Transcript of Short-Term Sacrifice Leads to Long-Term Financial Freedom New

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Normal is broke and Common sense is weird, so we're here to help you transform your life from the Ramsey Network in the Fairwinds Credit Union studio. This is The Ramsey Show, and I'm Rachel Cruze hosting this hour with my co-host of Smart Money Happy Hour and bestselling author George Campbell.

We're pre-gaming because we're actually filming Smart Money Happy Hour right after the show.

After the show, that's right. We usually do episodes, we tape them on Mondays, and when we get to host together, it's the best.

4 hours with Rachel Cruze, that's a blessing.

What a gift.

Let's help some people.

George, you are welcome. You are welcome. All right, give us a call at 888-828-1111. 855-225. And we're going to start off with James in Denver, Colorado. Hi James, welcome to the show.

Hey guys, thanks, thanks for having me. I appreciate it. How are you doing?

Hi, we're doing great. Thanks so much for calling in. How can we help?

Yeah, so, um, I guess my question— I'm 33. I've been very diligent about saving since junior high. Um, I finally Crossed the millionaire, I guess, threshold.

Nice. Congratulations.

About to buy a house cash. Thank you.

Wow.

Mainly because, well, yeah, I just don't want to, don't want to have a mortgage. Rates are a little bit higher and I could probably make more money having a mortgage and leaving it invested, but just to sleep a little better at night. So I'm going to do that. I have quite a bit set aside as far as brokerage, Roth, traditional. But my ultimate goal is to kind of quote-unquote retire early, not to be done working, but just with a traditional job, do things I'm a little bit more passionate about. I do some public speaking. I have a very unique situation. I'm quite disabled, I guess. I'm still working full-time. Um, but I do some public speaking and trying to figure out when I can kind of step away from a traditional job, rely on my investments and the little bit of income that comes in outside of that. I think that with what I'm doing, it's going to grow and provide a higher income later. Um, it's just not at the moment. So just trying to figure out that kind of freedom number.

Cool. How much do you have right now in that brokerage account?

Uh, $435,000.

Awesome. And you said you're 33, so you've got a ways to go before accessing those retirement accounts. So that, that brokerage account is that bridge to fund the gap. And so I would continue putting money into that. Now, when can you officially use that to cover your life? Well, there's about 1,000 variables that, you know, we don't have access to right now. We don't know the future, but, you know, you want enough in there that you could pull a percentage off of it and you're not going to run out before accessing those retirement funds, especially if, you know, you might have a gap in income for a couple of years as you get this new thing off the ground.

Right? Right.

Do you know what your expenses are if you looked at per year, if you don't have a mortgage, but factoring in the fact you still own a home? So if something breaks, right, that you, you have the ability to fix it. How much would you need to live off of, do you think, per year?

I think very conservatively, I could do it off of $30,000 to $40,000 a year. I would like much more than that.

Yeah, I was gonna say, like an actual, 'cause I would want this situation for you, James, to be realistic. Like, that is one thing kind of about, not that you are quoting the FIRE movement by any means, but that idea that like, I'm gonna live on nothing, I'm gonna save where I can just so I can retire, and then your standard of living is just so low that there's almost like—

Your quality of life suffers.

Yeah, no enjoyment, right? So like, what would be a realistic, like, I, this is the life I would want to live comfortably and good, nothing crazy extravagant, but definitely like I don't have to be thinking too much about money because I have enough. What would, what would that number be then?

I know $60,000 to $80,000 would do that because on an $80,000 income now, I'm saving close to $45,000 a year.

Okay. Okay.

So I, I know that I could do that. Yeah, I would like to have nicer things and do—

sure—

more, but let's dream big.

Yeah, you know, Yeah, yeah, if I have to live on rice and beans, continue to, I can. So I would say $60,000 to $80,000 would be a pretty comfortable number.

Would be that, yes.

Where I know, yeah, when I'm not saving an additional $40,000 a year.

And you said you had some income coming in. Was that from disability?

No, I'm employed full-time.

Okay, and what do you make now?

$80,000, probably $10,000 bonus, and maybe $20,000 with what I do on the side. Cool.

And you're single?

Yeah.

Okay.

No kids.

All right. Do you have plans on the horizon to maybe get married one day?

Oh, it's not looking like it. I, um, if it happens, it happens. It's nothing, nothing in the pipeline.

Okay. I'm just trying to factor in your long-term future. And I have seen a lot of these, the FIRE guys out there, they sort of go, well, get "Getting married and having kids is actually a deterrent to my financial plan." I go, "Well, your life sucks if family is a deterrent to your financial plan." So I just want to make sure that you were thinking bigger in terms of your life in general, not just with the dollars. But based on what you told me, I mean, $1.5 million in that brokerage account would definitely function.

I had $1.6 million.

Look at that!

Look at that, George!

Great minds think alike. That's just a gut. That's just like, if you had to aim at something, I would aim at $1.5 million. And with your income, you'd probably get there in the next, my guess is, I don't know, 10 years.

Yeah.

Does that sound accurate?

That's exactly what I had figured. So I'm pretending like I have a 15-year mortgage and I'm paying myself into the brokerage $1,500 a month.

Fantastic.

And so I kind of figured, yeah, I kind of figured 10 years. If I get real aggressive, I'm hoping to do it in 5.

Yeah, and you might be able to. And honestly, James, your income might be going up more, right, throughout these years and everything. So you may hit it, you may hit it earlier. But I do, I think that's a great next goal, especially for people. When my husband and I, we literally had this same conversation. I think I was telling you about this.

Yeah.

At the beginning of the year, just looking at like kind of our next big financial goal, 'cause we put in a pool 2 years ago, which was like a big thing we saved for. And then it's like, hey, what's like the next thing? Yeah, and there's kind of this like, crap hit the fan number.

The freedom number.

The freedom number. You call it the freedom, I don't know, kind of like crap hit the fan. I don't know, everything just goes and you're like, what can I do that I could just walk away and I could still enjoy my life? And yeah, and we ran that out and that's our goal. And so we, yeah, so we're shooting for that. And so James, I think that's great, especially you'll be on Baby Step 7. You won't have a mortgage, which is insane that you paid cash for your house.

And you're just maxing out investments.

Yeah, which is—

Non-retirement.

So, I mean, just so smart. And again, don't feel like you have to deprive yourself completely.

Enjoy your life now.

In the next year, 10 years, have some fun.

Go on a date, go on vacation.

Yes, enjoy some of it. Upgrade that house. But yeah, but that's kind of a, that's a really great next step, especially for people out there who are in Baby Step 7, I think, is to have that number.

Oh, and I wanna encourage James as well to not wait 10 years to go pursue the thing he wants to do.

Yeah, that's true.

Do it now, unless you sign some sort of non-compete that says you can't go public speak. I would just make that your side hustle. And eventually what might happen is it overtakes your income.

That's right.

Over time. And then you decide to leave 3 years from now and go do your thing full time. Because what breaks my heart is the FIRE people out there. They go, well, I'm going to go do something I'm passionate about one day. Like, well, just do it today. Go do the encore career now instead of when you're 55.

Right.

And exhausted.

And especially if, you know, you're miserable in it. Like, I think there are some people that are wired more of like, hey, I have a great job. It's not like, quote unquote, my passion, but I'm really good at it. I get paid a lot. And so I get to like use that money to, you know, have a great life. I think there's some of that people, and then I think there are some that are like, no, I wanna do what I love, but then sometimes they're broke when they do what they love all the time. And you're like, well, you have to make money and survive. So it is, it's that like beautiful point of what are you good at? What are you passionate about? And how can you create a great life around that? That's like the career, just like mwah.

And he might be able to do that in the next year.

Chef's kiss. Is that what the kids say?

I don't know if the kids say that, but—

Is that right?

I like it.

¡Hola!

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Up next, we have John in Pennsylvania.

Hi John, welcome to the show.

Hey guys, uh, how are you?

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

Hey, um, wow, this is crazy. Sorry. Um, so I have, um, a short question, uh, look, very short story behind it. Um, so my wife and I, um, we're— I'm 31, she's almost 30, um, but don't tell her I told you that. Um, we would never, we would never The only debt we have other than our house, um, is like $10,000 left on a car loan. Um, and that's it that we realistically could pay off pretty shortly if we just, uh, rice and beans it. Um, but my question is, uh, so I have a guitar that I bought for a couple thousand dollars like 10 years ago that is like pretty rare, one of one. And, um, someone recently offered me $12,000 for it, which is pretty nuts. Um, I'm just less sentimental than I used to be. I'm wondering if I should just get rid of this thing while I have the highest bidder, or if I should keep it as an asset. That's where my thoughts are right now, just trying to figure out the right next move.

Wow! So, you bought it for a couple grand, now it's worth $12,000. You've got $10,000 in debt. You're like, "I could sell the guitar, be completely debt-free today with $2,000 left over." —but you'll be guitarless, and that will make you sad. Right. You'll be like, "Did I make a dumb move? This could have been worth $20,000 if I waited." Because it sounds like you're looking at it as an investment/asset, and it's less so, "This was my grandpa's guitar." Yeah, that's what I'm wondering.

Is the sentimental value not really there as much, is what you said? It is more, you see it like what George just painted of like, "Hey, I could get some money out of this." Yeah, I bought it from an artist, like a musician.

So it's not really like dad or anything like that. That.

Um, so is that where the value is because the artist owned it?

So it was owned by, um, I— the guitar is the— it's a Gibson, um, signature model of a, uh, famous like punk rock guitar player, uh, from the band Blink-182.

Oh my gosh. Oh, George, George, it can't be Blink-182. I think there's a person in this building who might buy that. Maybe at this desk.

You might be getting an offer of $12,001 after this show from someone sitting here. That's pretty cool.

I was a little sad that John wasn't on, but also glad because he would immediately say, "No, don't sell that." Oh no! He would be a little more biased.

You're talking to the guy who told someone to sell a horse. I'm never above selling a guitar to get out of debt. But your numbers here, you're going to become debt-free pretty fast. How many more months until you guys are completely debt-free if you go hard at this?

If we really went hard at it, maybe 6 months at the most, really.

OK, so after 6 months, you're debt-free. Let's say you have the emergency fund another 3 or 4 months after that. Would you still consider selling the guitar just to have the extra cash, or would you say, "No, I'm going to hang on to it forever"?

Yeah, if there was no debt, what would you do with it?

Yeah, I feel like I would hold on to it because I could always make another $12,000, but I could probably never get this again.

I think I would hold on to it.

Yeah, I don't think it's on— nothing's on fire here. If you were like $150,000 in debt and you guys made $40,000, or this was going to clear a lot of pain in your life, but it sounds like you guys are on track to do this without really, you know, affecting your life right now. So I would say hang on to it.

How much do you guys make a year?

So I'm self-employed. My wife works part-time as a nurse. We have a couple of kids. We're around $100,000 to $125,000, which I know it's a big window, probably like $110,000. Okay. Okay.

Well, my question is, why aren't we knocking this debt out sooner? I would put some gas on this in other ways.

Get out of this in 3 to 4 versus 6.

Yeah, yeah, we definitely could. I knew that question was coming. We just started EveryDollar, so we're— Oh, good.

So here's my caveat. If you pay off the car in 90 days, you get to keep the guitar. How about that? Okay, deal.

Pay it off in 3 months.

Boom. See, I like, I don't know why, there's something about being human. I just need to, to dangle the carrot and put some gas on my financial plan. And I think that helps me go, "If I want to keep this guitar, I've got to go a little harder at this." And it's $10,000.

If it was like a nice car that would bring like $120,000, you know what I mean? Some of these like crazy antique cars. Like, if it made a huge dent, I feel like I'd be more apt to be like, "Get rid of it." Or if you were just in a dumpster fire situation.

Yes, and it was like, you got to clear everything.

Nothing counts anymore in life except for this.

But on the spectrum of dumpster fire to okay. That's right.

You guys are much closer to okay. Yep. So, uh, I think I'd keep it, John. Yeah. Oh man, so good.

That was a great concert. John and I went to that concert.

I know, we had a great time.

It healed my inner child just like Backstreet Boys did for you.

It healed me.

I know, music is magical. All right, let's go to Holly in Charleston— oh, West Virginia. Hi Holly, welcome to the show.

Rachel, it's so good to talk to you. Oh, thanks Holly.

George is not here, just me.

I'm I'm just honored to speak to the both of you today. I've been so excited about trying to call all day, and I finally got through. Oh, um, so glad. The Lord willed it. Yes, he did. Amen to that. Um, so here's, guys, here's my situation. Um, I have mental health concerns that, um, have not forced but coerced me to stop working and do intensive, intensive therapy. And because of that, I'm not working, but I have a family member who sends me $1,500 a month, and I was wondering, would that be— would it be possible to start the Ramsey Plan with a fixed income?

With that small of an income in your situation, I'd probably say not right now. I think I would get into a place mentally where you are able to engage the world in a sense of like that you are healthy enough to start working, have a job, right? And all of that in order to really probably go at this. Um, because how much, how much consumer debt do you have?

Uh, give or take a little bit, I think about $5K. So it's not bad actually. Okay. From several years ago. But right now I only have probably not even $5,000. Um, but I do have some, enough, enough to make me a little bit concerned. But not terrible. Yeah, it's $5,000.

Is it credit card debt? What kind of debt is it?

Uh, no ma'am, it is medical and then a tuition bill from the school I stopped attending. And then, um, two, uh, it was for Verizon and T-Mobile. Okay, uh, some phones. When I stopped my contract, they had a final bill, so, okay, um, I just haven't been able to pay it yet. Yeah.

Um, how much is your expenses every month? Because how are— I'm just wondering how you're going to live on $1,500.

Yeah, in West Virginia, as you can probably guess, living— cost of living is lower than most places. Um, my rent is $700. My, um, my electric is about $120 a month, and then my cell phone— my Wi-Fi is $50 a month, and then my cell phone is $45 a month. Um, I don't have to pay for water, sewer, trash, none of that. But, um, that's basically where I'm at. I'm left with maybe $500 $1,000. Okay, okay. Left over the month, and I have to spend that on groceries. So I'm sure I really am in a pickle, but I am very grateful. I'm really ungrateful to have a family member who cares enough about me while I get there. It's very kind. Like, the intense, extensive therapy that I need, that I truly need.

Are you paying for that on your own?

Uh, Medicaid. Okay, okay.

And is there an end date, Holly, to that program that you know? That, you know, is it like a 90-day or a 6-month or a 30-day?

The one that I had a referral to, I just finished one that was 90 days. I finished it, got a certificate, made me very proud of myself. I stuck with it. Yeah. And then they referred me to— they referred me to another one that's 12 months long. So— oh wow. Okay. Yeah, yeah. And it's, it's not even for sure that I got into that. I have to have a bunch of consults and a bunch of tests and things like that before they even accept me. So I'm just kind of hoping they— hoping I get into it, but no guarantee.

And waiting, okay. Yeah, so I think, yeah, from the, I think from the financial perspective, I think my goal would be not getting into any more debt, staying current on all your bills so you don't get behind, and then maybe making some small goals towards paying some of this off.

You might be able to negotiate that medical debt even with the little bit you have in savings. Yes, possibly. Say, this is all I have, will you take it?

Yeah, because if you can get some traction, a little bit, even if it's a couple hundred bucks extra a month that you kind of work your way on that smallest debt, that actually may give you some level of, you know, good energy, right? Of some confidence, yeah, of what you're doing. But yeah, I would take care of yourself, Holly. Get yourself in a good place, and it sounds like you're doing that.

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Rachel, hi George, thanks for taking my call.

Absolutely, how can we help? Um, I have—

my wife and I, we have a lot of concerns, but I, I can narrow this down to, uh, one or two at this point. We're 53 and 54 years old. Late bloomers as far as creating a good income, and we've developed, uh, we've collected a lot of debt. Okay. My wife graduated from law school not too long ago after dropping out of high school. She went back to school and got her law degree. Um, we, you know, accumulated a lot of debt there, um, about $215,000, $220,000. Okay. Uh, that's just the beginning. Um, uh, we have a home that we owe 365 on, and it's worth somewhere in the mid-fours, uh, maybe a little higher than that. Um, we have a lot of other debt that we've accumulated over the years. Um, so other than the school loans and the house, probably another, um, $150,000. Are there cars in there? Uh, there's only one car, um, sitting there right now. It's about $5,000 left, and that's the thing that got me calling you guys because I had the urge when I looked at that amount that was owed. I was like, hey, it's worth more than that, and I can go trade it in and get another car.

And then I was like, what are you, stupid? Um, you want to get another payment? And, uh, and so I decided not to do that and start looking back into Ramsey program, and it's brought me here after a couple of weeks. My wife's not quite on board with me yet because although she's got that attorney job, she— it's only been a prosecutor's pay, which is less than what I make as a manager at a warehouse club. What's your household income today? Net, we make almost $10,000 a month. That is after— that is our take-home, but that is after all the insurance. I mean, I max out everything on my paycheck really because— You're talking about investing? Insurance. Up till now, up till recently, I was investing $1,200 a month into my 401, but I stopped that because I'm going to start putting it toward debt. Good. I've already maxed out the— for this year, I've already maxed out my 401 match in my company. Does a gratuitous 6% on top of that. So I'm letting them add to my 401 from here on until debt gets cleared up. So the question— the questions I have are twofold, really.

Do I, um, do we need to sell the home? Uh, do we have to do that? We're living in a home that's quite frankly too big for us, but we we bought it. It was our first home we bought 3 years ago, and we wanted to have enough room for our family, our kids and grandkids to come over. What's your mortgage payment? Uh, $2,600.

That's right in line with our 25% parameter. So it's, it's not gonna—

it's real close.

You'll have like $70 grand in equity, maybe if you're lucky, maybe $50 net after fees to throw at your $370 in consumer debt. So that's where I'm doing the math here, going, you guys bring home $120, you got $370 in debt. How much can you realistically throw at all of your debt what you're at right now per month?

I'm still trying to collect all the data because we have not done a good job, obviously, of controlling our spending. We pull out a card and we spend and we don't pay attention. We go, "Hey, we still got money in our account." Mm-hmm. And that's how we live. And we've been living according to payments and not according to debt. What can we spend each month? So the other thing is my wife's not on track with this yet because with her job, she has got an ethical issue at work. She could be suing her employer and possibly not.

Suing a law firm?

That feels fun. Yeah, suing the county. Okay. Suing the county that she works for because there are questions in their ADA, you know, Disabilities Act, that they're not following through with and also questionable practices that put my wife's law law, um, her law degree or her bar.

My question— my question about her, just real quickly, does she see another path of making a ton more money in the next 5 years with this degree that she paid $220,000 for?

Quite possibly. But, but right now, she— like, I try to talk to her about this stuff and she says, I I'm 100% focused on trying to figure this thing out at work. So, the conversations just aren't happening. I am ready and raring to go. I will go live in a trailer. I'll go live in an RV if I have to.

Yeah, you're done.

Yeah, you're so done with all this. I'll cut wherever I need to. My wife's not there yet, and I knew that that was the biggest key. So, I called ELPs to talk to them, and I was looking specifically for somebody who could be a financial advisor and a financial counselor. Mm-hmm. To pull the trigger on that, but my wife's not, and I don't want to make decisions without her. Sure.

Do you guys work together, John, about money? Like in the past? Like, I'm not talking about the last 6 months.

We ignore it. Okay. So when one gets fired up, the other one's not. Yep. Yeah. And so we flip-flop through that.

Yes. Your whole time. Okay. So that's been the pattern for— I mean, how long have you guys been married? 31 years. Okay. So breaking a pattern of financial habits and unmarital habits with money, it's hard to do in a really quick way, right? You've hit your emotional breaking point, which was why this makes it easy. We call it the "I've had it" moment here at Ramsey. People do exactly what you do. They wake up one day, and because of one small situation or a crisis, they're like, "Holy crap, I'm done." Like you just, like you said, you're like, "I will go live in a trailer. I'll do whatever I have to do to get out of this." And she may not have to hit it to that extreme, but that's, you know, obviously that's why you're wanting to change is because you have hit that moment. And so, So, to expect her to flip a switch automatically with you, obviously, probably from a relational standpoint is not realistic. But like you said, it is needed. And so, I do want her to feel the weight of what you're carrying. Because as her husband, you have felt a massive level of now responsibility, a massive level of stress, and anxiety around this that you want free from.

And so, what can you all do as a partnership? Even if she's not to that point, my prayer is that she can come around you, as her husband, to say, "Okay, I have a lot of stress at work, john. You gotta give me 14 days just to kind of get a plan in place, and then my head will be clear, and then we can move forward." She can't live in the clouds, right, about money for the rest of her life. So, I almost would have some kind of like, "Hey, Hey, I'll give you some grace right now, but it's kind of on fire, our situation. So in the next 14 days, we have to sit down and address what we're gonna do about this.

What if this drags out for 2 years as you guys get foreclosed on 'cause you can't keep up with your payments? Exactly. It's gonna become her problem even if it's not right now. And the napkin math, John, to help you, let me just show you this. If you pay $2,000 a month toward your debts, it's gonna take you 15 years. Yeah. That's $2,000 a month. That's probably money you don't have right now to throw at all those debts. and so we act—

I think we actually do. How much can you throw at it?

Because if you can do $7K, $8K, now we're talking 3 to 4 years.

Well, because you stopped the $1,200 of your 401K, so you can add that. And then any level expenses that you can cut, you could probably cut another 3, right?

I would make it a goal to be out of this thing in less than 4 years, and that's going to take $8K a month getting thrown at this debt, which means upping the income. And maybe selling the house is just part of that game plan to clear some of it, working extra and all of it.

Yeah. Yeah, you guys do have that long road ahead and getting her on the same page and you guys talking about this is going to be a big part, right? You can't cut $3,000 out of a budget you used to spend without your spouse really being on board. And so her sitting down and you guys creating a plan together is gonna be crucial. And I think that she will have that ability to do it.

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Next up, we have Joe in Indianapolis. Hi Joe, welcome to the show.

Hey Rachel, hey George, how you guys doing?

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

Good. Yeah, it's a blessing to talk to you. Um, I'll keep it brief here, so So I actually get married in 12 days. Oh, congratulations. Thank you. Thank you so much. Yeah, it's been a long engagement, about 2 years. So we are more than ready. But we're going to be obviously combining finances and kind of tackling debt. So I would just like some wisdom and experience from you guys in how to just set ourselves up the best we can financially heading into this new chapter. Love it. Awesome.

And you both are on the same page that we're doing this? Yeah, yeah, it's about to be our debt, our income.

Absolutely. Yes, absolutely. That's great. How old are you guys?

Uh, we're 25. Okay, great. And how much debt will you guys have combined going in?

Um, so, and I, I just bought a house last year, so, um, consumer debt, I have about $17,500. Um, that is a student loan and medical. And then she, uh, is— she will be a chiropractor So she has about $190,000 of student debt that she'll be bringing in, and that's all that we'll have.

Okay. And how much do you guys— will you be making, do you think? Or is she, is she just graduating school or is she working?

She, she's just graduating, so she— we think that she'll probably make about $100,000. I'm talking to the, the chiropractors at the office that she's, uh, essentially doing her clinicals at right now where she will be working. And then I'm self— I'm self-employed uh, and I've only been working full-time in the workforce for 2 years now. Um, last year I made about $181,000, and I'm on track to do that this year as well.

Good for you guys, amazing.

Thank you very much. Great. And thank you. Income is going to help because you're now going to be making $281,000 trying to pay down $207,000. And so you got a big, a big pile here, but you got a big shovel to clean it. And so the goal is combine the income into one bank account. What my wife and I did is I had a checking and I just made it a joint checking, added her, and then we shut hers down. It was that simple. So joint checking, a joint savings, and use any, any money you guys have, any savings, money from the wedding that isn't used for the honeymoon or whatever to get your life started, and start throwing that at the debt. And then stay on a budget and keep living like you're broke. Don't get high on the hog just because she's working, making $100 grand now. Keep living like broke college students and just throw every cent at this debt until it's gone.

Yeah, it's wild. A question I had is I have about $150,000 in my, just a savings account, personal savings things. Um, and I, I think I know the answer to this, but should I write a check for $17,500 today and just pay everything off?

Yes, yes. And then write another huge check once you guys are back from the honeymoon and clear a bunch of these debts.

Okay, that's what I was thinking.

What's the money for, the $150,000?

Uh, that's— it's not for anything really. It's just what I've saved up working the last 2 years. And yeah, it's just accumulating in my account.

So do you have—

are you gonna have a hard time letting go of all of that to pay down her You know, I think when I first started making, like, I was a broke college student, first started making like quote-unquote like real money, right, in the adult life, I think at first, like probably 4 years ago, 3 years ago, I was a little bit hesitant, but I'm more than willing and wanting to just start, you know, from a clean slate. So I am willing, yes.

I love it. Well, if you use that, now you're down to $74,000 left to pay off, making $281,000, and now we're done in a year.

Better.

And so you see how that speeds us up? And guess what? You're going to be able to build some serious wealth making $281,000 with no payments for the rest of your life. Right? Yeah. Saving up $150,000. That's a lot of money, but you'll do it pretty quick with no debt payments.

Yeah. I like that. It's much easier to hear that from, you know, from somebody with your experience.

It's what I would do if I was in your shoes. Yeah. So it's not just like, well, it's what the Ramsey plan says. It's what I would do is clean up the debt as fast as possible with all the assets you guys —have. Yes. I mean, that's what's crazy.

If you have $150,000 saved, that, yeah, and $200,000, I mean, yeah, it's $50,000. And if you guys made it an aggressive goal to say, hey, let's pay this off in 6 months, right? What's wild to think about, Joe, is, yeah, I mean, we can talk about the debt payments, but in 6 months, that's going to be, you know, in your rearview mirror. It's going to be more now going forward for the rest of your lives. And hey, how do we set this up well? Between two people who you will learn very quickly that your wife is not you. And you guys are gonna have opposite tendencies with money. You know, you both maybe grew up in different backgrounds when it comes to money. All of that will start to kind of filter in. And so, what I would say from a relational side is to see your spouse as a strength and for her to do the same to you because opposites attract. And sometimes that can actually create create friction and tension and conflict. But when you can actually pause and say, "Hey, actually what they're bringing to the table is a thing I'm probably worse at.

And so, I'm gonna lean on their strength in this area," and vice versa, right? So, there's gonna be those relational dynamics, yeah, that you guys will be working through throughout all of marriage, but you're gonna get good at it. And my prayer is that as you guys follow the Baby Steps and you get out of this debt, you guys save up an emergency fund, You start investing in retirement. Y'all are 25. You can start all of this in the next, God, year.

That is so wild to me.

It's gonna be crazy, like, what you guys are gonna build. So have goals, have really big goals of saying, hey, let's, yeah, let's pay off the house. Let's go on this trip. And maybe it's a generosity play of like, yeah, maybe like we have parents that could never afford this type of trip. Let's make it a goal to be able to take them or, you know, whatever it looks like. But have, always have something you're kind of shooting for and aiming for. With your money, because you guys make a lot of money, and you're going to be on the other side of this debt in the blink of an eye, if you do it, which I'm going to assume you are, Joe, to pay it off. And I think that moving forward is the big, is kind of that big glaring thing for me. What are you going to do moving forward?

Well, the biggest temptation after you get married and you're making $281,000 at 25 is to look like you make $281,000. That's right. Let's get some fancy new cars. Even if you had the money to do it, it's still wild. I know, I know. That's right. And your friends going, You, you spent $150 grand on debt. You could have invested that, bro. That's going to be your friends on the other side. And so you have to get blinders on going, no, these are the goals we set for our family. And that is to be completely debt-free, to give us options and flexibility so that one day, let's say she has a kid and wants to stay home. Well, it's going to be hard to do that. That's right. Using her income when you got payments all around you and a mortgage. So instead, build a life that has options and margin. That has margin.

Love it. All right, let's head to Devin in Omaha. Hi, welcome to the show.

Hello. Hi, I'll try to keep it quick. Currently on Baby Steps 4, 5, and 6. I make about $113,000 a year. Wife makes between $80,000 and $90,000. And then I run a small business on the side that brings— it fluctuates quite a bit, anywhere between $25,000 and $45,000 a year. Oh, nice. Okay. Like I said, we're on Baby Steps 4, 5, and 6. We're just wondering if we're to the point where she can stay home. We had plans of paying off the mortgage within the next 3 or 4 years, but we have a 2.5-year-old and another baby, and is it all right to delay that Baby Step 6 to cherish these years so she can stay home with them?

Yes, for sure, for sure. I would still keep a semi-aggressive goal, right? 'Cause if you went all the way to what the average person, if they have a 30-year, it's like, I'll pay it off in 30. We still want you to pay it off in, you know, you know, a reasonable time to have that. But if it slows it down by a couple of years, because yeah, if you guys have 2 babies in the house and you're like, listen, we want, yeah, we don't wanna be paying for daycare. You know, your wife wants to be home and you guys make $150,000 a year with just your income, the side business and all. I mean, I think it's a green light for sure for her to stay home.

Have you done the budget and crunched the numbers just based on your income?

Yeah. Um, not factoring just my income. I don't, I don't try to factor my side business in too much to our budget monthly, just cause that's kind of bonus on the top almost. Right.

Just make that the extra mortgage payoff money. How about that? That's fun.

Yeah. So we'll have about $1,000 to $1,500 left a month still.

And that's after investing 15%, money in college, paying all the bills.

So here's my next part on that. Um, I have a pension. You guys say to only count half of what you put into your pension.

Yes. So if it's, you know, 6%, you can count 3. But they still—

yeah, so it's 5, so it'd only be 12.5%. So it'd be— I could bump it 2.5%. But yeah, we're still contributing to 529s and then retirement as well.

That's the key, is if it's going to derail the Baby Steps, then we got a problem here. But if you can still do 4, 5, and 6 on your income, then it's green lights.

Um, the other thing was, is this would bump us above the 25% rule for the mortgage just a little bit, but But by the end of the year, we'll have about $100,000 outside of our emergency fund saved up. Would it be okay to recast the mortgage?

Yeah, throw that lump sum at it and recast. That'll bring your payment down. I mean, either way, you're gonna knock the payment, the mortgage out fast anyways. So you guys are in great shape.

Yeah, and congratulations, Devin. I mean, honestly, you guys doing this and paying off your consumer debt, having an emergency fund. That's why you do it. Yes, this is awesome. Options in life so you're not tied down to a job that you hate when you want to be home with your kids. And so, yeah, you and your wife have done a fantastic job. So we're, we're excited for her. That's so fun.

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Welcome back to the Ramsey Show and the fair Airwinds Credit Union studio. I am Rachel Cruze, hosting today with George Campbell. I was gonna say co-host, bestselling author. Say what you want. All the things, all the things. But we are here to answer your questions. So, give us a call at 888-825-5225. We have Lacy on the line in Phoenix, Arizona. Hi, Lacy. Welcome to the show.

Hey, thanks for having me.

Absolutely. How can we help?

Yeah, so my question is, I'm a single mom of 3, and I'm trying to determine if I actually should drop my emergency savings down to $1,000 to put that $9,000 towards my car loan.

Oh my goodness. Okay, how old are the kids? 17, 10, and 8. Got your hands full. I applaud you, Lacey, being a single parent. I can't, I can't imagine. I mean, And you're doing a fantastic job just calling and having a sentence that you're putting together. 'Cause I know it's probably so much, so much work. Okay, so— Thank you. You have $9,000 saved. I have $10,000. $10,000 saved. And how much debt do you have?

So I have my mortgage, which is $400,000. And then I have my car loan that's $40,000.

Okay. How much do you make a year?

A year? Um, my, my net take-home monthly is $7,300.

Okay, so that car— so you're— what is that, probably about $90,000? Yeah, a year. Um, yeah, you're right, that car is kind of right on the bubble of too much car for what you make. We always say you don't want anything with motors and wheels being more than half of your annual income, and so You're not quite there, but you are kind of close. So I'm just curious, have you looked at if you sold the car, what could you sell it for?

I have, and I've actually been going back and forth on this for a month or two. Okay. So I'm in an equitable position in the vehicle, whether I were to trade it in or sell it private party. So I owe $40,000. If I were to cancel the warranties, I would get that prorated refund applied to the loan, and I would be at $35,000. $7,000 to pay that loan off. If I sell it private party, I'm hoping— it appears I would get about $43,000. And I actually just this weekend went into a dealership and was quoted a $41,000 amount for trading it in. And so I— the reason I bought this vehicle is because I had been in an accident. My car was totaled. And I purchased the warranties because I basically have no maintenance, no, you know, no issues for the next 6 years. So that's the 150,000-mile powertrain warranty, and then it includes oil changes, tire rotations, all of that stuff. So I felt like I was getting a really good deal. However, I still have a $750 car payment. So I was looking at, okay, if I downgrade into something just a wee bit smaller for you know, $20,000, $25,000, then that'll drop my payment probably $350 a month.

Um, but then I'm not— why not sell it, net your $6,000, and then use, you know, $5,000 or $9,000 to purchase something used for now and then upgrade later? Because then you're completely debt-free, and with your great income, you'll be able to save that emergency fund up quick. You'll have $10,000 back in no time.

Yeah, and it just makes me nervous to not have that $10,000 in my savings account, because if they're, you know, for example, I had a dog emergency a few months ago that cost me $3,000. So if something like that were to come up, then I'm back to having to put something on a credit card, which I really don't want to do, right?

My question is, say you did George's plan, okay, and that means you only have $5,000 in the savings. If you didn't have a car payment, could you, could you find another— I don't know, I'm making this up $6,000, do you think, beyond, beyond the car payment?

I mean, in the position I'm in today, my, my monthly margin is about $1,100. So getting rid of that car payment, I am, you know, $1,800, almost $1,900 in monthly margin.

Okay, which means you could cash flow a $3,000 emergency between your $1,000 emergency fund Yeah. And that's just one month in.

And if you put that aside, then you could have your emergency fund built back up in 3 months.

Mm-hmm. So I hope you don't have any emergencies in the meantime, but if you did—

But if you did, you could have, yeah, you could cash flow up to $8,000 at that point if you kept $5,000 in, used $5,000 for the car, plus the $6,000, go get an $11,000 car. Yeah, I mean, you could make this work. It's just, it's transferring risk, Lacy, is kind of what we're looking at because You know, people feel safe when they have cash in the bank, understandably, but yet over here there's still money owed. So from a net worth perspective, like there's still risk there. So if you did the plan of selling the car, netting out $6,000, putting $5,000 with it, buying an $11,000 car, now you have no risk, right? You have an $11,000 car, but plenty of people drive $11,000 cars.

And you might drive that for less than a year. Yes. As you save up and then get a better car. And then a better car. The problem is when we drive brand new cars, our body says, "I need to have a brand new car forever now." And so you, I kind of like stair-stepping it up because you get used to that nice new leather smell and the fancy, you know, leather heated seats. And so I think there's something about sacrifice where you go, "I'm gonna drive this beater car and sacrifice for a short season," especially with your situation being a single mom.

Yeah, so I have no debt.

You have less risk.

I have no risk, no risk financially. Like, it is all you, all you. There's no bank tied. Outside to you saying, "If you don't pay this, we can come and get it," right? There's none of that happening. And so, there's something that's very freeing about it. And we've studied, I mean, tens of thousands of people, I mean, hundreds of thousands throughout the years, millions of people that have gotten out of debt and have walked their way through the Baby Steps. And we have just seen time and time again, it really is the fastest, most reliable way to build wealth. When you have no payments and you depend on your income, which is your largest wealth-building tool, and you, yourself, with the autonomy of just you, are able to stair-step you financially. And so, getting a car loan out of your life, a $40,000 one, 'cause even if it was $2,000, you know, that you're putting aside, it'll be 2, 2.5 years till you pay this car off. And that's a long time to have a $750 car payment. Right, right.

I promise you, you can afford the oil change and the tire rotation should be free with wherever you got your tires. So I think, you know, they'll sell you on those warranties all day and make you think this car is about to fall apart. And I go, well, maybe I shouldn't be buying this car if you're so worried that I need a warranty so bad.

You talk about this in your book, "Breaking Free from Broke." Oh yeah, I mean, most of the money they make is warranties and financing.

It's not from the margin on the car. That's why they hate people like me who walk in with a check ready to pay cash. And so I would get outta that warranty, bringing it down to 37,000, $47,000, go get your $43,000 for it. Take that $6,000 in profit, plus some for your emergency fund, and find the best car you can. You know, do your research on make, model, and get a pre-purchase inspection for $100.

Yes, get an inspection. So you know you're not getting a lemon. That's right. And Lacy, if you have a few friends that are good with cars, maybe some of your friends' husbands or something, I don't know, have them look at it too, right? Because it is a big purchase, a car, and you want it to be reliable. You want to make sure all those things are in check. And they, they are though. That's— I promise you, you can find a used car that has all those things. And yeah, getting out of this payment and freeing it up, it's pretty amazing what it, what it does. Yeah. But we're cheering you on, Lacy. You're doing a really, really good job. Okay guys, let me ask you something. What would it take for you to switch your bank? Because if you're still earning next to nothing on your savings, you need to check out Fairwinds Credit Union. And I know what you're thinking, it might sound like a hassle. Moving your direct deposit, updating bills, getting a new debit card feels like a lot. But here's what most people don't realize. Staying where you are could be costing you hundreds of dollars every year.

Y'all, the average savings account pays less than half a percent. So let's say, for example, you got $20,000 saved. You might earn around $70 a year. But with a Fairwinds High Yield Savings Account earning 3% APY or more, that same money could earn you over $600. And that's real money that you can use towards the Baby Steps. So don't let temporary comfort keep you stuck. Check out the Smart Bundle from Fairwinds Credit Union. You get a High Yield Savings Account, a no-fee checking account, and the Ramsey Be Weird debit card. Go to fairwinds.org/bundle fairwinds.org/ramsey to learn more and make the switch today. That's fairwinds.org/ramsey, insured by the NCUA. Up next, we have Valerie in Chicago. Hi Valerie, welcome to the Hi. Hello. Thanks for calling in. How can we help?

So we are currently in a multi-generational household. We just moved in not too long ago with my in-laws, but there has been some costly updates that probably should have been taken care of a while ago, but my in-laws are expecting us to pay for it, but they haven't fully given us the home yet. Does that make sense? Yeah.

When are they planning on giving you the home?

Um, when it's paid off. OK.

That's still a bad idea for tax reasons, but we can couch that for a second and talk about this multi-generational home. So is it just your in-laws and you guys right now?

Yes. There are 10 of us living here in the home.

Wow! So it sounds like more than that. Is it kids? Who else is there?

We, we have 6 kids.

Oh, okay. So how does this work? I'm curious because I've heard about these. Who pays who? So they own the house, they pay the mortgage, and then you pay them rent?

And then we're just paying the utilities.

So you don't pay rent? No. Okay. So you're living pretty cheaply and they're going, well, hey, listen, you guys are living here pretty cheap. The house is going to be yours. We think you should pay for these renovations. Yes. Repairs. How much is it? Yes.

Um, well, just for example, we had to order like a new, um, like a window, and that was like $900. So, but it had, you know, been needed to be taken care of before we moved in.

So they waited until you guys moved in and said, hey, a bunch of repairs to do.

That's fun. Well, kind of, but not really. But my husband—

go ahead. Well, I was going to ask, how, how did this all come about? Did they offer this as, you know, a great option in life and you guys were like, let's do it? Um, yes. Okay.

My husband got a job opportunity and so we moved back to his hometown.

Left to your own devices, would you guys want to have your own place No, my—

we, we want the multi-generational to, to work.

We want it to work. Okay, well then I would do a reset. If you really want this to work, I would do a reset on all things finances because it sounds like you guys never actually came to any agreements as to how it would work other than you guys pay utilities. That was pretty much it, correct? We need a whole lot more than that. And the thing about taxes I mentioned, if they give you the house house while they're still alive, then you lose the ability to have the step-up in basis. So if they bought the house for $100,000, when they give it to you, now it's worth $500,000. Well, you're going to owe taxes on all the gains. But if you inherited the house after they pass, well, now there's a step-up. And so the IRS says, "Hey, the house is worth $500,000." You got it at $500,000. And you got it at $500,000. So there's no taxes. So if you went and sold it within a couple of months, you'd have no taxes to pay. And so that's one of the issues with giving a home to your kids. It sounds like a really sweet thing to do while you're alive, but it's actually one of the worst things you can do from a financial perspective.

So I'd caution you against that. Oh, I didn't.

Which then complicates it, right? Well, how do you get the house? Well, you need to like buy it from them outright.

Or you all live there until they die. I mean, you know what I mean? From— Oh yeah. But if that, is that what you guys want though? You want a long-term life like this? Yes.

Yeah, that's what we're planning on. How old are the parents?

In their 70s. Okay, so listen, people do life different, um, and if this is how you choose and what you guys value and want to do, you, you do what you guys want. I mean, you're both, you're all adults. Here's my fear, Valerie, is that down the line, and we've heard crazier than what I'm about to throw out, I'm just making this up, uh, you You know, his mom passes away in 5 years, dad's 75, meets a woman online at 80. She wants to go and leave and sell the house, whatever, whatever. And you're 10, 15 years into this wonderful plan, something gets derailed. And for 10 to 15 years, you and your nuclear family have done nothing from a home perspective of building equity, of having your own, of saving for a home. Quote unquote, you're out of the deal now, in this pretend scenario. And here you guys are in your 40s or 50s, and you're starting from nothing from a home perspective, which is one of the— it's the largest purchase you make is a home. It's the thing that if you rent, it continues to go up. So, that avenue's not smart long-term.

I mean, it just puts you in a scenario that can be very sticky that you don't see right now, but could happen in 10, 15 years. Someone gets sick, right? Or, and you have to take care of them. There's additional—

Or they run out of money and now they're doing a reverse mortgage. Mortgage, and now you can't even inherit the home without paying this. And so, there's a lot of issues that could arise in the meantime.

This, it sounds, this is why doing deals with family can be a little sticky. And what I'm gonna propose is gonna sound probably a little heartless, but I would. I would almost write some type of legal contract that could hold up in court, that literally plays out. It's what we would do if someone did a partnership in business. We don't recommend partnerships, but if we do, we're like, you gotta think about at all. Addiction, divorce, you know, you go through all the things that could happen to put you guys in a bad situation, and you guys need to lay out scenarios to protect yourselves, um, for whatever that could look like in the future. So that's my only word of caution. That doesn't always happen. Sometimes there's crazier things that happen. Sometimes nothing happens and, and everything's fine. But we wouldn't have jobs if everything went according to plan for people.

Yeah, and they are willing to write something, you know, get something in, in written form, um, in case, you know, XYZ happens.

Okay. And then I would also come to an agreement on how repairs and renovations are gonna work, cuz you're gonna have more of this as time goes on. And so are you guys gonna cover it forever? Are we gonna split it 50/50? Yeah. That's up to you guys to decide. And if you wanna foot the bill for this one, but I think if it's $20,000 in repairs and they just neglected to do them, I don't think that should fall on you.

And then Valerie, you and your husband need to have some really healthy check-ins as well, because sometimes you get locked in a situation where you start to be really unhappy living with his parents. And again, maybe not next year, but 5, 6, 7 years, resentment plays up and, you know what I mean, comes in and it starts to erode you guys, right? Like, you just need to be thinking through all of that. Of this? Or if he gets another job offer, he got a job offer to move home. What if he gets an offer that would triple his salary and it moves you guys somewhere that you like really want to, but then you feel stuck in some situations, right? Yeah. At the house.

So, I would— Or they expect you to take care of them regardless of the finances. Yes. Because they are in their 70s.

Yep. So, I would just be, I would be looking at every possible thing and saying it out loud and you and your husband be in agreements.

And I would meet with an estate planning attorney. Attorney just to help you navigate this. Not out of like, we're not suing anybody, it's just more, hey, can you help us craft this in a way that makes sense for everybody?

Yeah, I think that would be great, and I would feel comfortable probably doing that.

Yeah, and they can walk you through those financial aspects as well, as well of what I mentioned of inheriting the house versus them giving it to you while they're alive, because that's also some pieces to think about. We get too many calls where someone calls in and they go, yeah, they just gave it to me while they were alive, and we go, well, you you have a tax bill on that $700,000 in gains from when they bought it in 1982.

Yes, yes.

Okay, how many bedrooms is this?

I'm just curious, with 10 people there. 3, 4, 5 bedrooms.

Wow. So are the kids all bunking up?

Um, no, just some of— just some of our boys, they're younger, and so they also have a bedroom.

But there's essentially 2 like primary suites, um, and the 6 kids are splitting 3 rooms?

Yeah. Okay. And then we have a baby with us, but also, um, there's potential to like make other bedrooms if we need to along the way. But it's a pretty spacious house. It's 7,000 square feet. Oh wow, this is palacio.

That's great. Okay, well, I wish you the best. I really do hope it works. Um, thank you. It sounds so good on paper, like Grandma and Grandpa are there, and, and Dr. Arthur Brooks, he's mentioned this this because he— his kids live with him.

Yes, grown kids.

And it's a great situation, but it's because there's healthy boundaries in place. Yes, it takes— everyone has to be functional.

You know, he studies this for a living too, which is—

you need to have some financial footing, have good boundaries, be emotionally, mentally, financially healthy for this to work. Yep.

And a lot of things— a lot of people go in blindly, not thinking about what could be, or don't address things, and that's when the dysfunction starts play out. So it can be a beautiful thing if it works, um, but a lot of times people aren't, you know, aware of all the traps. So just going into it, you know, eyes wide open is important.

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We wish we could get to every call here on the show, but if you do have a money question and you want an answer to your specific situation, make sure to head over to our website and use Ask Ramsey. So Ask Ramsey is our free AI tool that's built and trained on Ramsey principles. So we put in the past, you know, few years of shows into this, articles, books, everything coming out of Ramsey so that your question, your specific question can be asked the way we would answer it. Again, ask your question at ramsaysolutions.com or click the link in the description if you're listening on podcast or YouTube. All right, let's go to Wanda in State College, Pennsylvania. Hi, Wanda. Welcome to the show.

Hi. Hi, Rachel. Hi, George.

How you doing? Hi, we're doing great.

How can we help today? So I would like to know how one ages gracefully, financially speaking. I honestly thought the Lord would come back, but while we wait, the cost of long-term cost of care is astronomical and frankly one cannot afford. I feel like the country is not financially kind to the elderly requiring care. And the life that we save for without debt, investing smartly, is just gone in a poof because the cost involved with any type of elder care. So, I'm 56. My husband is 57. And after having witnessed what my parents parents who have since passed on when they needed care. It makes me nervous for me and my husband and even my in-laws. So how does one plan for that?

Well, it's a great question. Um, so there's a couple of things you can do. There is long-term care insurance. Have you looked into that?

I, I've been thinking about it. I honestly have not, and I'm not sure like how old I need to be to even invest in that?

We generally say once you turn 60, on your 60th birthday, as a gift to yourself, I would look into it and purchase a policy for you and for your husband, because the earlier the better, the lower the premiums. Got it. Because that's the one thing that could tank you, is that long-term care. A nursing home stay, you know, can run over $100,000 a year easily, and the average stay is 2.5 years. So you're talking quarter of a million dollars out of your nest egg, if you even have it, to cover something like like that. Correct. And so it's worth it even though you're like, oh man, it's an expensive insurance. Yes, but you're not gonna have it forever. And hopefully, quote, you know, fingers crossed, we can get you self-insured to where your nest egg can cover that easily without, you know, depleting your retirement. Yep.

So that was gonna be the next option. So you can do long-term care insurance. And then the next option is, is you, Wanda, you and your husband. So where are you guys at financially?

Oh, we've got, um, a couple of retirement accounts. We're still working. Um, um, just about to pay off our house at the end of the year. So we're, we're doing okay and everything.

Um, how much are in those accounts?

Oh goodness, let me think. Um, he has like $300,000. I think I might have $400,000. I don't even know how they're split out. I kind of glaze over when it comes to investments and retirement. Um, we have about almost $100,000 in the bank.

Okay. So yeah, you guys are around $800,000 and then your house is almost paid off, which is so exciting.

Correct?

What's that worth? Probably on the last time we checked, somewhere around $250,000 to $300,000. Okay, great.

So you guys are net worth millionaires.

Okay, maybe. That's just the math.

This is maybe. That's the math, Wanda.

I think you are. It's not an opinion. I think you are, which is very exciting. Based on accounting standards.

Your assets minus liabilities would put you over the million-dollar mark, which is awesome. That's a great milestone. It's not to say you can go retire tomorrow, but at least you're heading in the right direction compared to most of America. So I would continue to invest. Once the house is paid off, I'd start maxing out those retirement accounts and build up enough of a nest egg where $250,000, you know, is not going to tank your retirement. You can still retire with dignity and know that you have those costs. And again, at that point, you still might want long-term care and let the nest egg continue to grow in the meantime. Maybe you need it, maybe you don't, but either way you're covered, not wondering, "Is a health scare or a nursing home stay going to ruin us?" Going to take us out, yep.

Alright, let's head to Catherine in Virginia. Hi Catherine, welcome to the show! Hi, how are you? Hi, we're doing great! How can we help?

OK, so I would like to know, should we increase our living expenses while we save up a down payment for our house?

House. Um, should you increase your living expenses? Yes. So spend more per month while you're saving up a down payment?

Yes, because we're welcoming our second baby in September, and right now we're living in a studio apartment so that we could save up quickly for, um, the emergency fund while I was pregnant. And our lease is about to be up. Okay. Yeah.

Um, how much do you guys bring home month?

Um, my husband brings home $5,320 per month.

Okay, perfect.

And are you home with the baby? Yes, we have a toddler. Um, she's 1 and a half.

Okay, so great. Um, so that where you guys are in Virginia, what would be an average rent for— I don't know if you guys do like a 2-bedroom or a 3-bedroom or a small home— what, what are you looking at rent rent-wise?

Um, it seems to be about like, for something decent, um, $1,300 to $1,500.

Okay, yeah, yeah, I would say that's pretty doable. I mean, we say 25% of your income is what should be for living expenses, um, or for— I'm sorry, for rent or mortgage. So that's about right.

Yeah, $1,350 or so would get you right there. And if it's, you know, 26%, it's not like anything's on fire. It's just a parameter to make sure that you have money left over to do things like save a down payment and invest and save for the kids' college and live your life and go on vacation. Because too many people have their house payment or rent at, you know, 50% of their take-home pay.

Yeah, so if you guys upped it some, Catherine, for sure, I think that you could make that move. Because saving for the down payment, it may take you guys, what, 2, 3 years possibly of you renting somewhere to save that up. And yeah, I probably would not want to do that in a studio apartment with 2 little kids. I would like walls and separate rooms for the sanity of everyone.

Yeah, because my husband, he actually works remotely. Um, he lost his job like right before, um, I got pregnant with our daughter, so we took a big pay cut. And so, um, after we used that money from our house that we had bought, um, when we first got married to move down here and pay off all of our debt Um, because we just couldn't afford the mortgage, which was about $2,000. Yeah, so we're just trying to figure out how we can save up as quickly as possible. Yeah, that's great.

Resetting with some peace this time, for sure.

Yeah. Do you guys have any more consumer debt that you're working on? No, none. Okay, great. So yeah, so it really is that down payment. Do you guys have kind of a goal that you're, you're shooting for?

Um, we're hoping about Hopefully in like 2.5 years, just based off of the numbers right now. My husband thinks he'll get a couple of raises, but I just don't want to base it off money we don't have yet.

Sure, I get that. Don't count the chickens before they hatch. But I'm hopeful. If he's got that mindset, I think he will increase his income because he's going for it.

Well, and the fact that he was being paid more in his last job than the job he took, so it makes me think he's marketable at some level. To be able to be making more too. So that's exciting.

I like that specific goal. $40,000, 2.5 years. That's a little over $1,300 a month. So we have to be putting that away. Yeah, we're putting it in right now. In a high-yield savings account. We'll let it grow. And if you don't have a good one, Fairwinds is an awesome partner of ours. You can go to fairwinds.org/ramsey and get a great high-yield savings account to help your down payment fund. Awesome. We're so excited for you.

And pregnant with number 2, you said, right? Yes. Okay. Congratulations. So exciting. Yeah, I think with, this is the change in lifestyle or in life that happens, life scenarios that does make you say, okay, what do we need to shift to create some peace that's doable? And the beautiful thing is that Catherine and her husband freaking work their butts off to get outta consumer debt so that $1,200, $1,300, $1,400 in rent is doable while saving more. If not, they would be paying 2 car payments that would equal that. You know, and they wouldn't be able to save for a down payment if they still had debt, so.

Those are heartbreaking calls when you get those. So it's nice to see someone doing it right.

I know. So that's the power, you guys, of getting out of debt and freeing up your income, is that you can actually put money away and save for things that you want in the future for you and your family. So Catherine, well done. Yeah, and good luck to you guys with baby number 2.

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Today's question comes from Owen in New York. He says, "I make $124,000 a year making two jobs, more than my parents ever earned. I bought a used car and went to a cheap in-state college. My problem is that I can't afford a home, and my parents, who are retired, have a $650,000 home. I live in upstate New York where property taxes are $1,000 a month and houses that aren't falling down sell in 3 days." "how can I possibly afford a home and how do I stop being this angry about being stolen from by the boomer generation and their generation's government, which is ruining my relationship with my parents?" That got dark quick. Oh my gosh. I felt a little anger and then he just said it out loud.

Hug Owen. I feel like Owen needs a hug. Wow. And he's mad at his parents?

He's mad at the entire boomer generation.

How dare you? How dare you own a home? Wow. And the generation's government. Listen, I get kind of being pissed about the housing situation. That's understandable. It is. It is so crazy. It is. It's wild how expensive.

I can't wait for Owen to have kids. For them to— they're going to be so mad at Owen's generation. You ruined everything.

You ruined everything. Listen. Oh no, Owen.

Why were you a child in 1992 instead of buying up a home? What were you doing, man? What were you doing at 3? That's the running joke. OK, but I do feel as anger. And I actually mentioned— Not to that extreme.

Not to that extreme.

Not to being mad at your parents. But I understand going, "I've done everything right." Sure. Even debt-free, making six figures, it's still hard to afford a home where you want to live, no matter what your age is. And so, I get where he's coming from. But the real question, "How can I possibly afford a home?" is set a goal. And if you're debt-free, you should have no payments. And if you have reasonable rent right now, you should have a pretty good amount of margin in that $124,000 to set set aside in a high-yield savings account to start saving up a down payment.

I mean, we just talked to a couple, right, right before the break. And they make, they bring home $5,000. And she said they still can probably put away $1,300. And that's with her and 2 kids and a husband.

Yeah, and he makes double that, single, no kids.

That's what I'm saying. So like, you can make some serious sacrifices to put some serious cash away. And that's the reality of what has to happen. Now, did that have to be true for your your parents for as long as what you're gonna have to do? Maybe not, maybe not. But it is the reality. And I think that's what's hard is like, it sucks. And I think we can say that, but then what's the next thing we're gonna do? Are we gonna sit and complain and be mad? Or are we gonna say, okay, let's get creative and figure out how can I put money aside to save up for a down payment? And we say for first-time home buyers, 5% is a great goal, right? Up to 20 is awesome to avoid PMI, but 5% Are you gonna have to drive 20 minutes further one direction than what you want? Maybe, I don't know. But so there's ways to do it and people are buying homes and maybe it's gonna take longer and not specifically where you wanna be. But that's where we're at. And that's the solution. That's what we try to do on this show is like, there's a lot of people that are just, they just complain about it all day, which I get, but also—

Venting can be fun for a little bit. Yeah, vent for some people.

Um, but what are you going to do? What are you going to do after that? If you keep venting, you're going to be getting nowhere financially if you don't have a goal.

Yeah, well, and there is some actual stats behind this anger. The median home price is now roughly 6 times the median household income. When you look back at the 1970s, it was like 2 times. Yep. So it is hard.

3 times. I don't want to minimize that.

It is harder for a young person to save up for that home. Um, and so that's not just the market being driving the market, part of it is structural, part of it is supply and demand, part of it is the interest rates during COVID were so low, and now everyone's hanging onto their house because of the mortgage.

Yeah, 2% rate or something.

So no one's letting go of their homes. And you've got the boomers who have had these homes for a long time, they've appreciated, and they're gonna have a big tax bill if they sell, so they don't wanna get out. But there is something, Rachel, I wanna bring up that is actually happening right now in Congress. Oh yeah. That could actually help a little bit. Okay, tell us. So it's not gonna be like a silver bullet, but it's a, a move in the right direction. So you may have heard on the news these large institutional investors, firms that own hundreds of thousands of single-family homes, even private equity firms. Yeah. Well, they've been buying up these homes at scale in cash, outbidding regular families, which is really frustrating. People like Owen who are about to go buy that home, it gets bought up by, you know, Blackstone. Yeah. Yeah. And so that makes it more difficult. And we believe homes are for people, not portfolios. And so there's actually a bipartisan bill working through Congress right now. It's called the 21st Century Road to Housing ACT. And what's encouraging is the Senate version passed 89 to 10.

Oh, wow. That's about as bipartisan as it gets. Yeah. So everybody is for these protections to keep large institutional investors from buying up more single-family homes. So it's a good bill and it actually could help some people buy a home, could free up some of the supply.

So it would basically stop these private equities of buying up residential homes.

It would force them to sell off within 7 years and the ones that own 350 or more, they can't buy anymore. It just blocks them completely. And if you are renting one of those homes, you have the first right of refusal to buy that house. So there's a lot of good things in the bill. Here's the catch, Rachel. This is government for you. So the Senate passed that, but it goes to the House now. Well, the House released their own amended version, and they quietly stripped out these key provisions that gave the bill its teeth. So they kept the name and they removed all the substance, and the House vote is happening this Wednesday. And so if this weakened version passes, these protections are gone, which sucks. So we don't want it now. We do not want this House bill to pass. And so listen, I'm not a person who thinks I can sway government, but if this matters to you, and I think it should, I would let my House representative know to say no. Yeah, this is one of those times where you go find your rep. 60 seconds, go to house.gov. We'll drop a link in the description to make it easy for you, and tell them to keep the protections in place and to say no to this bill on Wednesday.

And, you know, Congress hears from lobbyists every day. They almost never hear from regular people like you and I, and that's the gap you can fill. And we say all the time on the show, Rachel, you know, what happens in your house is more important than what happens in the White House. But there are structural things happening in the White House that can help the American people. I believe the government's job should be to create an environment that helps people win financially. That's right. That's right. Not to solve our problems, but to be a part of that solution. So go to House.gov, find your rep. We'll drop a link in the description if you want to learn more about what's going on. We'll drop a link to an article. Yeah, that's the main switch.

Good bill in Congress, now bad bill that went to the House.

So, I mean, as I was reading it, I was like, this is like a movie plot. It's so crazy. The bad guys are trying to swap it last minute to sneak it in. Yeah. And that— this is how it all happens. It's like late night, they kind of sneak it through the door, nobody knows about it, no one has time to read it, and then you're voting on it. This is insane. This is why I'm not in politics, Rachel. It's too much stress for me. I want to actually— we can help someone in 7 minutes on this show. I know Congress has a hard time doing that, but I'm glad we're moving in the right direction. This is a good bill and everybody should care about it and say yes to that.

Love it. But say no.

Say no to the House bill.

All right. But we are going to say yes to Mike in— what is this? Westchester, New York. Hi, Mike. Welcome to the show. How's it going, guys?

Good. How can we help? Good. So today I'm going to be talking about how I graduated in December from college. Um, and then I came out with about $21,000 in federal loans. I'm still in my grace until August, but I've already paid off about $11,000. Wow, good for you. Yes, thank you. My question today is, do I continue on this path for about another 4 or 5 months, or do I take out from my Roth and kind of just end all right now, um, as far as, as, uh, student loans?

Yeah, that's a great question. I would just keep at it. I would just keep cash flowing, paying this off, because if you did take money out of your Roth IRA, that's a retirement account, and you will get penalized by doing that and paying taxes too on it because you're not 59 and a half. So that's gonna be the key. You wanna be able to get that money out without that penalty. And so I would keep that in, let it continue to grow. And yeah, in 4 months, Mike, well done. You'll be, you'll be student loan debt-free. Do you have any other debt besides the student loan? That's it.

I drive a used car and I kind of just stay frugal.

Good for you. How much, how much are you making?

I bring home about $4,000 a month. Good for you, Mike. Well done.

Just keep at it. If you had non-retirement investments like in a brokerage account, then we would say, yeah, let's sell those off and get rid of this debt even faster. But because it's in those retirement accounts, you can technically take out contributions, but then you're still unplugging all the growth. And at your age, if you actually map out what that cost is costing you over decades—

way more than $10,000—

you'll be slapping yourself going, "What did I do? That could have been $150,000 or $500,000." Way to go, man. Get debt-free and stay debt-free.

Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show, and I'm Rachel Cruze. I'm Rachel Cruz, hosting with George Campbell. We are answering your questions at 888-825-5225. All right, let's head to Sam in Roanoke, Virginia. Hi Sam, welcome to the show.

Hey, how you guys doing? Hi, we're doing great.

How can we help?

So I'm 17 and I'm a business owner, and I'm just wondering how I can build credit without using a credit card, because I want to buy my first home within the next few years. Years and just don't know where to start on that.

Nice, way to go, man. What are you making with this business?

Uh, right now I'm doing around $2,000 to $3,000 a week. A week? That fluctuates. Yes, sir.

You're talking $100,000 to $150,000 a year at 17?

Yes, sir. Now that is before taxes, but yes, sir.

What are you doing, Sam? That's amazing.

Uh, I'm a mobile mechanic.

Wow!

Did you go to trade school for that?

I graduate in a month. Way to go!

Sam, we applaud you!

How do we clone Sam? Unbelievable! That's so great! I love this! So, you're trying to build credit because you want to buy a house one day?

In 3 years! He wants to be a homeowner.

By 20 years old. Well, here's the good news. You don't need credit to do that. I know that sounds crazy. Crazy coming out of my mouth. Do you believe me, Sam? First of all, do you trust me? I feel like Aladdin right now. I believe you. Okay. Yes. So the way to do that is through something called manual underwriting, and it's something I've done personally. And our friends at Churchill Mortgage, they specialize in these. They've done tons of them for Ramsey fans who live life outside of the stupid credit system we live in, which is go into debt to get a score so you can get more debt so you can hopefully pay that off perfectly to hopefully increase your score to hopefully get a higher score. Does this sound crazy to you?

Yeah, it does sound a little twisted.

Because it is. Manual underwriting instead of automated underwriting, which is let the computer decide if you should get the mortgage and let the 3-digit number define your financial life. Instead, the lender will look at your situation. Do you have on-time rent payments, Sam?

I don't believe so. I don't think I quite know what the So do you rent right now or do you live with family?

I live with my parents still.

Is the goal—

are you gonna live there for the next 3 years while you save up?

I'd like to rent eventually within the next year or two, but as of now, yes, I plan to stay there.

Okay, so you'll be required to show on-time rent payments, whether it's to your family or to a landlord if you decide to go rent elsewhere, but you'll need a year of on-time rent payments. You need some utility bills in your name, so, you know, think water, electric, cell phone, internet— things that show that you pay your bills on time, that your insurance premiums are paid consistently, that you have strong employment history, that this business has done $100 grand for the last 3 years, and some solid savings and down payment.

I gotcha.

And if you have those things, you don't need to have the credit score in order to buy that home or get the mortgage.

Yeah, so Sam, if you were to live with your parents for the next 3 years, then I would be keeping track at least 2 years out of rent.

Of documented bank transactions going to mom and dad's bank.

So document those if you put deposits in for rent. And maybe they put one bill in your name, like internet or something, I don't know. And you pay something so that you have a bill or your cell phone, one or two bills that's tied to your name. So making sure, yeah, you have that. And then of course the down payment, what he's saying. Or if you go and rent somewhere in the next year or two, then that's great because that rent will show up and that utility bill that you'll pay at the apartment or house that you rent, you know, all of that will show that history. But the history is big on manual underwriting. You have to have that.

Oh, I gotcha. That makes sense.

But yeah, I mean, you're— if you keep doing this, you're gonna pay cash for a home and ignore the entire system. That's pretty wild. What's your, what's your savings goal right now? Right now?

Uh, right now I'd like to have by the end of this year around $40,000 saved because I do want to possibly migrate into a shop space to rent at the end of this year. Yeah, cool. And, uh, just grow my business that way. It's amazing. Yeah, right now, what are your—

what are your monthly expenses?

Uh, so I do have 3 vehicles. Uh, I do have a lot of tools I have to go through to, I guess, keep my work going. And besides that, just insurance, gas, basic utilities. Nice.

And you're doing this all on your own?

Currently. Yes, ma'am. The solopreneur. That's amazing, Sam. That's great. All the cars are paid off?

Those 3 cars? Yes, sir.

Nice. Okay, Sam, I want to implore you because you're doing above and beyond. I mean, you're a 1%er when it comes to the 17-year-olds in America. Okay, and if you stick to this principle with your business, Sam, it is going to help you not only grow, but create such peace and wisdom, is do not go into debt in your business, okay? So when you were 20, 21, and you're like, hey, I need to go and get 5 more trucks and I need to do this and that, I'm just gonna go get a small business loan, you know, whatever, whatever, say no.

Don't do it. You're gonna get mailers, Instagram ads, emails telling you, hey, we'll give you a loan, Sam, scale your business. You deserve it. Say no.

Yes, move at the speed of cash with your business, Sam. Stay debt-free. And I promise you, it's one of the number one things that takes small businesses out is debt and overhead expenses like that.

And the debt stays with you even if the business fails. That's right. They don't care. They still want their payment.

You are in the green, and so stay there, Sam. Do not go into the red. Do not go into debt for your business. But man, well done.

I mean, think about 3 years. If he lives off, say, $30,000 or $40,000, living at home and socks away almost $100,000 a year for 3 years. That's $300,000. $300,000. That's mind-blowing.

Which would buy, you know, possibly a small home somewhere.

In Roanoke? I'm sure you can find a home in Roanoke for $300,000. Yes. Yes. Especially as a young single man at 20. That's pretty wild. So there you go, Sam. And I'm going to send you a copy of my book, Breaking Free from Broke. I have a whole chapter on credit scores and how to live without it. And I walk painstakingly through everything of how do you rent an apartment? How do you get a car? How do you buy a home? Without a credit score. And I hope it's a helpful gift to you because we, we want to see you win.

We believe in you. All right, Sydney from Instagram asks, if I only pay minimums on my higher debts and focus on the smallest debt payoff first, won't that put me further behind because those accounts will be accruing interest?

Sure. I mean, they're going to accrue interest no matter what because that's how debt works unless it's a 0%. And in that case, the goal is to pay it off so aggressively that the interest doesn't matter all that much. Like, yes, you might be paying $50 or $100 or a couple hundred bucks in interest, but if you're throwing $1,000 or $2,000 at it, you are faster than the interest. That's right. That's the goal.

And that's what I think people— yes, because when people do the math and they're like, well, shouldn't you pay off the highest interest rate first? What you don't understand, number one, is the behavior change. What actually ends up happening what's happening with the momentum. When you get a small win, our human spirit, it's how we're wired, is that you get excited and you get more intense and you keep going and going and going versus trying to pay off the highest interest rate. Let's say it's a credit card, it's $30,000 or something, right? And you're just like chipping away, but you got a $1,200 medical bill over here, things over here. When you just knock out the small ones and you combine all those minimum payments to keep throwing at the the highest, the next highest debt, it's incredible what happens. The momentum.

It's proven. I mean, it's not just a Ramsey thing. Like Harvard Business Review, MIT, they all have come out and said Dave Ramsey was right. The debt snowball method is the best way to pay off your debt.

It actually works. And to your point, George, when you're doing it this quickly, the average person is paying off all their debts in 18 to 24 months. The interest at the end of the day, it ends up kind of just being a wash. And so, because you're outpacing it the amount of money you're throwing at that debt.

You work your butt off for your money, but your money's never going to return the favor if all you do is hope for the the best. If you're ready to learn how to make your money work for you, check out the SmartVestor program. SmartVestor can help you find advisors who specialize in retirement planning, charitable giving, advanced investing strategies, and more. Whatever your goals, your pro will take the time to explain your options so you never have to invest in anything you don't understand. Head to RamseySolutions.com/SmartVestor to get connected. Ramsey Solutions is a paid, non-client promoter of participating pros. Learn more at RamseySolutions.com/SmartVestor.

Smartvestor. Let's go to Ben in Cincinnati. Hi, Ben, welcome Welcome to the show.

Hi, thank you for having me.

Absolutely. How can we help?

We just paid off all of our student loans and we took the Financial Peace class and it was worth it. Amazing. Congratulations. Yeah. Now we're just paying off— we paid off one other car. We have one more. We're paying off our minivan. And we just, we bought a house last year, so we're working on those. We do have like about $25K saved up in savings, a little bit for emergency and a little bit for the house emergency. But now as we're working through that, how would you say we should start saving up for her retirement since her job doesn't offer it?

Okay. So we got a couple of things going on. You guys, how much is, how much is left on the car?

On the car, we have about $12,000.

$12,000 left on the car. Okay. And then you have $25,000 in savings, and then you're asking about your wife's retirement. So before we get there, we do want this car cleaned up. Paid off. The debt. Yep, yep. So I would throw $12,000 at it. Today out of your $2,500.

Okay. Which means you free up a payment. What's the payment on that?

Uh, the payment on that is about $300. Boom.

You just got a nice raise right there.

Yep. So then I would build that, um, emergency fund back up to what you guys need, 3 to 6 months of expenses, and you guys can pick in that range where you feel comfortable. And then you move on to Baby Step 4, which is retirement. So her company does not offer like a 401, 403, no pension plan, nothing?

No, it's just a small Christian school, so they didn't have that in their offerings. Okay, as a benefit.

Well, one thing she can do is open up a Roth IRA, and so she can do that and fund— is it what, $7,000?

$7,500 is the contribution limit. What's your household income altogether, gross We're, uh, altogether before taxes, we're about $90,000 together.

Okay.

So if we— so our plan, the Ramsey Baby Steps, Baby Step 1, $1,000 emergency fund. You have that. Baby Step 2, we'll knock out the consumer debt. You're about to do that today after you get off the call. Baby Step 3, let's fully fund that emergency fund at 3 to 6 months of expenses. Then Baby Step 4 is 15% of your household income going into retirement accounts. So for you guys, that's $13,500. That's what we want to see put away in a simple order. If you have a match through your employer, let's take that first. Do you?

Yeah, I, I already do that. And, um, I think altogether with my employer putting in about, uh, 8%, I put in about 12%. So, um, we're putting—

so you're putting in 12% of your Yeah. But then she's not putting away anything?

Yeah, that was way before we got married. I was already doing that. OK.

And do you have a Roth 401 through your employer or just a traditional?

403. OK.

Do you have a Roth version of the 403 you have access to?

I don't think so. OK.

Add that to your homework assignment. To ask HR if there's a Roth version available. And you might be able to sign in and see on your 403 login there. But if you do have that, I love that option because it's gonna be after-tax money, but then it grows tax-free forever. So imagine that's net income. If you have $2 million sitting there in retirement, that's like $2 million of take-home pay that the government doesn't touch again. Okay. And I would bump yours up to 15%. Now, on her side, 15% of her income now can go into that Roth IRA, and now we're at this collective 15% household income.

Do you see how that works? Which is probably close to a little less than that $7,000. She may not fully max it out with her income. So, I would put, yes, 15% of hers into a Roth IRA. And then, if your employer match goes up to 8%, you may want to take it down a few percentages to max out a Roth IRA on your end, Ben.

If you don't have a Roth 403 option. Yeah. Because the goal is get the match, move to all the Roth options that you can, fund those, then move back to traditional options if you run out of Roth options. But with your income, you guys won't, you won't hit that. You'll be able to do all Roth there and not run out of room. So that's a great problem to have. Okay. But right now you're doing like 3 good things at once, which is making it bad because you're not, you don't have much focus. So like we said, if you knock out that car payment today, Yes. Get the emergency fund stock back up. In a couple of months max, you're investing 15% with no problem of that household income.

Well done. Alright, let's go to New York City, one of my favorite places. We have Sam on the line.

Hi, Sam. Hi, how are you guys?

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

I'm good. Basically, I'm really nervous. You're good. I have a job. Yeah, I'm at a job for now. Now, I'd say 3 years. I hate it. Um, but I make $120,000 and I have really no other career path that would get me anywhere near that. What do you do? So I'm basically like, I do bookkeeping for a big trash company. Okay.

Do you hate trash or do you hate bookkeeping?

No, I actually love trash because trash is feeding my family because my, my base salary is yearly, like $85,000, but I get another $25,000 annually, but I get another, um, through commissions. And they're not like, you know, one month, one month. These are in contract, you know, every month the same amount. And thank God it only goes up every month. That's cool.

I never heard of a bookkeeper making commissions.

Is it off trash, like accounts? Right. No, it's like, yeah, trash accounts.

So the more accounts created, you get a piece of that?

Yeah, exactly.

Exactly, the companies that I have been with for some time. Why do you hate it, Sam? What's going on that you're like, "I hate my job"?

I'll tell you, coming to work, I love coming here. It's an awesome, great place to work. But the actual work, I feel like there's a lot more I have to add to this planet than doing bookkeeping, which I hate.

And what is that thing you have to add to this planet? I don't know. You just feel it. You just feel this gnawing feeling that this is not it. Yeah, there's something more and I just need to know how to do it.

How do I, A, find out what that is, and B, how do I get there?

Well, that's where I was, I was joking about the trash versus bookkeeping, but sometimes you're doing the right thing in the wrong place. Sometimes you're doing the wrong thing, but in a great place. And there might be a different seat on the bus, as we say. And so that's where I'm digging in.

Is there any other opportunity within the company? Because you said you love going to work there, which is a positive. Do you look around and see a position that you're like, oh man, that would be something I think I could really add value and be really good at?

Um, no, like the positions are really pretty booked up. Like I think if someone outsider came in to run the company, probably half the people would lose their job.

Do you want more of a challenge? Like, are you kind of bored because you're like, all right, knock that out, what else? For sure. Okay. Yeah. Have you brought that up to your leadership?

Yes, I have. What do they say? Everything here runs very— not the word for it— like very mom and pop, like it's not like there's no— the company's very successful, but it's not very efficient. I'm trying to think for the right word.

Yeah. Well, that's where I'm wondering, are there opportunities where you go, hey, I noticed this over here. I know in my bookkeeper seat, it feels a little bit out of bounds, but could I try this little challenge over here and see if I can solve that and create some efficiencies in the business? If I'm the business owner, I'm so excited to have Sam on my team. So that's where I'm wondering, and if you run out of those opportunities or they're not giving them to you over a long period of time, and it's a— there's a soul tax you're paying, then I would look for a different opportunity where there is a bigger challenge for you. Maybe it's a more senior role. Maybe you're in leadership. Maybe you're solving a bigger problem. And so that's where I go, you might be doing the right thing and you're just not in the right seat right now.

Right. But the thing is that when you have, you know, 3 kids, a wife, a mortgage, the whole thing, Um, not that the wife is a tax, that helps, but when you have that many things going on, it's hard to just switch jobs.

Sure. Yeah. You have a responsibility. Yeah. To put food on the table. So yeah, you don't wanna neglect that by any means.

We would never tell you to have a gap in income.

No. But I do wonder for you kind of searching, yeah, yourself and just to say, hey, what else is out there? Um, if you hold on the line, we're gonna get you Ken Coleman's book, Find the Work You're Wired to Do. There's a great assessment on the back, in the, at the end of that book. And that may just be a good place just to kind of start jogging some ideas in your mind and start thinking through. And it may be at this company, it may be something totally different, and it may take 6 months, it may take a year and a half. But sometimes these, these decisions are slow and the awareness can be, you know, take some time. But overall, I think if you keep digging, Sam, you're gonna get some answers.

Hey guys, Dave Ramsey here. Every day on this show, we help people work through real money problems and figure out what to do next. Now you can get that same kind of help anytime with Ask Ramsey. Ask your money question and get answers built on Ramsey principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to RamseySolutions.com and try Ask Ramsey today. That's RamseySolutions.com. Com.

Are you sick and tired of working so hard but feeling like you have nothing to show for it. That so many people we talk to where they work and work, make a paycheck, but then they look up and they're like, "I just still feel like I am broke." And it's gone.

Yeah, I feel like I'm broke.

So if that is you, make sure to check out our EveryDollar app. So EveryDollar, the budgeting app, it helps you find extra money every single month and it builds you a personalized plan to help you beat debt and build wealth. And you can do all of this in 15 minutes, you guys, and find thousands of dollars that is hidden in margin that you don't even know you have.

Or your Pizza's free.

That's how it works. There you go. So, you guys, don't be normal. Live like no one else and start EveryDollar for free in the App Store or Google Play. That is one app, George. Shameless plug. It's— I plug in, I tap on a couple of apps every single day. Out of habit. Weather Channel app. I still love my Weather Channel app. Wow. I feel like a boomer, but I do. I love a Weather Channel app. Email, Instagram, and EveryDollar. That's it. I do. Those are like a routine for me. I'll go through and look, yeah. A simple woman. But EveryDollar it is. I'm like tracking those transactions, feeling good about May, put teacher's gifts in there this weekend. Oh nice, that's right. So yeah, when you do it all, you're like, okay, I feel organized, I feel in control.

You can't keep it all in your head. People go, oh no, I do a budget mentally. I'm like, mm, bet.

And can I say, if you have kids, have a higher miscellaneous fund than never before, because who knew you had to sign up for fall soccer in May? And you're like, "Oh my gosh, I'm signing up for soccer in May for fall. I didn't plan that." Put that in the miscellaneous category. So, but it helps.

It does. Even though it takes the stress out of the chaos of life.

Yes, it's wonderful. So again, there's a free version, you guys. Make sure to check it out. Build your budget. Actually be intentional with where your money is going. All right, let's head to Nick in Columbus, Ohio. Hi, Nick.

Welcome to the show. Hi, thanks for having me. Yes, absolutely. My wife and I are about to have our first child. Oh, we're in our mid-30s.

Congratulations. Thank you so much.

We, uh, so I have money in an investment account, um, that would cover all of our debts if I were to sell it. And I don't know that I want to do that. We have about— we're, we're just about millionaires in total. Um, that's mostly tied up in retirements. Um, I have been in school for 10 years. Uh, my wife has her master's, I have a bachelor's. It's a long story, but I had to restart because the school went under. Uh, luckily no debt from that, so we managed to pay off all of my school loans. Um, we owe about $180,000 total, and that's her student loans, the house, and, um, about $15K in credit card debt.

Okay, how much is just the student loans?

Loans, Nick?

It's about $50,000. $50,000.

How much was the credit card debt? You said about $15K. $15K. Okay, so that's the consumer debt. And $130,000 left on the mortgage?

Yes, that's correct. And how much is in the stocks? Um, it's just under $200,000. Um, okay, so my company pays me RSUs and I haven't touched it since I started this company.

Is all the— is, is all the $200,000 in the company stock? Is that correct? Okay, single stock.

And it's single stock and it's up 168%.

Well, that's some good return.

Good time to sell. That's exciting. Have you factored in what the taxes would be if you sold?

Um, I haven't factored that in. I just found your guys' show recently, um, and started listening. Okay. No, this was just— Yeah. With her pregnancy, she had a health scare. Luckily, everything is fine. But now I'm like— they had thought that she had a heart issue and then went to a specialist and ended up she didn't. But they were concerned she would die during labor.

Oh my gosh. Do you guys have liquid cash at all?

We have about $18K in liquid cash. Okay, good. Okay, perfect.

Perfect. Okay.

So you could pay off the debt and still have the $18K left over as your emergency emergency fund. Exactly. And have no mortgage payment or any other payment, which frees up how much if you added up those payments per month? Credit cards, student loans, mortgage?

My wife and I do things a little differently. We have two accounts. Her income goes into an account that pays for our food, gas, everything that we would need monthly. And my account just pays the bills. And I say my account. We're attached to both accounts. We see what goes in. We see what comes out. It's just how we've divided it. It is.

Why don't you just— can I just ask, Nick, why don't you just put it all on one account and everything comes out of one account?

Um, we had no money when we started dating in 2010. We were high school sweethearts, um, and we decided that by doing it this way, we worked while we were in college and we made sure that all of our bills were paid, and we've always just done it that way. Okay. Do you think things can change?

Do you think a mindset of an 18-year-old maybe could make some tweaks and some adjustments now that you're going to be parents and you're grown-ups and you're 30 years old and you both have careers?

Yep. That's, that's what I'm going through right now is like, we weren't planning to have kids necessarily. Not that it wasn't unplanned either. But it wasn't something that we were like, we're going to have kids. We were like, we're going to live, we're going to travel, we're going to do things that we want to do first. Totally, totally. With my college stuff happening, we ended up not doing as much of that and focusing more on that. Okay. So over the time, I've only had like 2 full years out of college. I graduated. Gotcha.

How much do you guys make a year? Your wife?

So not counting the RSUs, we make $260,000 roughly. With the RSUs, it's about $320,000. Okay.

Is she gonna be working still, Nick, do you think, after the baby's here?

That's her plan. She's a social worker. She gives— like, she helps the community locally through her job.

How much does she make? How much out of the $260,000 is hers? $110,000. $110,000, okay. Yeah. Okay, that's great. Yeah, so just a, I mean, you called in. Can I just give you a couple of maybe random thoughts I have about your situation? Yep. Okay, so we talk about when you are pregnant, we have a thing called stork mode, meaning if you are trying to get out of debt, we pause the debt snowball and we just save a bunch of money to the side in case something happens. Okay, now that is with people doing the true Baby Steps, which means they've already done Baby Step 1, which is they take everything down to $1,000. If you could imagine, Nick, yes. We want them to take everything down to $1,000 while getting out of debt. You guys will not have to do that because you have $18,000 saved and $200,000 in stock. So, I would not count stork mode for you because you guys have that money. Money, that you will have enough money even if you paid off all of your debt, if that makes sense. So, if I woke up in your shoes, I would, I probably wouldn't pay off the house right now, but I would go ahead and wipe the consumer debt and just be done with the $65,000.

And then once baby comes, everyone's good, mom's good, baby's good, then yeah, I mean, I might have a discussion to say, "Hey, what if we aggressively paid off the house?" and it just had no debt. Like, we had complete autonomy over our money, which is pretty crazy, the fact that we can even have this discussion, Nick, that this is a possibility for you guys. So that's what I would do in your situation. I'd go ahead and pay everything off. And if you hate not having a mortgage, you can go and get another mortgage if you want. You know, you can borrow against your house.

I mean, you're probably gonna get like a $3,000 or $4,000 raise if you paid off all of your debts, including the mortgage, right?

Yeah. I mean, this year has not been good for us financially. We had a lot of setbacks this year. We were basically debt-free coming into the year, and then we had house problems. Our basement flooded. We had to dig a new sump pump line. Our dog has been sick. He's 16 and entering kidney failure and stuff like that.

That's even more reason to be completely debt-free. Free, man. You have that money back in your life. You just sold yourself on becoming debt-free, and you're probably gonna have, you know, maybe 15% capital gains on the money that's appreciated. Not from what you bought it for, but the gap from what you bought it for to what it's worth today. That might be $20,000. And look, lo and behold, that's $180,000 you can throw at your debt. Oh gosh, I'd feel good. I like Rachel's— well, wade your toes in the water by paying off the consumer debt. Once the baby's here, I think You'll go, you know what, let's liquidate the rest.

Yeah, and then relationally, Nick, you and, you know, I would love to see you guys see yourselves more as one financially. This is our household, this is our family. The money that comes into the household in one account, how do we run our household out of this account versus divvying it up, who pays what? Hey guys, Rachel Cruze here, and I love summer. There is more fun on the calendar, more time with your people, and way more chances to make memories. But you know what else there's more of? Spending. Oh, between the extra groceries and gas and camp fees and family trips, it all starts to add up so fast. Fast. And before you know it, money stress starts to steal the fun out of everything. And that is why I love the EveryDollar budget app, because it helps you plan your money, track your spending, and find more margin in your budget so that you can put extra cash towards the goals that matter most. Enjoy your summer without the money stress. Download the EveryDollar app in the App Store or Google Play and start for free. Today. Our Scripture of the Day comes from 1 Samuel 16:7.

The Lord does not look at the things people look at. People look at the outward appearance, but the Lord looks at the heart. Nathan Morris said, "I've found that the stuff," sorry, "I have found that the less stuff I own, the less my stuff owns me." Such a minimalist.

Look at that. Before his time.

It's a little bit like the Dave Ramsey quote of, "It's okay to have nice stuff. Just don't let your nice stuff have you." I wonder if that's where Dave got it from. I don't know. Who's Nathan Morris? Do we know? Couldn't tell ya. We'll Google him real quick. Let's find out.

He's probably from a different era. Should we know him?

Is he an evangelist? He's not a president.

I really hope it's the founding member of Boyz II Men. Is it? I mean, that is a Nathan Morris. I don't think it's the same one. No! Let's give him the credit! Yes! Author of The Art of Getting Money, personal finance expert.

Man, boo! Boyz II Men lead singer would be so much more cool. In my heart, it will always be Boyz II Men. Kelli, work on our quotes of the day. We need some Boyz II Men. I'm sure they said something you know, really profound about stuff and money and life. I'd like to say that. Boyz II Men said it. I found that the less stuff I own, the less my stuff owns me. You should give a little tune, George. No, but that, yeah, the, it's okay to have nice stuff. Don't let your nice stuff have you is a great balance because your stuff having you is you go into debt for it. The borrower is slave to the lender. You don't own it. You owe "Go on it," so it has you. And the identity contentment piece is really big, that— "Where your treasure is—" "There your heart will be also." There you go. Look at you quoting another scripture. It's not just about debt, but it's—

It is. What is the chokehold that material goods have on you? And you can't take it with you.

You can't, nope. And so, it's fun to have stuff, right? It's okay. I'm just saying, left behind.

You can't even take your pants, all right? They'll be folded neatly on the bed. Every time I still see clothes folded on a bed, I freak out a little bit. That's that movie, Scar. Trauma. All three. Yeah, there's three.

They read— they gave me the kids version.

Listen, you get left behind the first time, you get left behind three times, that's on you. That's on you. Oh Lord.

Okay, uh, Emily. God bless you, Emily. Sorry. Thanks for hanging with us. Round us out. But, uh, yeah, in Idaho Falls we have Emily. Hey Emily, what's up?

Hi, I am just calling in to ask— my husband and I just had our 5th baby. We're almost done with Baby Step 3, but we are growing out of our house, and, um, we have an unfinished basement. We're just trying to figure out if it's financially wise to take out a loan to finish the basement. We're feeling really on top of each other right now.

Yeah, 7 people, that's a That's a lot.

What's it going to cost to do the basement?

So we estimate it'll be about $40,000 to do the basement. For context, we are in a 3-bedroom as is. So I have 2 kids in each room and a baby who's going to need a room soon. So we owe $200K on our mortgage and it's at a 2.3%. So moving just makes no sense. Neither does refinancing. Trying to figure out if a loan to do the basement would make sense. Um, another piece of information, our current mortgage payment is below 5% of our take-home.

Okay, how much do you guys bring home a month? About $10,000.

Okay, mortgage excluded, would you guys just go buy a different home right now if you could?

Absolutely not. We love our neighborhood, we love our home, we love the lot our home on. It's our favorite.

OK, so you want to make this home work no matter what. How much do you have in the emergency fund?

About $30,000. Well, by the time— I said we're almost done with Baby Step 3. When we're done, it'll be at about $35,000.

OK, because I think you can just cash flow this. That newborn baby is going to sleep next to you for the first couple of months, right?

Yeah, it did take us— I mean, we have a lot of kids. It took us about 4 years to get that fund put together.

But you bring home $10K a month, you said? We do, yeah.

Um, our food bill is more than our mortgage.

Okay, yeah, because you said the mortgage is 5%, so I went, can you save up a couple grand?

I was gonna say, yeah, could you, could you guys like really kind of go crazy and just say we're gonna save $4 grand a month and in 10 months we'll have it all? And you can even start planning and like doing things even before for that.

Yes. Yeah. So we do have, we have been doing that. Um, we're just, we're like I said, we're really on top of each other. I've got the baby. My husband also just started a new job where he'll be working from home sometimes and his current, I mean, he doesn't have an office because that's how many bedrooms. Yeah.

Yeah. So what are you going to do with the basement? Is it going to be a bedroom, an office? And you're going to parse it out.

So it's got space for 4 bedrooms. We are hoping to get a quote to do just, you know, 2 bedrooms initially, kind of leave the plumbing and stuff for later in the bathroom. Well, but I would imagine we're still looking at $20K for that.

That feels reasonable. Yeah. I mean, I mean, Emily, yeah, we're not going to tell you to take out a loan. So you called the wrong show. I'm so sorry, but— No, it's okay. I want your guys' advice. Yeah. So what I would what I would do though is start meeting with some, because I think if you guys really could buckle down and save $3,000 to $4,000 a month, you could actually start to cash flow this and get it at least starting. You don't have to have all $40,000 at the beginning. You know, you could, you, you could start some of this in 6 months. When, when is the baby due?

Oh, he's, uh, he's a couple months old.

Oh, he's here. Okay. I'm so sorry. Yeah. Yeah. So I mean, honestly, I, yeah, that's what I would do. I would just make a gross of goal to save, you know, $15,000, start the process, and you guys just be putting cash away every single month and be cash flowing it as the project is going so that you can get it done faster, you know, versus waiting and having it all saved up. That's what I would do personally, just to get the ball rolling, 'cause I know the urgency in it. But yeah, but we, yeah, I mean, we're not gonna—

You work too hard to get debt-free, so why go back in and restart the whole process process. And it just is— it's not the move because you're going to build this thing, you're going to feel it, you're going to be paying for it versus saving up and paying cash. You treat it differently. You're going to get multiple bids, you're going to be very strategic with every move and why you do it. When you take out a loan, or even worse, a HELOC, you go, well, let's just take out more, let's just really go big with it since we're already here. That's what most people do. They use their house like a piggy bank and they just keep moving backwards. And you guys make so much money, you're doing so great. I know it feels chaotic product right now, and you got a newborn, which is not helping anything as far as your exhaustion of feeling like, you know, it's all over.

Great sleeper, so thank goodness for that.

Well, and what you could do too, which may scare some people, but you have $30,000 in the emergency fund. You know, you guys could say, well, it only really takes us, you know, $7,000 to live off of, so technically $21,000 could be a 3-month. Yeah, it may feel a little risky because you got kids, one income, you know, but $21,000, you know, could be okay for a bit if you wanna take some—

To get through the project.

Yeah, to just— And then refill it. Yep, and then jumpstart it.

And if you had an emergency, you pause the work until you're back to some stability. Yep. And I think you can cash flow this and you'll get to the end and be thankful that you don't have a loan to pay.

I mean, seriously, it, yeah. And George, you hit on it, but I just do wanna reiterate, when you do things with cash, cash, there is something more subconscious that goes into the care at which the planning process is happening, the speed at which people do the, the changes. If there's changes, um, you're thinking about those so much more in a diligent way than when you borrow. It's a little bit like, okay, if that's an extra $5,000, tack it on, we'll figure it out later. Add it to my tab. Yeah, there can be a little bit of that feeling. And so it really does force you to stay in a time frame and an in a budget. I mean, that's what Winston and I found when we did our pool project and when we built our house in 2019. Like, it's a different game when you're cash flowing something like that, a big project. So it's—

It moves slower, but with that comes a whole lot of peace. Absolutely.

It takes more patience on the front end, right? To get to have the cash to do it. But in the process, you're just, yeah, I think you're just a little bit more paranoid about it. 'Cause you're like, this cannot go over. This just can't go over. So what do we have to figure out? What do we have to do?

But I mean, if you were running a budget for a company, you're gonna go, I gotta stay within the budget and we can't take on any debt. So once you take the debt off the table, it just changes things. And that's really helped me go, well, if I don't feel good about spending that much on it, maybe it's a sign. That's right. So if you're willing to finance it but not willing to pay, depart with all that cash, that's your body saying, this is a big purchase. Are you sure? Yes. And debt removes all of that. It makes it frictionless to get all of these things that you want now. And you signed a bunch of dotted lines that said, nope, you owe us. With interest.

Yes, with interest, that adds into it. Yep, absolutely. Well, thank you, Emily, and good luck to you guys. George, great show. Anytime. Always fun hosting with you. Thanks to everyone in the booth. And remember, there's ultimately only one way to financial peace, and that is to walk daily with the Prince of Peace, Christ Jesus.