in.

Starting point is 01:54:44 We're so proud of you guys. All right, here we go. It's Chad and Michelle and their daughters, Ariana, and Sydney from Bristol, Vermont. They paid off $268,000, the credit cards, the car loan, the tractor, the house and everything in five years, making 90 to 140. Count it down. Let's hear a debt-free scream. Three, two, one. We're dead free!

Starting point is 01:55:10 I love it. Michelle is jumping for joy. You would have thought she won the price. This is right. I mean, look at her. She's run marathons in 47 states. Those legs can jump. That's true. I wish out of Broyhill dynette set to give her as a prize. But instead, they get to be on the debt-free stage, which some say is even better. Hey guys, George Camel here. You ever feel like you make good money and still have nothing to show for it? You run into Target for one thing and somehow walk out $87 later with toothpaste and emotional support candles. Just me?

Starting point is 01:56:02 Okay. Well, that's the problem. Most people don't pay attention to how they spend their money. So it does whatever it wants. And that's why we created every dollar. It's a budgeting app that helps you create a simple plan for your money. Every dollar is simple. It's clear and it helps track where your money's actually going.

Starting point is 01:56:17 Plus, you get daily lessons, to-dos, and remind you. along the way. It's like having a money coach in your pocket. Your money's been freelancing long enough. It's time to give every dollar a full-time job. Go download every dollar for free on the app store or Google Play. Our scripture of the day, 1st Corinthians 924. Do you not know that in a race all the runners run, but only one gets the prize? Run in such a way as to get the prize. Sarah Blakely said, don't be intimidated by what you don't know. That can be your greatest strength and ensure that you do things differently from everyone else. I love that.

Starting point is 01:57:02 Hey, the First Corinthians made me think of something in that debt-free scream talking about running. We talk about gazelle intensity all the time. I think we should take a minute and explain that because if you've been rocking with us for a while, you're like, oh, gazelle-intetic. Like, we throw out phrases a lot, but that's one of those that if you're listening for the first time, you're like, what the heck were they talking about? What is gazelle intense? He's talking about laying down like a gazelle. So, you know, we talk about getting out of debt and doing it with intensity. And there are villains out there.

Starting point is 01:57:32 There are predators out there. That's how we consider debt. Debt is the lion. It is the apex predator that is chasing after you. And gazelles are able to outrun a cheetah or a lion that can, you know, have a burst of speed. But a gazelle, if you can run fast enough for long enough, you can outrun them. And so being like a gazelle in running fast and intense for a long period, of time will get you out of debt. So that's kind of the crux. I could never explain it the way Dave

Starting point is 01:57:59 does with his fury. I'll read you the original scripture Dave stole this from. You know, he plagiarizes a lot. So this is from Proverbs 6. It says, my son, if you have put up security for your neighbor, if you have shaken hands and pledged for a stranger, aka debts, you have been trapped by what you said and snared by the words of your mouth. So do this, my son, to free yourself since you have fallen into your neighbor's hands. Go to the point of exhaustion and give your neighbor no rest, allow no sleep to your eyes, no slumber to your eyelids, free yourself like a gazelle from the hand of the hunter, like a bird from the snare of the fowler. There it is. Poetic. Yes, I love it. That's some intensity right there. It is. It is. You got to go, you got to go hard and the paint. No sleep to your

Starting point is 01:58:39 eyes. No slumber. I like that. That's right. That's gazelle intensity, if you ever wondered. All right, L is in Detroit, Michigan up next. What's going on, Elle? Hey, George. Hey, Jade. How are you guys doing? Good. Did I get it right, or is it L.E? Nope, you got it right. First try. Okay, how can we help today? So I'm trying to figure out what to do with a pile of money that I have. Just lower the cost of living that I'm dealing with. Oh, wow. Okay, how much do you have?

Starting point is 01:59:08 Well, I have like $100,000 in a safe in my house. Gangster. And I'm expecting like, yeah, it's stupid, I know. I'm expecting like $28,000 more in about six weeks. How are you getting into? Where is this money coming from? Can you legally tell us? ranges. Like, we are weird people. So, like, we breed dogs. And this is all too over, like, four years. So I clean houses for a living. I get a lot of tips. My husband buys and

Starting point is 01:59:37 flips cars and, like, furniture. Okay. And so it's just like whatever cash we get, I mean, obviously, we claim it. And then if it's tips, I don't think you have to claim that. But it just sits in the house. So, but I'm thinking, I should probably do something with that, because, you know, it's not doing anything. And then our monthly mortgage payment increased due to taxes. And I'm pregnant with our first child. So I'm kind of, yeah, excited, but very, very scared for the future. Why are you scared for the future?

Starting point is 02:00:08 Do you guys have debt or is there something that's not secure about your life? No debt. Nope. The only debt that we have is a house and we owe $298,000 on the house. And we're both self-employed. So like I said, I clean house. houses. My income is steady, but I plan to quit working once I have our child. And then my husband, he's a painter. And so it really ebbs and flows with the season. Some months he'll make like

Starting point is 02:00:38 two grants. Some months he'll be able to bring in like 10 to 20,000 on like a high season. So I think that's one of the reasons why I'm just really unsure is because like you said, that lack of security is really knowing. What's the mortgage payment every month? Well, it was 2450, and as of March, it's now 2995. Ooh, yeah, that did go up. What happened? I know, yeah. You know, I think it's taxes, even though, like, we've only been living here for two years,

Starting point is 02:01:07 and I know that they kind of re-an-assessed the value went up on the assessment. Yeah. I was just making sure it wasn't anything else, but taxes and insurance that can do that. What do you bring in every month? You said his could be anywhere from 2 to 10 and on a good month 20. What's yours look like, cleaning houses? is. So, like on paper, it's three grand, but sometimes with tips, it's like four. Okay. So the good news is you have like $128,000, it sounds like that's to your name. And we can do a lot with that.

Starting point is 02:01:41 The bad news is, I think that it might be worth it for you guys to figure out what an exit plan looks like for you to exit out of your income and into his in a way that makes it feel secure. I think that that's what the crux of this call is. Yeah, I agree. Can he find something to do in the slower seasons? I mean, he sounds like a real handy guy. Are there other things he can do where he could keep business up to be, because really what you want, you got three grand in a mortgage, you want to be bringing home about $12,000 a month in order to make this all work and have some cushion to breathe, invest, safe for your kids' college, all of that. Mm-hmm.

Starting point is 02:02:23 So, I mean, yeah, it's one of those things where the things that he can do, it's unpredictable. You know, like, we just bought a car like three days ago that was $2,000 we paid, and it's worth like $7,000. So, I mean, it's like we can just, we have 12 cars, crazy. Wow. And you just sell them off. Yeah, I know. Because he's just flipping them.

Starting point is 02:02:45 Like, if you knew how much money in Pokemon cards we have, that'd be. Oh, my goodness. I like that you guys are resourceful. I like that you find many ways to make money. I think that's very cool. I think that what would really help is to lower your monthly expenses a lot and to make sure that you have a fair amount of savings. So six months of expenses, I would not do three months. I'd do six months for you guys.

Starting point is 02:03:08 And I would treat your money like a real estate agent or somebody who has variable income like that. And I would always make sure I have an extra months worth sitting there so that I always know that I have enough to cover the bill. So essentially, you're always one month ahead. I would recommend that for you. And honestly, if you guys have no debt, I'd probably keep, I'm not exactly sure what six months would be for you, but let's pretend it is $28,000. So you keep the $28,000 there in your emergency fund. You guys start the process of investing, baby step four. And maybe you take this $100,000 and you throw it on the mortgage.

Starting point is 02:03:42 maybe you recast the mortgage so that it's not such a big chunk of your life? I was thinking about doing that, but honestly I've been burnt like every person that I call, whether it's a mortgage company or just some person I know who's a lender, I feel like I've been burned

Starting point is 02:03:58 and everybody's just looking out for themselves and, you know, there's refi and obviously there's like closing costs and you start your loan or four years. Recast. Recast might cost you a couple hundred bucks. So you're not actually doing a refinance. They're just recalculating the payment

Starting point is 02:04:10 based on the new balance and keeping all the money. other terms the same. And if you want a trusted partner of ours, reach out to Churchill mortgage, and they can walk you through that and tell you if it makes sense for your situation. But I like that plan to give you guys some breathing room and cushion. But either way, we need to put this in an actual high-yield savings account, not in a safe. Yeah, it needs to earn some kind of interest. Yeah, inflation is eating away at that money right now, even if it's physically safe.

Starting point is 02:04:35 I know. So I would put it in a high-yield savings. We have another partner of Fairwinds. You can go to fairwinds.org slash Ramsey. They have a smart bundle just for our fans with a great high-yield savings account. And you can actually have up the 10 savings accounts in there. So what I would do in your shoes, Elle, is have a peaks and valleys fund with your variable income. So on a great month, he makes 10 or 20. Let's park a bunch of that in that peaks and valleys fund so that if he has a $2,000 month, we can pull from that instead of our emergency fund.

Starting point is 02:05:03 I see. Okay. That sounds like a good game plan for sure, especially with the income reduction coming up once I have the baby. Yes. That's going to give you a whole lot of peace instead of going, oh my gosh, our expenses are still the same, but he only made two grand this month. What are we going to do? Go flip some cars real quick. You need some simplicity and peace in your life as this baby enters the world. And so I'm wishing you guys the best on that journey. Thank you so much, you guys. I really appreciate the clarity. I sometimes just need a straight path forward.

Starting point is 02:05:32 Yeah, absolutely. That's what we're here for. That's one thing we got you. That's all I know how to do. Straight, a clear plan, straight path. I love it. Baby steps. Like, man, but the good news is there's a lot of good things happening here. You know, when you don't have a bunch of consumer debt, you have a pile of money, even if it's physically in a safe, that's a while. Usually you hear that from the, you know, the 78-year-old man with tin cans in his backyard, rarely from, you know, a young couple. Yeah. I mean, I would do it.

Starting point is 02:05:59 But, you know, you get that distrust of the banking system and go, ah, but. You got to spread it around. You got to have a little here, a little there, a little. At least it's insured in the bank. Yeah. You know what I mean? That's true. the night takes that safe, you're out. But FDIC insurance, NCUA insured, if you're with a credit

Starting point is 02:06:15 union like Fairwinds, go check it out. Remember, there's ultimately only one way to financial peace, folks. That's to walk daily with the Prince of Peace, Christ Jesus.

The Ramsey Show - The Right Financial Decision Starts With Understanding the Problem

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