The Ramsey Show - You Get To Decide Your Next Financial Step

Starting point is 00:00:07 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 in the Fairwinds Credit Union Studio. This is The Ramsey Show. I'm Ken Coleman. Thrilled to be alongside my friend, partner in crime today to help you.

Starting point is 00:00:32 She is Jade Warshaw. The phone number is AAA 825-25-2-25-2-25. AAA 8255-2-2-25. Let's go to Taylor. Who starts us off in Miami, Florida. Taylor, how can we help today? Hey, thank you all so much for having me. I'm really excited to be here. I just got married last month, and I, my husband and I both are struggling to combine our finances because of all of the moving parts, and we're looking for advice from y'all. What do you mean by all of the moving parts? Okay, so one issue I have is I'm a contingent worker. So some weeks with the job that I have, I only bill for a four-day week, and some days I bill for a seven-day week,

Starting point is 00:01:11 which means my base income a month could be $4,400 or it could be $7,600. And it's contingent on, for compliance reasons, I don't want to say publicly, but. You just have an irregular income. Yes, it's irregular. But usually the base amount I make is $4,400, and then the most I can make is $7,600 in a month. What about him? He is part-time for the school system. system, he makes 1,700 a month.

Starting point is 00:01:41 Okay, that's it. Okay. So let's talk about why he's only part-time. Well, he has a rental portfolio, and he manages right now four different rental properties. What's that bringing in? So one of the houses is just been built, and he roughly built it for 160K, and he's planning on selling this one for 240K. the other two, the cash flow between the two of them, they're only paying for themselves right now.

Starting point is 00:02:11 Okay, so that takes us back to Ken's initial question and my initial concern, which is still working part-time. The truth is he's still only profiting $1,700 a month. We'll get back to that in a minute. I want to answer your first question about getting everything on the same page. So what I would do, it's not as complex as you think. you need one joint checking account that you're both paid into, and then you need one joint savings account or high yield savings account that you're going to place your savings in. And then from there, that's honestly it.

Starting point is 00:02:45 Obviously, if you end up with 401ks, each other will automatically be the beneficiary there, that sort of thing. So for now, just those two accounts. And what I would do is I would open up every dollar and I would budget for your minimum month. So for you, I would budget the 4,400, for him, the 1,700. and I would start with that as you're kind of operating amount of money. And as you get more money, you just add it onto the budget.

Starting point is 00:03:08 As it comes in, you increase it. And now suddenly you might decide, oh, well, instead of spending, you know, $600 on groceries, now we can add a little bit more to that. Or before we didn't have, you know, money to do anything entertaining. Now we can add that back to the budget, right? And as money flows in, you can increase line items or you can add line items. Or if you have any debt, obviously the extra money would go towards. towards your smallest debt.

Starting point is 00:03:34 Okay. We are debt-free. Both of our vehicles are paid off. We don't have any credit card debt. We have a savings established together. We got about between $3,000 and $4,000 in gifts from the wedding alone, and we did not take a honeymoon. Would you think that we could, or do you think that money should go into savings?

Starting point is 00:03:54 I think you need to take a honeymoon. Okay. Yeah. I think that's great. You said you have savings plus the money from the wedding. Is it just the $4,000 or there's more on top of that? No, I have, we have like another little, I guess you'd call like an emergency account with $2,000 in it together. Okay, so it's $6,000 total.

Starting point is 00:04:14 Mm-hmm. Okay. So what I would do is, I mean, I would probably plan something modest because, I mean, you only have $6,000. And then I would try, if I were you, I would probably try to keep half of this aside as I'm starting to build the three to six months of expenses. And then I'd do half for the honeymoon. And just keep it modest. Okay. Yeah.

Starting point is 00:04:35 What is your going to be your margin? Now that, you know, we've walked through, we're just operating off of $6,100. That's his $1,700 and your $4,400. How much margin do you guys have after all the bills are paid? Meaning how much is left over after all the bills are paid? Yeah, how much is left over. Between $900 and $900 a month. Okay.

Starting point is 00:04:54 What's, if you have no debt, where's all that money going? Well, it, up and we just got married last month. months, it paid for the wedding. And now we're just now back to a spot where, you know, we paid for it. Got it. So what will it be? We're just now back to a spot where we're breaking even because we just paid all that stuff off. Honestly, I got an uncomfortable position paying for all of that. And now I'm like, oh, I can call now. Okay, gotcha. Well, again, you know, as he increases his income, you know, or certainly sees more value out of that, you know, the managing the rentals, you guys are in a decent spot for you to win.

Starting point is 00:05:29 And the good news is you have no debt. So, you know, just walking these baby steps out, which sounds like you're in baby step three, which is to get a fully funded emergency fund of three to six months. Three to six months of expenses as my brain falls apart. I'm going to take that. I like that. Yeah, yeah. What's the plan for you guys' residents?

Starting point is 00:05:50 Are you renting now or what's up? No, I purchased a house before I met him. And that's the house we're living in now. So you guys have four properties total? Well, really, we have more than that if you include his portfolio. He acquired all of his rentals, and he has, like, a couple of lots that he purchased for a really, really strong amount. So you guys do have a lot of debt. Well, and mortgage.

Starting point is 00:06:16 And how much mortgage debt? How much home mortgage debt do you have combined, including all his portfolio? including all the 60s. I'm counting it right now. That's okay. I have six, there's 60K on one of the rentals. Okay. There's 120 on another. Okay.

Starting point is 00:06:37 And there's 260 on the house that we live in now. Okay. And the other things are paid off. Okay. Because when I heard managing rentals at first, I thought this was just what he did for somebody else. No, no, no. He owns them. He owns them.

Starting point is 00:06:50 Yeah. He owns them. But he's positive in equity on all of them. Understood, but they're not, and they're not bringing in, and he's breaking even on rents. I'm just wondering about that. He's charging too little, he's charging too little for rent every month. Yeah. He's got close with the tenants that he has.

Starting point is 00:07:08 I'll be honest with you. This is just me. I'm not, I think there's some things you've done really well. If I were in your shoes, you guys are newly married, there's part of me. I would love, because you said he's equity positive in all of them. I would love if you sold some of these in order to pay. off of your personal residence. Because if you did that, you guys would be smoking, like, unstoppable. Yeah. Okay. Think about that. What's your mortgage?

Starting point is 00:07:37 Yeah, but what's your mortgage every month? What do you pay? My mortgage is $1,600, but I pay $2,000 because I add extra $400 to principal every month. All right. And that's included in my, like when I told you, I still have $8 to $900 left over every month. That's already after calculating that. So it would be $2,000 total. Correct. I love that for you guys because if you turned around and took that money, how old did you say you were? I'm 27.

Starting point is 00:08:04 Oh, my gosh. She's got the investment calculator out tailoring. I'm loving this because this is not even including like your normal 15%. I'm just saying if you took that money that you have now, you paid off the mortgage and you said, we're going to take that extra $2,000. We're going to invest it. We're going to invest it for a long period of time. let me add this in here. I'm going to tell you what this number is

Starting point is 00:08:27 just based on that. And it is, drum roll please. You're going to have $17 million. Yeah. If you do that from age 27 to age 67, you have nothing in there now. You contribute $2,000 a month. Average annualized rate of return 10 to 11%.

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Starting point is 00:10:00 This is a paid advertisement. NMLSID 1591. on NMLSconsumer access.org, Eagle Housing Lender. Okay, I want to make sure that we lock in on the number you just threw at that last caller because... You don't just say 17 million and speed past it like you didn't just say what you just said. No. And we were talking about this, you know, the reason that number is so high is... Well, number one, the time in the market. Like, nothing beats time in the market.

Starting point is 00:10:43 The fact that they would be starting in their 20s and their case 27 years old, that's why it's so important. important guys. When we teach this stuff, if you can get it, if you can teach it to your kids, your friends, kids, your grandma, like, teach it because the longer, the younger you are when you start this, that compounding interest, man, it's, it's a, what is it, the eighth wonder of the world? Is that what they used to say? I think that's what it is called. Is that right, eighth wonder? And it's true because for them, yeah, age 27, age 67, not saying that they have to work until they're 67, because they're going to be millionaires, obviously well into their 40s, right? But the point here is it doesn't take much. Can we talk a lot? A lot of times people think this is the sell

Starting point is 00:11:23 the car show, right? Because we're always telling people to sell their cars. But in this case, $2,000 is what is setting them free. I don't even know if that's 15% of their income. I don't know how much they're going to make over the course of their life. All I know is today, if they paid off their house, which they had the money to do, to have that $2,000 of margin and how powerful that is. and all of you who are watching right now need to think about that. Because if it's not $2,000, maybe for you it's $1,500,

Starting point is 00:11:51 maybe for you it's $500. Go home today. This is everybody's homework. All right. Pull out an investment calculator. Go to ramsysolutions.com. Pull out an investment calculator and plug in the numbers.

Starting point is 00:12:01 It's going to ask your current age. So if you're 47, I'm 42. I put 42 in there. And then when do you want to retire? I'll put 62 and then start playing around with the numbers. And at the bottom where it says, what do you think your annual return will be?

Starting point is 00:12:15 I want you to put 10 to 11 percent because that's what you should be making in the stock market can. If your mutual funds are not producing at least that, which of course over the past four years, it's been bananas, it's been in the 20s most of the time, you need to put that because the truth is since inception, since 1926, the stock market has an annualized rate of return, which means if we take all the years and take the average of them, it's between 10 to 11 percent. So you can say, oh, Jade, what about 9-11? What about 2008 and 9? Jade, what about now, right?

Starting point is 00:12:47 That's fine. Yes, it does dip and do all of this. But it does it as it ticks up. It does it like this. So we're always going up. So I want you to do that. And if you're invested now, go and look and see, oh, my gosh, what have my returns been? Because if you're somewhere in the five and six and seven percent, you're not invested

Starting point is 00:13:05 in the top in the tops 10, Ken. You need to be doing better than that. So that's just a little something. something. And here's what we're going to do to help with the homework that teacher Jay just threw out to everybody. We're going to put a link to the investment calculator that she's got up on our computer right now at Ramsey Solutions.com. We'll put the link in the show notes. Kelly, the producer, is going to do that because she's amazing as well. So we got a homework assignment and we already have the cheat sheet for it. I know. All you got to do is go to show

Starting point is 00:13:33 notes, click on the link. And I just want to second the motion. When you do what Jay tells you to do, you're going to really have a on-the-ground experience with vision casting. Oh, so good. That's what, I mean, when you can see into the future and what she's going to have you do is plug in numbers and see what is actually possible. But the possibility has power because it becomes a number and you can see it in the future with just consistent activity. So what's going to happen is as a result of your homework assignment for these fine folks. Yeah. Is they're going to now start to visual?

Starting point is 00:14:11 and set a vision for their future. I know you're ready to preach on this because what happens when there's no... Don't get me started. I'll take an offering. What happens when there's no vision? People perish. And what that means, that's straight out of scripture. And what that means is their soul, the spirit in all of us, truly begins to seep out of your body. And without getting any more of that.

Starting point is 00:14:36 And so that's why it's so huge. By the way, while we're at it, there needs to be a vision for your marriage. There needs to be a vision for your children. There needs to be a vision for your professional life. There needs to be a vision for your health. Yes. I mean, you will perish. And what that means is that you are slowly, which we all are.

Starting point is 00:14:59 But this idea of never having a vision and something that I'm looking forward to is what kills people. It kills your soul. Long before they die. Which is what Edgar Allan Poe said to put a bow on it. Most men lead lives of quiet. at desperation and go to the grave with the song still in them. Sorry, I had to, you know, I'm now pulling old references. I love it.

Starting point is 00:15:19 I love it. That's the idea. That's what we're talking about. All right, let's get to Bianca, who joins us now in Las Vegas. Bianca, how can we help today? Hi, good afternoon. So I have a question. My dad is selling his house that I'm currently living in, living in, and we're looking at me,

Starting point is 00:15:38 my sister and him getting $100,000, $100,000 each from the house. And I have three kids. I have two twins that are eight months. And then I have a four-year-old. I had to leave the father of my kids when my twins were five months. So as a say-at-home mom, I'm trying to get back on my feet. And I'm trying to see what should I do with these $100,000 to get started. Okay.

Starting point is 00:16:07 Wow. Well, can you give us a little detail of what are the money problems you're dealing with? In other words, you know, we want to know what your debt is. We want to start there so we can kind of help you walk through what you should do with the 100K. So give us a picture. Okay, so I have some school that I have to pay off that is $12,000. And then my debt for credit cards and stuff is $3,000. And then I did buy a mentorship to get started in my business.

Starting point is 00:16:37 that I have to pay off as well. How much? 3,000. Okay. So 12,000 for the school, 3,000 debt of credit cards, and then my mentorship, 3,000. So you got $18,000 of debt. The $100,000, is that going to be the only money to your name, or do you already have some money saved up? No, I have nothing.

Starting point is 00:17:01 I was a stay-at-home mom the whole time. How soon do you get the money? As soon as house sells and they're taking pictures next week. Okay. And then also too, because I'm getting into like the hair business and my content and all that, I do want a room for the house that I'm going to rent because I'm thinking, I'm debating whether doing a two-bedroom and all of us sleeping in one bedroom and then having one room to have all my things to travel and stuff.

Starting point is 00:17:37 as a traveling hairstylists. Interesting. Okay. Exactly. So I'm just debating whether I should. So the houses here are like $1,600 for two bedrooms. And for three bedrooms is $2,000. To rent the room out?

Starting point is 00:17:53 That's the profit on renting the room out? No, for renting a house. That's just her cost, rental costs. Got you. So are you generating any revenue, any income at all right now as a hairdresser? Currently, I'm just practice. That's the thing. I'm just practicing my, because it's a hair bridal business.

Starting point is 00:18:15 So I'm still learning, which I did hair for 14 years, but since I did color, it's a way different department. So I'm like learning a lot of stuff. Got it. Well, here's why I'm asking. Here's what I'm asking. How are you surviving right now? That's what I'm trying to get. My mom.

Starting point is 00:18:34 My mom. She's someone helping me right now. Okay. So you're not going into debt. Oh, and then I do have child support, too, that I'm getting $1,800. Okay, so we have $1,800 a month coming in, and mom is helping you out, and you're not going into debt for living expenses, is what I'm trying to get at. No.

Starting point is 00:18:52 Okay, great. No. That's good. That's good. Okay. So your big question is, I'm getting $100,000. We don't know when you're getting that. We hope within three to four months.

Starting point is 00:19:03 The house hasn't even gone on the market yet. and then there's, you know, time to get that. So let's just say to be safe, we're looking at four to five months at the earliest that you're getting this money. Is that fair? Yes, that's what I'm thinking too. Okay. And so when we get the $100,000, we want to clear the debt and then we set you up for the next level. So here's what we got going on.

Starting point is 00:19:24 We got to do a commercial break, and we want to be able to help you. And so hang on the line, Bianca. When we come back, Jay's going to walk you through every penny of this $100,000. and how it can set you up for financial success. So that's the good news. You're going to be okay. Hang on the line. We'll be back to take care of you.

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Starting point is 00:21:36 separating from the father of her kids, and she's getting $100,000 from the sale of the home. and so we're bringing her back because we've got to walk through this. She's got $18,000 in debt. And so, Jade, let's jump in here because last we talked to her, she's trying to find a place in that $1,600 a month range for rent. And so walk her through here, what would she do with this $100,000? How does she get on stable feet with this money?

Starting point is 00:22:04 Yeah, so the $100,000, I would use that to walk the baby steps. So the first thing you're doing, you're paying off the $18,000 of debt. Okay, so that's going to leave you with a, 78, around 80 left. And then from there on, you're going to estimate, you're going to do some research here. You're going to say, okay, what's it going to cost to rent in the area? I think you quoted around $1,600 a month. Then you're going to estimate food, transportation, all of these things, and you're going to create a budget. Right now, it's kind of a make-believe budget. But you're going to go, okay, what's my cost of living? Is it somewhere around $3,000, maybe $4,000 a month? And then you're

Starting point is 00:22:38 going to take that and you're going to multiply that by six, and you're going to put aside another $18,000 to $20,000 as a six-month emergency fund. So we've already spent 40,000 of this money, and now we've got 60,000 left. Now, here's my challenge to you. I would not take this money, Ken, and siphon off $1,600 a month for rent until it's gone. I agree.

Starting point is 00:22:59 That is not a plan. I would take this money. I would tuck it away and a high-yield savings account under lock and key. This is where you need somebody to hold you accountable. You're not married right now, but you need a really good friend, somebody who you're willing to give access to your life in the way of, I know where this money is, I know what you've told me, maybe I get an alert

Starting point is 00:23:22 to my phone if you start spending this money, something like that, to where this money can just hide there until you're ready to purchase a house. Yeah, I agree. Right, yeah. You know what I'm saying? I just don't want to spend everything on rent. You're not going to spend any of it on rent. I have a plan for that, Bianca.

Starting point is 00:23:38 So let me ask a quick question. When you say traveling hairdresser, does that just simply mean you go to the clients? Is that what that means? Forgive my ignorance. Yes, yes. So in the vital industry, you go to the venue and do the hair there or you travel to a salon that I have where I do daily rental. Okay. But I just want to have a room to do content because nowadays everything is content, you know.

Starting point is 00:24:02 Okay. I thought I heard that. So that means you're doing some social media stuff, right? Yes. Okay. Okay, let me ask you a question. Are you making any income off of that content? So I do practice every weekend on somebody, and they tip me like, I mean, for the month I get like $100, $150 maybe. Like, um, is that, is that making money on the content you're posting? That's what I'm asking. You said content, and I'm getting somewhere with this. You said, I want to make my content work. Well, content doesn't work unless it's generating revenue. So are you generating any revenue?

Starting point is 00:24:38 any revenue? No, I literally just started two weeks ago. You just started? Okay. Okay. Can I just be a coach for a second for you? Uh-huh. Yes.

Starting point is 00:24:49 There's an old phrase on some cheesy motivational poster somewhere that says, when you chase two rabbits, you lose both of them. And I just wonder, and I'm not saying that this is chasing two rabbits, but I wonder if you shouldn't be putting all of your energy into doing people's hair. And then we get to a point where, to your point, I'm not spending any of the money. Jade's got it under lock and key, and I keep it under lock and key, and I'm able to pay for my rent, buy my own job, I can pay for groceries through my own job. I don't need mom to support me.

Starting point is 00:25:26 And I just wonder if that's not the best use of your time. Well, here is my work, my business. I understand, but you have to put time into all the social media stuff. So again, you don't have to prove this to me. I'm just telling you, you don't have to prove anything to me. I'm not being cynical. I'm just wondering. There's two sides of it.

Starting point is 00:25:44 And I want to clarify this. I think this is going to help you, Bianca. If you are already doing someone's hair that day for money and it's easy for you to film it, it's not taking a lot of time on your day, yeah, it makes sense to post it online. From there, your revenue can be more so about advertising and getting people in the air. Because, you know, people use social media like Google now. So that's a great advertising venue. I think to Ken's point, it would be a while before you're generating any sort of revenue

Starting point is 00:26:14 from platforms. Is that what you're going? Is that where you're going for? Yeah. Yeah. So the content is not for me to be like a content creator. It's just to advertise myself. Yeah.

Starting point is 00:26:25 All right. And again, I'm only raising it. To put myself out there. Got it. And I love that, Bianca. That's why I'm saying. I didn't want you to hear cynicism from me. More just focus, utter focus right now so that we're bringing in as much money as possible

Starting point is 00:26:37 because you're a single mama, mama bear. It's got to take care of some very important people. And so that's just me saying, think about that right now. Every ounce of time you have for work needs to be generating money. That's all. How many hours a week are you working currently? Because what I'm trying to get out, I'm just going to be honest with you. You got four kids?

Starting point is 00:26:58 Three. Three boys. Three boys. And you're going to have a $1,600 rent. Because remember, the plan is to not touch this money. So my question for, my question for you. for you is how many hours are you working a week at this or where do you think it will start? And if it's at a part-time level, what will you do with the other time to bring in money?

Starting point is 00:27:18 I'm just throwing some questions out there for you to be thinking about. So my goal is to work Friday, Saturday, and Sunday and just do it full time. Right now, I'm just doing a couple of color clients to, like, be able to help me pay the bills and my mom, too. but I just basically Friday, Saturday, Sunday, which are the busiest days to work. Because when I get to the point where my business will be successful, I can make up to like a thousand to a thousand five hundred a week. But what will you do on the days that aren't Friday, Saturday, and Sunday? What will you do on Monday, Tuesday, Wednesday, Thursday?

Starting point is 00:27:57 Well, my plan was to stay with my kids because it pays more, it costs more to have them in daycare or somebody watch them. And that's why my goal is Monday to Thursday, stay with them, and then Friday, Saturday, and Sunday work those days. Can Mama not watch them while you're out working? My mom? Yeah, your mom. Yes, my mom works.

Starting point is 00:28:25 I really have nobody to watch them right now. That's why I chose to go. Yeah. Okay. So here's what I just want to caution you. I want you to do whatever you can not to siphon this money slowly. Okay. And because what can happen is you can have a distorted view of reality of how well you're doing.

Starting point is 00:28:48 Because when the bills are paid and everything seems fine, it makes you feel like everything's good. But if your hair business is not bringing in the money that you really need to survive, you could look up and be in a world of pain in about a year or so from now. Right. So just caution that I think you're thinking through this. I want you to do a deeper level of thinking on the Monday through Thursday deal and see if there's anything you can find because don't automatically assume you can't find work that can pay for daycare. I don't want you to automatically make that assumption. Yeah. And to that point,

Starting point is 00:29:21 I'm going to throw it out there. Maybe the best move for you right now is to go work for an established salon that needs somebody cutting hair and you're not the one trying to find clients. You've got enough to deal with right now as you're going through a very traumatic time. You need time to heal. So I would be considering if I could go make really good money or as much money as you possibly can, given your time limitations for a salon where they're generating customers for you or however that works, I'm over my skis here on this particular topic. I should be letting you talk about the business part.

Starting point is 00:29:51 But I think if you could get somebody else to pay you is my point. I agree. Until you get established and then we find, okay, I'm going to start doing a couple, keep my hair color clients on, you know, maybe I'm. I do a Monday night, you know, and the boys are in bed at eight. Maybe I do a couple, you know, I do one late night color. Yeah. And you begin to build that way. And I think this is the mindset you're going to have to have. But here, Jade, well, you need to do everything in your mind. You need to almost trick your mind that that $40,000 is someone else's and you just cannot

Starting point is 00:30:22 touch it unless there's some crazy insane emergency, which, of course, you've got to. Yep. But it's truly emergency money only. And I think if you do that, you will find a way. And there's no way, Bianca, that Jade and I would bet against a single mama. No way. Like, there's zero chance. Right? I want you to hear that. Like, there's no stopping you.

Starting point is 00:30:45 I wouldn't get in front of you if my life depended on it to take care of those three boys. So I want you to hear that you got this. We believe in you. Okay. But get after it like your life depends on it, all right? Dave, we got a lot of calls on this show where life happens. One day someone's healthy, they're working, providing for their family. and then a curveball hits.

Starting point is 00:31:27 You know, we hear it all the time. A car accident, a cancer diagnosis, a heart attack, and suddenly everything changes. Yeah, and that's why you've always said that having term life insurance from Xander is essential because it protects your family if the worst happens. Yeah, that's right. You need 10 to 12 times your income in coverage. No gimmicks, no whole life junk, just straightforward term life protection. But there's another piece that people often overlook, and that's long-term disability insurance.

Starting point is 00:31:58 Yeah, it's important to understand the difference between them. Life insurance steps in when you die. Disability insurance steps in while you're alive, but can't work. So it replaces a large part of your income, so the bills still get paid while you get back on your feet. Now, if your employer gives you free disability insurance, great. Take it. If it's discounted there at a better price, take it. But if not, Zander can help you find the right plan, Whether you're single or married, it's not optional. If you're going to be out of work for a while, then you need to make sure the money still showing up. And that's why Zander is our go-to.

Starting point is 00:32:32 They make it super simple to get the right coverage at the best price, no pressure, no upselling. I've trusted Jeff Zander and Zander insurance for over 25 years, and so is my family. So don't wait. It's fast. It's easy, and it could make all the difference. Go to Zander.com or call 800-356-42-82. protect yourself, protect your income, protect your family. Buying or selling a home is a big deal. You didn't need me to tell you that. It's just such a huge, huge deal. The emotion, the money that's involved here. And the reality is all these deferring headlines. There's clickbait on social media. Somebody always trying to tell you about the latest things. But we want you to know we're here minding the store. What are the real trends? What are home prices at right now?

Starting point is 00:33:34 What are we seeing with the inventory? What is the rate on the average 15-year fixed rate? All of those things, we've got that for you so that you can trust the information. And you can get that, by the way, by going to Ramsey Solutions.com slash market. That's Ramsey Solutions.com slash market. Or we have the link in the show notes. All right, let's go to Nick in Wichita, Kansas. Nick, how can we help you today? Hey, guys.

Starting point is 00:34:03 Thanks for taking my call. I'm just honored to be talking. you all. You too. What's going on? So basically, my wife and I bought this house about a year and a half ago with two incomes. We had planned for two incomes for quite some time. And the Lord bless us with our first daughter. And so we kind of switched paths. So my wife, as a stay-at-home mom, because we'd like to expand our family a little bit further. But we know that now this house is a little bit more than we can chew. So we're looking for other options. And one thing that we're looking at is some land that we would like to buy and then build a house on. So I called the bank up and they said, hey, you should take out

Starting point is 00:34:45 a he lock to buy the land and then get a construction loan. And I said, helock, I don't know what would Dave say. So that's why I'm kind of calling in today. So before we answered that part of it, what is too much to chew this house? How much are you, you know, You're running short on money. Give us that breakdown. Yeah. So currently with our mortgage and everything, unfortunately, we got a 30-year loan. And so it's 40% of our take-home pay right now. Which is how much? Which is a lot more than 25%.

Starting point is 00:35:22 Take-home pay is about $65,000. So take-home is $65, and what is the actual amount of the mortgage right now? So the mortgage is a little over 1,800 bucks, but we put extra on because we wanted to pay it off earlier than 30 years. Okay, now knowing what we know. I'm sorry. Go ahead. Well, knowing what we know now, the 1800 is too much, right? It's too much for you guys.

Starting point is 00:35:47 So as we start thinking about what we're doing now and you're thinking about a house with land, what is the number you need to be at? if you could wave the wand and change your mortgage payment to the right percentage, what would it be at 25 at max? So 25% would actually be about $1,500. The minimum payment right now is $1,800, but we actually pay more than that to make it not a 30-year loan. That's why it's at 40%. So it's actually about $2,400 instead. You said you take home $65,000. That's around $5,400 a month?

Starting point is 00:36:26 Yeah. Okay. And you said you're trying to get the more, 25% is about 13,300. So I wouldn't, I just want to, I just want to make sure we're on, we're on the same numbers because you're quoting different numbers than I have on my paper. So I just want to make sure you're off by about $300 on a lot of what you're saying, which is not a lot, but it is a lot. You said I'm saying. So I just, I want to, I just want to make sure I'm, it's fine that you're off. I just want to make sure we're tracking together. So you've been paying extra on the 80s. $1,800 mortgage. That's the paying the extra is what's put that at 40%. Yeah. Got it. Okay. Now we can move forward. Keep going. So the plan is somebody told you to take out a HELOC. You're, it rose your hackles. Is that what they say? To buy the land. Yeah. And but I, first of all, you know our answer to that. But I, beyond our principal answer on that, I, I just don't understand why, well, I do. They're trying to sell your product. Yeah, don't do it. Um, but, you should be able to do the lot and the house all together in one construction loan. And it needs to be, you know, within reason for you. So can you do that? Have you found a place

Starting point is 00:37:36 where you could get the lot and build a house and come in where you need to come in at at what your monthly mortgage is? Yes, yes, I think so. So the lot is about 65 grand, and we put about 150 into a house on it. And so with the equity we have in our home now, that would be bring us at a mortgage of about 150, maybe a little bit less. So that would, our monthly payment would be about, probably a little bit less than $1,500 a month. That's great. Okay. It's a much better situation. So the point is, put the house on the market and do what you just said, but you don't need to get a helock to buy the land. Okay. Yeah. You're just going to be displaced for a while. Yeah. Well, they're just selling you the bank. That's their job. Yeah. I mean, that's how they make money.

Starting point is 00:38:24 So, but yeah, you don't need that. You just do it all in one lump sum. You've actually, have you built a home before? I've never built a home. Neither have I. So I'm a bit of a rookie on this. Me too. But I know you can do it all in one swoops.

Starting point is 00:38:38 It sounds like you've researched it. So yeah, you're doing the right thing. I'm glad that you have equity that you can get out of the situation. Yeah, absolutely. Me too. Yeah, you're looking for a construction of permanent loan. Sometimes it's called like a one-closed loan because you're not doing a separate loan on the land and then a separate loan. It's all together and it's one close. It's going to be easy for you to do it that way.

Starting point is 00:39:00 Yeah. Thanks for the call. You're a smart young man and now you know what to do. And hey, walk away from these things as we have when we've made dumb decisions or maybe not dumb, but risky. And then the risk comes home to roost. So learn from this. Let's go to Emily, who joins us now in Philadelphia. Emily, how can we help you today? Hi, thank you so much for taking my call. Sure. So my husband and I were expecting our first baby. June. Congrats. Thank you.

Starting point is 00:39:27 And we were wondering the best way to build wealth for our child, especially because we hope to have many children. We wanted to make a little bit and we wanted to start now with that. And I wanted to know how to start this and update it as we have more children and our salaries changes. Oh, I love that. You know, I feel like that's kind of been a sentiment lately, people calling in and thinking about the best way to build wealth for their kids.

Starting point is 00:39:49 And truthfully, I think, Ken, you would agree, I think the best way to set your children up for wealth is for you to set yourself up to build wealth. Because when you do that, not only are they learning valuable money principles in the home, right? They're observing what you do on a daily basis. So they're seeing you save money. They're seeing how you speak about money. They're sensing the feeling about money in the house, right? So when it's healthy, that's very good for them. Not to mention as you're building wealth, then you can do those things for them that set them up to succeed like, you know, pay for their college. You can help them with their first car payment. right? You can match the cost or, you know, different things like that. So I think that's the best place to

Starting point is 00:40:29 to start. And obviously, as you're doing that, yeah, you're putting money in a 529 for them. Maybe you have the extra money that you're putting it aside, you know, in a mutual fund that you plan to gift them at their wedding, right? Those certain things. So let's talk about, given that, let's talk about your financial situation and where you guys are today. Okay. Yeah, so that was also kind of part of it because we make about a total as a household like 200,000 per year. But I am not sure how we're returning after return to leave. What will it change to then? A hundred thousand.

Starting point is 00:41:06 Oof. Yeah. Now, how is that good? Because we don't have a ton of time with you, so we're going to roll through this real quick. How will that change your budget in the sense of will it be super tight or will you still have margin? It will be pretty tight, especially. Especially because we're looking to buy a house now, but we're doing that based off of his income just in case. Good.

Starting point is 00:41:25 Smart. So it will be pretty tight. So you want to optimize what we have. And you have no debt? No debt, no. Good. Do you have an emergency fund? Yeah, we have almost six-month emergency fund and about like $60,000 in $40,000 and a brokerage should put down for the house.

Starting point is 00:41:43 Very good. Okay. And so I'm moving fast here just for Jay to give her the final coaching moment here. So will we still have margin to keep? investing 15% in Baby Step 4 with the reduction, you'll still be able to do that. Yes. And then it'll be tight. So now it's Baby Step 5.

Starting point is 00:42:00 So we just aren't going to have a lot to put in there, Jade, is what I'm hearing. Yeah, you're just, 529. That's the reality. So we've got to figure out some income. Yeah. It's going to be tight because you're going to be investing 15%, you're buying a new house. I mean, that's what it is. But here's the thing.

Starting point is 00:42:16 How old are you guys? 26 and 27. 26 and 27. You are so. similar to the couple that called in earlier that was going to have $17 million. If you guys avoid debt, you continue to do this, your income continues to grow over time, you are going to retire with several millions of dollars, right? On the $100,000 income, on the $1,500 income, you're going to have plenty.

Starting point is 00:42:41 You're going to have plenty to put that $1,500 into your investment savings. Let's talk about something nobody wants to think about until it wrecks their budget, medical debt. Medical debt is one of the biggest financial landmines in America today. And that's why Health Trust Financial is the only health insurance provider Ramsey recommends. You guys, a lot of people have medical debt, even with health insurance, because you can pick the wrong plan, pay big monthly premiums and still get slammed with huge out-of-pocket costs later. And if you're self-employed or you run a small business, you're paying 100% of that bill. But Health Trust Financial shops multiple top-rated carriers with no extra cost or pressure to help you get the right plan while finding, you big savings. And they don't just look at the cheapest one. They help you understand deductibles, networks, out-of-pocket costs so you don't get surprised later. And most people who work with Health Trust Financial save up to 50% on their health insurance costs. That's real margin you can put towards working the baby steps instead of medical bills. So don't let one hospital visit sabotage your financial plan. Go to healthtrustfinancial.com and protect your budget. That's healthtrustfinancial.com.

Starting point is 00:43:59 Welcome back to the Ramsey Show in the Fairwinds Credit Union Studio alongside Jade Warshaw. I am Ken Coleman. We're so excited to have you with us today. The phone number to jump in, AAA 825-2-2-2-25. AAA 825-5-2-2-5. Mason joins us now in Richmond, Virginia. Mason, how can we help today? Hey, how's it going? Thank you guys so much for being here. I was looking for what advice you could give me where I think most financial advisor, would say that my fiance and I are doing really well for our age, but man, I just find myself really stressed and anxious about money all the time.

Starting point is 00:44:44 Well, give us some evidence that would say that these financial advisors are correct. So we've got about 50,000 in investments. We've got no debt. We've got new paid off vehicles. We've got probably about 50 grand in cash. I mean, I think on paper we would be doing well, but there's just something in me that keeps me. There's just something in me that's telling me, hey, you're never going to retire. Life's getting more expensive. It only gets more expensive. And that's kind of just keeping me up at

Starting point is 00:45:20 night. I get it. Totally understand. But this is nothing to do with paper. This has everything to do with your past. Okay. And what I mean by that is somewhere along the way in the environment you grew up in or some experiences that you have lived or been adjacent to, you have developed this narrative that you're actually calling us about today. Is that true? I don't mind if I'm wrong, but I doubt you just pluck this fear out of thin air. Where is it coming from? That's what I can't tell you. My fiancé comes from a very well-off family, and I come from a pretty middle-class family, never struggled or anything. I really can't tell you where it's coming from. But, oh, I know where it is.

Starting point is 00:46:05 You just told me. You actually just answered it. Uh-huh. Yeah, you did. You married a woman who comes from a very wealthy family, which is very different. And you've got a little bit of fear of, I'm not going to be able to finish the way that I see her parents finish. Or maybe I'm not going to be able to acquire everything that they have acquired. And you are comparing your now to where they are, excuse me, you're comparing your necks to where they are now.

Starting point is 00:46:31 And I think that's probably what's driving you crazy. I want to bring Jade in. What are you hearing? How old are you? I'm 24. She's 23. I think Ken is exactly right. Number one, you're very, I mean, you're just getting started. My husband and I got married at 23. And Ken is exactly right.

Starting point is 00:46:47 You both came from families that did fine and did well and better than fine. And you do feel that pressure of, okay, we both have a lifestyle we are used to. We want to get there right away. And you're right. You know, you've got 50,000 investors. said no debt, $50,000 in cash, you've done extremely, extremely hear me well for 23 and 24 year olds. You are so far above the game. I don't know if you heard the first call that we took where it was some folks in a similar situation. And I was explaining to them the power of compounding interest.

Starting point is 00:47:22 You are in such a magnificent situation because your margin is yours to invest. And you're not a millionaire today, but I'm telling you it ain't going to take long. Ken Coleman. It's not going to take long at all. And I don't know if you've sat down. Here's what, here's my advice to you. And I've said this many times before. Fear comes in two forms, rational and irrational. And what I find is the irrational forms tend to be extremely vague. So what you're saying, I'm just afraid I won't be able to retire. I'm just afraid I'm going to mess it up. I'm just afraid that we won't build wealth. Why? In what way? What's going to happen? So what I would challenge you to do is take that vague fear and put some like substantiated a little and put some meat on the bones. Well, if you don't build wealth,

Starting point is 00:48:07 why would that be? What would happen? You would lose your job. The stock market would crash and play out your worst fears. And then you're going to look at it on paper and you're going to, you're going to kind of laugh at it and go, okay, that's pretty silly. Right? So let's put you on the spot. Yeah. Because you're such a kind young man. And let's just put it out there. I want you to be as specific as you can on your greatest fear. The one that you lay awake at night, be specific. What is it? Yeah, we'd love to move to California one day, and I own a home in Virginia. She'll be moving in here.

Starting point is 00:48:39 And it's a lot cheaper in Virginia than California. And so I just feel, hey, maybe we're never going to be able to buy a home there. And I understand that. Okay, hold on. Now we're getting somewhere. That's good, but I want specifics. So let's be specific because we're actually going to use Jade's coaching here, but we're going to give her numbers.

Starting point is 00:48:57 All right? So let's pick a number that's pretty really. What is that house going to cost in California, roughly? Maybe $750 for a condo or townhome? 750. I think you need to up it, my guy. Let's go one point. Let's go $1.4.

Starting point is 00:49:15 Yeah, I like that. I like that. All right, 1.4. And how many years from now that you would be moving to California? Any time frame. I mean, we'd love to move out there soon and just rent and buy home eventually. Okay, let's go eventually. And let's go.

Starting point is 00:49:30 you like 1.4 or do you want to do more than that? Let's start with 1.4 because they can get a condo or like a smaller townhouse. 1.4 and you got no debt and all that. So your big fear, you're telling me your big fear is I'll never be able to amass the amount of money I need to to buy that house and not be house poor. Is that what I'm hearing? Right. Correct. All right. Jay take over. This is fun. Now listen to this. Okay. So here's what I do. I'd take the numbers and I'd work backwards. We talked about this earlier because this is vision, right? You're not there today. Although I didn't get your income. What's your income today? Combined, it'll be 130.

Starting point is 00:50:06 Fantastic. Okay. So what I would start with is I'd work backwards. I'd say, okay, I want a house that's $1.5 million or $1.4 million. And right now I make $130K. Out of that, what do you take home every month? It's about $8,000 every month. $8,000.

Starting point is 00:50:23 And of that $8,000, how much is margin? Extra. About $2,500. $2,500. So I'd be looking at that and I'd say, okay, $2,500, that's my margin. I want something that's 1.4. I've got to figure out how much money I need to save or make in order to have something that's 25% of my take home.

Starting point is 00:50:43 That's the math to solve for. And when you solve for that math, you're going to start having answers and it's going to give you something aspirational to work towards because here's the thing. It is 100% not out of reach. It's just going to take some concerted effort to get there. Fair enough. Sure. And then what you can do, you can say, okay, if I take that $2,500 and let's play this out,

Starting point is 00:51:05 let's say this a five or six or seven year time horizon, what if I invested that money? How quickly could I get there if I invested it? And I would play that out. I would go on Ramsey Solutions. I'd use the calculator. I'd use the mortgage calculator, and I'd use the investment calculator. Do it real quick. That's exciting.

Starting point is 00:51:20 Do it a real quick. Punch in $2,000 a month. Still gives them a little bit of margin for other things. And we'll do it on a, let's do it on a, five-year horizon. Do you want to do that? 31? Do we like that?

Starting point is 00:51:35 Yeah, five years sounds great. Okay, five years sounds great. So do you have anything invested currently? You said 50, right? That's just in retirement accounts. Nothing else. Oh, okay, nothing. Okay, I won't use a retirement.

Starting point is 00:51:47 Okay, so if you started investing that today, you're going to have $250,000 in the next five years. And that's just with what you have now. That's no side hustle. that's no cutting back. That's nothing else. So that's pretty sweet. So the point is, is we're not even putting you into this timeline that you've got to move to California in five years. What we're trying to do is address your fear, that you're never going to have enough to live the life you want to live. My friend, you're in great shape.

Starting point is 00:52:16 Wonderful. You need to take a deep breath. You need to take those fears to somebody else besides us, talk through them. What's the source of it? No, I'm serious. Because it's okay, man, but it's so huge. Jay was right to just lay these fears out on paper, very specific, and just see how silly they are. Or how serious they are. Because sometimes they are justified. So you're in good shape, young man. Thank you so much for the call. You're way ahead of most people your age.

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Starting point is 00:53:33 customer data, all in one place. Because when your numbers are connected, AI actually works like it's supposed to. NetSuite's AI helps flag cash flow problems, spot inventory issues, close your books faster, and cut down on manual reporting. If your revenue is at least seven figures, go to netsuite.com slash Ramsey for a free product tour. That's netsuite.com slash Ramsey. All right, let's go to Washington, D.C. next where Angela awaits. Angela, how can we help? Hi, thanks for taking my call. So I kind of have a two-fold question. question. My husband and I have a, you know, great jobs and we're in baby step seven, a huge day brandy fans. My question is like, I want to be a stay-at-home mom, but is walking

Starting point is 00:54:39 away from this high-income job worth it? And if so, in the meantime, what do I say for? What else do I do to prepare for this? Okay. Yeah. Yeah. Let's walk this thing back. So when would you leave? If you were to leave, how long from now? Well, I don't have a time frame. I'm thinking September, but of course, like, whenever God tells me to. You know, we were praying into it and stuff like that.

Starting point is 00:55:08 Okay. What's your reason? What's your reason for walking away? I know stay-at-home mom, but give me something specific. My girls, they're five and seven. You know, I don't care to bring them before and after care. I want to be there on field. Totally get it.

Starting point is 00:55:25 Totally get it. It's the greatest reason in the world. That helps me, though, because my job here is. Yeah, well, here's what we want to do. We want to help you get to a place on this call or shortly thereafter where you can make a decision. It's not for us to tell you. That's why I asked that question. That's the greatest reason in the world.

Starting point is 00:55:43 How much do you make? Right. $300K. Okay. And how much does your husband make? 178. Okay. And so you're in Baby Step 7. What do you guys have? What does your retirement portfolio look like? I'm looking for a number. So net worth right now is 3.1.

Starting point is 00:56:06 Fantastic. Great job. So you're going to go down to 178 when you walk. And my guess is, as smart as you've been, you guys are still going to have plenty of margin? Oh, yes. Yes. How much margin? I think of time. Yep. It's about 2,500 a month. Fantastic. I'm having a hard time finding any reason.

Starting point is 00:56:29 You probably just feel the pressure of it. Well, that's what my next question was going to be, is this because you're afraid that, hmm, what if I want to come back and I might be throwing something away? Is it that? Or is it fear of what other people are going to say? I don't think it's fear of what anybody else is going to say because, you know, my husband and I always joke with him. inside the house, like we are the Joneses, right? Because our standard is different, right?

Starting point is 00:56:57 We're content with what we have. So I don't care what anybody else has. I see it as a bad of honor to be able to do that with my kids. Absolutely. So my husband and I grew up in poverty. My husband and I grew up in poverty, right? I never dreamed, and he never dreamed that we'd be making this much, right? Yeah.

Starting point is 00:57:16 And so would it be foolish to step away? and not have been wealth because it's your definition of success. It all has to do with your definition of success, your definition of importance, where you place your values of importance, it all has to do with that. And some people do,

Starting point is 00:57:40 their values are in their job and what they generate and their income and their productivity and all that stuff in the workspace. And other people, their values are centered in other areas. and that is totally okay. Okay, I'm going to give you an example.

Starting point is 00:57:54 Have you seen the movie The Devil Wares Prada? I have. No. Oh, man. I get five and seven. I don't watch TV. I get it. You got to watch it.

Starting point is 00:58:05 But in the movie, she has this amazing job that, quote, a million girls would kill for. She's in proximity. She's making money. She's doing her thing. And she doesn't like what it's doing to her home life. She doesn't like what it's doing to her. relationships around her. And so she sacrifices it and people think she's crazy for giving up this dream job. But for her, her values are placed in other places. That's all I wanted to tell you is it's

Starting point is 00:58:29 totally okay. Success for you means you're there with your kiddos. And that's fabulous. Let's rewind to your real fear here, which is we grew up in poverty. So the fear under there is, will I, so the question, I'm making this up, but the question that comes with that reality is, will we have enough? That's a question that is constantly rotating in your head because of your backwards. Okay, great. So here's the deal. So we have to reframe the question. And so instead of allowing the question to be, will we have enough, now we know we'll have enough. Like your confidence when I asked you, what will your margin be? It was awesome. You were like, you literally went like this. You went, oh, $2,500. Like, you're so. I was prepared. I mean, I was. I was. I was. I

Starting point is 00:59:16 I'm praising you and I'm pointing out to you your confidence when you weren't thinking about that question. You just, boom, we're fine. So now the new question is, what is enough? And so before you make this move, you write that out, what is enough? And it's like what we have is enough. We are the Joneses to use your phrase. What is enough is that I get to be mom to my five and seven year old. That's enough.

Starting point is 00:59:48 Yes? It is. It is. That's where my point is. God has gotten that out of me the past year and a half. So my point is, you're making a great decision. You're making a great decision. And here's the deal.

Starting point is 01:00:03 Those girls are going to be 15 and 17 in a whisper of a moment. I'm telling you, I'm on the other side of it. I'm ahead of you. Okay? I got my middle ones going to college in three months. my youngest has got two more years. I don't even know how that happened. Okay?

Starting point is 01:00:21 My point is you'll never get this time back. You can always get back in and make more money. Right, right. It's just so much, right? And it's like, what else haven't I thought of to do it well? It's good. Yeah. Have you allowed yourself to picture what a day is going to look like?

Starting point is 01:00:40 Let's just assume that tomorrow, you know, you're out. You've checked. You're done. I'm decluttering my house. I'm decluttering my house, and I am going to exercise. Oh, I love that. What are you going to do with the girls? What are you going to do on the first Monday when you aren't working in it's summertime? And you realize, I don't have to go in today.

Starting point is 01:00:59 What are you going to do with the girls? We're going to go on walks. We're going to go to the park because on how old they are. Like, we're going to go find something to get into. Or maybe we'll travel. I don't know. Go visit family. Sounds pretty great.

Starting point is 01:01:11 I haven't really decided summers. I love that for you. I love that so much. You're going to cook meals. You're going to take care of yourself. My husband wants me to be a safe home mom. Like, everybody wants me to. Oh, my gosh, what are we waiting on?

Starting point is 01:01:26 Why are we even waiting until September? You just needed permission. Yeah. The chain of 300,000. Well, listen. It sounds like golden handcuffs. Well, by the way, that's real. It is.

Starting point is 01:01:37 By the way, that's why that phrase came about and why it has stuck in culture salon because it really adequately describes the psychological situation. when somebody's thinking about doing what you're doing. It almost feels stupid, doesn't it? Yes, yes. Yeah, I get it. But what we got to do is... I know.

Starting point is 01:01:56 Well, I hope we helped because we have to reframe. The reason I asked you what the first Monday looks like with the girls when you're done is because that's what you have to reframe around. That's what you're deciding on. You're not deciding on being stupid and walking away from 300,000. You are deciding to make unbelievable memories that when it is all said and done, long after you stopped working, you are dreaming and fantasizing on the past, the good old days. And when you go home, you are in the middle of the good old days. Man, come on, Ken.

Starting point is 01:02:36 So that's, listen to that. That's joy. That's kind of what we wanted on this call. So, Angela, you didn't need our permission. I think that hopefully you see this now as not a dumb decision, but maybe the smartest decision you'll ever make. Yeah, that's powerful. Okay.

Starting point is 01:02:57 Well, thanks for walking me through that and help validating some things. I appreciate it very much. You're an awesome mama. And, boy, you'll never, ever, ever, ever, ever regret making the move that your heart's telling you to make. That I'll stand by and I'll fight with anybody on that anytime. Listen to your heart. It's not just a great song by heart. Listen to your heart. I knew she was going to do it. Oh, it's such a blessing to be able to throw a bounce pass to somebody who can do something with it.

Starting point is 01:03:28 There it is. At Ramsey, we don't partner with companies chasing trends or pushing gimmicks. Trust is earned. And that's why we send people to Fairwind's Credit Union. See, a lot of banks rely on teaser rates, marketing hype and fine print. But that's not how Fair Winds operates. They've been serving members for 75 years, and you don't last that long by cutting corners. You last by serving people well. There's a reason their name is on the studio wall. They've built products that help you manage money intentionally, not pull you into debt. If you're looking for a practical way to organize your money the Ramsey Way, check out the Fair Winds Smart Bundle. It pairs a half. high-yield savings account for your emergency fund with a checking account that doesn't drain your

Starting point is 01:04:52 balance with fee after fee after fee after fee. Open your Fairwinds smart bundle today at fairwins.org slash Ramsey and get the Ramsey be weird debit card. That's fairwins.org slash Ramsey. Insured by the NCUA. All right, are you aware that we have Ask Ramsey? What is ask Ramsey. You ask, I'll answer. Ask Ramsey is an AI tool that's built and trained on our proven Ramsey principles. And today we're going to break down the most asked questions from the week. And the big question that kind of wins the derby as the most asked question, Jade, is how do I determine the appropriate amount and type of life insurance that I need? Wow. Well, first off, I love people are thinking about this. And the Ramsey principles do make it simple. When you go on

Starting point is 01:05:55 ask Ramsey, it's going to get straight to the point. They're going to say term life only. That's all you need. That's what we would say here on the show. You need a term of about 15 to 20 years. That's what we would recommend on the show. They're going to say, hey, coverage amount needs to be 10 to 12 times your annual income, which is just what we would say here on the Ramsey show. Now, the reason is it's very straightforward. Your life insurance, guys, it has one job. The job is to replace your income of something happens to you so that your family is taking care of, okay, if you should be beamed up sooner than you expect, okay? And the whole point is we want you to avoid really bad policies, things like whole life, universal life policies, and just remember if you're a stay-at-home parent,

Starting point is 01:06:38 you need coverage too. You need term life insurance, even if you aren't debt-free. So that's the main thing here. Life insurance is not a baby step. You need to get it in place as soon as you learn about it, Ken. Absolutely. So remember Ask Grams. can help you determine how much term life insurance you need to get from Xander based on your specific situation. Of course, you've been with us anytime. We have been partnering with Xander for a very, very long time. They are fantastic. Zander insurance absolutely can help you. What they do is they actually shop all the different insurance opportunities for you to get you the best rate. I've known Jeff Zander for probably 15, 20 years. Yeah. A great dude, great

Starting point is 01:07:20 organization. So zander.com is the website there. And go today. You won't believe, by the way, how affordable term life is. I don't think most people think that life insurance is as cheap as it is. Yeah, it's in the teens. Yeah. So very, very important. And you got to do it. I remember early on when we got this teaching. This was many, many, many years ago. And we were in our 20s, and I just newlyweds, and I remember feeling so responsible going to bed that night that if something were happening to me, my bride, we didn't have kids, was going to be okay. Absolutely. And that's the key, the peace of mind to know that if something tragic happens and unexpected,

Starting point is 01:08:06 that after all the grief and all of that kind of stuff that they're dealing with, they don't have to deal with the stress of not being able to take care of themselves. That's why this is such a huge deal. And that's why, by the way, Jade, people are asking that question. They're starting to see it. So very good stuff. Kathy is up next in Denver, Colorado. Kathy, how can we help today?

Starting point is 01:08:25 Yeah, thank you for taking my call. What I'm calling about is my dad's finances. He's 80 and has Parkinson's and recently had a fall, so I ended up having him in a nursing home so he'd have access to therapy. So he has, oh, close to 600,000 in checking. Wow. Yeah. And so I'm wondering if I'm overstepping my bounds to put it in a CD.

Starting point is 01:09:01 I've asked him several times, and his theory is he's going to get out, and he's fine, and he's going to go back to running his business, and everything's good. So he says, nope, don't worry about it. Okay. But it's, you know, it's only earning one accounts at 0.01, one's at 0.25. Are you have power of attorney? No. You know, because I'm just a kid and I don't need it.

Starting point is 01:09:33 Understood. So it sounds like I have a feeling, yes, this is. money is of issue, but I think there's a bigger issue here, which is you've got to work on convincing him that you need more control in this situation as he's aging. And hopefully, as his health is declining at a very slow rate, is my hope here. But you said he's 80. How long has he had Parkinson's? He's had Parkinson's for probably 25 years. His mental state since this fall has deteriorated. And he, yeah, I'm the only child, so I don't have like anybody else to kind of bounce ideas off of. What about his home?

Starting point is 01:10:24 His previous home? Yes, it's quite rural. And so I had originally thought I would try moving him home this summer when the weather wasn't going to be an issue. But last time I talked to him here this morning, he thought he was in a hotel. So. What is his retirement accounts like? What does he have there? I know he's got 600K in checking.

Starting point is 01:10:48 What does the rest of it look like? Most all of it's in CDs. And honestly, I would have to go look all those up. I'm not 100% sure. My names are on the checking accounts so I can write checks. Can you just move the money and not, I mean, I'm not saying I would move it to a CD. I'd probably just put in a high-yield savings account. But can you?

Starting point is 01:11:11 Okay. Can you move that? Yes. Your name is on the account. Honestly, I might just go ahead and do it. He's going to be none the wiser, and it's for his benefit. I probably wouldn't go as far as to invest it because I feel like he would need to sign off on that. He has more than $600,000 is what I'm trying to understand, correct?

Starting point is 01:11:32 Yes, yes. Yeah, he's probably got... What's his worth? I mean, if you had to guess. Oh, including land. Yeah. Um, probably 10 to 12 million. Oh, my gosh.

Starting point is 01:11:47 Yeah, I guess the reason I'm asking this is Kathy, I love where your heart's at, and I'm so glad you call us. I don't think you have to do much here. Does he have an estate plan? No. Oh, now that, now that to me is the priority. You getting in charge of, you're taking over his finances, I think that's going to happen pretty soon anyway. Uh-huh. He's in such good shape that I think the bigger issue, is like you're the only child, what kind of a will does he have? There's no will. There's no will.

Starting point is 01:12:18 He has to do that. Like, that is, that is priority number one, not you managing his money. You're already managing his money in the sense that if he begins to lose all of his ability to function, you're already on the account so you can do all that. But the guys get 10 to 12 million out there. You need to get a will while he's still coherent. Yes. Okay. Okay. That's priority number. one. You know what's going to happen? Jade, tell her what happens if he passes and there's no will. There's no will. It's going to go through the courts. It's going to go through probate. It's just going to take forever. And you don't know how all of this is going to get divvied up. I mean, you're the only child, but I don't know what else is going on. I don't know if there's an X-Y

Starting point is 01:12:58 for this or that. What happens if he's got a stepbrother and everybody comes out of the woodwork. Yeah. This is scary to me. This is something I would be dealing with this weekend. Not this weekend. Like, you're hanging up the phone with us and you're going to see dad okay now listen you know how to talk to him okay but you've got to be asking him questions like hey dad do you have an estate plan and things of this nature and that's not going to be fun to talk to because he's thinking about getting out and last thing he told you i'm coming back to run my business and all these things um you know what i might do i might call up a lawyer and find somebody that will we'll take this on and that will go with you to him

Starting point is 01:13:39 It's great. And kind of work, you know what I'm saying? So your dad doesn't have to go anywhere. You could almost start wrapping this up. So I would get with the lawyer, I'd say, here's the situation. We need to get this done. He's not going to come to you and try to knock out and let him get, you know, the gist of the situation in order to get that started. Okay.

Starting point is 01:14:00 Okay. All righty. But I would say this. I'd start with a question with dad. Hey, dad, what's your plan? What is your plan? And maybe you've already had this conversation, have you? Yeah, to a certain degree.

Starting point is 01:14:13 And, yeah, he's going to get out and everything's going to be fine. And he's going to be going to be going to be going to be sure. I mean, Dad, what is your plan upon you passing? Because that would happen. I don't think he thinks he's going to happen. Wow. Well, no, that's a whole other thing. Me either.

Starting point is 01:14:29 Because, you know, nobody else has. Nobody else has gotten out of this deal alive. That's true. No, no. Well, Kathy, I'm not sure. That's a tough one. but this has got to be the sweetest, kindest, most respectful nudge. Yeah.

Starting point is 01:14:44 There's no one else to do it. And trust me, this is not going to be near as painful as what it will be if you don't get this handled. I can assure you of that. Oh, we've had a blast on the road taking the Ramsey show out on the road to see all you find, folks. We have two down. We did Charlotte and Denver. Jade and I were out with John Deloney in Denver just last week, and we're about ready to head out next week. To join Rachel Cruz, it'll be Rachel, Jade, and myself on April the 21st in Phoenix, and we have a few seats left.

Starting point is 01:15:53 Not many, but a few, and it's your last chance to snag those. It is a live Q&A. So it's the show, and instead of phone calls, we've got people in the room standing up at mics asking us questions. We have a lot of fun. The energy in the room is absolutely amazing. So if you're listening to us or watching and you're in the Phoenix area, we'd love to see April the 21st. Go to Ramsey Solutions.com slash events.

Starting point is 01:16:17 Ramsey Solutions.com slash events and get your ticket. It's going to be fun. Are you going to be enjoying any Phoenix food or sights and sounds? Have you thought that far ahead? You know, if I could, I would try to get to a basketball game. I know. We already checked on that. Unfortunately, Sons will not be in town.

Starting point is 01:16:34 That's gum it. I know. We would have been there, Will. We absolutely would have been there. So, anyway, it's not going to happen. Leslie is joining us in San Diego. California. Leslie, how can we help? Hi there. So I'm looking for financial advice. I've had a lot of major changes in my life over the last couple of years. And the most recent one has actually led me to a housing issue

Starting point is 01:16:55 where I'm not sure if I can even afford housing. It's a thicker shock at this point. And I'm just, I have family and friends who are giving me advice and options and different things to do. And I'm just not sure what is really the best option for me. Okay. Maybe walk us through these options that you're getting all this advice. on. So one is all of this kind of plays into I was doing the baby steps

Starting point is 01:17:22 before all of this happened. Before all what happened? Take us back. So my mom passed last month. Oh, I'm sorry. And I was living with her, hoping to take care of her. Oh. So I was on babysat too, paying off

Starting point is 01:17:38 all of my debt because I a couple years prior, I was in a car accident and I got a settlement and I my coworker was like hey our job pays for this do it see what it says and before you do anything with the money so I started the you know the dates are in the baby step final planning and everything and I was on step two and then my mom got sick um with cancer sorry so I it's funny a week after she was diagnosed I watched a video of your guys is and And all of them had said in the instance of cancer, drop everything in sake. So that's what I started to do because I wasn't sure what to do next and I was focusing on taking care of my mom.

Starting point is 01:18:23 So she's now passed and I can't afford the place that I was renting with her. And frankly, I don't, I wasn't expecting the cost to be so close to what I'm paying now on my own for our studio compared to what we were directing. Sure. Okay. So I have been looking for different options, and, you know, there are different things. So I saved some money about $13,000 in cash over the last couple of months to try and get an essay to figure out what I want to do. I have, they're not blood related, but they're family, and they have offered to help me buy a home and I would pay them back. Which makes me nervous.

Starting point is 01:19:12 Yes. I don't want to ruin the relationship. Absolutely. Go with your gut. So take that off the list, shall we? Can we just delete that? Okay. Delete.

Starting point is 01:19:21 What's next? So I have been looking at housing, and I'm about $600, $800 short on just basic cost, whether it is rent or, you know, estimated utility cost. I do have a car loan, which is pretty high. I mean, it's not too bad at $21,000, but the monthly pay. payment on it, it's about $600 a month, which is roughly what I'm short every month. Sure. Yep. Wow. I have, you know, like I said, I've saved up $13,000 so I can take a good chunk out of that and try and refinance it again. And that that was a thought. And I, you know, continue to try and save between now and when I have to leave where I am. What about, when do you have to leave where you are?

Starting point is 01:20:03 It's two months to find a place. Okay, two months. What about, because you're getting back on your fee, And I'm going to ask you in a minute what type of work you're doing. But have you considered someplace where you have a roommate? Because you've just been in a roommate situation and you were able to, it was tenable for you. So what if we find another roommate situation temporarily while you're able to get career back up and going and all of these things? Maybe pay off this car or sell off this car? It is crazy that a small 300 square foot studio apartment is the same cost as a roommate. So then why don't we do a small...

Starting point is 01:20:45 So if what you're saying is, I'd rather have a studio apartment than a roommate, and it's the same price, that's fine. Yeah. So originally I was like, oh, if it's cheaper, I'll do a roommate. And I mean, I don't have anyone I can do it with at all. You know, there are ways to find people, you know, kind of a thing. But the price is, you know, minimal, like $100 difference maybe.

Starting point is 01:21:08 I mean... Do you have to stay in that area? Do you have to stay in the area that you're in? Because it sounds like your area is super. expensive? So that is leaving the area that I'm in. Okay, so let's get real numbers. If I was in the same neighborhood, that number would be like $3,000.

Starting point is 01:21:25 Okay, but what's a one... So going 30 minutes in one direction or another gets me closer to... What are the prices? What's the one-bedroom studio going to cost you? A one-bedroom studio, about 20 minutes from where I am now is between 1695. in 2,100. Okay. What's keeping you in the area where you are now?

Starting point is 01:21:48 My job. So I do work for a construction company, and my radius has been 30 minutes from that job. Okay. I'm going back here because there was so much floating around. The $1,600, I'm taking the lowest number you just threw out at us, 1695, okay? That's your saying, if you got a roommate for something bigger, it would be the same amount. Did I understand that right? Yeah.

Starting point is 01:22:10 Okay. Is the $1,600 a month, is that putting you $600 behind? About, yeah. Okay. So when I factor in utilities, yes. So we got to get out of this car. That's what I'm thinking. Yeah, because would the $600 in the car payment obviously make a massive difference for you, correct?

Starting point is 01:22:30 Yeah, so I... But you'd still be scraping. You what? I have $13,000 in my bank account. Uh-huh. Tell us, okay. That I have been... essentially hoarding while we figured out what was happening with my mom.

Starting point is 01:22:46 Great. I want to get some real numbers from you before we run out of time. First off, I want to know, what are you earning from this job? Before taxes, $62,000 a year. Okay, what does that look like? What do you take home every month? My net is about $3,000. I am putting money into a 401k in an agency. Okay, there we go. We need to pause that. I think that we need to get you familiar with the baby steps, and we're going to make sure you leave with every dollar and everything that's connected to it, which is our Ramsey plan.

Starting point is 01:23:17 But what I'm trying to get you down to is a foundational spot. We need all of your income at your disposal. If we were to do the following things, this is going to work for you. If we pause retirement, because it's kind of like what you said with the cancer deal, you kind of paused and you stuck stacked up money until it was time. It's the same thing with investing. You're not in a place that you're ready to invest yet. So it's temporarily pause it.

Starting point is 01:23:40 Get that money back in your pocket. how much money would that be back in your pocket? Let's see, it's 6%, so about $200 each paycheck. Oh, there's, well, we're at $400 already. And what I would do, if I were in your shoes, that $21,000 car, I would look and see what it's worth. Hopefully you're not upside down. I would go on Kelly Blue Book tonight, see what it's worth private sale, and I would

Starting point is 01:24:07 sell it. And then I would use the $13,000 that you have, and I'd maybe use, I don't know, eight or 10 and I'd buy myself a car in cash. And now you've still got a little bit of money there that if you have other debt that you need to clear out, you can start using that for other debt. And I'd keep $1,000 saved. That's what I would do because now you've got the $600 back in your pocket every month. Plus the $400 from investing.

Starting point is 01:24:31 I just found you $1,000. Okay. Why are you not excited about this? That's a lot of money, girlfriend. I just broke you free. So my job matches my 401K, so that's why I've been hesitant to do that. You'll be able to do that later. Remember, this is just temporarily.

Starting point is 01:24:49 I want you to have the money that you need to get in a situation where you can find some stability, get your legs underneath you, and now you're not feeling like you're in crisis mode. And when that happens, you'll be able to find ways to build up your income, and eventually you'll be able to invest again. And that match will still be there waiting for you when you need it. Welcome back to the Ramsey Show in the Fair Wands Credit Union Studio, alongside Jade Warshaw, I'm Ken Coleman. So excited to have you with us today.

Starting point is 01:25:30 AAA 825-2-2-2-5 is the phone number. We start off with Joshua in San Francisco. Joshua, how can we help today? Hi. I've got about $80,000 in tax debt and $50,000 in credit card debt. And I'm wondering if I should file bankruptcy and just kind of start over. What's your income?

Starting point is 01:26:03 $70,000 and then combined with my wife, like around $100,000. Okay. And that's your total debt that you just gave us? Yes. Okay. What is your mortgage or your rent? Rent is $2,200. Okay.

Starting point is 01:26:21 What's your take-home number every month? Take home for me is probably like 4,400. And for my wife, her job's a little bit seasonal. She cleans Airbnbs, but it's probably around like $3,000 a month, at least on average. Okay. And what's making you think that bankruptcy is the only way out of this? Because it just seems like such an insurmountable... number and now the taxes are like racking up interest and penalties and the credit cards are

Starting point is 01:27:05 you know i used to be able to do balance transfers and kind of keep it under control but it's just gotten out of control and so now you know it's just high interest uh i can make the minimum payments but just seems like i'm never going to be able to pay it off sure what do you do for a living? Maintenance tech for apartment buildings. Okay. And what does your wife do? She cleans Airbnbs and does some caregiving.

Starting point is 01:27:35 Okay. I'm going to start right here and go right to what I think is one of the key things we need to address today is what is the amount of income after taxes if Jade and I could just put it into your account today, okay? What amount of money would allow you to start making progress and feel like you're actually getting momentum? You mean like how much money? Let's just assume I'm giving you extra income after taxes every month. I'm asking you, do you know how much money extra a month? If I gave it to you and payments, what would make a huge difference for you to where you go, not only am I taking care of it, but I'm actually starting to knock this debt down.

Starting point is 01:28:18 I'm making progress. I see momentum. What's that number? Additional income. I mean, if it's 150, or 130 grand total, I don't know. That's the problem. You see what I'm saying? That wasn't a trap question, but I don't think you're on a budget.

Starting point is 01:28:37 Am I right? Correct. So the reason I ask you that is because that's part of the issue. Your wife needs to be working at minimum 40 hours. Seasonal work for people who are broke and are worrying about bankruptcy is not an option. there is no seasonal work. You work in every season. You're working 60 hours a week for a season, right?

Starting point is 01:29:03 Mm-hmm. You said that like, that's interesting, but like you didn't believe me. I mean, we have a 14-year-old. I've encouraged her to get more of a regular job for many years. Why are we talking about the... Yeah, but the 14-year-old is self-sustaining. The 14-year-old can let themselves in from school. I've raised three kids.

Starting point is 01:29:25 My youngest is 18 now. I'm not worried about the 14-year-old. That's an excuse. Why isn't she making more money? I'm just telling you where she's at. I get it. She's like resentful of the fact even that she has to work at all. Well, that's a problem.

Starting point is 01:29:41 But you called us for financial advice and you guys need more income. So let's shift. All right? I can't solve the marriage problem. I can't solve that issue. But I can tell you this. I can tell you $3,600 changes your life. Without question.

Starting point is 01:29:55 $3,600 a month? So let's shift it to you, okay? Because she's resentful for working, and you're calling us. She's not on the phone. So with the skills you have, can you pick up overtime or go to a second job? And what this basically means is roughly $2,500 a month or even $2,000 a month would make a big difference. Can you do that, Josh? I could, yeah.

Starting point is 01:30:21 Well, that's our support. I've worked two jobs. many points in my life. Great. But still, like, so say I came up with an extra three grand a month to pay down this debt. That's even if I'm putting every dollar of that, that's 36 grand a year, it would still take me, what, five years, four or five years. It's going to take you between three and four years if you go intensely to pay this off. Right.

Starting point is 01:30:52 So my question is, as an alternative to that, what if I just filed for bankruptcy, got rid of as much of this debt as possible? What if I told you, what if I told you I spent seven and a half years paying off $460,000 of debt? And I didn't file for bankruptcy. I think that's awesome. I'm just kind of, I'm older now. Why are we different?

Starting point is 01:31:21 How old are you? I'm 47. Bro. Don't be bringing that to me. I'm 51. You're not old. And here's why. Here's why.

Starting point is 01:31:35 When you file bankruptcy, the control goes out of your hands. Yeah. Do you understand what it looks like? I don't think you do. Go ahead, Jay. Paint the picture. No, not exactly. They're going to decide.

Starting point is 01:31:46 They're going to make all the decisions. Depending on which chapter you file, they're going to make all decisions. They're either going to say, hey, we're going to put you on a payment plan, which is honestly something you can do yourself. They're going to look at your ass. and they're going to say we're going to sell off these assets and these assets and we're going to put that towards the debt.

Starting point is 01:32:02 That's something that you can decide to do for yourself. It's going to take your credit. That's something that's already happened or going to happen anyway. Do you see what I'm saying? So why relinquish control when you have the opportunity here to go, okay, I can look at my assets, I can determine what I want to sell off, when I want to sell it off, how I want to sell it off. I can look and I can call the IRS and I can say, let's get on a payment plan. Here's how much I can put towards. it. And that's what I want to retain for you is the dignity of being able to make your own choices and not them come in and have your stuff sold out from under you and all the choices made for you. That's what I'm trying to save you from. I've never experienced bankruptcy. Dave Ramsey has and he would sit here and tell you, you can work your way through this. And I'm telling you from my experience of paying off debt, the next four to five years, they're not going to be fun. I can tell you that right now. It's not going to be something that's enjoyable. there will be enjoyable parts of life,

Starting point is 01:33:00 but working two to three jobs is not going to be the enjoyable part. But what is going to feel good is knowing that you made some mistakes, you made a bit of a mess, but you're also the same person that can turn back around and clean it up. There's dignity in that, and there is something,

Starting point is 01:33:14 there's a confidence that's built in that. And I can tell you on this side of it, if you allow yourself to walk through that, you're going to come out of this, a completely changed person and guaranteed better for it. Guaranteed, Ken. Oh, there's no question.

Starting point is 01:33:27 I think, Joshua, what we're hearing is a guy who feels like he's ready to give up. You called us going, I think this is my last shot. This is the Hail Mary. The clock's ticking down, and I only have a 55-yard pass, and I hope someone catches it, and I think it's bankruptcy, and we're telling you that's not the case. You've got to believe. I do tell you, you've got our marriage issue. You guys have got to get on the same page.

Starting point is 01:33:50 I get that she don't want to do it, but I think you guys are in the half-to stage. You're past the want-to. All right, let's cut to the chase. it's easy to get discouraged about crazy house prices and interest rates. But when you have the right real estate agent to help you buy and sell the right way, you'll have confidence to make smart decisions. Ramsey trusted agents aren't just experts who guide you through buying or selling. They're people you can trust to have your back from the first call to closing day.

Starting point is 01:34:34 Find a Ramsey trusted agent near you at Ramsey Solutions.com slash agent. That's Ramsey Solutions.com slash a... If you're working the baby steps, the best and fastest way to do it is by using every dollar. It's more than just a budgeting app. The plan is built right in. You can track your progress. Plus, get personalized recommendations in coaching for your situation. It's like having one of us walk with you every day, showing you the next right step.

Starting point is 01:35:14 You can start every dollar for free by downloading it in the app store or Google Play. All right. Let's get to Alex right here in our backyard in Nashville. Alex, how can we help today? Hey guys. Me and my wife are recently married. We have a 10-month-old. We're about $35,000 in combined debt. I make about $84,000 a year before tax, and she recently started doing photography, and that's bringing in kind of a slow passive income. We have about $13,000 saved, and I'm about to receive a $10,000 bonus. So we're just trying to figure out how to navigate this debt. Okay, $10,000 bonus. I was just writing everything down. When do you get the bonus?

Starting point is 01:36:00 I was supposed to get it this past paycheck, but I worked for the government. So there's no telling. It could be next paycheck or three months from now. So I'm not super depending on that right away. But I was wondering what the best course of action would be to do with that. I also recently found out that I have a pension from an old job. I have that I didn't know about. And I have to decide what to do with that. How much? As well. There's about $13,000 in that. And when I called them a week ago, they said that I can

Starting point is 01:36:34 leave it in that fund for up to five years after separation from that police department. And it'll grow at a guaranteed 5%. Or I can transfer it to my new retirement or I can withdraw it and take a penalty. I would transfer it to retirement. I would not pull it out. It's, if it's retirement funds, I'd keep that retirement fund at this point because the penalty will be what, not just that you're taxed on at income tax, but will there be a 10% penalty? I believe she said it was 20. Oh, yeah, we're keeping that locked in. So yeah, I would do, if you're able to do a direct transfer rollover and just roll it over to an IRA,

Starting point is 01:37:14 I would do that. So let's take that money off the table. So we've got the $13,000 saved. We've got a $10,000 bonus that's coming at someone. point we don't really know exactly when. So that gives us, in theory, 23, but today just the 13. So are you familiar with the baby steps? I am. We're on baby step two. Been on it for quite a while. We spent the last two years paying off about $80,000 worth of private student loans. Oh, wow. Very good. Very good. So this 35,000 is just the tail end. What kind of debt is it?

Starting point is 01:37:47 18 of it is a government student loan for me. Three of it is a government student loan for her. Three of it is a credit card that she had before our marriage. And am I missing any? Yes. Oh, sorry. About 11 of it is a vehicle. Okay.

Starting point is 01:38:10 Okay. So, yeah, I'm going to look at this and I'm going to reverse engineer it. And I'm going to say, how quickly do I want to pay off this? $35,000 of debt. And that's going to inform how hard we work going forward. Is that fair enough? Yeah. So I don't know if you've gone into every dollar, but in every dollar, there's a really cool feature in there. It's a financial roadmap feature where you can basically go in, plug in your numbers, and it'll say, based on what you're doing today, here's how quickly you can pay this debt off. So my question to you is, how much margin do you have to throw out this debt every single month?

Starting point is 01:38:43 Well, we just recently sat down to do a complete overhaul of our finances. And I would say currently, like excluding her photography, maybe 500 a month. Okay, 500 a month. So you brought up the photography. I want to actually talk about the photography because I think that's part of you guys breaking this thing free. You didn't include it in your $84,000 of debt, which makes me think there's not a whole lot, I'm sorry, in your $35,000 of debt, which makes me think that there's not a whole bunch of of money being made from that. How much is she bringing in every month?

Starting point is 01:39:19 Well, she started it two months ago, and she initially was booked out every weekend for a month, and she did all their shoots for free, and now she's doing shoots for about 100 a shoot, and she's doing usually two a day, Friday, Saturday, and Sunday. Yeah. I want to go back into the numbers here. You have a car loan for $11,000. What's the payment on that every month? It's about 500. I wanted to, when we got married, we talked about just selling it and getting something cash. Unfortunately, there's some damage to the vehicles.

Starting point is 01:39:53 No, Alex, I don't know why we're not talking about the $13,000. You said you're walking the baby steps. Well, if you're in the baby steps, you shouldn't have $13,000. And a 12 of that has to go. You should have $12,000 at your disposal today. And if it's me, I'm going to pay that car off. I know that's not the smallest debt that you have. Or maybe it is.

Starting point is 01:40:11 I can't remember what the number brought down. He's got $3,000 in credit cards and $3,000. I don't know if you're okay with that, but I want to pay that car off and get that $500 a month back, and that's going to take care of that credit card payment fast. I don't know. I'm sure why we aren't paying the car off. Well, the reason that we had so much saved is because originally we were living with my family

Starting point is 01:40:31 and we didn't know how much money we needed because we're first-time parents. So we'd saved it up, and then I just didn't know the best way to address. No shame at all. I'm just saying, you know, I'm not cracking on. on you. I love that you've been responsible. I'm just saying that's $12,000 you have to tackle this stuff. You know, at this point, yeah, if you wanted to pay off the car first, fine. If you wanted to do typical debt snowball method, knock out the credit card for $3,000, knock out the student

Starting point is 01:40:57 loan and then come back and hit the car. That's fine. The point here is you've got $23,000 to pay off. And how quickly can you do that? If you throw $2,000 a month at that, you're done in six months, right? If you throw $1,000 a month at it, you're done in a calendar year, right? And if a wife goes to work, Jade, full time, and still does the photography part-time, we're only talking about a season. We're not telling her to shut the dream down. Right. Just go get a $30,000 job or something. And, boy, we're out of this quick.

Starting point is 01:41:24 Real fast. Right. But you guys are going to have to, I think this is your first encounter with kind of like that sacrificial lifestyle. And you're going to feel it. You're either going to feel it in time. You're going to feel it in your wallet. You're going to feel it in the things that you wish you were doing with your money instead, the things that you wish you were doing in your with your time instead, because I can guarantee you this can.

Starting point is 01:41:44 Nobody likes a side hustle. No. Nobody likes working extra hours, and nobody likes doing it for 12 months. So we'll go ahead and get, that's a gimmie. We'll tell you that that's the truth. But if you're asking us, hey, how do we do it? That's the method. You keep $1,000 saved as baby step one.

Starting point is 01:42:02 You take anything else that you have saved and you apply it to your debt using the debt snowball method. That's smallest to largest. Buy balance. You knock them out. And then from there on, now you're on to being able to take that money, save up three to six months of emergency funds. But baby step two is the kicker because that's where the sacrifice lies. Right.

Starting point is 01:42:22 What are your thoughts? No, I mean, that's exactly what I was looking for. I guess I was just kind of looking for the green light to go ahead and just dump the 12 and keep the $1,000 saved. And I really wanted clarification on the pension as well. Yeah. I guess I'll just move that over to my current retirement instead of throwing it at the debt. Yeah, because most of it will get sucked up anyway if you do this. If you said there's a 20% penalty, you'll be taxed on your income tax. Yeah, I would not touch that. Please just roll that over. And make sure your wife's on board with this. Yeah. What are you doing for a living now? Federal law enforcement. Yeah. Are you able to pick up, you know, part-time work, you know, in that? I am not. But the nice thing is I have guaranteed salary increases. So in October this year, I'm going to give a time.

Starting point is 01:43:10 $20,000 pay raise in October of next year to be the same. Great. Well, if your wife is willing to, just for a season, start making more money, and boy, you guys are going to be out of this. I'm going to tell you right now. We've heard too many stories, so I'm going to challenge you to be out of debt in 10 months. I think you totally have that in the bag.

Starting point is 01:43:28 That's going to require, again, sacrifice and stretching, you know, as far as more work, but I think you guys can do that. Yes, sir. I appreciate you guys. Yeah, appreciate you. Thanks for all you've done to serve our community and in our country. That's great. You know, this is very interesting. You said something that I wanted to bring back to you to young couples that are out there listening and they're new to this. You said this is your first time. You're talking to

Starting point is 01:43:54 Alex, you know, and his wife. It's your first time reaching this thing where we've got to come together and sacrifice. And you and Sam have always been the model of that. Encourage young couples. Yeah, this is good for your marriage. Whenever you can lock arms, whenever you can band together and gang up against the thing that's trying to horn in on your marriage, your life, your relationship, your dreams for each other. That is so solidifying. And what you get the opportunity to prove to each other is I can count on you and you can count on me.

Starting point is 01:44:20 If Sam says he's going to do it, he does it. If Jade says she's going to do it, she does it. That is the best thing. It builds trust and security in your marriage and wealth. Hey guys, Dave Ramsey here. Every day on this show, we help people work through real money problems and figure out what to do next. Now, you can get that same kind of help anytime with Ask Ramsey. Ask your money question and get answers built on Ramsey principles we use on the show. Whether you're making a

Starting point is 01:45:06 decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to Ramsey Solutions.com and try Ask Ramsey today. That's ramsysolutions.com. All right, our Ramsey show question of the day is brought to you by Y-R-R-R-FI. Defaulted private student loans can leave you feeling stuck and overwhelmed, but Y-R-R-R-N-E-F-O-N-O-T options with a low fixed rate and a payment based on what you can actually afford. Visit Y-ReFi.com slash Ramsey. That's Y-R-E-F-Y.com slash Ramsey. It may not be available in all states. Okay, today's question comes from Brooke and Alabama. My husband and I are on Baby Step 2 with about 50,000 in debt. We are also in stork mode, meaning they have a baby on the way. I love that my husband

Starting point is 01:46:14 has a generous heart, but we always go over budget with tithing and gift giving and never make progress paying off debt. I suggested that we buy smaller gifts for now so that we can be more generous in the future, but he won't consider doing this. Am I being stingy, or is he being too generous for our means. Okay. So I want to start by differentiating between the tithing and the gift giving. So if you're a tither, that means that you're a Christian person and you have the belief of giving 10% of your earnings to a local church. And it sounds like they have that belief. So I'm going to decouple that from the gift giving because if that's a religious value or conviction that you have, that needs to be part of your budget. I would say whether you are in baby step two or not. So for most of us, myself included,

Starting point is 01:47:10 even when we're in baby step two, tithe is at the top of the list. Giving is at the top of the list. We never stop tithing. I would not recommend you do that. Now, if the tithe, aside from the gift giving, if that is causing you to go over budget, that means there's something else that's wrong. Either there are other items in your budget that are overinflated or your income is an issue, right? Ken, I mean, that's what I would say. Yeah. So that would be my first, I'd, I'd, I'd, put my detective hat on and I'd say, okay, are we going over the budget simply if we tied? If we stop the gift giving, are we still in the red? And if that's the case, we have further work to do.

Starting point is 01:47:44 All right. Let's talk about the gift giving side of it. In Baby Step 2, I think that you need to be very choosy, parsimonious in your gift giving. because generosity generally flows out of overflow. And you don't really have that. So I would be very thoughtful about if I'm giving, when I'm giving, and how much I can actually put towards it because you can't be putting yourself in the red being generous.

Starting point is 01:48:19 Yeah, you know, yeah, you just can't give gifts right now. I mean, if we're not, are we talking about your kids? Are we talking about the birthday? Right, exactly. Or we talk about Christos, what are we talking about? But if we're talking about like, hey, you know, Larry's retired. retiring. I'd like to get him a golf head cover. It's like, no, man, you're broke. We're all chipping in for Janice. You know, she's getting...

Starting point is 01:48:38 Janice. I can tell you, who doesn't need a gift? Janice. She don't need it. She's got cats at home. She don't need anything. She's... That is so... I feel like that's right. There's like hundreds of thousands of Janus's that are listening to us right now. We're going to get flack for that. Janice, we love you. We love you, Janus. Yeah, that's funny. Good stuff there. Let's go to Kylie now in Dallas, Texas. Kylie, how can we help?

Starting point is 01:49:05 Kylie. Hi, hi. How are you? Good. How are you? I'm doing well. I'm calling with a quick question regarding my husband and I. We actually have no debt, strong savings and invest constantly and consistently.

Starting point is 01:49:22 But we feel very stuck. We're hesitant to make big decisions like buying a home or spending because we don't want to make the wrong move. So we just are looking for clarity on what we're. we can actually afford and how to move forward confidently without overthinking everything. Great. All right. So let's take the thinking out. Let's just look at the numbers. How about that? Is that okay? Sure. Okay. So what is your combined income? Combined income is my husband makes 200K a year. And then he gets a quarterly bonus that ranges between 20 and 35,000. So let's split the difference there.

Starting point is 01:50:03 Right? Let's go 25,000 just for fun. It's not truly splitting, I know, for those of you keeping score. But let's say, so that's another 100,000. Correct. So 300,000, do you bring any income in? I do not currently. So 300K, what do we have saved? We have around 250,000 in a high-yield savings account. Great. What do you have in your retirement accounts? We have 50K in a brokerage investment. account and maxed out the Roth IRAs. And we also match the 401Ks. So what's your total investment

Starting point is 01:50:42 nest egg right now? What is it at? Including the 401K? Yeah. I'm not sure. I'd love to know minus the $50,000. So the $50,000 is the only non-retirement investing that you have? I believe so. Okay. Yeah. I was just trying to get a full picture. The bottom line is you have $250,000 in cash in a high-yield savings account, which is way above what your three to six months emergency fund would be. And you've got a great income. So what type of house, what's the price point for the house that if you had all the money right now, I don't want scared, Kylie. I want Kylie who's dreaming because she can get any house she wants to get within, you know, obviously we're not talking about any house. That was poorly worded. What is the house you

Starting point is 01:51:35 want to get. Just give me the price range. For the school district that we would prefer to be in, the entry-level homes are probably around a million. Okay. Okay. And so when I look at that, you know, our rule of thumb here is you don't want your monthly payment on that to be any more than 25% of your take-home pay. And of course, that's everything in. That's HOA, taxes, insurance, all of that is included. in that price. So my question to you is, if we were to get on a mortgage calculator and plug those numbers in, you've got the two, and this is what I would do tonight with your husband, technically at your disposal, I would take the $250,000 that's in the HYSA, and I would knock it down

Starting point is 01:52:26 to six months of expenses. What would you call six months of expenses? Currently without having any debt we're renting our rent is $3,000 a month, no car notes, no anything. So I'll save $6,000 a month. Okay. Okay, so $36,000. We save that out. Does that feel good? We'll round it up to $40.

Starting point is 01:52:50 That makes me feel good. Okay, so now we're playing with $210,000. So what I'd be looking at is what's you guys is take home pay? his take home is 6,000 after taxes a paycheck so 6,000 that doesn't sound right on a three you say this man makes 300,000 a year well he gets quarterly bonuses so just from the 200k it's a little over 5,000 a paycheck so a little under 12,000 a month take home okay okay so what I would be doing is I would be looking for a mortgage of around $3,000 give or take. That would be my goal that you're paying every single month. So then what I'm going to do is I would go into a mortgage calculator. I'm using the one on Ramsey Solutions. And I'd say, okay, what do I have to put down in order to get my mortgage into that placement? And then I'd work backwards from there. Right now,

Starting point is 01:53:46 you got 210 you could throw in there. And if you wanted to get into this brokerage account, you could. That'd give you 260. If you wanted to, there's really no penalty in you doing that. And I'm looking at a 15-year fixed rate. If I do that, if I put $260,000 down on this million dollar house, that gives me a monthly mortgage payment of $7,955 estimated. For you, that's too high. So then I go, okay, what if we doubled that? What if we saved up, you know, 250 more over the course of time? How quickly could I do that? Now I'm putting $500,000 down on this house. When I do that, suddenly my mortgage is down to $5,800, right? So that's the game I would play, and that's going to help you know how much money do we need to have saved up in order to do this in a way that feels good. It feels right. Right. Would you recommend in the meantime to just continue renting in the school district that we would want to be in?

Starting point is 01:54:43 Yeah, I would. I think that that's where you guys want to be. And all you're doing it, when you're renting, you're just buying time. You're buying time and you're buying money to stack up for this down payment. And I think that that's a great. investment for you guys. You're going to be there in the next two to three years. Dave Ramsey here. Most people stay stuck with their money because they're not paying attention to it. Most people are living paycheck to paycheck, stressed out and broke. Don't be most people. You work way too hard to be broke and feel broke and you deserve to have something to show for it. That's why we built the every dollar budget app. It gives you a personalized plan for your money that shows you how to free up. extra money every month and use it to beat debt and build lasting wealth. Plus, you get real

Starting point is 01:55:57 coaches guiding you through your plan step by step. Look, most people hearing this will just keep hoping something changes, but not you. You're ready to make change happen. Starting now, go download every dollar in the app store or Google Play and start for free today. Our scripture of the day is first Thessalonians 511, therefore encourage one another and build each other up, just as in fact you are doing. Our quote of the day from David Brinkley, a successful man, is one who can lay a firm foundation with the bricks. Others have thrown in him.

Starting point is 01:56:47 I promise you, I've done that. I've done that a couple times in life. That always feels nice. Chris is up in Atlanta, Georgia. Chris, how can we help today? Hey, I was calling, had a question. I wanted to get you guys' opinion on if the vehicle that me and my wife are looking to purchase is in line with our current financial picture.

Starting point is 01:57:07 Okay. Tell us about it. How much it costs? All right. Looking at two different trucks, and one of them that I really like is $45,000. Okay. Okay. What's the other one? The other one's $35,000. Okay. And what else do we need to know here? So do you have any debt? No, sir. No debt, just a mortgage. And what do you have saved up for this vehicle?

Starting point is 01:57:37 Well, currently in retirement savings, I have 272,000 in a traditional 401k through my employer. And me and my wife, we have $15,000 liquid cash in a savings account. And what is your combined income? Last year, my taxable income was $187,000. My wife makes $35,000. So after-tax bring home between $150 and 160. Right. So you've got more than enough to cover, it looks like the truck, plus have a good three to six month emergency fund in cash, correct? Correct, yes, sir. And really where the question comes from is we just bought my wife a new vehicle after having our first child.

Starting point is 01:58:23 We did that with cash, and it was $37,500 vehicle. We paid cash for that. And we have cash to pay. We'd be paying cash for the truck as well. It just felt, like a lot of money, you know, within two months of each other. Yeah. Yeah. I mean, you've got it. What would you, of the $115,000, what would you consider your three to six months of emergency fund? We, you know, probably $25,000.

Starting point is 01:58:53 Oh, okay. Well, it sounds like you've got the margin there. Did you have the money possibly earmarked for something else? Because usually when you're saving up, you know, a stack of money like that, you're doing it for a purpose. Otherwise, you'd be investing. it, right? Correct. Yeah. And I mean, you know, for me, I've just always been, you know, when I, as I get paid, I move everything over that I don't need for the month to a savings

Starting point is 01:59:17 account. And you just said it right there. Your language there, that should set you free because you said, what you need, you keep in your account and what you don't need, you move over. So that means you don't need this money. It's not earmarked for anything else. And you're wanting to upgrade a vehicle. And what I'm looking at is the numbers of someone who can afford to do that. You don't have any debt. You've got the emergency fund of 25,000. You can spend another 45,000, and you've still got plenty of money left over. You've got a great income. It doesn't go against our rule, a rule of them here at Ramsey, as we say, vehicles shouldn't be more than half of your annual take-home pay. And that's because, you know, vehicles go down in value. And so we want to

Starting point is 02:00:05 make sure that we're limiting that. So you're not, you know, you're not going against that rule. I think this is just kind of a personal. Yeah. What's your emotion? Because you called us to get our take. What was your emotion about it? What did you think you should do? Yeah, it just felt like a lot of money. Well, it is. It is a lot of money. Whenever we, you know, whenever we bought our house, we put 20% down. So we wrote a big check then. You know, we paid cash from my wife's vehicle. We would pay cash for this one as well. Right. No, but does the 35... Right, but I'm leaning in here. Does the 35 feel way better to you than the 45, or is it very little difference?

Starting point is 02:00:43 Well, the main reason I call, because the 45 is the truck that I want. The 35 was where my wife was going through. Right. No, I get it. But I'm asking again, is there a different feeling in your gut, in your head, however you want to measure it? Is there a different feeling about the 35 if I paid 35 for something versus 45? That's what I'm trying to understand. Right. On my behalf, no, sir. Great. I'm very comfortable with the 45.

Starting point is 02:01:12 Right. It was my wife. Okay. And that's what I thought. I thought there was, and so that's where the relationship stuff comes in. So now to me, and again, I'm speaking from a guy who's been married almost 28 years. If, Jade, if Stacy and I are very separate on 10 grand, I'm going to choose. 10 grand less to be in a better situation? Maybe. I would I would push it a little bit because of course.

Starting point is 02:01:40 I would because expense, something being denoted expensive is all is all, it all has to do with ratio. And I don't I, I, yes, but that you're discounting a motion. Mathematically, yes. Now, and I would put that to her because obviously numbers and facts have the ability to affect emotions. I agree. And so if she doesn't have the right numerical facts. That's fair. Do you see what I'm saying? I think she does. I would push that just a little bit.

Starting point is 02:02:09 Yeah. Again, I'm not telling you not to do it. I'm just giving you my take, and I think that what I'm trying to get out of that, and I love that you push back on this because what I'm saying is then you've got to cast vision better. Yeah, that's true. You're not casting enough to where she feels safe. For some reason in her mind, she feels safe emotionally with 10 grand less. True or false?

Starting point is 02:02:29 True. So we got to cover that. You've got to fix that. Let me ask this, because I didn't clarify this. Are these brand new vehicles or are these used vehicles? These are used vehicles. Okay. Yeah.

Starting point is 02:02:40 Yeah, I hear what Ken is saying. What I, my thought is, this is why you work so hard. You work so hard. I agree with that. And you stack up and you save and you scrimp and you do all these things so that the day finally comes where you look at the lot and you go, I like that one. I get it. I like that one. But when the wife is going, I don't think you need that one, this one's better.

Starting point is 02:03:01 Yeah, but he's got to deal with that. Yes, but at the same time, I'd be like, come on, woman, don't kill my vibe because this is why I did all this. Only you can say that, because any dude that's got half a brain doesn't look at his wife and say, come on, woman, don't kill my vibe. I'm saying after he lays out the numbers. Chris, how comfortable are you saying that? I'm going to replay this and let Jade say it. That's my point, which is, by the way, really smart. That's a pro move.

Starting point is 02:03:27 Let Jade say it. I would rewind it. What's your wife's name if you want to say it? boy. Ashley. Ashley, this is you and me talking over lunch, you know. You guys have done so well. You got to live a little. This is what gives people gas in their tank. When they get to take, you know, the spoils of the war and go out and do something with it and have a good time. And by the way, Ashley, you can get yourself a little something too. That's what I think. I think you've earned it.

Starting point is 02:03:57 I'm backing away from the mic, Ashley. I'm just saying They've done so well They're doing so well I'm having fun I agree with you actually that the $10,000 if I'm talking to Ashley

Starting point is 02:04:10 I'm going to go let's walk through this let's walk through the 10,000 difference You feel so comfortable with 35 so I want to walk through this with you let's walk through it and not minimize her feelings let's walk through it

Starting point is 02:04:25 and let her get all of her words out and instead of having a counterpoint to her words, ask a question and response. There you go, Ken. You're so diplomatic. I love it. Well, it's not diplomatic. It's just psychology 101.

Starting point is 02:04:42 And I think she, for some reason, doesn't feel safe. She's going to get to watch this. And I actually think she should watch it because I think she'll see our heart. We're having a little fun of it. But yeah, I think it's fine for you to get the $45,000 truck. We spent all this time talking about these trucks. What are the two trucks? Yeah.

Starting point is 02:04:58 One of them is a One of them is a 22 Ford F-150 King Ranch and the other one is the same at 2019 and a little bit difference on the mileage as well

Starting point is 02:05:10 Right, so the 2022 is the $45,000 one. Correct, yeah there. You know, I haven't seen these newer King Ranches, but I had a friend who had a King Ranch when they first came out that is a nice truck.

Starting point is 02:05:22 It's nice. And I'm not a truck guy. If I showed up in a truck, people would be like, what happened to you? Oh, I'd be concerned But everybody in the studio is like shaking their head like, yeah, that's the one. Yeah, I think that's a good move. So, hey, I think her favorite dinner, her favorite restaurant, her favorite cocktail.

Starting point is 02:05:41 Maybe a gift. Maybe a gift. And dude, woo her on this truck. That's not manipulate. That's woo. Wooing. That's a big difference. And I think if you woo, you're going to go woo-woo when you get that big old King Ranch truck.

Starting point is 02:05:57 Thanks for calling, man. I appreciate it. Hey, to the rest of you, thanks for being with us. Remember this? 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 - You Get To Decide Your Next Financial Step

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