Transcript of Build Habits That Build Wealth

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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, and I'm Rachel Cruze hosting this hour with Jade Warshaw, and we are going to be answering your questions.

So give us a to call at 888-825-5225.

Starting us off is Robbie in Oklahoma City. Hi, Robbie. Welcome to the show.

Hey, thank you so much for having me. Really appreciate it. You know, I appreciate you giving me the time to kind of run some things by you.

Yeah, absolutely.

Yeah.

So currently I'm running into some issues from a budgetary standpoint. Just, you know, it really comes down to budget discipline at the end of the day with my wife. It's been a constant pain point for us throughout our marriage. We've been married over 10 years, got several kids, and while we're— I would say that we're not necessarily in a difficult position financially, the budget just keeps getting blown up, meaning we have really high and important priority things that we're putting money towards, and that money gets spent on other things. In particular, we were putting our kids through private school, and that's to the tune of about $2,000 a month to do that for us. And the money that we set aside for that ends up getting repurposed for more material things.

Wow.

And so, um, we've, we've gone through counseling, we've had many sit-downs, uh, over the years, and we just kind of go through this crazy cycle, you know, uh, where we— I feel like we're on the same page, and then, you know, here we are again, uh, dealing with the same issues.

Okay.

And so I'm basically at a point where I'm not sure what to do next. Um, Hence, you know, kind of turning to you all to get some wisdom, hopefully.

How much—

I'm just curious to know how much margin you guys have in your budget, or is it pretty tight? Like with private school, is it down to the wire and there's not much more room to do anything else?

So I would say we have the margin if we're disciplined.

How much margin?

Yeah, I would say we have, you know, about an additional $2,000 a month, um, that you have wiggle room there. Um, but you know, that's getting eaten up.

Um, so, and what is she, what is she spending the money on?

Uh, furniture, decor, clothes, um, you know, vendors for, for parties that she likes to throw. Um, it's, it's a lot of stuff, but I mean, those would be the higher spend.

Um, do you guys have categories in the budget now for clothes clothing, hosting, you know what I mean? Like the things that she enjoys to do, is there any money allotted to those things in the budget?

You know, that's a fair question. So to take a step back, you know, my income is designated for all, you know, necessary expenditures, you know, mortgage, utilities, like everything that, is, is necessary, um, and then also goes towards building our retirement, um, and savings. And what she brings to the table is basically everything else. So that, that would be contributed to, you know, and how much is that? So she nets around $60,000 a year.

Are you guys operating out of one account?

No, multiple.

But the funds are shared? Is it like a shared situation and it's just easier for your brain to think of it like that? 'Cause it is kind of strange that you're—

I don't like the separation. I like it's, like the ideal would be, yeah, we have this much in our housing, this much, this much. And regardless of whose dollars it's being pulled from, we're all functioning out of one account, if that makes sense.

Yeah, totally.

Yeah, she nets $60,000. What do you net?

$250,000.

Okay, and can I just ask, 'cause I don't wanna make any assumptions, what percentage are you investing every single month for retirement? What's the percentage number or percentage amount?

Yeah, so the— that's a good question. The percentage, I'm a little fuzzy on that. I put about, um, $750 in my 401k, uh, every month. And then that, uh, no, no, no, monthly. Um, so I get paid biweekly, and then that gets matched by my company.

Okay. And you said you net $250,000 a year?

Correct.

And she's at $60,000.

So you guys are a $310,000 household and you're only putting in $750 a month?

Uh, $750 a month. And then, uh, I put in another, so the 401 aside, I put in some into a brokerage account.

Uh-huh.

Separately.

Okay. So let me get, let me get to my point. My point is I wanna make sure that your ratios are correct. So we actually see the margin here because if you're telling me making $310,000 a year and you're paying $2K a month for private school. That's not crazy. That's less than daycare in some circumstances.

Yeah.

And there's only $2,000 left a month. I have a head scratch moment on that. So, cause my point is, if you're on my side, where's the money?

On my side. I'm sorry. I, I should have been more clear. On my side, I'm private.

And that's the problem.

Okay.

So Robbie, to get first—

I, I don't have visibility.

So here's, here's what I would say, Robby. Um, and I wish she was on the phone because I know there's two sides to every story in this, and it's obviously been a— it's been an issue because you guys have been to counseling for it and all of it. So on one, on one end of the spectrum, she's, um, you know, a shopaholic. She has an issue. She can't stop herself. It's compulsive. It is. It's an addiction, right? Like, that's one side. The other side is that you guys are on completely separate pages. You really don't know what's going on. She actually has the ability to spend a little bit of money every month. And to you, you're freaking out because everything is designated in this, we're separate.

Well, she can only spend off of her paycheck margin.

Off of her paycheck, and it's all separate. It's just, it's a little strange. So, if the middle ground, I may be leaning more to the latter for a second. So, what I would want, what I would suggest, you called us, I would sit down with her and I would say, we make X amount a month. Regardless of who brings it in, this is what we have per month. Now, out of what we have per month, we are gonna go down a detailed budget, and we're gonna talk about how much do you need for groceries? 'Cause if she's the grocery shopper, she's gonna know. If you haven't set foot in a grocery store in 5 years, you're not gonna know. So she's gonna know, this is how much we need for groceries. This is how much we X, Y, and Z, and you go down the list, and she has a clothing line item. She, all of this, because you guys are not, you're not, you don't have a ton of consumer debt, I'm assuming.

No, we don't owe on any of our vehicles. The only thing we really owe on is our mortgage. I mean, my wife has one $5,000, like, personal, um, you know, loan that she took. Um, just she's so— she's a realtor and took it out for some reasons that—

okay, so I would have an issue. Yeah, so I think you guys, Robbie, y'all are, y'all are all over the place a little bit. There's no cohesiveness. To this. It's her doing this, I'm doing that, my paycheck here, hers there. And I think that's the root problem. You guys are not working as a team. You're working as two business partners trying to make a household work, and it doesn't work that way. So tonight, if I were you, I would sit down, I would download EveryDollar, and you guys together create a household budget. And together, what are your debts? The $5,000 loan is as much yours as it is hers. I mean, you guys own all of this together and agree on where your money's going.

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Next up, we have Sherry in Orlando. Hi, Sherry. Welcome to the show.

Hi.

Um, I'm a little nervous.

Oh, you're good. Don't be nervous.

Um, I'm 70, and I've been told by my financial advisor last week that my IRA is only going to last me about 7 years. So he wants me to lower my distribution and raise the amount that's in the market. Um, and he suggested getting a job. Well, I, I would love to get a job, but I'm on high-flow oxygen.

Oh.

And I go, I go through a tank about every hour and a half when I'm out, and no one's going to hire me. Yeah, I feel fine, I just can't breathe. Yeah, right.

How much is in your IRA?

$130,000.

And how much do you pull from it? How much have you been pulling from it every year, every month?

Well, I've been pulling out $2,000 a month over the last 2 years. Okay. Um, I waited, um, I had alimony until I was 69, so I waited. Um, and so I've lowered my distribution to $1,500. Because my only other source of income is Social Security.

And how much is that?

It's $1,700 a month.

On, on that amount, the $1,500 and the $700, does that cover your bills? Or tell us how much you're in the red.

It's $1,700 a month, and right now it covers all my bills. Um, my son pays my mortgage.

How much is the mortgage?

Um, it's $1,700 a month also.

Okay, so he takes care of that. So you're— so you have the $1,500 that you're still taking out, and then the $1,700 basically covers all your bills?

Yeah.

Okay.

And the problem is, um, I have an expensive illness, so I have to have Medicare, regular Medicare, and a supplement.

Yes, yes. And that's where the $1,500 is going.

A lot of it, yeah. And then, um, HOA and stuff like that.

Your house, um, what do you owe on it and what's it worth?

Um, I bought it for $260,000 and it's down to $200,000.

Okay, what's it worth?

Uh, it's probably worth $300,000 now at this point.

Um, And so when you talk to your financial advisor, was he saying you're going to run out in 7 years if you continue to take the $3,000 before you cut that in half?

Um, well, I was taking $2,000. Um, yeah. And so even when I told him that I'd go down and with the goal of going down to $1,000 a month in distribution, he still said, well, that's still too much. Um, and I'm trying like Etsy and I'm trying eBay and I sell and I'm trying that. But I've just started at it. It's going to take a while to build that up.

What about customer service from home on the telephone?

I could probably do that. I'm just not sure where to look for it. I haven't had much luck on some of the sites.

I would look into that. I think that if you're able to, you know, have a conversation like this with us on the phone, that'd probably be a great place to start. And I would just, yeah, I'd, you know, get on the internet and look for, you know, at the different job postings and see that. I've said on here before, and again, this is not something that we endorse or anything, it's just something I did back in the day. There's a company called Arise that you can go on and do different customer service jobs. There's basically a whole posting of them and you can just choose which one you want. And you just need a headset and a computer and you can go from there. And it's not amazing money, but it is something. You probably make a couple of thousand bucks a month doing that.

That's all I need. I mean, I've really lived very frugally.

Right, right. Yeah, because if you got to the point, Sheri, where you don't touch this money, let's just say for 7 years, which I know may feel like a long time, then it doubles, right? So you got then $260,000 sitting there, and, 'cause you're withdrawing about 10%, which is high, because the market in some years is doing great. So he's probably running a very conservative estimate, which most investment professionals do when you're starting to withdraw. Money, and we actually probably take more of a lenient case. But even if you were, you know, taking out 6%, you probably would be okay. But then again, that gets you around to $1,000, and that's just basically just trying not to touch that $130,000, and you're just living off of the growth, which again, past years was 22% at one point, right? Which means your $130,000 would grow even if you were taking that 10%. So it's probably kind of playing that game. He may be a little aggressive on the 7 years. Of you running out at 7. I don't think that's going to happen. But Sherry, if you can supplement your income and not touch this for even 5 years, um, and find that extra $1,000 a month somewhere else, that would be a game changer for you.

Yeah, also he wants me to increase what I have in the market right now. It's at 30%, um, and he wants me to increase that to 40%. Do you think that's reasonable?

How, how can you? Where is the money coming from?

Well, I mean, the amount right now, the majority of it is in bonds.

Oh, oh, in your IRA?

Yes.

Oh, no, I would go all market. I didn't realize that. I didn't realize you had investment in bonds.

Yeah, yeah, yeah.

Probably where a lot of your problem is.

Yeah, because your bonds are probably only yielding 3%, Sherry, where you could be making— the numbers I was using was assumption that you had money invested in the market and that's at, you know, 22% one year. I think we're at 11% this year. You're going to get triple, if not more. By investing in the market. So, Sherry, I would. I know that probably makes you uncomfortable. I would at least go 80/20.

Even at this age?

Even if it was at this age.

Even though I'm 70 years old?

Yes, because you're having to live off of the return of what's happening. Now, I know that probably does freak you out, but you would have to ride out, right, if there is a down year or two. But when you look historically, even over the last 10 years, your gains would be triple than what you have now. I would say you actually should be in the market more at your age to have more of an aggressive growth pattern.

You don't have the luxury of being—

Of sitting in bonds, if you're trying to live off this money, right?

Yes.

So, I, yeah, so he suggested to you 70%, what was he, 'cause he's probably being—

Did he say 40, is that what you said?

Yes, he said 40.

I'd go, I'd go, I'd go 60 because you're gonna, you're gonna make so much more in the market.

Is he the one that put you in the bonds to begin with, or were you working with someone and then switched to him, or how did this happen?

Um, well, um, when Biden got elected, I moved everything out.

You did it?

Okay, the market. And then when Trump got elected, I changed that, but it And I talked to my son at Christmas and he was telling me, yes, Mom, you need to be a little more aggressive.

Yep.

So I upped it to 30% and right now my return is only 8.5%.

Yeah. So I think what's happened is you've allowed the market to spook you in different phases of life.

And the economy of the world.

And really, truly, the way to build wealth while you're investing is you truly do, you have to set it and forget it. Once you commit to a strategy, and we'll tell you what ours is, once you commit to it, you set it and forget it. Doesn't matter who's in, in presidential office, it doesn't matter what's going on. You are going to ride different waves. That is just part of it. So we're not going to sit here and tell you that there's never going to be a bump in the road. There is. But if you keep it invested, you don't lock in any losses, right? If you keep it invested, you continue to ride the wave and whatever dip occurs, you ride the wave until now we're back up again and above, right? So what I would do is what Rachel and I do. I would invest it across 4 different types of mutual funds. And if you don't, I think that the guy you're using is probably okay, but if you need somebody, you know, you can check out a SmartVestor Pro and they can walk you through this. But you're looking for mutual funds that are outperforming the market, really.

And that's where Rachel got that number of over 10%. Yeah, is what you should be looking for annualized, right? Obviously, in the previous years we've done way out, you know, way more than that. But yeah, growth, growth and income, aggressive growth and international is where you want this money and at this stage in the game, I'm with Rachel. Like, 80/20 feels fair. Yes.

So, I just ran some numbers real quick, Sheri. So, if you're 70, let's just give you 10 more years at 80. If you put that $130,000 and didn't touch it at an 11% return, that turns into $388,000. If you kept it in those bonds and they're getting a 3% return, it only goes to $175,000. So the difference there is astronomical. Now that's over a 10-year period, which I know is a long time. But if you just cut that in half, right, 5 years. So yes, Sherry, I would— I'm with your financial advisor and your son. I would be more aggressive and be putting more in so that you can actually be taking some money out and you're not tapping into that nest egg because you're not outpacing inflation even at this point.

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So this planner is more practical than ever. You're going to get brand new contents from Jade Warshaw. Myself and Dr. John Delony, plus goal-setting guidance and really clear action steps to keep your momentum going all year long. So do not wait. Grab it by August 23rd for just $35.97. This is the lowest it's gonna get, you guys. Even Black Friday pricing will not beat this. So go ahead and get your 2027 Ramsey Goal Planner. You can go to ramseysolutions.com/store, or if you're watching on YouTube or podcast, you can click the link in the description. All right, let's go to Keisha in Atlanta. Hi, Keisha, welcome to the show.

Hi, Jade. Hi, Rachel.

Hello, hello. Welcome, welcome. How can we help?

All right, first I just want to say thank you all, um, so much for the advice that y'all given, for being so transparent, um, with, you know, with what y'all have been through, and for giving the practical advice that anybody can follow. It has really changed my life, so thank you so much for that.

Thank you.

So I wrote my question out because I always hear people say how nervous they are, so I'm just going to read it. All right, so here it is. So my fiancé is 57 years old. He makes about $58,000 a year, has about $60K in retirement. The only debt he has is, uh, $50K in a car. Um, he owns his home that he owes roughly about $100,000 on. Um, me, I'm 46. I make $120K a year. I have $88K in retirement through my job. I have $50K in mutual funds, and a high-yield savings accounts, I have $20K.

I have a rental that I owe $46K on and no other debt.

I'm on Baby Steps 4, 5, and 6. I currently live in air property that we'll sell. When I get married, I'm going to move to where he is. So we'll sell that. And we'll also sell his house and buy one together. So my question is, he has the $50K in debt in the car. Could we or should we have a wedding that's budgeted at $5,000 or less in July of 2027? Or does he really, really need to focus on getting rid of that car loan before the wedding or to up the budget of the wedding?

What's the point?

I'm just trying to find out, is it— should we, or is it financial wise for us to have a wedding although he's in debt? Yeah, the wedding is only going to be $5K.

No, you can. Yeah, I'd have the wedding, but I wouldn't have a $50,000 car if I make $58,000 a year.

That's the problem.

Yeah, he needs to get rid of his car.

We talked about that.

And also, tell me how— tell me about this $5,000 wedding. Inquiring minds want to know how you're about to do this.

So my— one of my good friends has a fabulous home, and we always— I want to have an outside wedding, um, so that's always been something I want. So they've allowed us to have the wedding at their house, open up to us. Um, catering is really the only thing that we should have to pay for, um, that should be the most expensive.

And a dress and a honeymoon.

Oh, I am super simple, um, so my dress will be a friend dress, basically.

Okay, you got it, you got it on lock.

Okay, then, so yes, to answer your question, I'm great with you spending $5,000 on your wedding, Keisha. So yes, yes.

Ah, the $50,000 car, I don't like it, I don't like it, it's bothersome.

Oh, my heart sank.

Oh, the car is actually—

he paid— the total cost was $80,000.

Oh, my heart dropped when I said—

what kind of car is that?

Passed out. It's a 2024 Ford Mustang.

Okay, that was— that would not be on my bingo card.

No, no, not my food, but he added some extra stuff to it. All the insurances, the bills and whistles.

And so here's the question then, Keisha. Are you guys— now hear me, because everybody kind of has their wake-up moment at a different point. Do you guys align on your philosophy on money, on debt, on wealth building? Because if you're looking at this car the way Rachel and I are, and you're like, oh, This is wild behavior. But he looks at it and goes, this is so smart, I love this purchase, I'm not giving it up, and I would do it all over again. You guys are gonna butt heads down the road financially, and it's going to be tough for you.

So have you spoken about this and gotten a glimpse of what you're about to walk into? Because you're— because financially you're doing better than he is on paper, right?

Right.

So, uh, yeah, I am curious your thoughts towards his financial health.

Actually, um, we actually talked about that over the weekend, um, and he says he's on board. Um, I said He doesn't have any debt. He doesn't have credit cards. On board with what? With the financial plan. Um, so I told him about living debt-free and building wealth and what my idea is and what I would like to do. Um, as far as us building together and no more stupid purchases, of course. And he said we wouldn't make any decisions, um, without talking to each other about it first.

Okay. That's a good start, I think. But I think keep having the lines of communication open because it's very different to say, Do you wanna build wealth? Yes, I wanna build wealth too. Do you wanna have financial peace? Yes, I do too. But it's the how of how it's done that, you know, because the truth is a big part of this is, well, one thing that we have to do if we wanna build wealth is we can't have toys that are going down in value that are this big of a piece of our world. And so getting, I think you're at the point where you can start specifying the conversations even even more and saying, here's what I mean by that. Uh, it could mean us not driving $50,000 cars unless they're paid for, like that sort of thing.

Absolutely.

Absolutely. And I've gone through and I've taught FPU. And so before we get married, like I'm looking at in September, let's go through FPU together so that he really understands and have a clear picture of where I want to go with my life.

Well, you've done, you've done an incredible job.

Yeah, we'll gift you the FPU, by the way.

Yes, that'll be awesome.

That'll be our wedding gift to Yeah, and I think continuing to have those conversations, because Jade's exactly right, it's the high-level picture of things that is so, so important that you're like, "We agree on that." And then, when you start to actually get into the details of life, and you actually have to go through with the actions to get those high values, it's like, "Well, if it means that, then I don't want this." And so, that can be tough, so. Thanks for the call though, Keisha, and congratulations.

Yes.

All right, let's go to Mandy in St. Louis. Hi, Mandy, welcome to the show. Mandy, are you there?

Yes, I am. How are you guys? Hi, Rachel.

We're doing great. Thanks for calling in. How can we help?

First of all, I just have to say that when you two host and I'm listening on my earbuds, I have to see what you guys are dressed and look like because you guys are like classic and simple and it's like, It's like inspiring. So it's, um, I'm a long-time listener and, uh, super excited to talk to you ladies.

Love that.

Um, I'm 44. My husband and I are on Baby Step 6. We have a 12-year-old and a 9-year-old, and we make about a little over $200,000 a year. And I had wonderful parents, but I was raised with no, like, financial knowledge. And they're wonderful people, but they're living off of Social Security and like a small pension. They have no nest egg. So, we are investing our 15% and we're doing well. But what— when I started to clean up our finances, I started looking at their stuff and they had savings account and money in piggy banks and stuff like that. So, we took their money and we put it in some index funds with our financial planner. And every year, our financial planner, they go with us to our financial planning meeting and he turns the computer around and he shows them, this is how much money you guys made this year. What you're invested in. And I just want to know, am I doing right by my kids?

Is it too much for their age?

It's very age-appropriate conversations. He answers their silly little questions and things like that. But I just want to know, are we doing stuff too, too early for them?

It's a great question. I'm not mad about that. I don't want that to be the only isolated conversation and interaction they have with their own money. I want them to also have some money that they can cash, right? Or that's on like a Greenlight card or something. That they can spend and use and save and give. Like, I would want real-life interaction with money for them even more than the index funds. But if you do both, I think that's great. My parents did that. We had mutual funds, and I wanna say we were probably 13-ish, maybe a little older than yours. And we would look at it, and they would pull it. Now, that was when it was mailed to you in like a big packet. So, I think you're doing a great job, Mandy. I would keep doing that. I wouldn't change that part. I would just add in more interaction.

Getting their hands on their own money.

Yes, so that they're giving some of their money that they work for, they're saving some of it, they're spending some. I want them to feel the day-to-day interaction with money, not just the investment side. But no, I think we're both—

I agree.

Yeah, well done, Mandy. Great job. Hey guys, it's Rachel Cruze. If you're working the Baby Steps, every major expense deserves a second look. And healthcare is one of the biggest expenses in most families' budgets. And that is why I recommend that you check out Christian Healthcare Ministries. CHM isn't insurance. It's a health cost-sharing ministry. That means members help pay one another's medical bills, and they've been serving Christians since 1981. CHM programs start at just $115 a month. And here's why that matters. If you are paying more than you need to for healthcare, that money could be going toward paying off debt, building your emergency fund, or reaching your next financial goal. And your monthly cost isn't based on your medical history or where you live. Y'all, a lot of families find CHM gives them more room in the budget. That's why so many members members say they're better with CHM. And right now, new members can receive a 50% credit towards their first month of membership. Go to chministries.org/budget and use promo code Ramsey. That's chministries.org/budget and promo code Ramsey. Next up, we have Terry in Orlando, Florida. Hi Terry, welcome to the show. Terry, are you there?

Terry?

Maybe she'll come back.

Yes, yes.

Oh, there he is! Hey Terry, how are you?

Doing good. How are you guys doing? It's an honor to be on the show.

Oh, thank you. Thanks for calling in. How can we help?

How can I help? Uh, long story short, my wife is, uh, talk— having serious talks about divorcing me because of my bad financial habits.

Oh no. Okay, gosh.

Yeah.

How long have you been married?

2 years.

2 years?

2 years. Yeah, yeah, 2 years.

So tell us about your bad financial habits.

Um, well, I don't really initiate when it comes to financial meetings with each other. We don't really— I don't really talk about our financial too much. That's really on her side of things. Like, I'll make the money, or, you know, my half or my share, and I'll just like— we share account— and I'll just like leave it there. And whatever is the gist of it, I'll kind of, you know, do here and there. Like, if there's something needs to be paid, I'll do it, but I don't really know too much about our finances. And then the— our most recent situation that caused the divorce talks is that there was, um, like, um, again, like, she'll, she'll process most of the payments. And 3 months ago, what is she asking for from you?

What is it that she wants you to do that you, you have been unable to do in her eyes?

Um, like I said, initiate, uh, process certain payments, stay on top of certain payments. Uh, I just got my car repoed and, um, there's 3 months of late late fees, and I just paid off all those together.

Did it get repoed because you simply were not— yeah, you just didn't pay the payment, or you didn't have the money to pay the payment?

Which one? I didn't pay the payment. That's it. We had the money, I just didn't pay it.

And can I ask why? Just you forgot, or you thought she was gonna do— like, what, what was the reasoning behind that?

Um, it was more just not to get too nitty-gritty. I just, I just avoided it. Um, okay. Do you—

how old are you, Terry?

29.

29. And how old's your wife?

Uh, she's 27.

27.

Okay.

Before you guys got married, did you pay your own bills, or what was the How did things get done before you got married, or was it just a state of mess?

I was a teenager.

Not before you got married. You're 29. You've only been married 2 years.

We, we, we've been together for almost 8 years and 10.

So she's always— so what you're saying is she's always taking care of that? Is that what you're saying?

Not always. I'll do it here and there, but for the most part, yes.

Okay.

And I screwed up and I avoided it. And that's the part what I'm trying to change.

Uh-huh.

Okay. And do you under— do you know yourself well enough to know why? What, what, what, what fear comes up in you that you're like, I have to push this thought aside to even pay a car payment? I don't even want to— that's— yeah, I don't want to engage that at all.

Do—

where does that come from?

I would just, um, I don't think it's fear. Well, maybe fear somewhere that I don't understand, but I would just say Laziness.

Is it just pure lazy?

I feel just lazy.

I think, I think there's something else there. I do too.

Um, because you go to work. If you were a lazy person, you wouldn't get up and go to work. If you were all that lazy, you probably wouldn't be calling the show. I feel like there's clearly in certain areas a level of intentionality that you have the ability to have. And so that's why I have a hard time just with, nope, you're just a lazy guy. Yeah.

How did you, how did you grow up with money, Terry? What was your home situation like with money?

I come from a Caribbean family and it, like, that's already a story in itself.

You came from what, like, Caribbean family?

Oh, okay.

Yeah. And like, I didn't really— they like, think of it like this, you have support but you don't at the same time.

Yeah.

And it really is like, if you mess up, it's strictly on you.

And it's—

yeah, that's kind of how I've been. And well, and I say lazy to chalk it up because I think— oh, sorry. Because I just, I mean, I only have accountability to take and like, hey, I didn't miss those 3 months of car payments and it didn't mess us up.

Do y'all have a baby, Terry?

Much? Yes, I do.

You do?

Okay.

How old is the baby?

He is officially 2 months.

2 months. Okay. Sweet thing. Okay.

Can you tell me, because I'm trying to get a sense, because don't get me wrong, this is a big deal and it's a frustrating thing. I want to know if there's some other things that are pushing harder on the divorce conversation than just who pays the car payment. Um, are you working regularly? Does the laziness show itself in other areas of life? Like, are you not working regularly? Are you not helping out around the house? Are there other things that are going on that's not money related that this is really just one of the many things, or is this the only thing? And you're like, okay, I gotta get this one thing right. Just be honest.

I mean, to keep it straight, I would say, yeah, we have, but like, you know what, relationship does have multiple things, but I would say it shows itself up in other ways or factors. Like, so she says it's accumulation of these thoughts, bad financial habits, and I have been trying to change, but it just, it just keeps every time there's a mistake, like the repo, she'll bring up divorce. Like, the last time my car got repo'd, she filed divorce.

So, I don't think this is— I'm gonna be honest with you. I don't think this is a money issue. I think this is— I think you have some marriage issues, and I think you have some personal issues.

I think she wants you to step up, Terry. I'm gonna be honest. I think I'd be pissed if I just had a baby, and my husband can't even pay his own car payment. Like, I mean, a little bit of me, Terry, is like—

Gotta be able to do the minimum, the basics.

Yes, you have to step up. And so, there's— and I know you know that, or you wouldn't have called.

Called.

So you know what you have to do, but something is blocking you to go and do it. And I, and I think that that is— that's work you got to do, Terry. You got to figure out what is going on. And in the meantime, you just have to have action. And you're gonna have to rebuild some trust with her because I think she's just pissed. I think she's been doing this on her own and she's been taking care of the money because you even said, I made the money and I put in the account. And she— that's her thing. She's tired. She, she wants— she wants a partner. Yeah, she wants a teammate with her. And to be a husband that loves her, serves her. And what Jade is pointing out is exactly right. When you actually start fixing some of these issues, and I will use money as the main one, 'cause that's why you called, and you actually start being so selfless, and you're like, literally saying, "This is what I wanna do, but I know that's probably not the right thing. So, I'm gonna engage in this process that makes me so uncomfortable, but I'm gonna choose to do it for the betterment of my marriage." and you do that, it's gonna trickle through all the other areas of your marriage, when you start to change in one area, 'cause it changes you, Terri.

And I think part of it is you figuring out what is that mental block for you. And if I were you, I would spend, you know, a couple hundred bucks a month and go find a counselor or a therapist. And I would, I do think money can be such an embarrassment, shameful. Guilt-ridden topic, and you're not feeling much relief at home, 'cause your wife's threatening to leave, but to— you gotta—

Build that confidence.

Yeah, you gotta work some of this stuff out of what is holding you back, because there's something there. And in the meantime, I do wanna be clear, in my opinion, you still have to make some steps moving forward to take care of this baby. As that baby cried on the phone, I was like, "Oh my gosh, they got a new baby in the home." Like, you have a lot of responsibility, and you're— It's doable, Terri, 'cause the money's sitting there. It's not like you can't hold a job and you don't have the money. It's just following through with a couple of things. And if you have to make a checklist or have reminders on your phone.

Yeah, put a reminder, it's due today, pay it.

Whatever it is to put into place some actions.

Yeah. That's why I think it's gotta be deeper than that because those things, the logistics of it is quite easy. I set the alarm, it rings, or I put it on auto draft. What about that?

That's right.

You're not even thinking about it at all, Terry.

So, you know, actually, the thing is, like, when it came to the car payment, I really— and this is— I have to emphasize, I thought I did put on auto pay.

Okay, but what stops you? Let me stop. What stops you from right now, the moment you get off this phone, I realized it wasn't on auto pay, therefore I'm going to put it on auto pay this second, then I'm going to show it to my wife and say, hey, I realize I I messed up the last one, but I put it on autopay. I just wanna show you that I did that. It's gonna come out every month on the 15th.

And I would ask her, what do you need from me in this situ— ask your wife that. What do you need to see from me to help start making some steps towards rebuilding this trust?

Yeah.

Because fight for this marriage, Terri. I don't—

You've been with her all this time.

And I don't want you to lose this. Like, to me, this can be solved. For the sake of that baby and everyone, like, do not let this tear your marriage apart. Fight for it and do what you have to do to rebuild that trust.

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Welcome back Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I am Rachel Cruze with Jade Warshaw, and we're answering your questions about life and money. So give us a call at 888-825-5225. We have Cambria in Virginia Beach up next. Hi, welcome to the show.

Hey, how are you?

Hi, we're doing great. How can we help?

I'm wanting to know, if I'm being selfish wanting to go on a family, really expensive and once-in-a-lifetime family vacation.

Oh, I like it. It pains. I like this question.

Me too.

Okay, what's the situation?

So we've been debt-free. We've been doing Dave Ramsey for about 15 years. We used to teach it. We actually came out to the studio about 10 years ago, Dave. And we are in a really good financial situation, but we— my husband is retiring from the military in March, and next June my dad wants to go to Sweden. That's our heritage, and he's always wanted to take this trip. He's turning 80, and he wants to do a 12-day cruise that's about about $5,000, not including, you know, anything off the ship, um, excursions or anything. And flights for my husband and I and our two kids, about $4,000. And then, um, he wants to stay a week, uh, afterwards. Um, and he's gonna take care of the Airbnb or whatever we stay in after, but it's still going to be, you know, a good $12,000 trip.

Yeah, I would say $15,000.

Yeah, I would say— I would— yeah, I'd aim high.

$15,000. I would say—

yeah, so where's the problem? Um, well, with my husband retiring, not knowing what job he's gonna get, what— how much money, you know, he'll be making, how much time off he's gonna be able to have, you know, 4 months after starting a new job, and And I really wanna take this cruise. He's willing to do the week after. And so I guess my question is, do I, like he said, we can try and make it work to the best of our ability.

Well, you've been debt-free 10 years. So tell us about the other money that you have. I mean, when somebody tells me that, I'm waiting to hear of some, you know, several hundred grands laying around. In different places.

So we've actually—

we've been debt-free 15 years, um, and we have, uh, over half a million in our Roth IRA. Good. Um, we have, you know, several different investments, um, on the side. We have about $20,000 that, um, we've gained in— like, we have that— we have, um, we keep our Um, our car funds in— oh my gosh, it's okay.

Just tell me how much, how much liquid cash do you have?

Probably $50,000 to $60,000.

Okay, so $60,000 of liquid cash, and we'll just say that includes sinking funds, emergency funds. Is that fair enough?

Yes.

Okay, and then you've got— you said the $500,000 in, uh, your Roth IRA. Any other money laying around?

Um, I don't think so. There might be some here and there in like crypto and whatnot.

That is the house. Where are you guys at with your house?

Uh, we are about $175,000.

Okay. And how much do you guys bring in a year?

Um, now about $150,000, maybe $150,000.

And is he the only one working?

Yes, I'm a singer, so I get here and there, but it's not, you know, it's, it's just fun.

So he's making $150,000. Will he get anything with retirement when he, when he retires?

Um, he'll have about $5,000 a month to wake up.

Okay, okay, okay. So I mean, this is— I think I heard you say this is next year, like June of 2027, right?

Yes.

Is there the ability to save up the way you've done for your other sinking funds and have this off to the side? I mean, you've got a year to do it.

So a little less.

Yes.

Um, it's kind of harder because in April we started— we decided to— we didn't know about this trip. Um, and in April we started remodeling part of our house because we decided we're gonna stay here. We're gonna, you know, make— we're getting out of the military, we're staying here. We love our house. We've been here 10 years.

You know, how much remodel cost?

Um, we've spent almost $20,000 so far, and we're trying to cash flow as much of it as possible.

How much to go?

And, um, probably another $40,000.

Okay, so the good news is we know you guys can stack up money to, you know, to spend $60,000 on something at will.

Like, so, so every month we, we put stuff in different funds every month, and if we stopped doing that, there's probably, you know, there's probably about $2,000 to $2,500 that we could— there isn't $1,000 of like discretionary money that, that we choose every month where we want it to go.

The other money, I would seek to do this, I would seek to do this without touching— if you're going to do this, my goal would Let's cash flow it. Let's do the remodel. And we have to put a bow on that first. But let's look ahead and see what our money's looking like. When will we be done cash flowing the remodel? From then on, will we have enough money to put the $15,000 aside for this? Part of that conversation also is what, what's he going to do after he retires? And that's a big part of this.

And part of his onboarding package for his new job job could be slotted, "Hey, I do have a 3-week vacation that's been planned and it's paid for." So, as I start my job, part of my contract of starting this new employment can be that this can't take away from any PTO. You know what I mean? Like, you can negotiate some of that with a new employer. And we did talk about that. Yeah, so no, yes, I think you go.

You have the ability to go.

You kind of, listen to me, I'm such a spender. I'm like, "You have to go." I mean, your dad's 80. Yes, I mean, seriously.

Those are the things you cannot miss out on in life.

You know what's crazy is Winston's family, my husband's family, his grandmother came from Sweden, from Stockholm. And we did a— it's weird, as you're talking, I was like, "Is this me?" We did a cruise with my family around the same, probably the same Baltic Sea type cruise. And we went to like the cemetery where all of his— Yes, where his great-grandparents are. I mean, it was amazing and beautiful and like such a— it does, it feels like kind of a— once-in-a-lifetime type thing. And with your dad, who's 80, like, you won't regret going. So, yes, figure out a way to do it. And this sounds terrible. Maybe, I've been married too long, but I'm like, if he doesn't wanna do the cruise—

He doesn't have to go.

He doesn't have to go. Meet us over there.

Honestly, yes, that's not bad.

I mean, seriously, like, if— I don't think that's dumb. And if his work can't hold, he'll be okay. He's not crazy about going to Sweden, it sounds like. So I don't know, I would take the kids and go. Go with your parents.

Listen, I will be going without them.

But when you've done, yeah, when you've done what you have to do and you've been debt-free for 10, 15 years, this is precisely the thing that you should be doing.

Yes, absolutely.

Exactly.

Money is a tool to use to create a life that you love. And part of that is with your family creating memories. And it's not, you're not out of control.

No.

Like you guys have half a million in retirement, you're debt-free. I mean, like it all checks off in my book. So I, Yeah, I'm a green light, but I'm with Jade. You gotta cash flow it. You guys need to be disciplined and start saving, but you got a year, which is great.

Yeah, plenty of time.

You're gonna be fine.

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Okay, today's question comes from Camilla in Illinois. She I often hear the advice that you need $1 million in your retirement fund or some other arbitrary number. Does that amount apply to a married couple or does each individual need to have that amount invested? I assume it's combined because as a married couple you're combining other finances. But what happens when spouses are different ages and retire at different stages? So I like this question, Camila. So first, let me start out by saying the number that you need to retire comfortably is different for everybody. There is not one number that is a one-size-fits-all. Now, you do hear the number $1 million because obviously that's the first layer of the millions. And it's like, if you can hit $1 million, yeah, that's a, that's an amazing milestone. So I think that's why people park there a lot. And you hear a lot on social media or even in the media that is $1 million enough to retire? Does $1 million get you as far as it used to? I just think those are buzzwords. Because it's just a buzzy number. So that being said, what you're really looking for when you retire, just big picture, is you want enough in your nest egg that you can live off the interest without really having to touch the nest egg.

That's kind of what you're shooting for. Obviously, you want to be able to account for inflation in that equation, and that allows you to leave money to your children's children, right? That's the whole point of being able to build that sort of wealth. And some people are able to do that and some people aren't. They learn this later on and they have a nest egg and they draw on the nest egg and they draw it down, right? So what I would suggest is working with a SmartVestor Pro and figuring out what that number is for you. Around here, we've kind of figured out that 15%, if you invest that annually or monthly out of your gross income, that's kind of the magic number that should help you hit the number that you need for retirement. That's why we teach that. But the number truly is, Rachel, different for everybody.

It is, yeah. And depending on your lifestyle and what you want you want in retirement age. You know, some people want to go more simplistic and they're like, I want to just, I want to downsize. You know, they want to go, some people go the opposite way and they're like, I want to travel more. You know, so you kind of want to picture as much as you can, you know, what you want to do. But that 15% is the rule of thumb.

And having no debt.

That's right. Oh yeah. And if you have a paid-for house and everything, like it, that is, that's the way to go. So yeah, the million dollars in retirement, Yep, that will depend on your lifestyle and how much you're planning on taking out of that fund.

I guess we can talk about, she also mentioned it being together or separate.

Oh yes. So you do want separate retirement accounts because you want to get that tax advantage as much as possible. So individually, you both should have Roth IRAs individually, you know, 401s if your company has it or 403s or a SEP, you know, So, but if both of you have those going, yes, one of you will be able to draw out of theirs tax-free, you know, at 59 and a half, if it's a Roth, before the other. And then maybe you guys live on that and the other one decides to keep working or maybe they stop working 'cause you got enough there for the 59 and a half-year-old to take enough out to sustain the lifestyle you want. So, yeah, definitely different accounts, but from the mindset that we're still working out of one, we're seeing it still as ours.

Yes, it's ours together. But you can, to your point, you can take advantage of more money going into those accounts, $7,500 each in the Roth or, you know, whatever your limit is for your 401s, that sort of thing.

All right, let's go to James in Iowa City, Iowa. Hi, James. Welcome to the show.

Hello, how are you?

Hi, we're doing great. How can we help?

So I have a question on behalf of my great-grandma. She is debt-free, lives on a farm, has a home, has a cell tower on the farm that pays her monthly. Um, I think it's like $1,800 a month that she gets for having the cell tower on her farm. They came to her with 3 different offers a one-time lump sum payment of $355,000 for 20 years, or a second option of $390,000 over installments over 5 years, or the third option, $428,000 over 10-year installments.

What happens if during— what happens to the deal if for some reason over that period of time, whether it's the 5, 10, or 20, and she moves, what happens to the deal?

Um, she will not be moving, but I'm just saying, we need to know.

I think it would go to the, it would go to the person who, it would have to be part of the land lease, part of the, the contract of the new sale of the home.

Yeah.

Or even if she passes away, James, and you guys sell the property to someone else, I guess, is that part of the language that if, if there's a new owner, they automatically, they have to assume this tower for X amount of years?

Yes.

Okay, gotcha. Okay, how much money does she have?

She has right now I think like $50,000 in cash, but she also gets Social Security and she has a retirement, and I think her husband had something that she gets. He's passed away and she still gets something. I don't know if it was a military benefit.

Okay.

Um, Do you know what the retirement nest egg is?

Um, what, like, meaning what she has in retirement?

I think it's just the $50,000.

Okay.

And so she's actually—

no, I know—

I don't know what's in her retirement account actually, because she does have something saved that's in addition to Social Security, but I know it's not very much.

Okay.

I mean, I— my knee-jerk, James— I'll be curious what Jade has to say— is I always like a lump sum lump sum because she can turn around and invest that and make a great return. I think she'll get probably the most bang for her buck doing it that way. Even though it's a lesser amount, I think she will make, from a return perspective, more getting it within 5 years versus 20 years.

Yeah, I mean, that's basically what we would say with even a pension or something like that. If you can have the lump sum and reinvest it in—

Or the lottery. If someone wins the lottery, then like, go ahead and take it all. So that's— that's—

she's 82.

Okay.

So she has been living her whole life off of what she gets monthly. So this is something completely foreign to her. She's never heard of anything like this.

Sure.

The tower, my grandpa handled it all.

Okay.

And they were— he just wanted them out of his face, basically. And they were paying him $500 a month. Month. Now, her son, my uncle, who has passed away, um, got them up to $1,800, and now it goes up, I think, 5% every 5 years. So if we did not take the lump sum, it would go up 5% every 5 years. After the 20 years, it would have gone up.

Yeah, I just think she could make— yeah, I, I think she could still make more in the market, um, having a lump sum. Lump sum and put, 'cause if it's every 5 years, would you say every 5 years it goes up 5% or every year?

Yes.

Yeah.

Every 5 years.

Yeah, I think, I lean towards taking the lump sum of in 5 years.

I lean towards that too. Yeah, I think it's a no-brainer, honestly.

And have her sit down with, and you probably will help her, James, 'cause you're kind of an advocate, you know, for her even in this call, sit down with a CPA, SmartVestor Pro. You can find one on ramsaysolutions.com and figure out the best way from even a tax perspective of if she invests this money. 'Cause it sounds like she's pretty low maintenance. She's probably not gonna use, if any, of it. But from a generational perspective, what a beautiful thing, right? To be passed down one or two generations to be able to help out family, right? With what this money could be. And so I would sit down with an investment professional and just figure out from a trust standpoint, the trust, a trust standpoint, or even a will, the tax, the taxes. I don't know. I would want someone looking at this amount of money and just seeing how can we make this go the furthest.

Yeah. The best way.

The best way possible for her. And if she needs any of it, it is hers. I'm not just like, yeah, I'm not shagging that money off of her.

This lady sounds like she doesn't hardly—

She doesn't, it didn't sound like she cares for it. I mean, she's like, I'm good, I'm good, which is amazing. But man, what a, what a crazy thing.

That's pretty cool.

Pretty wild. Yeah. So great. Well, thanks for the call, James.

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Up next, we have Michelle in Spokane, Washington. Hi Michelle, welcome to the show.

Hi, thank you for taking my call.

You're welcome, how can we help?

Uh, well, I'm a 56-year-old divorced woman with no retirement saved and a mountain of debt.

Okay, Baby Step 2.

And my question is, once I finally get to Baby Step 4, because I have no retirement, should I stick with the 15% of my take-home to invest, or should I maybe consider increasing that while I'm working on paying off my home.

Well, let's tackle one thing at a time because you've got a mountain in front of you. So let's just one step at a time. So tell us about the debt that you have, the, the consumer debt.

Um, well, the consumer debt is I owe my mom $1,500, I owe the IRS $5,600, I have about $14,624 in credit card Okay, did you say—

say that number again?

Credit—

$14,624 in credit cards.

Okay.

A $23,976 car loan.

Okay.

And this is the scary one— $50,603 in personal loans.

Got it. Okay, um, Michelle, what's been going on? Um, did all this kind of escalate after the divorce, or Um, it's just been years. I spent a lot of—

almost 30 years paying off student loans.

Okay, sorry.

No, you're okay.

It's a lot.

How fresh is the divorce?

Oh, it's been years. I've been by myself with kids for many years.

Okay, okay.

How many kids do you have?

I have 3. The youngest just graduated. Nobody has student loan debt if I've done anything right.

That's great, that's excellent.

How much do you make a year, Michelle?

Um, about $84,000.

Okay, okay, perfect.

Okay, how much do you see every month in your, in your month-to-month, um, take-home?

Yeah, um, I take home about $7,000. I pay myself a— I'm self-employed, so I pay myself a wage that nets down to about $5,000, and I try to take another $2,000 from the business each month.

Okay, and you're not investing right now, right?

I'm not investing at all. I've been 7 months into Baby Step 2, so I am making progress.

Good for you.

Very good.

Good. How much, um, how much, um, debt do you have being thrown at— I'm sorry, how much cash per month is going towards paying off debt? $2,000? $3,000?

Um, I just got to the point where I can put $2,500 towards the debt.

Good.

Okay, fabulous.

I have $3,500 to move.

Yes.

I started with about $2,800.

So that's perfect.

I'm moving forward.

Okay. So within 3 months, the IRS and the $1,500 loan should be close to paid off. That's my plan.

That's my plan.

Okay, great.

What kind of work do you do? Are you able to do extra work, a side hustle, add more to this?

I hate to say what I do for a living. I'm a bookkeeper and accountant.

That's okay.

Okay.

Listen.

Don't be ashamed of that.

You're fine.

Yeah.

Yeah.

I know, but I always hear the accountants are the ones that make it with the right numbers.

No, you're fine. You are fine.

So, um, so yes, can you, I haven't been saying, I haven't been saying no to work. I've been working myself quite a bit. I don't see the need at this point to get a side hustle because I have the potential to, to bring in more.

Okay.

So I would, I would quantify that. Um, because sometimes you can take on more work, but you may not see the dollar side of it as soon as you want to. So I would really put a goal around around how much do I need to earn per month to hit this goal and how many clients does that amount to so that you are very intentional about going after that money. And then like Rachel said, just keep going smallest to largest by balance. And that's how you do the debt snowball. And like she said, in 3 months, once you've paid off your mom and the IRS, mm-hmm, now whatever those minimum payments were, if you were making those, that's now gonna go onto these credit cards. Uh, is it one credit card or several smaller ones?

Ones?

It's 2. I've paid off all the little ones. Everything's closed.

Okay, good.

So I think if my math is right, Michelle, and it— and again, if you throw on some extra money, I think in 2 and a half years this, this could all be gone. Um, and my hope is too with this car, um, and that, that includes possibly selling this car. Do you know how much you could get for it?

Maybe $27,000.

$23,000.

Oh, that's great.

That's great.

You owe $23,000, right?

Almost $24,000.

Okay, I would get a couple of thousand bucks, Michelle. Sell it, put that together, and go get an $8,000, $6,000, $8,000 car. Because that's gonna speed up this process so fast for you. Because I think the urgency of retirement savings is on your heels. So if you—

It was a wake-up call, ladies.

Yes, for sure. But if you can be out of debt, let's say by 59, okay, for the sake of our discussion, and you start throwing— I'm using our retirement calculator right here. I'm gonna— and I'm gonna say, do you have anything in retirement right now?

Nothing.

Absolutely nothing. Okay, let's just— I'm gonna go big here, just for the sake of all of it, okay? So, let's say you start investing at 59, retirement age is 67, and let's say you put $3,000 in a month. Like, you are— Jerk in it. You are just throwing money in this account.

All right, so you're saying the number that I've been thinking in my head, and at least my timeline is matching what the two of you are proposing.

Well, you're just taking what you were putting on debt, and now you're turning around and investing it.

And what you're gonna have, you're gonna have $458,000.

Okay.

At that point. By 67. By 67, yep. That's pretty wild that you go from negative—

To positive.

To half, almost half a million dollars, Michelle.

So stay with the 15% then and just continue to work on the house and invest it.

16.

Okay.

Yep. Tell us about your mortgage. I'm just curious.

Oh, um, I owe $217,000. My house payment is $1,610 a month.

Okay. Okay. Yeah, yeah, I probably was a little aggressive on the $3,000 a month because you do want to throw some of that at the house. So maybe a little less than that with a paid-off house. I wasn't— I, I, I, I got too excited for you, Michelle.

Well, it still might be I needed to hear that.

I needed to hear that. I just need to know that there's, yeah, that there, and you know, and you get to make the decision what you want. We find the fastest way is to get the house paid off and on. But with your age, if you, you know, if you said, you know what, I am gonna throw more at retirement and keep my low house payments, you know, that could be your decision. I'm not saying to do that, but I'm just thinking if you're aggressively throwing some money in investments, I think that, I think there is hope. Hope. Let's just say that. However you kind of slice, slice the pie, um, I think you're going to be good.

Thank you.

Yes, thank you.

I, I've been really overwhelmed and fearful, so thank you, ladies, both.

Yes, and you're a good mom, Michelle. I mean, even the fact that you were like fighting hard for these kids not to have student loans, cuz you said you took so long to pay yours off, and you're like, I don't— I can't do that. And, and there is a wake-up call, and everyone has that moment, Michelle, we kind of call it the "I've had it" moment, where you look up and you're like, "I'm 56. I have worked so hard. I've started my own business. I'm putting my kids through college, but like, what about me?" You know, you get to this point and it makes you mad, but that anger kind of creates that grit to get out of this. But it's, this is doable, right? I don't think, I don't see you in consumer debt for 6 years, right? I mean, like you could really, make a lot of progress. And I think you're feeling that. So, thanks for the call, Michelle. We appreciate it.

Ugh, it's gonna take a lot of intentionality, but I think with what we teach, there's always a measure of hope, and there's always a measure of increase that can be gained, right? She may not have $1 million, but it's better to have $458,000, right? That's right. Than $0. So, there's always a better measure of hope that can come from doing this.

Yes. And that is a pro to owning your own business. I mean, that is one thing, 'cause you can kind of, you can set your schedule. And even, you know, I mean, I know plenty of people in their 70s and they're still killing it. You know what I mean?

So you can work longer if you choose to.

Yes, and you can kind of create this environment that you need in order to create, you know, have income on the side and you're not just dependent upon those investments at 67 too, right? That could be an option. So, It is tough. I think it's a, it's probably a wake-up call for a lot of people too, Michelle, to realize like, yes, the day is coming, like it's happening. And the sooner you start, the better off you're gonna be.

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News/ramsey.

Well, we wish we could get to every call and question on the show, but if you have a money question and you want an answer for your situation, head over to our website and use Ask Ramsey. Ask Ramsey's our free AI tool that's built and trained on Ramsey principles. So you're gonna get an answer the same way that we would answer on the show. And I used this the other day, Jade, for something I was looking at and they continue to update it. Like they are really iterating this, like to make it as good as possible. And they'll ask you some questions to get a better insight into your situation. And I was like, that's what I would've asked. I literally thought that as the question comes up for me, I was like, that's probably what I would've asked on the show. So it really is, it is amazing. So go and ask your question today at ramseysolutions.com or click the link in the description if you're listening on podcast or watching on YouTube. All right, let's go to Luke in Billings, Montana. Hi, Luke, welcome to the show.

Hi, how's it going?

Thanks for taking my call.

Absolutely, how can we help today?

So we, my wife and I are in Baby Step 6. I'm having a hard time convincing her to cut up all the credit cards and let the FICO score go to zero because she's nervous when and if we go to refi our house for a lower interest rate because we use our FICO score basically, you know, to get our house originally.

So it sounds like she's missing a piece of information, I think. Think, because in her mind she's thinking if we have a zero credit score, we won't be able to get as good of an interest rate.

Yep.

Yeah, undetermined, like, yeah, they just can't pull up the information because you've been out of debt and closed all the accounts. And that only takes about 9 to 12 months, it's not that long.

That— and that's what I've told her, and the whole, uh, manual underwriting or whatever it's called.

Why doesn't she believe it? What Has she said, this is the reason why I don't believe that, that you're telling me the truth, or that that fact is real?

She just says we used it to get our house originally and it took so long to get it to a good score and I just don't want to close it. And I've tried to explain it to her a few times. And, um, you guys are making steps.

How, how much further do you guys have to pay off your house?

Um, we just bought it like 6 months ago, so we owe like $520,000 on it.

She thinks that you guys are going to refinance. Does she have a belief that it's going to go back down to 2% interest rate? Because it's not.

Yeah, right now we're at 6%.

Yeah, and that's pretty— I mean, from what everything that, you know, the Fed is doing and all that, like, for the foreseeable future, nobody is saying that it's going to go down significantly. It's probably going to stay pretty steady for, for a long time because remember, gotcha, Luke, that, that the 2% that we were living at was an unheard of— like that was, it was a result of, yes, all this other borrowing that was happening. And so it's corrected itself. And so 6% actually in the grand scheme of, of mortgages is not pretty good. That bad.

Yeah, right.

It's bad for us because we've been used to 2%, but it's probably, probably not. I mean, most, most real estate experts are saying it's probably never going to go back to 2%.

Gotcha.

But I do want to challenge you. And I don't— I think it's intellectually fair to do this in a marriage that when you're talking about something, if one person is talking about it from a perspective of facts, and the other person kind of refuses to do their side of the work of the argument, which is if you're, if you're doing your side, which is here's the information I found, she needs to do her side, which is I need to read the information or I need to see it. Can't just be on a vibe. It needs to be on— have a fair, have a fair intellectual conversation. And I would challenge her on that. I'd say, honey, I've looked into both sides of this. I understand the credit score side of it and I understand the manual underwriting side. I think you're only looking at one side. And I would really love for you to just read up on this and see that I'm not making this up. This is really here. There's two options to inform your ability to borrow money and you're stuck on one and there's a whole other option here that's actually better for our lifestyle.

And I think that's okay to do and just challenge her.

That was a good idea.

Yeah.

So that, yeah, I got pretty much, I mean, I've been listening to your guys' show for a little while now and the more I dig, the more I see the more I'm ready to cut them up. Yeah, but she's not, she's not ready.

Does she use it on a, on a monthly basis and pays it off?

Because no, they're all ours, they're all paid off, they're all at zero. We have our emergency fund and everything. Okay, so we invest it.

She needs to know though, that score will go down if you're not actively using debt. It will, they will penalize you. Yeah, so it's— so if she's going her plan, it's gonna slow, it's gonna So it's going to die a slow death versus just, you know, taking care of it now. And then it's all fine in about 9 to 12 months.

Yeah, that's, that's another really good point, Rachel, because she's got— if she wants to do the credit route, she's got to know, hey, it's not just having one line of credit open, right? It's— they're looking at the different types of credit you have, how long you've had the credit, what utilization of the credit, right? There's all these different markers that they're measuring. So that's a really good point, Rachel. Made.

Yeah, and she's more of like the use it for— use it for a tank of fuel, pay it off.

You know what I think? I think it's a comfort mechanism. I think it's just a comfort thing. It's not based on any facts. It's not based on math or, you know, it's just this is what she feels comfortable with. And I would challenge that.

Yeah, and she has even said before, um, you know, what if, what if we need need it or something like that. And it's like, we got $40K in the bank. I think we're probably fine.

Yeah.

When you're used to this like false safety net, which is what debt is, right? I mean, this is what banks and credit card companies pray for. They, they love being in someone's wallets for the just in case, because the just in case happens. And so that this is what they're wanting. And I think, you know, when you said you've been listening for a while. Part of our— my, like, frustration with that whole industry is they take advantage of people. They sit there and market themselves like they're helping you, and they're not, because the people that actually cannot pay their credit card bills— and that now it's gone up to $1.4 trillion in credit card debt. And Americans that are really struggling and really are living paycheck to paycheck, everyone else gets to take advantage of that with the points and whatever. And then we've been brainwashed with this whole idea of the FICO score and the credit score. And yeah, do you have to jump through a few more hoops to do something different? Yeah, 'cause you're not playing their game, but it still can be done. Like, we both have great, incredible lives.

I know.

And it's fine. Like, you really can live without this, you guys. You really can, and have complete autonomy. And Mastercard isn't the thing that catches your emergencies. It's you, that you have built up a system within your family that you— no one has a say in. And it's beautiful.

Yeah, I always say, it's— I mean, to your point, you're brainwashed hearing this, seeing the commercials. And so, you know, that's the grace that I have for her is we all grew up that way, you know?

That's right, that's right.

Never leave home without it, right? And the truth about that is there's so much money and revenue and profit tied to that style of borrowing money for a mortgage is usually what people are thinking of. Thinking of. But you don't have commercials about manual underwriting. Like, nobody's talking about it except us. And so for her, she's thinking, I've never heard what you're saying, but I hear, you know, the majority of the world, the majority of the noise is talking about it in this way. And I think sometimes you do, you have to be willing to go against the grain, do your research, not let it be, oh, because so-and-so said it, but actually look into it and look into the facts and dig and know what the heck it is that you're talking about and not just make stuff up.

That's right. Yeah, yeah, so if you do get out of debt, which is our Baby Step 2, where you get out of all consumer debt, and then Baby Step 3 is you save up a fully funded emergency fund, and then you want to go buy a home, you guys, for you first-time homebuyers, that's Baby Step 3B, and we say to save at least a 5 to 20% down payment. And if you have been out of debt and you've closed your accounts, accounts, okay, you've closed all your accounts. Now, if you have a mortgage, it's a different story because it's gonna be there. It's gonna be there. But if you don't have any debt, within 9 to 12 months, you guys, your credit score goes to what's called undetermined. They cannot determine your credit score because they don't have any debt information on you because there is no history to that point for them of how far they go back. And so, they do a process called manual underwriting, and you have to be current on been on a job for 2 years. You have to show proof of paying bills on time, like your cell phone insurance for 2 years.

Chase lines. Yes. And so there's some, there's elements of this that you get some paperwork, but you can still get a mortgage even without a FICO score.

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Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I am I'm Rachel Cruze with Jade Warshaw, and we are answering your questions about life and money. So give us a call at 888-825-5225. All right, let's go to Macon, Georgia, and we have Poncho on the line. Hi, Poncho, welcome to the show.

Hey, how you doing, man? Thank y'all for taking my call.

Yeah, absolutely. How can we help today?

Yes, ma'am. So long story short, and I'll keep it brief, I'm basically retired from two careers. I'm 41, so I feel like I've won in life, but I'm going to go back to school, figure out something I want to do when I grow up. And I've got really no debt. I've been working on the Baby Steps. I got my emergency fund fully funded in a high-yield savings. But I have some chunks of money from some pensions and a 457. It was a public safety 457, so I don't have any penalties. So my question for y'all is, The only real debt I have is my mortgage. And I just want to know, should I invest? Should I pay it off? What do y'all think?

Well, I want to know, I mean, you said you've retired from this job. What will be your income moving forward? Will you be receiving some sort of retirement income from these jobs? Or tell me more about what your income is going to be and that'll help us know.

Okay, absolutely. So I am retired military, so I do have a pension I'll get for the rest of my life.

Okay, how much is that?

It's just under $50,000 a year.

Okay.

And I do some part-time stuff now. Actually, I just retired a couple months ago. I wanna go back to school, you know, through the VA either. I'm gonna learn a trade. So trying to just reinvent myself. But the advice I got was, oh, take all this money and then put it in an annuity. And I'm like, mm, I don't think Mr. Ramsey's a big fan of annuities.

No, I wouldn't do that, but I would be interested in investing on my own. And really, you're to that point, if you've got 3 to 6 months in an emergency fund, which you did say you had some money, I would double-check and try to get it, you know, 6 months is a great place to start. And then from there, yeah, I'd be investing 15% off of the gross. So off the $50,000 a year, that's around $625. And I would start with a Roth IRA. I'd, you know, max one of those out. And then from there, you know, go on to the next thing. If by that point you do have a job that is offering a 401, that's a great place to go. If they have a match, I'd even go there first. And do your best to spread this investment around until you get to the 15%, the $625. But that's not an annuity. That's invested, you know, through mutual funds in the market.

Yes, ma'am.

So, so I have some money from a, from a pension. I have some money parked in an IRA now. But I've just got different chunks of money in different spots. And I listened to this whole spiel about annuities and I'm like, I said, wait a minute. I said, I'm a follower of Dave Ramsey.

And they didn't like that probably.

No, no.

And they're like, oh, well, the annuities, the old ones had a stigma. And I'm just like, uh, I just ain't passing the smell test.

Yeah.

Well, the problem with it is you get, especially like a fixed annuity, you get stuck in a situation that has low interest, it's low risk, but it's just, your money could be doing so much more. There's usually a lot of fees attached to annuities. You know, in some cases, some good commission for the guy selling it.

Of course.

And so, yeah, there's just probably more. Okay, so I am curious. You said you got money in different places. So you got, you have your pension coming in. You have your emergency fund in a high-yield savings account. How much is in that?

In there?

Uh, just, just under $12,000.

$12,000, perfect. Okay, and then what else do you have? What's in your IRA?

Uh, well, it's— so it, it's being moved from the county side. I want to say it's just under— it's either $48,000 or $50,000.

Okay, and what's that invested in right now, do you know?

Uh, no, ma'am. I just put it in a Roth, kind of, kind of like a holding pattern.

Okay. Um, and then what else you have?

Uh, I have a 457. I've got, um, geez, I got about $95,000 in there.

Okay.

Um, which, which I have access to. I mean, it was all pre-tax, it was tax-deferred, but there's not going to be a penalty.

Um, what's that invested in, do you know? Do you know how much you're making on those, on that?

Uh, I want to say my ROI last year was about 19%.

Okay, that's great. Yeah, so I almost would just park it. I mean, it's doing great if it's invested in something long-term that you're not happy with, like a, you know, mutual funds or an index fund, you could always cash it out and move it. But then you may— and because you said there's no penalties or taxes with that—

well, there is taxes, unfortunately.

So that, you know, if I were to just cash that out and like, say, put it towards—

yeah, yeah, okay. So yeah, I would probably leave that because that feels like it's doing well. Okay, what else?

Um, let's see.

And I have a couple smaller pensions that I'll get, but not till I'm, you know, 55.

Okay. So those are your 4 big buckets, really. The retirement coming from the military, your IRA, the $95,000 sitting.

And the emergency fund.

And then the emergency fund. Okay, well, I think you're doing good, Ponch. I mean, I think if you can cash flow school, if you can go work, or no, no, it's gonna be paid for because of the military. So, yeah, go get, I think, go get a degree. You just have to be able to live. I mean, my goal would be not for you to touch these investments because you are 41 and able to hopefully live off maybe this, whatever, $4,700 that comes to you monthly, or maybe get a job while you're in school, right? And find a trade and kind of create the next season of your life, the next chapter of your life. Life.

Yes, ma'am. I, I talk about a true, true blessing because I was, you know, I was pretty freaking poor most of my adult life. And I'm like, man, I've been given this golden opportunity. I work my tail off, but yeah, I'm not, I'm, I'm not the sit at home and do nothing type of guy, but I'm, but I also, all these chunks of money, I don't want to squander it.

You're doing better than you think you are. And the, the truth is you should have a couple of chunks of money. Like, the way you have this divided is just You're right. Everyone should have an emergency fund and a high-yield savings. You've got that. Everyone should have some sort of retirement nest egg, whether it's an IRA or a Roth IRA. Most people have some sort of a 401 or a 403, in your case a 457. And then it's just a blessing, you know, that you're receiving some retirement off of it, you know, early.

Yeah, it's not too much.

So you're exactly, you're exactly right where you should be.

Yes, ma'am.

Yep.

Great job. Well, you know what, we're going to send you Ken Coleman's book, Find the Work You're Wired to Do. Because there's a great assessment in the back, and it may just help narrow down some ideas for this next chapter, Poncho. But I think the next step for you is college, or degree, or trade school, you know, whatever you choose, that next step in education to get the next job. And then when you have that next job, like Jade's saying, invest 15% of that active income coming in and be paying off the house if you have your house, And yeah, and then that's it. So, it's not that much complicated. I know it probably feels like a lot.

Simple.

And well done. Thank you for your service and everything you did for this country, Poncho. We so appreciate it. And it's amazing that you can go from, what'd he say? I was just so poor.

Just broke.

Broke. Broke is a joke. To what you've got now. Like, it's very, very impressive. So, keep doing what you've been doing. Yeah, nothing's wrong. I would stay away from the annuities. So I'm glad you called in.

Hey guys, Rachel Cruze here, and I love summer. There is more fun on the calendar, more time with your people, and way more chances to make a memory. Memories. But you know what else there's more of? Spending. Oh, between the extra groceries and gas and camp fees and family trips, it all starts to add up so fast. And before you know it, money stress starts to steal the fun out of everything. And that is why I love the EveryDollar budget app, because it helps you plan your money, track your spending, and find more margin in your budget so that you can put extra cash towards the goals that matter most. Enjoy your summer without the money stress. Download the EveryDollar app in the App Store or Google Play and start for free today. Tired of working so hard and having nothing to show for it? Well, that is normal, and normal is broke. But you don't have to live that way. Our EveryDollar budget app helps you find extra money every month and builds you a personalized plan to beat debt and build wealth. And in just 15 minutes, you'll find thousands of dollars of hidden margin, and it's gonna feel like you got a raise.

So don't live normal when you can live like no one else. So start EveryDollar for free in the App Store or Google Play. All right, let's go to Tony in Cincinnati. Hi Tony, welcome to the show.

Hey guys, thanks for taking the time to take my call.

Absolutely, how can we help?

I have a question for you. I'm 55, my wife is 52, and right now we pay extra on our house every month, and we're on track to have it paid off in about 8 years. The mortgages are 2.75% a 5% interest rate. I'm wondering if I should not be paying the extra and instead using a portion of it to invest.

Oh, yeah.

It's the common question that we get.

Yes, the classic question when it comes to paying your house off early.

I mean, the truth is, paying off your house early is more than just a math question. You do want to go into retirement without a mortgage, and that's a big piece of this. And I will say this, there are worse things that you could do, right? You could say, yeah, I just want to do this and invest money, but you also want to have a paid-for mortgage in 8 years. And so I do believe that a major part of wealth building is not just money in retirement, but also having the peace and security of having a paid-off house. And so I would stay the course and I would put the extra, pay off the house in 8 years, and then after that, You can, you know, go hog wild on investing if you want to.

Well, I've been just, I just had my head down. I continued to plow forward and then I recently started thinking, am I actually doing the right thing?

Sure.

By paying this low mortgage rate off early, right?

Yeah.

And if you look at it from just a math perspective, Tony, sure, you're gonna make the spread of 10% in the market if you have a 2%, you know, on your home on interest that you're paying versus 12% you could be making, right? And just like round the numbers. So from a math perspective, that is true. But what is not calculated in the Excel sheets that you create is peace of mind.

It really is that.

It's that. It is this idea of having complete autonomy over your life and your money, that if whatever happens, they can't take your house. A bank doesn't own you anymore.

More.

There is something about that freedom that I promise, almost everyone we talk to that pays off their house does not regret it. They don't wanna go back in. And we used to make the joke all the time, you know, if you hate having a paid-for house, you can go get a second, you know, go get another mortgage if you wanted to. I know that would be at now 6%. So, I know that that argument doesn't last as much anymore. But there's just, yeah, there's an emotional, spiritual side side of money and debt that we talk about that a lot of people don't. And again, you can't factor that into your calculations because it's not there. But yeah, I would say stay the course. I think having that paid-off home, and then you could go back and reinvest your mortgage payment every month for the rest of, you know, retirement if you want to do that. But yep, having that paid-off house is a game changer.

Just having something that's truly yours. It's yours. No one can take it from you.

Yes. All right, let's go to Cody in Wichita, Kansas. Hi Cody, welcome to the show.

Thank you for taking time to answer my call. I appreciate it.

Absolutely. How can we help today?

Yeah, so I'm 23, I own a fencing business, and I'm getting married in about 3 months from now, and I—

oh, congratulations!

Thank you. I need somewhere to live and I can't run my fencing business just out of any place to rent. I can't find really anything. And I'm just wondering, would it be stupid to go borrow about $200,000 to $250,000 to build a house?

I would not. I would pause just from a couple of things you said kind of gave me like a head tilt. When you say there's not, there's no rentals that I can have to run my business out of. You know, when you make big statements like that, it shows to me that you may not have done all your research. And when you start to limit your options because of a belief system, then you pin yourself in a corner where you're like, the only thing I can do is build a home to make my life what I need it to be. So I would push against that philosophy, okay? I would implore you to be a little more creative in it. That's thing one. Thing two, I would not build a house my first year of marriage. There are so many decisions, so many things that change in life. You guys just need to enjoy. Enjoy life as a newlywed at 23 years old. You're running your own business. You have enough stress on you, Kody, already. I would get creative, find a rental. I don't know if you even have to rent somewhere else to run the company out of.

I don't know what that looks like for you, but I would do that for a year. And then if you guys look up in a year and say, "Hey, we wanna, you know, make a different, make a move," then that's when I would start talking about doing something.

And then, Kody, let's even talk about, since I agree 100% with Rachel, but, you know, there is gonna come a time when you do wanna buy a house and you wanna be ready and prepared to do that the right way. And there is a good, better, and best way to do that. And we'll tell you the best way, which is honestly, to be out of debt, to have 3 to 6 months of expenses.

Do you guys have that right now? Are you guys at that step by chance?

No, I am not out of debt. So right now I am actually in debt quite a ways.

Oh yeah?

With fairly good assets. I own a piece of property. I owe about $430,000 on it. It's worth about $700,000.

What kind of property?

Uh, it's just pasture land. I live on a farm.

Okay.

Okay. It's 160 acres. Um, so I have cows that, um, that I obviously run on that, that, that helped me make my payment, but I also would like to pay it off. And then I have, I have one vehicle note for, I think, $30,000, something like that.

What about your, uh, wife-to-be?

Uh, she doesn't have any vehicle loans at all. She has no debt at all.

Okay, so yeah, I mean, I'll be honest with you, if I were looking at this, I mean, the first order of business, I'd pay off the credit, uh, the car debt. Um, and then this land could be the difference between you guys having a house sooner than later, unless you're thinking you were going to build something on that land. What was land.

Yes. So actually, my dad has a bunch of land as well, and he deeded me over just 10 acres to my name. Um, if we were wanting to build a house, he would deed that over to me.

Okay.

And that'd be separate— that'd be separate than the pasture that you told us about?

Yes, that's— so I would have 170 then.

Yeah. Uh, I love the idea because you've got this business that you're building that apparently needs a special space for it. I might love the idea of at the right time offloading this pasture land, 'cause that might be the money that you need to build something.

I mean, how many, yeah, how many acres is it, Cody?

Uh, 160 acres.

Okay. So I mean, yeah, going forward, it's a great asset, um, that you have. So I would make it a goal to pay off the car, 'cause how much, how much will you guys be making making a year together?

A year together, I think I'm about— the business is only about 2 years old. This year I'm projected to make about $150,000 to $200,000. Good job. Um, and then I cheat— she was in, uh, she works at a bank, um, but getting ready for the wedding and stuff like that, I don't know. Yeah, she's not— she's quitting her job, but I'm sure she'll start. So I would guess, uh, we'd be making around $200,000 or something like that.

$200,000. Okay, amazing. Amazing. So yeah, I would make it a goal, Cody, to pay off the truck. You guys get a fully funded emergency fund of 3 to 6 months of expenses. And I would start saving on the, after that, a chunk of money, 'cause I do think, you know, building on that land, I think that's great. If your dad deeds over some, I mean, that's a gift for sure. But I would not, I would do this in maybe 2 years and then part if you need more money past the savings, which you will, I might consider selling some of the acreage of the property to help build this. And then you guys are going to have a massive loan of $430,000 that you're going to have to work to pay off. I mean, that's, that's a, that's a lot of risk, Cody. I'll just throw it out there. I know it's working out right now, but I'm just telling you. Um, that's a lot of money to pay off.

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. Find a Ramsey Trusted Agent near you at ramseysolutions.com/agent. That's ramseysolutions.com/agent.

If this show has helped you think differently about money, will you share it with somebody in your life? One of the best ways to spread the word about the show is honestly you guys. It's the word of mouth of how it's helped you, because we do, we wanna get as many people as possible to a place where they have financial peace. Make sure to share the show with your friends and family. We would greatly appreciate it. All right, let's go to Ann in Colorado Springs. Hi, Ann.

Hi, thanks so much for taking my question.

Yes, absolutely. What's up?

Well, mine's a little bit different. I'm not calling from a personal standpoint. I'm calling on behalf of my job. I am an executive director of a small nonprofit in rural Colorado. Just a little bit of a backstory that'll maybe help understand things. We had to purchase a new facility 5 years ago so we could open a free medical clinic. Prior to that, we did not have a mortgage whatsoever, and we only bought the new building with a promise from a grant funder that after a year they would pay off the remainder of the mortgage. So we went into it not thinking we were going to have a mortgage for very long. And within that year, when I approached them again— my previous position is I was a fundraiser— it was when Roe v. Wade had fell and they no longer supported pregnancy resource centers, which is what we were. So now we got stuck with a mortgage.

Oh no, the grant didn't go through.

—through.

Oh man, yeah, man.

Um, and the original mortgage was only for 5 years, and with a great interest rate. It's for 10 years total, but the first 5 years was like 3% interest. Okay. Um, we did not realize that at 5 years that it was a variable interest mortgage, and it jumped to 6.7%.

Shoot. Yes. Um, so that leads to where we are now.

Um, I took over as director 2 years ago and inherited $50,000 $100,000 of debt for the center, for the nonprofit. And by the grace of God, we have eliminated all of that debt. And for the first time in 40 years, we actually reached our first goal of having a 6-month operating buffer. Oh my God, well done!

Yeah, you balance that budget. I like, I like your style.

Oh, I balanced it. She's like, I'm getting there. This is a new problem for the board, um, and myself to have because we've never had anything over— like, we were nervous to pay the electric every month, and now we have a full 6-month operating cost, which to me, I hate debt, but I also hate living in fear that we're not going to be able to provide our services and pay bills.

So with all that done, does it make the mortgage manageable, or where— tell us where the problem is.

Well, the mortgage is manageable because I've shifted some things, and I've actually run rented out space in our building, um, that pays for the mortgage, but it has a balloon payment due in 5 years.

Can it be refinanced?

Well, and that's the step that we are right now. So that's, that's my big question, is we are— we looked into refinancing. We found an amazing Christian company, um, that's going to help us refinance. It will drop our mortgage rate by $200 a month.

Great. And there's no more variable rate, which is the biggest— there's no more variable rate.

And in fact, we can revisit it every— I think we have it for every 3 years that if the rate is lower, we can reamortize this. Okay, that's fabulous.

So where's the problem?

The problem is, is we have kind of a split opinion on my board of directors, and that split is, is to because we owe $220,000 on our building, um, and they think the, the part that is disagreeing with the plan right now thinks that we should put every penny that we have directly to the mortgage, including the 6 months of buffer.

Yes.

And how much is in there?

Uh, we have $157,000 right now in our buffer.

Okay.

Which is technically about 7 and a half months. Yeah. I have no problem throwing anything over the 6 months at the mortgage and try to get it paid off as quickly as possible. But I'm really nervous not to have that buffer.

So what, you have to win votes? Is that the situation? You need to, you need to be lobbying for votes.

We want to make sure that we're doing the right thing.

I mean, I agree with you.

This is the first problem for us that we've ever had. Uh-huh. We want to make sure that we are honoring God and being good stewards because we depend on our donors. And one of the points of view is it's not honoring to our donors to have anything in savings. But I'm like, to me, that's being a good steward to make sure that we can keep going, you know, beyond today. So should we keep our 6-month buffer and throw anything over that at the mortgage so we can try to remove that debt as quick as possible? Or should we throw every penny at it to try to erase the the debt.

No, I could even see a split, Ann, personally. If you went down to 3 months, I wonder if you guys could get some agreements. Because there's a nonprofit that we support, and I remember we looked over the books at one point, and they did have a ton of savings. And even me, you know, Ramsey Solutions, I even kind of was like, okay, well, they can be using some of this money elsewhere, right? So, I do wonder, I think that it's a great goal to have eventually again, but I do wonder if there's a little bit of a compromise, Ann, that if you guys are like, hey, let's go down to 4 months or 3 months. And this is kind of even just using the rule of thumb of just even the Baby Steps from a consumer side, not running a business, you know, of that 3 to 6 month. But even Ramsey, I mean, yeah, retained earnings for 6 months, that's pretty good. I'm pretty conservative, you know what I mean? I think you could take it down a little bit to throw some cash at this mortgage. And again, part of it is to get everybody on board.

And part of it is I think that that's an okay move. I would not take it down to zero. That does feel unwise to do that.

Yes. To be at zero, no savings, no retained earnings. There's no—

Yeah, and you don't get taxed on retained earnings for nonprofit. Correct? Correct. Yeah. Okay, so that's great. That's great.

We have our 6-month buffer in 4 separate, uh, investment accounts, okay, that we can access at any time in case there's an emergency. Um, and we have those maturing every 6 months. We have 2 6-month ones and 1— and 2 1-year ones. So there's always one maturing every 6 months. Okay.

Um, to kind of keep it liquid. Besides not getting that grant, because I would consider that an emergency, that's like a wow plans. Have you guys run into any big emergencies that you've had to use that fund for in the last 24 months?

Well, um, we've also been very blessed in the last 24 months that we've been able to do all of our major maintenance and improvements and upgrades. We repaired our roof, we replaced our HVAC system.

Okay, um, so there's nothing really looming out there that you would need? Yeah, I mean, I would be okay taking I'd take it down. I would be okay taking it down to 3, Ann. And I would, because I think you guys can, 'cause again, when this balloon is due, did you say in 5 years?

Yeah, and so we're in the process of refinancing it now.

Oh, that's right. You are gonna refinance.

Okay, so that will finish. And if you've been able to cash flow all of those major projects, if you take this down to 3 months like Rachel is suggesting, and I agree with her, and then you commit to cash flowing the rest with the same margin that you were using to do those projects, this mortgage is going to be gone in no time.

Yep. Yeah, I would hope so.

I hate that. I mean, I know.

How quickly did you pay off the $50,000?

It took 18 months. Okay.

So, so it really—

so you threw 80 years and then another additional 6 months to get everything else taken care of. So we've done a ton of work in 2 years.

Yeah, it's amazing. Problem to have for sure. Yeah. Because if you look at it, if you took 80, right, and maybe threw it, you know, you'd be down to 160. And you said it took about 18 months to do $50,000, right? Like you panned it out and I'm like, yeah, in probably 4 years, you guys could get this building paid off. It's pretty amazing.

Yeah, that would be the best thing. So, 'cause I wanna throw everything, my personal goal is to have every penny that we possibly can to go to helping our clients.

Absolutely, I know. Yes, I know. We need this.

Absolutely. And so if we have a mortgage, that's money that we're not being able to.

Totally, yes. Well, you're, you're incredible, Ann. I mean, you, you took, you took that organization by the reins and you just said, here's what we're doing, and looking at all of it. Because, um, to, to have someone like you in that nonprofit world with that business mind to even look to refinance so you're not stuck with this horrible adjustable rate mortgage, even those, those moves are so wise. So, so wise. So well done, Ann.

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Our scripture of the day is Psalm 104:24. How many are your works, Lord! In wisdom you made them all. The earth is full of your creatures. Vera Wang said— oh, I like a little— I like Vera Wang quotes. When you have a passion for something, then you tend not only to be better at it, but you work harder at it too. Indeed, I would agree with that. Vera Wang. All right, let's go to Linnea in Minneapolis. Hi, welcome to the show for taking my call today. Yes, absolutely. How can we help?

So I got a couple of issues, um, or things going on in a complicated situation. Okay. Um, so first one is me and my husband were about $120,000 in debt. We're 28 and about to be 29. I'm finishing college, so that's a lot of it is student loans.

Mm-hmm.

Some in collections, a car. And right now, we make enough money on paper, but we're stuck in this daily pay cycle that our job offers where we're able to cash out our earnings every every day. And so it's really detracting from our paychecks and we're just stuck in this vicious cycle every day.

You can take part of it every day. Oh, wow.

Yes. Do you get charged a fee or interest? I mean, anything, or is it just that's how you're getting paid?

It's like $1.99 or $2.99 every time you can cash out. Okay. And cash out up to twice a day.

What do you guys do for a living?

So we work for the same company. My husband works from home in a different department. And then I basically customer service and then I work in the back office in office. What do you guys work?

I'm sorry, what do you guys earn collectively?

$85,000 to $95,000. He's on 32 to 40 hour flex weeks, so it can range between that $85,000 to $95,000 altogether. Okay.

What are you saying?

Do you guys have kids?

I'm making $40,000. We have one 2-year-old daughter. A 2-year-old.

Okay, um, and what are you going back to school for?

I'm in school for psychology and I plan on getting my master's degree. Okay, you're gonna pay for that as of right now? No, um, we're— we might stop, um, and pause school to cash flow once we get into a better spot, but, um, right now we've been taking out loans.

How much longer do you have till you graduate?

I have one semester left until I'm done with my bachelor's degree.

And how much of the $120,000 is student loans?

About $50,000. Um, it'll be $60,000 after everything.

Okay, $60K. How much is— do you guys own the car? Um, $24,000. Okay. Um, and what's in collections right now? Is it credit cards?

Um, a couple personal loans and, um, some credit cards.

What does that add up to? About $50,000. $50,000, and those are all in collections?

Yeah, about $40,000 in collections. Um, most of it's on my husband's side because he had some larger credit cards and he had the larger personal loan. And then we have about $8,000 of active credit cards. We just decided that we were going to stop using them altogether.

Good. How long have those bills been in collections? How long has it been sitting there?

A couple years now. Okay.

So, um, the good news on that is we should be able to settle that and make some deals on that for significantly cheaper than the $50,000. And that would be something that I would make it probably my full-time job. I'd start with the smallest one, kind of snowball it. And whenever you guys can pile up some money, I'd try to settle it for maybe a quarter on the dollar and do it that way. Um, I just wanna go back. I wanna make sure I understood you. I thought I heard you say you make $90,000. Then I thought you said, I heard you say plus $40,000? Did I hear that? Or it's $90,000 total?

No, it's about $40,000 to each of us. $40,000 to each of you.

Got it. Okay.

Um, so he makes a little bit more than me, but he makes less hours. Once you get— I have the ability for overtime.

Once you get the degree, you have one semester left, what's your income going to go up to?

Hopefully for me alone, um, somewhere in the $90,000 to $100,000 range, um, once I have my master's.

Yeah, no, no, no, no, with this, just with this degree, nothing, because it doesn't— I don't think it adds value to your current job, right?

No, not really. Um, I can become like a case manager or something like that for about what I'm making now. Yep.

Okay.

All right, so the, the degree is a little bit of a wash, and we're not going to go deeper in debt to get the master's to hopefully make then $100,000. Got you. We are Okay, so, I mean, the number one goal would be to get you guys your head above water just in your current day-to-day bills so you're not having to have this daily pay. This paycheck deal. Yes, yeah, yeah, yeah. I want you on a rhythm. And so what this usually means is you kind of have to like shock the system, which is gonna mean working weekends, weekends, working nights somewhere. And it's gonna probably take, I would think, a good 60 days of another job, Lenea, to get some cash flow in so that you guys have enough in your accounts that you don't have to be waiting on that next paycheck, if that makes sense. That there's enough in there to pay what you guys need for the next one. And so—

I did something stupid too. I cashed out my 401. There wasn't much in it. Was $1,300. It was $1,600 before taxes. So I have that on the way to just give us a buffer of something so that we can get out of this cycle. And that was the only reason why I did it.

Do you know, let's pretend today that you were current and you weren't behind on anything. Do you know with the amount of money that you bring in every month and your minimum payments, are you in the red or are you in the green?

No, we make enough money on paper.

Yeah. Okay. So when you do your EveryDollar budget and you plug in, you know, the $90,000, how much is that per month for you guys?

Um, so it's about— I think after everything, they give us a surplus of like—

no, no, just the amount of your paychecks.

Like $6,000-ish probably hits your account, would you say? Um, should be $1,200 per check. I get paid biweekly, and then he gets paid around $900.

Okay, and nobody's investing right? No. Okay. Uh, so here's what I would say. Do the budget and do it with— I want to know exactly what that margin is going to be. And then the other number I want to know is exactly how much you are behind on today. Like, what's the deficit for this month? Right now we're in August, so, and we're not even midway through yet. So are you already operating at a deficit, or tell me how this current month looks?

Well, when I did the EveryDollar budget, it said that we have about $400 extra at the end of the month. But I think it's more of a timing issue. We have heavier bills in the second half of the month. Okay.

Good to know. So let's do this. On EveryDollar, there's a paycheck planning feature because what you're highlighting, Lene, is really important. It's the first step to budgeting is deciding how much we're going to spend, right? And assigning the line items. But the second part of budgeting that a lot of people miss is now we have to decide when when we can spend it. And sometimes it's as simple, Linnea, as calling in and saying, "My mortgage is due on the 1st." It might be easier if it's due on the 15th. And you can call in and make those changes. A lot of times there's flexibility as long as you're paying it that month, right? And moving things around so that you know, when I get the first check on the 30th, that's when I pay, you know, bills 1 through 3. And then on the 15th check, that's when I pay the majority of the other bills, right? I pay the 3 biggest ones with the first check, and I pay all the little ankle biters with the second check. And so it's a little bit of a puzzle sometimes to figure out what bills you can pay with what check.

But let that be your homework tonight because I actually think that that's the solution here is knowing, okay, when I get paid that first check on the 30th, even though my entire grocery budget might be $600, but I can only spend $250 of that grocery budget on the first check. And then when the second check comes, now I can spend the other $600. You see what I'm saying? You know what I'm saying? And so that's the puzzle that you guys need to sit down and figure out. 'Cause I think you're right. There is enough money there at least to hit the minimums. And then when you get on that rhythm, like Rachel said, now we can feel really confident about taking the $400 in margin and chucking it away at, you know, whatever credit card or the smallest debt is.

Lenea, do you know what you could sell your car for?

Carvana says $19,000. Okay. The second part of my question is, I'm having a hard time convincing my husband to let go of it. We just got it in January. It's a 2024 and he's really attached to it for the first time.

Yeah, well, I think if you guys can sell this, if you guys can do, if you guys can sell that, maybe get $12,000 for the collections and you start doing it, I think in 3.5 years, your life looks different. Yes. All right, there's ultimately only one way to financial peace and that's to walk daily with the Prince of Peace, Christ Jesus.