Transcript of Financial Pain Creates Real Change

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Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union studio, this is The Ramsey Show. I'm George Campbell, joined by Jade Warshaw this hour, and we're taking your calls for free. 888-825-5225. And as Dave says, some say the advice is worth what you paid for it.

A lovely riddle.

We'll see how it goes today. Jonathan kicks us off in Orlando. Jonathan, welcome to The Ramsey Show.

Uh, how you doing?

Doing well.

Um, I have, uh, a question. I got myself in, uh, a big mess where I'm actually— where I actually had to force— well, I actually forced a credit card company to sue me.

You forced them to sue you by not paying?

Uh, not paying. Um, every time I signed the agreement and set up a payment plan, I changed my numbers and bank accounts and they never hear from me again.

Why were you scamming like that?

Uh, well, it all started with American Express back in August 2023 where I paid off all my American Express cards and requested my, uh, close my account. And they did all except for one card. They returned the payment, they kept the, uh, they kept the minimum payment, and they told me I was no longer eligible to pay that card off in full because they just jacked the interest rates up to 49% on them.

Okay, I'm struggling to find a question in here. How can we help today?

Uh, so my question would be, uh, because I tried different, uh, lawyers and whatnot, and they all told me that Chapter 7 would probably be the best way out of it.

How much credit card debt do you have?

Uh, about $49,000.

Okay, and I just want to make sure I understood— I made sure I understood you. Did you say that American Express would not allow you to pay the full balance? Is that what I heard you say?

Yes, they told me that, uh, this was right after when they declared the pandemic over, and they jacked the interest up on all my cards to up above 49%. So I called them and I asked them why, see if I could get them back down to 19% where they was originally. And it's like they told me no, that was a federal going rate.

Okay, right. Okay, I understand they jacked the interest up, but I, I want clarity on the payment. You said that you couldn't pay it off, they would not allow you to pay it off. Is that simply because they made the interest so high you felt it was impossible, or was there something— somebody was restricting you on the phone from making a payment?

No, I, I sent them the payment twice. The first time they sent it back They kept the minimum payment and I had received the letters and they said they could not validate where my funds came from.

So there is one of the reasons that that might happen would be if your account's been frozen or closed or if you're under fraud or review and or if there's suspicious activity. And if what you're saying is you were constantly changing your, you know, address and constantly, that might be a reason. I don't know.

This was after they returned my payments, because it's been 2 years where the debt collector has been coming after me.

So where are you at in the lawsuit? Has there been a judgment against you?

Not yet. They just filed, and the same debt collector just went and bought the other credit cards, and they're getting ready to file the other On the other side.

Okay. How much money do you make?

I make roughly $70,000 a year.

And do you have any assets or money to your name right now?

Uh, no.

Is this the only debt? The $49,000?

Uh, no, I got a house. Uh, I got two cars.

Those both have loans on them?

Yeah.

What are the loans on the cars?

Uh, one's, uh, like $29,000. The other one's $7,000.

Do you need both cars?

I need one.

Could we sell the one that has a $29,000 loan on it?

Uh, actually, that one I can't, can't sell.

Are you upside down?

Uh, it's not upside down at the time of purchase when I ordered the truck in 2023.

Well, what's it worth today? You owe $29,000. What's it worth today?

Uh, today, Kelley Blue Book value has it right at $19,500.

So you're $10,000 underwater?

Yeah.

Uh, and that's it? There's no other personal loans, HELOCs, anything else that we should be privy to? No. Okay. Is it just you, or do you have a wife, kids?

Uh, wife. Uh, one of the biggest problems I've been trying to get, uh, been trying to send them payments and all that to this debt collector, but the more I pay them, the greedier they get.

And I don't think they're getting greedy. I think they want their money. Um, and they don't get me wrong, they, they have horrible ways of showing that. But the truth is, you owe this money and all of the backstory and getting up to this point. I think if we spend too much time thinking about all of that, it's just going to cloud our, our, our intentions going forward. So today what we're looking at is $49,000 of credit card debt. The past doesn't matter. We're looking at $29,000, a $29,000 vehicle that we're $10,000 upside down on and another $7,000 vehicle with $70,000 of income. Is your wife working at all?

No, she's not working. We just got married in, in April and, uh, we haven't been able to get— we're waiting for the attorneys to file her adjustment of status.

Is she not legally allowed to work in the States?

Right, until the adjustment of status is done.

Got you. Okay, how old are you guys?

I'm 45, she's 44.

Okay, so the, the solution to this problem isn't filing bankruptcy. The solution to this problem is you taking 100% control and responsibility for what's gone on here over the past several years. The truth is you've lived a lifestyle that's above what you earn. You earn $70,000 a year and you've got car loans you can't afford. For whatever reason, you've racked up almost $50,000 of credit card debt. And that's the truth. So getting out of this is going to require you raising your income in multiple ways, and it's going to require you lowering your expenses in multiple ways, none of which are going to be comfortable or fun, uh, in any way, shape, or form. But it is going to be comfortable and fun once you're out of the debt.

So the only way out of this is debt snowball it. And you know, if the credit card debts are old enough, eventually you might be able to settle for a little less than what's owed. But if you owe it and you can pay it, let's just make a plan to get this done. I mean, going into $49,000 of credit card debt tells me there's been a couple of years of buying some toys, living high on the hog, and now it's time to face the numbers, face reality, and get on a plan with your wife. Even though she doesn't have an income right now, she's involved with this. Yeah. Because some of the spending is gonna be from both of you. And so this is gonna take probably 3 to 4 years of some serious, serious sacrifice.

Yeah, and we didn't ask you about your mortgage, but I can tell you if your mortgage is more than 25%, of that $4,800 take-home pay that you probably have, that's probably one of the first things on the chopping block.

Yeah.

And bankruptcy is not a quick fix. It will destroy your financial life, stay on your credit report for 10 years, make it hard to rent an apartment, get jobs, all of that. So I would not go down that path.

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Anna is in Nashville, just down the road, up next. What's going on, Anna? Are you with us? Yes.

How you doing?

I'm a single mom. Good, how are you?

Good.

I'm a single mom of two and I'm self-employed, and I have $28,000 in credit card debt right now, so All of the payments are current, but the interest and debt is really hard to manage.

Hmm.

Is that your only debts? Is it $28K?

Yes.

Okay. What's your income?

It varies because I'm self-employed. So some months it's quite good and other months it's slower. So I'm creating some supplemental income.

Through side work or what?

Yeah.

OK. Give me an average month.

An average month this year has been really low because I've been taking some business courses and furthering my education. But some months I was making $3,000 a month and other months I was making very little.

So $3,000 is like the top end?

Mm-hmm.

What kind of work is it?

I'm a practitioner. So I started my own business to support women and children with anxiety. Um, but I basically left an abusive marriage, started my whole life over again, left the state. Okay. Um, paid off old bills, like on the credit card, it's old bills he wouldn't pay, attorney's fees. Got it. And then rebuilding my life to create a business where I could work from home.

Okay. How old are the kids?

Um, they're now 13 and 16.

Okay. So in school and you have full custody?

I do have full custody now.

Okay. Um, I, I think the struggle is coming from the $3,000 a month, which it sounds like on many months it's less than that. I think that's where a lot of the struggle is. You said you were doing some, uh, supplemental work. What are you earning? What are you doing and earning from that work?

Um, I'm just starting to pick up more and more work because before I could, the reason why some of the early months were low is I was just in survival mode. Sure. You know, leaving, leaving that place and then trying to help my kids. And so I wasn't at my best capacity. Sure. From now going forward, how long ago was that? Building and putting more out there.

How long ago did you leave?

I left 4 years ago. It took 2 years to get the divorce and I had no support for 2 years.

Understood. So you're, you're back on your feet, we'll say maybe 2 years back on your feet, but back to the other question, what is the supplemental work that you're doing and what are you earning from it?

Um, I just started some of the supplemental work, so I'm doing, you know, like some dog walking, pet sitting on the side.

Dog walking, pet sitting. Do you— I mean, you've just started, I realize that. And by the way, no one— we're just trying to get information. Um, no shame in any game. I did dog walk— dog walking and pet sitting. I did all that too when I was getting out of debt. So don't, don't feel bad about saying what it is, and don't feel bad about saying the amounts. The more details you give us, the more it'll help us help you out. So just getting started on that, what do you, what are you able to bring in, uh, on dog walking today and what do you think you can get it to?

I just started, so literally we have our like first customer. I tried to pick something I could do with my kids. So I mean, we're looking at, I love that. Um, you know, 4 days, it's gonna be a couple hundred dollars.

Okay, great.

Okay. Um, but I can also work from home while I'm doing that.

Okay, so you get a client for, if they're gone for a weekend, you think you can make $200 or $300 off of that. I love that. I think it's a great thing to be able to do with the kids. I wonder though, with 13 and 16-year-olds, do you need to do your job with the kids? I feel like the 16-year-old can stay home with the 13-year-old and you might be able to do several side hustles that don't involve them being available to go with you. And that might free you up a little bit there.

Exactly. And that's why I'm building my business right now. I'm able to— before I was doing one-on-ones with clients. Uh-huh. And so now I'm broadening it so it's a little more affordable for other people. I help other people who went through trauma.

And so that's— I want to challenge you on this, though. And this is— I'm being your buddy right now. This is not me trying to jam you. This is me trying to be your buddy. What you're earning from this side hustle consistently from your business equates to a side hustle. It's not a full-time business yet. I want you to keep doing it because you're clearly passionate about it and you have a point of view because you've lived it. But today, I would love to see you go out into the world and get a job that can earn you double that, because I think that you're worth it, and I think that you have that to offer, and it'll help you break free of this debt.

Yeah, you need stability right now, and right now, this, the business, it's great, but it, this feels like ministry. That you could get paid for long term. But let's make that gravy on top when we're not working full time, 40 hours a week. Do you have health insurance right now?

I have TRICARE.

Okay. So the focus is going to be let's get this income up because without that, it's going to be hard to even keep up with the credit card payments. What are the minimum payments every month on this $28K?

So there's two separate cards and the minimum payments equal about $700.

Okay.

Okay. So the goal is gonna be, what is the smallest balance of the two cards?

Roughly under $11,000.

And then the other one's about $17,000?

Yes.

Okay. So our goal is gonna be to chip away at that smaller $11,000 one. And I mean, if you put $1,000 toward it a month, you'd be done in around 11 months. So about a year.

Mm-hmm.

So that's just the napkin math to show you you know, how long it's going to take, how fast you can move depending on how much margin you have. So that's the name of the game here. We're talking about your income, we're talking about your expenses and the gap between that, hopefully there is one, is called your margin. Mm-hmm. And that's what's going to allow you to get out of this debt fast. Normally it takes people 18 to 24 months. It might be a slightly longer journey for you because you're a single mom, you're trying to go to school, which I wonder, can we put pause on school right now because it's hurting your ability to produce income?

Right. I mean, when I'm saying it was just continuing education, and so I have everything that I need right now. Okay. It's just a matter of more visibility and getting myself out there more.

That's true.

But that's— I get the clients, I need to get really good money.

The truth is, Anna, though, that there is a horizon on building that for anybody who's starting a business. There is a horizon for creating a, a reasonable client base that's dependable that you know you're going to earn. And so for that reason, No one is saying don't do it. No one is saying, you know, it's not worth it. We believe in that and we love that. However, a lot of times you have to do something full-time while you're building the business. While my husband and I were building our entertainment business, I still had to go and do gigs and perform and do a lot of the things that I didn't really wanna do, but that's where the steady money was. And so I had to do both at the same time for a while until the business that I really wanted to do took over and could earn me what I, what we needed in order to pay off our debt and sustain our life. So I, I just really want you to hear that. I agree with George, and, and this is for the broader audience. When you are about the business of paying off debt, you need focused intensity.

All right? You can't do a bunch of things at once because something's gonna suffer. You can't work on school, work on the business, pay 3 cards at the same time. You have to pick one goal and focus all of your intensity and all of your margin and all of your efforts at that one goal. Even if it feels silly to say, well, I'm just focused on paying $2,000 off on this credit card right now. You will be shocked, George, you know this, how quickly you will pay something off when you put all of your effort towards it.

You gotta get the blinders on. So Anna, there's a few moves to make here. I would pause school. I would try to go for a full-time job while you double down on these side gigs. And if you have clients currently, that's great and you can still try to find some more. But right now I would not be just so focused on growing the business because that's gonna take your efforts away from debt payoff, side gigs on top of everything else you've got going on.

Yeah. And you're gonna have to invest some of what you're earning back into that business to grow it. And now is not an investing time for you.

Yeah.

So I hope this business grows. I hope you call us back, you know, a couple years from now and say, "I'm debt-free, the business is flourishing." Because to help others, you've gotta do it from this place of strength. And right now, it's very tough. You're in a tough spot. And I love this passion you have to help others who have been through the same situation. But Jade's right, you need to charge what you're worth. Right now, you can't just make it more affordable. That's generosity, and generosity takes abundance to be generous. It's an overflow. And so I hope you get there. I love your heart for this, and we're hoping that you can knock out these two debts using the debt snowball method. I saw on the screen something about debt consolidation. No debt. I don't love that. Let's not make this into one giant mountain just to save $40 a month on our payment. The factor in this is you, the margin you can create through your income, through slashing your expenses, and maybe putting that 16-year-old to work too.

Yes.

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Welcome back to the Ramsey Show. I'm George Campbell here with Jade Warshaw. Open phones at 888-825-5737.

5-2-2-5.

We were just talking about margin, Jade. Yes. It's hard to find if you don't know where to look and you don't have a good app to help you along the way. And it's why I love EveryDollar. It's more than just our budgeting app now. And here's a great quote from one of our fans: "Love this app. Makes it super easy to budget with my husband. We've implemented this practice since our wedding day. We've had zero money fights because there's full transparency and we're on the same page." Wow! I love it. Still fights, but no money fights. Yes. That's a healthy marriage right there.

That is good.

If there's no fights, I question the marriage. I go, "Hmm, something's weird." You're not being real. Yeah. But money fights I could do without. That's fantastic. If you want to check out EveryDollar, you can get it in the App Store or Google Play. Download it today if you want to find that margin. Paula is in Boston up next. What's going on, Paula?

Hi there! Thanks for taking my call.

Sure! How can Jade and I help?

So, I have 2 daughters. Well, my husband and I have 2 daughters. They are ages 9 and 12. And we are in a really neat place where we're about to move from Baby Step 2 to Baby Step 7, which is the last one, right?

Baby Step 7. Oh!

Yeah.

Can I ask what happened?

Well, it's kind of a mixed emotion. So, we live in a very high-cost area. And my husband has a line of duty injury from the military and a line of duty injury from law enforcement here. So, he's going to be getting double, um, pension— well, pension and then military retirement as well. And because of the high cost of living here, we are actually selling our— what we're looking to sell our home here and then purchase in a lower cost of living area, and the home will be cash.

Wow, that's a blessing. And thank you for his sacrifice and service.

Wow, thank you so much. He's right here. I'll pass it along to him.

Wow. OK, so Baby Step 2 to Baby Step 7 just like that.

Yeah, a lot of work in between, but yeah, essentially it'll happen pretty quickly, God willing. But we have 2 daughters. They're 9 and 11. And because of his veteran status, we're wondering whether to invest in a 529 for our daughters. As dependents of 100% disabled veterans, they're eligible for Yellow Ribbon Schools and to use the remainder of his GI Bill. So sometimes it's half and half.— it just depends on what the funding is, but it's very likely that many colleges within the United States, they could go to them for free. That's awesome. Yeah, yeah. So, we just want to make a wise decision and support them, but we also want to enjoy our money and not kind of put it away without necessity.

Yeah, this would weigh into how I invest for school, I think, knowing that this is there. I'm not sure what all would be covered. Does it include just tuition, or is it room and board and all those other things? Do you know?

I believe it's just tuition.

Okay. I might invest a reasonable, like a smaller amount of money in a 529 knowing that, okay, if they go to a 4-year, they're going to need books. They're probably going to, you know, maybe they're going to want to live on campus, that sort of thing, a meal plan. I just wouldn't overly fund it. And there's calculators out there that you can use, but just something to keep in mind, the 529, whatever money that's left in there, not all, but up to $35,000, I believe, per child can be rolled over into a Roth IRA if they don't use it. So knowing that is kind of helpful. Also knowing that that money could pass to other siblings or other family members is also, I don't know if you would have anybody or if you or your husband has any need to hire your education, but those are good things to kind of keep in mind as you fund that and what amount that you put into that.

Okay, so if there's money left over, that amount can go into the Roth, but then what happens to the rest of it if it's not used?

You can pass it on, change the beneficiary anytime to even grandkids. Or, I mean, there's a worst-case scenario where you can just use the money. Just pull it out. There's just a 10% penalty.

Yeah. Oh, okay.

So it's not like you can't touch it. Just know anything beyond the $35,000, uh, yeah, 10%, which is not fun, but at least you're getting to your money.

So it's not going to just disappear. But I would do a lot of homework on this because there's still a little bit of a fingers crossed not knowing, you know, all the ins and outs, the fine print of this. Because my understanding, the GI Bill can only be used at one time for one person, or the benefits split, which means it's, you know, half a benefit each. So that's the part where I go, if you're still on the hook for the other half, well, now we need to make sure we have some savings to cover that.

Yeah, there's certain schools throughout the United States, like I know Liberty University is 100%, like it has a GI, so it's a Yellow Ribbon Yellow Ribbon schools, so they pay 100% of the tuition. So, anything that's left over for additional— so some schools will say 50% for Yellow Ribbon, the other 50% is the GI Bill. So, we would just encourage them to go to a Yellow Ribbon school.

Yeah.

Understood.

And again, there's a fingers crossed there. Can you force your kid? I hope, but maybe they go, "No, Mom, I want to go across the country to XYZ school because of this program or a boyfriend." And you're like—

Listen, OK, I have to speak on this because Paula, if that happens, the answer is no. You're on your own, kid.

Yeah, yeah, yeah, I agree.

And that's where the conversation's happening early and often to where those kids know exactly where you guys stand. That's right. They know exactly how to go to school debt-free if they so choose. And I hope they choose that. But again, the 529 plan is a great backup plan to have because you can use it for so much more than just that tuition. And it's not going to hurt. You put, you know, $200 a month in there from, you know, 11 to 18. You're going to have a nice buffer and not be worried about any spillover or gap.

Yeah. And just some nerdy things to keep in mind that, that 529 needs to be open, needs to have been open for at least 15 years before you can start rolling it. And, you know, the annual Roth contribution rates still apply. So whether it's $8,500 or maybe by those years it'll be like $11,000, who knows what the—

what the— So if you open them now, the kids will be, you know, 24 and 26. Well, that's great. They just have a starter retirement plan right there if you have two 529s for them. So I love, I love that you guys are thinking about this and it's an unfortunate circumstance in which you guys are leapfrogging the Baby Steps. But again, we're so grateful for your husband's service.

So that, that 529 rule was part of the SECURE Act.

Yeah, 2.0.

2.0. And I got to believe, you know, I feel like $35,000 is kind of low, but I got to believe that that might come up over time, possibly as Roth limits —contribution limits go up.

You can only convert up to the amount of the Roth IRA. So, in this case, you're $7,500. So, you can't do it all in one fell swoop.

But it goes up every year. So, you've got to believe 15 years later, which is when the Roth would be eligible.

Yeah. That's the hope. You never know what the government will do.

They could revoke the whole thing.

You never know. I'm just glad there's an option, because for so long, people were like, "Well, I don't want to do it because what if they don't go?" And I go, we have a student loan crisis upon us with about $1.7 trillion. I'm more worried they're going to go into crippling student loan debt than the wonderful problem of, "What if they don't go and I have a pile of money sitting here that I can change to any beneficiary?" And what's cool, this can become a generational college endowment fund. When you think about it, by the time your kids have grandkids—

You don't even have to add anything to it. It just grows.

It'll just snowball into this massive pile of money. I like that idea. I'm not aiming for that, but if it happens, I'm not mad about it.

It's not bad.

"Old grandpa George started a scholarship fund." for his whole generation. For all of Ken. Ken? I think that's what you call him.

That's very Beverly Hills.

What's weird to think about is I'm going to be somebody's ancestor. That's just weird to me. It just, I don't want to think about it. Blew my mind a little bit. I don't want to think about it. But it is a good teaching on the baby steps here, Jade, of when to do this. Because some people, they love their kids so much, they forego investing in their own retirement to try to put away some money for Junior.

Yeah, yeah, so let's talk about that. There's a time to begin investing. You've got to put your own mask on first. I've heard you say that. I think that's a really good great analogy for it. Over here, we're gonna teach you, get your own house in alignment, your personal business first. That's you paying off your debt. We teach a series of baby steps. Baby step 1, get $1,000 saved. That's pretty quick. Most people do it in 30 days, George. Baby step 2, we, we talked about it earlier in the show. This is where you're debt snowballing all of your debt, everything except the house. And then from there, now we're going to start playing a little bit of, uh, offense. Is that a good way to say it? Yeah. We're gonna start saving up some money for ourself, 3 to 6 months of expenses. It's a barrier between you and life, making sure you no longer go into debt, making sure you're in a really good financial footing so that you can begin Baby Step 4, which is investing. Now we're starting the process of investing. Baby Step 4, 5, and 6 we do simultaneously.

You want to know what that means? At the same time. So Baby Step 5 now is the 529. You could do an ESA. There's limits there. I like a 529. We just came along the details about it.

Yeah, yeah, I do 529 plans for both of my kids. Couple hundred bucks in there from 0 to 18. You'll have 6 figures in there, which is, by the way, what it's going to cost for a normal state school by then. You ain't lying. God bless. Let's keep saving. If you're waiting for the perfect interest rate before you buy a home or refinance, that moment may never come. That's why people should talk to Churchill Mortgage, because rates move every day. And when rates drop, buyers flood the market, which means more competition and higher home prices. Smart buyers know they can't time the market. They move with a strategy. Buy the home you can afford now and refinance later if rates improve. Churchill helps you understand what you can actually afford, not just what you qualify for. And with their Certified Homebuyer Program, you can get fully underwritten before you shop. So you can make moves faster and make stronger offers. And right now, Churchill has a special offer only for the Ramsey audience. Go to churchillmortgage.com/ramseyoffer to learn more. That's a special website. Remember this, churchillmortgage.com/ramseyoffer. This is a paid advertisement. The Churchill Certified Homebuyer Program is available for qualifying borrowers and select loan types only.

NMLS ID 1591, nmlsconsumeraccess.org, equal housing lender, 1749 Mallory Lane, Suite 100, Brentwood, Tennessee 37027. Alice is up next in San Antonio. Welcome to the show, Alice.

Hi, thank you so much. Um, my question was, what is the difference between being generous and enabling poor financial habits with family members?

Oh, love this question. And also, I'm sorry, how close are these family members?

Um, they're my husband, siblings, and mom.

Oh, oh, well, I think you said the difference in your explanation. I think the difference is poor financial habits. I think that is the difference between helping and enabling. If somebody has really poor financial habits And let me add this part, they're not interested in changing them. That is the difference, because I think all of us started out as at a point where we had a lot to learn financially. And when the knowledge came, we were willing to receive it. We were willing to look at ourselves and go, okay, yeah, they're right. I need to change. But if these family members are not willing to do that, that's where it becomes, I believe, enabling because it's no longer helping them.

Yeah, if there's no movement toward independence and the direction is not toward freedom for themselves and autonomy, well then we're just giving to give. And if they keep asking for more giving, it's not really giving at that point, it's entitlement. So is that where you guys are at? Are they— yeah, every month going, hey, can we get $500?

No, and it's, it's not even that much until like maybe it's just in like my head, but it's, it's We've been married for 7 years now, so I would say over the course of 7 years, it's probably been like every 3 months or so, and it like rotates between them, and then sometimes his friend also asks. Oh gosh, so what has been going around that you—

it's Bank of Alice.

Are you guys wealthy? No.

Um, and we've also gone through like different jobs. Like, uh, we have 2 little kids at home, and so I stay at home and work. I do some like side stuff, but like between us, you know, we probably, um, are on track to make about $70,000 this year, um, but it's like, you know, up and down. So it's like, it's not even like, you know, we're working six-figure, you know, getting— sure. Why do they think they—

why do they make the assumption that Allison friends will be able to fit the bill? Why do you think that is? Because you've given them money before?

Uh, yeah, and I'm not sure what he was doing like when he was single and stuff, but it just has been, you know, $25 here, $50 here, I need help covering my phone bill. Um, it's never really been like we can't put food on the table. It's always been like, hey, this bill is here. So I don't know where it started and whatnot, but I just know that it just keeps— if it's still 7 years later, every once in a while it comes up. So I feel like I'm in a bad position because we have $25 we could send them, but I just know it's going to come around again. And I don't want it to be $500 or $1,000 in the future kind of thing.

Are you guys debt-free? Yes, you're debt-free. What Baby Step are you on?

Um, I haven't really been following them, but we just re-rent. We don't have any credit card debt. We had school loans when we got married, but we paid them off within the first year. Um, and then, and we had some credit card debt, but then we paid it off. And do you have any savings for rent? Um, yeah, uh, we're working towards like 3 to 6 months of, um, you know, built up. So I think we're about 2 months ahead on our budget.

Okay, what does that equate to dollars-wise?

I think it's $3,800 a month.

Okay. $3,800. Uh, you have $3,800 saved or that's what you— Each month.

So, um, all in total, it sounds like crazy, but between all of our accounts, we probably have about $20,000, but I have it like all earmarked for months for a car fund or stuff like that.

Okay. So the small tweak, and you didn't ask, but I'm just going to say this, the small tweak that I would make is I would make sure to do the math and figure out what would be 6 months of expenses. With $70,000, I like the idea of you having a full 6 months of expenses. It sounds like, uh, only one of you is working, not both of you.

Yeah, my husband is working full-time and then I do like, um, contractor work. Yeah.

So every once in a while. Yeah. I'd love for it to be a full 6 months of expenses and I might hold back on the funds, especially if it's not something that's really, really pertinent to, to the moment. I would hold back on doing the funds and get the, the 6 months set settled, and then above and beyond, we could do the funds on top of that. So back to the question at hand, yeah, you just have to say no.

Is your husband aligned on this, or are you the one who's like, hey, I don't like this pattern, he's like, well, it's just $25, it's fine, or is he just as mad as you are?

No, he sees it as like, it's, it's only $25, and I see it as it's a pattern.

See, that, and that's where I feel weird.

Yeah, and that's where I feel weird because I'm like, I enjoy being generous, and but it Are you generous in other areas?

Like, do you guys have— is— do you— are you church people that you do tithe, or do you have foundations that you give to? Are you generous regularly in other ways?

Yes. Yeah, we do 10% to our church, and then we set aside another 10% to just give to random things. Okay.

And is this part of the 10% that you set aside to give to the random things?

No, not typically. It's usually like structured organizations, um, missionaries. Okay, so that answers that question.

That answers that kind of moral dilemma of, am I not a generous person? Clearly you are because you are giving, it sounds like, 10 to 20% of your income, which is very, very generous. So that answers that moral dilemma. Anything beyond that is, is this is the relational part of it, which is somewhere in his mind or upbringing, he kind of feels like, well, this is just what you do. You know, if your buddy asked, if your buddy asked for $10, "$25, you give it to us." "We're not hurting, so what's the big deal?" Now, there is, I do wanna, I think there's a difference here. If a friend of mine was like, "Hey, we're out to dinner, she forgot her wallet," of course, I'm spotting her the $25, whatever it is. That's very different than, "Hey man, you know, I'm just coming on some hard times. Can you spot me? You know, I just got, I need something for my cell phone bill," right? It's a different feeling, 'cause it's like, well, what's causing this? So, what you can do, a very, Amazing way to be generous if you have not already done this is you and your husband.

Number one, to George's point, you gotta get on the same page. But when you do, you sit down with the mother-in-law, you sit down with the friend, you sit down with the siblings and say, hey, here's what— and separately, not at the same time. Here's what we're seeing. It just sounds like you guys, we love you guys, and it just sounds like you're going through a hard time. We'd love to show you the thing that helped us. We've been there and we started walking these baby steps. We thought it'd be a great idea. We'd love to gift you this. And you can gift them EveryDollar. You can gift them Financial Peace University. Matter of fact, before you leave, we'll give you the Total Money Makeover. Put a bow on it and say, this is the best gift that we could give you because it's what helped us and we know it can help you too. And that to me is a subliminal way of saying, stop asking me for money.

They'll get the memo pretty quick. And it's okay to just say, hey, we're not able to do that. Hey, that's not in the budget for us, but we'd love to sit down and help you. "create a budget and help you avoid needing money for bills next month and the month after, 'cause we're seeing this pattern and we love you." And so it's not out of a place of, you know, you're better than them. It's out of a place of love, actually. And if they never feel the consequence, then they're never gonna change the behavior. So you're not being cruel by stopping. You're actually letting the reality of their life do the teaching that you can't. Yeah. And that's the hard thing to do with family, people that you love. Yes. And then they feel a certain way about you and they go, "Wow, Alex is so stingy." Well, this is the part of money.

This is the part of money that is emotional, which is it all has to do with the way we were brought up. If you were brought up in a way that, you know, everybody just kind of, it's a pot of money and you just kind of throughout the family, mom gives to dad, brother gives to mom and dad, grandma, you know, and everybody just kind of reaches in. That's very different from probably the way that you grew up with money emotionally. And that's why the two of you, you and your husband need to kind of sit down and have a meeting of the minds there. Because it's not necessarily that one is wrong or right. It's just your values and how you view it. Because, you know, some people might argue, hey, if the money doesn't bother you and you can do it, do it. Some people might argue that. I would disagree with that. But it's just a, it's from a value standpoint. Got it.

That makes sense. Not to rain on y'all's parade, but we did buy them budgeting books for Christmas 2 years ago. Good. Was it EveryDollar? No, it was a different one, but maybe we'll have to throw— I don't know. It's collecting.

That's why it didn't work. I'm just joking.

I don't even know if they read it.

Well, we'll give you EveryDollar because that's the one that'll actually work. And we'll also give you Total Money Makeover. George, what about Breaking Free from Broke?

Let's throw that one in there.

Yeah. And I'll give you mine also. What No One Tells You About— Well, there you go.

So the key pieces here are guilt-based giving is not generosity. And enabling isn't love. And the sooner you can understand that and put the boundary up in love, the better your life is gonna be, the better your marriage is gonna be.

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Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell here with Jade Warshaw. Open phones at 888-825-5225. Dani is up next in Orlando, Florida.

Dani, how can we help today? Hi, thank you guys for taking my call. Sure. So, um, a little background. Me and my husband have been married for about a year and a half. Um, he immigrated here from Peru. He's been here for about 5 years now. Um, he has a high possibility of being deported before our family case is approved. Oh, so that'll be— that decision will be made in December. So we're— we're— we still have about $15,000 in credit card debt that we were working on paying off. But my question is, should we just keep paying minimum payments and try and stack cash in this time since of the, you know, I don't know if he, if he's deported, it'll be like 2 to 5 years before he'll be able to come back. Oh my gosh. So I'll be going with him, of course.

Right. That was gonna be my ask. And what are the financial implications if this does happen? Like come December, let's say he is deported, you go with him. How much money is this gonna cost you guys?

And what will your new life be like? Um, it depends. He could be detained, um, for a couple months before he's deported, and then it's kind of up to the government as to where they'll deport him to. Then we may have to pay for him for a flight to a new place, um, that's a little safer for him. He's thinking about going to Spain. He has a buddy that lives there that could help him out with starting his life there.

Um, and you're just gonna follow him wherever he goes?

Absolutely. Okay.

What are you guys doing for work?

That's my husband right now. We both manage a kitchen. I make about $26 an hour and he makes $23 an hour. Um, and then we also have a bunch of side jobs, so we're bringing in about $8,000 a month. $8,000 a month.

Okay. And do you, are you renters? Do you have a house?

Tell us about any assets you have. We have 2 paid-off vehicles, uh, one that has a loan on it, but it's not upside down. It's a wash if we sell it. Um, so we have 3 vehicles. We're selling the one with debt on it to get that monthly payment out. Uh, we have monthly bills of about $1,000 in lawyer fees, and then the rest of our expenses are about $3,000 a month. So we'd be able to save a decent amount of money. But paying off all that credit card debt, I think, I'm not sure if it would be wise to do that given we might need it.

Yeah, I'm calling this storm mode for you guys because it's a storm and you know what's coming. And so I would treat it that way, just like we would if there was a baby coming or if you knew you were being laid off, that sort of thing. Did you say that you're renting? Yes. Okay. You are renting. Okay. So if you were to go— let's pick Spain. If you were to go to Spain, I'm guessing you would sell the remainder 2 cars. Mm-hmm. And how much would that give you?

About $7,500 for both of them.

Okay. That'd give you another $7,500. And then if you were to stop, uh, just pay minimum payments and stop debt snowballing, how much would you have saved by December to add to the $7,500?

Um, it— to get out of the apartment, it's $3,000. We'd be breaking our lease. Okay. Um, and then after that, we could probably save up about $15,000. Another $15,000.

Okay. Um, what I would start doing is to try to— and I know that you don't know you mentioned Spain, so I would just start there. I would just start gathering as much information as I can. I'd look at where his buddy lives in Spain. What's the cost of living over there? What's it cost to get a 2-room apartment or a 1-room apartment? What type of job opportunities are transferable that you do here that you could do there? And I do the same thing for Peru, wherever, whatever area of Peru his family is from, right? And just start to get as much knowledge and information as you can. I think that's going to give you more peace. Yeah, more money, more information will give more peace.

Absolutely. So it is wise to stop paying on the— well, just make minimums on the credit cards.

Yeah. And if this doesn't happen in December, well, now you have a pile of money. Just knock out those credit cards instantly.

Okay, okay.

But if you can approach this with like $25,000 in your pocket, I think that's going to feel really, really good. And to kind of have a checklist of here's what we're going to do. We're going to sell the car and then we're going to do the lease and then we're going to do this and just kind of literally put down a plan of action, like document it and document what it would look like going to Spain, document what it would look like going to Peru, all of that. And I think that that's just going to help you feel uber ready for this.

And you can use the EveryDollar app, Dani, and plan all this out. You can make a fake budget of like, hey, here's what our new life could cost us. Here's what our current life costs us. And in the meantime, use that budget to create as much margin as you can. Now is not the time to go YOLO and life's crazy, so let's eat out. Now it's how do we use as little of this money as possible to stack it up so that not only can we pay off the credit card debt, but we have an emergency fund. We have no debt now starting this new life. So that's the end goal is can we, whatever happens, can we restart this process with no debt and an emergency fund? You guys will operate differently no matter what happens.

Yeah, and some of the things to add to that list would be if you do go to Spain, you're gonna like, likely need some sort of work visa as well, and what's the cost for that. So make sure you're factoring that in as well.

That's a lot. That's a wild one. Wishing you guys the best. All right, Daniel is in New Orleans up next. What's going on, Daniel?

Hey, how's it going, guys? Thanks for taking my call. Yeah, so, um, I got a question. So I've always used you guys as like some advice for my kids growing up.

I lost my father when I was young, and I've used the principles and teachings that you guys have had. And just getting to now adulthood, my oldest daughter graduated from flight attending school the same day she graduated from college, debt-free with a bachelor's degree. And she's going to be doing some international travel with her new career, and I'm just trying to figure out how to navigate, you know, using a debit card during international travel and what kind of advice you guys can give me that I can pass along to her. I love that.

That sounds like an adventure for her. Um, well, I mean, I can tell you what I did. My husband and I worked on cruise ships and went to over 92 countries, and I had a debit card card, and a lot of times I would call them ahead of time and let them know, I'll be out of the country, here's where I'll be visiting. So my card would work in those different locations. I never had an issue with them thinking it was fraud, but also because I was traveling, they knew to be aware that there could be fraud. And it had, I had all the same protections.

And another key point here is international fees., and you can avoid that. Our friends at Fairwinds actually, they created a smart bundle for our fans that includes a Fairwinds debit card. And after watching my video that I did on this topic, they said, hey, let's get rid of international transaction fees for all of our users. So she can open up a Fairwinds account and sort of use that as her, you know, international spending money and keep her home bank account separate and just sort of fund it with how much she needs each month from that. And that'll help protect her, you know, son of OG account as well. So that could be a great move for her. And on top of that, they will even waive $10 a month in ATM fees if you're international. So a lot of cool features there. Not intentionally a plug for Fairwinds. They just, it happens to be the thing that came to mind of how to solve this. And for online purchases, there's a great one called privacy.com that allows you to create virtual debit card numbers. So that's another solution if she's making purchases abroad online. You even can do a physical card as well, but I think Farewinds would do the trick right now for her.

And I'm less worried about fraud now with things like Apple Pay. Yes. And I try to use the local currency instead of converting because that'll actually cost you more to convert to USD. But you know, do the research. Nowadays it's easier with a smartphone. That's right.

There's an app for everything. Yes, that's right.

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Jenna is in Seattle up next. Jenna, welcome to The Ramsey Show.

Hi there. Hey. So my question is quick and to the point. Should I allow my very generous boyfriend to pay off some additional debt of mine? Wow. Tell us more.

What does additional mean? How much has he paid off so far? I have many questions.

He paid off a personal loan that I had taken out to do some home repairs. About a year and a half or two— about a year and a half ago. And then about 6 months ago, he paid off my student loans. Ooh, how much was the personal loan and how much was the student loans? The personal loan was maybe $15,000 and the student loan was probably $30,000, $35,000. Oh my!

So he's paid off $50,000 worth of debt for you so far. Right. How much more is there to go? Well, I—

all I have is a car and a home loan. That's the only other debt that I have. Do you guys live in your home? We don't live together. Okay. Uh, we, uh, we maintain separate households. We've been together for about 3 years. He's widowed. Widowed. Any kids? Uh, we both have kids that are all college age.

Okay, uh, how old are you guys? In our 50s.

Okay. Um, he's retired. He retired young. Okay. He and his late wife did everything right financially, and I'm divorced, and so that kind of messed up my financial situation. But are you gonna marry him?

I'm just getting cut into the chase.

We, um, we've both decided we don't want to remarry, but we've, we found You know, we, we're committed to each other.

Uh, so you'll continue to live in separate households and hopefully be together forever in separate houses? Um, I don't know.

We're, we're still figuring that out.

I'm gonna tell you, Jenna, I think this question is more about you than it is about him. Because if you said to me, I, this is the one, like, I, I think we're getting married. I want to be with him. Uh, and I think it's happening. I think he's going to pop the question. I would feel less of the way I feel right now, which is I don't think you need to be accepting these gifts from somebody that you don't think that you're gonna be on the long haul with.

$50,000 is a lot of money. Well, I think we're going to be in the long haul. We just don't necessarily want to get married. I was in a very abusive marriage. True that. He had a very long, happy marriage, but, um, true that.

But you and I both know long haul doesn't exist without without a committed— without commitment. And I, I didn't hear it. It's like, it could be like, I, I care for him, I love him, but I don't know. It was more like that.

Is fair enough? Uh, I don't feel that way, but I can see how it comes across that way.

That's, that's my only thing. I don't— hear me, because this is on all the radio and all the YouTubes and all the podcasts— I think you're a great person. I don't think that you're in any way trying like scam this guy or—

Yeah, you're not doing anything wrong. It's on his volition if he wants to spend his money how he so chooses. He could give $50 grand to a charitable organization or gamble in Vegas. It's his money. He's choosing to help somebody that he loves, which is a very noble thing. We can all agree on that.

I just don't know that I would accept such a gift if there— if there wasn't a full commitment there, because this is the type of thing that could breed resentment later, I think.

Mm-hmm. Right. Couldn't this hang over your head of, hey, I paid off $70 grand of your debt and this is how you— could that happen one day?

I don't see that happening with him because he also pays for— we go on a lot of vacations and he pays for everything. He doesn't let me pay for much of anything. He just— he has done well and he— yes, he independently wealthy.

Like, he's obviously retired, he has a huge nest egg. If he's just willy-nilly paying off off debts like this? It sounds like he's doing very well. He's a multimillionaire, is my guess.

Well, yes. Yes. We're very open about the financial situation and it's very lopsided.

Give me an estimate. What's his net worth vs. your net worth?

He's in the double-digit millions and I'm in less than half a million.

Okay. Um, for you, for you and your placement in this relationship, I love the idea. I'm not saying that you need to go back and pay him back the $50,000. I'm not necessarily saying that, but I don't want you to let him pay your car off. I want you to do that. Okay. I want you from this, if you take on debt, debt, because you have said, hey, we're separate, we live in separate places, we have separate finances, and many— you're dating, like, you, you guys have maintained your boundaries. I actually love that for you. Since you're doing that, I would do that in this area as well. No, it's my debt, I want to pay it. I think that allows you to maintain a certain amount of independence, and I think it allows you to keep the, the— if this were a marriage, it'd be different, but it's not. So it allows you to keep the balance of power right where it should be, which is there. No one can say that this guy is taking care of me, that mooching off of him, that I'm living off of him, that I need him.

You're still a very independent woman, and I want that for you, and I think it's a good thing for you, and I think it'll make you feel better in the relationship long term. Yeah. What do you think?

That's kind of how I— that's how I feel about it.

Okay. Okay.

Um, he just—

yeah, he's, he's just a nice guy. I can sense it. Like, I really— is—

yeah. Oh my gosh.

And I think you're a nice lady too, and you're like, this is great. I think it's probably really great. I, I don't sense anything that's off here. I just— if I were in your shoes, yeah, it's, it's not, it's not. But I, I listen, I'll take it a step further. I hope you guys do commit. Like, I hope that you guys find the trust that you need and find the healing that you both need, because you both have been through it. I mean, you said he's a widower. And, and you've been through an abusive time, I— healing would have to take place in major ways, I think, for both of you to get there. But man, if you can, it, it's such a beautiful thing.

Yeah. Mar— marriage is not the villain here, and I know it feels that way because of your past experience, but being married to this guy is going to be light years difference than your last one. Right? Right. I can already see that based on the way he's treating you and his generosity. So it's not that we're like, you better get married or else, Jenna. No. I just think it adds a different level of commitment. It adds a layer of protection on, on his part, even though he doesn't really need it financially. But the question to ask yourself is this, is this help accelerating your own independence or is it replacing it? That's the part that worries us more than anything. Because what if one day you guys break up and now you are kind of needing him for his income and the lifestyle, and now you don't have that, you don't have your own retirement. So there's also some protections you don't have.

Have in that regard, right? George makes a good point, and I'll, I'll go further on that point, which is I, I love that the separation that you guys have created, because that's just what I think is a normal dating separation, and I think that that's good. But I think if you tie your finances up too much, uh, in the way of, yeah, letting him pay major debts, there could develop, uh, let's say in the future you're starting to notice some things that you're like, man, I don't know if this guy's the when he's done so much for you, it could make you feel like you need to stay with him longer than maybe you would've if these things hadn't been done for you. Does that make sense? Like it could just, yeah, create a cloudy vision there that I, I wouldn't want for you. Um, but I don't see that happening. I think it's gonna be all good, but I just wanna throw that out there for you.

Mm-hmm.

What is your income right now?

Um, my, from my primary job, I, uh, make about $150,000. 40, and then I get some of my ex-husband's pension, which all goes toward my retirement. And then I have a side gig.

Yeah. So you're good. You've got money. You've got your own—

You can pay off this car in a couple of months, it sounds like.

What's left on the loan? Right now, about $40,000.

OK. So if you took, let's say, $4,000 or $5,000 a month, you could be done with this in 8 to 10 months.

Potentially, yeah.

See, there's my question. I'm not putting that much on it, George. If this was only on you, there's no urgency here. You're not changing any behavior that got us here. Well, we went out and bought a, you know, $50,000-$60,000 car. And that's the part I want you to be good on your own to where you don't need him. And I think it's gonna change Jenna if she pays off her own car loan. She's gonna drive that thing differently. Than if generous boyfriend swooped in to pay it off. Now she's going car shopping again, going, "What other debt can we get in? Let's play this game. This is fun." So I'm wishing you guys the best. I hope you have a long, wonderful life together. And yes, I hope you get married. Selfishly. ¡Hey guys! George Campbell here. Listen, we need to talk about your phone plan because for a lot of you, it's like a bad roommate. You know the one— unpredictable moods, always asking for money, hard to get rid of, and they never do the dishes. And that's what the so-called big wireless carriers are like. They're counting on you overpaying forever. But Boost Mobile flipped the script.

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It's super easy. You compare agent profiles, interview them, and choose the right one to work with. And you can do that at ramseysolutions.com/agent to connect with a local Ramsey Trusted real estate pro for free, or click the link in the description if you're on YouTube or podcast. Katie is in Sacramento up next. Katie, what's going on?

Hi, so I had a question. I am getting a about $75,000 workers' comp settlement, and my parents want me to save all of it for a down payment on a house. And I was wondering if it's valid to take $5,000 or $10,000 of that and spend it on my wedding for next year.

Oh, okay. What happened with the workers' comp situation? What was the situation?

I got injured and yeah, I ended up getting an attorney and turned into this. Wow.

Are you okay now? Are there any kind of ongoing health concerns? I'm getting better.

Yeah, I have good private insurance. So yeah, but I'm slowly getting better now. I'm just doing a lot of different treatments.

And you'll be able to work as you once did? Yes, correct. Okay.

I start nursing school in the fall, actually.

Okay, cool, cool, cool. Um, so you're getting married, uh, are your parents helping fund the wedding at all, or it's just you and your fiancé fitting the bill?

So it's a little bit of both. So his parents are pitching in a little bit, mine are pitching in a little bit, and then we're also going to have to pay a little bit on our own.

What's the total budget?

I think we're looking at about $15,000, and I'm thinking we're going to be splitting it 3 ways.

Okay, $15,000, you said? Yes. Okay, so you, you guys collectively as a couple would owe $5,000?

Yes. Okay, and you want to take $5,000 of the $75,000 and that be your cut? Yes, correct. I mean, I don't, I don't see why not. Um, is there anything else to the equation we need to know about? Do you have a bunch of debt laying around anywhere? It doesn't sound like you do.

No, we have no debt. We have paid off vehicles and we currently are living in a trailer on our future in-laws' property to save money. I don't— I have my bachelor's degree, but I don't have any student loans. I have all of it paid off. How are you paying for nursing school? It's only about $5,000 because it's through a community college, so my parents are offering to pay for it.

They're paying for that. I mean, I think $5,000 of the $75,000 is a reasonable amount. I think the $15,000 wedding in full is a reasonable—

I'm honestly impressed you can do a wedding for that number in today's America. I agree.

Yeah, definitely. And I guess my second part to this question is what to do with the rest of the money to help it grow over time until I'm ready to buy a house.

Yeah, how far away is that purchase, you think? Is it a year, 2 years, 5 years?

About 5 years. 5 years. I'm 21 right now. The magic number!

Ah! Ding, ding, ding! So the way we look at this is, 5 years is a long-term decision. And so you could invest this money. You could invest it in a brokerage account, non-retirement, put it in some index funds and let it ride. And hopefully in 5 years— the reason 5 years is sort of this magic number is because over 5 years you're likely to see some gain in that investment account versus a shorter time period, for like 2 to 3 years. You could see some market dips and you go to pull out that money and it's a smaller amount than you even put in. That's not the ideal scenario. So if that worries you at all, a high-yield savings account is still a great option. You can make over 3%. You know, you can jump onto fairwinds.org/ramsey and open one with the Smart Bundle, and that'll at least help your money grow and not get eaten up by inflation sitting in a checking account.

Yeah, what would you do, Georgia? Would you invest it or would you hold it?

You're At 5 years, if I knew it was 5 years and I'm not going to get a little doom-scrolling on Zillow and go, "Oh, really? 3 years?" then I would be comfortable investing it. You can always contact a Smartvestor Pro on our website to help you invest that wisely. Otherwise, a high-yield savings account, no one's going to be mad at you if you do that. Nope.

OK. Alright, sounds good. Well, thank you guys so much.

Good luck with everything. It's a lot of life change. That is a lot. Nursing school, getting married, trying to buy a house, especially at 21. Done. Yeah. So much life left to live.

Babies, I tell you.

Don't you wish you could go back and be 21 and debt-free?

Oh, if I was 21 and debt-free, I wouldn't know how to act. I don't even think I would know how to—

I don't think I can stay that way at 21 with my prefrontal cortex. Like, I gotta go get some debt.

I'm itching for some debt. Listen, I think I needed to learn my lesson. Maybe it was good that I had a lot of debt.

Some of us need to touch the hot stuff.

Yeah, that's right.

All right. Oh boy. Mike is in Portland up next.

What's going on, Mike? Mike. Hi, uh, thank you for taking my call. Uh, I've got two questions. One is much more minor than the, the other one. Um, so I'm gonna lay down the, the sort of groundwork here. So I'm 29 years old, uh, I am a nurse and I make pretty good money. Uh, I currently make about $250,000 a year. Whoa, as a nurse? How? Uh, travel? I do, uh, no, no. So luckily, uh, on the West Coast we do— I'm from Florida, uh, and we make crap money there. Uh, and we get paid a whole lot more here on the West Coast. That's, that's one of the reasons I came out here. And I do, uh, I do work a good amount of overtime as well. So this isn't just me working.

Is this a specific type of nursing?

Um, no, I'm just a nurse in the hospital. Every nurse in my hospital could make that much if they work.

I mean, that's like doctor money. I'm just impressed.

Way to go. Well, see, that's actually part of the problem. I mean, it's a good problem to have, sure. But this is, uh, this is the reason I'm calling because, um, I like being a nurse. It's great. Uh, but I don't want to do this forever. I do want to do more down the line. So, um, I also have, uh, I've been here for about a year and a half and I've got just a little bit over $200K invested in my, um, in my brokerage account. Um, and it's, it's been going well. Uh, and really I went into nursing because I wanted to do something else down the line initially. It's basically something you can go back to school for and you essentially are— you work in anesthesia. Those guys make much more money than even the $250,000 I make. It's closer to like $350,000, $375,000. But it's a 3-year school to go to and most of those schools will either make you sign a contract saying you cannot work during that time. And even if they don't make you sign a contract, you really— you can't really work in that time. It's so intense.

You're so busy. It's pretty intense. Yeah. Be able to work very much. So initially when I worked in Florida, I was going to make about $60K a year. So that was a pretty easy thing to pass up for 3 years to go to school and make a whole lot more money. But now it's so much more.

So to give up all this income, what would you be earning if you got the degree after 3 years?

So pretty, pretty reasonably anywhere between $350K and $375K. That would be pretty reasonable. And what's this program cost? So that's the other thing. The cost of the program, usually about $130,000 to $160,000 depending on the school. But you also have to live, right? So you also— most people have to take loans out. It's very similar to medical school because most people go to medical school, they don't have a significant amount of money to even live off of.

Well, you've got the money invested to pay for the cost of the education, but but you're not quite, the problem would be what would you live off of for 3 years?

How much do you need to live for a year if you were just acting like a broke college student while you're in this program?

So I pretty much live like that now. I invest my money very, very aggressively. Probably, probably maybe like $3,000 a month.

So you could live off, let's say $50,000 a year. You could live.

Oh, for sure. So you need $150,000.

Plus the amount for the program, which is $300,000. You currently have $200,000. Here's a game plan. I would just work for another 6 to 12 months and save up another $100K, and then you've got a nice little parachute to not work for 3 years and cash flow this entire program. And you will likely be the only person to graduate from that program completely debt-free.

So here's the other option. I think that's a— that is one of the ones that I— is one of the options I was thinking about. Um, but the other option I thought about is is, why not just keep doing what I'm doing? What I mean by that is, if I were to keep doing what I'm doing for about another 5 years, I would reasonably— assuming the market goes OK— I invest in very, very safe investments.

We've got 5 seconds, Mike. Spit it out. You want to retire early? What? No, I don't want to retire early.

I would just like to work for 5 more years and have about $1 million invested, and then instead of going the anesthesia route, just go be a nurse practitioner.

Yeah, my brother does that. That's a great field as well. I think either way you're good. Follow your heart here, do what you feel is right. The Ramsey Show question of the day is brought to you by Yrefy. Out-of-control private student loans can make it feel like you're stuck financially, but Yrefy helps borrowers explore refinancing with low fixed rates and payments that make sense for their budget. Visit yrefy.com/ramsey to learn more. That's the letter Y, Y-R-E-F-Y,.com/ramsey. May not be available in all states.

All right, today's question comes from Travis in Maryland. He says, I'm debt-free and I built a successful career making over $150,000 at age 28. I will soon be marrying my fiancée who is graduating from medical school with $475,000 in student loans. She seems flippant about this amount of debt when I bring it up. While the amount stresses me out, I've never had any debt because I paid for college, vehicles, and etc. out of pocket. How can I communicate to her the importance of getting this paid off once we're married? Once we're married? Oh yeah, yeah, yeah, yeah.

Okay, I wouldn't wait till then, bud.

I know, because I'd want to show and prove. I'd be like, show me that you agree with this sentiment by starting to pay off some of this debt on your own, fiancé.

Yeah, not being aligned on your values around money is one of the biggest red flags.

It's a red flag. Big flag.

You've got to get that part dialed in before you get married.

Yeah, the fact that she seems flippant about it specifically is what would give me a little bit of pause here.

Which, can we be honest, most people who went to medical school and went half a million dollars into debt are flippant because either they're in denial or it's monopoly money to them because they're like, "Well, it'll just take me a lifetime to pay this off." off.

Yeah, I have a couple of questions. I wish you'd called in, Travis, because I, I want to know when is she graduating, and I want to know how much time, and when you're getting married, so I can understand the time frame. What I think needs to happen is, as much, as much as she can begin starting to pay these off now while she's working, uh, and then once I— again, I don't know the timeline.

Yeah, she's graduating, we don't know when, we don't know when she'll have a job, what residency looks like, all of that. So this could be a long journey before she's making real money. And so if they're married, it's basically, it's Travis's problem. That's right. So he's worried, understandably, about taking on $500,000 of debt.

And if she's not on board with him going, you know, full force paying it off, it's going to be a problem.

And he's like, we got to clean this up before we get a house. Well, there's going to be a lot of fights.

They got to have this conversation. This is a conversation that you're not going to want to have, but you need to have. And you have to have the conversation and not try to manipulate the outcome. Room for it to be what you want simply because you think you want to marry this person. You need to go where the facts lead, my friend.

And I would get to the bottom of why she's flipping about it and do it calmly. You don't need to be, you know, defensive and instigating and yelling, but just say, hey, I want to know why are you so cavalier and nonchalant about this? Like, this is a lot of money. Yeah. And you might need to help show her that with some math and what a monthly budget would look like trying to pay off half a million dollars in student loans. And she's gonna go, "Oh, I'm making $60K in residency for 5 years. This is gonna be a tight life." Yeah. And it's gonna delay our ability to buy a home and go on vacations and upgrade the cars and all the things you wanna do once you're married. That's true. And so if you guys can at least get on the same page of, here's the game plan once we're married, here's how we're gonna attack this debt, then I would move forward. But I would not wait until you're married to have that discussion.

I would not. And I wanna, let's talk about this for a tad bit longer because I think this is important. So if you're dating someone and you want to start having the conversations about money, the first thing you're just trying to learn is what their philosophy is around debt and spending. And I think the best way to do that is to simply float a question out there and listen for the response. Don't start by saying your point of view, because I think a lot of times if you're out with somebody, you like them, you think there's a future. If you have a sense of what they believe, sometimes you can kind of veer your answer towards There's a little bit of fake it till you make it. A little bit, yeah. And you don't, and with this subject, you don't want that. So it would be as simple as me being like, so George, you know, so we've never talked about this before. Like, what's your philosophy on money? Like, what do you think about money? And you just, you're just quiet and you just listen. Really? What do you think about debt? Debt is fascinating to me.

What do you think about it? And if he's like, well, you know, if you leverage it the right way, huh? You know, learn. And I would, that night I would just, everything would be like, oh, that's so cool. "Uh-huh." You know, does he ask you the question back? Be way— like, these are all things.

And does she shut down when you bring it up? Now it's something we gotta dig into. What's behind that? And it might be something from her childhood or how her parents handled money. Who knows? Shame, guilt, baggage. But you gotta deal with this stuff before you put that ring on it.

Yeah, there's gotta be like 3 levels that you gotta get to. Number 1 is just you learning. Number 2 is, are they asking you, are they interested in your opinions on the matter? And number 3, Maybe they shut down the first few times, but if you go in there for a third try, is it still lock and key, or are you able to see a little bit more light every time you ask?

Because if you are, that's a good sign. Yeah. And the bad stuff is just going to be amplified once you're married.

Yes.

Once you can really let your hair down.

Yeah. It doesn't get easier simply because there's a ring on your finger. Yeah.

Please. Good luck, Travis. Wish you the best. Terry is in Boise up next. What's going on, Terry?

Hi, I am calling, uh, to get you guys' opinion about, uh, what constitutes a valid emergency to go into safety funds.

Oh, do you guys disagree on this?

Uh, vehemently. Oh wow. What do you—

okay, what do you think constitutes as a financial emergency?

Um, things like, uh, well, so I've, I've been on a long-term job search, and so that's adding to my wife's stress about money. Um, so that in and of itself is kind of an emergency, which I've tried to include in the conversation. Um, her take-home pay is about $3,800 a month. Month, and we have been using every dollar and been living on a very declared budget. And so when things like, you know, holes in the shoes or prescription contacts for our kids or a dentist or a car repair, more like kind of preventative maintenance, car care, a lot of times— She thinks that's an emergency. They put us over the $3,800 and we even, I actually even know pretty much the exact amount that we should be supplementing the monthly income by about $300-ish because of how, how responsible we're being. Um, but, uh, she is just very fearful of, of the savings going away. Um, because the job search has taken so long. Are you guys living off of savings?

Savings because of you not having income?

No, no, no.

We're, we're living off of, uh, her income. So, okay, how much is in savings? Uh, $40,000. Oh wow. Yeah. And you guys don't have any debt? None. No, we just finished, um, we went back to, uh, Financial Peace University through our church last year to get rid of medical bills and tax issues that I had from my, from my company that has closed. Okay, way to go.

Well, you guys are in a better financial position than you think, especially once you get some income in the door. How long have you been going without income on your side?

Almost a year. Okay, what?

That feels too long. Zero income, zero work, zero side gigs.

Um, I have applied to everything. So I'm a sales engineer in industrial automation. Um, there's not a lot of that here. Um, a lot of the, a lot of the jobs that I've applied for, like at the nurseries or just kind of like retail jobs, they kind of don't understand what I'm doing there. I've, they've actually made made comments about like, this job's for high schoolers kind of thing.

Sure. Um, that's okay.

That's okay if they make those comments. I told them I'm in the middle of a career change. It's fine. Um, it's been confusing.

It's been a little rough. Um, because you're saying $300 would solve this per month? Yes.

Yeah.

And we have the budget history to show that.

So $4,100 is really what it should be. If she's taking home $38,000, she needs to be taking home $41,000, or you guys need to be creating that level to cover all the bills. And so I'll, I'll say this, here's what constitutes an emergency. Is it unexpected? Is it urgent? Is it necessary? If it's not those things, then we know, all right, this really was just poor planning. Let's add a sinking fund line item in the budget for car maintenance, for contact lenses, 'cause we know that's gonna come up every few months. Months, that will solve a lot of these problems. But I think she's really stressed because you haven't had a job in a year.

Any job, any job, all the jobs. Make a job.

Welcome back to The Ramsey Show and the farewell The Tailwinds Credit Union studio. I'm George Campbell, joined by Jade Warshaw. We've got open phones at 888-825-5225. You jump in, join the conversation about your life and your money. Doug is in Charleston, South Carolina up next. What's happening, Doug? Doug, are you with us?

Did we lose you? Yeah, no, I got you.

Good. How can we help?

Well, I'm 50 years old. You said 50? Currently, yes, 50. Okay, that's right. And I retired early. Um, I'm debt-free, I've got $2.2 million saved up, and I'm spending hard on 72 teeth.

Sorry, what was that last part? Your phone's breaking up on us. Try speaking directly into it. So you— $2.2 million, and then what What?

I want to do a 72T retirement plan.

Okay, and what's your expenses every year?

Do that. I don't have any bills. Everything I got paid for. Um, I'm sorry, what? Be like, everything I have is paid for.

You don't have any bills? No, sir. How does that work?

Property tax and insurance?

I mean, a cell phone and light bill and stuff like that, but not, not bills bills, you know what I'm I mean, no car payments, no—

Sure, but I'm talking about your— I mean, you don't eat?

Well, other than that, obviously, but other than that, bills.

Okay, because I'm thinking like health insurance, life insurance, car insurance, homeowner's insurance, property taxes, groceries, eating out, subscriptions. You got none of that?

Well, yes, we have that. I haven't figured that up exactly. I'm guessing around around $4,000 a month. Okay. Maybe $5,000.

So to run your house, $5,000 a month, $60,000 take-home pay would cover you every year?

Yes, I would think so. Okay.

Who else is involved in this picture?

Just my wife. Okay.

And is she working or is she retired?

No, she's a stay-at-home mom. Okay. How old are the kids? Kids? They're grown and gone.

Oh, so she's no longer— she's a stay-at-home wife now?

That's correct.

Yes. Okay, cool. I was like, well, man, there's no kids here. This is a sweet gig. All right, so she's— you both want to retire? Are you both good with this goal, or is there sort of an encore career on the horizon for you that you want to pursue?

Well, I, I do some pressure washing on the side now, um, that I would probably continue to to do. And I guess the reason— one of the reasons why I'm calling is to kind of help clarify it for her and me, where she's not nervous and I'm not nervous about doing it.

Have you guys ever worked with a financial advisor?

We do, yes sir.

Okay, have you run these numbers by them to see the projections and all the what-if scenarios?

I have a Teams meeting with, um, with my financial advisor Monday. Day. But I wanted to get— I want to get your opinion as well.

I appreciate that.

I just figured the more opinions I get, yeah, the better.

I've listened to you for years. You're in a great spot if you're completely debt-free at 50 with $2.2 million and you have $60 grand in expenses every year. That tells me you're, you're in good shape to do this. Um, that's why I was asking about those caveats. Are there any upcoming expenses? Do the kids need to save for college? You've got a paid-for house, all of that. Where, where is this $2.2 million sitting?

Yeah, is it Roth or is it traditional funds?

Um, most of it's in a 401k, but about 7 years ago they opened up a portion in our 401k to put it in Roth. And then I have some— I also have a Roth for me and for my wife outside of my 401k plan with my financial advisor.

How much do you guys have in cash?

Readily available cash, probably about $50,000.

Okay. Has your financial advisor talked about having some cash reserves or bonds or a bond tent, something like that to help preserve your nest egg?

No, sir, they haven't.

Okay, that would be something I would ask about. Those are the kinds of things where I want to know every scenario. Let's say the market was down for 3 years. How would you guys make it without depleting the nest egg at the worst time, those kinds of scenarios. And if you can, you know, dot the i and cross the t 7 different ways, then I'm going, "All right, green lights, go for it." Okay. And you can also try it for a year. And if you're like, "Hey, the portfolio can sustain this, we've enjoyed this," then you kind of know. And if not, you're only 51 by then, and you're a smart guy, you can always go back to work and make some money, right?

Yeah. Where I'm at is, is a rather large steel mill and it's, it, I could probably end up getting a job back there eventually, but it's, it's very hard on the body in the deep South in a steel mill in the summertime. So I don't know that I'd be wanting to go back there and I get what you're going to say next. You're going to say, you don't have to go back to a steel mill. You could find other things to do. And I understand that, but I'm just trying to, travel, do some fun stuff now instead of work all the time.

Sure. I mean, the— at the rate you're talking about, to take out enough money now, you're going to pay taxes if it's on the traditional side. So the other pieces of homework I would talk to your advisor about is Roth conversions, and then also the other pile of money outside of your retirement, which is locked up. And again, you mentioned that the 72T, which can be a tool to access that retirement fund early, but I would try to let let that money grow and keep compounding before you access it. So if you have other money you could use, and that might mean you work for a little bit longer, stack up some cash, maybe get a year of expenses under your belt and let that money grow for another year. But I think sitting with that financial advisor and going, hey, I need a final gut check, show me every projection possible to make me feel really good about this. But you're talking about, you know, maybe a 3, 3.5% withdrawal rate, which if you look at any, every financial planner would say, you're good. You're never going to run out of money if you do it that way.

Okay. But the question is long-term care, the crazy health stuff that could come up, big expenses that come up. That's the kind of stuff I want you to be ready for in case you go, man, I'd love to buy a car, but it feels like I shouldn't. I don't want you to have a sort of a limited retirement because you're scared to spend money because you're not sure if you're going to run out. And that's why I would have a lot of confidence going in. Okay, but you guys appreciate it. You've done really well, man. As long as your, you know, lifestyle doesn't inflate like crazy. Yeah, you got a green light for me. Let us know how it goes. I wouldn't want to be in that steel mill for a single day, Jade. I don't think I'd make it. No, like, no, I wouldn't make it through the audition. They'd be like, hey, pick up that piece.

Nope, he would just look at a photo of me and go, she's she's not, she can't do it.

Well, you know, especially in the trades, it is when a job is hard on your body, it's like you're in the NFL. Like you can't do this for 30 years. And so I totally understand. I also just go, I've seen a lot of people follow the FIRE movement, which is Financial Independence, Retire Early. And this is not a similar situation, but they stack up a lot of money aggressively over a shorter period of time. And they basically burn themselves out to the point of exhaustion, panic attacks in order to retire I want to retire early to— Do what? To do what? And so I always tell them, what are you retiring to instead of from?

I think it's, and Dave and I had this conversation the other day on the air. I think the word retire when you're that young, I think what you really want is work optional. Much better phrase. You know what I mean? It's that, and that way it's like, I may not want to go to my 9 to 5 job Monday through Friday, but if it's the right type of work and it's the right hours and it's on my terms, Yeah, I'd be willing to do the thing I love and still make money from it. And I think that's probably what most people are after. I don't think most people just want to sit and do nothing.

Yeah, retire feels like Price Is Right reruns and bingo at the VFW hall. Yes. And I think you just— that will lead to an early death if that's all you do. And trust me, I love bingo and Price Is Right more than anybody.

But options are what people want. They want the option to say not today.

Flexibility, freedom. That's what you're after.

After.

Mhm. You spend hours researching before making a major purchase like a home or car, but it's also a good idea to put in the work searching for the right insurance coverage to protect your biggest assets. I recommend using Ramsey Trusted Pros. Whether you're looking for car, home, or any other type of insurance, Ramsey trusted providers have been coached and vetted to serve you like we would. Find what you need at RamseySolutions.com/insurance.

Welcome back to The Ramsey Show. Before the break, we were talking to Doug and he was asking, can I retire early at 50 years old? I got $2.2 million in retirement accounts. I got $50K in cash. And he said he was going to use the 72T rule to do it. So we just want to take a moment to help our listening audience understand what that is, because they're probably going, is this a life hack? Is this a loophole? What's going on?

They're trying to bridge time because they've got time before they reach 59 and a half. Or maybe some people are trying to bridge time before they receive Social Security, all of that. And so it's, how can I get at this money without being penalized for not being retirement age?

Yes, because the IRS normally will charge you a 10% penalty if you pull money from that 401 or IRA before age 59½. Section 72 of the tax code is the exception and lets you avoid that penalty, but there's some fine print, red tape, and stipulations as well.

Oh, you love that, Brokamp! You love fine print, George!

I love the fine print. You can only do this if you agree to take what is called substantially equal periodic payments, SEPP, from the account. So think of it like you're making a deal with the IRS. They're saying, "Hey, you can have your money early, but you have to take a fixed amount on our schedule, not yours." And you're locked in for 5 years to that schedule. Yeah, it's 5 years or to 59½, whichever is longer. So in Doug's case, you're talking 9½ years of making sure that you can live off of this exact payment. And so that's part of the risk I was talking about where you got to make sure your I's are dotted, T's are crossed before you just go, "Oh, cool." "Ooh! There's a loophole.

I can do it." Well, where people get hung up sometimes is they know, "OK, I won't be charged the 10% early withdrawal," but they forget that they're still going to have to pay income taxes on that money.

Yeah, because it's traditional. And here's the crazy part. If you miss a payment, take extra, change the amount, modify the plan before the lock-in period ends, the 10% penalty applies retroactively to every single payment you've already taken, plus interest on all of it. The IRS does not forgive honest mistakes here. There's no, "Oh, my bad." My bad. Yeah. And so that's why I'm not a fan of this.

It's kind of a last resort option, I would say.

Yeah. And this is— so if you're wondering, okay, well, George, how can I access money earlier? How do I retire before 59 and a half if I so choose? And the much better way is to create what's called a bridge account. Yes. So this is where you just open a non-retirement brokerage account. You can still invest in index funds and mutual funds within that, and there's no penalties. That's right. You'll pay taxes on the gains of that, —either long-term or short-term. Hopefully long-term, because that'll be a whole lot cheaper. And that way you can access that money until you can access the retirement account. So think about if he had $1 million in a bridge account on top of his $2 million. Well, now he's not even touching that retirement account. He's completely in control. It is just growing for 10 more years, and he has this million-dollar bridge account to live off of in the meantime. And he'll pay some capital gains on that, but there's some really cool tax planning you can do to basically pay no taxes. Yeah. If you're married filing jointly, get the standard deduction, you can basically take out $130,000 tax-free.

I love that. So a lot of cool things there. Again, this is why you want to have a good financial advisor in your corner. And if you want to get connected to one, jump on to RamseySolutions.com, click on SmartVestor Pro, and they will nerd out 10x what I could do on this show. That was a good time. I hope you enjoyed that. If you didn't fall asleep at the wheel by now, hopefully. All right, Joe, Hey, Jade. Ask Ramsey is our free AI tool that was built and trained on proven Ramsey principles, and we're going to break down some of the most asked questions of the week. We had a lot of questions— look at this— around saving for retirement, paying off credit card debt, but the most asked question was around zero-based budgeting. My favorite.

The main question: How do I create my very first zero-based budget, George? How do I do it?

This is great. So the core idea with the zero-based budget is that every dollar gets a job before the month begins. So, if you brought in $5,000, we need to allocate every dollar of that $5,000. So, even if you have $3,000 in bills, well, if you don't make a plan for that other $2,000, it will disappear into DoorDash and entertainment and whatever else is going on in your life. So, you start by writing down your monthly take-home pay. You can enter this into EveryDollar in the income section each paycheck and start with what hits your bank account after taxes.

Yeah, and we like I like to say after that, once you start and go through and start your expenses, let the first line item of the budget be giving. It just puts your heart in the right place. Set aside 10% for church, charity, general giving, whatever it is. That's the first thing on your budget. And then from there, go on to the most important 4 walls is what we call them. Your food, your utilities, your shelter, your transportation. And I'd say in a close 4th and 5th, it's probably insurance and daycare. Yes. And then of course, debt.

If you've got some consumer debt, we're gonna list that as the minimum payments and it will actually break out the debt it will snowball for you inside of EveryDollar. It will break it out by smallest balance to largest balance. And then you're going to subtract until you hit zero. So if there's money left over, let's throw it at the debt if you got debt. If you're trying to save up the emergency fund, any leftover money goes to the emergency fund. Love that. And you know, some people might go, "Well, Jade, I'm in the red." That's okay. "My expenses are $3,500, but I'm only taking in $3,000." Yeah, that's a learning experience there.

And that's when it's time to start cutting back.

You should say, "Glad I did a budget to figure this out, that I'm $500 in the hole." month.

Yeah, and you can look for areas to cut back. For most of us, it's areas of subscriptions, going out to eat, uh, self-care. Those types of areas are the areas that we can cut back. And if you look and you go, there's no place for me to cut back, I am— then now we know we need to add a side hustle to the mix, which you can do. But just know it takes about 3 months to really get in the, in the flow of budgeting and to really create a budget that's going to work for you and your family.

That's right. So check out Ask Ramsey. You can get based on your specific income and expenses. It'll walk you through it just like we would on the show. Go to RamseySolutions.com or click the link in the description if you're on podcast or YouTube. Kiana is in Seattle up next. Kiana, did I get that right? Yes, sir. Crisis averted. How can I help today?

Thanks for the call. Thanks for answering. So my boyfriend and I are trying to figure out a plan for finances so we both can be on the same page in the future. What can we do right now to set up for success? And what would the alternative be to building up credit?

Great questions.

How old are you two? I'm 18. He's 19.

I'm almost 19. How long have you guys been together?

Officially 6 months. Wow.

But we've known each other for a while.

And what have the money conversations been like thus far? It sounds like you guys have talked about this a little bit.

Yeah. We're both a little over-planners. We're just thinking and talking. Trying to figure out just like how we would do things if we're going to be using credit cards or not. Because I was raised without like, no credit cards are a bad thing. My parents and I, my parents are both debt-free except for the house. I still remember when they cut up the credit card.

I love that. So is there some tension because he's like, what? That's crazy. Like, you got to have a credit card.

Actually, there's no tension, which is great. So he's good.

He's like, cool. Yeah, I think credit cards are not a healthy tool either.

Either. Yeah, he's not. He thinks that they could possibly be used smart, but, um, but we both don't have enough information to figure it out together.

Well, I think there's two, I think there's two paths that we need to cover on this. And one is, do you even need credit? Like, is credit necessary to your life? And then the other side of this is, and I'll probably start here and work backwards with George, which is, okay, please, please, please, at no point, if you guys, even if you decide we don't care, we don't agree with what Ramsey says about not needing credit, please never co-sign together. You're, yes, you're dating, who knows if you'll get married one day, but if he's thinking debt could be used in a good way sometimes, like maybe getting a car note, I cannot tell you how many times people call in here and they've co-signed a with somebody that they were once dating. Because they wanted to help them. Because they wanted to help. They wanted to build credit. They wanted to start their life together. And then it goes south and he's looking for her to, to pay her into this car that they've co-signed on. Right? So the first part of the conversation is whatever you do, please don't co-sign. If there's a co-signer needed, it's because that person would not be approved for debt on their own because they're clearly broke.

Broke and you co-sign with somebody, you know this, I'm saying it for those listening. If you co-sign with somebody, it goes the opposite way, you're on the hook for the entire balance.

Never do it. And then the other piece of this, you're talking about how do we build credit without a credit card? Well, then I go, what are you trying to build credit for? For a car loan? Well, I thought we agreed we're not going into debt for a car. We're gonna save up, pay cash. So all the things that you think I need credit for that, I would question it and go, do you And I walk you through this in my book Breaking Free From Broke. So I'm going to send this to you as a gift because if you guys read this together, you're going to be reading off the same sheet of music. You'll be totally aligned. You'll know how to communicate about it, how to navigate life without a credit card, without credit. And I walk you through every piece of it in the book, in the credit score chapter. So hang on the line. We're going to send you Breaking Free From Broke. If you want the audiobook, just let our phone screener know. They'll get you that as well. I wish you the best. Wish you guys the best. Green, green flag so far with this relationship.

Hey, George Campbell here.

We often talk about how being normal sucks when it comes to your your money.

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Mary is in Cincinnati up next.

Mary, welcome to the Welcome to the show! Hey, George and Jade! I'm so excited to talk to you guys!

We're excited to talk to you! What's going on?

So my question is, my husband and I would like some advice on what to do in our situation, specifically about paying off our mortgage. So we are in the process of adopting a baby and we would love to be completely debt-free before the baby comes. We have no debt except $16,000 that's left on our mortgage. Wow! And we're wondering If when we— yes, we've been working so hard and listening to your show and just so inspired by all the callers. It's really motivated us to get to this place, and we're excited where we're at. Um, but we're wondering if when we get down to the last $8,000 on the mortgage, if we can just use part of our emergency fund to pay it off because we're just itching.

Would it be taking it from 6 months to 3 months?

It would. So we have $18,000 in an emergency fund currently. We have $36,000 in an adoption fund, which we think would cover the adoption plus time of me being off work, but we're thinking of throwing a little bit extra towards that. Um, we make about $75,000 a year combined, and our house is worth $275,000. Wow. Awesome.

What's the mortgage payment? The principal and interest part?

Um, so we owe about $1,000, $1,063 a month, and we're down to less than— I think it's like $39 in interest. Wow. $300 towards escrow, and then the rest is on the mortgage.

Yeah, so you would free up just about $1,100 a month.

It would, which is why we're so ready. Yeah, I feel that.

Yeah, I would, I would look at what savings too short.

Yeah, what will your budget look like without a mortgage payment.

I would calculate that out for a month and then go minimum 3 months, knowing you're going to stack it right back up. So that freed-up mortgage payment is just going to move to the emergency fund until you're back to 6 months, which is probably the better move as you adopt this sweet child. Yes. OK. How sure are you that the $36,000 will cover everything? That's my only question mark. Because I know these can always be more expensive than you intended them be and kind of drag out longer?

Yes, we've already paid some towards the fund or towards the adoption, so, um, it would just be— if it would be extra, it would be cutting into like my time off of work, um, would be cut maybe a little bit shorter. But we are pretty confident that we'd have, uh, maybe like 10 to 12, uh, still for need to have time off.

So that's covering the gap in income without dipping into the emergency fund, is what you're saying? Correct. I love this! You guys are such planners.

Way to go! Thanks! My husband is—

Oh, we lost you! She was about to say— I'm guessing she was going to say, "My husband's so excited." Yeah.

They've done such a good job.

Just know I didn't hang up on you, Mary.

That was on your own volition. On $75,000 a year to save $36,000 for an adoption, $18,000 for an emergency emergency fund.

Knock the mortgage down.

Knock the mortgage down. Rock stars. That is impressive.

Don't tell me you can't do it, because Mary just proved you wrong.

Yeah, I'm inspired.

She's making us all look bad out here. And what a noble— you know what it is?

They have a big why. Yeah, they do.

They want to adopt that baby. And that will— if you can put the blinders on and focus, you're like, "I don't need all these other expenses and subscriptions and the vacations. I just want to bring that baby home." And man, if we can bring this baby into the world debt-free, free, even better. That's a great why. But yeah, for the teaching on that, we always say you want 3 to 6 months in the emergency fund. And people go, "Well, can I scale down the emergency fund?" How do I know? Yeah. Temporarily. So, my gut is always, if you can at least keep 3 months in there, knowing you've got a new budget, you don't have a mortgage payment, so that also changes the numbers, how much you need in that emergency fund. Then I go, "All right, go for it. Just know you want to make sure that you don't have an emergency as soon as that house is paid off." Right.

And on the bigger scheme of things, when people are deciding whether I should have 3 months or 6 months, is there a wrong or a right? You do want to look at certain factors that can help you determine that. Are there 2 incomes coming in or are there 1? If you're a 1-income family, in my opinion, you got to have 6 months. Like there's just a little bit more risk there. Therefore, you want a little bit more of a cushion there. What's the health situation of everybody? Are you guys healthy or are there ongoing health concerns? That's another one. If everybody's healthy and there's 2 incomes, 3 months might be all right. But if, do you see what I'm saying? So factor that in.

And the stability of the jobs and income. If you're a teacher and a UPS employee, well, that's pretty stable. If you're in commission sales and you're not sure what the income's gonna be, I would lean towards 6 months. Yeah.

So I, I gotta tell you, ever since COVID-19, I almost am always on board with 6 months no matter what. I just, it just makes me feel good to tell other people, hey, if you can get 6 months, just do it.

Oh yeah. And here's the thing, usually one spouse wants it to be more than the other. And I'm not gonna stereotype, but generally the women have the security gland flaring up going, "Hey, we need a little more security." And the guys are like, "Nah, we're fine. We got $10 in the account." Let it ride. "I can make that work for another week." And so I always lean on the spouse that wants the bigger one, go with that answer. You're never gonna regret having 6 months instead of 3. No, I don't think so. Having more peace, more security. And the honest truth is that Baby Step 3 3 is one of the hardest baby steps.

It's— it is a sleeper. People sleep on how difficult, because you've come out of baby step 2 and you think that you're about to have like this major relief of life is going to get easy. And then you're like, oh, holy crap, it's— this is— this has got a level of challenge to it as well.

You don't get the excitement of knocking out a debt, freeing up a payment. That's what it is. The gazelle intensity. Like, you still need the gazelle intensity without all of the fanfare. Fair?

Well, it's what you described earlier, which is the why kind of gets hidden when you're paying off the debt. The why is right in front of your face. You're like, I see you, Sallie Mae, and I hate your face. And so you're ready to like make the debt payment. When you're saving money, you feel good about the fact that you're paying yourself, but it just doesn't have the same— you gotta manufacture the tenacity.

Well, it's like paying into an insurance plan. You're like, great, I'm glad this is helping to cover me in case something happens, but this is not exciting to pay for.

I don't I love this.

Nobody's stoked to pay for their auto insurance for the year, but you're real happy you have it.

Right, and once you do see that 6 months sitting in the account, you're like, this is, you become, what's the guy, Smeagol from Lord of the Rings? Oh yeah. What's his name? Smeagol. Gollum. Isn't it like with an S? Smeagol? Gollum and Smeagol, okay. Nobody knows. My precious is what I'm getting at. Yeah, it's funny. It becomes your precious.

Once you build it, you're like.

What's the man's name? You guys know what it is in the audience. Is it Smeagol?

Is it both? It's like pre and post? Smeagol versus Gollum? Okay, we got there. It's the same person.

First of all, let's forget this conversation ever happened, that I referenced Lord of the Rings.

We'll edit this out because the nerds are going to come after you in the comments and flame you, as the kids say. You're going to get roasted. But it is true. Once you build the emergency fund, it's like you built that sandcastle and it took you forever and you're like, nobody touch this thing. Nobody touch it.

And even a real emergency emergency, you're like, no, it's not an emergency. And you'll do everything you can to keep it.

Well, what's funny is once you build it, you stop having the same level of emergencies. I agree with that. Because they don't feel like emergencies. The flat tire is now just an inconvenience instead of a, ah!

Yeah, 'cause at that point, I also think your money management skills have reached an all-time high. And so you're just, you've become such a better planner. You can look at life and go, I see this coming and I'm going to plan for it, I know it, right? And I think that all of that just comes with time and financial literacy.

And yeah, and you get better at maintaining the things you do have, which causes less emergencies. Yeah. So it's sort of a self-fulfilling prophecy. And most people go, I could cash flow this in my budget this month. I don't need to tap into it.

All right, George, inquiring minds want to know, uh-oh, do you, do you ever just have times where you're like, I just, I like, I feel good about keeping a little more than 6 months? Oh, 100%. Okay. My wife is that way. Me too.

Like, whatever my number is, she's like, double it. I'm like, "Oh, okay, fine." And you know what? It's sort of like a life fund. Yes. Of whatever, if we wanna buy something, a bigger purchase or an opportunity comes our way, or a generosity opportunity. You have the money. We have the money. So it's like— Just reach over. You have an emergency fund for your emergency fund.

I love the feeling of that.

Can't beat it.

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Our scripture of the day, Galatians 1:10. Am I now trying to win the approval of human Kings or of God? Or am I trying to please people? If I were still trying to please people, I would not be a servant of Christ. Amen to that. P.T. Barnum said, money in some respects is like fire. It is a very excellent servant but a terrible master. Oh, it's good, said the circus guy. A lot of fire. He knows a lot about that. Yeah, yeah. All right, Erica is up next in Dallas. What's going Erica.

Hey guys, thank you so much for taking my call. Okay, so I'll get right into it. My husband and I were both 31 and we've been married for 3 years. We're currently in Baby Step 2 and we're about $10,000 away from becoming debt-free. So I know we're not quite ready to purchase our first home. We currently are living in my mother-in-law's house and we only pay like the household bills. And last month she told us that she will be selling her current house and moving back here and she wants us to stay. And I know that over the years she has said that she wants to leave this house to my husband upon her passing. Um, so I guess my question is, is it financially wise to stay in the house although it's legally not ours, or would it be better for us to just save up and buy our own home once we're ready?

I totally I understand the, the, the allure of thinking, oh, we could just stay in this house, it's gonna be his one day anyway. But the reality is you'd be living with the mother-in-law, and I just think that something like that would drive a person crazy after a while. And the truth is, that was never your goal. You never sat down with your husband and said, you know what would be great? Let's live with your mother-in-law. Live with my mom-in-law for, you know, maybe another 20 years until she passes and then we'll get the house. Like, that wasn't the goal. The goal is let's save up and buy a house of our own. So I think that you should continue down the path of your original goal. And if circumstances change and she moves back in, that just means you've got to move out sooner and maybe you rent for a while someplace else. Um, but don't let that affect what you initially set out to do. Do.

Okay, yeah, we, um, I'm currently in nursing school and I should be graduating next May, and now I already have a job lined up, so I know that we'll be able to start saving at least a year and a half after I graduate for us to buy our own house. So do you think while I'm still in school we should just go ahead and move out? Because she'll be moving in by like the end of the I mean, go ahead, George.

I'm just curious, so she's moving back into her house that you guys are living in, correct? Yes. Yes. Okay, what would rent cost you if you moved to a reasonable place nearby?

Yeah, so we do have two dogs and they're coming with us. Um, so with the yard, I'm looking at anywhere between $2,100 to $2,500.

$2,500 bucks. Yes. Okay. And what's the current household income with you in nursing school?

My husband, he works 2 jobs and he brings in $65,000 a year. And I only work like 30 days out of the month, so I only bring in like $1,000. Okay.

$65,000 a year. So is he taking home like $4,000 a month or so?

Um, with overtime he can bring in $5,000.

Okay. So definitely not renting a $2,500 house. That's out of the picture. That's 50% of your take-home pay. So the truth is we might need to sacrifice for a little while longer and live with mother-in-law unless there's some real issues here. Are there things where you're like, I cannot do this, we need to figure something else out?

No, she's, she's like a second mom to me. I love her to death and her being here doesn't bother me at all. It's just my husband, he doesn't want us to stay for a house. Like he likes the idea of being able to live here and this home becoming his one day. So I guess that's like really where we're not seeing eye to eye, whereas I don't mind living here for the next 5 years if that— if we need to save up or whatever.

But if you want to stay there because you love it, that's one thing. But if you're staying there with the promise of one day this will be mine, I don't love that because there's so much life that can happen in between. And we've heard all those stories. Mom takes out a reverse mortgage because she ends up broke in retirement, has a health crisis, and now this house is not what you thought. Now there's a giant loan attached to it, you know. And so that's where I go, I wouldn't count my chickens before the— what is it? Don't count the eggs before the chicken hatches?

Something like that. Don't count your chickens before they hatch. There we go. I don't like this idea either, and I'll say this and I'll let it ride, but I understand that sometimes culturally people have different ways of living and they're like family, generational living is more, um, more the norm. And I understand that. However, just from a marriage point of view, I, I, I tend to believe that marriages need their space to grow and become what they're gonna be. And it's just very hard to do that in a contained environment with mom there, especially when it's long-term. Term. I, I just think you guys are so— you're young, but you're old to be living with a parent, right? You're young in your marriage, but you're also 31. It's not like you're 21. So there's part of me that's like, hey, be 31 and use your income and understand that, hey, if we want to be able to have this type of an apartment, we're going to have to improve our income in this way. And allow yourself to stand on your own two I think that would be my advice, barring the cultural statement that I made earlier, earlier, if that's part of this and you're like, hey, this is just how we do it in my culture, then I'm not going to fight you on that.

If you're going to stay, I would have an end goal in sight and make it stated among the group that we are gone by this time. And that helps add some clarity to the situation. John is in San Antonio up next.

What's going on, John? Hey, hey guys, thanks for taking my call. So, um, I am finishing my internal medicine residency here in a year, so I'm thinking about, you know, where to move for my first real physician job. Um, I have some family in the Bay Area and I'm thinking about going there, and I was just, you know, wondering if that would be a bad move financially because because it's pretty much the most expensive part of the country to go to.

Well, do you want to go there? All things— if you took the money off the table of taxes and all that, are you like, man, I would love to live in the Bay Area? Or is it, well, I could make more in the Bay Area, but it's going to cost me more to live?

Yeah, I would say so, that I do, you know, want to go there.

Okay, because nothing is set in stone. You could go there, try it out for 2 years, decide it's not for and then peace out. Yeah. And so I like the idea— if this is really where you want to go and you're going, hey, I'm gonna make, I don't know, $300,000— yeah, it's gonna cost me a lot in rent, it's gonna cost me a lot to live, but if anybody can make it work out there, it's a guy making $300,000.

Yeah. Okay.

So if you were like, hey, I'm gonna make 40 grand, I want to go live in the Bay Area, I'd go, hey man, that's gonna be a really tough life. Yeah. But with your income, do you know what it may be in the Bay Area?

Yeah, um, the jobs, the base rate pays like $320,000.

Okay, so we'll just half that because Bay Area, and now you're bringing home $160,000. And then look at rents, look at groceries, where you want to live, what that's really going to cost, and that'll give you some clarity versus just vibes.

Yeah, you have to think about your values and what it is that you're trying to accomplish financially. Are you going to want to be a homeowner one day? Are you going to have— want to have a wife one day that stays home? Like, what are the things that you believe that you want out of your life for the next 10 years? And would you be able to accomplish it living at that cost of living? Um, or would you be able to accomplish a level of that, and would you be happy with the level of life that it gives you? And then you have your answer, right? Right.

How old are you?

Uh, I'm on the older end. I'm 35. I'll be 36 When I—

you're on the older end. What's it mean for me? What's this mean for me, John?

I feel like I'm done.

I guess compared to my colleagues, you know, everyone—

I basically took 7 years off. But I mean, to become, to become a doctor, it's like a 17-year journey, so you've got to be in your 30s by the time you finish it. So you're doing great, man. I would— if you want to pull the trigger on this, I would go for it after doing some homework work. I would obviously go visit the area. That's a good start and get a feel for like, alright, this is what my life would be like. Kind of pretend like you're living like a local and this is where my apartment would be, here's the lifestyle, and then you can go for it. Because at 35, as a single guy, you can always change your mind at 37 and nobody's mad at you. You're not uprooting too much. Best of luck. Alright, that puts this hour of The Ramsey Show in the books. Remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.