The Ramsey Show - This Is Why You Don’t Let Fear Drive Your Financial Decisions

Episode Date: March 18, 2024

💵 Sign-up for EveryDollar today - The simplest way to budget for your life! George Kamel & Ken Coleman answer your questions and discuss: "How do I best set up my debt snowball?" "How should we use money gifted to us?" "Can we afford to go on a vacation?" "Are we buying too much house?" "Should we be intense with our down payment savings?" Support Our Sponsors: Christian Healthcare Ministries Zander Insurance BetterHelp Next Steps 📞 Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET or click here! 🏦 Take Your 3-Minute Money Assessment - Get a personalized money plan! 🏠 Find a Ramsey Trusted Real Estate Agent 📊 Dave Ramsey's personal playbook on investing and real estate. Listen to more from Ramsey Network 🎙️ The Ramsey Show   🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show 💸 The Ramsey Show Highlights 💰 George Kamel 💼 The Ken Coleman Show 📈 EntreLeadership Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

🎵 Live from the headquarters of Ramsey Solutions, this is The Ramsey Show, where we help you win in your life. We want you to win with your money. We want you to win in your work. We want you to win in your relationships. And so we take your questions. I'm Ken Coleman. George Campbell joins me this hour.

The phone number to jump in is 888-825-5225. That's 888-825-5225. George and I always have fun together. There's a, I don't know what you call this, the comment, Hinterlands, or they call us the root beer float. Yeah. And you have self-designated as the root beer and so that leaves the vanilla ice cream for me we'll see how it goes today but we

do enjoy being with you we enjoy having fun while giving you advice so you're ready to go i'm excited all right jonathan starts us off in pensacola florida jonathan how can we help hey gentlemen thanks for having me on you bet what. What's going on? I had a quick question. I'm trying to consolidate my snowball for paying off my debt, and I wanted to know how to properly break it up. So I have a student loan, a credit card loan, and then I have a medical debt. But the medical debt is going to the same collection group. It's just they have it in two different accounts. And I wanted to know on my snowball, do I separate that debt into two different accounts?

Because one is $3,000, one's a little over $10,000. And obviously the $3,000 would be at the bottom. Like it would be the first one I'm trying to pay off. Yes, and they have different payments? They're to the same people. They're two different accounts. Okay, with different payments. So one has a $200 payment, one has a $500 payment?

Yeah, basically. Okay, then I would keep them separate because the key with the debt snowball is that you keep them separate on purpose. You said the word consolidate, which is meaning to bring together. I want you to keep them separate so that when you free up a payment, you roll that next payment into the next debt and you feel the momentum faster. That's the psychological win of the debt snowball. So if you just laid out the balances, smallest to largest, regardless of the payment, which one would come first?

What's the smallest balance? The $3,000 one. Perfect. Followed by one of the credit, which one would come first? What's the smallest balance? The $3,000 one. Perfect. Followed by one of the credit cards, I assume. Are these multiple cards? No, it's just one. It's a little over $6,000. Okay.

Followed by your $10,000 medical, followed by a student loan? Yes. Nailed it. Okay, so that's the order you want to attack these. Make minimum payments on all of the debts except for that smallest medical debt and throw as much as you can extra to that debt until it's knocked out. How quickly can you knock out that first debt? Oof.

Man, I mean, I could have it done by the end of the year for sure. End of the year? $3,000 is going to take you all year long? What are you making? Maybe not. Annually, I bring in a little over $48,000 a year after taxes. Okay. What are you doing for work? I'm a pastor. All right. Well, can you do things on the side, like officiate weddings or funerals and get some honorariums for that? I do some things on the side already. What I bring from pastoring is a little over $38,000. There's another $5,000 I do

in cleaning work that I do. And I do hospitality events as well. All those side hustles are going to help you create more margin. That's what you need right now. Because if you don't have an extra 500 bucks or a thousand bucks to throw at this debt, then something is wrong with your expenses and your income. So that's your next goal is to free up as much as you can to throw at those debts. And we'll help you out. I'm going to give you one year of every dollar premium so that you can lay out your debt snowball, track every expense, track the transaction, connect your bank account, and feel the momentum of this snowball.

Oh, thanks. I appreciate it. Thank you. Absolutely. Thanks for calling in. Yeah, there you go. You know, you were starting to get a little agitated there, but you pulled it back. I thought maybe you're going to challenge the pastor with some type of parable, maybe

a little biblical challenge. Oh, I should have done that. Because I think he can get there. But he can out-pastor me. He knows a lot more verses than I do off the top of his head. I know. I thought you were going there. You didn't.

But that's okay. It's risky. It's the first call. We're getting, we're stretching still. That's true. You know, we're only one call in. You don't want to break out Proverbs 22, 7 too early. No, you don't.

All right, let's go to Palmer next in Raleigh, North Carolina. Palmer, how can we help? Hey, my question is basically, should my wife and I take money out of our retirement account to pay off our house? Are you of age, good sir? Yeah, I'm 62 and my wife is 61. Okay, and what's in the nest egg? We've got about 650 in the nest egg and there's about 82 left on the house. Are you working now? Yes. Yeah. We bring in probably about 130,000 between the two of us a year. And how long would it take you to pay off the house from today to what would be the payoff if you just kept paying it or got aggressive towards it?

What's the quickest you could pay it off, the 82? Well, the normal payments right now would be another 10 years. Yeah, but that's not... But if you put extra, because I'm guessing you guys have some extra margin? To be honest with you, I have no idea. I don't... I think your next homework assignment is to make a budget with your wife

and go, how much money do we have if we follow this plan to put towards the mortgage principle on top of our normal payment? Yeah, could you... Like, let's just throw some numbers out just for the heck of it, not holding you to it, okay? Could you throw $1,500, excuse me, could you throw $1,500 a

month towards that? Extra. Rob, that might stretch it a little bit. Yeah, we probably could. And what's your normal mortgage payment? $970. So think about that. If you could double or triple that payment, it's going to fly. It's not going to take 10 years. I'm trying to get him to the two to three year. Yeah, if you can pay this off in two to three years while you're still working, I would rather you do that than rob the nest egg too soon. Because $650 is a wonderful start, but that will deplete it by almost $100,000.

And what's your house worth? Probably about $250,000. Yeah. And do you guys see yourself staying there long-term? Well, we'll see. We'll see what God has for us in the future. Exactly. We're not too sure.

So the reason I'm asking that is based on your responses to that, we don't know that this is your long-term play. I hate to say only. I know $82,000 is real money, but you make good money, and I think I would rather leave that money in retirement and let that keep building. I would not pull a big chunk out of it. I'd let that keep building, pay off the house. You might end up selling it down the road anyway.

I just would leave that retirement account completely alone. George, you agree? Yeah. I mean, if you could throw two, 2,500 bucks at this mortgage, it's gone in under three years while you're still working. Okay. Without robbing the nest egg. Because I want this nest egg to continue growing for you. And history shows us if you just leave it alone, it will double about every seven years. Right. And so I want you guys to have a great retirement instead of just scrimping by. I agree. If you had five million in there, I'd say go for it. Right. But it's just not enough. Right. The juice may

not be worth the squeeze, as my friend Ken would say. I love it, George. I love when you borrow some of my phrases that aren't really mine. I try to give you credit. I'll take it. I'll take it as much as I can get. Juice-related quotes. That's your sweet spot. Thank you. Thank you very much. All right. I'll tell you what. We've got to step away for just a couple of minutes, but we're not going anywhere and you shouldn't either. He's George Campbell. I'm Ken Coleman, and this is The Ramsey

Show. Hey, when you go against what society thinks is, quote, normal, like avoiding debt, for example, it might seem weird at first, and that is totally okay. We want you to be weird if that means doing things intentionally, including how you spend your health care dollars. And one way to be intentional is with Christian health care ministries. CHM isn't health insurance. They're a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of healthcare costs without sacrificing their freedom. Find out more and join at chministries.org slash budget. That's chministries.org slash budget. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. The phone number for you That's chministries.org slash budget.

Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. The phone number for you, because it is your show, we're here to talk with you about your life. That phone number is 888-825-5225, 888-825-5225. So I'm looking at my hands here. We've got a new event. Dave Ramsey's Investing Essentials. Are you a part of that? I am. You are? I thought you were. I don't see your name on here.

Well, you know, Dave gets all the love these days. Well, yeah. So from what I understand, this is Dave sharing his personal playbook on investing. Something people have been asking for for a long time. The nuts and bolts we talk a lot about on the show, but this is a deep dive. Yes. So, of course, we'll cover the basics. We'll talk about 401ks and mutual funds, but we're also going to be talking about the way Dave has personally invested to build his wealth, including real estate investing. That's been a hot topic on the show. Dave's going to unpack the right way to do it, even in this economy. And I'll be joining him to talk about some of the investing trends and traps out there, how to maximize some of your retirement options, especially for those who are self-employed.

We talk about this on the show. You have options too. So we just want to lay it all out there, and I hope it gives people some confidence that they're building wealth the right way. And you don't even have to put on your church clothes. You don't have to. Your work clothes, you can watch it in the sweatpants at home. It's a two-night virtual event. May 21 and 22 are the dates. May 21, May 22. And you're going to learn a lot that George just shared with you.

Tickets start at just $1.99. And you can sign up, get your ticket today at RamseySolutions.com slash events. RamseySolutions.com slash events. And you want to click on Dave Ramsey's Investing Essentials. You can watch it right from the comfort of your home. That's always fun. So check that. Looking forward to it. All right, let's go to Los Angeles, California, where Charles joins us.

Charles, how can we help? Hey, how are you guys? We're having a blast. What's going on? Great. So my wife and I are on Baby Step 3B, and our question is should we use some of our money that we have saved up for a down payment to start a business?

What kind of business? Yeah, so the business consists in creating an app. We have been working with some developers, and it will cost us $20,000, in which we have the option to pay monthly for 12 months, which is $1,667 a month. So we can't cash flow these payments without touching our savings, but we know that eventually we would have to pay for marketing, lawyers, et cetera. So is it okay to use some of our down payment for our business?

Well, I don't think you've given us enough facts for me to say. I'd want to know, okay, I get the $20,000 is for the actual development of the app. Does that include testing as well, or is it just they're going to give you an app and then you start messing with it from there? No, they will do all the testing and make sure everything is you know on point okay and then what are your expenses let's just let's fast forward twenty thousand dollars later out of your house savings fund and let's say we got an app it's been tested debugged it's actually working but now we actually have to get people to use it what's that going to cost you?

Yeah, I couldn't tell you yet. Obviously not at that point. Well, but so there's my answer. You're not ready. Well, the biggest question is, will this even ROI? Would you be okay if you lit $20,000 on fire and it delayed your house dreams by a year or two? He doesn't know. If we play it out, if you play out a worst-case scenario,

if this is a total failure, you build an app, I'm just playing it out to get you to a decision here. And so if this did not ROI, you just blew $20,000, now you're behind on your house dream, is that okay with you? I feel like that would be okay. Currently, we have $60,000 for a down payment. Okay. I'm going to be a little... These are $20,000. We don't even have to touch those $60,000 at the moment. Yeah, but I appreciate George's question. I'm going to be a little bit more

strict on this. The fact that you can't tell me what the next stage of the business looks like, I'm not knocking on you. I'm not trying to be unkind. That's horrible. I wouldn't burn $20,000 and be okay with it under any circumstance. So I appreciate what George is asking. I get it. But I'm telling you, no, you don't even know what the next stage of the business looks like. You shouldn't spend $20,000 on any business idea until you have gotten a whole lot of answers and you can sit there and say with intelligence in less than 30 seconds or less, here's what my risk factor is, and it's well worth the risk. But you don't have enough information

to even answer George's question. So for that reason, George, what am I? You're out. I'm out. You just got shark tanked. You're not ready. You're not ready. Well, think about it this way, Charles.

The safer bet's the house, George. You put $20,000 into the house, that's a guaranteed return in the form of guaranteed equity. Ding, ding, ding. You put $20,000 into an app, and we've seen it happen too many times. People get excited about this business idea.

They pay this company to produce it, and all of a sudden it just sits there because they didn't think about what's next. How are we going to market it? How are we going to monetize it? Are we going to charge $20? Okay, well, Apple's going to take 30% off the top. Are we going to do it free with a freemium model

where you can buy things within the app? These are the steps you got to think about when it comes to this business. What is the app? I'm just curious. Okay. So it's a app is for a dog and daycare boarding. So it wouldn't be for the US. It would be for the country my wife and I were born and raised at. And we're just doing some Google research. Roughly 50% of the population have at least one dog in the household. Okay, so this would be you live in the U.S. You're going to try to create an international app where that's just for one country? Yeah, so we have dual citizenship.

So it would be easy for us to just go there and start developing there. And so the app would allow dog owners to use your app and get daycare services when they're looking for some. Right, yeah. We've done some research. There's no app like that in that country.

Well, there might be a reason. Right? There might be a good reason. There might be a bad reason. And so we just want you to be super careful with this cash because you've worked so hard. So I'll just reiterate, I would tell you to stay in the house savings business and put a really good down payment on for all the reasons George gave. He's absolutely right. And I would tell you that you also need to do way more research. And in the time it takes you to do that research and really figure out, is this a good business idea in this location? You could

be saving up the additional 20 grand. But even then I wouldn't invest it unless I felt like the probability of success was much higher than just, well, let's give it a rip. That's never a good idea. It needs to be, we've done market research. We know there's a need for this. We have a wait list of 20,000 people who want access to it. That's where I get excited and go, all right, this has some legs on it. So maybe start small. Maybe build a website where it's very archaic and primal, and you go there and you click a few links, but that's going to cost you $100 versus $20,000. Oh, I like that, George.

So I think there's better ways to go about this before you go drop that kind of money. So I don't want to squash your dreams. This could be a brilliant idea, but I want you to do it in a way that doesn't derail your other financial goals. That's right. I appreciate that. Can I ask a real quick follow-up question? Yeah, go. Yeah. So since Mark and I are self-employed, should we both open a Roth IRA and max them out doing this process? Well, if you're in Baby Step 3B, many choose to invest 15%. And so 15% gets you two maxed out Roth IRAs, that's great.

But because you have multiple goals happening right now with the home down payment savings, some people choose to invest less than 15%. Some choose to go zero or up to a match. So for you guys, don't go above 15%. Okay. And we're also putting $200 in S&P 500. So should we stop doing that? In a brokerage account outside of retirement?

Yeah. I would pause on that and stick to your tax-advantaged accounts first in retirement. Later on down the road, then we can start looking at those brokerage and bridge accounts. Gotcha, gotcha. Good question, Charles. And hey, man, we're for you. We really are. We just want you

to be really really smart really really slow slow and smart don't get a lot of clicks on tiktok and instagram when it comes to advice for businesses they just don't because you know why nobody gets excited about slow and smart well let me tell you what slow and smart leads to george wealth rich people like slow and smart they're not impulsive wealth. Rich people like slow and smart. They're not impulsive. Because they've done it over and over again. People that are impatient, wannabes, they like the fast. Fast and dumb

leads to broke. Fast and dumb. Woohoo! I love it. But this TikTok guy said, and he's got 9 million views. Yeah, well, he's broke. Living in his parents' basement. This is the Ramsey Show. These days, it's not if your identity gets stolen, it's when. And the only ID theft protection plan I have ever recommended is from Zander Insurance. It helps real people with real-life situations.

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Welcome back to The Ramsey Show, where we help you win with your money, in your work, and in your relationships. I'm Ken Coleman. George Campbell joins me. We're so excited that you're with us. On the debt-free stage out there are Lucas and Alexis. Welcome. Thank you.

How are you guys doing doing we're doing great you're doing good okay good good good and that tells me you're here to do a debt-free scream is this true this is true this is true okay great where you guys from we're from Clarksville Tennessee okay not far away it's right the road okay very nice traffic was good this morning I hope wasn't too bad okay nice nice nice all right let's get the. How much debt did you pay off? We paid off $81,188. $81,188? Is that what I heard?

$81,188, correct. Oh, $188. Excuse me. George, I don't know what's going on with my voice here. We'll get you there. Yeah, I took a week off for spring break, and it's like my vocal cords are gone. I don't know what's going on. And how long did that take?

It took 14 months. 14 months. Okay, and what was your range of income during that time range of income was 72 000 all the way up to about 86 000 okay great what do you guys do for a living i'm military okay i stay home with the children yay love that that's awesome and uh what branch of military are you army okay great thank you for your service thank you for your support yeah absolutely all right so uh take us to 14 months ago what happened that made you guys decide to get on this journey well it was about nine months before we started that our first born layla over there she was born and she just turned two the other day uh well we transitioned to one income and you know we were

doing okay but we weren't really just weren't saving enough that we wanted to one income and, you know, we were doing okay, but we weren't really just saving enough that we wanted to. We weren't investing as much as we wanted to. We knew that we wanted to optimize things in one way or another. And so we found the Ramsey show and I started listening to it on my commute to work and I brought it to Alexis here and I said, Hey, I think we can maybe pay our debt off in a year, maybe a little bit more that's how it worked out but she took it and she did a budget for us and she said wow I

think I think we could do this and so that's exactly what we did and we just kind of stepped it in gear from there and then just recently we had Claire here she's three months old and so fun so so what I understand here this was there wasn't a lot of pushback at all, if any, from Alexis. In fact, she probably made the idea a reality, sounds like. That's correct. Wow. What kind of debt was it? It was student loans. It was a personal loan. It was a car loan, a little bit of credit card, and some medical debt, a little bit of everything. Yeah, you had a nice little buffet little potpourri if you will cornucopia that's even better so were you guys just normal like

how long you've been married now almost three years and you'd never been debt free you got married had some debt kept some debt accrued some debt and then there was this wake-up call when you go down to one income we were like all right things are tight this is not as fun as i thought it would be even with the blessing of children and so you got your butts in gear and just 14 months into this thing it's gone now and you got your income back in your life what's next for you guys well i'm just really excited to start uh building that emergency fund up eventually start investing and then saving for our girls college and then yeah taking it from there so and you guys i mean you look very young can you tell us 27 wow i'm 25 25 and 27 and you got this stuff out of your life and i love that there was no excuses made you didn't sit and wallow in pity and go well this is life this is

the american way collect our payments someone will forgive the student loans at some point these credit card companies at least i'm getting my two percent you guys actually woke up to this was there a a tool a resource something that gave you that new knowledge well the podcast gave us a lot of inspiration and uh specifically the debt-free screams uh we always listened to it when we traveled and when we just took simple trips through the city and everything and we drew a lot of inspiration from other people and that's exactly why we wanted to come here today and do our debt-free scream. Yeah. Talk about the community of people that you had with you.

Oh, yeah. So my parents are here with us. They were some of our biggest cheerleaders. And then I've got to shout out my grandparents. They were doing the Ramsey plan before the Ramsey plan was cool. Yeah. That's amazing. So we drew a lot of inspiration from them as well.

Just common sense, debt-free living. That's correct. Yeah. That's amazing. We drew a lot of inspiration from them as well. Just common sense, debt-free living. That's correct. Oh, that's incredible. So you got some other young couples. You got middle-aged couples. Maybe you got some older couples that are listening right now. Yes, we do. What would you tell them?

We have some good friends, Adam and Emily Fisher. They're actually going through the plan right now. Oh, good. Yeah, so they kept us in it, and we're keeping it with them, and we're staying the path together. Yeah. Make the budget and stick to it. So you're, so for you, it's budget, budget, budget. That's the key. All right. Anything else, Lucas? What's the key? Budget's big. I think, uh, consistency is also a big thing. You know, life happens and you got to replace the tires and the car breaks down, but you can't let it take you too, too far

off the path. You got to get right back on and get back into it. Well, I know you've inspired a whole new set of people out there, so you're paying this forward, especially for those service members out there. I mean, the difference that it makes when you're debt-free and you're making the sacrifice, but you're not worried about the finances at home, that makes all the difference. It really does.

That's huge. I love it. All right. So are we ready? Are we going to get the littles in there? Can we get the kiddos up here? I think we can. It looks like, is it Claire the youngest?

Yeah. She in a slumber right now? She's out cold. She's about to wake up from the scream anyways. So we'll see. And the two-year-old's meandering somewhere around the lobby. There she goes with the parents. Okay, good.

We got the kiddos. All the support. So we got Layla, who's two, and Claire is a newborn. I hope you're watching on YouTube, America, because this might be the cutest family you'll see today. Super, super cute. Okay. All right. Here we go. Let's run it down. We got Lucas and Alexis, along with Claire and Layla. They're from Clarksville, Tennessee, and they paid off $81,188 over 14 months making $72,000 up to $86,000. Lucas and Alexis

take it away. Let's hear your debt-free scream. 3, 2, 1 We're debt-free! There it is. And the babies aren't crying. The babies survived it. And we've got a special gift for you guys as well we forgot to mention two every dollar gift cards good for a

one-year membership so you guys can use those every dollar memberships or you can pay them forward to someone else to get them on the journey but uh you said the key is budgeting and so you will enjoy that uh for sure as you continue your financial journey yeah that every dollar premium uh because a lot of bells and whistles and makes life a lot easier. 100%. That is your gift, and you get to give one away to somebody. I like that idea. I like the two.

Maybe you give both away if they already have it, but, you know. That is true. Or use it for yourself. There's no judgment here. No judgment at all. It's free. It's Dave's stuff. You and I love to give away Dave's stuff for free.

It costs us nothing, and it makes Ken look good. That's right. We love it. It's like a bumper. You and I love to give away Dave's stuff for free. It costs us nothing and it makes Ken look good. That's right. We love it. It's like a bumper sticker. I like that. You know, it's interesting, George, when we, because this is really cool. We've got a 27 and a 25-year-old. And I think it's important to kind of, we've got new people that are joining the show all the time.

So maybe this is the first debt-free screen that some people have ever heard or seen. Yeah. I mean, just set the table right now. Okay. So let's say they're making the 86 or maybe somewhere between the 72 and 86. Now they're debt-free. And so now they begin the process of whether it's baby step three, then 3B, you know, and then they start that 15%. I want you to paint a picture to what wealth looks like for this young couple at their

age. He's 25. Let's say they get through three in the next year and they begin investing it. Let's say he's 26. Well, from 26 to let's say 62, that's fair, right? Sure. And in military, he'll probably retire early with some beautiful benefits there. But let's just take 86,000 and take 15% of that. Well, that's 12,900. And so every month they could invest $1,075. And let's say they start from zero. That 1,075 every single month with an average return of about 10%, which is what we've seen, is $4.5 million at 62 years old. Drop it down to 8%. All right. Let's go down to 8%.

Just for the cynics. More conservative. $2.7 million. Okay. I'd still take that. And conservative, $2.7 million. Okay. I'd still take that. And that's outside of any other investing they do. That's saying he never gets a raise. That doesn't include his military retirement.

So this is just the process as we teach it. And you look at doing it that young, it's really huge. And this is great, too, because this is a young couple that had, again, normal situations, all different types of debt, $81,000, and they knocked it out really quick. That's really dual. I mean, $81,000, if you just look at that and you go, that's a lot of money to pay off for a young couple. They did it in 14 months. While cash flowing some things, we didn't get into that. Yeah.

And with a stay-at-home spouse. That's huge. So they went from two incomes to one. So we're not pitching get-rich-stuff here, quick stuff. We're not pitching this unbelievably impossible thing that only a few fortunate souls accomplish. Yeah, there was no trust funds, no lottery winners here, just hard work and sacrifice. It's doable, and that's why I love this story. So, good stuff.

All right, we're going to go out and celebrate with Lucas, Alexis, Layla, and Claire. And, George, don't kiss the babies. I stay away. Okay? That's a little creepy these days. Don't do that. But we'll be back right after that with more of your calls. This is The Ramsey Show.

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Take off the costumes and take off the mask with BetterHelp. Visit betterhelp.com slash deloney to get 10% off your first month. That's betterhelp.com slash Deloney to get 10% off your first month. That's BetterHelp.com slash Deloney. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. The phone number for you is 888-825-5225. Let's go to Kalamazoo, Michigan, and that's where we join David.

David, how can we help? Hey, guys. Thanks for taking my call. I'm looking for your advice and guidance on something that feels like a no-win scenario. I'm unfortunately in the business transaction of a divorce with my wife and determining an equitable division of the marital assets. And one of the bigger items in this division is my retirement account. I have about $140,000 more in my account than she does, and I'm looking at what seem like two options that are available in the process. One is that she gets around 50% of that difference, which might be something like $70,000. And another option that she's proposed is that I take on some amount of her

debt to close the gap. She has about thirty five thousand dollars in student loan and another sixty eight hundred on a car that she's taking from the marriage. So she wants me to assume about forty two thousand dollars of her debt and then potentially either not touch the rest of my retirement account or she would only get whatever that remaining difference is, about $28,000. So I'm not sure if there are other options, but I guess I'm wondering what your thoughts are on the two options and which is the lesser of two evils. Well, I'm sorry to hear what you're going through. That is not fun, even at a transactional level.

Are you guys working with mediation? Is this court-ordered? What's been the judge's side? We're just starting in the process, so we both have attorneys. We're hoping to work things out on our own to minimize any mediation that might be needed and not go to the court to have it decided. Okay. Well, I mean, financially speaking, it makes more sense for you not to touch the retirement as much as possible. Right. When you look at the future growth of that. And so taking that money away, unplugging that growth would have a lot of zeros on the end as you fast forward. And so out of the two scenarios you offered up, I would rather you take on, do you have the money to pay off the debt? No, I will not have enough money to pay that off.

What are the other assets here? Did you guys have a home together? We do have a home. That's not likely to cover the difference that's there either. So you would sell the home and split it 50-50, the proceeds? Okay. What would that amount to? I don't have a number on that yet. We just had our appraisal done, so we're waiting for those numbers to come back. Okay. And do you have any other money in the bank or any other assets? Just the savings that we will split.

It'll come out to probably around $7,000 each for that money. Okay. And do you have any debt? I will have one small loan, but beyond that, I have no other debt. Okay. I still like, if those are the only two options, I still like the second option, where you take on a portion of her debt and maybe leftover from the retirement. Okay. What do you think, Ken? I agree with you. Like you said, this is kind of a no-win. It's a rock and a hard place.

Yeah. How old are you? I'm curious. What's your age? I'm 50. Okay. What's your age? I'm 50. Okay. What's your income? I gross about $104,000 and bring home roughly $63,000. Yeah. Which way were you leaning about?

I'm sorry. Go ahead. Well, I'm just curious. I agree with George in the way he broke it down. It's not really two exciting options at all, but I think his is the best. But I'm just curious, were you leaning that way or another way? I'm trying to stay away from debt as much as I possibly can. And when I run my own numbers, it'll take me about three years at my current investment

to make up that $70,000. But I could also divert all of that investment money into paying off the debt that I may take on from her to get through it quicker and still maintain my retirement at some level. So yeah, I kind of want to protect my retirement, but it's also not that far of a timeframe for me to get back to where it was. Right. But I think if you weigh that, though, versus, okay, let's just say we take on the 70s at the number, to make sure I'm remembering. Approximately, yeah. That's how much would come out of my retirement if we split it.

I know, but I would rather you consider, okay, what would I have to do? What would need to be true in my life to knock the 70 out a lot faster than I think and not touch the retirement? I think it's more doable than you think. Do I think you're going to have to hustle maybe? Do you maybe take on a second job, sell some stuff, some other stuff, do whatever it takes? I just, I don't know. That's where my head's at. And with some quick calculations, David, just to help you grapple with this, that 70,000,

if you just left it there, just that portion alone, just growing at 9% from 50 to 62, that's over 200 grand. There's an opportunity cost. So that's the opportunity cost is you're really, by giving her 70 out of retirement account, you're giving her 200 grand. Yeah. And that's why I want you to minimize how much you take out of retirement. And if at all possible, you avoid it. Yep.

Okay. I mean, David, I love what George just did there, David. To me, that would put a nasty taste in my mouth in what is an already nasty situation. Yes? Right. Exactly. Well, I wouldn't give her $200,000.

Is there any other, like, is there alimony here, any child support, or is this it? This is probably going to be it. We only have one minor child, and we're splitting custody equally, and she makes about the same that I do, so there's really not that difference in income. So not, I mean, we're, again, we're still in the beginning, so we haven't worked through that process, but from what we're being told, there probably won't be anything or it'll be extremely minimal. Good. Okay. I just think, David, that George's advice, I agree. I just think this minimizes the damage from an already damaging situation. And there's just no sense in hurting your retirement potential. I'd leave the 70 in

the retirement and I'd gut it out. Gut it out. There'll be something good that comes out of it. Yeah, absolutely. I mean, it's a tough call, George. Yeah. Because on one hand, I get where he's coming from. He's going, I just want to be done with this. You know, just. Well, and it feels weird to now take on debt that he didn't technically have, even though he did because they were married. So that's a whole nother situation. That's right. So that's why I see it differently just to go, all right, I'll take on this debt.

Even if it was 70K in debt, I'm going to pay that off aggressively and not have to, you know, unplug my retirement at all. I agree. Just the compound interest is the game. And I love the way you set that up. Just the compound interest is the game. And I love the way you set that up. That is the real question to answer. And especially at 50, and he's heading into retirement in the next decade. I'd rather see him have that nest egg intact. Yeah. That's where the spirit of it comes from. But let's see if we can answer Chloe's question really quick.

Chloe, how can we help? We got about a minute and a half. What's your question? Hello. So I recently received a large amount, $300,000, as a gift from a relative. After paying off our debt, we'll be left with about $200,000, and that does not include our mortgage. So my question was, you know, basically the best way to maximize the rest of that money. Well, maximize, that's a loaded word. What's left on the mortgage? So we have about $260,000 left on our mortgage. The reason we are hesitant to put that towards it is because the house that we are currently living in is in a bad area and it needs about $30,000 worth of improvements. So if we were to take the money to complete those improvements and then sell the house we live in, I don't believe we would get

that money back. You're not going to get the money back if you make the improvements? Yes, correct. So basically when we bought this house, it was a flip. It was supposed to be renovated. We paid upfront for extra inspections, the whole nine yards, and the quality of the work that was completed ended up being quite subpar. So we would basically be redoing the renovations that we basically paid for upfront when we bought the house. This is a flip gone wrong. Correct. Yeah. I mean, I would minimize what you put into this, put in what you need to, to sell it and get out of there. And whatever money is remaining, add into the new down payment for the new house.

And that's what I would use that money toward. Okay. So then you wouldn't necessarily put anything in like investments or accounts or anything like that. I mean, you can give, save, spend as long as you're investing 15% of your income if you want to consider that income. If you want to consider part of it giving money and the rest, enjoy some of it and put the rest towards that next goal. But I would definitely not sink it all into this house and then be underwater on it. That's not a good plan either.

Yeah, love that. Well, you've got some good options, Chloe, and I agree with George. So run that out and you're going to be in a much better situation. All right, that does it for the first hour. Thank you to George Campbell, my co-host, and to James Childs, our fearless leader in the booth. This is The Ramsey Show. Live from the headquarters of Ramsey Solutions,

this is The Ramsey Show. It's where we help you win in your life, win with your money, win in your work, and win in your relationships. I'm Ken Coleman. George Campbell joins me this hour, and we're taking your questions. 888-825-5225 is the phone number. questions. 888-825-5225 is the phone number.

That's 888-825-5225. George is our money expert today. I'll weigh in on some of those things, and then I'm your work expert today. So if you think about your income as your greatest wealth building tool, which we've said for decades, then you need to be maximizing your professional growth. And so any questions around your professional growth, jumping into maybe a side hustle, should I try for a promotion in the middle of the baby steps, anything work-related that obviously has an income angle to it, of course I'd be happy to answer those questions as well. So any work-related questions along with the money questions,

and George has got a great take on those as well. So let's get to it as we start this hour. Savannah is up in Houston, Texas. Savannah, how can we help? How are you guys today? We're having a blast. What's going on with you? Good. I'm excited. It's the root-bear-float combo today. There it is. There it is. My husband and I are on baby step four and six, and we've had a lot of life happen to us the last couple months, and so I'm trying to figure out if you guys would go on vacation or cancel the vacation and put it towards the stuff we've got going on. All right. Lay it out for us. What's going on? All right. So you have emergency surgery at the beginning of January, and we actually have all of that covered. I have to have

surgery in May and that's where kind of the contention is coming in. We have a vacation booked at the end of April and we've already paid for it but we can cancel it and get a full refund and so we were I was at the grocery store the other day, and then the car wouldn't start, so then we had to tow to the mechanic, and we just got that bill as well. So my husband looked at me and said that he thinks we should cancel the vacation, and since he's the free spirit spender, it got me thinking a little bit that maybe we should cancel it and get the full refund and use all that towards what we've got going on. How much would that be?

It would be $3,900. That'd go a long way to helping, wouldn't it? Yes. We have his medical bills covered. We'll have my surgery paid for by the time the date rolls around, but we don't have the $200 besides our emergency fund to cover for the car. So what's in the emergency fund? We have $20,000. Okay. So you're saying you would dip into the emergency fund $200 out of $20,000? It would be $2,000 for the truck repairs. Okay.

So it'd dip down to $18,000, you'd replenish that, and you'd be back? Yes. Oh, man. Where's the vacation? It's in Alabama, Gulf Coast. Okay. And this is just the two of you, the kids? Who all is going on this vacation?

Just the two of us. All right. Ah. I mean, I don't see this as a detrimental oh-my-gosh moment. You're not going into debt for the vacation. It's paid for. And truthfully, my worry is that you guys never go on vacation because there's always going to be something in life. There's always going to be a car repair. There's going to be a, we got this medical bill. So I don't want you at this stage

of life. If you're in baby step two, I'd say, absolutely. Let's cancel it. Let's get the refund. But you know, you're, you're dipping into the emergency fund for a good reason. You had an emergency. You weren't expecting this car to need a $2,000 repair. And you'll get right back from the vacation. You'll replenish the emergency fund. You'll be back at it. So from a risk perspective, I'm not worried for you guys. I have no fear.

And from a free, it sounds like he's been spooked by all these expenses coming up, and he's kind of losing some mojo. Yes. by all these expenses coming up, and he's kind of losing some mojo. Yes, and another problem is we may owe on taxes, but that's the only unknown expense that we have out there right now. When are you going to file your tax return? Our accountant is working on it, and so we should probably know within a couple weeks. Okay. But then the 15th of next month is coming pretty quick.

Yeah. Well, once you know that, I mean, if that changes it drastically, if you owe $10,000, this might be a different situation. But if it's something where you guys can cashflow all of this and still enjoy the trip and come back and cashflow the rest of the surgeries and the car repair, and if you need to dip into the emergency for a legitimate emergency, don't feel bad. That's what it's there for. And then replenish it as soon as you can and get back on the horse. But I don't feel bad. That's what it's there for. Mm-hmm. And then replenish it as soon as you can. And get back on the horse. But I don't know

that I'd go ahead and just cancel the trip at this point. That's what I was thinking, because I like experiences. So I would love to still go, but if he's stressed, then he's not going to enjoy it. That was my bigger worry. I was like, if this guy's going to be on the vacation stressed the whole time, that is going to add a little wrench in the plan.

Well, I agree, but I think I would sit down and talk with him. The way George just walked that out with you, you guys need to have the same conversation. Okay, let's look at our reality. Let's find out the tax bill. I think that's the last piece of information. And then at that point, I'd go, all right, now how much do we value this time away? And can we truly appreciate it for what it is and that you guys aren't in a bad spot? You've just gone through a season of pop-ups.

And you're about to go into another season where you're having the surgery. And so I think it's okay to go, you know what, it's been a heck of a year. We need to just go decompress and enjoy some time away together. Okay. And I think there's value in that as well. Okay. Awesome. Well, thank you, guys. I appreciate it. You bet. You know And I think there's value in that as well. Okay. Awesome. Well, thank you guys. I appreciate it. You bet. You know, I get that. I get the concern there, but man, that time away is huge. And a lot of people, as they follow the baby steps, they're out of that baby step two,

three land. It can be hard to enjoy life again because you've been sacrificing. You've been living like no one else, but you got to remember the purpose of that was on the other side, to live like no one else. Yeah, I love that. This is part of it. Life's always going to happen. I agree. Let's go to Nate now in Salt Lake City, Utah.

Nate, how can we help? Hey, guys. Thank you for your time. You bet. What's going on? Hey, my wife and I, we are on Baby Step 2. We've got $20,000 in credit card debt, 50,000 in a home equity loan, and about 100,000 equity in the home. My question is, do we sell the home to pay off our debt? We got into this house

super excited and put basically all our savings, all our money into fixing it up. And now we had a kid, and life's just getting a little hard right now. What do you guys make? We make $90,000 total. Okay. And you've got $70,000 between the credit cards and the home equity loan? Correct. Yep. Okay.

So how aggressively could you pay this off? Could you pay this off in two years? Could you pay $35 on these debts a year and knock it out in two? Not the way things are going right now. What does that mean? I work in sales. Oh, so you've got some slow months?

Yeah, slow months and just inconsistent. Like one month will be nothing, next month will be great. So I can't plan as much as I'd like to. Is she working outside of the home? She is, yes. Okay. And collectively you guys are making 90? Correct.

Okay. I wouldn't go ahead and just sell the house as a shortcut because shortcuts are what got you here. I think we need to look at some behavior change and some career change and try to get that income up. Because if you can knock this out in two or three years, it's not worth selling this house. And I hate that you guys are in the spot where you fell for this trap of the American dream at all costs, including debt to build a dream house that's now a burden instead of a blessing. And you now want to sell. And that breaks my heart. I think your sales job needs to get replaced with a better sales job. I really do. I think that's your first step. I'd like to

give you something that at least, I think, pave a path for you. Let's give you the Get Clear Assessment and my book, From Paycheck to Purpose. Let's throw in the Proximity Principle as well. All of those tools right now need to be employed to get you a better job where we've got consistent income, and then we start to make some real headway. Thanks for the call. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. We're thrilled that you are with us. The phone number to jump in is 888-825-5225. Today's question of the day comes from Brian in Nebraska. A show caller recently mentioned that he received money from his state's lottery fund that was earmarked for scholarships. The host congratulated him on getting those funds.

They did? While I understand that they were happy for him, can you help me understand why we celebrate people who get lottery funds but not those who get credit card points? It seems like the same type of system since both lotteries and credit cards prey on lower income people. Very interesting. So if I'm reading this right, why are we celebrating people who get scholarship money from their state? That's the question. And you're tying it to the fact that it came from the lottery. And then you're also saying that's the same as someone taking out a credit card and piling up purchases and points and using them that way. I don't think it's the same. It isn't.

And the question behind the question is we're always going, hey, don't play the points. The credit card system is disgusting. You don't have to be a part of it. And he's saying, well, hey, you were cheering on a caller who went to school debt-free thanks to these scholarships funded by a gross system. So how is it any different?

It's very different. He didn't sign up for a credit card. He is a resident of a state. And that state has a program which has these funds available. Again, we're playing moral gymnastics here. Sounds like it. So we're going to celebrate anybody who gets a scholarship because they got a scholarship. And it means they don't have to go into debt.

Yes. If now, if I had to play the lottery in order to get a scholarship, I think I would say, now you can see the moral equivalence. Yeah. But again, I mean, listen, this is not moral either. This is just what we believe are sound financial principles and morality is not the issue here. The issue is, what do we think is wise versus what do we think is ridiculously silly and harmful to your finances? So it felt like a gotcha question and there's no gotcha there, but thanks for submitting. Well, I mean, he's right in that both do prey on lower income people. I mean, lower income people disproportionately purchase the most lottery tickets. And so I agree. I'm not happy about any of this. I wish people didn't play the lottery. Do poor people disproportionately take

out credit cards? No, many of them can't even, they won't even get accepted. So that's not true either. Well, the spectrum of people who have credit cards is low to high income. Now, who's benefiting the most from these rewards programs? We know it's the higher income earners, which makes sense. But we also know the Fed did a study, Ken, 15 billion moves from the lower income, uneducated, high to low minority areas every single year. And that part hurts my head. So from a moral perspective, it is disgusting to see how much wealth is being moved through credit card rewards. Yeah.

But I agree. This is a state-funded program for the state that you live in, and you're going to school debt-free. You're not playing the lottery to get there versus the credit card points, which is you have to be a part of the system in order to benefit from the system. Right. All right. Good question, though. Thank you for the question. Good discussion, and one that I still want to grapple with and chew on for a while.

Really? What are you grappling with? Well, I think it's an interesting, I think there's more to dig into here, but I think this particular question has been answered. Yeah. I think it's an interesting thing to look into where all these things coming from, who's funding it, who's benefiting, who's not. Yeah. How much of the actual lottery gate is going to education? Is it a hundred percent?

I got questions as well. I get that. But you're essentially, you're adding a tax for things that we would also, like a cigarette tax. No question. Tax those higher, use that to fund good things. That's right. It's a consumption tax. No question about it. Let's go to David now, who joins us in Atlanta, Georgia. David, how can we help? Hey there, what's going on? I've got a question for you, and I appreciate you taking my call. My wife and I are first-time homebuyers.

We have no debt. Both cars are, well, my car is about as old as I am. We were thinking about putting an offer on a house. I'm just kind of curious if there's a rule of thumb around what kind of percentage around housing should we be following as a rule of thumb. No kids yet, but that's kind of next on our list, and I'm just trying to plan ahead. Great. So how much do you guys have allocated just for a down payment? Yeah, we can put down 20%. We'll probably wind up at like 15 just to try to preserve a little bit of cash.

So 15000 down? 15% down. Oh, 15%. So what's the home value that you guys are looking at? What are the home prices? Yeah. Looking at just north of $5,000. Wow.

What's your household income? About north of $150,000. Great. And what's your average monthly take-home pay? We bring in about $10,000 a150. Great. And what's your average monthly take-home pay? We bring in about $10 a month. Fantastic. So the parameter you're asking for, we do have one in this category, and that would be 25% of after-tax income. So after-tax income, but before other deductions like your health care premiums,

you're investing 15% of your 401k. So if you did the manual math just to take out taxes, that would give you the number, which I assume is maybe even a little more than 10k. Got it. Okay, that makes sense. So you'd be looking at around $2,500 for a payment on a 15-year fixed rate mortgage. So that tells me you might need more down. I'm doing the math for you right here. 75 down, that's 15% out of 500 on a 15-year fix with current rates. It's probably a $4,700 payment, 4,500 bucks, depending on HOA and taxes and all of that. And so you might want to wait and put down,

let's say 150, which gets you closer to 3,600 and so on and so forth. You put 200 down, that would get you to 3,200. And so rates right now are crushing people when it comes to that monthly payment. And so one thing you could do is wait, save up more, and hope that the rates take a dip, and that would allow you to afford the same amount of house, but with a lower payment. That makes total sense. Awesome. That actually answers my whole question, so I appreciate it. All right. Thank you, David.

But based on what you just told us, yes, right now you would be buying too much house, and you might need to look at a townhome or a condo that's in the $300 range and then upgrade later. And that's what my wife and I did. Yeah. And, you know, it's important to point out, just based on everything that I'm reading and seeing, I want to preach patience on the down payment, not patience on the rate. What I mean by that is if you're waiting around going, well, let's see if those rates drop back down a point, two points.

I don't know that that's a wise game of patience. Don't sit on the sidelines. Whenever you're ready financially, go for it. So the patience would be wait until my income is at a place and my savings are in a place that I can get the house that I want. Patience there, yes. But just waiting game to see that the interest rates are going to get back to where they are. I got to tell you, George, I don't see it. We don't know.

Well, the answer is we don't know. That's right. But I don't see it. It's not going to go back down to 2%. It may not in our lifetime. I'd be willing to say. Maybe our grandkids can. Yes, yes. I just think that those crazy rates, that people were getting the high twos and the

threes. I mean, mine's in threes. It's just bananas. It's not happening. And that's where I go, well, following the Ramsey plan, you've got no debt when you're saving up for this down payment. So they're making 150. How much of that can they throw toward a down payment? A large portion. They could throw 50 grand, 60 grand a year at this and have another 100 to 200 grand within a few years. Right. Are you beginning to see the appetite for getting back into the housing market with the American people starting to go, okay, well, it seemed shocking a year ago. Now I'm starting to reconcile with it. I think there is a little bit of that. And as people are sort of forced to move, whether it's for work or family, they're buying houses still. And we know four and

a half million people bought a home last year. So it's happening. But I think a lot of people are in one or two spots. Number one, they're tied to that low interest mortgage and they can't let go of it because if they move, they have to then go get a 6% or 7% or 8% mortgage. The other camp, which is what you're talking about, people can't afford a mortgage payment when it's at 8% versus a 3%. That can double the payment pretty quickly. So people are just sort of staying put and hopefully being patient, saving up that down payment, building a financial foundation. And so I know it's tough out there for future want-to, want to be homeowners, but please don't buy a home before you're ready. Because you'll be calling us back saying, should we sell the home? We bought too

much house. That's right. And remember, renting is not a sin. It's not wasting money. If it's giving you freedom and flexibility to get in a position to where you can buy a house and not be house poor. Pastor Ken preaching. There it is. There it is. We'll take an offering on this commercial break. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me this hour. The phone number is 888-825-5225. Hey, it's that time of year again. You're either thinking about it, scrambling, or maybe you've got indigestion, thinking about your taxes. I tend to get indigestion. I just don't like paying taxes. That's your move.

You've done it yet? You filed your tax return? Oh, yeah. How'd it go? I haven't gotten the numbers yet. Oh, boy. It's in the process. So technically, I've not filed.

That's what you're saying. That's what I was asking. No, my guy David, he's listening. He listens to us, by the way, day behind. Oh, nice. He's one of our tax pros. Wonderful. I say our, not our.

It rhymes with you, but tax pros. Thank you. We go together. Right, right, right, right, right. It's a group effort. Yeah, but he's working on it right now. David, let's go, buddy. I need some money.

Let's see if this tax tip will impress your friend David. All right. You ready for this one? Let's go, buddy. I need some money. Let's see if this tax tip will impress your friend, David. All right. You ready for this one? Let's go. You've got two choices for claiming tax deductions and understanding the difference can save you some big bucks. So you can either take what's called the standard deduction or you can itemize your deductions. Now, both options can lower your tax bill, but which one is best? Well, it depends. So let's take a closer look. Taking the standard deduction, it's the easy option. It's the one that makes sense for the most people mathematically. And so it subtracts a set amount from your taxable income based on your filing status.

So let's say you're single, you make 65 grand. The standard deduction would knock off close to 14 grand. So you would just pay taxes on about 51,000 of that income. So it's like an automatic tax freebie on the front end. Now, itemizing your deductions, of course, takes more work because you need to subtract all of your deductible expenses from that income one by one. Medical expenses, charitable gifts, state sales taxes, all the receipts. And if that adds up to more than that standard deduction, it's worth it to itemize. So it's a simple math equation, but itemizing takes work and it can

make sense for some people. So if you want help with this, you want help making sense of it, you want to file with confidence, go to ramseysolutions.com slash tax. We've got tons of resources there for you, including tax guides. We'll help you choose whether you should go with a pro or file on your own. And we just want to take a little bit of the indigestion out of the tax season this year. Yeah. Yeah. And we do. So it is a great, great resource. Again, RamseySolutions.com slash tax. RamseySolutions.com slash tax. All right, taking your money questions and your work-related questions.

How about some more money in your pocket? All right, we'll help with those calls as well. Are you thinking about launching something this year? Are you thinking about leaving, going somewhere? We'll take any of those questions as well. Let's go to Troy now in Peoria, Illinois. Troy, how can we help? Hey, how are you doing today? Good. How are you, Troy? So I am a senior in high school. And the reason I'm calling is I'm facing a pretty hard decision about college here. So if I stay in state here in Illinois, they have a dumb rule where you have to live on campus for the first year.

And just doing some rough calculation, that over eight semesters is probably going to cost $50,000 to $80,000. I don't know the total yet because we haven't gotten the passport back. But recently I got accepted into the University of Hawaii, and it's my absolute dream school. But I'm not dumb enough to spend 200 grand on undergrad so I've been in contact with the National Guard of Hawaii and just through them paying for some of it they would that total four years would be 30 to 65 grand but the only problem with that is I plan to get my doctorate in physical therapy and that's going to run me 100 grand but with the military it's a six-year contract so I'll be stuck with the cost of living in hawaii unless they can transfer me back to illinois but i run a business here in high

school and i just love working for myself so i also plan to open up my own physical therapy clinic after i get out of grad school because i love the financial freedom it can bring me but that's going to put me another 150 grand in debt minimum. But I've met with a couple private clinic owners, and they all said if I do it right, I should have no problem hitting a million dollars in profit after the first three years open. But the only problem with that is if I fail opening my own clinic, I'm stuck with all that debt while making somewhere between $70,000 to $90,000 a year. But to me, it just feels like I need to get out of Illinois to put myself in the sink or something.

Like, I know nobody. All right, Troy. Troy, I'm having a hard time keeping up with you, buddy. You got the facts down. So what's your question? I just don't know if going to Hawaii is a financially responsible decision when the cost of living is so high, and if I want to open up my own business, that's going to be an extreme amount of money if I could come back to the States to do that.

I just don't know. I want to stay out of debt is my main thing. I get that. Okay, so let's just boil this down. You want to stay out of debt. We're thrilled for that. And we want to walk you through some steps to take, okay? So the thing that you want to do is you want to be a physical therapist and eventually work for yourself. Yes. getting those degrees without going into debt. And it seems like you know the answer to that.

It seems like you're going to have to be really patient, right? It seems like you're going to have to go, okay, what are my options to just go get a four-year degree? What's the cheapest way to get a four-year degree that I can cash flow? Then I've got to go graduate level. Am I still correct? Yes. Okay then. And so when you're asking a question like this, the only thing that people don't like about the answer to this is that it can be done, but it takes time. And so you've got to look at that and go, am I willing to wait as long as it takes? Now wait doesn't mean I'm sitting around doing nothing,

but wait means I'm going to go maybe to community college for the first two years, and then I get my two years done there. And then that allows me to save up money, make some money, and I cash flow the other two years of my undergrad. And then I'm going to have to go work and I have to make money and save up to get in the graduate level program. You know, this is what you have to decide. And so if you really truly do not want to go into debt for school, then you must make that decision and then say, I'm willing to walk the path that matches up with that decision. And you're just throwing all these, well, but, and but, and this, and this, and this, and this.

And it's like, on one hand, you don't want debt, but on the other hand, you feel like, well, it's kind of, you know, I kind of can do it and I can go to the National Guard and blah, blah, blah. No, you just need to decide what's the path that you must walk in order to be debt-free. 100%. But what? Well, my big thing is that, like, I've had a lot of my friends or family members that, you know, don't make past 30. And if I'm working all the time trying to save up the money to go to college, like, what happens if, you know, I tragically in a car accident or something, and I don't get to experience those things I would want to do if my life was to be cut short. Okay. So you're saying—

That's a good question. All right. So what I'm hearing you say is waiting to your late 20s to be able to be in the physical therapy world and enjoy the benefits that come with that, the thing you're worried about is what if you die before that? Yeah.

You can't live life like that. Nobody knows when their time's up. Nobody. But you don't make a bunch of really crazy decisions. Let's play this off. Let's say we do the thing that you want to do and you get into all this debt. What's the total amount of debt you would be in after that long list of things you told us? What would be the total amount of debt? It's between 300 to 400 grand all right george walking through three to four hundred grand i'm going to pass the baton over here three to four hundred grand but he's but he's alive he didn't die early yep and you're making how much low end as a private clinic owner i'm probably000 a year. But you have a lot of

expenses. You now took on debt to start this clinic, and so most of that money goes right back out to the lenders. Yep. So it's more like you make $50,000. But if you do it our way, with more peace, more patience, a little more hard work, a little more sacrifice, you could do this all debt-free and then be making 200 grand and you keep it. You see the difference? Yeah. And so I love your, you know, go, you know, you have this attitude that I think is brilliant. You're really smart. You're doing the homework, but you're also going so far ahead that you're going to get paralyzed by it. And the truth is life is a zigzag, man. My career has been a zigzag. Ken's has been a zigzag. So you can do all the planning you want, but the important part is taking the right next step and taking debt off the table. You do those two things and follow the advice

Ken gave you, you're going to be fine. And it's going to look different than you ever imagined. Yeah. You know, everybody, everybody wants to do whatever it takes, but no one wants to wait as long as it takes, and the waiting is... Brutal. It's excruciating, but it always pays off. Hey, hang on the line. I'm going to send you a copy of my book, Breaking Free from Broke.

There's a whole chapter on student loans in college, and much of it is the wisdom Ken imparted on you, so we'll give you that as our gift. There it is, Breaking Free from Broke. Get it wherever books are sold. George Campbell needs a new pair of shoes. This is The Ramsey Show. Welcome back to The Ramsey Show, America. We're so excited that you're with us. We're here to talk to you about you, specifically your money, your work, and your relationships. 888-825-5225 is the phone number. I'm Ken Coleman.

George Campbell is with me this hour. 888-825-5225. A lot of money questions today, George. But, you know, if anybody's out there, you've got some work-related questions like, hey, how do I get promoted, or should I make a switch, or should I get this degree, Should I not get the degree? Anything related to that professional journey. Well, as we know, it makes more money. Come on. As people

have money problems, a lot of it stems from needing more income. Always. Bigger shovel means you get through the baby steps faster. Yep. And so it's a huge part of it. So give us a call if you want to talk about ways you can do that. How do you build wealth, right? And I'd love to take on some of those questions because it is possible. All right, let's go to Portsmouth, Virginia, my old stomping grounds in the Hampton Roads area, George, is what they call that. Derek is there. Derek, how can we help? Yes, hi.

Thanks for taking my call. Sure. What's going on? So my question is just real brief, I'll get to it. Um, so should I take money out of my 401k to pay off one of my debts? How old are you? So I am 30 years old. 30 years old.

Okay. How much debt do you have? So we are a little less now because my wife and I are going to FPU, and we're in baby step two. Okay. But we're roughly at $64,500. $64,000. What kind of debt is that? What makes up the $ 64,000. What kind of debt is that? What makes up the 64? So we have two credit cards,

which are at a zero interest rate right now. We have Dave's favorite, SoFi. We have a car loan, and we recently replaced our roof, so we had to borrow a little bit of money for that. What's the household income? So just single, one income, me and my wife is their home. So I bring in 90 from my primary job, and I bring in 16 from my side household. Great. Okay, so we've got a solid six-figure income. And back to your question, I'll answer it quickly, and then we'll explain. But do not withdraw money from your 401k to pay off this debt. Okay. You're going to pay a 10% penalty

and also pay income taxes on the amount you withdraw, which means you're essentially borrowing money at 30% interest, 40% interest, which is a bad idea. And you're also unplugging the future growth of that money. So instead, what I'd rather see you do is use this fabulous income you have to start tackling these debts using the debt snowball method. Regardless of the interest rate, even if it's 0%, attack it smallest to largest balance. And the other thing you might consider is selling one or both of these cars. Are you underwater on these cars?

Do you owe more on it than it's worth? So my car, my daily driver is a 04 Nissan Altima, so that's not worth very much. The one I have the loan on, it's kind of a complicated situation.

I made a stupid mistake when I was younger and I co-signed for a vehicle for someone. And naturally, I mean, they've reneged on the payment and they went somewhere, I think that's somewhere in Georgia. So you got stuck with the loan? Yes, sir. Did you roll that negative equity into another loan? I haven't. I probably could roll it into another loan.

So you just have two car loans and one of the cars you don't even have? Just one car loan, yes, but it's on the one I don't have. Got it. Okay, so we can't go sell this car to get out of debt faster. All right. Well, the good news is you make six figures. The bad news is every single ounce beyond your food, utility, shelter, transportation, insurance bills needs to go to paying off this debt aggressively. So the question becomes, how quickly can we pay off the debt? Not where else are we going to rob the money from? And so if you can pay $32,000 a year, it's gone in two years, right? Right. Yes.

So now it becomes, okay, we make $106,000. How do I free up $32,000 a year in order to do that? Well, that looks oddly like $2,600 a month. How do we find that? Well, it may take more income. It may take cutting expenses. And that's where the budget comes into play. And I assume you and your wife are not on a strict monthly budget right now. So we are, yes, sir. We're on, well, we were using the free version of every dollar. Right now we just upgraded the premium. Oh, wonderful. I was going to gift it to you.

And in fact, I will just to keep it going. So hang on the line. We will gift you a year of every dollar premium. That is the key. I wish there was some secret sauce, Ken. I wish there was some secret sauce, Ken. I wish there was a shortcut. But robbing your 401k at 30%, 40% with these penalties and taxes while unplugging the growth is not a shortcut that we want you to take. Because it doesn't address what got you into the situation in the first place. And that's why we say that.

And so we'd rather you walk through the pain of learning, you know, through pain. Like, oh, this was dumb. And by the way, we've all done it. and we've had to pay it and pay it off, and then we learned from that. So appreciate the call. All right, let's go to Bria in Raleigh, North Carolina. Bria, how can we help? Hey, guys.

Thanks for taking my call. Sure. What's up? So I kind of have a three-part question. I'm going to be out of debt at the end of this month, and I'm going to start saving up to buy a house. So I just want to know, like, where I should keep the funds for that, if it's, like, in a high-yield savings account or in mutual funds,

and then how you guys feel about, like, first-time homebuyer, like, programs that they offer. Okay. So let's hit it in three parts. You're debt-free in April, and you're saying you're going to save up for a house after that, but you skipped a crucial step, which is the emergency fund. Well, yes. So I'll be debt-free by the end of March, and then by the end of April, I'll have my three-month emergency fund. So then after that,

I'll start saving up. Wow. You're going to save up three months of expenses in one month? With all the overtime and stuff that I've been working, yeah. Way to go. Good for you. That's great. What's your income? Base, it's 80, but with all the overtime and stuff that I'm making or I'm doing, it'd be closer to like 105. Oh, incredible. Okay. So let's say you're making that 105 and yes, if you're going to plan on buying this house within the next few years, I would park that money in a high-yield savings account. Okay. And I would advise against these first-time homebuyer programs.

They have so many strings attached, so much red tape, so much fine print, all of these restrictions, and you're way better off going with a conventional mortgage with actually some money down. Most of these programs exist to let people who really should not get into a house feel like they can get into a house. And they do it with almost nothing down, zero equity, they're broke, and it causes pain down the road. Now, that's not you. But I also think putting 20% down would be a great goal for you. Even 10% would be okay for a first-time home buyer. And then finding a house that's really affordable is a squishy word, especially in your area, in Raleigh, housing market's pretty crazy.

But if you can find a condo or townhome versus a single-family home in the nicest neighborhood, it's going to put you in a better spot long-term. Wow. So I'm a little intrigued by that statement. You me. You'd rather get the condo? Well, for a first-time homebuyer, are you single, Bria? I think you got it. Yeah, okay. Okay, she's still there. So you're single.

What kind of home are you looking for as a first-time homebuyer? What's the price point? Honestly, I'm kind of flexible. I don't need a big house. I've just been renting since I got out of college, and I would like to like start building equity um but I just kind of like a townhome is fine a single-story house I'm not I don't need like a five-bedroom house sure is the housing market pretty strong in Raleigh yeah surrounding surrounding

areas as well yeah I anyway I don't disagree, George, but based on what she just said, I wonder, you know, be a little bit more patient and maybe get a smaller home. But are you telling me you're paying attention to this more than me? Well, it's a single person. A lot of people think I need a single family. We have townhomes, you know, my first two homes, and it helped us build that equity and get in the game faster. All right. I like it. Okay, good.

All right, so both will work is what I'm hearing you say. So good stuff. Thanks. Good hour, my friend. And thanks to James Childs, our fearless leader. This is The Ramsey Solutions, this is The Ramsey Show. It's where we help you win with your money, in your work, and in your relationships.

I'm Ken Coleman. George Campbell joins me. The phone number is 888-825-5225. 888-825-5225. George is our resident money expert. Today, I'll be your resident work and professional growth expert. So any questions relating to those topics, and they go together so very well, we're here to help. So let's get it started with Heather this hour in Asheville, North Carolina, one of my favorite

places in all of the Southeast, Asheville, North Carolina. Heather, how can we help? Hi, Ken. Hi, George. It's so good to be able to talk to you guys today. I have a money and a parenting question. And so my question is this. My husband and I adopted our son in November. He's 17 years old, and he was with us through foster care prior to that. We found out at his adoption meeting that he's entitled to Social Security. And so we have started receiving social security benefits for him. We would like to be able to put those in an account for him that we would gift him at some point in the future when he's an adult, when he can handle it. We're thinking after college at

some point. So my question is twofold. One, what would be the best investment vehicle for that? I'm not sure if it's an UTMA or something that is under our name and we gift it to him later. And then my second question is, how do we have this conversation with him when it is time to gift this money to him to help him understand the stewardship and just how to handle these finances? Because we're looking at, it's probably going to be about $14,000 in the initial investment and then, you know, whatever, it grows from there. What's on the horizon for him? He will likely go to college.

He's in a hybrid high school associate's degree program right now. And so he intends to go to a four-year university. But that's covered through the state of North Carolina because of how old he was and still being in foster care. So that's a hundred percent covered. As long as he goes to a in-state school, North Carolina. Right. So, and we've had that conversation. So I told him, I said, Hey, if you can get a free in-state degree and you choose to do one that you would pay for, that's stupid. And you're not stupid. So you're not going to do that that's good parenting right there yeah he's bought into the idea of going in state okay good that's huge so we got 14 grand and we want to invest this for his future doesn't need to be used for college is there any other expenses

coming up that he might need this money for like a car for example um He is saving up for a vehicle right now, but I don't, he's, it's tricky. I don't think he needs to get a massive, expensive vehicle. He's saving up right now for something that'll be reasonable for a first-time driver to be driving. Okay. And is he working right now? He does. He works at our local grocery store. Fantastic. So he's got earned income, which means that he can use any of that earned income toward a Roth IRA and start contributing to that, which is really cool. And you mentioned the UTMA, the UGMA, Uniform Gifts to Minors Act, Uniform Transfer to Minors Act. And those can be decent options. It's similar to that custodial IRA and then the other option is a brokerage account if you really want to invest this money you can just put it out there in the

market non-retirement and pay the capital gains taxes on that down the road when you're ready to withdraw it yeah so part of what I'm considering is like do I want it to be something that he wouldn't have access to until he's at retirement age, or is it something that could be a really good step towards a house down payment down the road? So I'm really between, should it be in just a regular brokerage? Should it be retirement? Yeah. I mean, knowing that he's going to have these goals coming up, I think he's going to be just fine for retirement the way you're raising him. If he starts to invest when he's working, he's going to have so much in retirement versus having money liquid now to cover future goals like housing, which in the Asheville area is insane. And so when you start to look at that, I go, I'd probably want

to keep that more liquid and not tied up in retirement. And that might even mean a high savings account because who knows what expenses he'll have in the next five years as he goes through college and needs a deposit for the apartment and all kinds of moving expenses. And so keeping it liquid in a high yield savings right now with the savings rates that are out there is not a bad move until you at least know what you want to do with the money next. And so that's a good spot for it. Otherwise, the UTMA, the UGMA or the brokerage would probably be your best bet, but he can contribute up to his earned income. So if he makes $2,000, he can contribute $2,000 to a Roth IRA. Okay.

And then would you do the UTMA to help with taxes, or should we stay in our name? Because that's part of my concern is, like, what if he does go off the rails? What if something happens i know i've heard dave mentioned that you know he he has things so that if his kids were not living a proper way he they would not have access to a ton of money um yeah i mean if that if that's a legitimate concern for you as a parent um you can keep it more locked away with that UTMA and UGMA account to have more say over when the full control happens. Okay. So if that's a real concern, and Ken, you can speak to this as someone who has older kids, but if this is not a concern, this is more of a hypothetical, I would leave it a little more liquid. Yeah, I would too. I want to see how he progresses, right? Does he know about this money?

He doesn't. Okay. He found out that it might exist at our pre-adoption meeting and he was like, oh, oh. And we were like, no, you don't need thousands of dollars at 17 years old. Which is a lot to him at this juncture, but in the grand scheme of life, this is not a million dollars sitting out there that is like, he's going to go retire from this. I think it's about the conversations you need to be having about compound interest. Like, hey, let me just show you. If you were to do this, and George gets his fancy calculator out and you start walking him through, if you were just teaching him some basic things that these kids aren't taught, that they don't even think about. And then let's see how he does as he begins to get a job and he's saving money, he's doing it now. It sounds like, how does he treat

money? Start to pay attention to those patterns. And then you do your best to instruct. But I tell my wife this a lot lately. There's just some things your kids are going to have to learn that life is going to have to teach them. I told them, but I can't teach them and life is going to teach them. And then I'm there to go, hey, I am so sorry. And here's what we can do and here's what you learned from this. So I think some of this stuff, I think what you're doing is very, very wise. And I agree with George. But it's about conversation.

And this is a great situation, by the way. I really honor you. I mean, this is when America is at its best and citizens around the world. Heather, I applaud you and your family for fostering to adopt and adopting. This is a huge, huge endeavor that you've taken on. And boy, he's, he's a blessed young man. And I didn't want to finish this call without telling you guys that what you've done here is very honorable. And I bless you for it, and I'm proud of you and excited for his future. Absolutely. Thank you.

Yeah, absolutely. As a little graduation gift, Heather, I'm going to send him a copy of my book, Breaking Free from Broke. It'll help him avoid so many of the traps that he's about to encounter as you set foot into adulthood. And can I add something to that, George? Please. Let's also give the young man the student version of the Get Clear Career Assessment. Oh, love that. Yeah, we have a high school version of that.

And let's give that to him as well as the proximity principle, which is all about making connections to turn connections into opportunities. That's the graduation gift from George and I. I love it. Yeah. Thanks again, Heather, for the call. All right, quick break. We'll be right back. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell is with me. The phone number to jump in to talk about your life, specifically your money, your work, and your relationships. That number is 888-825-5225. Well, George, it's going to be here before we know it.

May 10 and 11, the big money makeover weekend destination event right here at our Ramsey headquarters in the Nashville, Tennessee area. One weekend crash course on everything we teach about money, all the baby steps, brand new content from all of the personalities, plus you and Rachel will be doing your hit podcast, the Smart Money Happy Hour. Have you picked a guest for that, or is it just going to be the two of you? I'm not sure we decided to go guest forward with that. Is that a personal question, Ken? I was just curious. That'll be fun, and all of us will be doing Q&As throughout the weekend

as well as our talk. So that's Dave Ramsey, Rachel Cruz, George Campbell, Jade Warshaw, me, and Dr. John Deloney. Don't wait. Get those tickets now. Platinum Plus tickets are already sold out, but we still have some Platinum and VIP tickets if you jump on them now. Ramseysolutions.com slash events.

That's Ramseysolutions.com slash events. That's ramsaysolutions.com slash events. This is a destination event. So get it in the budget, plan the travel, the lodging, wherever you live. It's worth hanging out with us in Nashville for a weekend. It's a great time. Yep. Going to be a lot of fun. All right, let's go to the Atlanta, Georgia area there where Aiden is joining us.

Aiden, how can we help? Hey, guys. Pleasure to talk to you. Long time listener, just first time caller? Hey, guys. Pleasure to talk to you. Long-time listener, just first-time caller. Oh, fun. Thanks for calling. I just called because I've been working a sales job for about a year now, about a year out of college. And it's not exactly what I thought it would be.

I definitely don't see myself making a career out of it. But I'm not really sure where to go. I have an English degree and I have a passion for cars, but I don't know how to make the two collide. Um, and I was looking for just some advice. Why the English degree? Take us back.

Um, well, I really like talking to people. I like getting to know them. And, um, that's kind of why I got into sales. Um, but I'm also good at you know just communicating either verbally or just across different mediums whether so essentially if we take if we go back it was like this is an easy degree for me because i'm really good at it i can enjoy college and then pretty much just you know crush this degree because it's easy. It was all talent. Yeah, pretty much. Yeah. And what kind of sales job are you in now? It's pretty much, you know, person-to-person sales. Not to get too specific

with it, but it's, you know, cold calling. It's going to meet with people at their houses or homes or houses or offices, you know, direct to consumer. What is the issue, or let me say this a different way, what was the part that you go, eh, it's not what I thought it was going to be? Give me that. Well, I just, I don't like the sales aspect of it. I think I like meeting people and I like meeting with, you know, obviously the, just the people I work with are very successful and, um, they can afford what I do, but I just, um, uh, I feel, I feel bad just being a sales guy and I want to be a little more than that.

Yeah. Tell me, um, without getting into job title, I don't want you to overthink this answer. I want you to answer this almost like an elementary school student. Okay. How simple I want you to overthink this answer. I want you to answer this almost like an elementary school student. Okay. How simple I want this to be. Okay. I want you to describe what you think would be an amazing day right now. Forget job title. Tell me what you would be doing during the day. You're working, you're doing something and it feels like there's a heavy people quotient. Is that fair? Yeah, I would definitely, but I would have to say that I would be meeting all different types of people, helping them out with their problems. Okay. What problems?

Do any problems jump to you, like just kind of right off the top of your head? If I was helping these people, Ken, all day long, and I was helping with this problem, that'd be a great day. What's the problem? Well, I love working with cars. I think I love tinkering with them. And I like, you know, my brother's coming to me with problems with their cars and I try to figure them out. And even my coworkers. Love it. Love it. I think, yeah, I think something along that line of helping people get to work every day. Yeah. Well, I think you've got a really huge servant heart.

Like, you love helping to serve. It's something that just gives you a lot of joy. Is that true? Yeah, and actually, I took your survey and it said that. Well, wait a second. How about giving me the—first of all, it's not a survey. Don't bury that. It's an assessment.

Hello. Do you have your Get Clear Assessment results with you? Not exactly right in front of me. All right. Okay, so tell me what you can remember from the purpose statement. And it said that you were your missional driver, which is what motivates you. That's the last part of the assessment that fills in the purpose statement for everybody that's trying to catch up at home and listening. It tells us what are the results that motivate us. And Aiden, you're motivated by serving people. That's what came out in your results.

Right. It was leadership, servitude, and something else. And my main driver is being achievement-oriented, not for the recognition, but just for the self-fulfillment. Okay. So I think you need to be thinking about the car industry, and I'm saying industry very loosely. I mean, I think there's multiple ladders, but I think at the base level, yeah, I think you should start right now.

What are you making in this sales job? Probably about $50 or $60. Yeah. Do you know off the top of your head what you could make in the Atlanta area right now fixing cars? I got no clue, honestly. You need to check. Now, are you full-blown mechanically inclined or is it body work i mean what are we talking about um i'm more interested in like the mechanics of it

i don't have any schooling in it or any experience um and so that's that was my main question is if you think i should just go head on and i do school for it i do i think it's a trade what is a trade school do you have any idea george would you mind looking up really quick? What is a mechanical trade school cost in the Atlanta, Georgia area? I'm curious to see what he's going to find out. But what do you think it is? What do you know about it, Aiden? It can't be more than like 10 grand. That's what I'm thinking. And I guarantee you they need you. Yeah, I'm seeing Atlanta Tech is popping up, $8,000. $8,000. I absolutely would cash flow that. And you know what I would do while you're doing that?

I'd start working on people's cars that you go, like, for instance, you know, if I say I got a catalytic converter issue and the local guy is going to charge me this, and if you've got friends and family, go, look, I'll cut whatever the quote is by 20%. I'll do it. Like, put something out on social media. Go, hey, you got a car issue. Two things. Number one, tell me what it is.

Number two, go get a quote and I'll beat it by 20%. Because I'm looking to get. Yeah. It's a pretty good idea. And not only are you getting experience, you're getting cash. But you're already good at doing stuff now. You know what I mean? And could you even now get a job at a service center for a dealership?

That's what I wonder. Do you even have to have the trade school? Yeah, and I've looked into going into dealerships and just handing them my resume of just work all over the place and saying, hey, I really like cars. I want to work at a dealership or at least in a shop. Would you hire me? Why not?

What do you have to lose? That's fair. There's two options here. Not a lot. But I would absolutely go up. And here's what I want. Somebody sharp. You're really, really sharp.

And let me tell you something. I'm going to challenge you that by the end of this week, I want you to research what the ultimate mechanical jobs are. What's beyond being a great mechanic running your own shop? Because you could be a multimillionaire running your own shop one day. That's an option. Get paid really well working for a great dealer or another local mechanic. But what does it look like up the ladder? Are there high-end mechanical jobs?

What would that journey look like for you? Who's working on those race car Ferraris and McLarens? I just think it would be worthwhile for you to look at that. Does that make sense, what I'm challenging you to do? Yeah, that makes perfect sense. I want you to see, what does the top of the mechanical world look like?

What do they make? What are they working on? How'd they get there? I just don't think we do this kind of stuff when we talk about mechanics. And I don't want this call to end with us limiting you to, you know, you're working over at the Grease Monkey Express, and that's the top of the game for you, because I don't think it is. So really good stuff. Thanks

for the call, Aiden. I'd get busy right now making money, making connections and doing research to see what does it look like? Because a guy like you who loves cars and loves serving and taking care of people, I think the sky's the limit for you. And good news, Ken, greasemonkeyexpress.com is available. Thank you, George. Some lucky soul is going to become a multimillionaire running Grease Monkey Express. This is The Ramsey Show. Welcome back to The Ramsey Show. The phone number is 888-825-5225.

I'm Ken Coleman. George Kimmel is with me, and we are here for you. 888-825-5225. Let's go to Baltimore, Maryland, and Amy joins us there. Amy, how can we help? Hi, George and Ken. I'm so excited to be talking to you. You bet.

What is going on? Well, my husband and I, a little back story. I'll keep it quick, though. We've always been pretty frugal, especially in the early years. We had one car, one cell phone, things like that. But as he started making more and we had kids, lifestyle kept in a little bit. And we didn't ever spend more than we earned, but we got very complacent and kind of lazy with budgeting as we earned more money. So I'm really, really trying to dial everything in.

I have some big goals that I want us to hit in the next 10 years, but I'm trying to clean up some of the lazy investing we've done over the last few years and dial it in more to Roth. So neither of us have a Roth IRA. I do have some old mutual funds that I've contributed to just a little here and there over the years. And I have those total 20,000. And I have 10,000, 11,000 in I bonds. And really, I want to know the process to close those out and to start investing in the Roths for both my husband and I. But I know the cap is only $7,000 for that. So I'm kind of wondering if I should just pull $14,000 out for this year and then leave the rest of it until next year.

Or if I should just close everything out all at once and just put it in a high-yield savings account and be done with it until I can invest it again next year. Does that make sense? Yes. And so you guys are debt-free? We are debt-free. We have about $230,000 in equity in our house. We have, um, we have a $30,000 emergency fund and we started saving for our kids. Um, college are, we do have a four 57 plan, um, through my husband's work. So for that, we contribute 900 monthly. And if I cap out one, um, ofs at $7,000 a year and contribute $200 to another one every month, that would put us at the 15% investing. Okay. Yeah. I'm just wondering, do you use future income to invest instead of cashing all these out

and moving them into investments? What is your next future goal? Could you knock down the mortgage with this money instead? So, well, that that is one of our goals. So right now, our big like sinking fund goals, we have we have to finish saving for our kids school as a priority every year. Like they're all in private school. Um, and for our district now that it's not crazy expensive. Um, but that is like the very first thing we have to meet every year. Um, so past that though, our goals are, are, um, dumping everything we can into the house. So I just wasn't sure with, as far as the Roths go or anything like that, if we should just stick with our income or if I should cash those out. Because I mean, as I started reading over the past few months, I've binged. I don't know how many episodes and I've read probably 10 books

on investing and my brain is just spinning as to what to do with these accounts because technically they're not tax advantage. Sure. And that's okay. I don't want you to beat up. You know, you guys have done a great job saving. You're completely debt-free. You have an emergency fund. Whether the money's sitting in a Roth or it's sitting in I-bonds right now, it's not a deal breaker. And you guys are young. How old are you two? So I am 35 and my husband is 38. Okay. And so we still have another, you know, 25, 30 years here of investing to catch up. And I also assume you guys have the highest income you've had in your working life. Yes. What's your household income?

So I think this past year we were at $145. This year will be a little higher because I did pick up a full extra job over this past year. And then next year, I'm going to be leaving that job. Okay. And you guys have nothing right now in retirement accounts except for that $457,000? The $457,000, we have about $38,000 in that. Okay. And it's $900,000 going into that every month. Got it. Well, I just want to encourage you. Also, he has a pension. Oh, great. He'll have a pension. So on top of all of this, he will have a pension at 62 and a half percent of his salary when he retires. And that also upon his death would transfer to me as well. Okay. Well, I would just go ahead and start

investing 15% of your future income into retirement and use that money maybe to cover the upcoming school expenses, maybe use it to knock down the mortgage a little bit and get ahead on that goal. Because just looking at the numbers, age 35 to 62, you start with zero in that account. You invest 15% of 150, which you guys said you probably make more than that at a 10 percent return you'd have over three million dollars at 62 in that one account at nine percent it's still 2.5 million in the roth if we started today yes and that's so if it's in the roth portion you've already paid taxes so that's essentially two three million of net income that you've already been taxed on that you can use to live. Okay, so I guess there's my next

question. Should we max out the 457 plan so he's able to access that whenever he leaves the police department and that he would be able to access immediately? Although I think he plans on getting another job when he retires from the PD. So with that, would you recommend maxing out the Roth before and put the remainder of the 15% towards the 457 or the majority in the 457 and then the remainder in the Roth? I prefer the Roth personally. I think there's more advantages to it and it's more in your control.

And so I would max that out before moving back to the 457. And just let those mutual funds or I-bonds go unless we choose to dump those towards the house then? Yes. Either use that for the school expenses or use it to knock down the mortgage because I think having that nice chunk to knock down the mortgage principal is going to give you some pep in your step as you get closer to that finish line. That's very true. I do have a quick question on the capital gains tax involved in the mutual funds. I've never pulled anything out of there. And I did contribute about $200 a month to it for

maybe like four years or so, but I've never pulled anything out. So the capital gains tax on that, how does that work? Well, it'll be dependent on your income and tax bracket. And so you'll be at long-term capital gains since it's been in there so long. So it'll be a lower amount. It's not going to be at your normal income tax level, likely closer. It'll likely be 15% with your income. So I would get connected with a tax pro. We have them at ramsaysolutions.com. And these are Ramsey trusted tax pros that can help you figure out what the tax burden will be, make sure you're prepared to pay that as part of whatever your next financial step is.

Okay, absolutely. Thank you so much. Yeah, way to go, Amy. She had her list of questions ready to go. That was impressive. I mean, I feel like we answered more there in that four minutes. It was like a special segment. It was like George is in the hot seat. You know, let's go, let's go, let's go. How many questions could we get more there in that four minutes it was like a special segment it was like uh

george is in the hot seat you know let's go let's go let's get how many questions could we get in there but i mean zooming out of all of that she was saying we were doing a lot we were a little bit sloppy we were doing a lot of good things but we didn't feel confident and i think there's such power in just simplicity and just doing one thing and doing it really well. And that's what I love about the baby steps. Get out of debt, get the emergency fund, invest 15% into retirement. And we have an order to that madness. It's match beats Roth beats traditional. If you have the employer match, take that because that's 100% free money. You doubled your money instantly. And then the Roth portion is used after tax money,

grows tax-free, and that can be a beautiful thing in retirement when Uncle Sam already got his chunk of change on the front end, then finally moving on to the traditional accounts. And so it's that simple, but it's that hard to stay focused in a world where there's a thousand options and you're hearing all kinds of things on TikTok and from your brother-in-law on what you should be doing. And Ken, did you hear about I-bonds? The treasury bills right now are at all-time highs and you got to get in

and you got to do a brokerage account because these funds, it just becomes overwhelming. And so when you look at our, if you look, peel back Dave and I's financial plan, it looks oddly boring. Yeah. It's here's a 401k, here's a Roth IRA, here's some paid for real estate.

Nothing fancy. Yeah. But it also gives people great confidence that you can build wealth without being a financial genius. That's absolutely right. Simple, slow, steady. It always wins the race. The KISS method.

Keep it simple, stupid. I think that's how it goes, right? That's great. Very good. Keep it stupid, simple. I'm too stupid to remember. You channeling your inner Gene Simmons there. Keep your tongue in your mouth, George.

Nobody wants to see that. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. George Camel is with me this hour. It's time for our Scripture of the Day, which comes from Philippians 4, verse 8. Finally, brothers and sisters, whatever is true, whatever is noble, whatever is right, whatever is pure, whatever is lovely, whatever is admirable,

if anything is excellent or praiseworthy, think about such things. Our quote from Teddy Roosevelt, Knowing what's right doesn't mean much unless you do what's right. Big difference between knowing and doing. Good stuff there. All right, let's get back to the phones Tony is joining us in San Antonio Texas Tony how can we help you broke up on us Tony

speak directly into your phone and just like that we'll try to get you back on the line we'll see if our team can help I bet it was a great question, too. I thought it was. Gosh darn it. Okay.

We're going to go to Jason right here in Nashville. Jason, how can I help? Yeah. Quick background information. Baby step six. Looking to pay off the house early. My question was, I live in an older house and trying to balance saving for sinking funds versus paying off the house early. Whenever I think about all of the different

sinking funds for HVAC, for new roof, plan kind of the worst case scenario out, it feels like the sinking funds would go on never ending. So just getting a balancing act behind putting my money into the mortgage, which I can't get back out versus being wise with the sinking funds. I'm not sure if that makes sense. Well, you don't get... The sinking funds, are you actually using them as you're building them up? No, I'm thinking building them up for the future. So, like, I'm going to have to repair a roof at some point. I'm going to have to repair an HVAC system. Thinking about if I get a leak in the basement, encapsulating the basement's another $40,000.

Are you wanting to stay in this place long term? Sounds like you're emotionally done with this place. I'm not necessarily emotionally done with it, no. Would you consider yourself to be a worrier or a planner? I would consider myself to be a planner in this category, yeah. Yeah. So, I mean, I love that you're thinking about these things, but a really healthy emergency fund goes a long way here. And if we've got a real issue where we know the HVAC's going in another year because we're starting to see issues with it and we had to do some repairs, then it becomes a

little bit of a shift. And this is why the budget is so important. But having all these funds of what could be, that becomes exhausting and that's created this, I'm never going to be able to put an extra nickel towards paying my house off and i just think that's because you're so worried and you're planning for the worst case scenario and i don't think you have to do that because the more you're paying the house down you know and you get debt free on that then then these kind of emergencies not only do you have the money but you could cash flow a lot of these things. What's left on the mortgage? I have $108,000 left on the mortgage. I have about $55,000 in liquid savings.

Okay. So that's your emergency fund? Yeah. I mean, that could go down. I'm overfunded on my emergency fund if we do the three to six months okay so let's consider some of that you're sinking funds so set a goal for those sinking funds let's say you want to put 500 bucks a month away for home repairs that's six grand a year and three years from now you'll have 18 grand in there and a high yield savings account more with interest would that be enough to cover you between that plus the emergency fund? That's what I don't know. Well, I think the answer is yes, $55,000 plus $18,000. You're telling me that the HVAC is going to cost as much as your entire emergency fund?

Well, I'm anticipating an HVAC that's probably within the year. Okay. So if you price that out, is that 10 grand, 15 grand? I've gotten estimates in the past, 12 to 17. Okay. So let's call it 15. And then you said the roof is the next thing? At some point. Yep. So what's that going to cost and how much life is left in it based on the estimates? I haven't gotten estimates for the roof yet. I would do that because it's going to give you facts instead of just, you know, paranoia. And this will tell you, hey, the roof's probably got five years left in it. It's probably going to cost 30 grand. Great. I need to save up six grand for five years to cover this repair. And the truth is, even if it happened earlier, you have the money in the emergency fund.

So all that to say, set a simple goal for the sinking fund. Let's call it 500 bucks a month. Anything beyond that, we can start throwing at the mortgage. And then I would just keep living my life. Okay. You with us there? We can hear your gears grinding. I can hear how unsatisfactory this answer is. Yeah. You're going to spend all your time planning for the worst case scenario and not actually making progress. Well, I'm making progress. It's just a matter of at what point do I stop saving for sinking funds? Well, you don't. George just walked you through. You don't.

You just keep saving $500 a month. And if it gets to a point where you have $100,000 sitting in this and you haven't used it, then, yeah, let's throw some of that to the mortgage. But like I said, get estimates on what this is actually going to cost and when, you know, when you'll actually need it. Because some of this might be 10 years out, and I'm not going to lose sleep over something that could happen 10 years from now. And you already have the emergency fund. So don't feel bad using it if it's a true emergency. It's unexpected. I didn't think this would happen. and here we are, and it's urgent, and I need to have heat in the winter.

And so don't feel bad about using it. Just replenish it when that emergency hits, and that will help curb a lot of this fear. Yeah, this is so much fear-based right here. And you could drive yourself crazy thinking about all that could go wrong with your house. Yes, especially older homes, and I know they can be a pain to deal with, but you made a choice to buy an older home that needed a lot of repairs. But even these newer homes, dude.

I mean, these guys, listen, the construction people are throwing these houses up so fast. Oh, my goodness. I mean, just a new home is no guarantee that I'm not going to have to deal with home issues. Just like new cars. People think, well, I'll never have issues. All of a sudden, that new car is in the shop. They don't make them like they used to, Ken. Yeah, Yeah. That's true. You know me, I love the older

cars, man. You do. Simple engines. He loves a Karmann Ghia. Let me tell you. I do. I do. I do. I need to take you for a ride in that. I would love to. Yeah. I feel like it's my kind of car. I could teach you how to drive it. You don't know how to drive a stick, do you? Couldn't do it if you paid me. Really? No. Oh, that's a good YouTube video there. All right, let's go to Josiah, our last call of the day in Dallas, Texas. Josiah, how can we help? Oh, yes, sir. I'm trying to find out or get some advice on how to get out of a truck loan that I'm in currently. Purchased it right after a divorce and just trying to figure out how to make, uh, make it work or, or need to get rid of it. How much is the truck worth?

Um, currently the truck is probably worth roughly around 70,000. It was a hundred thousand dollar truck when I bought it. Wow. What's left on the loan? Um, 86,000., my goodness. So you're underwater $16,000? Yes. Do you have $16,000 in cash? I do not. Okay. Well, there's only two ways out of this thing, which was your original question. One is to either come up with the $16,000 or go to a credit union and get the difference in cash,

plus enough to get you a beater car for now. So now my next question with that, how would I go about that without credit for that? What do you mean without credit? I mean, as far as credit goes, I mean, I'm not shot in the water with that as well. Oh, your credit's tanked. Correct.

Yeah, then your only option would be to save up the difference and then sell it. Okay. Okay. Okay. Do you have anything else you could sell? What do you make? Currently, I make around $174,000 a year. What do you do?

I am a technical services manager for a pipeline company. I just wonder what kind of extra side work you can do with that expertise where you can get some cash quick. Next two or three months, come up with that money that George is talking about. Because you're bringing home 10K a month. And so it wouldn't take long if you got on a tight budget. I know this truck payment's probably 1,200 bucks. Oh my gosh, makes me want to throw up thinking about it. But you got to come up with that 16 grand fast plus another five to get a beater car to get around for now. And it's not going to be pretty, but it'll be worth it. That's how you get out of it, and you're going to be free from that.

So get after it, Josiah. Thank you for the call. George, good hour. Thank you, sir. Thanks to James Childs and our fearless crew as well in the booth for keeping us on the air. This is The Ramsey? Hey, folks, Dave here. You want to hear even more life-changing content from Ramsey?

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