Transcript of Normal Is Broke—Don't be Normal!

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Normal is broke and common sense is weird. We're here to help you transform your life from the Ramsey Network in the Fairwinds Credit Union studio. This is the Ramsey Show. I'm Rachel Cruz, hosting this hour with personal finance expert and good friend Jade Warshaw. We're answering your questions, you can give us a call at 888-825-5225. All right, starting off, we have nick in Kansas City. Hey, nick. Welcome to the show. Hi. How are you guys doing? We're doing great. How can we help?

So I've had a life insurance, I believe it's a whole life insurance policy, that my dad had started for me in about 2008. We've been paying about $500 a month into that policy see since then, and I was looking at it with my representative, and I only have about 150 in there, but I've had it for so long that I From the research I've been doing, it feels like I should have never done it, but it seems like it's mostly front loaded. And so I don't know if I should stay into that, pull that money out, put it into something different. And also what I could do, what products I could explore now that I'm making more money than way back in 2008, what I should be putting my money into. I decided I want to start a Roth IRA for my wife and I, and to start. And then I have some extra money after that, and I wouldn't know where to go after that.

So you said the cash value is only 150K. What's the death benefit?

Only 500.

And how much did you say you've paid in? Five hundred a month. Oh, my gosh. Since 2008?

Yes.

Oh, my word. Yeah. I mean, I'd get almost 18 years. I try to get out of it immediately today.

Yeah, for sure. I mean, it It's one of the worst financial products, honestly, that's out there. I mean, when you look at whole life or universal life, it's so crappy because what you're seeing is exactly what people experience because they're trying to mix an investment with insurance, and you You never end up... You never get ahead. You really don't. Versus if you had taken just a term policy that's so significantly cheaper and getting as much coverage. I mean, if you're a healthy young guy, you're only going to pay 20, 30 bucks a month. It's not a lot. If you had invested that remaining amount just in a mutual fund or in an index fund or a brokerage account, what it would have been with the market. I'm sorry to say, I feel like you're experiencing the crappy product that whole life insurance is. If you were to get out of it, is your next question, have you researched doing that? Because different companies, there's different holdings and fees and all of it. Have you looked at it? You just went ahead and cashed it out?

Yeah, a little bit. I'll be honest, that's why I've called you guys, because I am so confused about the penalties. I'm so confused. I I feel like I've made a lot of good decisions in my life, but this was one horrible one.

Yeah, I would call them today. I mean, obviously, you're going to lose the death benefit because you're canceling the policy. But some of that cash value should end up rolling to you minus fees. So I would call and find out exactly what that is. And then once you feel good about the information, yeah, just cancel it because it's not serving you. If you had taken that same money and invested it just in an index fund, it would have been more than double by now. It would have been close to $300,000. So I think we both agree that that wasn't the best way to invest that money. And then if you're looking for coverage, yeah, then just go to term coverage instead.

Yeah, I would contact Xander, nick. Xander Insurance, because they'll shop their a mortgage. They basically shop companies to get you the lowest rate for a term life. And I would go ahead and do that. I would do a term life before you cancel the whole life just because you have a wife. Do you have kids? Yeah, I have two kids. Yeah. So I would make sure before you cancel the whole life policy, get a term in place. Again, it's going to be very inexpensive. You and your wife both need a policy. Do that, then cancel the whole life. And once you get that cash out, like what Jade's saying is, then you can start applying it actually to invest, that's actually going to make you money.

Now, when this was purchased, was the intent to build wealth, or was the intent for insurance purposes, for life insurance? What was the intent?

The intent... Well, my dad did it with one of his friends, and he's been paying for it for most of the time. I worked for him for my father, but I didn't actually... I mean, I wasn't making a lot of money until maybe 2000 17. And since then, everything's been great. But the insurance was just to make sure that after I was married and that anything that I had debt-wise was going to be Pay it off.

Yeah. So that's a good word to the wise. When you're purchasing insurance, it should just be that. It doesn't have to be married with any other investment thing. Insurance is insurance. Investments are investments. They're separate deals there. And So just knowing that going forward, it's a really good call and a really good question because I think people get caught up in life all the time.

Yeah. So the next step, nick, when we're talking about investing, do you guys have an emergency fund in place?

Yes. Okay. Probably too much.

Probably too much is what you said. You're just covered, nick. You're just covered. Covered all the way around.

Like I said, I've made a lot of good decisions in my life. Yeah, sure. But my retirement is not one of them.

Okay. So then let's be looking at that next. Yes. So the Roth IRA you mentioned, yes, absolutely. And your wife, even if she's not working, she can open up a spousal, Roth IRA. So I would do those two as well. I think the limit this year, if you get it all in place, is 8,000. Sometimes it changes year to year, but you can fully fund that if you can for this year, which would be amazing. And then be looking into, do you have a 401(k) at work?

My wife has a 401(k).

I do not. You do not. Okay, perfect. Just as a household, you want to be investing 15% of your income. I would do those Roths first. Then your wife needs to be looking at her 401(k) and go ahead and go up to the match as well, which you guys can do both. She does that. Yeah, that's great. Then anything Then beyond that, you guys can continue to throw money at her 401(k), if it's a Roth, that's a great option. Then some people want flexibility outside of retirement, so you could look into other options like an index fund, a brokerage account, a mutual fund. But all of those, again, they're not going to have the tax advantage like retirement. We would say 15% of your income needs to be going straight into retirement. That is 401(k)s, Roth IRAs. Then anything above that, once you guys pay off your house and everything, you can look into some other options, which I feel like you guys... I mean, like you said, you're smart. I mean, you guys have made some great decisions so far. It's just this whole life policy sucks, and I feel like you're feeling the repercussions of that.

Okay.

Awesome. Well, thanks for the call, nick. I appreciate it. So, yeah, you guys, if you're looking at life insurance, again, term life is the way to go. It's so inexpensive. Winston and I just upped ours again. I think it was probably three years ago. And we had someone come to the house because you got to do all your health stuff. You got to prove all your health. And, yeah, and we get it back. I'm Oh, my gosh. Because we even upped the amount. We went ahead and upped the amount of what we were... And it was so inexpensive. It really was not a lot.

If you're healthy, it's not bad.

Yeah. So if you're able to do that, you guys, so worth it. And again, Xander Insurance is a great place. It's the place Winston and I use to shop our health insurance because they shop multiple companies. It's not just looking at one company. They're looking all over to get you the best rate possible. So, nick, that's what I would do for your family and anyone else listening.

Statistics show that half of Americans don't have enough life insurance, or they don't have any at all.

I don't understand this, John.

Why don't people want to take care of their family?

They think they're going to die or Something like that.

Something like that. I used to be one of those guys. I didn't even think about it. One of my buddies said, Hey, the only reason to not have life insurance is if you hate your wife and kids. I immediately went and got term life insurance.

That's a gut punch. You're telling me for decades, Dave, I've sat across People who've lost a spouse, they've lost somebody important to them, and they don't know what to do next. Me too. You're going to have a crisis here, and you got two options while you're sitting and talking to a young widow. She's concerned about how she's going to invest all this money properly and not mess this up, or she's concerned how she's going to eat tomorrow. That's exactly right. These are the two options. Take care of your dadgum family, man. Term life insurance can replace income, pay off debts, cover funeral expenses, so your family can actually have the opportunity to just be sad, to just miss That's exactly what it's supposed to be.

It's saying I love you to your family.

Term Life Insurance. Jeff Zander and the team at Zander Insurance makes it easy and affordable. I've used them personally for 25 years.

They're the only people I trust.

Go to zander. Com or call 800-356-4282.

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Hi. My question is, is it worth taking out a car loan to avoid being in a never-ending loop of cheap cars and insurance payouts? I can give some backstory on this if you'd like.

Sure.

Yeah. I just got married 22 days ago. Congratulations. My wife has had her... Thank you. My wife's first car She had for three years, and it got totaled at the end of the summer. We got a $5,000 payout for it.

When you say it got totaled, did she hit somebody or somebody hit her?

She avoided being in a pileup, and by avoiding being in a pileup, she went into a ditch, and the ditch broke the frame. So better the car than her.

Yeah, for real.

So that got totaled, and we bought her dad's car for the same price as the insurance payout because she was on her parents' insurance at the time. So it was $5,000 for her dad's car. And then this past week, actually, last Tuesday, we came home and a tree was on top of her car that she just bought in August from her parents. And now that car is being totaled for around $5,000. Okay.

So I guess- Okay, so it's not crappy car is breaking down, Matthew. You could have wrecked it. She could have gone into a ditch in a nice car. A tree could have fallen on a nice car. It's just bad luck. It's not the car's fault. You're not saying that the transmissions keep breaking and you're paying more than the car's worth and fixing it. So your argument... Well, keep going. Do you have a better argument?

I don't think so.

With insurance, these cars are so... The first car was over 10 years old, and this car, now, we just got to those 10 years old. So insurance isn't going to pay to fix body damage or anything like that.

They're going to give you what it's worth.

What it's worth, yeah.

Right. So if I just buy another car for the same cash value of what it's worth, that's going to put me in another spot of, if that car gets in an accident or something happens, I'm just going to be in another.

Right. But nothing was wrong with the car to begin with. You're staying lateral, which is fine. You didn't call in saying, Hey, I've had these $5,000 cars, and they're just breaking down left and right. You called saying she avoided a pile up, a tree fell, lightning could hit the next car tomorrow, and then they'd pay you out another 5,000. The car is still not the issue. I think the issue is you just want a nicer car, and you're hoping that this can give you an excuse to get one.

Okay. I haven't thought about it from that perspective. I have.

I think that's what you want. Can you tell me anything other than these bad luck situations?

I mean, I feel like the argument would be much more convincing, Matthew, even though you can't convince us to take out a car payment because what you're going to spend on a car, the interest and all of it, it's not a good investment. You could talk to a majority of financial experts out there that may not agree with us on credit card points or certain things. Almost everyone agrees that a car payment is the worst type of debt you could probably get into because you're paying interest and you're paying more on something that's going down in value. And so that makes no sense. Versus a house, right? You go and you pay interest on a mortgage. Well, at least for the most part, houses are going up in value slowly, fast. I mean, all of it. But over time, a car goes down. People call this show when they're like, Hey, I went and got a car payment. For $26,000, and now it's worth $20,000. I mean, almost all the time people are underwater in cars. And so that's because they buy too much car. They buy a car they can't afford, and it goes down in value, and they can't take the financial hit.

They don't have the money to be able to even And we're going to absorb that. That's right.

So you'll get this next $5,000 payout, and you'll go get another $5,000 car. Now, if you had some extra cash you wanted to put with that, and you're out of baby step, too. I'm not mad at that. What baby step are you on?

I'm not sure exactly. We have about thousands. I haven't looked at it exactly for Baby Step. We have about a thousand in an emergency fund. Okay, good. We're paying off our wedding and our honeymoon. We have about 2,000 left on a credit card.

Okay. How much does the wedding and honeymoon pay off?

We have about 2,000 left paid. It was probably about a $40,000 wedding and about $6,000 honeymoon.

Okay, but you only have 2,000 left to go. Yeah. Okay, good. So we would call that Baby Step, too. So in the land of Baby Steps, there's seven of them. The first one you have, which is to have a thousand dollars saved just between you and life. And then the second one, yeah, you pay off the debt, smallest to largest. It sounds like you're doing that. And how quickly can you get this $2,000 paid off?

Ideally within the next month.

Okay, great. And then after that- That's really the time thing of getting paychecks in, because we're living within our means.

Good. Saving money where we need. Any student loans or anything, Matthew? Any other debt?

Yeah, she has about 9,000 in student loans. They ran her junk folder and the mailings of miss payments for going to her old house, and that was a whole thing of She forgot about the loan, and it was quick, and she needed to stay in school.

Is there anything else besides the 9,000? No. Okay. That's it. So everything but the house is Baby Step Two.

How much are you guys making total together, Matthew, you and your wife?

Seventy-seventy take home.

Wonderful. Okay. Combined. Yeah, that's great. How old are you guys?

She's 23. I'm 22. Okay. So she turns 24 if you're in two months. Okay. And I'm just calling in as a husband. I'm like, Well, we've already had to do car searches the last two months and have to deal with all of that. My main thought was if I take a $5,000 loan or something like that- It's not going to change what happens.

You're still going to have to do car research if another tree falls on the car.

If you bought a $50,000 car in cash today, if a tree falls on it, you're still going to have to replace it, and they're still going to give you the value of the car. So I want you to let go of that. I want you to let that out of your kung fu grip, because for some reason, you think that getting a more expensive car is going to change things.

The tree is going to be like, Hold on.

Hold on.

We can't fall on a Mercedes. It's a suburban. I'm going to fall this way instead.

It's like those commercials, Mayhem. Yeah, yeah. I know. Mayhem follows you no matter what, my guy. I know.

Yeah. So, Matthew, you guys are doing great. I mean, you really are. And I just want you to shift that mindset. If you start to entertain debt, then it is the easiest road to go down because Because there are people and companies that are wide open, willing to accept you and make you feel great and justify any way to get you in because they're going to be making so much money off of you. That is the industry, okay? That is the industry. And so when you can avoid that, and you guys are so young, and I'm like, please, if you can just avoid that, you guys together, and you make a pact and say, We are not going into debt. So we're going to pay cash for our cars. If we have to go on an anniversary trip next year, we're going to save up and pay for When you can avoid it and you guys are making 70 grand and you get out of debt, you guys are on the positive end then financially. So don't continue to have these thoughts of debt because it just constantly will financially take you more in the negative.

And it takes away from your networth. It takes away peace of mind and all of it. So if you can, and I would implore you to consider just living, living debt-free. And it's not exciting. The ego is not going to love it. We don't love the $5,000 car. It doesn't make you feel great. It doesn't make you feel successful. But it's not forever. Feel successful. Yes, but for a season. That's for a season. And then you guys can save up cash, sell the $5,000 car for $5,000 because it's probably what it's still going to be worth. That's right. Put it with another five. And that's a $10,000 car. And then you do it again and again and again until you guys are, yeah, at cars that you love, but you're paying cash for them. And it's going to be a slower process, but man, so worth it.

Got you. I needed to hear this because I grew up in a family where you didn't buy cars. We always bought cars for cash. That's the same way with her. We were just in a pickle of like, do we just keep doing this?

Yes, you do. I needed to hear that. For sure. Yeah. Your parents have set up some great examples. Both of you come from a very similar background, and so stick with it. That's why we always say, Normal's broken common sense is weird when we open the show because that's what's happening. So live within your means, Matthew. If you don't have the money, don't buy it. Don't be under that impression that if I can afford the payment, I can afford it. No, you have to be able to pay for things in cash.

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In Atlanta, Georgia, we have Joel coming up next. Hi, Joel. Hey there. Thank you for having me. Yeah, absolutely. How can we help today?

Hey. So me and my wife have a new six-month-old daughter, and we are about $287,000.

Congratulations.

Thank you so much. We're about $287,000 in student loan debt. And I'm trying to figure out the best way to tackle this. So we have the emergency fund, but we recently had a car repair, and that shipped that out pretty quick. And so I guess I'm asking, are there times in which the emergency fund should be bigger before you start hammering those student loans? And then I guess the secondary question is, I'm looking at the income-based repayment compared to these large amounts that we're paying on student loans each month. I just need a little bit of guidance here because we're trying to decide what to do with that.

What did you get your degrees in?

My wife is a nurse practitioner, pediatric, and she went to Emory. And I'm a video editor, and my student loans are only about 30,000. And hers are about 250,000.

How much is she making a year?

Right now, since she just graduated in December, she's making about $70, and I am also making about $70. We're making about the same amount right now.

Okay. And she just had a baby.

And she has... Yeah, yeah, yeah.

She's crazy. Is she going to be going back to work making more than 70? Is that her plan?

Yes. So she has started back to work already, and that's where she is at now. Hopefully, over the next few years, obviously, that increases places that she can take on more patients. But we're trying to operate with what we have now and trying to look forward to the future. How do we prepare for possible other cars and all that thing?

You're not doing any investing right now, are you?

I do have a 401(k) at work that I stopped contributing to last year while we were moving, having the baby and all the things early this year, and then I started again. Okay.

So I think you need to pause that because right now, if what you say is true and you're interested and serious about paying off this debt, then that means you need every piece of money that you can get your hands on. And that includes right now, just for the time being, pausing that investing. And trust me, you'll get to it later. I'm like you. My husband and I had $280,000 in student loans, and we paused investing. It was just a short period of time, but it really does give you the ammunition you need to knock out the debt a lot faster. When you guys get your check, that net amount, how How much is it every month?

We bring in about 8,000 total, among both of us each month. And most of that goes out with bills, daycare, because we're both working. And then also the student loan debt, or the student loan payments on hers were about 3,000 a month, and I was for the 10-year plan. So I took it back down to the 25-year plan. That gives us a little bit more breathing room. But once again, not enough to save for a car and all those things.

So I'm not mad at you taking advantage of taking it down to the 25-year plan to lower the payments on all of them, but only with this caveat, if you take all of the extra money that it saves you and put it on the smallest debt. So do you have any debt besides the student loans?

No, that's our own debt.

The student loans, I'm guessing, are broken up into smaller student loans. It's not just one big one for two. Exactly. If you make it, if you do the plan, that's the 25-year plan, and let's say it drops it down to what's What's the payment now? From 3,000 down to- About 1900. 1900. Now you can take that extra $1,100 and you can throw it at the smallest student loan at the principal. Do you see what I'm saying? So it's giving you more firepower to knock that smallest one out first, so it's not getting eaten away with interest. Does that make sense?

Yes, absolutely. But should we take a few months first to save up a little bit bigger emergency fund? No.

How much do you have in your emergency fund now? How much is in there now?

Well, it was at 1100 this morning, but I had to get a repair on one of our cars, and now it's at like 400.

Okay, so stack it back up to a thousand. We found over the course of 25 years, 30 years doing this plan, that $1,000 is the sweet spot. It's just enough that if something breaks down with the car, right, Rachel, you can pop in there and get it fixed. But it's also not so much that it's taking away from the momentum of you paying off the debt. It might feel like not a lot, but your wife's already had the baby, the baby's healthy, you guys are home, childcare is paid for. You can take that moment and exhale and say, Okay, the risk or the danger is over. $1,000 is good. And then, yeah, if you clip that other $1,100 at that student loan, you're going to pay it off a lot sooner. And think about how much more you can add to it. So this is probably you doing some overtime. Probably now is not the time for your wife to do overtime with a baby, but getting that number up as high as you can, because ultimately, you guys are going to be the ones that say, Okay, if we do it at a rate of $1,100 a month extra.

Here's how long it's going to take. We're not satisfied with that. So let's see if we can get it up to $2,200 a month extra. Are we satisfied with that? Do you see what I'm saying? And reverse engineer that number to get it where you want it to be. Yeah.

And, Joel, it's a lot. I mean, $300,000 of debt. This is going to be a long game for you guys, right? I mean, this is a long journey. So your wife, she's in a career where the upward trajectory is massive. I feel like in that medical field, I would be depending on her in a sense of like... Because you can do extra work 100 %, and I would. I would be taking on extra.

I am. I do freelance that brings like 600 a month.

You can do a lot. That's great. That's awesome. Yes. So for her long term, and when I say long term, saying 5-8 years, I'm going to be making as much as I can. Because to your point, she went $250,000 in debt for this degree. And so the upward trajectory of her having a bigger shovel over time is probably going to be more possible. And I'll just be frank with you, too, Joel. Jade and I are both moms. So that feeling, especially your first, is it your first? Yes. It's different. I think I cried every day going in for a little bit. I know.

I cried more in the past six months than the rest of my life can buy it.

It's so emotional, and it's so exhausting. And this is not to pick on you Guys, but it's just another example, a real life example, literally, of you, Joel, in Atlanta with your wife, and what debt is freaking doing. In a perfect world, if there was no student loans, and we had an 18-year-old girl call in because she wanted to go to a private school in Minneapolis that It's going to cost $250,000 to get an undergrad degree. And we were like, Don't do it. Don't do it. Because you want options, right? And if your wife wants to stay home, it's like, It sucks. Now, could you guys choose that? Absolutely. And then it'll take you maybe a lot longer to get out That's what it says. But what sucks is that the debts that the student loans are in was in a field and at a school that was very expensive. And again, hopefully she has the opportunity to be making more. I mean, that's the goal, right? If you're going to be going that much more in the debt, that you're going to be able to... That's going to be sufficient with the income you're making.

But it just sucks. You know what I mean? Because it limits options on what you guys want to do in life. So again, that's not to pick on you. It's just another example of what debt It takes your freedom, and it takes your options, and it sucks.

So even with a baby, 1,000, you would say, is a good round number. I think it's just as a father, it's like, I'm a little terrified that something is going to blow up, and we're not going to happen.

Well, you got to think about it like this. What you're saying makes sense. Logically, I hear what you're saying, but think about it like this. Let's pretend, let's imagine the worst thing that could take place, which would be the worst emergency. I don't know, something with your roof, maybe?

Right.

Let's pretend that cost $3,000 to fix. Well, you've got your emergency fund, but then you've got your actual income. Remember, you're putting an extra, you're paying extra on your debt every month. If you said, if I have my emergency fund and I stop the extra that I'm paying on my debt for that month just to cover whatever crazy thing could possibly happen, and if I pulled back the purse strings a little bit more and tightened up a little more, I could probably find another five, $600. So you see that there's actually money there. You're just not You're taking it out of the mix in order to pay debt, but it's there if you were to need it.

Yeah, that's a really good point. You see what I'm saying? Wow. Thank you for that. You're welcome. So you think stay far away from the IDR and the IDR, though, right?

Like I said, the IDR doesn't bother me, especially if you were moving it from the 10-year plan to the 25. That doesn't bother me, but only with the caveat that you're going to use the extra money to pay off the debt. If you use that money to go out to eat and just inflate your lifestyle, then you are only playing yourself. And I can't stress that enough.

No, that's a great point. Yeah. And I think with a lot of things, too, whether it's medical bills or that thing, you usually have a month or two to be able to... Do you know what I mean? That's right. Sometimes it's not an immediate today. Yes. This moment we have to. Sometimes you have a little bit of time, to your point, that you can get that cash back. But I get it, Joel. I know that mama bear mentality of, I just want to be smart, keep everyone safe, and all the things is so good, so true. For that $1,000, that emergency fund stays true no matter what.

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I'm doing well. So I have a question for you. I was just informed a few weeks ago that I'll be getting laid off at the end of the year. Oh, no. My wife and I have... Yeah, it's all good. My wife and I have about $100,000 in cash right now. I'm just trying to figure out what I should do with that in these uncertain times.

Okay. What do you do, Michael?

I work for a large corporation in product management. Okay.

What were you making?

I was making 160,000 plus a 20 % bonus.

Okay. And does your wife work at all?

She does, yes. And what does she make? She makes $110,000 a year. Okay.

And how quickly do you think you can find a new job? Is this something you can start looking for this week?

Yeah. I mean, a job and a good job are different things. Sure. I did get a decent severance package that can really carry, hold me over almost for a whole year.

How much was that?

So I have my full salary through the end of October of next year.

Oh, good. And that's not including the $100,000 you guys have saved?

Correct. Okay, that's really good. That is nice. I want to encourage you that you're in a really good position with the severance and with the cash sitting there and the fact that your wife also works. I want to caution you, though, because I don't want that to be a reason to not be motivated to really go out there and get a job that was just as good as the other, replace this income, and possibly make more money. I mean, what's to stop you from making more going into the next season with all of the experience that you have in that field?

Right. Yeah, absolutely. That's one of the goals for sure, to get this opportunity available.

If I were you, I would be looking tonight at your budget. Do you guys have a budget?

We have a loose budget, definitely. Inclusive of the mortgage, one small car loan, and just other monthly bills.

So what I would do, we'll give you every dollar before you get off the phone tonight, but I want you and your wife to sit down tonight and really Can we plug in all of the numbers, because if you can, my goal would be to touch as little of your saved money as possible. Do you guys have kids at home or who all is at home? We do.

We have three kids, 14, 11, and 6 years old.

Okay. So I would want the goal to be we're going to touch as little of this 100,000 as possible. So in order to figure out what that is, you've got to set a budget for 110 and see, okay, monthly, if we set our budget for whatever your wife brings home- And he'll be getting his severance, too. And you'll be getting your severance, too. So, oh, that's true. So not much- That is true. Not much should change.

Yeah, I would be paying your debt. How much you guys have left on your car?

We have, it's a 2025, and we have a little less than $10,000 left on that.

Okay, well, I would pay that off tonight. That's true.

Yep.

What other debt do you guys have?

That's a 4 % interest rate. I don't care. The only The only other debt that we have is our mortgage.

Perfect. Okay. All right, great. Yeah. So the baby steps, Michael, is the seven steps that we walk people through. So technically, I think you guys are on baby step four because you guys will be debt-free by tonight, correct? Because you're going to just pay off that car. And then that'll be a $90,000 sitting in savings. And I would figure out your monthly expenses, what you guys... What you have. And I would go ahead and get a six-month emergency fund just because you got three kids, the job thing is in the air. Six months is plenty because you're still getting paid. I mean, you're still going to get a salary. So I take that. Whatever that six months is for you. I'm making this up. So just say it's like, I don't know, 10,000. So say it's 60,000, you'll have 30,000 left. And then with that 30,000, I mean, honestly, I don't think I would be motivated to feel like I have to keep any more because of a job loss because you're getting paid the same. So it's almost like you haven't lost a job Technically, right? Because you're still getting a paycheck. So you guys are still living your life.

Is the severance at all tied to if you get new employment anywhere? Will that stop at all, or do you get that plus if you get a new job?

I would get that plus if I get a new job, as long as it's not with the same company, obviously.

That's great.

That's great. Which is awesome. Yeah. And then I would be funding 15 % of your income into retirement, and I would count the severance as income. I mean, I would still say. So I honestly would just keep going, and then I would put extra on the house. I mean, I would just go through the baby steps. I don't think I would be that alarmed. When I first heard you were being laid off, honestly, in my head, I'm like, Oh, my gosh, if you have no savings, you're down to one income, then there's a lot of shifting that has to take place. And that's usually people's situation. But you're getting a nice severance. You guys are going to be debt-free. You have a fully-funded emergency fund. So not much really has to change, Michael. I don't feel that urgency. Do you, Jade?

No. I mean, the only thing I'm thinking is you've got to find another job that's going to replace your income, and you've got to be on it. That's it. Got it.

So would you guys take that other 30,000 and put it into a brokerage account, into an SMT 500 fund or something along those lines, or should I just keep the cash? That's where my big decision is right now.

Okay. So I almost would do option C, Michael, because if you're funding 15 % of your income into retirement, the next step beyond any other investing is to pay off the house. So I almost would How much do you guys have left on your mortgage?

Two hundred and fifty thousand.

Okay.

It's a 2. 85 rate.

Okay, yes. Again, the interest rates don't really apply to what we talk. When we talk about math, it is so behavior change, finding peace. Dr. John Deloney, one of our other hosts, he always says we're solving for peace, and we find when people are completely debt-free, that is one of the most peaceful places you can be financially, versus high stress, high financial stress with to pay bills and keep up with everything. So you can do what you want with that 30,000, Michael, that's left. If you want to open up a brokerage account or something, yes, that's not going to hurt. But the next step technically would be to throw anything extra at the house. But because there is this, again, weird thing with the layoff, if you want to feel extra safe, you can. But I don't feel like you have to have extra padding. You remember when you have a six-month emergency fund and you're still getting paid.

Yeah, you're still getting paid. There's part of me that might wait Wait until it's a storm. It's not the stormiest of storms because of the money. But you get a job. There's part of me that might wait until you land that next job. And then if you do, I mean, what a blessing because you'd be getting the severance plus to pay from your new job. Then you'd have something to do with this 30,000. You could really do some major damage on your mortgage at that point as far as paying it off. Whether or not you wait until you secure the next job is really up to you and how you and your wife feel about it security-wise.

Awesome. All right. Well, I appreciate I appreciate the advice, and hopefully good luck moving forward.

Absolutely, Michael. Well, I'm sorry about the job loss, but I'm thankful you guys are in the position you are. You guys have done a great job saving. Yeah, and again, that severance is so helpful.

That's everything. Rachel, let's just take a moment and talk I'm going to talk about it because I could tell you're getting frustrated. Not frustrated, but like- The interest rate.

The interest rate.

And let's talk about that because people get so hung up on, I've got this debt, but the interest rate is good. So therefore, somewhere in their mind, they think they can just string it along because is that 2. 2%? That is not a big deal. It is a big deal. Debt is risk no matter how you slice it. If you are tied to debt, that means you have risk associated with your life. Even if the interest rate is lower, it's actually in many ways more dangerous because you're more likely to leave it around and keep it in your life for longer. So just remember, guys.

Yes. That is debt. And that is the hard thing because I think even the question with paying off the house. They have $60,000 left in the mortgage, and they have $70,000 in non-retirement investments. And they're like, Wait, you want me to just pay off my house? But I'm making up to 20 % this last year, and my mortgage is the old interest rate of three %. I could be making a 17 % spread. And so the calculations come into place. And again, we're not dumb. We get that. Totally get that. That makes sense mathematically. But what is never calculated, again, is the emotions around money, the stress around money, the peace that you have around it. And so we can play the math game all day long. But that's even one reason we talk about you pay off the smallest debt first, not the highest interest rate. It's not a math problem. Majority of personal finance is your behavior. It's not the head knowledge. It's not the Excel sheets. It's not trying to form the interest rate that's what's best for you, and it's not that bad. Debt is debt. So to your point, the borrower slaves the lender when it says in Proverbs.

So there's something freeing about being debt-free, you guys. So Yeah, again, Michael, he has a great Head Start. Yeah, I'm excited for him. I think a new change, good season. Yes, it's good for him. And they were wise. So it's not a crisis. This is just an inconvenience.

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Normal is broke and common sense This is weird. So we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show. I'm Rachel Cruz, hosting today with Jade Warshall. We're taking your calls at 888-824. Com. 5, 5, 2, 2, 5. Up first, we have Jeff in Minneapolis. Hi, Jeff. Welcome to the show.

Hey, good afternoon.

Thanks for calling in. How can we help?

Yeah. So my family and I were in the in the process of getting ready to purchase a home for ourselves. This will be the third home that we've owned. We sold our previous house back in June when we were relocated for a job change. And I'm feeling that we're sitting pretty good financially with what we have invested and in retirement and trying to identify the right level of home that our budget can support. We're still letting ourselves be comfortable financially, but also feeling that going into our third home, we maybe don't need to settle on every single item at this point of our life as well.

Good.

So what are you thinking about spending?

Well, right now we're considering a property that would be around the 550 to 600 range. I I never think I would end up in a home of that size. But with real estate being somewhat inflated right now, that's what we're looking and needing to be in to check all the boxes that we're looking for housewise.

And you feel good that if you put whatever down payment you're going to put, it's not going to be any more than 25% of your take home when you include taxes, insurance, HOA, all that stuff?

Yeah, depending on what we put down for a down payment, we'd be tracking right about the 25% mark.

What do you have saved in cash?

We're sitting on 310 in cash right now. That includes a bunch of money from the sale of our home in the summer. About 50 of that is what I've considered to be our emergency fund. Okay. The rest of that would go into the home purchase, so about 250.

Okay, good for you, Jeff.

Well done. Is there anything standing in the way? Do you have any other debt?

Well, we're sitting pretty good. Otherwise, we've got a small car loan, $5,000 on that. That's the only other debt that we have. We're free of credit card debt, free of education debt. Student loans?

Good.

Yeah, none of that.

We've got a young family at home. What's the problem, Jeff?

We're a young family at home, so we're trying to provide some flexibility to have life change if needed there, whether it's education or- So what do you need from us?

What made you call in? What's your biggest question?

Well, as we've been looking at this home purchase, it's just What we think about is, is that really the best way to deploy that money? Should that money go into a home purchase or should it be further invested or set aside for a child's education? Is it the right move to put that much money into a home right now?

Well, you said yourself, you said you're sitting pretty with your investments. You said everything seems to be on track. Let's just play it out. If you did purchase this house, like you're saying, it would meet the criteria that we say is a safe place to buy a house and still have enough margin to do the things that you've mentioned which is save up for kids, college, be able to put a little bit extra on the house. You'd still have that money in order to do that. Whereas if you didn't purchase this house, let's pretend you didn't purchase this house, let's pretend that you... What would you do? Take this money and invest it? Would you drop it in the stock market?

Drop some in the market, beef up a 529.

Okay. And then how long would you rent?

Well, we need to get into a long-term home as soon as we can just for everybody's comfort.

But you're saying just maybe a smaller home, something not- Yeah, maybe it's a $400,000 home, and our monthly payment is closer to 1,200 instead of 2,400.

Would it suit your needs if you did that, or would you feel like you were sacrificing?

I would feel like we were sacrificing. Yeah.

And how old are the kids? Two and a half right now. Okay. And how much do you guys make a year?

I'm at 93, and my wife's at 57.

Okay. How did you guys grow up with money, Jeff? Because you said I wouldn't imagine ever buying a home this expensive.

Yeah. My wife grew up from pretty limited means, larger They're a larger family, and they made it work. But she definitely comes from a different background than I do. When I was growing up, we, as a family, did never have to worry about money. My parents always made smart decisions with it.

Who's more hesitant about the house purchase?

You or her? Right. A fruitful approach to life. I would say she's a little more hesitant than I am.

Which makes total sense. Sometimes money is weird because you guys have been really successful, Jeff. I mean, you guys make six figures I'm going to say you have no debt because I think you're going to pay that car off tonight is what I want you to do with some of this money. You're debt-free. You have a fully-funded emergency fund. You have a massive down payment. You have little kids. You've already started 529s. I mean, you guys, in all terms, are very successful. I think sometimes if we come from a family where there was a little bit more scarcity, you had to watch things, more caution around it, it's almost like her emotions haven't caught up with the reality of what she's living. And I think that's really normal. I think a lot of people, when we get calls, sometimes people are like, Oh, my gosh, we can spend this on vacation, but is that crazy? They can't emotionally digest where they really are at, realistically. And so I totally see where she's coming from, and I get that. But also, our emotions can't be our driver of decisions always because they sometimes don't make sense.

They're not logical always. And when you look at the numbers, you guys are not out of control at all. That's a good time when the numbers do help you.

Looking at the numbers. I mean, the same thing happened to us the other night, Jeff. My husband had said there was a line item on our budget. He was like, Man, I just think that's too expensive. I had to look at him and say, And relative to what? Like, Relative to what? Because sometimes you can have a certain number in your mind about a certain thing that, like you said, I didn't think we'd ever have a house that was $500,000 or $600,000. But that might have been relative to the old situation. But relative to where you are now, like Rachel said, it's totally within means. Sometimes running out those numbers and running out the actual percentage of your income is so helpful because it helps you, it helps your emotions align with where you are now and go, Oh, my gosh, this is so true. Then just take some time and marinate in that, high five each other and be like, Man, we really did it. Good for us. We can afford things that we once thought were out of reach. I think it's so important to mark those times, both mentally and emotionally, because they are wins.

It's so easy to go through life and not celebrate your wins.

That's so good. That's good advice. Yeah, I appreciate that. Yeah. Do you all have a specific house that you guys have looked at and you're thinking about putting a down payment on? Is there a specific one that she can picture and see, or is it just that's the price range and you guys are going to start looking?

No, we've been in the market for a while. We've had several offers that have not gone through on different properties, which has caused us to escalate what we're looking to spend. At one point, we weren't going to go above $450. Now we're knocking on the door $550 for a specific property. So that's what gives us some apprehension as well. We shifted away from our original conservative plan, and we've always been conservative in all of our financial decisions.

Totally. I hear you. I hear you. Yeah.

That's when those guard rules really help, though. What we said before, the 25% rule. That's when that's like your true north of. We may have started out one way, but this is truly the line in the sand. We know no matter what we choose, we're not crossing that. I think for you guys, like you said, if you do the plan the way you said, you're not going to cross that line, and I think that's good for you to remember.

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Today's question comes from Jamie in Iowa. They say, I'm struggling to pay off debt, not because I can't afford to, but because it's hard for me to let go of the cash that's in the bank. I I have close to $80,000 in car loans and a $450,000 mortgage. I have liquid cash of $300,000 and a brokerage account with $100,000 in it. I know it makes no sense to keep the debt, but I have a hard time not seeing all of the cash available. How do I overcome this mentally? Oh, man. So this is crazy because, yeah, if you were to clear out the $300,000 of liquid cash, or at least take it down to three to six months and then take the 100,000 out of the brokerage, you could almost pay off everything, including the mortgage. Almost, you'd get pretty close, but for sure, you'd clear the 80,000 in car loans and get rid of most of the mortgage. I have a sense, Jamie, that this is some fear of the unknown, I think. Whenever people cling on to savings, it's usually either one of two things. It's like that scarcity mentality that we talked about earlier, which is maybe the way you came up, something caused you to be like, When I have money, I have to keep it.

Whether you grew up super duper poor or you were in some relationship where you couldn't get what you needed or you had a scary time where you lost a job and your family suffered and you had to go on food stamps, whatever that was, something affected you to the point that, yeah, you feel like you have to cling to money. Or maybe it was none of that. Maybe you just feel like you're doing super duper well and you just love the feeling of looking over in that account and seeing that money and just the idea of what it feel like when it's gone, you don't know because you've never done it. I think that that's so much... Rachel, we talked about this earlier today. So much of what we teach is a big question mark to people because people are calling us. Most people have been in debt their entire life. Most people have never felt what it feels like to have a paid-off mortgage. Most people have never felt what it feels like to have, in her case, $300,000 in savings. And so much of this is a question mark that when we ask people to shift into the unknown, they're clutching their pearls like, Well, what's it going to feel like?

What's going to happen? What if? What if? What if? And all these what ifs come. And I get it, it can be overwhelming. But in this case, you almost have to ask yourself, Well, what if I don't do this? What's the repercussion on the other end? Let's talk about that. Because if you keep this $80,000 in car loans around, all you're going to end up doing is drinking yourself with interest. That's ridiculous. Why do that? Same thing with the mortgage. I mean, an amortization schedule is there for a reason. It's explaining how much the interest is costing you year over year and how much is going to the principal. So you can see on paper that the longer you keep that debt around, the more you're paying an interest. So you have to ask yourself at what cost And what would it feel like to be free?

Yeah. And it is so interesting that people, we always talk about change is so hard. And even if you're doing something that you know is stupid, like what she's even saying. She knows it. She's even saying, but it It feels comfortable because I know. Even though what I'm doing is wrong, at least I know how it feels, and I can at least stay in there. So there is a level of change in life that's hard. If you're changing something relationally, if you're changing your physically or your health. It causes something to be stretched within you. But if you're changing to something that is good, and what we have found time and time again is that people that are debt free, they are free. They are free. That's it. And if If you want to get back into debt, you can always get back into debt. There's a whole industry waiting for you. If you hate it, you can get right back in and take a personal loan and put money back. Whatever you want to figure out.

You can put it back if you want to.

Yes, but there's something about owning your life. And when you pay things off and you build back up that savings, it's all yours. That car is yours. That savings that you build back up is yours. And so it is. It's a different approach. And you've even said, Jade, before how it's a myth that you're safer with the cash because you have risk. The cash, if something were to happen and you have to drain your cash for some reason, you still have a payment.

You still have payment. Yes. And if you want to take it completely mathematically, The feeling of if you tell me, Hey, I have 300,000 in a brokerage, 300,000 in cash, and 100,000 in a brokerage, you're thinking you think you own $400,000. But that is not true. If If you own 450, if you owe 450 on a mortgage, you owe 50,000. Yes. Nothing is yours. That equation does not add up. And then there's the other 80,000 in car loans. So technically, you are in the red.

It's a negative net worth.

It's a negative networth. So all of this is based on a lie that you're telling yourself, This money's mine, this money's mine. And it's really, really not. And so if you approach it from the math, the math is laughing at you. And if you approach it from the emotions, the emotions are going, Well, there's more peace over here if you go ahead and pay this off. So it's like what Dr. John Deloney says, You have to choose reality. And what is the reality telling you? And that's what I would tell you to do, Jamie, is take Rachel's advice, pay it off, and if you feel terrible, which no one's ever called in here and said, I paid off all my debt and I feel horrible. Help me get it back. But you could if you wanted to.

You could if you want to. I hope that helps. All right, let's go to Dallas, and we have Chad on the line. Hi, Chad. Hey, How are you doing? We're doing great. How can we help?

So I've been listening for a while, and pretty much everybody I hear you talk about the baby steps with is on a structured income. My question is, my income fluctuates monthly and yearly. Is there a custom plan made for somebody in my situation, or do we just try to make the baby steps work for me?

Yeah, everybody. Well, there's a lot of irregular income earners that call in.

I was one, Chad, if that makes you feel better.

Yeah, I technically am. I just hadn't heard one in all the- Okay, yes. It's very common. There's a lot of people that are irregular, whether they are doing freelances work or commission-based positions where they make a lot one season or like photographers, they make a ton one season, and then it goes dead. That is a very normal approach to money, or people have that situation all the time. No, there's It's not a special way to do the baby steps, but if your job, is it seasonally very different, Chad? Yeah. Okay. Tell me about that. What's the seasons?

Mother Nature controls my work, basically. I fix tail damaged cars. So if it storms, I have good storm seasons. I make a lot of money. If I have weak storm systems, then I- Perfect.

And look. So what I would do is- I usually have about a four to five month slow period throughout the year, that I saved my money for that slow time.

And so the thought of paying that money off onto my debt- Got you.

Yes.

Work dies off, and now I'm scrounging for money to pay my bills.

So the paying extra on your debt doesn't include your monthly expenses. So I would have that fund of what you've set aside for savings, which is so smart. I would consider that amount of money for your expenses, for your your walls, your food, your shelter, utilities, transportation. That's not just extra money that's just hanging out that has no purpose. That's to cover your basic living expenses during low season. So we do say to have an account that we call your peaks and Valleys. And so you If you know, Okay, we spend X amount every single month that we need this much, and if we don't bring in any money, I have to pull this amount out of savings in order to cover our expenses. If you're down to a T like that and you know that that fund is there for that, no, I would not throw that extra at the debt. That's totally fine. The paying off debt is above anything or anything that you can cut. So I would look at your lifestyle and say, Hey, is there anything in our regular expenses that we have, regardless of seasonality of the weather, that we can throw extra at the house?

But no, that fund, I would consider your Peaks and Valleys fund to be able to literally pay your bills. So we don't tell people to get behind on their bills to pay off debt. Stay current, which is what that fund is for. But And anything extra that you can squeeze out of the budget and or any more work you can do in those slow periods- That's the T.

That's the T right there is doing work in the slow periods.

Yeah, go get another job during that time. And man, you could double up, which is great.

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Well, if you enjoy the show, one of the best ways that you can help us out is by spreading the word. So putting it on social, sharing it with your friends and family, it's always helpful. So make sure to subscribe. And yeah, give us a like, share the videos. And we always love to spread the word about the show because we want to help people get control of their money. Absolutely. All right, next, let's go to Trey in Houston. Hi, Trey. Welcome to the show. How are you doing? We're doing good. How can we help?

So I'm about $4,000 in credit card debt right now. I don't have any other loans, nor anything else. And basically, me and my girlfriend have been talking about getting married, and I've been thinking about just engaging her soon and stuff, and she's been talking about homes and everything like that. And I've been talking to her about the show, but I just want to know, how can I tell my girlfriend that I lied about my financial situation?

Oh, no, you lied. What happened?

So basically, I only told her I have $2,000.

Why did you lie, Trey? Why?

So at first, that's where I was at. And And then it started racking up over time. But I did get my third apartment, and then I just not always knew.

So let me understand. When you told her you had 2K, did you have 2K? And then you accumulated another two without telling her that you accumulated while you were accumulating the other two?

Yes.

Okay, that makes me feel a little bit better.

Yeah, for sure. So you didn't lie to her upfront, but you've not been honest with her since. When was that conversation that you told So you had a two-k, and now it's 5K? Was it a year ago or two weeks ago?

It was a couple of weeks ago.

A couple of weeks ago. So you accumulated the 2K in two weeks?

Yeah.

Oh, okay.

Do And what again? Did you say your third apartment? What was the 2K for?

2k was used mainly for basically a lot of the stuff that I have. Currently, I got a lot of new stuff that I really haven't told her about either. What? I got a lot of new stuff.

Name it.

I got a new bed. I got a new bed. I got some other pots, pans, stuff like that.

Okay, because you just moved.

Okay, so you're buying stuff for the apartment?

I moved not to So basically, I moved not too long ago, but I've been at her apartment a lot of my time. Understood. So a lot of this stuff has been... I've been at her apartment. So just tell her. I moved not too long ago, and then I'm like, I'm going to move in.

What do you think will happen if you say, Hey, just so you know- She's listening now, so she's probably hearing me. Is she there with you, or is she at work listening, and you're going to come home to Furi?

She's listening on the... Yes, I'm going to be on the...

All right. Well, hi, Trey's Girlfriend. Hope you're doing well.

This is like, Maury. Why did you make it like this, Trey? Okay, so what's your girlfriend's name? Can you say it since she's listening? Shaila. Shaila. I can say it. All right, Shaila. Now you know, and we're trying to tell him he needs to come home tonight and I'm not going to tell you what happened, but he's telling you now. So the key here is you need to start paying this off. What are you making? What do you earn, Trey?

So I originally earned about 48, but now I make around 50 because I got a 4 % pay increase. Good. So I make around 50 a year. At this point, me and her have been talking about this. We've been talking about your show. We've been talking about the baby steps I said it to her today and stuff. So we've been really talking and honing in, and we've been talking about all this stuff about getting out of debt. She told me where she's in debt on her end. How much does she have? That's just around 8,000 or 9,000 in student loans.

Okay. Now, can I ask you, Trey, if you've been listening to this show So what caused you to go... I mean, you have a fine income, 50,000. What caused you to go into debt to buy pots and pans in a bed? Why didn't you just cash flow that? What was going through your mind?

So at first, the problem was that I had to get the stuff that's currently in my apartment, the couch and bed stuff, is not mine. It was my sister's, so I had to give that back to her.

Got you. So you felt like you're in a time crunch?

Yes, I was in a time crunch situation where I had to spend it, just do it, either do it now or I'll get the situation.

I see. So I just want to encourage you going forward. I love that you and Sheila are listening to the show. I love that you guys are starting to hone in on this. I just want to encourage you and also just admonish you. Going forward, there's always going to be times where you feel like there's a time crunch. There's going to be times where you feel like you have to move fast.

Urgency is where the debt industry loves you when you're urgent. But you're on a car lot and you're like, I got to get a new car. I moved to, oh, God, oh, God, oh, God.

They find you in crisis.

That's right. A hundred %.

But if you can start now to exercise the muscle of just even taking a moment, taking a breather and going, Okay, what can I do instead? Can I sleep on a friend's couch for a week while I save up some money? Yes. Could I go on Craigslist? I don't even know if Craigslist exists anymore.

Or an air mattress, $100 air mattress.

I slept an air mattress for a long time. Yeah.

So just always know, Trey, that there is always another option. So in a situation, whether it's furniture or a car, There are options out there. So slowing down is a really big part of making wise financial decisions, not feeling you're backed into a corner. And then, and I would want to get to, and again, it's only been two weeks, so it's not like you've lived with this for months and lied to her. But I would want to know from you what's caused you to not tell her. Is it because she'll get mad? Is it that you're embarrassed? Is it that you wish you had done better? And now you have some guilt and shame around the choices that you made? What was the main motivation? Do you know?

I would say, honestly, for me, the main thing was just me and her have been talking about marriage, and we've been talking about how much we want to spend. She's been talking about being We're getting eloped instead so we can save a lot of that money. We don't just go in and just have this big wedding ceremony, and she's not looking for that. I think it was a situation where it was a little bit of embarrassment. Like, dang, I didn't really want to tell her that I just did this because she's going to tell me, Hey, why did you do that? You didn't need to do that. We couldn't figure something out.

Absolutely. Yeah.

Even this, Trey, is an example of just learning that communication pattern. You You had a feeling about not telling her. You didn't tell her. But then even still, you came on the show as a strange way of telling her. I would just want to encourage you in the future, if this is a person you love, you trust, go to them and tell them the truth.

Yeah. And starting off marriage with hiding the pots and pans, Trey. We don't want to do that. We don't want to do that. We don't want to get in that habit. Because genuinely, I mean, secret start to... That erodes trust so fast. Sure does. And as honest as you can be, Trey, with about this and going forward. I mean, yeah, we've been married over a decade, both of us. To men, our own husbands.

What we've learned- To men, our own husbands. Yeah.

Sorry, not to each other. To our own spouses. I think we both could say that there are things that are going to come up in life that you're embarrassed about and you don't like. You know what I mean? That is going to happen. And the moment you start hiding those things is where that trust erodes. So the more vulnerable and honest you can be, Trey, and this is a great first step. And let me just say to lighten the lighten the load a little bit that it's $2,000. Yeah, it's not. It could be much worse, but that doesn't matter. Regardless of the amount, it's the principle behind it that I want you to get in a healthy pattern of you guys communicating and being on. And I want you to cut up the credit. Was it credit cards that you charged it on, you said? Yes, it was credit cards. Cut it up, Trey. You guys have been talking and listening to the show. You've been talking about the show, listening to the show. When she starts doing the stuff that we talk about. So cut up the credit cards, you guys cash flow. She sounds amazing.

I know she's listening, girl. We are for you. We are on her team and your team, Trey. But she sounds so level soul-headed. And be wise about this. If you don't have the money, don't buy it and let that start to be a pattern in your life. And that includes the engagement ring. That includes the wedding and the honeymoon and all the things. But yeah, I think it's going to be awesome. Do you know when you're going to... Well, no, I don't want to ask for that.

How long have you been together?

Right now, I've been with her off and on. We were off and on for about a year now, but I have been secured with her for about... We're going on three months now.

Secured with her? That's a good- I don't know.

Really, really. That's a phase I didn't know about.

… Holding in. Yeah, secured. Before we stopped talking for a little bit, and then we got back together.

Okay. I like it. I like it, Trey. Secured. Wow. I'm excited for you all. Oh, man. Love it. And all the security coming forward. It's great.

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The all new EveryDollars is here, and now it is way more than just a budgeting app. There's so much in this, and the features are incredible, and it's all designed to help you make progress faster when it comes to your money. The average person finds thousands of dollars in margin in just the first 15 minutes of using the new EveryDollars. So start EveryDollars for free today. You can get it in the App Store or Google Play. All right, let's go to Andrew in Chicago. Hi, Andrew. Welcome to the show.

Hey, Jake. Hey, Rachel. How are you guys doing today?

We're doing great. How can we help?

So I am about to propose to my girlfriend of five years coming up in the next month or so.

Congratulations.

And with us moving forward, obviously, that comes wedding, we pay for the wedding and looking at buying a house in the next couple of years. My question is, when you're saving up for a down payment for a wedding, should you still invest your 15 % of your income for retirement, or should you reduce that to a lower % or guidance on that?

Well, so in the baby steps, technically the house would be 3B. So you'd save up baby step three first, so three to six months. Then you do 3B, which is say for a down down payment, and then four is the investing, the 15 %. Now, if you felt like you could do three, be in four at the same time and find progress on that down payment, I would say that's fine. That's up to you guys if you want to do that. Do you have any other debt or anything like that?

So we're both out of debt. She's going to be graduating College here in December. Great. I'm currently debt free. We're keeping our finances separate until marriage. Okay. So I'm just looking for guidance for what we should do. I currently have $20,000 in savings.

Does she- My yearly salary... Go ahead.

Go ahead. My yearly salary, I'm going to a new job in two weeks. My current salary will be $100,000, and her salary as a teacher will be $50,000 when she starts in January.

What would you be looking to spend? I mean, in the Chicago area, it can be pretty spendy. What's it going to cost to get what you guys need?

Probably somewhere as a first home, probably somewhere between $200,000 and 300, I would say.

Okay. Then, yeah.

We're going to have to go further out in the West. Yeah, and the wedding, right? How much are you guys wanting to spend on the wedding?

We're just getting into those weeds. We haven't really decided on a budget yet.

Don't call your wedding a weed.

No, I'm just kidding. Is family helping pay for any of that, or is it all on you guys?

Yeah, I believe both her parents and my dad, both are going to contribute to the wedding.

So the first point of that would be really sitting down with them and finding out, honestly, what they plan to contribute, because that's going to, I mean, obviously, heavily impact what the overall spend of the wedding is, because you guys are then going to have to look at your budget and say, Whether Whether they help us or not, here's what we can contribute. So having those numbers ahead of time and also understanding how it will be dispersed is very important to planning a wedding because if their thought was like, Oh, we're just going to give you 10 grand as a wedding gift, that's very different because deposits and stuff have to be made. So really getting in the details on that, as awkward as it may seem, I think is so important and is so helpful on the beginning part of planning a wedding because those timelines and those deposits We got to go on time.

Yes. So to make sure you guys know, Okay, here's what we're being helped with, that amount. And is that amount of money enough for what we're wanting as a wedding? And if not, how much more do we need to add to that? And is that realistic or do we need to pull back some of our expectations. And then on top of that, yes, saving for a house. So if I were you guys, I'm okay with people pausing baby step four and not investing for maybe three-ish years. That's not really a hard and fast rule.

But it's a good one, though.

Anything beyond that, I would probably want to get in and start investing because that compound interest is so great. But if you all need to pause for a few years just to build up a large amount for a down payment, then I would be okay with that. But I probably wouldn't go any longer than three years not investing. Okay.

And then the three to six month emergency fund, is that based off of your income or off of expenses?

It's really based off of... You could think about it a couple of ways. I like to think about job situation. I like to think of relationship status and health. So for instance, if you were a single person, I'd probably automatically go to six months simply because if I lose my income, that's it. But if I'm married and there's another person who if I lose my income, but if they have theirs, there's a little bit more security there. That's how I consider the relational side of it. Then I'm thinking about health. If one of you is in poorer health and there's an opportunity for hospital stays or being out of work, that's another thing that could impact wanting to have six months versus three months. Those are the things that I look at with you guys. I mean, is there anything- Well, and I think I would say, too, are you asking, should you save three months of income or three months of expenses?

Or are you asking time frame?

How much you should save is that based off of saving up to three months of your income or three months of your- Yeah.

So we don't really do by income. It's more of expenses. So when you look at keeping, yes, the rent paid, food on the table. So that's what Winston and I did. We looked at our monthly. And we say, did you go bare Bear Bones. And we stayed... Did you go Bear Bones?

We did it Bear Bones at first, and then later on, we upped it.

And then you upped it, yes. So you guys could just start with, okay, what keeps food, lights on, the rent paid, and get that not all the extra exciting stuff, no going out to eat. If you got the Bear Bones, how Which is that? Then you can multiply that by three, four, five, six. And that can give you that number for that emergency fund. But what Jade's saying, too, I think is important that you guys are going to be two people with two incomes, no kids. So you really could go on that three months, especially since you are going to be saving up for a down payment. Getting to that.

Because you can always come back later.

Yes, and up it. That's right. Is that helpful, Andrew?

Yeah, that's perfect. That's both questions. So fun to answer.

Definitely didn't know. Perfect. Great. Well, congratulations again. Yeah, that's going to be fun. All right, quickly, let's go to Jamie in San Diego. Hi, Jamie. Welcome to the show. Hi. Thank you so much. Yes. How can we help today?

Okay, my question is, my husband and I, seven years ago, were gifted Financial Peace University as a wedding gift. We were able to get completely out of debt, save six months of expenses in our emergency fund, we currently invest 15 % of our household income. And we have about $215,000 in savings. We live in a really expensive area. We cannot afford to pay a mortgage yet. We're in San Diego, so it's just really expensive. But my question is, we just had our second kid. I'm supposed to go back to work in December. The thought of going back to work and paying so much in childcare for someone else to raise our kids, it's just really hard. So is it just a completely stupid move for me to not go back to work and us pull $1,000 to $2,000 of savings each month so that I can stay home with our kids because we have such a big question of savings?

Yes, you all have $250. You all have $2,500. You all have $2,500 liquid, right? $2,500. Yeah. $2,500. Okay. You know, I would be okay with it for... I don't know. If it really is 1,000 a month, and you need a little- Two. So 2,000 a month.

Yeah. What's the long-term plan? Is there Can you guys get a long-term solve here, or are you just living in an area that's way too expensive for you guys? Do you need to move?

No. Well, my husband changed careers about six months ago, and he is on a track where he is going to be getting promotions. And so hopefully, this would only be a year or two of having to pull from savings. And he has a lot of growth opportunity, but there's not yet.

I would say Jamie, I would be okay with it. I think you guys have worked hard. You put money aside to be able to make some of these moves. But I would have a threshold because what can happen is you're like, Well, we're in San Diego. The promotions haven't really come. It's not really what's happening. If stuff doesn't happen according to plan, you can start justifying your position. That 2: 15 is going to be gone in an instant. So you need a threshold to say, We're not going past 100,000 in savings. So either I have to go back to work if the promotions aren't coming, but have that threshold. But yes, I am okay with it for a time, for sure. But don't sit there and just drain that 2: 15 without another plan. So have a threshold what you will not pass. That can be whatever number it is for you guys. But yeah, you've worked hard to make choices, and this is a choice you want, and you can afford it. Welcome back to The Ramsey Show in the Fairwinds Credit Union Studio. I'm Richel Cruz, hosting today with Jade Warshaw, and we're answering your questions.

Up next, we have Nancy in Dallas, Texas. Hi, Nancy. Welcome to the show.

Hi. Thanks for having me.

Yes, absolutely. How can we help today?

So my husband lost his job about a week ago.

Oh my gosh. I'm sorry.

And he was our sole income earner, as I'm high-risk pregnancy right now with our third kiddo, and I just want some guidance on how we navigate the next few months until he's able to find work.

Oh my gosh.

Now, are you high risk because of your age, or are you high risk because of other factors?

Because of other factors. And thank God, there's a chance that the issue will resolve itself by the time the baby comes to term. Yeah.

How far longer?

Until that, I'm on bed rest. Okay, man. I am 24 weeks right now. Okay.

So financially, where are you guys? How much debt you guys have?

So we actually moved houses earlier this summer to a house in the country, and we've been trying to sell our other house.

Oh, gosh. You have two mortgage payments?

No, thank God. The house we're in right now, we have no debt on.

Oh, great.

Yeah, but we have debt on the old house. And then we have two car loans.

Okay. How much are your car loans?

My husband owes five grand on his truck, and then we owe 24 grand on my minivan. Okay.

And how much is the payment on the 5K, the truck? $770 a month. Okay. And how much is your van payment? $507. Okay. And how much is the mortgage payment on the house that you're not living in?

$1,470.

Okay. Perfect. Okay. And what was he bringing home per month? What was hitting your account?

He got a lot of overtime, so it was consistently between seven and eight, but his base pay was $40 an hour, 36 hours a week.

Okay. And what What was he doing? What work?

He worked maintenance, facility maintenance.

Okay.

Do you have any money saved? I mean, you were able to buy a second house outright. Where did that money come from?

My husband worked really hard. We both did for a while, and then we came into some family inheritance money. And so it just sped up this process for this dream we had of moving out of the city and slowing down our lives.

So between savings and inheritance, we were able to get out here.

And then we thought selling our previous home, it would pay off the cars, pay off the mortgage.

What will it bring when you sell it eventually?

It's listed for $260 right now, and I owe $160 on it. So it should pay off all of our debt.

So you don't have anything left over saved from- No, we We ended up using all of our savings, pretty much to build the house.

We still have our 1,000 emergency fund, though.

One thousand? Okay.

Tell me this, Nancy. How hard will it be for him to be able to replace that income? It just feels like maintenance Again, I don't want to be ignorant, but I feel like that's a very wide spectrum of being able to probably plug in somewhere pretty quickly, right? Does he feel like there's options?

He's been applying a lot. I don't know that we'll find anything that's comparable to the last company.

Sure.

Okay. But I think we can find something in the high 20s, low 30s.

Sure. Okay. So what I would do, because you guys have 2700 $100 a month going out to debt. And I would figure out, maybe you already have a really tight budget to figure out. You don't have a mortgage payment on the house you're currently living in. But I would figure out food, utilities, Gas for the cars, the things that you guys have to have, and figure out, Okay, here is the minimum that we can scrape by. And I don't know what that is going to be for you guys. I don't know if it's $4,000, $5,000. I have no idea. But you guys need to figure that out with the debt included. And if I were you, which I'm so urgent, so I can't even imagine how you're feeling that you're on bedrest and this is happening. Did he get any severance at all?

No, no severance.

Okay.

What's the movement on the house? Is there anything... I would be on my realtor like, We got to close. We got to get an offer and close in 30 days.

We've had the house listed since June, and it was originally solicited at 290, and we dropped it 30K over the past five months.

When did you do the drop? Oh, it's been gradual. Okay.

It's been gradual. Yeah, well, average- We just dropped it down. I think the last drop, we did a week and a half.

Yeah, average is two months right now sitting. So you guys are over that a little bit.

So it might be a price thing.

Yeah. So I am with Jade. What you guys can do to be urgent on that, but even urgent on the income side. If I were him, I wouldn't care if it's comparable for right now because some things are going to turn. Because after you have the baby, the house sells, some things are going to start to alleviate some stress as life continues on. I mean, it'll be in the next six, seven months. But until then, in these next I mean, I would think until summer. That would be in my head. I got to go do anything. Anything to be able to stay current on this stuff. And my hope is, too, Nancy, that he does apply and that what he was doing, obviously, was bringing a market value of something that was fantastic and that he can find something. I think there's always a natural assumption in our human spirit that if we lose something, that the next thing is never going to be as good. And so we're probably going to have to always down on grade, especially if there's a layoff situation. But that's not always the case.

I think both of you got to sit down tonight and decide that come hell or high water, like debt, you're not going to go crazy into debt because of this, even if he's picking up Uber tomorrow. Any money coming in is going to be better than no money coming in. Because with $1,000, you guys are up against the wall, which is for the listening audience, why we always say you got to have 3-6 six months of expenses before buying a house. You've just got to have it. Even if you're counting on another house to spend, money is not yours until it's in your hand. This is a cautionary word for the wise for everybody else listening. For you guys, Nancy, we're pulling for you. Whatever he can get immediately. We had a call the other day where a guy lost his job, and I'm going to give you the same homework that I gave him, which is to make a list tonight. You guys sit down, make a list of everybody know that's in that field or know somebody that's in that field, and call him. Make contact. Don't just text him, call him and say, Hey, I'm in the market.

Do you know anything? Have you heard anything? And really start making those connections person to person as much as you can He should be going to coffee with people because that's the way you're going to get a job. Just putting in resumes on the internet doesn't work anymore. So make that list tonight, and you guys hit the pavement on that.

Yeah, absolutely, Nancy. I'm so sorry. I could only imagine how stressful, but I think the stress will lower when money starts coming in. In any way that's possible for him in this season, that's what we're looking at. I know I'm sure he feels it, too. Again, that budget, figuring out how much on the minimal side that you guys can spend on food, utilities, all of that, cutting subscriptions, not going out to eat. You guys are bare bones. It's that crisis mode right now, and that's okay. You're going to get through it. You're going to get through it, and he's going to find another job. The house is going to sell. Things are going to happen. But for now, we are going to buckle down. Hey, guys, it's Rachael Cruz, and I've got great news for you. The Ramsey Christmas Cash Giveaway is here. We are giving away $500 every week, plus a grand prize of $5,000 in cash. Listen, you can enter daily to boost your chances of winning, and there's no purchase necessary. Just go to ramsey solutions. Com/giveaway. That's ramsey solutions. Com/giveaway. Good luck, you guys. Everyone needs insurance, but it can be hard trying to find a pro who's not just looking to make a buck, but agents that actually know their stuff and they're wanting to help you.

So with a Ramsey Trusted Insurance Pro, you'll never have to deal with a sleazy business or slimy salespeople because they're all interviewed, they're vetted and coached to make sure that they are market experts when it comes to your best interest. So go to ramseysolutions. Com/coverage to find the type of insurance that you're looking for and connect with a Ramsey Trusted agent. Or you can click the link in the description if you are watching on YouTube or listening on podcast. All right, let's go to Mary and Portland, Oregon. Hi, Mary. Welcome to the show.

Hi. Hello.

Hello, hello. How can we help today?

Oh, thank you so much for just hearing this story out and giving your thoughts. So basically, my husband and I were debt free except for a mortgage, and he is a hardcore do it yourself or works really hard. He's a diamond in the rough. We bought 10 acres 23 years ago when we got married with a single wide mobile home on it with the intention to build. And life happens. And there was five of us in 850 square feet. So him being him, built an addition onto the mobile home that has failed. We have extreme mold, and it needs to be torn down. He wants to rebuild it. And I think that we should either build or bring in a double-wide mobile home. We've even looked at moving, but with a brand new grandbaby on the way. And my mom just recently in assisted living. I don't think that that's just an option. So we're curious, what would you do when you're in this situation, when you really don't owe much on your mortgage, and you're looking at adding another mortgage?

Yeah. Just a question, why can't you move? You said a baby and your mother, is it because you don't want to leave the area or the property? Because you could move somewhere else. I'm not saying that's the option. I'm just making sure that I heard you correctly.

Basically, it's family that's here, and we live in an area that's extremely expensive, and we could never purchase what we have right now and replace it. My husband has built a shop on the property that he has worked out of, and so that would mean leaving that and leaving our extra income We just couldn't replace it. We'd have to move really far away.

Sure. Okay. And you guys have... Is it 25 acres?

We have 10 acres.

Ten acres. Okay, perfect. And how much is the mobile home worth right now?

You mean the current mortgage? Yeah. We owe 95,000.

Okay. And how much do you guys make a year?

A year, he's at 80,000 a year. That doesn't include any of the extras.

Okay. On average, what does he make extra?

That one, I couldn't say. It comes and goes, and so we don't really rely on it. It could be a couple of thousand every month or so.

So can I ask a question about the addition? So you had the initial mobile home, then you added an addition. The addition is the only place that has mold, right?

As far as I know, we haven't dug too far into it other than the addition yet.

So if you were to... How many in your family? Is it just- There's five of us. Five of us. So if you were to remove the addition, could everybody temporarily be in the initial part of the house? Or I don't know how large this is.

It's 850 square feet. I mean, it would be tight, but yeah, we could do that.

How much would it cost? I'd love to know the numbers of what it would cost to remove the addition and then what it costs to add another addition.

My husband does all himself. He won't let anyone else do it.

Still.

He may not have an option. You know what I mean? That's where people pin themselves into bad situations is because, well, he won't do it. I'm talking more to him than you, Mary, that you guys are in a situation that it's like, I don't know. It may have to be an option. You know what I mean? Just taking it off completely because of his pride and he just wants to do everything himself, which obviously didn't work. So we need all the options in the world, right? Do you feel that way? But he won't even entertain the idea?

No, he will. He'll entertain any of the ideas. He's phenomenal. We just want to make a financial decision that's correct because we don't own much on our property. He is more of the type that once it's paid off, he can breathe and he has room, but yet we have no home to live in.

Well, yeah, you can't live in mold. So again, with my other question is, regardless who does the work, what's it cost to tear it off and what's it cost to put a new one on?

I guess tearing it down, he would do. So it wouldn't cost me anything to tear it other than taking things to the dump.

Okay, so free.

Free. Okay. And then in rebuilding it, I think it cost us maybe 5,000 to 7,000 to build it.

Okay. So then that's the equation we're solving for. How quickly... Now, if you have That's why I asked, Can everybody stay in the main site? Because you got to get out of the mold. So it's like getting that done and then doing the math of how quickly can you save 5,000 to $6,000 with the margin that you have? Because there's no other debt, you should have a decent amount of margin laying around. I mean, maybe not a decent amount. You're family of five on $80,000.

Do you work, Mary?

I homeschool my kids. Okay. Yeah. So yes, I do.

Yeah. No, fair. I shouldn't. Yes. I didn't mean to phrase it that way.

But I'm still going to ask the same question because you work full-time, your husband works full-time. Both of you are going to have to do something on the side to bring an income in order to save up this 5,000 to $7,000 as quickly as possible because you guys are going to feel each other's presence in that single part of that mobile home.

His side business, you said, well, it's around a thousand, maybe 2,000 a month, but we don't really count on it. I would be counting. I would make it a goal to say we need to save at least $2,000 for the next three months. That's 6000. So then we can start the addition, and that'll be a couple of months to do that. And so life looks different come May, June. If you guys actually buckle down and say, Hey, no, we are going to work extra to make this It's not going to happen.

Yeah. The one thing that concerns me is the fact that once you get into a mobile home and you take parts out of it and you add new parts in, it's not legal. And also, insurance doesn't cover you if your house burns down.

So what you're saying is your husband can't do the work. You have to hire a professional.

I don't think legally you can build an addition onto a mobile home.

But he did.

And you were living with that, and you wouldn't have said... Don't get me wrong, I'm not saying that you need to do something legal, but where was that logic the first time, I guess, is what I'm asking.

My husband does things on his own terms.

Got you. So, Mary, help me with this. When you called in with the question, Rachel's first thing was, You need to move somewhere else. And you were like, That's impossible. So now we try to go into your world and say, Okay, well, then let's just rebuild. And you're like, Well, here's the problem. So what do you want to do?

I mean, I'm open to anything. That's why I was calling.

Well, you're not open to anything because you're not open to moving. And you have- No, I'm open. Well, listen, I'm on your side. But I'm just saying what you said back to you. Moving is too expensive and you're concerned with the legality of the addition. So you have some qualms. So you're We're going to have to choose, is there an option that we didn't think of? Are you thinking, Hey, scrap the mobile home and let's build our own home? You tell us what you're thinking of doing so we can help you get there.

That's probably what I would look at anyways, Mary, to make it a goal to build something. It'd obviously be more expensive, and it would be adding on a mortgage. I want you guys to do that. But having something that... Because mobile homes, depending on the market- They go down sometimes. Yes, sometimes they do go down. Having something from a financial standpoint that's really steady for your family long term, I think, is a great goal. Is there a building plot on that land, on that 10 acres? I'm sure there is.

Yeah, right where we're sitting.

Okay. So maybe it's you guys moving somewhere part-time. I don't know, Mary. I'm just trying to think of things.

That's what I was leading towards. But is that financially a good choice? When you're almost paid off on your mortgage, do you want to add another 30-year mortgage?

Well, it's not that. What you could consider, and this is just, I'm throwing something out there because I like Rachel's idea of getting in something permanent that can go up in value. But the truth is, you don't have the money to do that today, and you're living in a situation that's not healthy because of the mold. What if you kept the land? What if you rented somewhere for a while to save up, to be able build on the land? People do it every day. And renting for a while is not going backwards.

No. And it would be, he could still keep his shop there on the land. But yeah, you guys are going to have to get creative- I have to figure something out. For a long-term plan to get this to work. So it's definitely not one plus one just equals two, and this is the easy route. There's going to have to be some give and take from you guys from location standpoint, maybe for a little while, while you guys save some extra work that you're doing. But again, the long-term thinking here for housing is the key, not just in the next six months.

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Up next, we have Michael in Seattle, Washington. Hi, Michael. Welcome to the show. All right. Thanks for taking my call. Absolutely. How can we help today?

My question is, we are expecting our first born in March next year.

Oh, congratulations.

Thank you. My question is, am I able to afford or is it wise for me to stay home with the baby?

Well, let's look at it from, are we talking obviously a financial perspective, so does your wife work?

Yes.

What does she do and what does she earn?

She's an HR manager, and she earns 170.

Okay. And what do you do today and what are you earning today?

I'm an engineer, and I make 135.

Okay. Do you guys have debt?

We have some debt on a rental property, and that's it. Our mortgage.

Okay. So you have some debt on the rental, and then your mortgage. What's your mortgage worth?

The note, it has $450 left, and the house is worth $585.

Okay. What about the rental? I'm just curious.

Rentals $225, worth $225. The work $2. 25 left on the note is $150.

Okay. If you were to have crunched the numbers and said, Okay, we can Do you have three to six months of expenses?

We do. We have about 30K. Love it. Yeah, and so on.

I mean, yeah, if you crunch the numbers and you're like, Okay, we'd be going down substantially, but we We can live off 170, and we can continue to do Baby Step 4. I don't know how I feel about this rental. Maybe that's not the question for today. But if you can do it budget-wise, there's really not a problem. Yeah.

Have you all done a mock budget at 170? Just to see what she brings home every month. Do you guys comfortably live there? Can live on that?

We have not done a mock budget, but we can probably live off 170. I know probably is not a good term.

Yeah, you got to do it in real numbers.

Because usually, the home is the problem. Yes, that was my primary question is, can we afford the house? Is this advisable? Should we pay down the mortgage more?

How much does she bring- How much does her paycheck a month? How much is her paycheck a month? Right now, it's like maybe 6,000, but that's got some investing taken out of it and other things.

That's fine, because you are in baby step four, so the investing would have to stay taken out of it. But how much is your mortgage?

Mortgage is 4,600.

Oh, 4,600?

Yeah. Impossible.

Yeah, that's- No, that's almost... I mean, that's... Well, yeah, then you guys, you can't live off 1,500, can you? A month? Because- If she brings home 6,000- No, you can't.

I'm going to answer it for you.

And your mortgage, right, Michael? But for real, that's not right, right? You can't live off that.

Yeah, she must bring home more than that. I'm sorry, I'm getting my numbers mixed up.

Okay. Well, it's important to do that budget. And I also want you to consider- Well, yeah, if she makes 170, she's not bringing home 6000.

Yeah, no. It's more even after- After tax and everything. Yeah, it's more like 10,000.

Okay. Okay. That would make more sense.

And then you said that she is... Do you know what percentage is going towards investing?

Yeah, 30 %.

Okay, so that could come back down. So you'd have some extra money there. So that's looking better. But also, you have to consider this rental. I would probably say if you do this, that you might have to sell the rental because if for some reason you don't have renters and you're on the hook for that mortgage for a time, that's going to put you up a creek. Do you agree?

Yeah, absolutely.

And that'll give you a $70,000 cushion, too, with the equity, which is just nice during this time.

Yeah, because are you really making anything off the rental, or are you just breaking even? Breaking even. Yeah. I'd sell it immediately and keep that cushion.

I'm I was curious, Michael, what caused you to be the one to stay home and not her. I know she's making... I mean, yeah, she makes 35 more than you do. But I don't know. Was it a career decision?

She loves her job, and after the baby, she definitely wants to continue on with her career. I like my job, but don't love it, if that makes sense. Okay. Yeah. I'm just wondering if I can stay home with the kid because I feel like I would be a better dad than I am an employee.

I love it.

It's great. Okay, perfect.

Well- If we sell the rental, what should we throw that equity to?

Technically, at this stage, it's go towards your mortgage. That's where you're at in the baby steps. I mean, once you guys are doing 15 % and you're putting a little extra for the kid's college, 529 once the baby is born, then any extra money would go towards the mortgage, and you really wouldn't do any investing on top of the 15 % until after the mortgage is paid. So yeah, I mean, right now, let's see, you're at 30,000 saved. Yeah, that's good. If you wanted to... Is that a full six months, like full budget, six months of expenses? Yeah, that's just our cash aside, not our other asset. So if you said she's bringing home 10 grand, that feels like three months of savings. I'd probably beef that up to six if you wanted a robust three to six months since only one person is working. And then, yeah, the rest of it, you could put it towards the house. That's what I'd do.

Okay. So pay down the mortgage as fast as we can. And It would tighten up the budget, and it would be okay.

Yeah, I think that's great. Yeah. I mean, the numbers aren't crazy. I mean, the mortgage, 4,600 going to 10,000 is a little bit like a... But I mean, if that's what you guys are choosing, then... Right? I mean, it's close to- It's really high. 45 %.

Let's give you some clarity, because you said you still have to dig in on the numbers. If you get the numbers and it's over 30 %, you got problems. Like, 30 is like- And that includes back her match, like her retirement and all of that, right?

That's added back in to the salary. So don't take that out. Add the retirement back in. That gives you a little bit buffer. Health insurance, you can buffer back in. So some of this is like, this is just after tax. It's not after health insurance and retirement. So add those numbers back into her salary. And if the mortgage is more than 30 % of what she's bringing home, that gives us pause. Yeah.

25 % is the rule, but you can make it work on 30, but just know it's going to be tighter. That's why we said that. But that's what you're getting to. If you're getting upwards, Michael, of 35, 40 %, you have to just say no, at least for a season until you can, I don't know, maybe get this house paid off, or maybe it's you working part-time and closing that gap on the mortgage and working it out like that.

Yeah, for sure. Now, it's a good question. I think that's always a hard dynamic, Jay, that we get a lot of people wanting to go down to one income, usually because of a family, and they've set their lifestyle as a two income lifestyle. And yeah, you take one away. The mortgage suddenly is a larger part of your percentage and all this stuff. That's one reason the rule of thumb of living below your means in general is a great idea. That's right. Because when you over extend yourself, even beyond two salaries, right? You're going into debt and all of this. Then pulling back is that much harder. So And if the bank, if you go to buy a house, you guys, the bank is going to offer you a lot more money- That's right. Every time. Than what you need to take. And so you really do want to be more conservative on these numbers so that it gives you options and choices. And if you know you want to be starting a family soon and one of you wants to stay home, and you're looking to buy a house, remember this, right? Don't build your life around two incomes if you know that it's probably not going to be two incomes for the next couple of years.

But all that's really... It's really hard, though. And then to do a mock budget, because we get this question a lot, if they can Be a stay-at-home parent.

Yeah, run the numbers for real.

And live it out. If you have the opportunity and the time to- Try it. Yeah, live one month with the budget that would be and see how it all feels, because sometimes people go down to one income thinking it's going to bring peace, and it actually brings more stress. And for a season, work to get out of debt and put yourself in a better financial situation and then come back home, and there's more margin and more peace and more enjoyment. So, yeah, a lot of different ways to look at it. And it values conversation, too, of what you want for your family, for sure. But also, we got to be adults to make the math work.

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Our scripture today comes from Isaiah 54: 10. Though the mountains be shaking, Shaken, and the hills be removed, yet my unfailing love for you will not be shaken, nor my covenant of peace be removed, says the Lord, who has compassion on you. The singer Pink. We got Pink. We got the Book of Isaiah, and the singer Pink. Love it. Pink said, You can't move mountains by whispering at them. Okay, Pink. All right. I guess that's true. I guess we just be a little more aggressive towards those mountains. Maybe.

I don't know. Also a mustard seed, I thought, but Is it conflicting with the Bible? I don't know.

We don't know where we get our quotes. We take them. Listen, we take them.

She's a fabulous singer. Yeah. Give her that.

She She dances. She does all the aerial trips. I have her that. Yes.

We'll give her that, not quotes.

All right. Let's go to Tracy in California. Hi, Tracy. Welcome to the show.

Hi. Thank you so much for taking my call.

You are welcome. How can we help today?

I left teaching. I was an elementary school teacher several years ago, and now it's time for me to go ahead and apply for my pension. I have a couple of options that are quite different, and I wondered if you could help me decide.

All right. What are your options?

Well, I can retire now at 60 on my application, and I will go forward with a monthly pension of about $1,700 a month. Or I could backdate to age 55, and that would lower my monthly to 1,135, but I would get about $73,000 to cash out, about 50 grand after taxes.

Fifty grand in addition to the 1,100 that you'll get monthly?

Yeah, that'll still go forward.

Okay. What other retirement do you have? I've saved.

And so my husband and I are debt-free, thanks to the Ramsey plan.

Good for you guys.

Yeah. I have about 360 in retirement investments. Okay. And his accounts have about 500,000 in retirement investments.

Good for you guys.

And then he will get his pension. That'll be about 7,800 a month plus Social Security. Sunday, and Medicare. Well, medical and then Medicare Sunday.

What's that amount to?

Yeah.

So 78 total for him.

Yeah.

That was including his Social Security and everything?

No, Social Security will be on top of that.

And how much will that be?

We're guessing not much. We're guessing probably 3,000 at the most. Three thousand? Maybe closer to.

And you have some Social Security as well?

No, I will not. I didn't qualify for that. Okay.

That's 10,800. What's your monthly budget? What's it take to operate your lifestyle?

Well, We live in a very expensive part of California. So right now, with pets, et cetera, we're probably at about nine.

Okay. So if you had... His is $10,800. It takes nine to operate the budget, and that's not you ever touching a nest egg. And then if you had the $1,700, would that be more than enough? Well- Because I'm almost wondering, this 50,000 could be helpful for you as a nest egg. If you can get by on the 1,000, then- I probably would take the lower payment, but getting the lump sum of the 50, because then you get to invest it, Tracy, right?

With a pension, you don't have a lot of control over where they're investing it. So if you get this 50,000, you guys could put that in a great index fund or something. You know what I mean? And you may not even have to touch a lot of this retirement just because of his pension and yours. But if you need to, that's why it's all there. But if you got that 50,000, you guys are on the upwards of a little over $900,000 on your own, which is incredible. And with your house and everything, I mean, yeah, you guys are baby subs millionaires, Tracy. You're exactly what we talk about. I mean, you're a teacher. I mean, it's phenomenal. So I almost would want more control over the pension and the amount. Sorry. I want control, so I would want it as soon as possible so that I can turn around and invest in something that I know I'm pretty guaranteed of what I'm putting the money into, where the pension, you don't really have a lot of control over that. So I would opt for the latter, getting 1,100 with the lump sum of what it'll be, 75 but 50 after taxes.

The extra 700 is incidental for you, I think.

Okay. I guess I didn't consider investing because we already had money put away. So I didn't know that that's what we should do with it, and I was afraid that if it comes to us, it'll be gone. Whereas the larger monthly pension would continue for my life.

Well, I think it's the opposite. I think that $700, if you add it to your monthly budget, it's going to get piddled away on dog food and other things. But the 50,000, I mean, if you turn around in the moment you get it, if you invest it and put it with your other nest egg, that's going to go to work for you in far greater ways than that $700. Because you weren't going to invest that $700 a month. You were going to likely spend it on lifestyle, right? And you said that your lifestyle ticks right now on 9,000. So with your husband's pension, his Social Security, plus your $1,000, you're already at 11,800 a month, which is basically more than what you have now.

And that's not touching your retirement. And you guys have other savings, right? Just Do you have other savings? Yes. That's just an emergency fund on the side? Yes. Perfect. Yeah. Tracy, you guys are doing great. Way to go. Either way, you're going to be fine. So just hear me say that. If that just keeps you up tonight, then choose the first one. Either way, totally fine. But if it were Jade and myself, this is what I would choose. That's what we do. All right, let's go to Olivia in Wisconsin. Hi, Olivia. Welcome to the show. Hi. How are you? We're doing great. How can we help?

I was wondering if I should be paying off my student loans while I'm still in college, or if I should keep taking them out and wait until afterwards.

What would you be paying them off with? Do you have income?

Just other side income money. Both my fiancé and I work part-time.

Okay. So if it were me, I would be saving to cash flow as much as you can for the remaining college and not take out any more loans and see, Okay, what do we have to cash flow to not go deeper in debt? And then once you graduate, you'll have six months until those payments start hitting, and then you guys can tackle that debt, or you tackle. It's your fiancé, but I know you guys probably will be getting married. How much do you have in student loan debt?

I have about $10,000, and he has about $20,000.

Okay, he has $20,000, you have $10,000. And how much do you have left in school? How much time?

We both have two and a a half years less still.

Okay. And what's it cost per semester?

Per semester, for me, it's about five with financial aid and whatnot. And for him, it averages about 10.

Okay. Yeah. So I'd be focused, like Rachel said, on how can I cash flow this every single semester so I'm not going further into debt.

And cash flowing my portion. You guys don't need to be paying on each other's tuition until you are married. So So that's a call we get Olivia, where they're like, I have $30,000, but I helped my fiancé get through school, and we never ended up marrying. So I would be separating these. So whatever work you're doing goes towards your tuition. Whatever work he's doing goes to his. And then once you guys get married, do you all have a date set?

Yeah, it'll be May of next year.

Beautiful. So after May, then you guys can combine everything. Are you guys making enough to to live off of being full-time students?

Yeah, we take our extra loans for that, too, as well. We make about 3,000 a month.

Wait a minute. That's not made money if you're taking loans for it.

We want to stop that. Do not take loans to be living off of. You guys need to be cash flowing your lives. And if that means pausing school for a little bit, then we may need to do that. But we don't need to go deeper in debt for lifestyle. So you either need to find and be working more or just pump the brakes on the tuition because you guys may not be able to afford it right now. Thanks for the call, Olivia. Well, Jade, great show. So fun. Always fun. Thanks to all the guys in the booth. And remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.