Transcript of Develop Steady Habits That Create Lasting Wealth

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Normal is broken, common sense is weird, so we're here to help you transform yo' life. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show. I'm Jade Warshaw. Next to me, GK, George Campbell, taking your calls really for the next 3 hours. It's gonna feel like 2 hours to you.

It's going to fly by. Oh, because literally the amount of show they hear without ads and radio breaks.

That's right. But for us, it's 3 hours in the studio. And we've got Sam, who is on the line in Cincinnati, Ohio. Hey, Sam, how can we help today?

Hey, can you guys hear me?

We can. Can you hear us?

I am 19 years old. Sorry. Yes, I can. I'm 19 years old. I just graduated high school. I'm heading to college about 45 minutes away. Um, I'll be coming home on the weekends because I have a lawn and landscaping business that I like to keep up. Um, and so I have a truck that's not good on gas mileage, so I'm looking to buy a car, um, something small like a Honda Accord. My parents want me to buy something a little nicer and reliable, maybe around $20,000, but that would take me down really low on cash, and so I'd have to take out a loan. I'd rather buy something around $10,000 and just just pay it in cash and just get something that just gets the job done.

I love that.

Have you ever heard the phrase that people vote with their wallets? Uh, no. When it comes to politics, they vote for what's best for them financially. I think your parents should vote with their wallet if they're going to have a say in you taking on a car, right? So unless they're paying for it, I know they want Sam to have a nice reliable car, but Sam can only afford an $8,000 car and he's going to get the best one he can for that money. Yeah, that's where it ends.

I will say I have around $20,000 now in cash and up until August I'll be making anywhere between $1,500 to $2,200 a week. Wow. And so, and then I have another, uh, around $16,000 in tools and equipment. That's all, that's all paid off. That was all paid in cash.

Wow.

Good job.

Excellent. Um, so I just, just, I don't know if that changes the scenario.

It doesn't. It doesn't. What that tells me is you're so smart with money. And you understand the power of cash, and it sounds like you understand the power of delayed gratification, right? And that's kind of what this car business is about. I, it sounds like you don't want to go all the way down to zero in savings, and I actually think that's very wise. And I think you understand, I'm 19, I don't need a $20,000 car. So you understand the difference of needs versus wants. So that's what's gotten you this far. And your parents, God love them, I think that they're, you know, they're not trying to jack you or trying to do anything negative. They're just, they're just, they want you to have a safe car and they probably somewhere in their minds don't believe that you can find a $10,000 car that checks all the boxes. And I think that when you do it, they'll go, oh, that is nice. That does work.

I'm curious, do they know how well you're doing? How much cash you have?

Yeah, they do. My dad's an accountant and I like to call him my own accountant. He runs all my numbers and does all that stuff. Oh, okay.

So how much of that $20K would you call your emergency fund?

Um, in terms of expenses, I guess when I go to college, I honestly don't know how much I'm gonna spend. It's in a little town called Cedarville and there's not much to do. So I'm guessing I'm not gonna spend any more than, I don't know, $300 a month.

Wow.

Well, let's say $10,000 is your emergency fund. Okay. And let's say the other $10,000 becomes your car fund and you can make $1,500 a week and bank most of that.

Right? Yeah.

How many more weeks can you work?

Um, now until mid-August, so I don't know how many weeks.

Oh, that gets us like 2 months. Okay, we'll call it 7 weeks, right?

Okay.

And let's go on the low end. You said you can make $1,500 a week on the lower end.

Yes.

Okay. $1,500 a week, 7 weeks. That's over $10,000. So you take your $10,000 you have. Call that the car fund, a new $10,000 from your future income. Now you could buy a $20,000 car in cash. Do you need a $20,000 car? Absolutely not. You could find a great Honda Accord that's a, you know, 2016 for $12,000, $15,000 probably.

Sure. Okay.

Yeah. Yep.

Well, well, I appreciate you guys.

You've got some options. I just, I love to hear a responsible young lad handling his money. With care. Love that. All right, Abby in Birmingham, Alabama is next up. Hey Abby, how can George and I help?

Hey, so I had a question about life insurance. So I'm 27, about to be 28. I've had a $75,000 whole life since I was 22, but I just recently went through Zander from listening to y'all and got a $200,000 term policy, which you can keep it till you're 80 or whatever. And I went to go cancel my whole life the other day and They talked me out of it because they were like, well, what happens when it gets to the point you can't pay it anymore? Like, you're— because, you know, the bands are like 5 years, so it goes up like a percent or 2 every 5 years. Now, I was like, well, I'm doing Dave Ramsey, and that's— you're supposed to be self-insured by the time that happens anyway. That's right. They were like, you know, Dave Ramsey owns part of Xander. He makes money off of—

that's hilarious.

That's crazy.

So now, you know, they have no integrity. Because they've already lied to your face and they're trying to convince you to keep it so they can keep their commissions. Yeah. So a little bit of a vested interest to ask them if you should keep it.

All righty, because I was going to do the surrender or whatever, and you should— he was telling me all that. And, um, I mean, what do I— I know it's a scam in the end, but there's also this thing about you can pause it, quit making payments on them, but not really surrender.

Okay, so here's, here's the issue. No, because you have 2 products wrapped up in one, right? Part of what you're paying every single month is being invested and it's being invested at a very poor rate of return. Very, very bad. Somewhere between 1 to 3% is what I would estimate.

That cash value is crawling. You could do better in a high yield savings account.

Right.

Than you could with that cash value.

Not to mention, if you pass away, your family doesn't get to keep that cash value. That goes away. That goes back to your insurance agent who sold you this, right? And so what we're suggesting is, let's just pay for insurance. Let's just pay a little bit or a lot bit less per month on the term life insurance. Then the extra money that you're not paying in that premium, you could take that and invest that at 10%. Or if you don't wanna invest it, you could apply it to your budget, right? Whatever Baby Step you're on. So you're saving yourself money by simply buying insurance. And if you believe what we teach about the Baby Steps, there is a time to pay off debt, there's a time to save money, there's a time to have insurance, there's a time, right? There's a time to invest. And so that's a great way to think of it is right now is a time to buy insurance. When you're ready to invest, you'll be doing that at 15%, and you'll be doing that earning probably 10 to 11% in the market.

Well, what's your current payment you're making for that whole life insurance policy?

Um, it's, I think it's $51.87 a month. So go on and say 52.

$51.87, like $51.87?

Yes, sir.

Okay. And the death benefit is real small, $75,000. That's not going to get you very far if something were to happen to you. What is your household income, or your personal income, sorry?

Um, about probably right at $30,000. I'm like a part— I clean houses right now. I'm actually a nurse, but I had a baby and been doing what I can do to cash flow while my husband's working as well.

Cool. So we recommend having 10 to 12 times your income. So you're actually a little low on that $200,000 side for Xander. I would up it to $300,000. You can also get another policy versus just trying to swap it out if you already have it. But surrender that policy. Don't trust them. Run far, far away from any kind of permanent life. You might as well light your money on fire.

Yeah, just remember, the purpose of life insurance is for anybody who's dependent on your income. If something were to happen to you, this is to replace that. It's to make sure that they're okay. And $75,000 is maybe going to get them a year of life, but you want to set them up for life, which is why you want 10 to 12 times your income.

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All right, back to the phone lines where we have Emily in Omaha, Nebraska. Emily, you're on the line. How can we help?

Hi, how are you?

Excellent.

How are you? Um, I'm, I'm doing all right, thank you. Um, but, um, honestly, I'm on the show today to just ask, as someone who has, um, I really feel like exhausted almost every option, um, and has done everything to cut spending and, um, all those things to pay down her debts, like, what are suggestions or recommendations that you have to generate more income to keep aggressively attacking Debt. Yeah.

So tell us where you're at right now. You've cut your budget back, and with everything pulled back to a skeleton, how much margin do you have right now?

Very, very little. So I recently became unemployed. I was working on a minimum wage budget before, and after leaving that job, I thankfully got a job today, but I won't start that until 2 weeks, and that is going to pay me $20 an hour, so it's significantly more than what I was working with before. But before, I think I only had about $20.

Wow.

After—

After your bills.

So you've been staying alive like the Bee Gees. You've been barely making it, and now there's sun starting to part through the clouds, and you've got $20 an hour. This is great. Are you behind on anything?

Um, yes, yes, I am.

Tell us what you're behind on.

Yeah, um, I am behind on my credit card debts and a personal loan debt.

Okay. Um, what, um, so you start this job, you'll be working 40 hours a week?

Yes.

Okay, excellent. All right, so let's go through the debt so we can get a picture of it, and then we can try to help you find kind of where you are today and where you need to go next. So we know you're behind on the credit the personal loan. What are the total amounts of those debts?

Um, in total, it minus, um, like my student loan debt, it's about, uh, $29,000.

Okay, $29,000 minus the student loan.

If we added student loans in there, what's the total?

Um, about $50,000.

Okay, okay, so another $20,000 of student loan debt. Yes. Okay, cool. Alrighty then. Um, yeah, so you've got this job, you're starting to work. The first thing that you're gonna do when you get that first paycheck is let's get current on everything. Let's get current on everything and let's make sure we've got our four walls working. First thing you're gonna do is I pay my rent and then I pay my utilities. I make sure there's gas in the car and I make sure there's groceries. Those are the four things first, and then we're getting current on anything that's behind. So that's the first thing. Write it down in your notebook. And then after that, we can begin to say, okay, what's a normal rhythm going to look like going forward? We've got everything taken care of. We're going to make sure to give you EveryDollar, which is how you're going to budget your money. Do you have it already?

EveryDollar app? Yeah, I do.

You do have it. Okay, excellent. Have you opened it? Have you gotten started in it?

Not yet. I recently came across it.

Okay, so that's homework number 2. Tonight you're gonna open up EveryDollar and you're gonna do the math and say, okay, if I work $40 a week at this new job, what are my paychecks gonna be? Do you get paid biweekly? If you get paid a month, however you get paid, put it in there. And then we're gonna start to run out all the things I just said. First, you're doing those 4 walls, then you're getting current on everything, and then we're gonna find out how much margin there is. And whatever margin you have left, That is going at your smallest debt on top of the minimum payment. So your smallest debt is probably one of these credit cards, I'm guessing. Mm-hmm. How much is it?

Or sorry, no, it's, um, a bill from the IRS right now is the smallest.

Did we factor that into the $50K or is that on top of that?

Yeah, that's, that's factored in.

Okay. What do you owe them?

Um, $986.31.

Okay, cool. So that's the first goal. We put the IRS debt at the very, very top because they can really screw up your life and they basically have unlimited access to your financial world. So we're going to attack that one first. Luckily it's the smallest, so it'll be gone real fast. So I'm curious, you said you had $20 left at the end of the month with your old job. Now with the new one, I'm going to guess you're going to be taking home like $2,700 a month after taxes.

Hopefully.

OK. So now how much margin would you have then if you kept your expenses this low and made your minimum payments on debt? How much extra could you have?

Potentially—

we can help you if you tell us what you were making before.

I was making $14 an hour before.

OK.

So you got a, you're getting about a $12,000 raise. So let's call that you're getting an extra $700, $800 a month.

Mm-hmm. That's big. That's major for you. But, uh, it, it's good, but I don't want us to stop there because how old are you, Emily?

I am, um, 27.

Okay. You're 27 years old, which is, you're at a major crossroads right now. You felt what it feels like to struggle, but at 27, I don't want you waking up at 37 feeling the same way. Right. I, I'm making $20 an hour. I'm trying to make ends meet. I'm just looking for margin. So I want the bigger goal to be, I don't want to feel like this. I don't want to be floundering. I want to plan. And so I'd be looking for what is it that I want to do with my career? What do I see myself doing 5 years down the line, 10 years down the line, 20 years down the line? And I'd start making a plan for what it looks like to start accomplishing that because we can give you quick fixes for how to get margin because the truth is, yeah, you are going to need a side hustle on top of this $20 an hour job. Um, you are going to need to pay off this debt. You are going to need handle that side of things. But if you can start looking on the career side of things, that's really what's gonna break you free long-term.

And short-term, there's a lot of things you can do to up the income. And Emily, let me encourage you, I was exactly where you were when I was 23. I started at Ramsey. I was $40 grand in debt with my con— my consumer debts, credit cards, student loans, and I was making about that. So it was overwhelming to see those numbers. So what I started doing was finding out what stuff do I have around the house I could sell? Is there anything I could flip that I could buy cheap on Facebook and then sell for more? Can I do any of these delivery Delivery jobs. Back in the day, they didn't even have DoorDash and Uber Eats, so I was doing Uber and Lyft, driving people around nights and weekends. And then look at your tax withholdings. If you're getting a big refund at the end of the year, we can change that. Are you doing any investing right now?

I am, actually.

OK, I would pause that down to zero because that's going to free up a couple hundred bucks, probably, right?

Yeah. Perfect. I have, yeah.

So every single extra dollar we can find is going to get thrown at this debt, and you will get back to investing in no time, and you will retire a multimillionaire if you follow this Plan. Yes. And then there's also all kinds of things you can do, like babysitting. Oh, yeah. Dog sitting, pet walking.

I mean, just think babysitting is where the cash is. That's where the bag resides.

I don't know when babysitters started charging like $20-something an hour, but it's gotten insane.

As someone who has to pay these people, I have come across, and I'm sorry to say that I have paid as much as $30 an hour for A babysitter.

A babysitter.

Uh-huh. Now this, this is the type that, you know, cleans up after the kids, puts everything away, will fold the laundry, will put things, you know, it's not just, I just sit there on my phone while you, right? Yeah. So I would encourage you to look into some of those service-based positions because people will pay because they need it.

Yeah.

Because they need it done.

There's apps like, you know, on sites like care.com, you make an account and people will find you. And if you have, you know, if you look like a sane person with a decent profile picture, they'll go, okay, yes, let's see if Emily can handle this in Omaha. And so there's going to be a lot of things you can do. I'm going to send you my book, Breaking Free from Broke. There's a whole chapter called Margin is Breathing Room where I show people, here's all the ways you can spend less. Here's all the ways you can make more. That's it. Those are the two levers. And you've already done so much good work in spending less. So now it's how can we make more in the short term and then long term? How do we get that core income up with our full-time job? But I have a lot of faith that you will get through this. My guess is less than 2 years.

Yeah, I do too. But the key thing is this is the crossroads. And for anybody listening, when you have that I've had it moment, which is what Emily essentially has had, which is I'm tired of struggling, I'm tired of just staying alive, I'm tired of just holding on by, you know, my fingernails to get through a day, that's when the rubber meets the road. And you have to decide if you do the things that we teach, the time is going to pass anyway. And to George's You are gonna wake up on the other side, you'll be out of debt, you'll have savings for the first time ever, and you'll be well on your way to building wealth.

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Back to the phone lines we go.

We've got John who's in Reno, Nevada. Forever reminding me of Sister Act. What's going on, John? How can we help?

Yeah, hi.

Yes, I have a question. Right now my daughter's not speaking to me because, you know, there was comments that I said about me not putting myself in debt for her to go to college. I never said I wouldn't help her. It's just, you know, I don't want to put my family too in danger for putting me in a loan. So then after that, I I mean, it's been probably now a year and 3 months that she hasn't talked to me. And I guess my question is, um, I make about $185,000. I'm, uh, I have, um, $45,000 in debt. I still want to help her, but I just don't know how to do this or how to even explain it to her. It's just, you know, it just got pretty ugly.

Can I ask a question? I feel like like, for whatever reason, I'm making an assumption and I don't want to make it if I'm wrong. Uh, is your wife involved, or is this a— is, is it just you and her, or is there a wife involved? Tell me, tell me more about your family situation.

So, so yeah, so me, so me and my wife are willing to help out, right? And the only thing is, just one of the things that we don't try to do is put ourselves in loans.

Understood. I just wanted to make sure I understood the family dynamic.

So when did this conversation start? I'm curious, was it because This is like, we know that eventually someone might go to college and then the word—

June 2025.

That's when you started the conversation?

Yeah.

Okay.

And when is college supposed to begin?

Well, she actually graduated this year and she decided to go out of state in, uh, college too.

Okay.

And you guys never had this conversation?

Uh, we had the conversation a couple years back, but her mom, uh, and what I'm not with her mom.

Um, that's what I was trying to understand.

Yeah, they— I guess they never give me type of information or anything, you know, like to be able to clear things out. They're just like, oh, you need to pay for this. And then in that same conversation, they were like, oh, well, she— can you at least help for the car? And I was like, what car are we buying? So there was never really any type of information given to me other than just little bits and pieces, and then you just expected me to do it right there and then.

Okay, understood. That's, that's the family dynamic I was trying to get to. I had a sense that something— there was a separation or, you know, she— your wife is not in the house. Um, here's, here's what I think is happening, and I could be wrong, but just by the way that you're saying your words, it sounds more like you're talking more about what you're not gonna do versus talking about what you are going to do. And I would be leading the conversation with exactly what I'm going to do to help. And I think if you do that, then it'll cause them to hang out there as well and remember that from the conversation. For example, if she says, but Daddy, I want to go to this school and I, the only way I'm going to go is going to, I need a $30,000 loan. And you say, I'm not taking no $30,000 loan, right? That's not going to work. But if she says, but Daddy, I want to go to this college and you say, honey, I'm going to give you $15,000 for college. It's up to you to figure out. Which school you can go to where that money will go the furthest.

Here are my suggestions. Do you see what I'm saying? That's a very, that's a very different conversation. Now you've never said no. You've never said no. You've just said, here's what I'm saying yes to. And I think that that would go a long way because if what's happening is true, which is they're having a bunch of side conversations and they're, you know, marinating on this and maybe inflating it beyond what you've said. Your best protection is to be able to say over and over, I'm giving her the $15,000. I'm giving her the $15,000. I've said I would pay, you know, up to this point for this particular school. So if you're being accused of not caring, show that you care by saying, here's a school that works. It's in my budget. If we all pool our money, we can do it like this, right? Let's solve the problem versus everybody talking about what we can't do. Yeah.

And that I did try, but their thing is like, no, she needs to go here. That's what she wants to do and that's what she's gonna do. And at that point I was like, hey, well, I'm not going to be able to do that, especially if it's out of state. Um, and then you have to pay out-of-state fees too.

So are you not helping at all financially right now?

Yeah. So what I did was just, uh, put, you know, I put myself in child support and all that stuff. So I've been paying all that, uh, child support. Um, and that's pretty much it. And when she— whenever she comes to— she came to the house before, you know, she, you know, she had her own room, her own place to be, and I had You know, told her like, hey, if you need anything, you know, come to talk to dad.

Well, not anything.

Yeah. Like, whoa. What I meant, like, uh, when it came to school, right. You know, let me know and we'll talk, but I don't need to be talking to your mom because it's just become such a toxic—

well, that's what I want to know. What is the relationship with mom versus you?

And how long has it been like that?

Yeah. So, so it's been 18 years. I never married her. So I have my own, uh, family, uh, with My wife. Yeah. So yeah, with my wife, I never married her. Uh, so she, I never been with her ever, ever since my kid was born.

So this has just kind of been, for lack of a better word, like baby mama drama for 18 years, back and forth, back and forth. Okay. That makes a lot more sense.

Now I just want to—

I want to clarify just to get down to brass tacks. We understand you're not going into debt. I would not, I would agree with you. And I think George would too. We're not going into debt. I'm not signing a Parent PLUS loan. I'm not gonna recommend for her to go into debt. How much, how much money do you plan to give her every month or every semester for college? What's the number that you have in your head?

That I don't have. Uh, but I mean, I could come up with the number.

That's what we need.

Yeah. Could that restart this relationship? I think if you going to her and saying, hey, I have really screwed this up and I'm so sorry. There was a lack of clarity. I did not communicate well. I communicated too late, and that's on me. What I do want to do is restart this conversation and create a plan for you to go to college debt-free. And here's how much I can do right now based on my financial situation. Would that get her to perk up?

I'm hoping, yeah.

Because there's so much deeper here. This is— there's a lot of relational issues. This money thing is just like one baby symptom of years and years of broken relationships. And I think she's now seeing this as is, man, this guy hasn't been there for me relationally and he's not even here for me financially.

Well, yeah, and that's how it seems, right? And the thing is that we all— I've always been there for her. Uh, she's stayed with me, like I told you guys, like every weekend and stuff like that. Uh, I made sure that I went to the courts, got child support on myself, and then make sure that I had visitation for, uh, with her because I knew that we're gonna try to pull her away. Um, so I I made myself, uh, you know, available for her.

It sounds like there's two conflicting family dynamics. You've got a family over here who, we're a no-debt family, and then there's a family on this end for her that's like, hey, whatever it takes, we're gonna do it. And she's caught in the middle of that is what it sounds like. I, I agree with George wholeheartedly. If you come to her, because I'm gonna tell you like this, my dad said to me, I'm not— when I said I want to go to the school and I need a loan, he said, I'm not doing student loans. He said to me straight up, he was like, "You better get a scholarship. You better be good at sports because I'm not taking out no student loans," is what he said. And I was like, "Okay," you know? And I remember at the time feeling a way about it, 'cause you know, you're 18, you're 17, you're 16, you're young. But on this side, I'm like, "Oh, thank goodness. I'm really glad that he didn't ensnare both of us." You know, I went on and I was hardheaded and took out some loans, but at least it wasn't a Parent PLUS loan, and at least I didn't ensnare him in it.

So, I think on the flip side, like, longer down the line, she's going to appreciate that. But if you do what George said and you humble yourself and apologize for not starting this conversation earlier as the adult, she is— that's going to do something to her on the inside because parents don't apologize to children enough for the mistakes that they make. And so please, please do that. And don't do it in the heat of the, you know, the next conversation. You go first, call her up and get, "Hey, can I take you out to lunch? Can I take you out to dinner?" sit her down and go, I messed up and here's how I, how I did it. And I think that's going to change the whole landscape from us going forward.

Yeah, no, I agree.

Cool, cool, cool, man. Well, it's a great wake-up call to all the parents out there. Do not start this conversation as your child is touring schools. Start this conversation at 12, at 14, at 15, so there's no surprises. Your kid knows exactly where you stand. Hey, I will cover 4 years at an state school.

That's right.

That's what I'm willing to cover.

And if you can't, if you don't have the money, that's okay. As long as you have set the expectation, I don't have the money for college, you're gonna have to get a job, you're gonna have to do work-study, you're gonna have to go to community college. As long as you set the expectation, that's all we can really ask of you.

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All right, back to the phone lines we go, where we have Timmy who is in Dallas. Dallas, Texas. Hey, Timmy, how can George and I help you out today?

Hey, good afternoon. Hey, shout out to, uh, Smart Money Happy Hour. Hey, don't go hard. Represent. No, baby, baby, thank you. Keep it going.

You're welcome. It's Friday. I know you guys aren't gonna see this till later, but it's Friday, so I feel like I'm on a different level.

We're vibing.

How can we help, Timmy?

All right, so my I did call last week about our mobile home. So we owed about 80— we owe $98,000.

Okay. I think I remember this.

We finally got an appraisal. It was, uh, Paola in Dallas, Texas. But we finally got an appraisal and the difference is $33,000.

That's what it's worth?

You're saying it's worth $65,000? 65.

Okay. 65.

Yes.

Okay. So you're 33 upside down.

Yes. Yes.

So that's fun. Uh, so we're, we're already, we're in Baby Step 3. And so we have right now saved up, I want to say $2,000. And so now it's, now it's like, which way do I go? Right? I want to sell this thing. Like Dave said last time, it's just, I just, I'm financially illiterate. I just I don't know what to do.

Yeah, I, I would, I, this is going down every single day that you wait. Um, for those who didn't hear that episode yet, your wife called in. This was something that was really keeping you guys stuck and we suggested that you sell it right away, get it appraised, sell it right away. So you've got the appraisal and the way to get from upside down on this is you've gotta get a loan for the difference. And oh man, as, as much fun as that's not gonna be, um, it's better to have $33,000 of debt than to have $98,000 of debt that's just creating a bigger gap day by day by day, right? Basically going up. So that's what I would do. I would try to go down to the credit union if you can. Um, try to find something with as low as, you know, lowest interest rate as you can. But the key is we've got to get out of this mobile home that's going down. Now tell me about the land, cuz I don't remember. Do you guys own the land or where is it?

Unfortunately, we do just rent out the land. And so each year it just keeps increasing. Yeah. So right now we're at $950,000. Oh yeah.

Gotta get out of this. Yeah, yeah. And just— and, and find some place to rent for a while and just kind of clear your minds of this, this thing that did not go well for you.

Yeah. How much money do you guys have right now?

So late in the game. Uh, say that one more time.

How much money do you guys have right now to your name?

Um, I would say in savings, checking, just $3,000.

Okay, because I'm wondering— I'm guessing the time it would take you to save up the gas cap, it would be a year or two from now, right?

Correct.

Correct.

To save up $33,000. What's your current household income?

Current household income is $80,000.

OK. And what's your monthly expenses? How much does that add up to, to cover everything?

$2,700.

OK. So there should be some margin at the end of each month right now, right?

Yes. Yes, there is.

OK. So if you guys are taking home $60,000 and spending $30,000, you could save up $30,000 in a year., again, the value's gonna go down. So the gap is only going to grow at this rate. Mm-hmm. Because the appraisal's only gonna come back the same or lower next time you do it.

Yeah. I mean, if you can, if you take out that loan for the difference and then you get very aggressive about paying off that $33,000, you know, that's, that's the choice you have to make. I'd hope that you could do that, you know, within the year as well. Mm-hmm. If you got extremely aggressive. So it, it's, it's your choice, but I, If I were in your shoes today, I think I'd call it and, and get out of there. Have you looked at rent in your area?

Um, unfortunately, I think rent's pretty high in my area, so it's going to be around $1,700. But a 2-bedroom, just because I got 2 daughters.

If I remember correctly, didn't you tell me that the interest rate on this thing is crazy, so your payment's high on the— your payment's super high?

0.95.

Yeah.

Oh, okay. What are you paying every month for for it?

Um, the mortgage alone is $1,100.

Uh-huh. But then the rental, and then the plus the lot rent, yeah, $950. So you're— yeah, this is going to be cheap. It's going to be cheaper for you to rent. I mean, you'll have to pay, right? You have the $33,000 loan, so you'll have to put some margin towards that.

But I think you're putting $2,000 towards housing already, right, is what we're saying.

Yep.

Okay. And so putting $2,000 towards something that helps you build for your future is way better than something that's going down in value like a vehicle. So this is not going to be fun. And I don't know how easy it's going to be to get a loan for the difference on this, but that's your option other than selling stuff aggressively, saving up as much income as you can. But again, that could be a year from now before you can get out of this.

Do your due diligence, see what you can find. And as a last resort, yeah, go ahead and cash flow it. But when we say cash flow, we don't mean like doop, doop, doop, doop, doop. I mean, everybody's picking up second and third jobs, and we are attacking this like a virus. Like, we're going crazy on it, okay? We want you to get out of this for good. Shelly is in Atlanta, Georgia. Shelly, how can we help today?

Um, thank you for taking my call. I've been listening for quite a while now, and I really appreciate everything you guys do. You two are my favorite.

Aw.

Thank you.

It means a lot. Anyway, my question is, my husband was diagnosed with dementia about a year and a half ago. He's been doing treatments every 2 weeks. We have very expensive insurance, but it is covering it, so that's a good thing. He's doing quite well. Good. He's 77, and he works part-time still, believe it or not. Wow. Just 1 day a week, but it's just something to do, you know? Yeah. My question is, I'm trying to save up, fill up our emergency fund, and we're completely debt-free. Uh, house is paid off, everything is done. I'm 65 and I still work full-time. My question is, do I keep putting money into the emergency fund to get to the recommended 12 months in a situation like this? Or— that's what I heard on Ramsey— but, or do I use some of that money to try to bring him to some of his siblings? He has 6 siblings and they're kind of spread out out. Um, 4 of them are coming for my son's wedding next week, but there's still 2 that we haven't seen in a while. Because I feel like, you know, we're getting to that point in time where I, I feel like, I feel guilty that he's not being— he's not seeing them.

Is— are the siblings that he hasn't seen that are not coming for the wedding, are they older? Like, are they— is it hard for them to get out?

Um, there are all their, their ages range from like 67 to 80. Okay. And actually, the 80-year-old's coming in from New York, and— but, um, there's one that's in New Hampshire, and he's like in his late 70s as well, but he's not able to travel. Correct. And then, um, we have one that's, uh, in Lake Charles, Louisiana, but he's, um, he's a little bit younger. But, um, yeah, they're just busy.

Listen, you have no debt. You've paid off all your debt. You paid off your mortgage as well. Yeah, you do need to save up an emergency fund, but I think that you guys have worked hard and earned the right to, you know, take a trip to New Hampshire to see a family member or whatnot. So I would not let that stop you. What are you earning? You said you're still working full-time. What do you make?

Um, I just do a little job. It's about $45,000. And then with his Social Security and his job, between all of it, it's like $77,000.

So, okay.

Okay. What is his Social Security? I want to know monthly what you guys are bringing in.

Um, he is bringing in $27,047. Okay. And, um, mine, after everything is taken out, probably is around $326,000.

Okay. Okay. And there's no nest egg?

Uh, $300,000.

$300,000.

I would be looking, of course, for the short-term plan, which is, yes, we need an emergency fund. You can go 6 months or more. You might just have a sinking fund in the budget for medical expenses. And then we need a long-term plan because if you're looking at, you know, dementia care, it could be $50,000 to $100,000 a year, right?

Right. And that's, that's why, that's what stops me from spending money, like very frugal.

We don't do much.

And you should be.

But we had, we had, um, we had thought about getting long-term care. Well, of course we never did it. Now we can't because of him, you know, with his diagnosis, you can't get the insurance. Insurance. Yeah, yeah. Um, so, but, but as far as—

so it—

on one hand you're saying go ahead and just keep—

I would—

yeah, keep funding it and then start a sinking fund and don't feel guilty for spending along the way. You still have to live your life. You still need to see family. And the best thing you can do is make a game plan for what this looks like long term. Become an expert on this health insurance plan. What does it cover? What doesn't it cover? Have the full out-of-pocket max ready to That's all the things you can do in a situation this difficult. And we are, we are rooting for him. Sounds like he's doing good. Let's hope it stays that way.

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I'm Jade, this is George, and we got T, who's in Orlando, Florida, on the line. Hey T, what's up?

Hi guys, how are you?

Doing great. How can we help today?

Okay, I'll try to keep it as brief as possible. So my husband and I are currently working to pay off debt and we're trying to follow like the Dave Ramsey plan as far as the Baby Steps. Which we have not started because we're in a difficult situation and kind of need help with a realistic plan with our finances. So we both have loans we're paying off. My husband, he bought from a loan company several, and he is paying those balances. And I've also borrowed to help pay off his part of the rent, which was originally supposed to be for my car payment. And because we're focusing on making those payments, our cash flow is extremely tight. So in addition, I'm helping cover a portion of his rent obligations while he's paying off his loans. Which has caused me to fall behind.

I'm sorry, what's the rent for?

Are you living in different places?

No, we live in an apartment, same apartment complex.

And you're married? Yes. What do you mean when you say his portion of the rent? Does he owe from another?

Yeah, he— no, not from another.

We split the rent in half, but he hasn't been making his portion, so you covered it with debt? Yeah.

Because I, I come up short because I have my bills that I'm paying too, and if I don't have enough, I had to make the non-smart decision.

How long have you been married?

Um, 2 years will be on Monday. 2 years.

Okay, happy anniversary. And you said— I— you mentioned children. How many total?

No children.

Oh, I thought I heard you mention somebody.

Okay, so what's the rent?

The rent is about $1,916. Okay.

And what do you guys each make?

I make about $1,500 every 2 weeks. He gets paid every week, so it's about $700 every week.

Okay. So you're both bringing in about $3,000 a month. Yeah. About $6,000 total. Yeah. Okay. So the rent is about a third of your income, which is a little high, but it's not not broken. Why did he get behind on rent?

That's what I've been trying to figure out too. Um, I did ask him. He did mention borrowing from like 5 different other companies that he's paying back. Oh boy. I asked how when he gets paid every week, and I didn't really get a clear answer on that part.

Well, this is— T, you know this— this is a huge marriage issue more than it is a financial issue. There is zero transparency, zero accountability, zero acting like a married couple. You just— you You got shacked up with a bad roommate.

Have either of you expressed the interest in wanting to kind of combine money so that everything is transparent and it's just one big pool?

Uh, you got— actually, I did. That was me. And what did he say? Uh, it's kind of hesitant on it. Um, he didn't really like the idea of like, even though it's coming— his money is coming in through his account, mine in my account— he didn't want to combine. Did he say why? No. Is it shame?

Is it fear? Is it baggage? I think we need to get to the root of that in order to solve this, because I don't see a path forward if you're going to continue to borrow on his behalf because he's behind on rent and he won't tell you why. This is crazy.

It's very tangled up.

It's a very tangled up situation because you can't control him, you can't change him. And so if he continues to make bad decisions, it's going to affect you, right? Yeah, in some way, shape, or form. And I hope you don't take on any more debt for him. Can you promise me that?

No. Um, I'm currently paying mine back. I just have 2 more payments left and I'll be done.

Okay. This kind of sucks. What's your total debt?

What's his total debt?

Um, I have my car that I'm paying off. I have about $7,000 left— $6,000 left on it. Okay. I just have, um, also my credit card, which is about $800 and something left on on it. And I just have paying off my car parts, which is about a little over $2,000 left. And then he just has the, um, I'll say about $1,000, $1,500 left for his. What's that debt? Um, it's between those 5 loan companies. Okay, what are these loan companies? Wait, um, some type of apps he found on his phone.

Okay, I thought so. Like these short-term— it's basically payday loans but make it digital. Yeah, which is even worse.

Something's going on here. Um, I'm going to break up the money talk just for a minute because I want to go back to the marriage talk. Uh, I've been married for almost 20 years. It'll be 20 years next year with my husband. And one of the reasons you get married is, yes, you want a level of commitment, you want to know like, this is my person, but a bigger part of that is you see the ability to build something bigger than yourselves together over time. And there's a shared vision that's there, and you spend the years of your marriage aligning on that vision and going towards it together. That's one of the joys. That's why you have children. That's why you buy a house. Like, those are the— you're just creating this life together that you both visualize, and both agree on, and both believe in it so much that you work hard to achieve it. And what I hear right now, and this is not meant for shame, or indictment, or anything like that. It's just, just, you called us and I'm letting you know what I observed because it's still really early and still very, very fixable.

What I hear right now is two people who agreed to live together, but that's kind of it. And so you've got goals and he's got goals and you spend your money like this and he spends his money like that. And I ain't gotta tell you what I do and she don't have to tell me what she did. Right. And it will be impossible to build anything like that. And I think you're starting to butt up against that. You're starting to feel that, which is why you suggested, hey, let's put the money together. Together. That's thing one. Thing two, I wanna mention, because it's just the truth, and it's, again, it's not to promote fear or shame or anything like that, but when people want to hide, it's generally because they have something to hide. Most people, the part of the purpose of entering marriage is you wanna be known. You want somebody to see you and know you and get to accept all the facets of you. And this person is hiding something that they don't want you to see because they're either ashamed of it, they don't think you'll accept it. They— do you see what I'm saying?

So that's what I'm hearing. I'm not a counselor nor a therapist. I'm just a person who's been in a relationship with the same guy for almost 20 years. So I would really dig into that and I would really do it, um, out of love, not out of I'm angry at you or I'm pointing the finger at you, but man, I love you and I chose you for a reason and I just feel like there's something here that's between us that's between us. It's, it's, it's causing a rift and I don't like that. And I would love to get to the point where we know each other and we have nothing to hide. And if we have to see a counselor to make that happen, I'm all in with this, right? Approach it from love and see what happens. Okay, now we can get to the numbers.

Well, the good news is you can attack your debt all you want. You can get rid of it. And you're, you're right. There's not like, it's not like you have $50,000 of debt here. The problem is is unless we address the root problem, you're going to go further into debt. You're going to get evicted eventually if this continues. Or like Jade said, you have this conversation, you restart what this marriage looks like. Well, now we have some unity, we have some vision, we have transparency, accountability. Now we can make a plan for $6,000 coming in instead of my $3,000 and his $2,800. And I don't know what he's doing and he's not paying his share of the bills. This is not working. And so tonight you have a new marriage. Marriage. It's gonna be a come-to-Jesus conversation. Catch him in a good moment. Don't come out attacking him.

Yeah. Don't do it in the heat of an argument. For sure.

It's not, "You're the problem and I'm doing perfect." It's, "Hey, we've been really miles apart. We are in different galaxies right now. And I love you. I want a different kind of marriage and I want a different financial future." Ooh, I love that.

Listen, when you sense a red— and this is for anybody Everybody listen, when you sense a red flag, don't ignore it. Go headstrong into it, ten toes deep, get right into it, and get to the root of that problem.

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Well, investing can be confusing and overwhelming, so lucky for you, we created a two-night virtual event that that gives you a simple strategy that you can feel confident in. Uh, George, you and Dave paired up on this, and I'm really excited. Uh, it's going to be a two-night Investing Essentials event, September 1st through the 2nd. It's the only place that Dave unpacks his playbook for investing and wealth planning. Uh, plus this year you guys added some new content.

Yeah, so we did real estate investing on night two. We're gonna shove that into night one and make night two all about wealth planning. I like that. So we're going to talk about legacy, navigating wills, insurance, taxes, how to keep the government's hands off of all the wealth you've built. Great. How to pass it on to your kids without destroying their life. All of the things that, that will really affect a lot of people who are in that Baby Step 4 through 7 phase. And Dave, we go super nerdy. So if you've ever been like, man, I wish they'd go deeper. I wish we'd get a little more inside baseball. Yeah. Listen, Dave will have some formulas that will have— he's like Beautiful Mind out there. It's like Good Will Hunting to see Dave on the board crunching the numbers. So check it out. Tickets start at $199. Get yours today at ramsaysolutions.com/events, or click the link in the show notes if you're listening on podcast or YouTube.

Yeah! Stella is in Rochester, New York. Stella!

How can we help you? Well, I'm actually looking for some advice on house investing. My husband and I have been married for a few years. We're out of debt. We're trying to save up for a down payment. And someone close to us who's done really well investing in real estate is giving us some very well-meaning advice, but something sounds fishy to me and I can't quite figure out where the problem is.

Okay, so you're getting fishy advice. You're on baby— you've paid off all the debt. Do you have a personal residence, or this is strictly for, you know, wealth building purposes right now?

Okay, um, we're out of debt, we have our emergency fund, and and we're working on a down payment. So I guess you could say Baby Step 3.5.

Love that. 3B is what we call it, which is right on. Are you guys investing at all, or you're just solely saving up?

Um, we're right on that tipping point between having the 6-month emergency fund and starting to invest.

Love that.

Okay, so tell us about— this friend is telling us, oh, you know, this is a way that you could, you know, get in on the ground level and grow really fast and, you know, win. And what are— what, what is that telling tell us the details.

What are they saying?

So he was looking at a rental property in Florida which was $1.2 million, which we could never afford. But after a hurricane, it's now $600,000. So he says he or we could buy it, put in $200,000 in renovations, and then it would be back to that $1.2 million value. So boom, you just made $600,000. Now you can take out a home equity loan on and then use it to buy another house and do the same thing. So you just made magic money. You don't have to pay income taxes and it's win-win. What could possibly go wrong?

There's where you lost me. So if you had said, hey, here's a property that needs some work and some improvements and you know, I can get it for cheaper because it needs work and improvements and I'm going to purchase it and do that. I'm all for that. Uh, but there's several parts in this, George, I know you heard it too, that are just really, it just sounded like a TikTok came to life.

Yeah. And they've been watching a whole lot of it and maybe they try tried it, maybe it has worked so far. That's not the whole story here. Yeah, and I agree there's something fishy. Are they profiting off of this? I don't understand how your— it seems like your friends are benefiting if you do this.

Well, do they do this?

They do this. They've done well for themselves, but I don't— I'm starting to wonder, wondering if they're actually in plus, or if they just owe more than they're actually worth. And you'll never know.

And you'll never know. You'll never know.

But what I know, unless you told us not the truth, which is okay, because you don't have to tell us where you are, but my screen says you're in New York and this property is in Florida. So they're, they're saying, hey, go in other states where you can't even really see the property. You don't even know the market. And let's get involved over there. You got to pay a property manager.

Is somebody who cares about us very deeply. They live in another state and they're snowbirds. So this was a property he was looking at, and then he was trying to give us advice on we could do something.

Why don't they buy it?

And in my brain, he was talking about it. I don't remember what decision he made.

I think you let them have this one. So I appreciate the offer. This is all you guys. We're working on our own financial plan, and we're gonna go slow, and we're okay with with that.

And by the way—

We're in the Rochester area. There's a much lower house that we can actually afford, and we do this. You know, when it's lost its value, we put in some amount, it doubles in value. What goes wrong when he starts stacking those HELOCs? What's the error that happens there?

You're stacking debt on top of debt on top of debt. So every rung of this ladder that he's describing is borrowed money tied to your home. So one bad contractor bid, one vacant month, one rate hike, one Florida insurance premium and you're underwater and the whole house of cards comes tumbling down. And they get real quiet when that part happens, and you don't hear from them. You only hear from them when things are going really well and they're really loud and they want you to get in on this. So this is like an MLM, it's like cryptocurrency. Someone just got a little too excited and they want everyone in on it. So I don't know if they personally benefit or if they're just real excited because it worked for them. They went, wow, free money! Yeah, but you guys do not need this level of risk in your life, and it violates several of of our real estate principles. Number one is pay cash for any investment property because of the risk that's involved. It's hard. You can do the formula and you can represent the risk. Nobody does that. People who are into real estate investing, generally their risk meter in their brain is broken.

Every extra dollar they want to put into a house to reinvest, to get a HELOC, to do it again, do it again. And the truth is, I love this proverb, 13:11. Proverbs 11: Wealth gained hastily will dwindle. Whoever gathers little by little will increase it. So if it feels like your wealth is being built too slow, you're on the right track.

Okay. I, and I think you guys need to clarify what is your goal? Is your goal today to have a save for a house that's you, you know, yours and yours alone and it's just your primary residence. Is that your first goal or is your first goal to be Scrooge McDuck and have a, a real estate empire? I think just from listening to you, the first goal you've been walking the baby steps. So my guess is your first goal here is we just want a house and we want something to call our own and we want to do it in a smart way. And if you do that, that will set you up to build wealth like George is describing and then be able to pay cash for real estate with extra margin. But I would not ever sacrifice the American dream of being able to purchase a home and being able to pay off that home and live in peace for or, you know, some sort of real estate mogul's idea of how to really just ruin your life with debt and HELOCs.

Yeah, I mean, this is Dave Ramsey's origin story, right? Absolutely. He built a $4 million real estate portfolio and borrowed money at age 26, and he lost it all when the bank called his notes. And it can happen fast. Yeah. And so it's a lot of risk that is not represented in these conversations. And for those reasons, I would very politely say, no thank you, we're going to live our life. We got other financial plans. But thank you for letting us know about this, quote, "opportunity." Absolutely. That's my trigger word, Jade. Opportunity. If you call into the show and you say, "Um, hi, we have an opportunity," whatever comes next is about to be the worst decision you've ever made.

It's never good. It's never good. It's never good to have an opportunity.

No one ever says, "Hey, we have the opportunity to purchase a house really peacefully with 30% down." It's always, "We have an opportunity to do zero down," down on this home and start with zero equity and be in a really risky financial position.

Yeah, it's never good. And what we teach, it's very simple to understand. Some might say that it's boring because it doesn't have a lot of hoops to jump through and it's not a lot of bells and whistles.

It doesn't make for a great TikTok when we say, hey, save up, pay off your own house first, then save up and pay cash for any investment real estate property. I'd get zero likes on that video.

Yeah, and while We're at it, don't borrow against your current mortgage because we actually want you to gain that equity. We like the idea of you having equity and money in the bank.

Yeah, versus putting your house on the block, variable interest rates. I mean, it's just a credit card attached to your house. Yeah, absolutely. That's what a HELOC is. Absolutely. And people make it sound like it's some wealth hack that everyone knows about and does except for you.

Yeah, and then when you're ready to sell that piece of property and you're thinking, oh, here's my payday, now you've got that HELOC hanging over that. It's like, oh, I forgot about that. About that. Yep. I still owe $50,000 over there, or what have you. So the way that we teach, the whole purpose, guys, is we want your home to be a blessing and not a burden. When we tell you things like the 25% rule, your mortgage should be no more than 25% of your take-home pay after taxes, it's so that you feel good and you can actually enjoy your home. You're not house poor. When we tell you not to borrow against your home on HELOCs or home equity loans, it's so that your wealth that you build is your wealth, and when the time comes for you to upgrade in-house, you have all of that at your disposal.

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The Ramsey Show question of the day is brought to you by Yrefi. If you've fallen behind on your private student loans and don't know where to turn, Yrefi works with borrowers other lenders won't and helps explore low fixed-rate refinancing options. Go to yrefy.com/ramsey. That's the letter y, r-e-f-y, dot com, slash ramsey. Remember, it may not be available in all states.

George, today's question comes from Isaac in Indiana. Our primary home is our only debt with a $300,000 mortgage. I have roughly $400,000 in mutual funds and a little over $300,000 invested in precious metals. Should I sell my metals and put the funds towards my primary I know what you're going to say, but it's a big struggle for me. My initial investment in them was only $150,000, and my gut says to wait until there's enough to pay off the mortgage completely and cover capital gains. But waiting is slowing down our investing more for retirement. Kick me in the pants with your wisdom. Wow! Wow! Well, that's the first time I've heard that. I like that line, though. I might use that. Gladly. Gladly, sir. So, he's got— I don't know if the— it sounds like the mutual funds are non-retirement, the $400,000, on top of the $300,000 in precious metals. I don't know why it's sentimental to him, but he said his initial, it's more about the taxes. I think he's scared of the tax hit more than anything else.

And I think he knows what we'd say about like commodities. I think that's why he's also looking there and not looking at the mutual funds.

Yeah, if you're going, should I use the mutual funds or the precious metals? I would personally use the precious metals. I don't know what apocalypse is gonna help you survive with your bars of gold Scrooge McDuck style. But a paid-for house, that's what you're really trading for. Would I rather have a paid-for house or would I rather have $300,000 in gold and silver? I would rather have a paid-for house personally. Indeed. And so yes, you'll have $150,000 that was the growth. You'll have capital gains tax at your rate. It may be 15% of that. And so you're talking about really to pay off the house, you're gonna have a tax of $22,000 to pay. Now, if you are debt-free with an emergency fund and savings, you could cover that. Or what I would do is just pull from the mutual funds. Pull $22,000 from mutual funds to cover the taxes when tax time comes due and enjoy your freed-up mortgage payment.

Small price to pay to have a paid-for mortgage, I think.

$22,000. Do the math on this. Take that mortgage payment, the principal and interest, pop it into an investment calculator for the rest of your life and say, "I invested that." Now we're I'm talking, there's $1 million on the other side of paying off this mortgage.

I'll take it. I like it. Yeah, or just thinking about if you didn't pay off the mortgage, what you're paying in interest all of that time, you're gonna pay well over $22,000.

Oh yeah. So, we can—

Any way you slice it.

We can do the math all day long, but this is more emotional than anything. It's just a big, big chunk of money. It is. And there's something physical that you're letting go of to get rid of these precious medals.

I understand it. Well, that kick in the pants wasn't so bad. Let's go to Elizabeth, who's in Nashville, Tennessee, right in our backyard. Hey, Elizabeth. Hey, how are you doing? Doing good. How can George and I help?

I'm reaching out because I just found you guys literally within the last 2 months, and my husband and I are in $189,000 worth of debt, and I currently work in AP and wondering if I should continue to get my accounting degree or just get this debt paid off. What kind of debt is the $189,000? It's $150,000 in student loans between my husband and myself. He got his master's degree, and then I, when I was younger, was stupid and went to school twice and dropped out. And then it's $8,000 in a car, $4,500 was with 2 credit cards and then $3,000 for the vet.

Okay. And how much longer do you have if you continued school?

48 credits.

That sounds like a lot of credits.

So it's a couple of years? Yes. Are you currently taking out student loans to pay or how are you cash flowing it?

I was taking out student loans, but we just had a 2-month-old. And so I I stopped school while I was pregnant because it was very difficult. Right. So you haven't restarted school yet? I haven't restarted, so I'm trying to figure out.

I do think you, I think you need to because you're not, if you told me you were paying cash, we'd be having maybe a slightly different discussion. But if you're calling me saying debt is the problem and I'm currently borrowing while I know it's the problem, you can't solve a problem while simultaneously creating it. Creating it. And if we know debt is the problem, we have to stop borrowing money. That is the first and foremost step that you have to make when you decide, hey, I'm going to get my life right with this money. You got to stop borrowing money. That's thing one. Thing two is we'd say, okay, now we got to get on a budget. And thing three is now we're going to start to work this thing through the Baby Steps, which is the method of teaching that we have to help people break free from debt and build wealth ultimately over time. Are you familiar with the Baby steps?

Yes, we've been— we started a, a Financial Peace University class. Excellent. And we're trying to, we're trying to get our income up. And between— our child doesn't start daycare for another month, so we're— when one's not with baby, we're driving for Lyft, but then we're putting that on our car and we're trying to make more income, but we're just— we don't know how— where to begin.

What's your household income now?

It's $120,000 gross. Our take-home right now is $6,200.

Okay. Are either of you investing right now?

Um, we stopped— actually, both stopped our 401 last night.

Very good, because I'm wondering why you're only taking home $74,000 out of $120,000. $50,000 in taxes is crazy.

He's a high school teacher in the Metro School District, and they are on a 10-month contract, so they were withdrawing money for the summer. Summer, which we talked about last night too.

Okay, so hopefully that take-home pay goes up, and then he can get—

go up, and then he can get something for the summer to cover those summer months. Yes, a side job.

He's the one staying home with baby to prevent like that additional daycare from kicking in earlier.

Got it. And how much are you making personally? $55,000. And what would you be making if you continued this program?

I could have been go up to $100,000.

But that's not immediate.

No, it wouldn't be immediate.

That's sort of like this is where this could go. So year 1, could you be making $65,000? Yes. Okay, I'm just— I'm looking at the ROI of this because I'm scared we're going to fast forward if you continued this school and you're going to be $250,000 in debt now with a toddler trying to clean this up, making only $10,000 more, which is, you're getting like $600, $700 extra in your paychecks. So that's my fear. And so the other side of this is if we pause school, we try to get our core income up without going further into debt, we clean this mess up for the next couple of years, at least, now we can start from a place of peace, a place of strength instead of desperation.

Yeah, these student loans, are they, are you currently making payments or are they in forbearance or deferred?

We're currently making payments on them. We did do the income-based one because it was $1,500 a month, which we couldn't afford that with baby and everything. Okay, so the payments got lowered, but it stresses me out that the interest is now higher than our payment that we're making.

That's right, and make less progress because you just lowered the payment.

Yeah, and that's the, the picture I want to paint just to make sure you guys understand what's at stake here. I would never just say stop going to school, uh, without a really good reason, and really good reason is the longer you wait to attack this $150,000 student loans, I mean, you can look up in 10 years and instead of it being $150,000, it's closer to $200,000, right? And so I don't want that to be the case. I want you guys to really do a complete 180 on what you've been doing. You've been focused, obviously both of you, on your careers. That means school. That means education. You focus on starting a family. Now I want you to focus We are paying off debt. We are eat, sleeping, and breathing debt payments, right? That's all we're doing. We're working so many extra jobs. We are leaning on friends and family to watch the baby because you've got to go out and hit your shift, right? That's what's going to be taking place. And I'm just warning you upfront, it's not fun, but the outcome is totally, totally worth it. Worth it if you guys can really get on the same page of this and say, okay, here's what we're doing, here's what I can do, here's what you can do, here's what we're cutting back.

And I'd start with that vet bill, minimum payments on everything. And how quickly can you get $3,000 to get the vet out of your life?

I like this plan. Baby steps, one little movement at a time, and eventually you start gaining that momentum.

Okay, guys, let me ask you something.

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Do you remember that?

How old do you think I am? I'm sorry. Not as old as, not as old as me apparently. Austin is it? Thank you, Will Rudder. He knows what I'm talking about in the booth. Austin is in Roanoke, Virginia. What's going on, Austin?

Austin. Hey, Jade and George, what's up?

Doing good. I just aged myself. Help me feel better. Let us solve your problem.

All right, Jade, so, um, here we go. Um, so I'm a 26-year-old pharmacy student. I'm going into my third year. I have about $290,000 in a brokerage account and an inherited IRA. I've been taking out student loans for the first 2 years, which has accrued to about $100,000 in debt. I was wondering if I should cash out my, um, brokerage and cash flow the rest of my schooling.

Okay, let me make sure I've got this straight. So the $290, uh, part of it is in a brokerage and part of it is in an inherited IRA? Yeah, that's right.

I got about $158,000 in a brokerage and the inherited IRA is about $128,000.

Okay, and the inherited IRA, how much are you required to pull out out every year?

My RMD that I took out last year was about $20,000, but the RMD, I think it's around $5,000.

OK. So you took out more?

Yes. OK. For tax reasons.

Wow. Well, I would definitely get rid of this debt. You've got the money. What's the brokerage account being used for? What are you investing in that?

It's through an investment group that was recommended by a family friend. It's just kind of been sitting there and I've just been watching it grow. I logged into my financial aid provider today and saw that I just crossed $100,000 in debt and I was like, "Oh no!" Wow!

Well, here's the thing I would think through. It's taxes. The brokerage account and the inherited IRA have very different tax treatments. When you take money out of that inherited IRA, it's taxed as ordinary income. Whatever your tax bracket is— let's say that's 22%— while the brokerage account, if you have long-term capital gains, you've held those assets for more than a year, well now that could be 15%. So you're going to take a much smaller hit by taking the money out of the brokerage account. So that's the part I would look at. My guess is the brokerage account is going to be your best bet to knock out that $100K, and I would absolutely do it.

Okay, and for the rest of my tuition, I have 2 years left, would you recommend just cash flowing that?

Oh, if you can. I mean, you've got the $5,000 that's going to come out. Of the inherited IRA whether you like it or not.

You've got to draw down that IRA, so that kind of becomes your cash flow school money, right?

Yeah, could. Tuition's like $40,000 a year. I haven't been taking the full amount of loans. I've been paying for half and loaning the minimal amount that financial aid will let me take out.

I would just avoid loans altogether in the future. Pay off the ones you have and then cash flow the rest using the inherited IRA and then even part of the brokerage if you have to, because coming out of school, making good money with no debt, it's gonna put you in a very different place financially. You're gonna have so many more options with all that margin coming in versus your friends who are in school graduating with $250 grand in debt. Right. Now they have to live over here, they have to work over here, and so that's what happens. Debt-free equals margin, options, flexibility, and I understand you can make the case that, well, if I leave it invested, it could turn into into this, you're going to be just fine at your age. If you start investing with no debt, your investing rate is going to be significantly higher than your peers.

Yeah, absolutely. How much school is left?

Uh, 2 years, so about $80,000 worth of tuition left. Oh, great.

And I'd be working hard too. I'd be working hard to cash flow as much as I can so that you don't have to pull as much off. But I would consider this a college fund and thank whoever—

yeah, who left this How did you get this for you?

Well, my grandma left this to me. I'm very blessed. What a legacy.

I think she'd be smiling upon you seeing you graduate debt-free, sharp young man, whole life ahead of him without debt. I mean, because now you can do the same for your grandkids. Exactly. A good man leaves an inheritance to his children's children, the Bible says. I love that. That's future thinking. You stop thinking about yourself as much and go, what am I doing for the next generation and the ones beyond that?

If you can start your young adult life with no you are significantly ahead.

It's like a wealth cheat code. It's a cheat code.

I mean, 'cause you're not gonna spend the, you know, the average person that we find around here who starts working the Baby Steps because they have debt, it's taken them, you know, 1.5 to 2 years. That's on average. That means there's people who it takes a lot longer and there's people who takes a little bit less. But to not have to spend the first 2 to 3 years of your life—

Cleaning up a mess.

Cleaning up a mess and getting on financial footing, but to just be able to accelerate forward.

You become a homeowner faster. You're gonna build wealth faster. You're gonna be able to retire retire earlier than all of your peers. Yeah, I like it.

If I think about that, I might be crying on the couch about, about how much time it took to right the wrongs. I was debt-free at 23.

What could have been? Oh boy.

Is it Kira? Kyra is in Great Falls, Montana. Kyra, did I get it right? It's Kyra. Yes, second, second time.

Okay, how How can we help you? Okay. So my question is about renting a car with a debit card. I travel for work a couple times a year, and I've never had a problem with it up until the last couple months. I went to rent a car, and they were like, "Sorry, you don't pass the credit check. We can't rent you this car." Thankfully, I had my mom traveling with me, so she was able to rent it because she had a credit card. But, you know, they basically told me there was no way around it. They were not going to rent me a car because I did not have a credit card.

Was it because your return ticket wasn't to the same destination? Because I know that they will put up a stink about that. No.

So I showed them my return flights. I, you know, did the $500 deposit or hold on my card, all that stuff. And they asked me for my Social Security number. I gave it to them and they came back with a a little piece of paper that said my credit score was 4. So, you know, we haven't had credit cards for 6— I don't know, because we don't borrow money cards for 6 years. We have a paid-for home. Wow. Who was it? Any vehicle? You want to shout them out?

Yeah, shout them out. Who was this wonderful credit card company that did you wrong?

Or the rental car company?

Rental car. Yeah, yeah, rental car. It was Hertz. Um, so it's so good. Back in— yeah, happened back in April. And then my husband and I actually got pre-approved for a mortgage so that we can move. And the— we told them that they were going to have to do manual underwriting, and I told them about my rental car experience and how my credit score was 4 and all this stuff. And they actually came back to us and they were like, well, your husband doesn't have a credit score, but you have a great one, so we can actually approve you for this mortgage because your credit score so great. I don't know how.

Wow.

I would pull your credit report to get to the bottom later.

Yeah, I went to rent a car again about 2 weeks later, same thing. They wouldn't rent it to me because I didn't pass the credit check. So that's really interesting.

I would want to make sure— first off, I do want to clarify that a zero credit score is just as good as a good credit score, but if you have anything that's hanging around open open that is causing that to reflect as just a low credit score. I would double check. I would hop on and make sure that there's no open accounts. There's nothing anywhere that's keeping that from rolling to indeterminable. Um, and then other than that, I would choose a different rental car company because unfortunately, um, and, and you'll find this with apartments, you'll find this with mortgage companies, you'll find this across the board. There are some companies that won't do their due diligence to to look and really say, okay, does this person have the money to do the thing that they're saying they're gonna do? And for that reason, you have to be the one to say, I'm just gonna find a company who is gonna keep the lights turned on upstairs and understand that I have the money to rent this car, buy this apartment, manually underwrite this house.

Yeah. And remember, the person working at that desk may be incompetent. And so that's always a possibility. And you might need to talk to a manager. And if they are the manager, God bless. Yeah. I would go over to the, you know, a different rental counter and go, hey, they wouldn't help me over over here. I've got plenty of money. I want to rent a car. I will bring it back. Yeah. And I've had a good experience. I'm trying to think of the ones I've had a good experience with. We use Avis.

My husband and I tend to do Avis.

Oh, nice. And National and Enterprise I've had good experiences with. So I would try those. But you do, you do a little research. Call ahead and ask, hey, what's your debit card policy? Be prepared for the credit check. Let them know, hey, I don't have a score. You're going to pull it up and it's going to say no score. That's fine. What they're looking for is that bad or low score. And for some For some reason, you had a whopping 4. That's why— That's about as low as I've heard.

Welcome back to The Ramsey Show here on The Fairwinds Credit Union. Union Studio. We've got Liza, who's in Austin, Texas, on the line next.

Hey Liza, how can George and I help out? Hi, um, good afternoon. I love your show and I, um, I really have been taking notes all these past 2-3 months on, um, financial matters. Um, but I do have a concern. Um, this is all new to me. I, I just— I grew up with not being financially responsible and how to save money. Um, I am a single I have one daughter. She is 20, and she is going to school, university. And we have not been— well, lately, financial aid has not been helping us out because we earn, I guess— I guess earn— we don't earn. How do I say? We earn a lot for a family of two, and I've been helping her out paying her her tuition every semester, but I— what I rely on to pay for her tuition balance or leftover balance to help her pay her semester is taken out of my Roth IRA. Oh. And I don't like to do that because that's my— of course, that's my retirement. Absolutely. And yeah, so any helpful tips, please? Um, yeah, where do I start?

How much, uh, how much have you pulled out of the Roth so far?

Um, like every, every year I take about, um, I take about $1,500 times 2 will be about, uh, $3,000 a year. How much is in there total right now? It's $5,858.70. Okay. Okay.

So it's It's about to be zero if we keep this up.

Uh, yes, exactly. How old are you? I am 44.

Okay, well, it's clear that you love your daughter. Can we agree on that? Yeah, you're doing something genuinely sacrificial to invest in her future, and that, that part is right. Your heart is right there. But the vehicle that you're using to do that, that's the issue here. Because right now, here's the future. Let me paint it for you. You retire You're broke. Now your daughter has to take care of you financially, sacrificing her future, creating a generational cycle. Mm. Right? Yeah. And you didn't mean for this. You had good intentions. But I don't want you to become a burden to your daughter later on because you sacrifice for her today. So I think there's a different way we can come up with a game plan to cash flow $3,000 a year. Would you agree? Yes, sir. We're not talking $30,000.

$3,000 is manageable. Yes, it's about like $6,000 to $7,000 a semester.

Okay, um, so is she working at all?

Uh, she's about to work, uh, here part-time in the summer. Good.

So how much will she make doing that?

That we don't know yet because she will be working soon. So she's going for animal science, that's her major, and, um, she's been applying to all these like vet clinics and stuff. And so, um, is she wanting to be a vet?

Vet vet tech? What's her goal?

Uh, like a vet tech? Yes. Okay.

Does she know how much vet techs make?

Uh, I think she told me once, but I forgot that number.

Okay. I thought I heard you say that for a family of two, you guys bring in a really good income. What do you guys bring in together, or what do you bring in?

Um, a year is $120,000. Okay. Approximately.

Okay. And how much longer does she have for How old is Emma?

She has 2 more years to go. 2 more years.

So we're talking like $12,000 solves this? Correct.

Yes, sir. You got it. OK.

So what if we had a game plan to where she works part-time, she covers, let's say, half of that amount over the next 2 years, and you cover the other half, and you both cash flow it without robbing your future? OK.

Let me write this down. I have my notes and everything. Yeah, you said you bring home how much a month? $7,000? $7,000.

Now, how much of that can we use to save for the college fund and cash flow this?

OK, I have consumer debt and I have a car loan.

What's left on the car loan?

It's $9,984.56. OK. And the other? And the consumer debt is $4,603.05.

Okay. And have you stopped going into debt?

Yes. Okay, great. I'm just paying these off already. Um, these are like past, uh, um, past debt.

They're older debts.

Yeah, they're older. Yes. Uh, yes, sir.

So let's ask— answer one question for me. So before, you were saying that you were taking out $3,000 a year from the Roth IRA to make this happen, right? So that's essentially all we're looking to find. If you were floating all of it except $3,000, that feels like fairly easy equation to solve unless I'm missing something.

Because now we can just budget $250 a month over to a little savings account so that we have $3,000 by the end of the year. You see the math on that? Mm-hmm. Mm-hmm. $3,000 divided by 12. So now we can make a budget. Okay, hey, we're gonna budget to cover our debts aggressively, pay that off. And on the side, we put $250 away in a savings account earmarked for her college.

Yes, in addition to what you were already putting aside.

Yes. And then if she can work part-time, that lowers the amount you even need to put in.

Yes, um, because I, uh, I do cash out my vacations from work, so that's like every quarter. Um, so I use that extra money to pay, uh, for, uh, the rest of her, her tuition plus, uh, the $1,500 of the IRA— IRA, I'm sorry, Roth IRA.

I'm sorry. Okay, so we won't cash out the additional $1,000 or however much it was from the IRA. If you want to keep cashing out your vacation, that seems to be working for you. There's extra cash there, and then the rest is cash flow through the budget plus your daughter's, uh, portion from her job. And I think you've got it covered.

I think you're doing a great job. Paychecks are the solution instead of your retirement account. So are you investing anything currently into the Roth IRA every month or anywhere else Yes, it's once a month.

It's with Edward Jones. How much is that? About $400, $480, or $460 a month.

OK, so starting today, we're going to pause that. We're going to take back that $480 a month and apply it to our debts.

Oh, OK. So we can actually go tell our employer, say, "Hey, I can stop that?" Yes.

Say, "I'd like to stop all contributions." And what this does is it allows you to focus for a season so that you can get rid of your consumer debt so that you can cash flow your daughter's college. So that's your deep why. Let that fuel you to get really intense, to not let this debt drag on any longer. It's been hanging out long enough. You got a future ahead of you. Your daughter has a future ahead of her. And so let this be an aggressive season for the next 6 months. We're going to knock out the consumer debt, which frees up how much in payments? What's the car payment? What's the consumer debt payment every month?

The, okay, the, uh, Um, the, the car loan is $390, but I pay $500 a month. Actually, I raised it to $525 to pay it faster.

Okay. So $390 on the car plus how much on the consumer debt?

Uh, it, well, it varies on the payments monthly, but it's $4,000 right now. $4,603. I make monthly, like, I guess their minimum payments because I have some like, uh, yes.

Okay. So right there, that's going to be $500, $600, $700 freed up once you knock out these debts. Now you got some margin. Now instead of ever robbing a retirement again, we are just building and building and building so that you can retire with dignity and not have to rely on your daughter to cover the gap.

And the good news is once you do that, if you start investing 15% of your income from, let's say, age 46 when this is actually done to age 65, you're going to be right close to $1 million. Woo!

You should not feel uncertain about investing, and you don't have to. That's why we created Investing Essentials, a 2-night virtual event where George Campbell and I walk you through my playbook for investing and wealth planning. We'll simplify everything from 401s and mutual funds to passing on wealth so you can invest with confidence. Tickets start at $199. Get yours today at ramsaysolutions.com/events or click the link in the show notes. Okay, let's—

So Ask Ramsey is our free AI tool that's built and trained on proven Ramsey principles. And today we're going to break down the most asked question of the week. So this week I think we saw the biggest question was, "What's the best way to create a debt payoff plan?" Well, they're in the right spot, George. I love it!

Well, if you've hung out with us for long enough, you've heard us talk about the debt snowball method. The other method that you may have heard about is called debt avalanche. Think about it this way. Avalanche is focused on the highest interest rate. The debt snowball is focused on the smallest balance. You list out all of your debts from smallest balance to largest balance, we ignore the interest rate for now, and we're gonna pay minimums on all of the debts except that small one. The small one we're gonna attack with all the vengeance we can. Everything extra, we're gonna just focus on that one debt. Yes, that's it. And once that debt is knocked out, what happens? You freed up a payment that you can roll into the next debt and the next one. And so that creates a snowball effect as you pick up more snow along the way. You get some quick wins, you get some progress, you get momentum. That's what causes people to get out of debt.

I love that. And so if that helped you, you can try Ask Ramsey for yourself. Ask Ramsey can help you lay out a debt payoff plan based on your debt balances, your minimum payments, and your interest rates. Uh, ask your question today at ask@ramseysolutions.com or just click the link in the description if you're listening on podcast or YouTube. Gail is in Phoenix, Arizona.

Hey Gail, how can we help today? Hi, how you doing?

Doing excellent. What's up in your Good.

Well, so, um, I'm just gonna be turning 69. Um, uh, last 40 years, a serious drug problem. I worked a lot. I worked for a lawyer, back and forth. Um, so I lived at home, took care of my mom, and she died about 2 years ago. Uh, thank you. Um, the house I lived in with her, um, me and my brother were able to sell it for 7 times the amount. Wow. When they bought it.

So what'd you end up taking?

We got $700,000, and I think it was $750,000, right around there. Um, the house they bought for like $135,000 30 years ago. And, you know, I think because, you know, in an addiction you don't think about anything but yourself, and, uh, never thought I'd get old, let alone, you know, what I would do what to do with my life. But I have a son. Um, I was, I was a single mom. He's 37 now. I don't know how that happened, but— and so we sold the house, and I was able to— okay, I got sober. I got serious with God. I started to walk with God. I mean, serious one. And you know, once that started, I started walking, all these Things were hitting me like a ton of bricks. You're this old. You don't have— you didn't save. Never thinking about retirement. So, I bought the house. I got it for $325,000. It was $350,000. I got them down to $325,000. I was able to gut the whole house because it was very old, very old. And I bought it. I don't have a mortgage. Wow. I love that.

Way to go. I love that. Gail, how can we help you today? It wouldn't have happened without God. Listen, right on. Amen. Yep. How can we help you out today?

So what ha— so this last 2 years I've been just saving. I, I, like I said, I work full-time at a law firm. My salary, my, my salary is about $50,000 a year. Um, yeah. And so I started taking, uh, I went full retirement age with my retirement, um, my, yeah, to get my retirement savings. I, yeah. I started that. I get full retirement, that's $2,303 a month. Okay. So that's the money coming in. I don't— my HOA is only $80 a month. So all I have— no debt whatsoever. I own a car, uh, you know, so I just have my regular bills.

Are you investing? Are you investing 15% every single month?

No, that's the question. I was able to save even after, you know, I did all my— I started start saving last month. I, I should be putting $1,000.

You should be putting about $625 away every single month into your 401k if your job has one.

I don't have one. Is there any retirement plan through the employer? Okay, nothing. So you have access to a Roth IRA at least?

I don't have a clue what to do. What I did do the other day or last week was I took $7,000, opened a brokerage account. Okay. To, to buy SpaceX. I was allotted 14 shares. That was it. So I still have $5,000 sitting there. Well, let us help you.

Let us help you, because we only have a little bit of time with you, and we appreciate the backstory because that does help. But what George and I would suggest for you to do today, the same way that you went over and opened a brokerage account, you can open a Roth IRA because you have earned income. So we want you to open a Roth IRA, and then we want you to invest. At this point, I wouldn't mind if you just picked—

Yeah, it's $8,000 a year since you're over 50, and that'll allow you to sock away $8,000 a year tax-free because you're using after-tax income to fund it, and it's not tied to your employer. And that will compound over the next 10, 20 years, God willing, into a nice little nest egg for you. Yeah. And so between that plus Social Security, the goal is how can I survive? Because right now you don't have much of a nest egg, it sounds like, but you have a paid 4 house.

And I would stop buying those single stocks, by the way. Yeah, I don't want you to do that again. Okay, okay, don't do that anymore.

So I don't— I'm, I'm gonna be 69, so my boss is saying he wants to retire next year. That means I have to— well, I'll definitely keep working, but what do I do? What's— where do I get a Roth IRA? I don't know anything.

Where did you open the brokerage account?

I opened it with E-Trade, so Morgan Stanley.

Okay, so you can open a Roth IRA through them as well. And if in your shoes, what I would do is get a pro in your corner because time is of the essence and we cannot screw this up. So I've got just the person for you. Jump on to RamseySolutions.com and click on SmartVestor Pro. These are investment professionals with the heart of a teacher because that's what you need right now. You need the financial literacy so that you know what you're doing versus just hoping. This is like spray and pray. I hope my money's doing well. I hope it grows. They will actually educate educate you to go, here's what a mutual fund is versus a single stock, here's what a Roth IRA is versus a brokerage account, and they can help create a strategy so that you can retire with dignity instead of just fingers crossed, hopefully one day I can.

And you've done a good job. I mean, the fact that you were able to buy a house in cash is a great thing. You've got a great secure, uh, job, you've got a good income going forward, you're going to be just fine. Uh, but you've got to do what George said to do next. You can't just guess and hope that everything works out.

Yeah, well, there's a level that DIY becomes dangerous. Yeah, because I've done DIY in my own house with like a house project. Doesn't end well. Usually I end up calling a pro to fix all the things I messed up.

Yeah, especially if you don't feel like you have a baseline of knowledge and you don't have a lot of time. She doesn't have time to make any more mistakes.

At 22, you can screw some things up and make up for it later.

Listen, at 22, if you just parked your money in an index fund, I would probably never stop you, right? And it's just growing and growing and growing. There are worse things you you could do, right? So I, I agree with her, a SmartVestor Pro, you have to, you need to get the help you need. But I think that Gail was a cautionary tale for a lot of people listening. It's so easy to just go through life, George, and think, I'll, you know, I'll make that change later. I'll save later. I'll save later, you know, and the time, it does catch up with you. And so if you're listening now and you're looking at your finances and you feel that squeeze of living paycheck to paycheck, if you feel, that shame about knowing the debt that you have. You haven't touched the student loans. You're still spending on a credit card, right? You just went down and bought yet another car and you have another car payment. It's gonna be another 3 to 4 years before you pay it off. Don't ignore that. We get those checks in our spirit. We get those red flags. Start today.

If you start today, then you will look up in 2 years, 3 years, the debt will be gone. I know for Sam and I, it was 7 and a half years. How long did it take?

How long did it take you?

2 years. 2 years. You commit for 2 years, your debt's gone.

And the next 20 is freedom and margin. Yes, freedom and margin.

And you can actually live like no one else. George said something so amazing to me on the way into the studio. We go out and shake people's hands in the breaks. He came back, he said, Jade, one of my favorite things that I get to spend money on is a laundry service.

I love that. Buying my time back.

Buying your time back. And all of that is because you sacrifice to win when it was time. It was crunch time. And when it's time time to crunch, get to crunching!

Get to crunching! Well, I mean, here's the crazy math on this. At 20 years old, every dollar you invest becomes $73.65. But you invest that same dollar at 50 years old, it becomes $3.50 at 65. That hurts. Instead of $73, you got $3 because you waited 30 years. So do not delay. Get to investing. The best time to plant the tree was 20 years ago, the next best time is today. It's not too late if you can still fog up a mirror.

The time is gonna pass anyway, boys and girls.

Hey, George Campbell here. So you're thinking about buying or selling your home. It's exciting, but there's a lot to think about, and all those decisions can feel overwhelming. Well, here's the good news: you don't have to tackle the process alone. Ramsey's Real Estate Home Base is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start-to-finish guides, a podcast, and even an in-depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps toward your home goals, go to ramsaysolutions.com/realestate. That's ramsaysolutions.com/realestate.

Ramsey.com/real-estate. Well, buying or selling your home is a high-stakes game because one bad deal, it could cost you tens of thousands of dollars. You don't want to overpay for your next house or sell your current home for less than it's worth. That's why Ramsey Trusted connects you with vetted real estate real estate agents who have the experience to guide you step by step to make smart decisions, not expensive mistakes. Connecting is really easy. Just compare agent profiles, interview your top choices, and ultimately pick the one that's right for you. Find a local Ramsey Trusted Agent who has your best interest at heart for free at ramsaysolutions.com/agent, or click the link in the description if you're listening on YouTube or podcast. Jackson is in Colorado Springs, Colorado. Hey, Jackson, what's up?

Hey Jordan Jade, how are you?

Doing great. How can we help today?

I had a question regarding our Baby Step 3 emergency fund. Wife and I just hit, uh, 3 months and we both think we need to get to 6 months. However, that'll take us about another 14 months to get there. Part of that is a sinking fund for a, uh, labor and delivery bill. Ah, what would be your thoughts on where we should be at. 3 months is about $25,000. 6 months is about $42,000.

I think that what you're doing is about right, kind of stopping and saying we need to put this money aside specifically for labor and delivery. We know we're going to need that money. Um, I would exactly do that because chances are you are going to use that. You might hit your deductible. You don't know what the situation is going to be. So I like the idea of that. Hopefully there's some that you can hold back when it's all all said and done and plop it over into the emergency fund. And if not, you can just push play, you know, on the extra 3 months once you're done saving up for labor and delivery.

Perfect. Yeah, I have another question if there's time.

Yeah, what, what are the numbers? Tell us the numbers. What's 3 months? 3 months is about $25,000.

Okay, 6 months is about $42,000, a little over $42,000. We are both pretty conservative, said let's go to $45,000.

Yeah, and what's labor delivery?

So we just had one about a year ago that was about $7,500. I've budgeted $9,000 just to be safe.

Okay, so hopefully you'll have another $1,500 when it's all said and done to plop over there and, and get you closer to the $42,000-$45,000 you want. Yeah, hopefully.

What was your other question? Would you— we have a paid-for car that's worth $45,000. We've been debating back and forth if we should sell it, buy a $20,000 our car and basically end our Baby Step 3 with them, with the extra.

Oh, I see. Okay. Um, what's your income?

Uh, wife's stay-at-home mom, she makes about $1,000 a month doing remote work, and then I make $132,200 after base salary and vehicle allowance.

And what's your other car worth, or other vehicles?

My truck is worth about $18,000 We're just under the 50% mark. Okay.

Yeah. Nothing's on fire here, but if you're just like, we don't really need this much car, we can get something great and reliable for the family for $20,000 or $25,000, you can always use that margin to then apply to the emergency fund and spare yourself 14 months of sacrifice. So it's like either way, there's sacrifice going from a $45,000 car to a $20,000 car. You'll feel that. You'll feel that. And saving 14 months of sacrifice sacrifice with this baby on all that going on, I think that's well worth it if you guys don't really care about driving the fanciest cars.

Yeah, and I do love my wife being in a basically brand new car that's paid for.

Yeah, what kind of car is the, the one that's paid for?

Uh, Toyota Tundra— or I'm sorry, Toyota 4Runner. Mine's a Tundra. 4Runner.

Okay, so she'll be using the 4Runner. It's gonna last forever. Yeah, I mean, yeah, 4Runners are great and they hold their value pretty good too. So you're in good shape, man. Congratulations. You guys have really thought through this intentionally. Yeah, it's a good place to be.

Very good. Thanks for the call. All right, we've got Rebecca in Dayton, Ohio.

Rebecca, you're on the line. Hi, Jaden. Hi, Jaden George. Thanks for taking the call. Yeah, absolutely. I have a question about my husband's retirement account from a previous employer. He switched jobs about a a year ago. He did have a traditional 401 with the previous employer. He now has a Roth 401 at the new employer, and his old account has been doing pretty good. And so we've just— he just kind of let it ride. But we've been hearing you say that that's kind of like leaving your stuff at your ex's house. So we're kind of trying to figure out how to go about moving that, but we're so nervous that we would do it wrong, but we should be able to do that ourselves. Is that correct? Yeah.

It's not a complicated process. The key is you never want to see the money in your bank account. You want to do something called a direct rollover, and you want to keep it in-kind, meaning if it's a traditional 401, we want to do a traditional IRA. OK. Because if you move it to a Roth IRA, well, now you've got to pay the taxes on that.

Both of the accounts, the old account that's traditional and the new Roth, they just happen to be with the same company. Company, but does he need— you know, he opened the Fidelity account. Does it need to stay with the same company, or it doesn't matter?

No, it doesn't matter. He could roll it over to Vanguard. So you could just get a direct rollover over to a Vanguard IRA, Fidelity IRA. It doesn't matter. The key is direct rollover. And what happened with my wife's 401 when she left Ramsey to stay home with our kids, they actually mailed us a check. Now, it wasn't to my name, it was to the Vanguard Vanguard account, and then I deposited that check into the Vanguard account. So it's not a complicated process, but I understand it's a lot— there's like a lot of zeros on the end and it can feel intimidating. So if you need help with that, you can always reach out to a SmartVestor Pro. Just jump on ramseysolutions.com, click SmartVestor Pro, and those are investing pros. That's what I did when I first started at Ramsey. I had an old Apple 401. They helped me roll it over to an IRA. That was— that took some guesswork out for me for sure. Okay. And then you want to invest it. That's another key. It's just going to sit in the settlement fund in the cash portion. So you want to make sure you actually invest that money once it's in there into good funds.

Yeah. And I was going to say, you mentioned that you didn't want to move it because you liked the way it was invested. So I would just choose the same funds again and make sure if you really loved your rate of return, that it's invested the exact same way in the same funds.

Just get to as close as possible.

It's been getting about 18%. So we're like, okay, that's good. But now we're thinking we do still need to move it where we can control it. Yeah.

Well, I mean, it's not magic. The market has been doing really well the last couple of years. It was like 26%, 23%, 17%. So, that is probably the reason for that. It's not magical funds. You can probably find very similar funds in that IRA. But I do like an IRA because you have full control of it. That's a nice feature. And you have access to all of the investments in the world versus just what's in your employer's 401.

Absolutely. Well, George, let's see. Let's try to help Connor. I think we can do it real quick. Connor! Get your question fast, Connor in Washington, Washington, DC.

I'll be quick. I got married a month ago and we experienced an import of love and generosity. I'm sitting— or I'm driving a leased car that expires in December. I'd be able to buy it for $19,000, or I can, you know, forego it, let the dealer take it, and then buy a beater. Um, but I feel like I'm getting a pretty good value on this, on this car. So the question is, do we take the gifts from the wedding and put them towards this shinier car, or do we just put them directly towards the loans and, and keep it simple?

Gosh, yeah. How much loans do you have?

What do you owe in debt? We have $72,000 total in student loans.

You know, I, I'm all about having a nice car, but if you can have more cash to go towards this debt, I'm gonna take that every single time. The gift was yours to do what you want with. And I would definitely, when I can get out of it, I get out of it and I would take some cash and buy a beater.

Yeah, the way I think about this is if you did not have this lease and you had $19,000 and you had $72,000 in debt, would you go out and buy a $19,000 car? Probably not. And so I know it's a little painful. You're newlyweds, you're excited, you want to feel like we made it, we're doing well for ourselves. And then you go out and buy a $7,000 $30,000 car, now you're going, ah, this kind of stinks. But what happened for me, Jade, is it actually lit a fire under me. Anything that you don't like about that car just becomes more fuel to get out of debt faster.

So you're right. I know that's right. Sam and I used to have a, we had an old Jeep. It was a Jeep Liberty. And we decided like, this is our, we were a one-car family and everything went wrong with that car. But you know, you're getting out of debt. At one point, the motors went out in the windows, so the windows wouldn't stay up. And to take it to get fixed, it was like $700. And we were like, nope. My husband found like shoelaces and like inside the door used the shoelaces to keep it up. MacGyver. MacGyver. By the time we got out of that car and upgraded, like smoke would come out of the engine every time I started it up. It was just— it's a beater. I'm glad you're alive to tell the tale. I lived to tell the story.

Well, you don't need to go that crazy, Connor, but I would just buy a reasonable used car for far less than $19,000.

We're not telling you to do anything we haven't done ourselves is the point of the story.

Dave Ramsey here. For more than 30 years, I've been talking to folks on the air, and I can tell you that most people are broke not because they don't make enough money, but because they don't have a plan. You need to give every dollar you earn a job, because when you do that, something changes. You stop guessing, you stop worrying, you stop stressing. Our EveryDollar budgeting app will show you how to find extra cash, pay off debt, and finally start winning with money. But most people won't do it. They'll keep living paycheck to paycheck, keep hoping things will change without making a change. It's time to say enough is enough. It's time to take control of your money. It's time to start your EveryDollar budget for free today. Go download it in the App Store or Google Play Ramsey Show scripture and quote of the day.

Ephesians 2:4-5. But because of his great love for us, God, who is rich in mercy, made us alive with Christ even when we were dead in transgressions. It is by grace you You have been saved. Thank you. Earl Wilson said this: if you think nobody cares if you're alive, try missing a couple of car payments. That'll do it. They'll come after you. Oh, that's so funny. I love that. All right. It's also kind of sad.

There's a sadness to it for sure.

Jesse is in Nashville, Tennessee. Hey Jesse, how can we help?

What's going on, guys? Hope you're all doing good today.

Yeah. What can we help with?

Yeah. My question, uh, yeah, I'm 22 years old, you know, graduated college. I've now kind of been working for a year and my question is, should I be chasing in my career something that is more financially stable or something that's closer, like tailored to my passions?

And what is the balance in that? Why can't it be both? Tell us more.

Uh, yeah, I worked, so I worked 9 months in foster care and I enjoyed it, but it was very much just didn't pay great, and it just emotionally burnt me out, and I thought I needed a break. So now I'm trying something in the business realm, selling insurance, and, you know, it's maybe more higher earning and kind of provide more for me, but I'm trying to figure out that's just something I want to do long term, and if this is what I want to do, you know, it feels like the big 15 20 years.

That feels like a really big leap of interest from caring for children, literally orphans, to caring, to selling insurance. Is there something that you can do that still works heavily with caring for people, mainly children, that maybe doesn't burn you out quite as much and maybe you can make a little bit more money? That's what I'd be thinking because clearly, do you see what I'm saying? There's a huge gap there. Yeah.

Have you thought about that? No, definitely I haven't yet. That's what I've just been trying to ponder and think on these past, past few months as I've started this job in insurance now.

Well, our colleague, our former colleague, whom we still love, Ken Coleman, uh, wrote a book, Find the Work You're Wired to Do, and inside of it there's a career assessment. George and I are going to send that to you because I think that's all your hangup is. I think I think that you've identified what it is that you're passionate about. We just have to figure out all the different ways and all the different career fields that you can use that passion. And that book is going to help you do that. What I wouldn't do today is choose a career simply based on how much money you can make out of it and what you perceive to be stable. I would not do that.

Yeah, you'll get to the end of that road with a lot of regret going, now what? I'm burnt out. I paid a soul tax for decade. Sure, I made some money, but it was not worth it. So I want to know this, Jesse, where are you at financially today at 22?

Yeah, I mean, I've been living at home with my parents. I paid off all my debt, and you know, I'm kind of at a point— I just proposed to my girlfriend. Hey, we're about to be married in the next 9 months. So it's kind of, you know, we're not, not in the negatives, got a couple thousand dollars in savings, good emergency fund, and now it's just trying to figure out what can can I do to, as we navigate going into marriage. So that's great.

Well, that financial piece gives you so much flexibility. It gives you options to pursue the thing you really want to do instead of, well, I have to go sell insurance because it makes a lot of money because I have a lot of debt to pay off. So staying debt-free is actually sort of a hack for doing the career that fuels you. And I'm just, I did a quick Google search and Find the Work You're Wired to Do will help you with this, but I'm looking at jobs like licensed clinical social worker making $60,000 to $90,000, child protective services investigator supervisor $50,000 to $75,000, foster care program director $65,000 to $100,000. So there's a lot of jobs out there that can pay well, and the truth is at 22 with no experience, expect to not make much. That's right. That's kind of the name of the game. And as you get more experience, by 32 you should be making much more. So you got a lot of time on your hands, so just don't squander it. Start to kind of vibe out what is, what is the thing I liked about about that? How can I pursue that?

But the key is, what do you love? What does the world need? What are you good at? And then what can you be paid for? And if you find that sweet spot in the center there, you have struck lightning. It's something most people don't do their entire lives. I like that.

I like that. Good question. Thanks for the call. We've got Drew, who's in Springfield, Missouri, up next. Hey Drew. Yeah, how can we help?

Me and my wife have a question. We Uh, we were thinking about taking some equity out of property that we have to buy some rental property.

Okay, how many properties do you have total?

We have two. We have our main house, uh, it's paid for. We have a lake house and it's paid for.

Okay, and so which— you were going to borrow against one of these to buy the next property?

Yeah, we were The way we feel about it is it's like having cash in a checking account. It's really not doing much. Um, and I could be wrong, that might be the wrong way of thinking it, but it just seems like a lot of equity sitting there not doing anything. So yes, we were going to take the equity out of the lake house and try and put it in some rental properties.

It won't— the lake house was meant for you guys as a toy, right? You're not renting it out?

Yeah, that was It's just, no, we're not renting it out. It's just a weekend thing.

Okay. So here's the way to look at it. It's not an investment and therefore it doesn't need to make you money. It's just for you to enjoy. And the reason we tell people to pay cash for things like that is so that you can stomach that. You know, Dave Ramsey's got a lot of properties. He's got a lake house that he loves. He does not look at it and go, man, there's a lot of money just sitting in that lake house. I'd like to have that. Because what happens is now you're moving backwards. Taken on the HELOC or the home equity loan to do this. Now the lake house is on the block. You got a new payment in your life to try to do this again with another rental property. So I, the, I wanna know what's the deeper reason behind this? Cause I don't think it's that the lake house is just sitting there. It sounds like you guys are wanting to build wealth in a different way.

Well, yeah. And so really what's driving it is we got started late on on investment accounts. We just got started a few years ago and we're trying to catch up is kind of what the— How old are you guys? I'm 38 and she is 39.

All right, what's the lake house worth?

It's roughly $300,000. We put a lot of improvements to it. I mean, we bought it and just have remodeled it from one end to the other. Together, so it's kind of hard to tell, but 300 is a safe number.

How often do you use the lake house?

Just about every weekend.

Oh wow, so it's getting a lot of use. So you're not— it's not something you were like, hey, I'd be willing to sell this thing and put the money in investments because we're behind?

No, it's, it's our hobby. It's pretty much our only hobby. We—

what's your income? What do you guys bring in every month?

Um, well, we take home about $145,000 a year, and, um, what's the gross amount that we— um, I'm not 100% sure on that.

Um, but how much could you invest a month right now in order to, quote, catch up? Because you're only 38, you got plenty of time. Absolutely.

And you got no debt in your life, it sounds like. Well, there is a— the boat that's sitting in the, in the boat slip, I owe $6,000 on it, and that's it on debt. We invest out of that $145,000 that we take home, we invest $68,500 of that. Wow, okay, that's great.

The stock market?

Yeah, we have an Edward Jones account.

Okay, and how much do you currently have in investments?

Uh, $224,000, and that's— that's— we've accumulated that over, uh, this is my second second year.

So, okay, well, let me show you the math on this. You're 38. Mm-hmm. You got $5,600 a month basically going into these investments. You already have $224,000. You're gonna have $7.4 million at 60 if you just keep this up. Yeah, that's pretty good. So therefore, I tell you that to say you don't need to rush this. You don't need to take out a HELOC to go get an investment property that hopefully ROIs, hopefully, you know, actually makes any amount of money because you have debt leveraged against it, which is going to hurt the cash flow. So I would just keep doing what you're doing. The life hack here is your income and your savings rate, not that you're not doing enough wealth hacks and taking out enough HELOCs to leverage more properties. That's right.

You guys have done really, really well and you've set yourself up for success. There's no reason to really change, change the recipe now unless you love real estate.

State, then just stack cash or invest and buy real estate in cash. But the stock market is a great passive way, a truly passive way. No headaches, no landlording. The money just grows and grows and grows.

That's right. Well, thanks for hanging out with us today, guys. And remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.