The Ramsey Show - We Make $200K and We’re Still Broke

Starting point is 00:00:04 Brought to you by the Every Dollar app. Start budgeting for free today. Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studio, this is the Ramsey Show. I'm George Campbell, joined today by The Rachel Cruz, who is also a co-host of mine on another show we do called Smart Money Happy Hour, which you can check out on YouTube, podcast, Spotify, all the good places. Taking your calls at AAA 8255-2-2-2-2-4. Jessica kicks us off in Idaho. What's going on, Jessica? I'm real nervous about talking through with this, but it's real thankful.

Starting point is 00:00:50 It's you, too. I enjoy your other show for our money happy hour. Thank you. Thank you. Feeling a little on the anxious side. We got you. Well, thank you. All right, I will just jump in here.

Starting point is 00:01:01 So my husband and I are both 50. We have a combined gross income of a 200K, net 161. we did not pay taxes in 2023. He owns his own business, an H-Bag business. And with the accounting, we found out last October for 2024, which filed late, was $47,000 that we owed. Well, now, because we didn't find out so super late, we now did not get to correct anything for 2025. and so we own additional $25,000 for 2025. We also have combined current consumer debt, which, again, I am not real proud of this by any stretch, but it's about $137K.

Starting point is 00:01:50 So what is that? Jessica, what does that consist of, the $137? Oh, the good stuff. It consists of credit cards, some small. small, you know, sides, you know, loans to try to, you know, eventually refy, but then didn't necessarily refy. But then also we had a, after we purchased our house in 23, we had a really bad septic issue and had to replace that end, our drain filled, which cost us 50 grand, all that. And so you took a loan out for the whole 50?

Starting point is 00:02:29 We sure did. Okay. Yeah. Can I ask a stupid question on behalf of America? Sure. Maybe not. Well, for a couple that's making $13,400 a month in take-home pay, why were you turning to debt at every corner? Where was all that money going? I think what, stupid. It was just all stupid. You're 100% right. We weren't making that at the time. That's just where we're at now. This is newer income. So you guys have made more money over time,

Starting point is 00:02:59 and I've probably spent it all, as most people do. As soon as they get a raise, they go, sweet more money for us to make more bad decisions with right we we jumped on that bad decision train absolutely and again not proud of that by any stretch well you're that's normal jessica you're not alone in this and uh i i think there's hope here you have 137000 in loans that cross-consumer debts you have another 70 000 it's called 75k owed to the IRS so it's a little over 200,000 that you guys have right correct that's the total mess to clean up and that doesn't include your mortgage how much of that is your mortgage? Our mortgage is 4150 a month. 4,100, yeah.

Starting point is 00:03:41 Okay. Anyway, that's a monthly. So our mortgage is not even included in that. And so our mortgage is 575 total. Okay. That's what's left on that. Woo. Okay. Well, the good news is you guys have an incredible income. The bad news is you're going to... We also don't have any retirement either at 50 years old. Yeah. That's okay. We'll make up for that later. You guys are going to be working probably longer than you wanted to. But if you can keep making $200 grand, this is a solvable problem. Yeah.

Starting point is 00:04:12 On napkin math, you go, all right, $50 grand a year, we're done in four years. Yeah, if you guys can find a way, and I just took what you bring home a month, minus the mortgage, you know, you should have around $11,000-ish left. And if you guys can throw $6,000 a month at this debt, Jessica, which means you live on nothing. I mean, your grocery budgets like $200 a week, if that. Like, I mean, it is like we are just, we are doing nothing but paying this off. Yeah. And if you can. That's under three years.

Starting point is 00:04:47 Yeah. If you can throw, if you can, if you can be intense for three, three and a half years, you guys could get out of this. And that doesn't even include selling stuff, right? Or working extra or whatever that is. I mean, there's stuff in here that you can move. It's just going to be a couple of years of grinding it out. I may or may not be wanting to cry right now because that makes me real excited because we're both on the same page.

Starting point is 00:05:09 We both want to tap us. Are you guys both full-time? Are you guys full-time? Yes, we are. And kids? Do you have kids? No. No, we do.

Starting point is 00:05:19 Not in the home. Okay. So that's a good. I mean, honestly, that's great. And if you guys. Less mouths to feed. Yeah. And it takes a level of even a step of humility at 50 years.

Starting point is 00:05:29 old after two great careers to say, hey, we're going to go work nights. And you and your husband just handshake and say, all right, I'll see you at 9 p.m. tonight because we're going to leave at five our jobs. We're going to go work somewhere for four hours. And we're going to come home. And that's going to be an extra $1,500,000 bucks a month that's added to this. That shortens it. You know what I mean? Like you start to see a path out. It's just going to be hard, Jessica. I mean, but I think you guys are at it. I mean, even as you're explaining coming on to the call, how you're feeling. Like, the emotions are just right there.

Starting point is 00:05:59 They're right there, which actually is a good thing because you're actually feeling something. And that's going to help in the motivation of it all. It really will. Yeah. What was going to be your next step if you hadn't called? Well, I mean, obviously looking at the debt consolidations, just literally, I mean, we've already talked because we're like, all right, we've got to get these baby steps started. We've already drawn out our spreadsheet, living that life.

Starting point is 00:06:30 And then, you know, yeah, calling that consolidated, what can we do to, you know, shorten this pain, you know, that we both are anxious about. And neither of us like it. It's very weighty. And, you know, we've got kids that are getting married and all the things. And so it's just you feel real handicapped in your abilities to really be progressively moving forward and, you know, I'm trying to even bless them with, you know, helping to pay for all this. And so you just, I don't, we don't like feeling this pressure either. And so we're definitely to that point of just being super overwhelmed.

Starting point is 00:07:07 Well, I want to free you of feeling the obligation that you need to pay for everything or else you're a bad mom. I think you guys are incredible. The fact they're even struggling with this tells me how much you care about these kids and your family. And so here's the truth. You can't cover a wedding right now. You can't bless them with some outrageous. gift. But the best thing you can do is clean up your own financial mess so that they don't have to take care of you later on in life. That's the true burden to worry about. And maybe later on down the

Starting point is 00:07:36 road, you do get to bless them with an amazing gift six years from now. Yes, that would be awesome. So can we say we're doing this in three years that you'll call us back and do a dead free scream? Oh my gosh. I would love to. Well, here it is. Absolutely. You spit shake with your husband. 6,000 a month is going toward this debt. The IRS debt comes first because they will screw up your life. So let's make sure that we cover that, then attack all of the other debts, sell everything we can. Did you all have anything to sell, Jessica? Do you have like a four-wheel or an extra car?

Starting point is 00:08:12 I mean, I don't even know. Some toys. No extra vehicle, but we do have a camp trailer that we've definitely, that's one of the things my husband has said, let's try to get rid of it and sell it. I've even talked about selling the house, to be honest. Not sure that there, I mean, there's maybe 120, 20, you know, of equity in their equity. That's like your like last ditch effort.

Starting point is 00:08:39 That's like we're on the verge of bankruptcy. We're going to have to sell the house. But I wouldn't do that. You guys have an amazing income and we are rooting for you. After the holidays, a lot of people start feeling budget pressure. And it's a wake-up call to get intentional. So listen, don't fall. for buy now, pay later, cell phone plans that drag you back into debt.

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Starting point is 00:10:10 Sure. How can Rachel and I help today? Well, I'm 68 years old and I have a $40,000 student loan debt for my daughter. and the only retirement amount I have is $37,000 in an IRA. I am still working, and I wanted to know if I should take that all my retirement savings and pay off this student loan and just be done with it. That's the only debt I have. I own my house, I own my car, no credit cards. Oh, man.

Starting point is 00:10:51 Is the loan in your name? Yes. Okay, so is it a parent plus loan? Yeah, it's a parent plus. Oh, boy. That's brutal. Where's your daughter at in life, Pat? No, she never finished.

Starting point is 00:11:08 Never finished. She's stay-at-home mom, so she doesn't really have the finances to help pay. I've asked her several times. Does she understand your situation? Yeah, she does. Again, she just, she doesn't have the money. Yeah. Well, she has too little one, so she's, you know, she can't work right now. And what about her, I mean, her husband's working, right? Um, on and off. Oh, boy. Well, here's my fear, Pat. Let me play this out for you. You drain every penny of retirement to pay off your, these parent plus loans. now you're left with nothing. Now we're down to Social Security

Starting point is 00:11:55 and you working until you can't work anymore. That's it. That's the only future available to you at that point. Not that the $37,000 is your saving grace for retirement, but that's really draining everything down to nothing all to pay off this Parent Plus loan for your daughter. And so I'm just trying to figure out what the other options are. What is your current income?

Starting point is 00:12:18 78 a year great and what are your expenses um so around 3,000 a month okay so you should have if we were doing a budget you should have a few thousand dollars left over each month oh I have a few hundred left I figured like around 400 left I do budget um and I do have other debt 400 400 No, that's all, but it's, you know, till my take-home pay is like $3,400 because of me contributing to my IRA. I've been putting 25% in. I've been really trying to build it up. Okay. You're trying to make up for lost time.

Starting point is 00:13:08 Mm-hmm. Man. Well, I'm trying to think through a plan where you could knock out these loans, get them out of your life, and still try to build a decent nest egg. That's what I've been trying to do. I've been putting $600 a month against this loan. Well, the interest is probably $600 a month at this point. Those parent plus loans are brutal.

Starting point is 00:13:31 Oh, they are brutal. Yeah, I was looking at the daily interest is $6, almost $7 a day. And that was the other thing. It's 7.9%. Is there a way to negotiate that interest? I don't know that they'll negotiate. The only way to get out of that would be to refinance it, which you'd lose the federal protections. It'd become a private student loan.

Starting point is 00:13:57 And I don't know if you'd get a much better rate. It's something you can look into. But, again, I don't think this is going to be the solution. I'm wondering if we paused all retirement investing and just got real intense about this and you pay it off in two years. Because right now you're trying to do two things at once and you're not making great. progress on either. Right. Pat, what will you be getting at? Are you getting Social Security right now? I am. I'm getting $2,000 a month in Social Security. Okay. Are your benefits hurt by the fact that you're working right now? That I don't know because I just started collecting Social Security. Okay. You are a full

Starting point is 00:14:39 retirement age, so I think you should be getting the full amount, even if you're working at this point. But that's something to look into, at least you have a great income. I mean, there's some saving grace here. Usually people that are 68, either retired and are just trying to live off Social Security or they're not making $80,000 a year. They're making $30, $40, $50. And so this is at least something you have to your advantage of knocking this out. And maybe eventually, I don't know their situation financially, but if they're able to even chip in and help, because I just don't want them to, you to be a burden to them when you're in your 70s because you have nothing saved. And now mom's got to move in. with them and they have to cover her financial life.

Starting point is 00:15:17 Oh, that won't. Yeah, that won't happen. The husband. He wouldn't even let you move in. No. Sounds like a peach. All right. Well, Pat, these Parent Plus loans really are becoming like a cancer on society. It's destroyed relationships and parents took it out thinking they were doing the right thing for their kids. The kids go, hey, it's in your name, you took it out. I was a kid. I was 18. I didn't know what I was doing. This is on you. But I would at least be very blunt about your financial reality with your daughter so that she knows what's on the line. And if they can at all help you get rid of this, that at least gives you a chance at a decent retirement.

Starting point is 00:15:59 Okay. So I'm pausing my contributions in my IRA. Yeah. Yeah, put that 25% back in your paycheck. Remember, you're not pausing it for the rest of your life. You're pausing it for a short period of time. 24 months. We're going to pause it all.

Starting point is 00:16:14 and we're going to start throwing, you know, this kind of loan, you're talking about $3,000 a month going toward the loan to knock it out in two years, a little more than that. Because the interest is adding up, you're right. And so the more we throw at the principle, the faster this thing's gone. Because right now you throw $600 at it, but $100 or $200 is interest. Well, only $400 is now knocked out. And so if we can start throwing $3,000 at it, you'll actually see that balance start to go down instead of just keeping it at bay.

Starting point is 00:16:41 Okay. But there's no other magic wand I can throw at you. I mean, these loans are not even bankruptible in most cases. And so really the only way to get rid of student loans is to pass away, which is the darkest part of it all. Oh, my goodness. I'm wishing you the best, Pat. So sorry. Riley is up next in Memphis, Tennessee.

Starting point is 00:17:02 Riley, welcome to the show. Hey, how are you all? Doing great. What's going on with you? Hey, about two years ago, I bought a $60,000. $1,000 truck. I currently owe $39 on it, and it's worth about $29.32. Okay.

Starting point is 00:17:24 I can afford the payment, but once I get done paying the payment, after I get paid and, you know, insurance and buying diesel for it, I'm left with about $100 for two weeks. Yeah, that's right. After your truck payment? Yeah, after my truck payment. How much do you make? How much do you make a month? How much you bring home a month?

Starting point is 00:17:46 That fluctuates depending upon if they're letting us work overtime. But it could be anywhere from 1,400 bring home to 2,000 bring home. In a week? So it's, I mean, every two weeks. Okay. Okay. And how much is your truck payment? $758.64.

Starting point is 00:18:08 Okay. That's a lot, my friend. That's a quarter of your take-home pay. It is. Just going to the truck payment. So you're underwater by 7 to 9 grand. So that's the magic number we need to come up with, either in cash through savings, future income, or by going down to your local credit union and seeing if they'll give you that loan

Starting point is 00:18:26 for the difference plus some to get you something to get around it. Yeah. An ideal situation is like a $12,000 loan, $13,000 loan. So you have an extra $3,000 to $4,000 to go get a crappy truck to drive around. Facebook marketplace and get an inspection and just go, all right, this thing's not, it's not fancy. But it runs. And then you save almost $1,000 a month, $750. Yeah, between the diesel, the insurance, and the payment,

Starting point is 00:18:49 you're going to feel like you got a giant raise because you did. Yeah. Well, I talked to the bank this morning, and they told me that I have another car that's paid for, and it runs fine. It's in the driveway. They told me to get the VN and put it up for collateral. No. And then you just don't do that.

Starting point is 00:19:10 Like a title loan? No. Yeah. Yeah, like a, oh, they just said for collateral because I've never had a loan. That's a title loan. It means they own the car if you missed the payments. I don't like that at all. Yeah, no, just see if you can do just, yeah, just a personal loan for nine grand at that point.

Starting point is 00:19:26 Or if you have a thousand bucks saved Riley than an $8,000 loan, whatever it is for that difference. Yeah, and pay this truck off. AASAP. You've worked too hard to get control of your money just to let strangers control your data. Think about it. Just about every time you sign up for a new. newsletter, grab a coupon code, or start a free trial, your personal info, like your name, email address, phone number, and more gets scooped up and sold by data brokers.

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Starting point is 00:20:49 That's join delete me.com slash Ramsey. We wish that we could get to every call and question here on the Ramsey show. And we can. But if you have a money question, you want an answer. there is hope for you. You can head over to our website and use Ask Ramsey. It's our free AI tool

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Starting point is 00:21:41 That's so true. Can do. I actually use it today, Rachel. You know what I asked it? What do you have? I know our car parameter that no more than half your income and things with wheels and motors, but I was like, what about net worth as a ratio? And it told me, it said, hey, make sure that the cars in your life aren't more than 5% of your total net worth.

Starting point is 00:21:59 Of your total net worth. I was like, thanks, Ask Ramsey. Gosh, Ramsey. I was like, I think it's five. I think I've heard Dave say this. And Ask Ramsey knows all. So it's settled the debate for me. And you can get the answer the same way we'd answer it right here on the show.

Starting point is 00:22:12 So ask your question today at Ramsey Solutions.com. Go take it for a test drive. I think you'll really enjoy it. Or click the link in the description if you're listening on podcast or YouTube. Tyler joins us in Canada. Tyler, welcome to the show. Oh, thank you for having me. It's my first time calling, so I'm excited to hear your feedback.

Starting point is 00:22:30 Hey, about time. We're glad to have you. What's your question? Thank you very much. Yeah, so my wife and I are moving to a different province in Canada. She's just about to be done graduating seven years' worth of school. she's going to be a veterinarian when she's done. Nice.

Starting point is 00:22:48 And because of the, she has a job, guaranteed contract, she's already signed it. And I have worked lined up back home as well that we both know what we're going to be making. So we went ahead and made a decision. We put an offer on a house in part because of the money we had saved for school. Plus, unfortunately, her father passed away recently, but that meant she got, you know, the life insurance payment made it so that it was more than possible for us to do either a 10 or 20% down payment on all the housing that we were looking at in rural New Brunswick in this case. Which maybe that's fine advice.

Starting point is 00:23:26 Maybe it's not. But the problem became then, you know, they're good people and they had, you know, their worries and concerns. But her mother and grandmother and my in-laws have sort of been telling us that it's too much too soon and it's a bad decision. and I was just wondering if I'm making a mistake or if what I'm doing is fine. Are they saying it's a bad decision because of where you guys are financially or because it's just too soon because you just graduated, your newlyweds? Was it more of a life or money reason? I think it's definitely more money reasons. Like we've been married for almost five years, so it's not like you're keeping up too much onto a new relationship or anything.

Starting point is 00:24:08 And they know your incomes? Yeah, they know what we're going to be making. A lot of debt from her vet school? We have some hangover. The only caveat here is because it's Canada, there's no interest on the student loans. So we are paying them, but it's a little. How much student loan debt is there? It doesn't matter for the, it's around 30,000.

Starting point is 00:24:31 Okay. What other debts do you guys have? Nothing. It's just those. Do you all have any money? There's no credit cards. Okay. And how much money do you guys have saved?

Starting point is 00:24:39 total, including when her father passed away? So all between what I've saved and between what we have, we've probably got around 80,000, okay. Saved. Yeah, so it'd be a little over $80,000. That's like liquid right now. Okay. It's non-retirement. Gotcha.

Starting point is 00:24:56 So if you take away the loans, that brings you down to 50, take away an emergency fund of six months. That takes it another 30 down. So you're left with 20 grand, essentially, right? Let's go three months. They're young. They don't have kids. Okay. Rachel's being very kind.

Starting point is 00:25:09 Let's live on the edge. We'll go 20k. 20K. So 20K for emergency fund, 30K for debt. Then you got 30K and then. Leaves you with 30 left for a down payment. Yeah, 30,000 for a down payment is where we would say you guys are parameter-wise versus 80. How much is the house that you guys put an offer on?

Starting point is 00:25:25 So what we ended up settling for was 345. So 10% would be the 34 and a half. Yeah. I was hoping to, so maybe this is the philosophy difference, I was going to leave the student loans and go for 20. on the house and then use the excess because it would be, you know, an extra 500 bucks a month that I'm saving on the mortgage. And I wanted to use that to go in and pay the student loans. How much a month extra would you get? You'd say, so you'd save 500 a month if you put 20% in. Right, because it would avoid PMI. Right. Yeah. Sure. That would be going instead of, you know,

Starting point is 00:26:00 paying the student loan or the long stop immediately just because it's because there's no interest on it, my incentive to pay it isn't quite the same. And I would rather, I think I'm net saving more money by reducing the insurance load or the interest on the house rather than, you know, the student loans that I'm less incentivized to pay. Yes. Well, yeah, and in that case, if it was just 500 you're putting towards those loans, it'd be like three and a half years until they're paid off. So our philosophy is to be debt-free before you buy a home and to have an emergency fund in place. And then what is left is, yeah, what you would put down for a house. How much do you guys make a year together? What all the new jobs be? it'll be the sort of both the floor the most conservative estimate will be 125.

Starting point is 00:26:45 Okay. Her job, she's expected, obviously, like, within three years to be making a lot more than the 85 starting. And there's a commission component. So, like, depending on what drug she does or doesn't sell. So one. I'm not, like, planning that into a budget or anything, but it's another consideration. So 125 for both of you. Right.

Starting point is 00:27:03 What are you making? Oh, no, no, that's combined. 125 is combined. Combined. Okay. She'd be around 85. Got you. about like conservative.

Starting point is 00:27:09 Okay, yeah. So if you guys lived on 90, well, I guess that's before taxes. Yeah, my guess is your take-home pay will be somewhere in the $7,000 range? Yeah, that seems about right. Okay. And maybe I would say a little bit more than that, but yeah, that's around there. Okay. My fear is that, I mean, if you do it the Ramsey way, you're talking about, I know you guys

Starting point is 00:27:31 have a different mortgage structure. You guys have like adjustable rate mortgages that change every five years. Is that right? And our interests, or the rate is like three and a half percent here where it's more, I think, for you guys as well. Okay. Not sure, though. But the rate could change, you know, every couple of years. Yeah.

Starting point is 00:27:49 So my fear is that you pick up this home and if you do it our way, you know, that mortgage could be $3,000 out of your seven, right? Mm-hmm. It's possible. That feels like a big load to carry going into this new phase of life. and we know we recommend 25% going towards your housing. And so you'd be closer to 40 edging up to 50, depending on the situation, insurance, property taxes, all of that. HOA, I don't know how that works in Canada, but that's my fear right now. It's world, so there's no HOA and the property taxes is a little, it's about $100 a month.

Starting point is 00:28:26 Okay. So there's a piece to me that says you guys might be able to make this work, but it's going to be more stressful than you think. it is. But if you waited another, let's say, six months, you signed a short lease agreement to rent in this new province, kind of get used to the area. Even just a year. You know what I mean? It's the province where we were

Starting point is 00:28:46 from. I guess the only other thing, a piece of information that might be relevant here, her job requires her like week on week off to be in one of two different places. So where we were getting is kind of in the middle to reduce her driving between each one.

Starting point is 00:29:02 And it's closer to where I would end up working as well. So the options to rent that are actually close are like close to non-existent because of how rural it is. Okay. Well, how far is the, what's the difference of the two places? It'd be, we're talking about like 45 minutes. That's 20 minute drive versus over an hour, yeah. Okay. Well, for a year, here's the thing, Tyler. The reason that everything is laid out the way it is with the baby steps and all of it, which hasn't changed in 30 plus years, is because this is the most peaceful,

Starting point is 00:29:35 most efficient way to build wealth long term. And I say peaceful, people getting out of debt, it's not really peaceful, it's crazy. You're like trying to get out. But the point is that, especially with a house,

Starting point is 00:29:47 you know, your house is supposed to be a blessing. It's supposed to be a place of peace and rest. And the thing is people quickly move into that purchase, thinking, okay, if I could just get that house, it's going to be okay. And we'll figure out the finances.

Starting point is 00:30:00 well, it's okay, we're right on that edge. But what George was saying earlier is you're just, you're right on that edge. And what it could cause is a level of stress that's unnecessary for today. That if you guys just waited one year, had an inconvenience of an extra 25, 30, 40 minute drive for one year, saved like crazy, knocked out the debt, had, you know, looked at it and said, okay, we can go full force, 20% down.

Starting point is 00:30:24 Like, it's just a more peaceful way. And there's no one telling you you have to buy a house right now, you know? No. There's no one. And you can, you know, it gives you more options online. One of you, let's see you have kids. One of you wants to stay home. Well, you can't.

Starting point is 00:30:35 And guess what? There's no daycare out in the woods. And so now we're left an alert. So we're trying to think about future Tyler as well. Wishing you the best. Most people just drift through life with their money. No plan, no budget. Stuck on autopilot.

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Starting point is 00:31:42 Fair Winds Credit Union is for people who are serious about taking control of their money. So if you're ready to stop drifting and start building wealth on purpose, open your smart bundle today at fairwins.org slash Ramsey. That's fairwins.org slash Ramsey, insured by the NCUA. Haley's in Seattle up next. Haley, welcome to the show. Hi, thanks. Super excited to be here.

Starting point is 00:32:26 What's going on with you today? I am trying to decide if my family just made the biggest financial mistake of our lives. Oh, no. What is it? Say more. So we just sold our Ramsey Model Perfect House in Boise, Idaho to move to a high-cost living in Seattle, Washington. Why'd you move? We have two young kids, and I became permanently disabled.

Starting point is 00:32:58 from my job. And I wanted to be close to family. Oh, thank you. I'm dealing with it, but I wanted to be close to family to help with the raising of our children. Yeah, that's a very noble decision and a great why. So what is causing you to feel like that was a big mistake? Is it all financial related because it's just more expensive? Yes. So, well, I mean, it's hard to justify leaving a $1,200. mortgage. Well, it is when you're permanently disabled and you have young kids, you want to be near family. I mean, that's... And it depends on how much of your world this new mortgage is. Yes. You might just be like, well, we're paying this much, now we're paying this much. The sticker shock sometimes hurts more than the actual reality ratios. So like our rent, we moved into an apartment

Starting point is 00:33:49 and our rent is $3,285 a month. Oh, yeah, that can hurt. And what's the household income now, like every month? About $7,500. So that's where you're feeling the pinch. Half of the income is now going to rent instead of building equity at $1,200 a month. Exactly. And it was, I mean, it was just such an affordable place to live, too. Yeah. Sure.

Starting point is 00:34:17 Okay, well, it's done, right? The decisions made. The house has been sold, correct? Yes. Yep. Okay. So what can we do moving forward to help you? So we, my husband and I feel like we are never going to be able to reenter the economy as like homeowners and like take that next step again.

Starting point is 00:34:36 We feel like we took this huge step back. And I guess my husband is in the mindset currently that we made the biggest financial decision that could ruin our future going forward. And it's going to take us years to recruit. It's very dramatic. Wow. Very dramatic. The clouds are just hovering over you. Well, what happened to the proceeds from the house?

Starting point is 00:35:00 You sound like me. Like the world's coming to an end. I mean, it's scary. Like, I get where he's coming from. I get, yes. I feel like he has such a solid financial base that I don't think that's not true. How much did you get from the house when you sold the house? 230.

Starting point is 00:35:18 Where did that go? Where's that? That one is in a high-yield savings account right now, because we don't know, like, when we could buy again. Okay. What are the houses going in the area that you guys are in? Oh, gosh. Like, for a decent three-bedroom house,

Starting point is 00:35:35 we're looking at $7 to $800,000. Okay. Yeah. So this is a solvable problem. I mean, yes, it's more expensive than living in Boise. So we need to get that out of our head as the baseline. And you all knew that, though, Haley. Like, right?

Starting point is 00:35:47 Like, you... Right. You guys didn't just, like, show up in Seattle and be like, oh, my gosh, this is more expensive. Like, you knew that. So living in it's a different reality. I understand that. But it wasn't, it wasn't, it wasn't, it is.

Starting point is 00:36:02 It wasn't like it surprised you. Well, I think it surprised my husband a little bit, just because he wasn't really for the movie. He loved our home and, like, the situation we were in and we felt like we were really financially stable and he kind of believed that we could make it worth even about family. I wonder if that's part of the big statements, Haley. is that yes, it is more expensive, which can feel overwhelming.

Starting point is 00:36:26 But you guys have $280,000 sitting in a high-yield savings account, which is more than enough for a down payment on a new home. And I think part of it is I just don't want any level of bitterness or resentment in him to grow because it doesn't sound like you both were felt really, really solid and really excited and really on the same page about this move. It's not something you chose. You didn't do it out of a place of strength. No. Well, it just seems so. It feels like we just went against everything that Dave Ramsey teaches.

Starting point is 00:36:58 Forget Dave Ramsey. This is your life, Haley. I mean, you have this health condition that has caused you to have to move, and it wasn't your choice. And I have Dr. John Deloney in my head going, you need to grieve the life that you had. That one's over. And now there's a new chapter. And so we can either look backwards and go, oh, my gosh, if we just could live in Boise again, or we can go, hey, this is a fun adventure. sure we got young kids living in this really cool city. Yes, it's more expensive, but my husband has a great job. Maybe he can make even more money in the long run being in Seattle, especially with all the tech stuff around it. There's a great economy there. And you guys will be homeowners again one day. You have hundreds of thousands of dollars saved. Right. And I was going to say, would we put all of that money down on a new home? Yes. It was stuck in the last home, wasn't it? What else would you do with it? I don't know. I don't know. I just feel like it, I don't know.

Starting point is 00:37:53 Yeah. I guess it just feels like we're using a lot of. Was this move, Haley, a quick decision? When from the moment you guys started talking about it to it actually happening? Was it a couple, like, was it a year? Was it? Oh gosh, like months. Okay, so I do, I do wonder if you guys rushed into it.

Starting point is 00:38:10 And George, I love you. But I will correct. He said you needed to move. You didn't have to move. Yes. You chose to. For the help. For the house.

Starting point is 00:38:17 Yeah, exactly. For the overall quality of your life. because of what happened. How long ago was the accident that caused you to be permanently disabled? It's kind of hard. I'm blind, so it was a slow progression. Okay.

Starting point is 00:38:32 Oh, I'm so sorry. Hale, y'all are just dealing with it. Can I just say that? You're just dealing with a lot. That is one of the most horrific, life-changing, yes. You're, I mean, you're grieving your sight, which I can't even imagine.

Starting point is 00:38:48 Yeah. Oh, I didn't want to give up word. Your husband, no, sure. Yes, and giving up that part of you that was contributing and that you loved, your work. You know, your husband who's, you know what I mean? Like, there's a lot. And I'm sure it's a lot on him to figure all this out. Yeah, I think the stress is less about it being more expensive in Seattle.

Starting point is 00:39:10 And I think it's that your life has completely changed, completely changed. And what George said, quoting John, of kind of grieving what was supposed to. to be what our life, what we thought would look like for the next 10, 15 years of our life, it looks so different on so many levels, right? And that's a really sad reality, you know, that's hard. Not that you guys can't get through it and create something beautiful in this next season, but to acknowledge that, that that's difficult. Yeah, yeah, it has been hard, but I, again, like you guys said, I feel like we're in, like a safe space. I mean, we're around, family and and there is the financial backing to purchase a home.

Starting point is 00:39:55 We're just kind of hesitant. It feels like putting all that money into a new home in this area. Like just with the current economy and climate, like we don't know if that's like smart or if renting is the better way to go. Yeah, what do you mean by the current account? When you say that, what does that mean to you? It just to me, it feels like with the interest rates of where they're at and the type of houses, they're like they're not like a lot of them are fixed or uppers at the 700 to 800,000 range.

Starting point is 00:40:24 You know, we're going to have to, we'll get into a home and we'll probably have to replace through for the H-FAC system is going to be ancient. And so it's like this fear factor of like if we buy into another home, like is that really going to be wise? Are we going to get equity on that house? Long term, long term it will. Paying $3,000 in rents forever and ever amen is not the wisest move. It would be, you know what I mean?

Starting point is 00:40:47 more wise to get in. And you guys need to, I would say, slow down before you buy and actually look to see, yes, does the HVAC unit need to be replaced? You'll see all of that in the inspection of the home. None of that will be a surprise. You guys will have some factor. But yes, being a homeowner is more expensive. You're exactly right. But also, I do think there's some semantics that are thrown around when it comes to the economy and the housing market. And it is true. Houses are more. expensive than they were five years ago. Yes, interest rates are around 5% and they're not at the two to three percent. Like there are some realities, but just this like vague idea that, oh gosh, the economy is just not good. We shouldn't buy a home. I would want some more facts around those

Starting point is 00:41:33 thoughts. My fear, you look back 10 years from now and you go, wow, the economy was great back then and we had no idea. And so I'm a glass half full kind of guy when it comes to that. So the goal is let's, let's grieve what was and let's make a plan for the future. And that might be a mean we're going to save 25 grand a year or 50 grand a year for this next home three years from now. And that's it. It's slowed down your wealth building, but you have the right setup in place for your life. And that's far more important. Well, Dave, you know, on the show all the time we get calls about cars, used cars. What's one thing you want folks to know? Well, really a couple things. Number one is always buy used unless

Starting point is 00:42:17 you got a million dollars. We don't buy new cars. And if you're going to buy used, number two, you want it to last. And that means regular proper maintenance. Yeah, that's a big deal. I know when Sam and I moved from South Florida up to Tennessee, that's the first thing you're looking for. You need somebody who can take care of your car. So when we found Christian Brothers automotive, it was a no-brainer and they've been absolutely great. We're excited to recognize Christian Brothers as the official auto repair partner of the Ramsey Show. Christian Brothers keeps things simple, honest, and transparent. Every repair is backed by their nationwide, nice difference warranty. Three years or 36,000 miles, whichever helps you more.

Starting point is 00:42:53 Listen, Dave, I'm first to admit, I'm not into cars like you are, but the thing about Christian Brothers is I feel just as confident going in there. They're not trying to upsell me. I feel 100% confident that I'm going to get the service that I need. Hey, if you want your car to last and stay on track with the baby steps, trust Christian Brothers. Go to CBAC.com slash Ramsey to find your local shop, schedule service, and get an exclusive Ramsey discount, 10% off your visit, up to $250. Yeah, that's CBAC.com slash Ramsey C Store for details. Welcome back to The Ramsey Show in the Fairwinds Credit Union Studio. I'm George Camel, joined by bestselling author Rachel Cruz, and we're taking your calls at AAA 825-5-2-2-25.

Starting point is 00:43:49 Lynn is in Maine up next. Lynn, welcome to the show. Are you with us? So close. Yes, I am. Oh, good. Yes, I am. You scared me half to death, Lynn.

Starting point is 00:44:02 Thank you so much for taking my call. I'm sorry. Yeah, what's going on? Hi, so my husband and I got married last year. We started the baby steps right after getting married. We paid off our debt aside from our mortgage. In six months into marriage, I found out that my husband owed $80,000 in back taxes. And also at this time, we found out we were pregnant with our first child.

Starting point is 00:44:28 Oh, my gosh. That's finding out a lot going on. we paid the $80,000 out of our emergency funds and house funds, so we had the money to pay that. But we are unsure where to go from here emotionally and financially because tax season for 2025 is quickly approaching and we are expecting to owe about $40,000. Oh, my gosh. Lynn, why has the accounting not changed after everything? The accounting. Are you doing quarterly payments? No.

Starting point is 00:45:08 No, we hadn't. Okay. Okay. So you didn't make any payments in 2025. But didn't learn from owning 80,000. Do you know what I mean? Like, I'm just wondering, did it not occur to your husband? We found out in December.

Starting point is 00:45:24 So we were trying to catch up before we paid 2025. Oh, so you found out about the 80 in December. Yeah. And at that point, 2025. You found that was for 2024? That was for 2022, 2022, and 2023, and 24. Got it. So by the time you found out about all of this, it was too late because 2025 was over at that point.

Starting point is 00:45:48 So now we're just sort of cleaning up. This is still part of the mess. Let's call it 120 grand and you've cleaned up 80 of it. Yes, exactly. Well, it's fairly simple. It's a $40,000 debt that you owe the government, and so we've got to pay that as aggressively as possible. Do you have other debts as well? We don't.

Starting point is 00:46:08 We paid off all of our other debts. Good. Thankfully, we do have, we have a business. It's a restaurant. So we have $40,000. Well, total, we have $60,000 in the bank account for our restaurant, and we have, have $20,000 in our personal account. And I know you talk about pausing, paying debt when you find out you are pregnant. So we're just wondering if we should take money from the business account

Starting point is 00:46:45 or if we should get on a payment plan with the IRS or what our best way forward. Yeah, I think for Stork Mode is what we call it, I think IRS debt is not included. Like, I think you got to pay it. Especially if you have the money. So the question. is what was that 60 grand earmarked for in the business account? Is that needed for upcoming purchases, investments, anything like that, or was it just kind of an emergency fund for the business? Yeah, an emergency fund for the business. It takes about $15,000 a week to operate while we do bring in more than $15,000 a week. We just wanted to kind of... Yeah, how much do you guys bring home? A total a month. We bring home. We bring home. We bring home.

Starting point is 00:47:30 about 15,000. Oh, amazing. Okay. So you could easily restock the business account if you took 40K. I would pay 40K today out of the business. Because truthfully, this is kind of an emergency for your business. Is he didn't withhold enough taxes or at all. And so I would take that out.

Starting point is 00:47:46 Now you get 20K in there plus 20K in checking. So you're not in a lurch if you did need to cover, you know, an emergency. And so I would just work on restocking that. And you guys should still be good for your stork mode. I mean, you have 20 grand. The stork mode is more for like, we are broke, we have a $1,000 starter emergency fund, and we need to make sure that we're covered in case there's, you know, health bills.

Starting point is 00:48:08 Right, right, okay. So I have full confidence. I would clean it up because truthfully, why you're pregnant, you don't want to be dealing with the stress of IRS day. Yes, yeah, get rid of it. I want this to be exciting and fun and not this looming in the back of your mind that we owe the IRS all this money. Do you have someone that's helping you with your taxes for the business?

Starting point is 00:48:26 We do now, yes. Okay, now. Count in that we had before wasn't great, but we have somebody trustworthy now, which, so we feel like we're in a good path forward. Obviously, this was very hard emotionally, which I'm still trying to get over. I think that's the biggest thing for me right now. Emotionally because you didn't know about it? Because trust or? Yes.

Starting point is 00:48:51 Yeah. And was it, do you feel like was there any level of secrecy out of, out of, not malice, that sounds bad, but of like, oh, gosh, I don't want her to know? Or was it complete just ignorance of genuinely not knowing that he owed this? I think it's hard to say for sure. I think part of him maybe knew that he owed something. I don't think that he knew that he owed $80,000. He was filing taxes for the business but wasn't filing personal, the money that he was

Starting point is 00:49:21 taking from the business. Yep, yep. And he wasn't fully realizing, but also, should have definitely checked. So it's just been hard to find that out. Yeah, for sure, Lynn. That's very stressful. Yeah, absolutely. Well, the good news is you guys can cover this with the cash on hand and it's fixed for the future. So I would just get rid of it now. I wouldn't get on a payment plan. Just cut them to check for 40 grand and fix it for the future. I mean, you got your next quarter is coming up here to pay your quarterly estimated payments. So let's prepare for that

Starting point is 00:49:56 and finally get ahead of it instead of kind of being reactive. Right. And use kind of cash flow for the next month or try to cash flow for the next month quarterly because we're kind of still playing catch up right now. Exactly. So you might owe 10 or 15 grand in quarterly and a quarterly payment coming up. And so we got to make sure we have that. And so the next week we're going to be living on a pretty tight budget now.

Starting point is 00:50:20 So I don't know how you guys are living now. If I was making 15 grand a week, I'd be living Lovita Loka. And so it might be time to back. down the hatches and live a little bit more conservatively until we get through this phase. The taxes are solved, the baby's here. Yeah, he may not bring home as much because he's putting more in the business to make sure those taxes are paid. Okay. Okay, awesome. Thank you so much. Yes, best of luck with that sweet baby. I know. Such an exciting time. You don't want it clouded by this mountain of debt. So much. And it's scary. Like what she said.

Starting point is 00:50:52 I mean, and thank God, I mean, they're somewhat responsible. They got 60 grand. and an emergency fund in the business, 20 grandf? I mean, like, there's elements of it that are a saving grace because some people... Usually if you're making that kind of money, you're comfortable with all these payments around you and you're just sort of keeping up. Yes. And luckily, they lived fiscally responsibly in other ways. Yes, to be able to have some of that.

Starting point is 00:51:13 Yep, that's savings. And a good reminder for anybody who is self-employed, even if you do like side gigs. I mean, you got to pay self-employment tax. You got to pay her quarterly estimated payments. And it's not that hard. you can sort of calculate using calculators on the IRS website how much you'll own taxes. And you go, all right, I'm going to owe 40 grand this year or I made this much this quarter. I need to write a check to the IRS and log in, connect your bank, and pay the IRS what they're out.

Starting point is 00:51:38 It's not fun, but we can't pretend like, ooh, free money. I don't have to pay taxes because I'm self-employed. You got to pay them and then some, bud. You got the business taxes and your personal taxes. The government wants their cut. And so make sure you take care of that so it doesn't add stress to your life because the IRS can really screw it up. They can garnish your wages, come after your stuff.

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Starting point is 00:53:27 and use the promo code Ramsey to save 20%. That's mamabearlegalforms.com, use code Ramsey. We're headed to Providence, Rhode Island. James joins us there. What's going on, James? Hey, how you guys doing? Great. What's your question today? My question is about communication.

Starting point is 00:54:02 I'm 30 years old and I just got engaged and I found you guys maybe a year ago and I'm on Baby Step 2. I got $10,000 left on a car loan and I budgeted $12,000 and maybe a little more for a wedding that we have coming up in 2028. That's a long ways away. Yeah.

Starting point is 00:54:26 Well, we could have. done it next year, but we wanted to fund it ourselves without going into debt. Okay. So that's why we chose 2028. Right now I make around 50,000 a year, but transitioning careers to become a firefighter, and I'll be making 80K, so I'm helping my income for our future. But I wanted to try and start a conversation with her, but as I, tried to talk about debt and all of that.

Starting point is 00:55:01 I just found myself not knowing how to approach it well. I've become really passionate about living debt-free and trying to become debt-free. So how do I communicate with her without coming off as controlling or judgmental about her having debt and all that? What do you know about her finances? From what I know, she has credit card debt. She has card debt and student loan. the amount is not I don't have full knowledge on the amounts I know it's north of 25,000 total or more well you guys are engaged so you have the right to start talking about this

Starting point is 00:55:43 stuff it's not like it's been two dates and you're like hey I really want to lay it all out and so now is the time consider this year's like premarital counseling to make sure and you go into it saying hey as we head towards marriage I want to make sure that we're aligned because I know money is a huge part of marriage. And I don't want us to be having money fights. I want us to hit our financial goals. And my values around money is that I believe being debt-free is our best path to building wealth and having a marriage with less fights.

Starting point is 00:56:11 And see how that hits her. And it's not a judgment. You're not saying, I can't believe you're in debt. You better get out before we're married or else. That's not the spirit of this conversation. Yeah, it's almost like not even shaming the past decisions, but it's more like, hey, going forward, how are we going to build a life together where we're we're unified and we have the same value system, right? And that would be true with how you want to

Starting point is 00:56:34 handle in-laws, how you want to parent, your spiritual life. Like, I mean, this is all part of, you know, uniting two lives together when you get married. And you don't have to be the same person, right? She may still be a spender. You may still be a saver. It's not like you're trying to morph her into who you are. But the value systems on which you make decisions has, does it have to be consistent? but the more consistent they are, I would say probably, I don't want to say the easier the marriage is going to be, but definitely it's a less mountain to climb. Yep. Less tension in that area, for sure.

Starting point is 00:57:10 So, yeah, so if you, go ahead. I know she, like, she's the one, and, like, I really want my future to be with her, and I just want our future together to be as stress-free as possible, you know. Yeah. What if you guys did something together? to sort of get on the same page, like reading the total money makeover or going through Financial Peace University and going, hey, as part of our sort of premarital counseling, I'd love for us to go through this money course or read this book together so that we're kind of speaking the same

Starting point is 00:57:41 language. Well, her language, she's a teacher, she's an English teacher, so her language, she has a bunch of books. So, I mean, that would probably be the good first step is through books. I love it. And even an audio book, too. If you guys are on a road trip or something, just it's, it can, you know, it can be a good It can be casual. It's not like it's an intense, we're going to do a book report here.

Starting point is 00:58:01 Yeah, no. And you're not wrong to ask this stuff, James. I do want to just affirm that when you're engaged to someone, everything's out on the table. Like, you're about to combine your lives. You know what you mean? So bringing up big conversations and hard conversations, that's a, that's the grounds of marriage. Like that that is what you're going to do. And so you're right. practicing at that. now is very important. And for you guys to, you know, I mean, by the time you guys walked down the aisle, James, you needed to know how much she makes, what's in retirement, what she has set up, you know, as a teacher, what debt she has. She needs, I mean, you guys are going to know everything because you're going to combine it all and be one after that marriage. So, um, you just don't want to come off as, you know, someone, like, I'm trying to like dominate or, or anything. I just want to know what I have to deal with. And what we will have to deal with. And what we will have to deal with together once we become married.

Starting point is 00:59:00 And nothing about you sounds controlling and dominating at this point in the conversation. So I don't know that you could really screw it up unless you're just super, way too passionate and overbearing. And she's like, who is this guy? He came out of nowhere. But if she knows you well enough, this is going to feel like another conversation and just say, hey, I've been thinking a lot about this. And I was thinking, man, it'll be really cool to be heading into marriage debt-free.

Starting point is 00:59:23 Can we like just, I want to map it out on paper and just see, like, what's possible? you got to pay for the wedding. You're both covering that. And you're still getting out of debt, James. So it's not like you, you know, you know, I mean, there's no better than thou. Yeah, yeah. I mean, that's what you can say. I mean, I've, you know, messed up with money. I've been so in debt and it stressed me out. And I've started to actually find freedom and peace by getting out of debt. And it's really important to me that as we build a future together that we see and are aligned on this. And it doesn't have to be like this my way or the highway, but at least, at least approaching the conversation, you know. And then whatever she says next, That's your cue to dig in and ask more clarifying questions and really get to the heart of whatever her fears or dreams are. Definitely. And then you can sort of couch that to go, okay, now I can see how debt freedom is a part of that. And I think even going into it saying, I have these goals, how cool it would it be if we had options when we got married?

Starting point is 01:00:15 Instead of having to clean up a bunch of debt, how awesome would it be to have the wedding paid for and no debt and money in the bank so that we're closer to buying a house? Or we can go on this amazing vacation or honeymoon. And so now we're dreaming. This is an exciting conversation versus a woe is me. And you get to know a person through the lens of money, right, of how she grew up. What was her household growing up with money? You know, was it stressful? Was money talked about? Was there? Scarcity? Was it scarcity mindset? You know, you kind of learn of how she is, what her personalities are, what her tendency is around money, the things that she loves to do with it, the things that she's scared of and that she's fearful for in the future. I mean, you know, you get to, you really get to know, you really get to know. know someone as well on a great level, on a deep level when it comes to these conversations too. Okay.

Starting point is 01:01:03 Thank you so much. Sorry. Probably overwhelmed you, James. You know what? Hold on the line. And Kelly's going to pick up and we'll give you a copy of my book, Know Yourself, know your money, because it does talk about those money classrooms of how you grew up of your tendencies and total money makeover.

Starting point is 01:01:16 We'll give you two copies. We'll give you two copies of Total Money Makeover. So you each can read one. She's an English teacher. She wants her own. Yeah, yeah. Mark it up, highlight it. Yeah.

Starting point is 01:01:24 And this is exciting. We probably overwhelmed him. Sorry, James. No, he's excited. I get it. In engagement, you're nervous. You're like, I don't want to screw this up. You know, you're on the precipice. Yes. So you're like, now's not the time to throw a wrench into things. But it's the right wrench. But it is. Yeah. It's the right wrench. You don't want to throw it. Because money, I know. Money fights and money problems are one of the leading causes of divorce. It's in the top three lists always of reasons why people get divorced. And it's a big, big conversation. Like, it's a big conversation to have and an urgent one to have. Yeah, I don't know what woman is like, if you came up to her and said, hey, money fights and money problems are one of the leading cause of divorce, I don't want that to be us.

Starting point is 01:02:04 I want to just. Yeah, you almost feel love to care for. What a fiscally responsible man I'm about to marry. This is awesome. James is such so responsible. And if she gets frazzled or upset, then you're the calm one going, hey, what's going on here? Well, then that's saying more about her. What's going on there?

Starting point is 01:02:20 And then you can dig in. Yes. So there's really no, like. Lose, lose, yes. This is going to be so great. I wish I was there to watch it. You know, we should do like a show where we were like, we're in their ear with a little microphone? Oh my gosh, that'd be so fun.

Starting point is 01:02:33 And we're like, say this, say this. I want her hand. Grab her hand. Okay. All right. If you guys want that show, we'll, we'll workshop it. We'll pitch it to the networks. Because people know we can talk.

Starting point is 01:02:42 I think we just talk James is Eero. I would love it. But like you have her, I've got him and we're like sort of battling. Oh, that's good. I think that's great. I'd watch that show. I think that sounds fantastic. It's like impractical joker.

Starting point is 01:02:53 That's what I was going to say. There's a show that, yes, where they make them do something, but we would actually be helpful. But it's not a prank show. We're just trying to help you. We're really trying to help. Nail the conversation. Ooh, the money fight show. That's what it should be. All right, guys. I think we just nailed it. We just pitched it. I think Dave Ramsey just signed off. We're good. Can't wait. If you're looking for a more budget-friendly way to save on medical costs and stay true to your values, Christian Healthcare Ministries is a great option to think about. CHM is not health insurance. It's a health cost-sharing ministry, a biblical community-based way for Christians to share each other's medical bills. That means no enrollment deadlines and you can choose any doctor or hospital you want. That kind of freedom is big, especially if you're self-employed between jobs or you just need something that fits your budget better. CHM has been around for decades, faithfully serving the Christian community. And many members save hundreds of dollars a month compared to,

Starting point is 01:04:20 to traditional health insurance. And that margin gives you breathing room when you're working the baby steps and trying to steward your money well. And right now, CHM's offering new members a 50% credit towards their first month of membership. Get started at CHMistries.org slash budget and use promo code Ramsey.

Starting point is 01:04:39 That's CHMistries.org slash budget and promo code Ramsey. The Ramsey Show Question of the Day is brought to you by WRI-Fi. When your private student loans are in default, your progress stalls out. Y-Refi can help you restart by refinancing defaulted private student loans into a low fixed-rate payment that fits your budget so you can stop spinning your wheels. Visit Y-refi.com slash Ramsey. That's the letter Y-R-E-F-Y.R-E-F-Y dot com slash Ramsey may not be available in all states.

Starting point is 01:05:23 Today's question comes from Brooklyn in Ohio. I am 27 and married to a great guy who also lives by your principals. We're on babysaps four, five, and six, and our home will be paid off in five years. We have a six-month-old baby. I'm a free spirit, but with my husband's help, I have become a saver. Wow. I didn't know. You could change. Our wedding budget a couple of years ago was almost $50,000. And with inflation, our daughter's wedding is going to cost around $70,000.

Starting point is 01:05:51 I want to start a wedding savings account for her, but my husband thinks we should pay off the house first. Can we do both at the same time or pay off the house first and then save for the wedding? That is a hilarious and fantastic. I mean, from a free spirit, too, I'm planning the house first. I'm planning the wedding for the six-month-old. That's pretty impressive. Because she wants a great wedding in 20-plus years or whatever. Yeah, in the year 2050.

Starting point is 01:06:15 So no, Brooklyn, I would not be saving right now for a wedding. I would be paying off the house. I want your husband's team. You don't know. You don't know what it's going to cost. You don't know what your daughter is going to want. We don't know that far in the future, right? So that's a very far-off purchase to make.

Starting point is 01:06:35 Now, one thing you could be thinking about, though, is college, you know, and saving for that. But, yep, for the wedding, I would wait a little bit. I would get the house paid off and get some college funding happening on the side. And then as she gets older and you guys are in a great financial position to be saving. And yep. Yep. I just crunch the numbers for you while Rachel was talking. I got so deathly bored.

Starting point is 01:06:59 I was like, I'm just going to go to the investment calculator. Well, I want to just show her that this is a solvable problem, right? you focus on paying down the house. Yes. Five years from now, they're debt free with a five and a half year old daughter. Okay. Right? So that gives them, let's say 20 years.

Starting point is 01:07:11 Let's say at 25, she's getting married. Okay. Wedding's happening. Yeah. So it's 20 years. If you invest $100 a month, starting from nothing, in an investment account, non-retirement, so just like a taxable brokerage account in index funds, you will have $86,000 likely.

Starting point is 01:07:27 Let me go, 10% to be a conservative. That's at 11. 10%. And that's $100 a month. So 75 to 85%. 75 to 85 grand you'd have when she's 25. So that's 100 bucks a month. That's very doable.

Starting point is 01:07:40 Again, when you have no mortgage payment. Yeah, absolutely. And that's what I'm actually doing right now is not just for a wedding, but you got to think about a car, a wedding, a down payment as a gift, what our house is going to cost, how can I help my kid get a leg up while they're young adults? So I think it's more that. I think it's just the savings for future purchases in life, right? college, yes, if you want to help them in some other way, down payment you mentioned or, yeah,

Starting point is 01:08:10 wedding, all of that. And there's no obligation. You're not a bad parent if you can't help with these things. But if you can, and you definitely can when you have a paid-for house following the steps, it just gives you more options and flexibility and more room to be generous. So I love this question, Brooklyn. You are nailing it. You and your husband are doing the exact thing we would tell you to do.

Starting point is 01:08:29 So keep it up. Pay off the house first. AJ is in Nashville. Up next, AJ, welcome to the show. Hey, you guys. How you doing? Great. How are you? I'm doing pretty good. I wanted to call in.

Starting point is 01:08:41 So my fiance and I got engaged last March, and the wedding is in July this year. Woohoo. I already had a house and everything, so she just moved in with me about a year and a half ago. So I paid a mortgage and kind of feel house broke, I reckon. She makes a little more than twice what I make. And I know she'd help if I asked her too, but with her student loans, credit cards, and just, I guess, miscellaneous things, like her wedding dress and stuff like that, money's type for her too. So my question is, I know Dave's generally pretty traditionally against it, but would it be easier for us to combine finances early since the wedding in five months or just hold off on it and then, you know, hit the ground on it from there? Yeah, no, I would not combine finances till you're married.

Starting point is 01:09:33 I would have her be working on her debt and you working on your financial situation. Then when you guys get married, combine. And then if you are out of debt and she still has debt, then your income will be going to help her pay off her debt. And, you know, you guys are focused as a household on that. So, AJ, how did you afford the house before she moved in? Because you said you had a house and then she ended up moving in. But it's still stressful for you. Is it too much house?

Starting point is 01:10:01 I'd argue it is. But when I bought the house, it was in 21. I was in a sales role, so I was doing really well. And then some things happened with the customers I was working with, so I kind of just took a hit. Oh, gotcha. Okay. Are you still in a sales role?

Starting point is 01:10:23 No. I still make commission, but it's more of a support. Okay. When you guys combine in July, lie after you get married, because that's soon. I mean, you guys will be, you know, it's a couple months. Will the mortgage them between both of your incomes be about a fourth of your take-home pay? Monthly take-home pay? Yeah, yeah. Okay, perfect. Okay, so you guys can afford the house once you get married. But yeah, but to answer your question, no, I would keep everything separate until you get

Starting point is 01:10:54 married. The scary part is that she doesn't have housing expenses and she makes double what you do and she's still paycheck to paycheck? Yeah, so she got her loan debt. She just paid her car off. She, I think the way we grew up is really different. She's been pretty much on our own. She was like 15. So I think it's just as a matter of how we look at it.

Starting point is 01:11:15 Yeah, is she pay to paycheck, AJ, because she's paying off debt, or is she just paying minimum payments on everything? I think it's minimum payments. I think lately she's kind of kicked into another gear where she wants to try to. to get everything paid off before we get married or at minimum before we have kids, which was ideally two years as a timeline for that. Okay. I would just dig into this and get aligned on what the goals are going to be.

Starting point is 01:11:42 It sounds like she is aggressively paying off the debt. I don't think she's just sitting around comfy going, well, we'll just deal with it when we're married. I like the attitude of how cool it would be to have this debt paid off by the time we're married. So, I mean, it's going to be tight until then. I don't think it's an – if you were like, hey, listen, I – it's tight for me to cover all of the housing expenses on my own right now. I don't think it's terrible to ask her to pitch in.

Starting point is 01:12:04 And if you did it, you know, I'm old school. I would have just said, let's not move in together before we're married. But, you know, you guys have made those choices already. We're not going to evict her at this point. I don't think that probably wouldn't go over well for you. But I would get on a game plan of here's what's going to happen from, you know, March through July. Here's how we're going to handle the finances.

Starting point is 01:12:22 Once July comes and we're married, we'll combine. And whatever debt is left, we'll attack together. Yeah, but I think my fear. was on asking her initially when she moved in was I didn't want her paying towards like a house if she's not getting anything out of it. Right. Yeah, I mean, unless it's quote unquote rent at that point, right? If you had a roommate, they would be paying rent.

Starting point is 01:12:43 But yes, no, I hear what you're saying because her name is not on the house. But when you guys get married, yeah, combining assets and everything is a big. I mean, it will end up being half hers in a sense once you guys are married. Yeah. I mean, you did the front end work. So either way, I believe all marital. assets should be combined, one account, not keeping your separate accounts for fun money, just do it all out of one joint checking account, do a budget, keep a high-yield savings.

Starting point is 01:13:07 That's, again, joint that you both have access to. That is the key to a great marriage as it relates to money. Okay. Good luck, my man. Great job, AJ. I'm going to send you a Financial Peace University as our premarital counseling gift. It's one of the best courses to get on the same page and to light a fire under you guys to start dreaming about what life is going to be like as a couple of.

Starting point is 01:13:28 as you build wealth. Thanks for the call. It's wild how relationships and money get so intertwined and it can get heated quick. And he's trying to avoid the, I don't know, want to ask her because she's working on her thing and do we combine? Yeah. And I think the most important conversation is when July happens and we are a married couple, what does life look like? And painting that picture is really important. Because you probably both have very different pictures right now. Yeah, if you haven't talked about it, you do. Yeah, absolutely. It's rare that you're like, I was thinking the same thing.

Starting point is 01:13:58 This is what I want to do. That's rare. Yeah. So the more aligned you guys can be before the wedding day on, again, every topic in life. This happens to be, we're talking about money here, but on everything that, yeah, I mean, there's just more clarity, more direction, and a little bit more enjoyment because you're walking the same path together through life versus competing, right, or budding heads in it. So, yep, AJ, great question. And good luck to you guys.

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Starting point is 01:16:05 Welcome back to the Ramsey Show. Tax season is upon us. If you want free checklists and guides that will help you file, go to ramsysolutions.com slash taxes. We've got you covered for all the resources. you need. Elaine is in North Carolina up next. Elaine, welcome to the show. Hi, thanks for taking my call. Yeah, what's going on? Well, I am recently widowed. My husband took care of all the finances. I am 64. I'm in good shape in regards to finance. I just don't know exactly what I'm doing.

Starting point is 01:17:03 So I have about three and a half million dollars in a high-yield savings right now. I have two homes probably worth right under another million. I know I will eventually, hopefully this year, be selling one of the houses. And I do have an appointment next week with a certified, financial planner, someone that I trust. And that, so my question to you is, do I just deal with one financial planner? Or do you, should you split up your money and do it with different people? I'm comfortable with one, having someone in your corner that you, that you

Starting point is 01:18:05 trust and you look at. I mean, I think having a team of people is wise, like having someone, you know, a tax pro in your corner for taxes and different things. So there's different elements of money that I would probably bring some people in just to make sure you have expertise in these areas. But when it comes to specifically investing and looking over your entire financial picture, yeah, if you had one person again that you trust and that you know that you, you, at least know the history of even other people they've worked with, you know what I mean? Like that they are reputable. Yeah.

Starting point is 01:18:43 I would be comfortable with just one. And I say that because my husband and I, we just, we have one that we use and that we use for 10 years. So, so they'll be able to look at this $3.5 million and say, hey, how much of this do we want to leave liquid? How much of this do we want to maybe put into the market so that it grows? and maybe you can live off that and even have some, you know, when you pass away to pass on to your kids, right? And so whatever that legacy looks like for you guys. Because what a wonderful position that you're in, Elaine. I'm so thankful for that.

Starting point is 01:19:19 I know that's such a heartbreaking thing to lose your husband, and I'm so sorry. But I'm glad the financial piece isn't a stress factor in this. Yes, I'm very thankful to my husband. Yes. to God. Yes. I have one more question for you. Yeah. So being 64, I don't yet have social security. My husband would have been, well, he passed away. He would have been 65 this year. So I was told, and I'm just wondering, because I've heard from different people, I was told, though, that I should not take Social Security right now or claim his because I really don't need it right now.

Starting point is 01:20:06 And I never worked really outside of our home. I did the whole wife and mom and, you know, all of that stuff. So what I would get in Social Security would be miniscule. And I've been told that if I wait till what, later 60s, 70, that I would get all of his. his what he would have had. Yeah, at 67, they'll be full retirement age, so you'll get 100% of the benefit. If you take it now, it's reduced. And so because you don't need it, I mean, you're three years away, you got three and a half million, I would just wait.

Starting point is 01:20:42 And you said you're healthy? Yes, I am healthy. So the longer you live, the better of a deal it becomes to take Social Security later. And obviously, you know, God only knows how long we get to live. But in your case, I would be waiting until 67. Okay, and that's actually what my financial planner said, but like I was talking to some friends, and they were like, well, you don't know if you're going to live that long, and you could, you know, take it now and then if you don't need it, invest that.

Starting point is 01:21:13 So, but... Well, the truth is you're going to be fine either way, Elaine. I mean, Social Security is a drop in the bucket compared to the legacy that you guys have built on your own without the help of the government. Okay. All right. Well, that really helps. me. That gives me a lot of confidence. Yes. Can I ask the 3.5 million, was that part of that life insurance?

Starting point is 01:21:34 Was that you guys over decades saving? How did you guys, how did you accumulate that much? It was both. Okay. It was both. I just got a, my husband always had life insurance. Praise God. And then he was a very hard worker. And we did, in fact, we employed the Ramsey program years ago. and before our children married, we took them to Atlanta to see your father and go to, you know, before they got married and we were like, you need to do this. It's the prerequisite. So great, Elaine. Oh, my goodness.

Starting point is 01:22:11 Well, and I would wait too, Elaine, we do say usually if there's some type of, you know, tragedy or death, that it's okay to wait a year, right? Just to, I don't know how when he passed away, but you can have some time. There's no rush to do anything. So if you feel a little stressed or questioning or not understanding, you have time on your side. So don't feel any urgency from this financial planner to do something today. You know, you can wait a little bit and that's okay. It's whenever you feel comfortable and any questions you have for this financial planner ask and fully understand before you put your money in to whatever you're putting in. So I would say those two things.

Starting point is 01:22:55 Okay. Thank you so much. I really appreciate it. It helped me a lot. Well, thanks for trusting us with the call, and I'm so sorry for your loss. Lucy is in Lewisburg, West Virginia up next. Lucy, welcome to the show. Hi, how are you guys? Great. What's your question? So I just turned 30. I've got a four-month-old, married last year as well, and my grandparents, when they were still alive, they had built a cabin that could comfortably hold at least 12 to 18 people overnight. So they made it as a vacation for us because of what we do.

Starting point is 01:23:35 We're farmers. We don't get to go on vacation very often. This is kind of close to us. But my grandparents left the entire cabin in my four, well, myself and my four siblings names. So there was money to maintain that cabin. and it's drying up. In other words, you know, we're running out to the bottom of it. And right now, our farm is currently bankrolling it.

Starting point is 01:23:58 So we estimate about 8 to 10,000 a year is what it costs to maintain the cabin. That's everything. And maybe a little bit extra if we have stuff happens, you know, quick fix and stuff like that. But I know for, so I'm 30. I have another sibling that's 27, when it's 25, and 20, gosh, 24 and then 18. So my question is, is that the farm is not in a position to bankroll this for a long time. You know, the farm will take care of it for, you know, what it needs.

Starting point is 01:24:34 But when does it ultimately become the responsibility of my siblings and I to pay for this because we own it? But we have guests and friends that stay in it too at no charge. Yeah, you guys are going to have to just create some kind of, document, honestly, and rules and boundaries around this property because five people owning a property is pretty difficult. And so from the... It is. And the biggest thing is that I know at least, so my brother, the only boy, he will probably, we've talked about it in our family before, he will not financially be able to contribute to this camp year after year. So we estimated, you know, between $15 to $2,000,000.

Starting point is 01:25:18 year each of us give into the camp to kind of, you know, help help pay more. You might either just buy his portion out, and he doesn't own it anymore if he can't. But that's the thing, though, my parents alive, like, you shouldn't do that. Just pay for his part. You know, he can't do it. So, so I need to help him. Shared owners should mean shared responsibility. And so it doesn't really matter what your parents feel like you should do. He owns a fourth of this. So a fourth of it is his responsibility. And if he can't pay it, you guys can be generous for a little while and ship in. But long term, you're going to have to figure out if he should be a part.

Starting point is 01:25:48 of this or not, and that's going to be the harder conversation. Wishing you the best as you have those conversations, but I like Rachel's plan, make a document, make it very clear so that nobody goes, but I thought that's not what you want. Welcome back to the Ramsey Show in the Fairwinds Credit Union Studio. I'm George Camel, joined by Rachel Cruz this hour, taking your calls at AAA 825-5-2-25. Hannah is in New York City up next. Hannah, welcome to the Ramsey Show. Hi, how are you guys? Doing great. How can we help? So basically my question is my husband and I own a gym here in New York City. And about a year ago, right before I had our baby, we decided to move into the basement of the gym to save money on rent and then kind of make it so that I could be a stay-at-home mom and run the business at the same time.

Starting point is 01:27:03 and in that year because we were like able to save so much money we paid off $70,000 of our business loans, but we still have about $120,000 in debt. And we're trying to decide when to move out because we're not technically supposed to live here and it's not the most comfortable living situation, but we do want to pay off the rest of our debt. Oh boy. So when you say technically, do you mean it's not legal? It is not zoned for it. Oh, boy.

Starting point is 01:27:41 Well, that poses a problem. Yeah. I mean, one is the actual legal implications. Another one's just the integrity of the situation on top of the risk that you're putting yourself in, especially with a baby. Yeah. I mean, is it even safe to have a baby there? It is safe. It meets all the requirements of the windows being above ground and, like, the ceilings being high enough, all of that.

Starting point is 01:28:07 It's just the zoning. Got it. Well, the real question is, why can't you guys afford rent and start to knock out this debt? We, I mean, in New York City, rent is so expensive. We were paying $3,000 a month for an apartment that was basically, you know, a call. closet. Can you afford to live there, Hannah? I mean, you're not paying rent right now, but in order to, you know what I mean, have

Starting point is 01:28:37 the four walls, what we call them, food, shelter, utilities, transportation. In order to survive, you have to be able to afford it. Will you guys be able to? I think so. We went from last year when we moved here. We were only bringing in gross $40,000 a month for the gym. and we've improved that by $25,000 a month. So now we're bringing in about $65,000 a month.

Starting point is 01:29:02 Nice. How much of that do you take home? So last year we were taking home basically nothing. But now we're probably taking about $10,000 to $15,000 a month. Great. Okay. So let's play this out. Even if you're spending $4,000 a month and you make $15,000, that's still reasonable.

Starting point is 01:29:24 And of course, everything's just going to be more. York City, but it's not like you guys are making $5 grand a month and you're paying $4,000 and rent. Right, yeah. And we could probably pay the same amount of debt off that we were paying last year. Yeah, I would make that a goal of let's still attack the debt aggressively and have a place that we can legally live in and rent, even if it slows you down. Yeah, because eventually you're going to have to move.

Starting point is 01:29:48 You know what I mean? So I think I would rather be on the proactive end of you all choosing than versus, I don't know, getting fined or something found out. You know what I mean? It's like a force situation. Or get sued by the city, I don't know. Yeah. That sounds like, I wouldn't put it past New York City. I know, right. I mean, for real. Yeah, I would be, I would be making this move soon. And just to set up a home and set up a, you know, a place that you guys are going to be for a while. Where did you guys move from? Just a couple blocks away. Oh, okay. Gotcha. Okay. Because we said we moved here last year. I I didn't know what that meant.

Starting point is 01:30:20 So, okay. Yeah, no, we just moved here last year. We actually did, the inspectors did come and look at it because someone reported us. Oh, boy. So you already found out. You're fine. Yeah, but they did it. They said that we were okay.

Starting point is 01:30:35 Wow. New York City is just a wild place. It is a wild place. So that's why we weren't, we're not too worried about it. But it would be nice to have, like, more of a real house. Yeah. Right. I would make it a very urgent.

Starting point is 01:30:49 goal to get out of there and get your own place. Now, what makes up the 120,000 in debt? What's left now is credit cards is about 40,000, and then I have 80,000 in student loans. Okay. And are those broken up into smaller debts and multiple credit cards? Yeah, it is multiple. So I would just debt snowball this, and you're going to just try to live as frugally as you can, which I know is saying a lot in New York City paying four-bren and rent, but anything that isn't your four walls and insurance, we're going to try to chunk at this debt. And that gives me some urgency to also go, hey, how can this business make even more? How do we really continue to scale this thing?

Starting point is 01:31:29 Because then if you can keep that up and your debt-free, you guys are going to be living beautifully in New York City. Yeah. Yeah, that's very exciting to think about. So I think this is a very doable plan. As long as that 65K a month is sustainable and it's not going to go down to 40 or 30 in the next few months, than spending $4,000 a month on rent, you know, if you need a slightly nicer place, you don't need to go crazy. But I think $4,000 a month will get you something a whole lot better than the three, right? Yeah, absolutely. Okay.

Starting point is 01:31:58 The goal is to keep it around 25% of your take-home pay, which I understand a very high cost of living area like New York City. It might be a little over the parameter, but the goal is to not have 50% of your take-home pay going to rent. And you guys are on the path to that. So thank you so much for the call. Stephen is in Lynchburg, Virginia up next. What's going on, Stephen? Hey, how are y'all doing? Great.

Starting point is 01:32:21 How can Rachel and I help? All right. Well, I'm 21. I'm a senior in college, and I'm planning on graduating debt-free, and my grandfather passed away in October, and I just turned 21, and I found out that I've inherited about $50,000, and I like to know what to do with it.

Starting point is 01:32:43 You all were recommended by a friend. We came highly recommended, Rachel. Call a friend. And Stephen called us, George. That's great. So you said you're graduating debt-free. Do you have any other debt? A car loan, credit cards, anything like that?

Starting point is 01:32:56 No, sir. Okay. How much do you have saved right now, aside from the 50-K? Not a whole lot, be honest with you. Okay. And you say you're graduating in May? Yes, ma'am. Yes.

Starting point is 01:33:10 What are you going to do after graduation? Do you know? That is one thing I'm trying to figure out currently. Okay, okay. You know what, Stephen, you know what I would do? You're probably going to hate my advice, but I would put it in a high-yield savings account, and I wouldn't touch it. And I would just let it sit there, okay?

Starting point is 01:33:31 And I would force yourself, not force, that sounds terrible. I would make myself when I graduate college to find a job, start, living a lifestyle on the salary that I'm making and create a life for myself and then when you're somewhere that is settled and that you know, okay, I'm probably going to be here for a bit, then I would probably use part of that 50 grand and other money that you're going to be saving

Starting point is 01:34:01 from your first job as an emergency fund and then possibly a down payment for a home. And... You know what I yield savings accounts? you would recommend. Oh, yeah. I got the one for you, my friend. We're in the Fairwinds Credit Union Studio, and they have an awesome smart bundle that they created

Starting point is 01:34:18 just for people like you. Yeah. And it's got a high-yield savings account with a great rate, also has a no-feet checking. And I like that the no-feet checking is connected to high-ield saving. So if you did have an emergency where you needed this money, you could get it. You could get it easily. So, Stephen, my caution to you is $50,000 is going to feel like $5 million when you're 21. That can go so fast.

Starting point is 01:34:37 So don't feel like you hit the lotto, okay? because if that's your mindset, you're going to end up spending it and thinking it's going to last you years and years and years and years and it won't. This is not a post-graduation vacation in a new car. Yes. This is future Stephen down payment money. Yes, future Stephen. You will be so thankful you did it. You'll be so thankful. Great job.

Starting point is 01:34:56 How many times have you started January saying, this is the year I'm finally going to get my money under control? But then months go by and you still feel broke. You work too hard to keep living like that. Look, there's only one way to move. the needle on your finances this year. You've got to have a plan. So start by downloading every dollar. Every dollar is way more than our world-class budgeting app. In 15 minutes, we'll build you a personalized plan to free up extra margin in your budget and use it to beat debt and build wealth. You'll find thousands of dollars on average just the first day. And you'll

Starting point is 01:35:48 get new steps and new lessons every day that help you stay on track and create unstoppable Don't waste one more day feeling broke and stressed. Get your plan in just 15 minutes by downloading every dollar for free today. Scott is in Sacramento up next. Scott, how can we help today? Hey, thanks for taking my call. I appreciate everything you guys do. Thank you. What's going on today? Yeah, I have a question regarding when it would be prudent to take on new expenses during the baby step journey. So a little bit of background for me. Starting sometime last year, I just got sick and tired of being sick and tired. I started really looking at my finances a lot closer.

Starting point is 01:36:51 And I'm in some debt and I decided to do everything I can to get out of it. And I started listening to the Ramsey show about two months ago or so. I'm picking up a lot of tidbits of knowledge and I think I'm really enjoying a lot of what you guys are. Good for you. That's awesome. Yeah, I appreciate it. My question, though, is some of the stuff that I've heard, Dave and you all talk about are certain types of expenses that would be probably good expenses, such as certain

Starting point is 01:37:24 types of insurance, long-term disability, identity theft insurance, things like that. My life insurance policy is like one-time's my salary right now. and I'm kind of in the I'm in the baby step two phase right now. I would like to know when, when during the baby step journey would be a good time to start paying towards these other expenses that I'm not currently paying towards. And another one would be like a will. I heard him talk about how, you know, at age 18 you should be getting a will or even financial peace university, you know, any kind of expenses that I feel like

Starting point is 01:38:05 would really help me in my financial journey. Yep. No, there are great questions. Yeah. So some of these insurances, yeah, I would say are probably a requirement that I would do. So some of that you would definitely want are renters or homeowners, obviously, in car insurance. But yeah, long-term disability is definitely what I would pay for. I mean, ID theft protection is a great one.

Starting point is 01:38:29 You know, Xander Insurance is who we recommend for that. And then for life insurance, are you married, Scott? That's complicated question. Yes, but I am actually in the beginning stages of a divorce. Oh, shoot. I'm sorry. Do you have kids? No, no kids. But it is, it is amicable. Okay. Yeah, so because the life insurance, that's what I was going to say, to have just term life, as if someone's dependent upon your income. And so, so yeah, in this situation, I guess depending on if you have to pay alimony, I don't know what that would look like.

Starting point is 01:39:05 But if it all comes out that you guys are not, if there's nothing financial that you're tied to her in any means, especially because you don't have kids, you may not need a ton of life insurance. It's really if someone's dependent upon your income. So that would be the one that you may could get away with for a little bit, unless again by court proceedings or something that you have to pay her a certain amount and you, you know, or something like that.

Starting point is 01:39:31 And then what other, do you have health insurance right now through your employer? Yeah, I have health insurance. I have auto insurance. I have homeowners insurance. So it's really life and long-term disability that you were kind of unsure about? Yeah, identity theft as well. Think about it this way. The baby steps are kind of offense to build wealth, and then you've got all these insurances in place for defense because those can derail all the wealth you're building. When you think about how many people go into bankruptcy for medical costs or a car wreck and you were underinsured and now they're suing you for hundreds of thousands of dollars.

Starting point is 01:40:08 That's the kind of stuff that you need to transfer the risk to the insurance company, and it's well worth the cost. The insurances we're talking about here are not expensive. Yeah, correct. How old are you? But is it something, I'm 41. Okay. What was that?

Starting point is 01:40:24 Is it something I should be looking into getting right now, even though I've really, I've just started getting gazelle intense, as you guys put it? So, yeah, the insurances are not a baby step. Yeah, yeah, I would go ahead put those out. It's a prerequisite to doing the baby steps. And so I would get a will in place. And if you want help with that, we've got a great partner with Mama Bear legal forms. You can create that online and they're, you know, created by attorneys, but you can just fill it out all online.

Starting point is 01:40:52 So it's super easy. And these are pieces of the puzzle, especially at 41. I don't know what the rest of your life looks like. Will you get remarried? Maybe, right? I hope so. And so, again, life insurance, you might want to get it now while you're young and healthy. Yeah, it's a good point. Because it's only going to get more expensive. And you can lock in, you know, a 25-year term so that you know you could get married and have kids and you're covered until you're, you know, in your 60s. And so there's things that you want to sort of think about future Scott and what he would be thankful to have. And I would just get it all priced out. And you don't need like millions of dollars of life insurance. How much do you make a year?

Starting point is 01:41:29 About 120 right now. Okay. So you'd be looking at like a, you know, $1.2 million policy, maybe even a little more if you want to go 12 times your income. And you might find that it's pretty affordable. And yes, it slows down your debt a tiny bit because it's going to cost you, I don't know, $80 a month or whatever it ends up being. But the peace of mind that you get, knowing that you're covered and knowing you're not going to pay $120, $4 years from now when you're older and it's more risky. It wouldn't be a bad idea. Okay. Yeah. And stay on the line, Scott, because Kelly will pick up and we'll give you. financial peace university and a year of every dollar our budgeting app just as a thank you as a new listener there's an insurance lesson in financial peace university that's right juicy stuff dave really crushes it on the insurance lesson rachel made sure he did that way to binge it it is just rachel hey do you want to do this lesson in financial peace university and i said it's too good i'm going to give it to dave i'll let dave do it he loves it he loves the deductible we love a deductible

Starting point is 01:42:25 but you're asking the right questions i appreciate the call we're excited for you yep sorry about the Yeah, not a fun situation. The divorce stuff, but excited about the money. Well, usually it's when the life changes happen is when you sort of take stock and go, am I, am I doing all the right things? That's a great point. People when they get, when they have babies, they do the same thing. They look up, they're like, oh my gosh, what have we been doing?

Starting point is 01:42:44 You know, kind of, yeah. Yeah, and a good way to make sure you're covered on all the bases for anyone listening is jump on to Ramsey Solutions.com slash checkup. We have an awesome coverage checkup tool with just a few clicks. You'll kind of know where the blind spots are when it comes to insurance and we'll connect you with the people that we trust for all of that. Yeah, but in high level, Xander Insurance for ID theft protection and term life insurance is great. Mom and Bear Legal Forms for Will.

Starting point is 01:43:07 So just some resources for you guys out there that are wanting to get your insurances in place as well. You want to get a little nerdy and sleep better at night. That's it. All right. Let's get out to Julia in Pittsburgh. How can we help, Julia? Hi, guys. So I just recently got my work bonus.

Starting point is 01:43:25 It was about $14,000 after taxes. Heck you. Yeah, and I have about $32,000 in debt, and I'm trying to figure out what is the best way to pay down some of it with my bonus. I have about $15,000 in savings for a long-term emergency fund and $1,000 for a short term. So I don't really feel like I need to use it to amp up my savings. I want to try to tackle the debt. However, half of it is no interest and some of it is very low interest.

Starting point is 01:43:58 So following the debt snowball, I could pay down the lower balances, but there's zero percent interest. So I'm trying to figure out does it make more sense to knock out the ones that have a little bit higher interest and pay it down that way. Well, the truth is you could be close to debt-free as soon as this bonus hits because you'll have $30,000 in cash spread out, right, between the bonus and all this emergency fund? Yeah, yeah. And so it really won't matter much if you do it the Ramsey way, which is leave the $1,000 emergency fund, but take the bonus plus the full emergency fund. That's going to be 29,000 out of the 32, and you can knock out almost all of it.

Starting point is 01:44:34 And at that point, just knock out the lowest balances and free up those payments faster, and then you'll have three grand left. And so the interest is really not going to matter. Okay. My only worry, and I feel like this is probably a worry a lot of people have when they have an emergency fund, is like, it took me a while to get there.

Starting point is 01:44:54 Yeah, but you also have... But you also have a zero percent interest. Yeah, but you also have a ton of payment. right now. So if you were debt-free today, how much money is going out the door in payments? So payments are 900 a month. I pay. Okay. So let's say you were gazelle intents, and that's baby step three is to bump up your emergency fund to three to six months of expenses. So what if you threw an extra $1,000 a month at that emergency fund plus what you were paying your payments, you could, in 10 months,

Starting point is 01:45:26 you could be back up to where you are and completely debt-free. Okay. You just got to be intense about it. It takes a mental shift to go, oh, I'm actually not safe having this money over here because I owe 32. The risk is still there. Yeah. Yeah. So getting rid of the risk, you will stock up that money really fast.

Starting point is 01:45:42 And I highly doubt you're going to have a $20,000 emergency while you're trying to build this up. So we're rooting for you. Follow the plan. It works. Hey, guys, George Camel here. Do you ever feel like insurance companies only care about your money and not what you actually need? Well, there's a better way. When you go to Ramsey's insurance.

Starting point is 01:46:16 resource hub, you'll start feeling confident that you're getting the right coverage that's truly best for you. You'll find helpful info on everything from life insurance, health insurance, identity theft protection, and more. And when you're ready to get the coverage you need, you can connect with a Ramsey trusted insurance pro who will only get you what you need at the best price. Go to Ramsey Solutions.com slash insurance. Ramsey Solutions.com slash insurance. Sarah is in New York up next. Sarah, welcome to the Ramsey Show. Yes, hi. How are you? Good. How can Rachel and I help today?

Starting point is 01:47:01 I'm just a little confused. I have some money like that I don't need right now, and I was thinking I'm not thinking. I just don't know who to trust on what to do. I'm not very savvy. That's one I have. Another one I had is that I want to buy a car out. Do you suggest buying or leasing? Okay, so I think you broke up on us a little bit. But you have cash you want to invest. You don't feel super confident. not super savvy on that, and you want to know about buying a car and what the best way to do that is?

Starting point is 01:47:35 Yes, correct. Okay. How much money do you have right now? So right now I have about, I have close to $100,000. Wow. Nice. Where is it right now? No, I'm sorry. I'm sorry. Yeah. Right. So I have about close to 80 just like sitting. Like that wasn't a CD, but I'm like, I want to just stop with CD. I want to do more. And then I have about the rest. I have them just like my checking.

Starting point is 01:47:59 which I live out of every month, but I make sure every month to leave over some for savings, even though I don't have too much. For sure. So you kind of have an emergency fund that's there. It's not an official emergency vibe. I never set up when I just set up a 401K plan when my company over is 2% match. And I did that. Nice.

Starting point is 01:48:21 I just started it. Good for you. I've zeroed that. No, I'm still young. I'm learning all this. You're crushing it. Great job. You said you're looking to buy a car.

Starting point is 01:48:29 Do you have one right now? No, I don't. Okay, and you need one for transportation to work or what? No, so that's the thing. I work in, I take a bus to work because I work in the city. It's not worth, like, Manhattan. It's not worth driving. Yeah.

Starting point is 01:48:44 But, like, personally, I think it would be nice to have a car. I don't know if I could afford one. I know I could, but I just don't know if it's worth it. Let's focus on the definition of a Ford, because most people go, well, if I can afford the payment, I can afford this car. And the problem is these dealerships With insurance What's that?

Starting point is 01:49:03 No, I know I could afford one now I don't know if I can upkeep long with insurance With a amount of you know That's something I think about And so the key is we're going to pay cash for this car And we know the long term maintenance and insurance costs on top of that And having into the city is like 10 X the cost of having it anywhere else Yeah, and a lot of people sell their car when they go to Manhattan

Starting point is 01:49:21 So do you feel like you really do need one, Sarah? For my freedom, yeah, at night And just to get out of places that it would be nice to have one. Okay. I haven't got one until now because I wasn't sure. I don't know. I just open the 401K, and I now pay for my own.

Starting point is 01:49:35 I pay for insurance. I was on Medicaid, and now I was K-12, so I'm not sure. You know, taxes just eats up so much. Yeah. How old are you? I'm 23. Okay, awesome. How much do you make?

Starting point is 01:49:48 I make about 49-year. $49,000? Yeah. And how much are you currently investing into that 401K through your employer? I'm investing 6%. Because I get like 3. I'm investing 6. Okay, so you're investing 6.

Starting point is 01:50:04 They're adding 3 on top of that. So a total of 9%. Yeah. Okay. So that's $4,410 is what's happening per year out of your $49,000 income. Okay. So the difference between investing in that CD is a CD has a fixed rate and it will mature and you'll make that, you know, 3.5 or 4%, right? Yes.

Starting point is 01:50:28 But with investing, you're putting this money into the stock market. And if you do it right, you're going to have a tiny piece of a whole bunch of companies that are doing really well that we're all rooting for. And what we've seen with... So how do I know who to trust and where to go? I'm ready to invest close to 80. Like, I don't need it now. I can invest like the next five years.

Starting point is 01:50:47 Sure. So, well, you have this 80, and that might be for a different purpose. And so right now we're investing... I would recommend investing 15% of your income, regardless of the employer match. So you put in 15, they put on three on top of that. That would double your investment rate right now. How cool would that be? They're giving me 3% though only for a 401k plan.

Starting point is 01:51:08 That means they can't pull it out, correct? Correct. You'd have to wait until you're of retirement age. So if you want money outside of that that you want to invest, you could use a portion of that cash to do so. Yeah, so. Yeah, so what I would do, Sarah, is I would get an emergency fund. So I would open up.

Starting point is 01:51:27 I just go to Fair Winds, that's a credit union, one that we recommend, and open up a high-yield savings account, okay, and put some money in probably three months of what your expenses would be for three months, and that we can consider that your fully funded emergency fund. So if we were to do that, how much does it take you to live a month? What are your expenses per month? So it takes me probably a little over a thousand? Just a thousand bucks?

Starting point is 01:51:56 How is that rent? I live on nothing. No, I live with my parents. Oh, okay. So, okay. So for now, we'll say your starter emergency fund is, you know, $5,000 for right now. Okay. So I would just keep that on the side.

Starting point is 01:52:12 And that's there just in case something happens. Now, when you move out of your parents and you start paying rent, you're going to bump that up, okay, as your lifestyle goes up. Then I would look at my retirement, like what George was saying, we went to fund. 15% of your income into into retirement. So that means 6% already is going into this 401k. That means you have

Starting point is 01:52:36 9% left of what you can invest with your income. And so what I would do is open up a Roth IRA and you can put up to $7,500. Is that right? Is that $7,500 this year? Yes, $7,500 for the year. Per year is the limit.

Starting point is 01:52:52 And so I would do and figure out, okay, how much of that 9% of my income needs to go into that Roth IRA? So those are, that's retirement. Okay. So when you do that, oh my gosh, I bet you could run numbers. Yeah, George, run, did you run some numbers? What I was calculating here, Sarah, and you can do this at home, and we'll put it up on the screen here for anyone watching. I'm using our investment calculator, and I'm going, okay, Sarah's 23. She makes 49,000 a year. And if she invest 15% plus you have a 3% match. That's 8,820 bucks a year. Are you tracking? Yes. So monthly, that's 735 bucks a month is going into that 401k into what we call mutual funds. And that has a collection of hundreds of

Starting point is 01:53:35 companies, and you own a little piece of those. And what we've seen is about a 10% to 12% rate of return over the last several decades versus that 3 or 4% you're getting in the CD. You tracking? Yes, but I never put that into the CD. I mean to say yes. I only, I put the 80 salesman into the CD. Got it. Yeah. That's why I got to eat, I put less than 80. But as far as the return, like you said, you're like, I want to do more with it.

Starting point is 01:54:00 And that's what investing will do for you. It's going to have compound growth. So if you have a thousand bucks in there. So number one, you have funds within your 401K, and there's going to be some great funds in there, as well as investing outside of retirement, which is where you can reach out to a financial advisor. And you can jump on to Ramsey Solutions.com and click on SmartVestor. And you can reach out to someone called a SmartVestor. pro. These are financial advisors that will teach you and help you understand what you're investing

Starting point is 01:54:27 into before you make any decisions. So it's not, hey, here's my money, take it, invest it. You want someone who's going to help you understand this. And what they'll do is invest you in the very similar funds. I'm like, I'm not sure who to try. I'm like, I don't know. You're right to be skeptical because there's a lot of bad actors out there who are really just insurance salesmen in cheap's clothing and wolf's clothing and they're going, hey, I got you. How about this whole life policy? And they make it real complicated. You want this to be as simple as possible. And so what you'll end up having is a retirement account, your 401k, maybe this IRA, which again is not connected to your employer, but another great place to invest with compound growth. And then outside of that, you've got the,

Starting point is 01:55:04 it's called a taxable brokerage account. And this is a non-retirement account where you might be able to, you'll be able to access that money before you're of retirement age. And so think about it like buckets. You want to have a few different buckets for flexibility and options. but can I give you the numbers here before we run out of time? Yes. If you keep this up, you remain debt free, and you never get a raise, which we all agree, Sarah will get a raise. She's going to make more than $49,000 in her career, right? But even if you didn't, from 23 to 63, if you invest $735, and we assume a 10% rate of return over those 40 years, if we smoothed it all out, you would have $4.6 million sitting in that 401K.

Starting point is 01:55:45 At 63. Here's the crazy part. You didn't contribute $4.6 million. You contributed $352,000 of that $4.6 million. $4.3 million, Sarah, was just compound growth doing the heavy lifting over a long period of time. So you want to start now. Yep. So go and find a smart vester pro in your area.

Starting point is 01:56:04 Interview two or three of them. Get a feel for them. See if you like them. These are people that we have vetted and that we trust. And if you guys want to check out that investment calculator, I will drop a link in the show notes or description of this episode. So go click there, play with the numbers for yourself, and see just how many millions you could have to build wealth and leave a legacy. If you've been working the plan, paying off debt saving, and changing your family tree,

Starting point is 01:56:48 I'm proud of you. And if you're in Baby Step 4 or beyond, it's time to celebrate. The Live Like No One Else Cruise is back March 14 through 21, 2027. Join the Ramsey personalities and me as we sail to Half Moon Key, Cosamel, Jamaica, and Grand Cayman on the ultimate debt-free vacation. Cabins will sell out just like last time. Lock in yours with a $600 deposit at ramsysolutions.com slash events. Our scripture of the day, Proverbs 2819. Whoever works his land will have plenty of bread,

Starting point is 01:57:42 but he who follows worthless pursuits will have plenty of poverty. Justin Timberlake once said, if you put out 150%, then you can always expect 100% back. That's what I was always told as a kid and it's worked for me so far. Interesting math. So you got to put 150 in to get 100 back out. Put that in your investment calculator. Not a great investment if I popped into a calculator. I don't know if I would do that investment, Justin.

Starting point is 01:58:09 I don't know. Okay, but I guess you're saying you really got to overdo it to succeed. You got to go over index on how much you try. Yeah, I guess so. Oh, yeah, yie. So if I put 50% in, I get zero out, apparently, based on this math. That's right. Yep, you got to go above and beyond.

Starting point is 01:58:24 You got to go all in, baby. Above and beyond. Thanks, JT. All right, Rachel joins us in Utah up next. Rachel, meet Rachel. Hi. Hey. Hi, Rachel.

Starting point is 01:58:36 Hi, Rachel. I just have a quick question. So my husband and I just read the Total Money Makeover last week. We, like, binged it, and we're so excited. We're all fired up about getting started, but we just want to make sure that we make the right first steps because we just got a tax return about $8,000. And we have about $4,500 of credit card debt. But we also want to sell our cars to downside so we don't have car payments. And we don't think we're going to be able to sell my husband's truck for more than what we owe on it.

Starting point is 01:59:09 So we're wondering if we should use the cash that we have from our tax return to help pay off what we owe on the. the truck after we sell it or if we should use the cash to pay off the credit cards and then sell the truck later on. Oh, great question. Okay, how much do you guys owe on the truck? About 14,000. 14,000. And what's it worth now if you were to sell it to an individual?

Starting point is 01:59:34 I don't know, but my husband's thinking it's going to be less because it's, it doesn't have, like, it's been in a wreck and so it doesn't have like a clean title. So I don't think that we're going to be less. that we're going to be able to sell it for. But you don't know 100% though, right? So I would look at Kelly Blue Book and put in all that information because you'll have, yeah, history with the vehicle,

Starting point is 01:59:56 you'll input all that data. And I would be curious what Kelly Blue Book says. You might be right. Yeah, you might be some underwater. Or you'd ever know, depending on when he bought it, you know, sometimes you could sell it for 15 grand. You're actually 1,000 ahead. I mean, we're not sure yet.

Starting point is 02:00:09 What's your household income? About 80,000. Okay, because the other option is just, keeping the truck and just paying it off aggressively. Right. Yeah, it's hard because we, yeah, we're just not sure if we should, like, do the credit card debt first or the truck loan because I feel like with this cash, we could for sure pay it off, you know, after we thought we could make up for what we owe still. But if we don't do that and we use the cash to pay off credit cards, I feel like we will have

Starting point is 02:00:41 that truck payment for a lot longer in order to save up. Well, if you knock out all the credit cards, that still leaves you with, what, $3,500 to throw out the car loan? Yeah, that's true. Then you're down to $10,000. Yeah, and how much is going to credit card payments every month? How much are you guys paying? We've actually, we have been able to pay off our credit cards without, like, the total statement balance, without paying any interest up until his point.

Starting point is 02:01:09 But we, that's, the $8,000 is basically all the cash that we have. Yes. Well, I was just thinking, yeah, if you paid off the credit card debt, that does free up some more money per month. That's not going to pay minimum payments on credit cards. You know, it's, that's cash back to you guys. But you're saying you've never had credit card payments? You've just paid it in full each month until now? No, we've paid off the statement. Yeah, we've never, yeah. But now there's a balance that you're carrying. Now there's a balance. It's not due to like the middle of next month. So we'd have, you know, a couple more paychecks before then, but it would probably, we might not be able to make it. I'm not sure. Okay.

Starting point is 02:01:53 I wouldn't just knock out the credit card debt, just debt snowball everything. So you'll knock out all the credit cards. You'll knock out a chunk of the car loan. You'll have 10K left on that. You're making 80K. So now it's how much of that 80K or take home pay can we throw at this car at this truck? And my guess is if you can throw, I mean, two grand a month, you're done in five months. Right.

Starting point is 02:02:13 Okay. So three grand a month, you're done. little over three months. We'll use that cash to do the credit cards. Yeah, is that all your debt you got is just the credit cards in the truck? And my car, but we'll be able to sell my car for more than what we owe on it. Okay. And still have enough to get something different because you're going to need something to get around, right? We actually, we actually have a car, another car. Oh my goodness. Oh, well, perfect. Perfect. That's great. It's like a Russian doll underneath that is another car. Okay. Right. That's good news. So you can sell it and be just fine.

Starting point is 02:02:45 and be completely debt-free. Yeah. Great job, Rachel. Just keep that intensity up and build the emergency fund, and then you'll never have to go into debt again. You've got sort of a debt insurance plan at that point. Yeah, we were kind of shocked when we read the book because we're like, oh, my gosh, we can be debt-free in, like, a few months.

Starting point is 02:03:02 Yes. That's awesome. Well done, you guys. I'm proud of you. That's the hardest part is just realizing we don't want to live like this anymore, and we don't need to. Most people would just assume, well, you've got to have a car payment. What are you going to do?

Starting point is 02:03:14 You can't save up and pay cash. for a car. That's crazy. So you guys are doing it the right way. We're happy that the total money makeover helped you guys out. It's a great book for anybody out there who's like, what is this Ramsey stuff? I just want to get on the plan and get fired up. It is the book. You can go check it out, Ramsey Solutions.com. Doug is in Sacramento. Doug, what's going on? Hey, how's it going? Good. How are you? Good. Hey, so just my question is, it's real brief. I feel like my wife and I are doing well. we both have good jobs, but I feel like we're not doing more with our money because we don't know what to do.

Starting point is 02:03:50 We have an emergency fund that's 15K. We have like 165 in a high-yield savings. What's that for? That's the thing is like my wife is this, she wants to save all our money. She's like worried about not having any and she wants to save, save, save. but I feel like we should be doing something with that. Okay. Are you guys renting or do you own a home?

Starting point is 02:04:17 We own a home. What's left on the mortgage? 340. Okay. So that's one thing we could do with the money. And it's at 3.4%. Okay. And you guys have no debt?

Starting point is 02:04:31 I have... Outside of the mortgage? I have a truck payment. We owe like it's $460 a month and we owe $20 on it. That's another thing you can do with that money. I'm fine in all kinds of things. We can do a lot of stuff, Doug. We have a couple grand on credit cards, but we always pay them off.

Starting point is 02:04:51 We never pay interest on it. Okay, you're not carrying a balance, you're saying? No, never. Okay. Well, I would, if I'm in your shoes, you're saying, what do we do next? I would get rid of any and all debt in my life and then start to tackle the house and also be investing 15% after that. So are you guys investing a certain percentage right now of your household income? I don't think a percentage.

Starting point is 02:05:18 So we both have like Robin Hood accounts that like a friend from work turned me on to. And I think I have like 10 grand on mine and she has like five or six grand on hers. Do you guys not have like a retirement plan through your employers? She has a 401K that's got 360 in it. And I have a deferred cop that's got 78 in it. Okay. I would focus on those tax events. managed accounts long before I ever opened up the Robin Hood app. I hate that thing with a burning

Starting point is 02:05:45 passion. It's basically the lottery for finance pros. I know, I know, I know nothing about like investing. So like that's the only thing that I knew how to do. Like a friend showed me how to do it. I would say investing is in your retirement plan is easier than navigating Robin Hood because they always got something new they're trying to throw at you and get into. So I would put away 15% of your household income, which is how much? What's the total between the two of you, gross household income? 270. That's a fantastic income.

Starting point is 02:06:15 I think you guys should be doing a whole lot better. That means you should be investing $40,000 across retirement plans. And I would start with anything that has a match on it, then move to any Roth type accounts or Roth 401K or whatever you have available, and then move back to traditional accounts. And if you still haven't hit that 15% mark and you maxed everything out, then you can go to things outside of retirement, you know, like a taxable break. brokerage account. But I would stick to mutual funds. I would never play with individual stocks. I wouldn't touch crypto. You guys can build some serious wealth if you just start to attack these

Starting point is 02:06:49 things in order with some focus. Yeah. So getting out of that consumer debt, getting a 401k in place, and a Roth IRA, and you guys funding 15% of your incomes into those. Yep, is a great place starting to start attacking the house. You guys have some movement you can be making for sure with this money. The baby steps will tell you everything you need to know, my friend. All right, that puts this hour with the Ramsey Show in the books. We'll be back before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.

The Ramsey Show - We Make $200K and We’re Still Broke

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