Transcript of Shortcuts Won’t Help You Get Ahead With Money New

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Normal is broke and common sense is weird, so we're here to help to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show. I'm George Campbell, joined by Jade Warshawn. We're taking your calls at 888-825-5225. Pick up the phone, give us a call if you want the right next step for your life and your money. Omar is kicking us off in New York City. What's going on, Omar?

Hey, hi, how are you? Um, so I'm a 30-year-old general dentist living in the Northern New Jersey, New York City area.

Graduated from dental school back in May 2024 with around $510,000 in student loan debt.

Uh, I've been paying it off aggressively, uh, since the last 8 months when I started working. So I'm around $450,000 in student loan debt. Um, and I'm kind of just wondering how exactly to prioritize that. You know, I'm looking to buy my own dental practice in the upcoming years. I'm married with a daughter, so hopefully a home. Um, so I'm wondering, do I pay it aggressively and solely focus on that or pay a good chunk towards there and also some savings for my practice and for a house in the future?

I mean, what you just said is, is the exact key. You've gotta figure out how to prioritize this, and it sounds like you were doing a good job of that the past 8 months. The fact that you paid off $60,000 of this lickety-split, which I think is good. Um, if you're asking George and I, which you are, I would tell you that the priority here does need to be this debt. I certainly would not go into further debt with a medical practice. I love the idea of home ownership, but at the same time, if I imagine being in your shoes, already having $450,000 and then piling another, I don't know, $500,000 or $600,000 on top of that in mortgage debt, that, I don't know how it makes you feel, Omar, but that makes me start to quiver. You know what I'm saying? Like my armpits start to sweat a little bit. And so for that reason, My, my take on this, and this is just a Ramsey worldview, I would say, is that here we believe that your biggest wealth-building tool is your income. And so in order to have your income at your full disposal, right at your fingertips, you've got to make sure that portions of that are not being sucked up by debt payments.

And so for you, having $450,000 of student loans, yes, you make a great income, but that's still money and that's, that's being sucked up and it's still risk. That you're adding into your life. And so our path here is all about you finding your way, yes, to wealth, but also to financial freedom and peace. And freedom and peace are emotional aspects of money that get left out a lot. And so for that reason, I would say absolutely prioritize the student loans first and foremost.

Okay.

So, you know, while paying off my student loans, it's maybe dumb to say, but I kind of just wanted to save some on the side.

So my wife and I, we've been putting every month or so some into our high yield savings. And I do have around, I would say, $55,000 in high yield savings. Good.

And I just don't know, should I dump that into my student loans or just keep it as is?

Yeah, I would. So here we teach a series of Baby Steps. Are you familiar with them at all?

Yeah, I am.

So then, you know that Baby Step 1 for us is a starter emergency fund. And I'm going to blow your mind and probably some people's minds who are listening right now. When I tell you that that starter emergency fund is only $1,000. So essentially, yeah, you'd be taking $54,000 of the $55,000 and throwing it at these student loans and knocking them down to $395,000. But doesn't that feel amazing?

It does. Yeah.

And if you had an emergency, what would likely happen is you take that next paycheck and apply to the emergency instead of the debt. And so making your kind of money, there's very few emergencies that would exceed your paychecks in a month.

Yeah. So, you know, one of the main reasons for my call is because the last, or the last few months I've been putting every single cent into my loans and stopped funding my high yield savings account. And my wife and I just weren't sure, is that the best idea? Um, and I kind of just want to hop on this call and just get that little relief, you know?

Yes.

Yeah.

You're doing the right thing, even though it feels weird. Cause like, well, I've been told it's good to save. Sure. It's also kind of scary to have half a million dollars owed to a lender, and those payments are coming due whether you like it or not. So the faster you get rid of these loans, the faster we can live our life. And I'm happy that you're a practicing dentist and you made it through making good money. How much are you actually making?

So, uh, I'm only 8 months in.

I, after taxes, I take about $16,000 a month.

Great, great, great.

And right now you're applying what you told me, about $7,500 a month. Toward your debt?

Yeah, the last, the last few months I've been putting around $10,000 to $11,000.

Good.

Well, let me do some math for you because I did it just to give you some encouragement. If you did $7,500 a month toward the debt, you're done in 5 years. If you do $9,375, you're done in 4 years. But here's the plan I want you to aim at: 3 years you can pay off this debt if you put $12,500 towards it every month. That's aggressive, right?

Yes, fly by.

Yeah, and 3 years fly by pretty quick.

But then you got to learn how to live off $4,000 a month for your life. So if you can keep living like a broke with the college student, even with the kid, with your wife and go, hey, 36 months of sacrifice so that the next 36 years can be filled with freedom. That's what you're really doing.

Yeah.

And do you think your—

I appreciate that.

Do you think your income will go up at all in those 3 years?

Yeah.

So I mean, I'm projecting my income in the next couple years to go up to at least, you know, 20, 30% more.

Okay.

Amazing.

There you go.

So with every increase you get in income, Don't go increase your lifestyle. Instead, increase your debt payments. Yeah, that way it's done in less than 36 months because you have too many goals to be just, just scraping by making minimum payments. You want to own a house, you want to own a practice, and the best path to that is to clear the decks, get rid of the debt, rebuild the emergency fund, and now you're able to cash flow. Think about now you got $16,000 or $20,000 free to do whatever you want with, to stack up for a down payment or for a practice. It's a different ballgame.

Correct.

And, and I just want to, I want to add to that what George is saying because there, you can walk away from this conversation with two points of view. One is what we're saying, which is, hey, the, the quicker you get it done, the quicker you can get about the business of, yeah, saving up for a down payment, saving up for the practice, all those fun things, right? Or you can walk away from this conversation and go, oh, 2 to 3 years, that feels too long. That doesn't sound fun. I'm not going to do it. I'd rather go ahead and, you know, start on the house and, and stack up more debt there. And I'd rather think about this practice and stack up more debt there, right? So this really is going to point to what mentality do you want to have in life? Do you want to be a person who can short-term sacrifice for a while for a long-term gain, right? Can you have the foresight to say, if I just really lock in, and I think you have that foresight, you're a dentist for crying out loud, right? So lock into that same mindset that allowed you to accomplish that degree and allowed you to go on that path where you said, just for a short time, it's really going to suck, but if I do this now, The world becomes my oyster, right?

Yeah.

And so the biggest blocker for you, Omar, is not gonna be you and your wife. It's gonna be your friends, your family, your peers going, dude, Omar, what are you doing, man? You should have a nice house by now. You should be driving a nicer car.

Yeah.

You should have your own practice. And you're gonna be going, nope, I am laser focused on this debt right now. But the truth is most dentists, dentists won't take the advice that we're giving you right now. And also most dentists are broke.

Yeah.

They have a huge house with a huge payment. They have luxury cars with a huge payment. They have practices with a million-dollar loan on them while they're still trying to pay on their student debt.

That's what a lot of people, my colleagues, have been telling me, like, you know, just pay the minimum, open up your practice, and just worry about it later. Pay the lump sum down the road.

Oh, the old down-the-road trick. That's right. When life gets so much easier, we have less responsibility and chaos.

Right.

Dude, do it now. Your life will never be as simple as it is now. And I promise you, if you hate it on the other side, when you're debt-free, owning a practice free and clear, with a house payment you can actually afford. If you hate it, call us back and you can yell at us. I give you permission. Let's talk about something nobody wants to think about until it wrecks their budget: medical debt. Medical debt is one of the biggest financial landmines in America today, and that's why HealthTrust Financial is the only health insurance provider Ramsey recommends. You guys, a lot of people have medical debt even with health insurance because you can pick the wrong plan, pay big monthly premiums, and still get slammed with huge out-of-pocket costs later. And if you're self-employed or you run a small business, you're paying 100% of that bill. But HealthTrust Financial shops multiple top-rated carriers with no extra cost or pressure to help you get the right plan while finding you big savings. And they don't just look at the cheapest one. They help you understand deductibles, networks, out-of-pocket costs so you don't get surprised later. And most people who work with HealthTrust Financial save up to 50% on their health insurance costs.

That's real margin you can put towards working the Baby Steps instead of medical bills. So don't let one hospital visit sabotage your financial plan. Go to healthtrustfinancial.com and protect your budget. That's HealthTrust Financial, .com. Megan is in San Antonio up next. Megan, welcome to The Ramsey Show.

Thank you so much.

How can we help today?

00:10:40

So I'm a single mom with 3 young kids. I've been divorced for about 6 years. And after the divorce, my mom moved in with us. And so I support her, but she helps with the kids. I've worked very hard to get to Baby Step 4 since the divorce, but now I feel stuck. My take-home after taxes is about $6,200 a month. And I recently put my house on the market just because we live in a very tight space. It's 3 bedrooms, 2 baths for the 5 of us. I'm sharing a bathroom with my 3 kids. So my question is, would it be smarter to deal with the living space that we have currently to have sooner financial freedom, or should I make the sacrifice to get a bigger space so my kids have more room while they're growing up?

Wow.

Well, first of all, you have done an incredible job. I mean, coming out of one of the hardest seasons of your life, you have just scratched and clawed and taken care of those kids and gotten out of debt and taken care of your mom. You are— you're a hero. You're a warrior.

Thank you.

So just know that the path looks different for you. It's not as easy as it is for some people with two incomes and nobody to take care of. And so it's going to look different. So let's talk through this decision. You bringing home $6,200. What is your current mortgage payment?

It's $1,800 a month.

Okay.

Not including insurance.

Oh, what is it with insurance?

Um, it's another $150 for insurance.

Okay, so about $1,950 all in for principal, interest, taxes, insurance?

Correct.

Okay.

And this house that you would get, what is that going to cost you? Is it equivalent? Is it going to be a lot more as far as the mortgage?

It would be more. Probably if I were to get a 15-year mortgage, it would probably be $2,300 at least.

Oh boy.

Okay.

And is there opportunity for you to make more at work? What does the sort of path for growth look like?

Um, I was just recently promoted, so I don't see any other promotions happening anytime soon.

Okay.

I'm a nurse, so I do pick up extra shifts on the weekend, but it's hard to balance that with also wanting to spend time with the kids too.

Yeah.

I wonder, um, so you said you have this deal with your mom. She's living there in exchange for that. She helps with the kids. Is there— is she unwell? Is there anything that precludes her from having her own space at this point?

It's just my, my schedule is very sporadic, so I can get called in in the middle of the night. And so that way, if she's there and I need to leave to go to work, she's— the kids will be taken care of.

Here's where I'm— here's where I'm trying to solve so that you kind of know my train of thought. You're already over slightly what we would say is kind of that baseline for where your mortgage wants to fall. 25% of your take-home. In a perfect world, your mortgage would be like $1,550, right? And it's already $1,950. I would have a hard time telling you, hey, yeah, go up in mortgage, go up to $2,300 because that's going to make you house poor for all intents and purposes. And I would not want that for you. So I, in my opinion, we need to look for solutions that don't cause you to pay more money per month for your living space. And the, the first thing that I'm looking at is freeing up space and already, did you say it's a 3-2?

Yes.

So freeing up some space there. I'm fine with the kids sharing a room. I'm fine with the kids sharing a bathroom, but it feels like with your mom in that space, it's causing difficulty. So in my mind, I'm thinking, okay, is there a way that mom can move to, maybe she's in an apartment that's really close by that if you do have to do something in the middle of the night, it's easy for her to come by. Um, maybe there's some future planning that we can do to, to, to mitigate some of that. That craziness in the night. But do you see what I'm saying? I don't think going up in mortgage payment is going to solve the problem. It's going to create a different problem for you.

I think that's probably true. That's why I'm—

and you likely couldn't invest in it on the market. You're probably going to have to forego investing and go, well, I can't afford the 15% investing. I need that money to afford the mortgage, all the bills. That's the other part that worries me is we put a total halt on your wealth building. And so, this might just be a not now. It might be, let's wait a year, let's build up some more equity, let's keep knocking down the mortgage so that we have more to put down on the next house, bringing the mortgage down. Or we go, is there a house that's actually bigger that's maybe a little further out, but it fits our family and we can keep that payment to $1,600 a month? So that's the other option. Is there other houses out there? Have you actually looked with a real estate pro to see what the options are?

Yeah, it's just unfortunately everything around here, those are pretty much the cheapest options.

To stay near your employer, near schools, all that?

Yeah.

Okay. And what is the long-term plan with Mom? Is she able to afford her own place? Is she able to eventually take care of herself?

I know she 100% could, but I feel like there's an obligation to support her because she retired a couple of years early to move in with us.

When you say obligation, is that financial or is that she can't physically take care of herself?

No, no, she can take care of herself. I just feel like the expectation on her part is that I will take care of her since she made a sacrifice to take care of the kids.

How old are the 3 kids?

Um, 5, 6, and 8.

So they're all in school, right? The 5-year-old is in kindergarten?

Yes, but I homeschool them, so she helps with that too.

Interesting. Yeah, I, I can point to a couple of places. Now this is a values conversation, but I can look at a couple of places where there might be room to move. And again, it's when I say move, I mean something to shake loose, but it's really up to you on, on how important those things are. Because, uh, if you told me, yeah, my kids are in school, um, and grandma looks after them when they come home from school at 3 o'clock or at 3:30, whatever the time is. Then I'd go, okay, well, you know, that makes— it makes— does that make sense? You wouldn't have to feel so much of an obligation to her. But when you tell me, oh no, she's, she's basically working a full-time job by homeschooling them and taking care of them, I see why you feel such a strong obligation there. And unfortunately, if you continue to choose that, I'm not saying it's wrong. I'm just saying it's, it's your values. If you continue choosing that, then what you're also choosing is We live in a smaller place where we're cramped and that's okay.

As a trade-off.

It's hard. Yeah, it's hard to have it all sometimes.

But I want to address the expectation because it seems like there's some unhealthy entitlement creeping in here. And I get that she sounds like a wonderful woman. She's helping take care of your kids. And while she expects you to take care of her, you didn't expect to go through a divorce decimating your life, crawling out of debt, taking care of 3 kids on a single income. And so there's also this resetting of expectations of, "Mom, in a perfect world, I would love for you to be able to live with us. But unfortunately right now, everything's tight. We don't have anywhere to go and we need a little bit of our space back. I still would love for you to help in this way.

And you get a vote here too." But that's kind of, I see what you're saying. Like, I think that you're viewing it as this is her pay. Like, I can't give her salary for the things that she's doing. So in exchange for that, her pay is she gets to live here. And I don't charge her rent. Is, is, am I looking at that right? So if you say, Mom, move out but still do all these tasks for me, it's kind of like she's working for free.

Yeah.

And she can't afford to do that, right?

Yeah.

Or can she have Social Security?

But she's just living off of Social Security, so she can't afford it either. What's her payment every month, or what's her income total?

Um, I think she gets— I know she has a lot in investments, but she's worried that if she were to ever get sick or need a retirement home as she got older, that all of that money would be needed for that, which I understand. But Social Security is $2,500 a month. That's all she pays for is her insurance, which is about $300 a month.

Okay, I think you guys have a deal here, and it seems like you know, it's a quid pro quo. You got your part out of it. She gets her part out of it. And I think that there's just some parts of it that are uncomfortable. And I think that's just part of dealing with— to George's point, you're, you're a single mom making it with 3 kids. And there's going to be— I mean, I don't have to tell you, you already know, you're well acquainted with, with the sacrifice and the struggle here. And I think that this is just part of it for this season.

And the other option, Megan, I'm just throwing it out there. I don't love it, but you could get the new house, $2,300 a month, and she pays $700 so she can have her own room and space.

Hmm.

And that could solve a few problems. Now, it doesn't solve the long term because if she moves out, you're stuck with that payment. But it could in the short term alleviate some of these issues. But it sounds like right now you just got to wait, keep knocking out that mortgage with the equity, and then eventually we can make this move once we are capped.

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Big announcement, guys. It's May and the Ramsey Cash Giveaway is officially here. You can enter every day. Thank you for that. I was waiting for the horns. May 1st through the 31st, you can enter every day. One grand prize winner will get $10,000. Plus, there will be one $500 winner every single week, and you can enter daily to increase your chances of winning. Plus, be sure to check out our sale going on right now while you're over there. Kick off your summer with books and assessments for just $12. Go to ramseysolutions.com/giveaway right now to enter. No purchase necessary to win. Joseph is in Minneapolis up next. What's going on, Joseph?

Hey, how's it going? How are you?

Great. What's going on with you today?

Nothing much. I just have a quick question about, uh, so my wife and I are expecting our first at the end of the year and we're trying to pay down some consumer debts. Uh, so we've looked at balance transfer cards. Um, we have one line of credit that is currently bearing interest at 15.4%, which is pretty mild as far as like credit cards go. Um, there's about $12,000 on that card and we're paying it down aggressively, $2,000 a month. Um, we've been hammering it towards that, plus our balance transfer cards and whatnot. My question to you guys is, is there an option to— like, I've looked at personal loans or debt consolidation loans, but every offer that I get is above that 15.4% that that one line of credit is actively accruing. And so my question is about, is there ways to consolidate lines of credit from preexisting cards, like ones that I've already set up for myself back in high school? I'm 26, for reference. And the newer balance transfer lines of credit that were set up within the past 24 months. Like, is there a way to consolidate the lines of credit? Is there a way to unlock other tools that may be lower than the 15.4% outside of going to friends and family?

I mean, there possibly would be, but the question I have before I answer that is, how quickly do you think you can pay off this $12,000?

10 months.

Okay. So we're talking about we're trying to do the most to save ourselves maybe $140 a month in interest.

Yeah, I think the most recent interest charge that was on that line of credit was like $220 a month.

Right. But you're actually— you'll be actively paying it down. So the amount of interest that you're paying is also the actual amount is going down. I think that your energy is better spent in this way, paying off the debt and finding ways to pour more money on it. I think that's where the energy is better spent. And I say that for this reason. The why behind that is a lot of times when we— there's two things that happen here. Uh, what kind of debt is it first?

Uh, it's consumer debt. Uh, we got married in May of last year, so a lot of it is wedding, wedding debt.

Um, and is it just on the credit card? It's just on one credit card or multiples?

Yeah, so there's, there's the $12,000 that's bearing interest on the one credit card. Uh, we've done two balance transfers to two separate cards. One of them is completely paid off. The other one, I recently just re— renewed my, what you call it, the offer to get 0% on another balance transfer. So that—

so what's your total debt right now?

Yeah, $17,000.

Okay. So the other reason that I don't love consolidating debt is because the way we teach debt payoff is the debt snowball method. And there is something to be said for having a couple of smaller debts that are separate versus one big debt. Because when they're separate, you can focus all of your extra margin on one, get a quick win, and actually feel good about what you've done. So instead of having one massive thing that's $17,000, it's kind of cool if you have it broken up. There's a $12,000 one, there's a $2,000 one, and there's a $3,000 one.

Sure.

Because then you knock out the $2,000 one and there's actual science, like there's psychology behind that that backs that up. And so for that reason, I, I kind of like keeping 'em separate. If you were con— if you did consolidate them, George, there's worse things he could do. But I don't think if It seems like that's where your energy is.

So far, Joseph, everything you've said is a shell game of just moving the debt around, switching outfits for the debt. Let's move the debt in some stretchy pants so we feel a little more comfortable. I'm trying to get rid of the debt instead of move it around. Are you with me? You with me? We lost Joseph. Okay, there you are. I was like, come on, man. I was hoping for a big one more time. Are you with me?

Can you hear me?

Yeah. Yeah.

Hello?

Yeah.

Okay, cool. Yeah, I understand what you said.

I can tell you're a smart guy. You know your numbers. I just want you to, like Jade said, focus your energy in the right place, not calculating how much interest you can save, but instead calculating how fast can I get out of debt if I just throw the most at the payment? No more balance transfers, no more consolidation, no more lines of credit, no more Instagram ads, no debt relief, no debt settlement. The guy in the mirror is the solution to the debt, not an outside force, not another debt whack-a-mole. You feel me?

He's there. He feels you.

He's there in spirit. His phone keeps cutting out. I promise, guys, he is pumped up right now.

I'll play the role of Joseph. Yes, George, I feel what you're saying.

I could just feel— I was exhausted just listening to him talk about all the balance transfers he did to move all this around. Like, dude, in that time, you could have just knocked it out.

You could have been done.

I mean, if you're throwing $2,000 at the debt, you got $17,000 It's pretty easy math here. Let's just knock it out in, you know, what's 8 months, 9 months? You said 10 months. So, all right, less than a year it's gone. And we're not going to focus on interest rate. We're going to focus on the margin we're throwing at that principal. That's the goal here. Thank you for the call. Steven is in Fort Worth, Texas up next. Steven, welcome to the show. How can we help?

Hi, thanks for taking my call. I'll try to keep it quick. So my wife and I are having a baby in June. We've already got like our stork mode. We've got $16,000 in a high yield savings account that we've— since we already have that saved up, we've still been paying on my wife's student loans. We've paid about $75,000 since last June, and we are on track to pay off the last $20,000 by the time the baby is born.

Awesome.

Um, however, I just got a job offer that would require me to move to another city, and the house that we bought 4 years ago was a bit of a fixer-upper, and we paused our renovations to, uh, do the Baby Steps. Properly. So we feel like there's some work that's going to have to be done before we can actually sell it. And we're not sure if we should continue making big payments on the student loan or hit pause on that right now so that we can cash flow anything as long as it would have a good ROI that makes sense, that would actually increase our equity.

I mean, I got to tell you, I think I'd hit pause on both of these things since this baby is on the way.

How soon is this job stuff happening? Is that for sure?

I have a contingent offer. They're running a background check right now. We still haven't established the start date. They already said that they would be willing to let me do a hybrid sort of thing until I'm ready to move after the baby's born.

Oh, that's great! That buys you some time.

Yeah, but the move would probably be July or August.

What type of work needs to be done on the house, and how much money do you think is at stake if you do or don't do it?

Um, it would be probably several thousand dollars if we— because we did most of the work already ourselves, and we're kind of exhausted of that, so we need to have a contractor do it. It's things like updating the flooring, a little bit of painting, and then potentially even renovating the master bathroom that's like original '50s.

Oh boy, that's a lot.

Is that like 10, 20 grand? Yeah. What do you, what do you think the real number is?

Everything together would, could be that. Like I said, you need to talk to an art, uh, a realtor about specifically which items would increase the value the most.

Mm-hmm.

But yeah, it would probably be anywhere from $5,000 to $20,000 total.

I don't see how you can do a bathroom and floors for $5,000, but maybe check those numbers.

I mean, if you didn't do the bathroom, it would be $5,000. Oh, okay. Okay, got you.

I was about to say, that makes more sense. In 1999. Um, I think that— how long would it take you to save up the money to do that work?

Uh, so we'll be getting, uh, $7,500 of miscellaneous expenses paid by the company as part of the relocation package, on top of what they calculated it would cost to actually move.

Um, okay, but you'll need that money to move, so that's already earmarked for whatever, whatever they pay us to move, plus miscellaneous expenses.

Another is another—

they'll cover that too anyway, right?

But I'm saying with your own cash money, because the money that they're paying you to move, trust me, you're going to need that money to move. So I would keep that earmarked for what it's earmarked for. And now we have to set aside and understand what the timeline is going to be for us to do these renovations. How long would it take to save up $20,000 to $25,000? And really just, I think now you are in stork mode, we're pushing pause on it, but during that pause, let's really plot this out and map it out with a timeline. How much do we need to save? How much time is it going to take to save it? Can we, can we work as we go? And really just create a plan that's going to give you guys a lot of peace.

Yeah, and iron out the exact start date and push it as far as you can to buy yourself as much time to get the renovations done, get the baby here, get yourself in good financial position.

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Ryan is on the line in Kansas City. Ryan, welcome to The Ramsey Show.

Hi, thanks for having me, guys.

Absolutely.

What's your question? So I have a financial advisor and we were kind of going through the Baby Steps and I was kind of telling him where I wanted to go with the Baby Steps. And I was getting my 401k investments up to about 15%. I was at 13, my wife was at 12. And he told me, hey, have you ever thought that you might have too much in retirement and you might want to live a little bit more freely now? And so he suggested that we kind of knock it down to 8% because my company matches my 8% at 11%. And so he suggested that that's too much money going into retirement and we should live more freely currently. And I was hoping to get your guys' opinion on, is this the right move or should I still be pushing to get done with Baby Step 4?

Wow. I've never heard of a financial advisor telling you to invest less. I mean, are you guys already financially independent? Do you have millions of dollars?

Yeah, what do you have?

Okay. So we don't have millions. We've got $350,000 put away in our 401(k)s. Between my wife and I. We make combined— I make $111,000, she makes $118,000 a year, and then I also get $24,000 from disability from the military service. Uh, and we have 2 kids and I, I kind of want to start saving for my kids' college fund. And that's why, cause I've got a 7-year-old and a 4-year-old and I'm scared that I'm not going to be able to just cashflow that for them. I want to start building 529s. That's kind of where all this came in.

And you don't have the margin to do the investing that you're doing and put aside some? You guys make a great income.

Well, thank you. And, uh, right now we're kind of struggling to do both.

Why? So something that, that means something is out of proportion.

Yeah, lifestyle creep.

There it is. Thank you for the self-awareness. I love that we didn't have to pull it out of you.

Well, let's go back to the— so we've got lifestyle creep going on, George, and let's also go back to and answer the question from from the advisor. So I love the fact that you have an 8% match that kicks in at 11%. I think that's, that's very cool. And I think that that's gravy because the truth is you could switch jobs and there not be a match to that extent. And I just love the idea of when you're in Baby Step 4, understanding what it feels like to flex your muscle of investing 15%. And that way, if it ever goes away, you're just used to like, this is what I do, this is what I do. And you can consider the match just a really awesome bonus and the benefit that it actually is for you building wealth. So I actually wouldn't take the advice of the advisor if you truly are on Baby Step 4. I think that you need to do Baby Step 4 and sock that money away. Now, to that point, if it's tight, I'm looking at other areas on the budget, George, to see what's going on here.

So $38K is about 15% of your gross income based on my calculations. So that's how much we want to be putting away into tax-advantaged retirement accounts regardless of the match. So that's, that's step one. Once you have that going, then we move on to college savings and set a goal. You can use an investment calculator on our website and go, all right, if we put $400 away for the older one, $300 away for the younger one, we're going to have this much by the time they turn 18. Plus we might need to cash flow some. They get scholarships, yada yada. So that, that's where you form a game plan for that. And then you guys also have a mortgage.

We do, yep. And that's, uh, $2,040, $2,044 a month.

Okay, that's very reasonable considering your take-home pay, which I imagine— is your take-home pay like $15,000 a month?

Uh, it's, it's a little shy of that. It's $14,000. It's, it's a little over $14K. Yeah, yeah, perfect.

And then you get those bonuses at the end of the year.

So now I'm going, okay, how do we budget this $14K in such a way that we're able to invest for our kids first before we have every little luxury in life. And my guess is you can find some wiggle room and fun money in $14,000.

Yeah, yeah, you're, you're right. And we're trying to— so we just— I just downloaded EveryDollar and I finished my first month last month in April. So we just started budgeting, trying to see where we could when everything was red and I overspent. Not the best, but it helped. It was eye-opening, I think is the best way to say it. It was eye-opening to see where the money was actually going versus where we thought it was going.

So you saw the lifestyle creep happening.

But the crazy part is you were doing that already, but just delusionally instead of intentionally. So now you know. Now you can do better and go, "Alright, we need to cut in this area. Here's where the money leaks happened. We thought we were spending—" $200 eating out, it was really $500. We need to ratchet down on that. So now you and your wife can create a game plan and spit shake and stick to it and go, all right, we're going to cut these areas down, ramp this area up, add this investment. And what I do, Ryan, is I auto-invest it to my kids' 529 plan so that the paycheck hits, you don't even see that money. It happens on payday. So by the time I have a chance to even look at the bank account, the money's already building wealth for me. That's the kind of mindset you need to get into, is being so proactive that whatever is left and whatever the fun stuff is, that floats to the bottom and priorities are at the top.

And to George's point, and that's such a good point, George, for anybody who's listening, whatever you can automate, you automate your 401(k), obviously that's coming out of your check automatically. 529 coming out of the check automatically. If you're putting money aside for sinking funds, it's coming out. And when you do that, then when you actually receive your check into your account amount, you're already used to what that amount is and you don't miss. Does that make sense? You don't miss the money that's gone out.

You force the boundaries to do the smart thing that you know is good for you. You force yourself to eat the vegetables first.

Okay, so really quickly, especially because George, you're on the phone and you always use the retirement calculator. I was using the retirement calculator on Ramsey Solutions and I plugged it in. I plugged all of our stats in. And it's showing that in retirement it could be up to like, with the 11.8% that you suggest, it could be up to $22 to $24 million in retirement. That's to me, I feel like if I sacrificed a little bit of that now, it would make sense because I could pay, you know, I feel like I'm going to be fine in retirement anyways, but getting kids through college might be tight. We're, we still think drive to the 15%. And then just focus on the budget, crack it down and go through with the 529s as well.

The reason— okay, I would love to talk about that a little bit because I do think if you had called in today and you were like, hey, we've been socking money away, we've got $4 million, you know, and you had accumulated a certain amount of wealth. I— well, give me a little bit, Jade. I would have definitely felt the feeling of, of do we have to be quite so intense? I mean, we're going to have so much money. I could understand that. But you're not quite there yet. Therefore, the choices that you make today really, really matter. And how you craft your lifestyle really, really matters. And where you are, where you're making this really great income, it's so easy to get sloppy because you do have the cash flow and you can, you know what I'm saying? Like your income can kind of COVID up things. But the truth is, if you're making this income and the margin is not there, for you to do the Baby Steps, that is a huge red flag that, man, we do need to tighten it up. If I looked at my budget today, George, and I said, for some reason, there's just not 15% there to invest, you'd look at me like I was on the crazy train.

Like, what in the world are you doing?

Well, because the truth is I'll find it. It just might be hidden in a debt payment or lifestyle creep.

Yeah, it's hidden in DoorDash. Yeah, absolutely. And so for you, Ryan, I think you have the opportunity to really look at your lifestyle and put the correct boundaries in the correct place. And that's something that's gonna serve you well beyond this of being able to have the discipline of saying, I know when I'm off the rails and here's what it looks like. So it's more of a philosophical thing for me than a, if you don't do this, does that make sense? You're gonna have plenty of money and there's a lot worse that you could do. Okay. So hear me say that.

And the other part of this is there are a lot of assumptions made. Like it's fun to punch it into a calculator and go, cool, that's how much I'm gonna have. But we also don't know what the returns will be, what inflation will be, will your income stay this high forever? What if there's a health diagnosis? What if one person wants to stay home? That's right. And so you have to factor in a whole lot of options. So I like to be a little bit pessimistic about the future to force myself to do smart things. And if you have too much money, that's just more impact you can have on your family, your community, the things you are passionate about. So I wouldn't be too worried about having too much. But I think creating the habit of at least investing 15%, especially with your low mortgage compared to your income, I think you can find this money easily. And it'll be a great exercise for you and your wife to be a little less sloppy with the spending. Because you can out-earn your stupidity with the money you guys make. You know, the money leaks can happen.

You don't really feel them. So adding some friction back in and putting your money where it matters, man, you're going to feel so good. I think so too. Being proactive and intentional instead of just going, "Eh, we'll be all right.

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Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell here with Jade Warshaw taking your calls calls at 888-825-5225. Max is in Minneapolis up next.

What's going on, Max? Hey George, hey Jade, how are you guys?

We're doing great. How can we help today?

Hey, yeah, just I had a quick question for you guys. My wife and I are in Baby Step 2, um, and I just received a pretty significant job offer. I mean, I'm just, I'm really struggling with the idea of leaving my current employer and just, I really don't know how how to leave an employer that's been so loyal to me. Um, I just was wondering what your thoughts were.

Wow. What's the, um, pay now and what will you be making?

Um, currently I'm, I'm an electrician, so I'm an apprentice. Um, I'm making $28 an hour right now. Um, and the new job offer at the other place would be $50 an hour. Whoa.

Wow.

That's a pretty serious upgrade, man. That's almost doubling your income. Yeah, by a lot.

So explain to us the trouble that you're having with— so it's not the move, it's not the job, it's strictly, man, I'm loyal to these people, they've been good to me, how do I tell them? Is that it?

Yeah, that's pretty much it. One of the biggest things that he helps my wife and I with, he owns duplexes in town and he gives us $750 off a month on rent just for working for him. So that's a pretty— that helps us a lot just with our living expenses. And I mean, part of being an electrician, to become a journeyman, which is the next step, you have to take a pretty big test. And he takes his time out of Saturday mornings to come into work outside of work hours to help me study and help me understand what the test is going to be like. And he just does a lot for me and gives me a van to drive.

It sounds like he's a friend. It sounds like he's just as much a good friend and a good person as he is a good boss.

Mentor, super generous. That's awesome. How long have you been there? Uh, 5 years.

Okay. Is it, is it fair to say, let's, let's, uh, cause I'm kind of going somewhere with the idea that he's, he's not just a boss, he's been a good friend. So if, if a friend called you up and told you some really great news, how would you feel? Even if it kind of affected you, but you can tell, man, this is really good for them. How would you feel?

I would feel very excited for them.

Were you out there like looking for this job? Um, not really.

I just have, um, other friends who, um, are in a similar position who had already taken before me and there's just more to come to. They're just, they're looking for people. They're looking for guys. Guys that are hungry to work.

And yeah, well, what I wouldn't do is just stay in it for loyalty. I would have the conversation with a whole lot of gratitude and let him know exactly how you feel. Man, you honestly changed my life over the last 5 years. The way you've mentored me, the generosity you've had toward me and my family, the things you've done for us outside of this place, it has impacted me, and I'm going to take that with me forever. 'But there's an opportunity that is going to change our family's finances and help us get out of debt, help us build wealth. And we're going to take that opportunity. But I want to let you know that this place means the world to me, and I hope that we can remain friends.' How would he handle that?

I think he would handle that pretty well. I think I'm just a little too nervous about what the reaction will be.

Yeah, well, I think it's probably worse in your head than what's real. I don't think he's going to yell at you. And go, after everything I did for you, this is how you treat me. I mean, if he knew you were going to double your income, he should be happy for you as a mentor. Absolutely. The reason he did all this was because he believed in you and he wanted you to grow as a person, as an electrician. And a natural byproduct of that is when you grow, you outgrow. Yeah.

And I think, I think mature adults understand that nothing lasts forever, you know, and few things last for a really, really, really, really, really, really long time. Right. Right. So I think that's just part of life. You, to George's point, you grow and sometimes you outgrow and you can move on from different spaces and that's okay. I think judging by the way you're describing this guy, I think he's going to understand that.

Yeah, I would be more worried if he was like a toxic boss. You know, I got to bring him this news and he's a narcissistic jerk and he's not going to take kindly to it. But I mean, great example is our friend Ken Coleman, who recently left Ramsey. Perfect example. And he was here 12 years, friend to Dave's before he got here, friend to Dave's after he left. And he had a very honest conversation with Dave and led with a whole lot of gratitude. 'Cause I mean, Ken and I, you know, we grew up here, I feel like, especially me. And I kind of took over for Ken when I started here as a host and MC. And so my journey and Ken's intertwined. And as he shared it, all you, like he was dripping with gratitude for the way Dave has treated him, the team here. And nobody felt any level of, wow, I thought Ken was loyal. Loyal. We know he was— he was loyal up until the day he left, and now he's just a loyal friend. Yeah. And so I think you're gonna have to— this is like the first breakup of other breakups, and the first one always— the first one hits the deepest.

First cut is the deepest. I knew you're gone. I didn't want to sing it, but I wanted to. Just know that. Sheryl Crow. So, Max, I think you have the emotional maturity to have this conversation, and luckily I think he has the emotional maturity to handle double it. And I'm, I'm honestly just so happy for you. And I'm not even your friend. I mean, I guess I'm a new friend, but if he finds out you're going to double your income, he can't pay you that, right? It's not like he's underpaying you right now.

No, he—

I don't think he could match that. Exactly. And I think that's a fair— you're not doing this to try to like manipulate him into paying you more because he can't. Yeah. And so therefore it's not like a tactic you're using, uh, you're just changing your family tree right now as a young electrician who has a lot of room for growth. And I think you're going to that if he's a real one, he's gonna stick with you as a friend in the long haul, and he's gonna be cheering you on from the sidelines.

Now, are you moving to take this job, or are you staying put?

Um, it's union, so I kind of pick where I want to work, but there's per diem and stuff that comes with it.

Okay, and are you going to choose to move, or are you gonna choose to stay put? I will stay where I'm at. Okay, and are you still gonna live in the duplex that your old boss offers you? Um, so it's—

I'm locked in for a year with, um, he hired out a management company, so it's technically through a management company. It's not necessarily just—

you're not dealing with him directly.

Okay, I wanted to know how that's gonna— I could—

is that the awkward part?

Yeah, some awkwardness there. Get out. Okay, what—

how much debt do you have left?

Uh, we have $22,000 in consumer debt. Awesome.

And you're going to be making $100K on your own when you take this new job?

Yeah, our take-home pay with this new income would be around $10,600 a month.

Woo! Like that! Man, that's pretty wild, which means you're going to get rid of this debt fast, build up an emergency fund fast, be investing double what you would have been. I think that's an amazing feat at your age to be in that place, and nobody would fault you for it. Nope. That's the goal, man. And if you want, here's what I would do. I would practice the conversation. Like, you can write a letter first to kind of get all the words out there, because when you start the actual conversation, it's going to be like a word vomit, and you're going to be nervous, and it's going to be emotional. And so just knowing ahead of time how you want it to go and kind of knowing the flow and the arc— hey, I want to start with the generosity, I want to then enter with the opportunity, end with how grateful I am for this friendship and then you guys can get into logistics. And I think quickly you'll find his facial expression will be that of maybe surprise, maybe a little bit like, oh man, but then at the end, happiness. Yep. For a friend.

Thanks for the call, man.

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Joseph is in Tampa. Up next, Joseph, welcome to the show.

Hey, how's it going? Great.

How can we help today?

Um, I don't really know how to put it in a question, but I have a lot of debt. I'm not really sure where to go, and honestly, I just feel like I'm failing my fiancée and our two kids and I just need help.

Wow, those are some fighting words. How much debt do you have?

Um, total $77,607. Okay, what kind of debt is that?

Break it down for us.

Um, $34,000 in credit cards, uh, personal loans, and a broken rental lease. Um, Um, about $29,000 in a pickup and about $14,600 in student loans.

Okay, so the overall is, I want to get out of this, I want to let go of the stress, I want to do more for my family financially. Yeah, sorry. It's all right, you take your time. This is— I mean, there's a lot here. I can tell this has been weighing on you a long time.

Yeah, it's really hard. It's really hard.

What caused this? Was there an incident that kind of caused a snowball in the wrong direction, or is this just a couple of decades of just not being intentional and just letting life happen?

I'm only 25, and I mean, I don't want to make excuses for myself, but I grew up and watched my parents be really bad with money, have a lot of debt, and they still do. Um, so I mean, I didn't really know what a debit card was growing up. I knew what a credit card was, you know.

I understand.

Okay. So the last few years, you know, just making dumb decisions and, and now I've matured a little bit and realized that I messed up and I got to fix it. So you're working and what are you earning? Yes. Um, I don't know the exact, I think it's almost $71,000 a year.

Okay, what does it look like a month? What's your paychecks look like every time you bring them home?

Um, about $1,200 a week. Okay, $1,200 a week. And what about your fiancée?

Um, she stays home with the kids. Okay, and how old are the kids? Um, our daughter is almost 4 and our son just turned 2.

Okay, and is there a wedding in sight, or—

um, we've been thinking about going to the courthouse, but we've also kind of agreed that we need to tackle some of this debt first before we can start saving for a wedding. Okay, I would—

okay, what are your monthly expenses look like right now, guys?

Have, um, so everything that I'm actively paying on comes out to $1,870 a month. That's just the debt? No, that's just like my pickup payment and then all my bills.

Okay, that's not the— that's not your full—

are you guys renting right now?

Um, we are currently with my in-laws right now.

Okay, so you have very little housing expenses, which is good. Yes. So you have a little bit of margin right now to throw extra on, on your smallest debt?

Um, the way I've got it calculated, and I could have it calculated wrong, is I have about $250 a week left over.

So $1,000 a month to throw extra on the smallest debt.

Have you built a budget yet? Because if you don't have EveryDollar, we need to get you in that because I think it's going to give you a better visibility into all of this. Have you tried that?

I have downloaded EveryDollar before. I can't tell you that I've used it. I just have a piece of paper in front of me with the cost of all my bills and you know, how it comes out each month.

Before we get off the line, we're going to make sure you have EveryDollar because it's going to help you in so many ways. Number one, it's going to give you a clear picture of what your income is, what your expenses are, and it's going to help you with the most important thing next. And that's what you need to focus on. And just being able to see once you plug in, okay, here's my income, here's all the expenses, here's how much margin I have per month. Looking at it on a weekly basis is helpful, but really seeing it for the month and seeing those lump sums is is even more helpful. And I think that's gonna give you a clearer picture on what's actually going on. And then you'll know, okay, I have, you know, $800 or I have $1,000 every single month that I can throw at the smallest debt, which in this case is the student loan. But I have questions about this $29,000 truck. Can you tell us more about that?

Yeah. Yeah, I was 22, thought I was, doing well for myself. And I mean, at the time it wasn't the worst, but I'm doing way better now. And I— what's it worth? Um, probably right about— I actually talked to my buddy, he's a car salesman, but he said he can blue book it at right about $28,000. So I owe just about what it's worth.

Okay, so I— if I were in your shoes, I'd be offloading that truck immediately. Do you have any money saved anywhere?

I have $400 in a savings account. Okay, so here's the plan.

I'm going to give you a step-by-step Plan. Thing one, I want you going by a credit union this weekend and I want you to say, I need $5,000. And that's going to be the money that you spend on your used vehicle. It's going to be a beater. It's going to suck. It's going to have a lot of miles on it, but it's going to be like a Toyota or something that runs forever. Okay. So that's thing one. And then thing two is you need to get $1,000 saved. So you need $600 more in a hurry. So I want you going through your house, you and your fiancé. Say, looking at every single thing that you can buy or post or, you know what I'm saying, to sell, because you need $1,000 saved. That's Baby Step 1. And just, okay, having cleared out that truck and now having the truck payment back, because what were you paying on the truck?

$930 a month. And that's without the insurance?

That, yeah, my insurance— I'd cover my fiancée's as well— is $330. Yeah.

So you having that $1,200 freed up on top of $1,000 that you said you can throw at the debt, now we're moving. You see what's happening here? We just freed up $2,200 throw at your smallest debt, right? Which is over $25,000 a year. So worst case, if you just did that and nothing else, you're done in 3 years. So I want to show you there is a way out if you just get really focused and follow this plan exactly as we teach it. If you go, well, I want to just take parts of it, it's not gonna work. You got to go all in.

Now let's go back to the fiancé. So you don't, you don't have the money saved for the wedding. Tell me about the courthouse. Can you guys just go down to the courthouse and get married legally so it's done and done?

Um, I think so. Um, I mean, I don't really know all the rules.

It's just a certificate. It's just something you both sign.

Okay.

Told me in the past that even if we do a courthouse wedding, that she said she would still want a dress and a photographer and a tux.

Here's what I'm getting at, and, and this is what— here's where my mind is going. Uh, you You guys want to be married. You have a family together. I would love for you guys to be able to link arms on this and attack this together because it's for both of your future. You called in here sounding like you just have a pit in your stomach. It's because you're looking at the future with this woman and with your kids, and you want to do better for that, right? And so what better— what better way to start than to fully commit? Now, today you don't have the money for, you know, a big party. If she wants to put on her best address and go down to the courthouse, I think that's great. Or if you guys simply want to say, today this is kind of our secret and we're going and we're signing the paper, nobody really has to know about it. This is just so that legally we have the protections to go all in on this together. And then after, you know, in a year or however long, once we calculate that this is done, then we can throw the big party and we can tell our— all of our friends, and it can be this funny story that we tell.

Hey, we were married all along, we just didn't Right. That's fine. Right. But for today, what I want is the security of you knowing that you can talk to her and include this, her in this, and her income now counts towards this. And now it's just not your debt, it's her debt too. And you guys are actually beginning a life together. Okay. And I don't want you to feel the pressure of, I've gotta clean this up first before you got children. Yeah.

That's a great why, by the way, Joe. Joseph, one of the best whys is those kids and that woman who you love. And so I want to circle back to what you said at the beginning, that you're failing your family. Well, let me tell you this: failure is an event, it's not an identity. Failure is a comma, it's not a coma. So don't let it be. That's not who you are. You made some mistakes at 22. Welcome to the club, man. Now it's who am I going to be tomorrow and the next day and the next day. You live that out, we're going to hook you up with EveryDollar to walk you through it, and my book Breaking Free from Broke. I want you to call us back when you're married, when you're debt-free. We want to celebrate every single milestone with you, buddy. Hey you guys, did you know that there are thousands of data brokers whose entire business is collecting and selling personal information? Things like your home address, your phone number, and even your relatives' names.

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Ask Ramsey is our free AI tool that's built and trained on proven Ramsey principles. And today we're going to break down the most asked questions from the week. A lot of questions about buying and selling a house, investing, and budgeting, but the top question was around retirement savings accounts.

Yeah, the specific question was, should I only contribute to a 401(k) or switch to a Roth IRA? Good question!

Juicy nerdy debate. Very juicy! There's a lot of variables here. No. 1: if you're still paying off debt, pause all investing. This is a question for later. If you have paid off all your debt, got 3-6 months of expenses saved, then you should be investing 15% of your gross household income into tax-advantaged retirement accounts like 401(k)s and Roth IRAs. To start we say match first. So if you have an employer match— Yes! Match inside of a 401(k), then take that first. Free money. Then you can go to a Roth IRA. Yes. Next. Finally, if you run out of money, like you've— you max out the Roth IRA, you can go back to your traditional 401(k) until you hit 15%. I love that.

We call that rule of thumb here: match beats Roth beats traditional. And part of that, like we said, yeah, match is free money. That's free money that your company is giving you. You don't want to miss out on that. Instantly. Yeah. Yes, of course. And then, of course, you know, the Roth IRA, that's going to give you the tax-free growth and tax-free withdrawal in retirement. We love a Roth. If you have a Roth 401(k), go like ham on that immediately. And then, of course, if you don't have that, you just do the Roth IRA and then you can go back to that 401(k) traditional, which helps you get to your 15% goal.

So if you want to play around with your numbers, your situation, have the conversation with Ask Ramsey. It'll help you determine how much of your household income needs to go into each retirement account. And you can ask all of your questions today at ramseysolutions.com or click the link in the description if you're on podcast or YouTube. Stephanie is in Detroit up next. Stephanie, what's up?

Hi, I am graduating from medical school next week with a lot of debt. My question is, do you think making minimum income-driven payments to qualify for the Public Service Loan Forgiveness is a smart strategy, or am I taking too much risk relying on a government program them potentially accruing more interest if the program is canceled.

Ooh, very thoughtfully worded, Stephanie. Appreciate that.

Thank you.

Yeah, I'm, you know, people hear us on the show and they go, wow, these people really hate student loan forgiveness. No, we're just pro-people taking control of their life. It's not even a responsibility thing. There's nothing wrong with the public student loan forgiveness program. It's just really hard to actually get it done. And it's a long time and you're still making payments the whole way. And you're also limiting your income because you kind of have to work in a certain place in order to get that forgiveness. And if that changes, well, you're out. And so that's the risk that I'm more worried about, not it being canceled entirely, but more just, you don't know what the future holds and I don't want to limit you. If you get an amazing job offer in the private sector, but you can't take it because you have these golden handcuffs stuffs, that's a real bummer.

But truthfully, the data on it, I mean, the data on it is not good. And I'll just tell you right now, at this point, like, currently, only 5.5% of the applications are approved for forgiveness. So that means 93% of the applications are denied.

That's, that's a lot.

You're telling me there's a chance? That's a horror. Like, that's, that's a horrible shot, you know, to risk how many years of your doing a job that maybe you don't want to do just to possibly get the chance at this. So how many—

how much student loans do you have? I have 300— about $315,000, which is a lot. I'm starting residency in June at a place that does qualify, and I'll have about 6 years of training that would go towards the 10 years. So that's kind of where, like, you know, I'd only have 4 years as a a practicing physician elsewhere that would need to finish to qualify.

And what do you think you'll be making?

After fellowship, I'll probably be making between $350,000 and $400,000. That's fantastic. Yeah, excellent.

I mean, well, here's the napkin math on that. If you can just for a short time, let's say, we can go both ways. Let's say you did it 4 years, you made the minimum payments, so you still paid into it, but maybe you got the rest forgiven after 4 4 years. Cool, we did it. Let's look at the other side where you are in full control and you just attack it with a vengeance and keep living like a broke college student in residency. Well, if you could put, you know, if you could live off, let's say, $75,000 or $80,000 of that, $350,000 to $400,000, right? That leaves you with $300,000 you could throw at the debts. You'd be done in 18 months. Right. Instead of hoping that 4 years from now or whatever it is that it's paid off. So either way, I think you could try it, but I think I think I like the odds of Stephanie more than the government program working out.

Right. I guess we're just— I'm engaged in one of the things we wonder is, should we be putting more money towards the loan right now, or should we try to like buy a home and, you know, pay a mortgage? I just think that's kind of where we go.

Listen, we had a Dennis call in earlier. Similar question, similar amount of debt, and he had the same struggle as like, hey, I'm getting to that point in my life. I wanna start a family. I wanna buy a house. I also have this crippling debt. And don't forget, you know, with the mortgage, you're taking on debt, you're taking on more risk, you're taking on more financial responsibility in your life. And when I hear somebody that has $315,000 of debt, and then you say, oh, and I'm thinking of buying a house on top of that, that just feels like the ultimate stressor because now you're cutting into your margin because home ownership, George, I don't have to tell you, it's one expense after another. Another.

I mean, especially as a newlywed couple. Yes. There's no reason you guys have to jump into a home. I mean, just rent for a year, enjoy your newlywed life without all of the stresses of homeownership. Yes, there's some blessings in there, but if you do it with a huge mortgage you can't afford, which by the way, you'll have close to nothing down, which is going to make your mortgage huge on top of the student loan debt. Even if the payment is income-driven and it seems low, it's sort of kind of a, you know, a farce because it's $315,000 no matter what the payment is every month.

That's a good point. And if you really think about this, um, Stephanie, the house that you would choose to purchase, uh, on a $400,000 income is, uh, if you had no debt, the house that you would choose is very different than the one that you would choose if you had $315,000 in debt. Am I wrong or am I right? Yeah, absolutely. Yeah. So I think it's worth it. It behooves you to, to wait on this, get the debt paid off. By then, maybe you're even earning a little bit more money, and your then-husband will be working too, right?

Yeah, he works. Um, what's he doing? We, you know, he works as a brass salesman. Um, so he does well for himself. We're just not planning on combining anything until we're married next year.

But think about that. Let me walk you through that. If you get debt-free, let's say before you're married, let's say you follow this in 18 months or whatever, you do this now. Obviously you need to be out of residency making that kind of money, so you'll probably be married by then. But if you can pay off the debt in 18 months, $315,000, then you can save up another $315,000 in 18 months.

Yeah, well, my, my income won't be that for another 6 years though.

Yeah, so that's a ways away.

So even when you're married though, when you combine incomes once you're married, you'll still be able to start knocking out this debt even before you're making that kind of money. And so it still tells me— I'm just saying, within 3 years of being married, 4 years you're probably gonna be debt-free with an emergency fund and a down payment. But you just have to stay focused.

That sounds impossible to me.

It'll happen. You'll be shocked at how fast you'll move. Time passes anyway. Yep. Once you guys are married and you have two people working toward the same goal. Now that's hoping that he's on the same page as you, that you guys have the same money values, principles, goals. That's gonna cause you to move so much faster. And I have great faith that you're gonna be just fine. Fine. But I would focus on paying it off because of your situation. I think the upside is there for you just to knock it out and not have that carrot dangling of forgiveness and then to not get it because you messed up the application or you got a private sector job. Yeah. So I wouldn't do it personally, but I'm not mad at you if you do it.

And don't take my word for it, Stephanie. Yeah. Get on the interwebs, get on ChatGPT and look it up for yourself and you're going to, you You will be astounded at the numbers and at the data on this. And you're gonna go, oh crap, she was right. I wish she wasn't. Listen, I wish I wasn't right. I wish that this was a guaranteed move for you and it would happen and it'd be a light switch. But that's just, unfortunately, that's just not the way it is.

Yeah. Oof. Especially when I think the problem is people are now going into massive amounts of debt without really feeling it. That's right. Because they're going, Well, I could probably get it forgiven later. Probably. Fingers crossed.

Well, what it's hiding under is the rate has actually increased. But when you say, oh, we've gone from 3% or we've gone from 1% to 3% or 3% to 5%, it's still 5%.

That's terrible. Now it's 5 out of 100 people who are going to get it. Oof.

All right, Jade, let's talk about insurance. Everybody needs it. Nobody wants to talk about it. And it can be hard trying to find pros who aren't just looking to make a buck, trying to find agents who know their stuff. Well, we've got you. Ramsey Trusted Insurance Pros are vetted and coached to make sure they're market experts who have your best interests at heart. So go to ramseysolutions.com/coverage to find the type of insurance you're looking for and connect with a Ramsey Trusted Agent. Amen. Love to see that. I just upped my life insurance last night and I felt real good about it. Went over to Zander, got the quote, filled out the application. It was a breeze, 5 minutes on my phone. Love that. And I slept a little bit better at night. So now I just gotta—

Yeah, did you do another appointment?

I think I need some blood work done. That's the non-fun part. Are you squeamish? A little bit. Well, one time they hit a, a valve. I didn't know I had those, but apparently we all do. I never gave blood after that. Let me just say that.

That was painful. Somebody just passed out whilst they were driving listening to this.

Sorry, guys. My bad. My bad. Alright, let's go to the phones. Blake is in Chattanooga, Tennessee.

What's going on, Blake? Hi, thank you guys for taking my call. Sure. How can we help? I have a question about retirement. Right now, my husband and I, we're on baby steps 4, 5, and 6. We are not hitting to 15% of our income, and I'm not sure where to go. So we already maxed out our IRAs. We're doing 12% in my husband's 401(k) through work, which is about $12,000 or $13,000, and that does only bring us to $27,000. On a low year, like if we take a low month, $30,000 a month roughly, that's a low month for us, that's $360,000 a year, right? We're coming up pretty short on 15% for the year.

So So good problem to have.

I love that. So what is your gross household income for the year?

Give me a ballpark on that.

Um, the lowest it would be is about $360,000, but probably somewhere closer to, I'm hoping, $450,000 this year.

Woohoo! So you're maxing out the 401(k), you're each doing a Roth IRA, you're maxing out those. Are you doing an HSA as well?

No, we do not do an HSA.

Okay. I love this problem. I mean, I can tell you, George, you can say what you do.

I can say what I would do. I'm going off of that $450,000 number and we're going to go 15% of that is $67,500. So if you both max out a 401(k), is that what I'm hearing?

No, I don't have a 401(k), just him.

OK, so we're going to max out his 401(k). Is that $24,500 this year? Yes. OK, so we've got that done. Now both of you can do a backdoor Roth IRA because your income is too high for a Roth. You do that. So that's $15,000, $7,500 apiece? Yes. Okay. And do you guys have access to a high deductible healthcare plan?

Mm-mm. Mm, we— I feel like that's what we have, yes, is a high deductible healthcare plan.

So you should have the HSA.

If you do, then you have the ability to open the HSA.

We don't ever use it because we don't really— we don't ever really go to the doctor or need the money.

Well, here's the life hack. That's even better. You fund this thing and any money above a threshold, like any money above $1,000, you can invest just like an IRA. And the really cool part is you can just stack money in there and after the age of 65 it becomes like a bonus traditional IRA.

And I think it's $8,500 a year you can do.

Yeah, I think like $8,750 or something for a family. So I would max that out as well if you have access to that. That's another $8,750. Then he might have access to something called a mega backdoor 401(k). This is where you can do after-tax contributions and then convert it over to a Roth IRA. He can look into that. But honestly, once you've done the 401(k), the IRA, the HSA, I might then just go to a taxable brokerage account and invest in index funds and have a, what I would call a bridge account. Because I assume you guys are young? Yes, 35, 36. Amazing. So this bridge account, let's say you wanted to be work optional at 50 or 55. Well, this bridge account, in this brokerage account that's not a retirement account, you can just use that money. You'll pay capital gains taxes on any of the growth, but you can use that money to float you until you hit 59½ to access the retirement accounts without penalty. OK. That's what I would be doing, in that order. We talk about match, then Roth, then traditional. Then outside of that you've got the HSAs, you have the backdoor options.

Then, if you've exhausted all of those, because you want to take advantage of anything that has tax advantages, then go to the brokerage account and just invest outside of retirement to finish it out.

OK, that makes sense.

Yeah. So you might be putting $20,000-$30,000 into that brokerage account. And if one day you may have an employer plan, then I would start utilizing that. Yes, sir. You're doing great. What's your net worth at?

You said $35,000? Yes. Probably not very much. I mean, we owe a bit on our house. I mean, we've got our emergency fund. I don't know, actually.

Oh, there's an idea. You know what I would do, personally? I might use that extra money and throw it at the mortgage.

We do. We pay $1,500 extra a month towards our, towards our house right now.

On top of the normal payment? Yes, correct. Make it $3,000. Let's get root now. How much faster will it get paid off at that point? How many years?

Yeah, uh, it's a 30-year loan. We bought the house probably a year and a half ago. I think we owe $490,000 on it, so it's pretty hefty payment. $3,500.

Um, I'd start chipping away at that. Thing and knocking it out in like 7— I would have a goal to have it paid off in about 7 years with your income.

7 years? Yeah, you can do it.

You guys make half a million dollars. I mean, not that it's easy, but you can definitely accomplish this. If you throw, let's say, $100 grand a year at it, you're done in 4 years, 5 years. Yeah, yeah. And that's plausible for you guys. But yeah, I mean, that's throwing What, $7,000, $8,000 a month at the mortgage total? So I think it's very doable. I would sit down with your husband tonight and start crunching some numbers and setting some real tactical goals. And I think that's going to put some fire under you guys to get even more intentional with everything you're doing. And then I would automate it all so that you don't have to think about it. Less brain calories. Love that. That's a great problem to have. I love that question. All right, Derek is in Grand Rapids up next.

What's happening, Derek? Hey, so I had a question. I've got some people that are calling me for wanting me— pick me up as a client for their financial advising services. Um, paint you a quick picture. I'm a self-employed real estate agent, been doing it for 6 years, so my income is not guaranteed. Um, I own a house, I'm married with one kid, and my goal so far has been to to just pay off the house as quickly as possible. We don't have any other consumer debt other than the house. And my dad's been getting on my case about starting investing in some more traditional ways. Um, and one of those ways is he said I need to get life insurance because I have a kid, and I need to start investing in traditional accounts. Well, this financial advisor— I, I know Ramsey's position on whole life insurance and that it's and I agree. But he presented this thing called a variable life insurance plan. It sounds good, and I feel like I'm missing a downside.

Oh, I bet he made it sound good. Do you know why, Derek? Do you know why he would pitch you a VUL over term life insurance?

I'm guessing he'll make a lot more money.

Ding, ding, ding! We have a winner! This guy wants a fat commission check. Let me be clear, he's not a financial advisor. He's an insurance salesman in financial advisor clothing.

Could be.

Does he call himself a wealth strategist on Instagram? I don't know. I'm not on Instagram. That's the tell, by the way. And their websites are always a little bit vague and sketchy.

You're like, "What is he actually selling me?" Yeah, because it's investments, but you don't have to have a securities license to sell variable life.

That's the scary part. They can get away with, with kind of selling investments through the insurance policy. But no, these are, these are terrible investments, and the returns are awful. The commissions are super high. The premiums are super high. So here's what I would do instead: get term life insurance to cover the insurance side, which is going to be a fraction of the cost, like $20, $30, $40, $50 a month, and then invest the difference.

The term policy he presented was like $28 a month. There you go.

And then whatever premium he was pitching you, if it was gonna be $500, just invest that $472 difference on your own and you'll be so much better off. Otherwise, you're gonna be calling me back in 5 years going, "Hey, how do I surrender this awful policy that my friend roped me into, or family friend roped me into?" No, and I wouldn't get any financial advice from him in the future because it's tainted now. You already know he's trying to steer you towards products that make him money not build you wealth. Yes, big difference, big difference. Thanks for the call, man. Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell, joined by Jade Warshaw. We're taking your calls at 888-825-5225. Beth is in Pensacola up next. What's going on, Beth?

Hey, how you doing? Good, how are you?

Good. What's your question today?

Okay, so I have $80,000 cash, but I have a 3.5-year-old mobile home home that I owe $86,000 on that's completely falling apart due to manufacturer defects. Um, it's completely rotted. We have mold. We really need to get out of here. Um, and then I also have student loans, so I'm trying to figure out, like, do I take the $80K, pay off the house, and just walk away from it all, or do I take the money to fix the house, which estimates right now are between $60,000 and $90,000? Goodness gracious. Or do I I get the student loan monkey off my back. How much are the student loans? Um, so between me and my husband, it's $85,000.

$85,000. Where did this $80,000 cash come from?

Um, so we actually purchased property that we were going to move the mobile home to, but in its current condition, if we take it apart— it's a double wide, it's in a trailer park right now— um, if we were to try to put it back together, the engineers say that it would probably never go back together, right? So we sold the property, and so now we have the money from the property that we purchased.

Got it, got it. So what would this thing sell for even if you did the repairs?

Like nothing. That's, that's what I'm trying to figure out.

It's not worth sinking $90,000 into it when it's already not worth that, right? So could you get anything for it right now?

Um, I've tried. I've not had any luck. I've honestly been trying to move out of here since I purchased the place because nothing is basically what I was sold.

But, um, how much did you purchase it for?

So it was worth $129,000. I purchased it for $105,000 at a discount in exchange for living in the park for 4 years, which at that time we didn't have the property, so it was okay. Um, and then I owe $86,000 on it today.

And you've been in the park for 4 years?

Uh, we will be in August, so it's— our home's about 3 and a half years old.

Okay. Um, man, oh man. And how many, how many, um, bids have you had on the mold? Have you checked with several places or just the one that quoted you $60,000 to $90,000?

Yeah, no, we've been like 4 months back and forth with the insurance and the mobile home dealer. And, you know, they're saying they're not going to touch it because it's out of warranty, even though another home identical to mine with the identical damage in the same park, and he actually just let his home go back to the lender. But we worked really hard to build our credit.

Yeah, where are you living in the meantime? Where are you living? You can't live in the mold.

We're still in the house.

Mm-hmm. That's the hard truth, is this just might be a money pit. And either way, it's a money pit, or already has been a money pit, and you might need to just use the savings, pay off the mortgage, and get out of this thing as soon as you you can.

I think so too.

Otherwise you're going to go through foreclosure, give it back to the bank, and it's going to destroy your financial world for a while. Yeah. And you guys can save back up $80 grand. That's not the end of the world, right?

It kind of feels like it. We both kind of came from nothing, so this is like a huge amount of money for us. It is.

But let's, let's, let's paint a picture because I think, I think you've been in the midst of this for file. And how would it feel to completely be free of this? There's no mortgage left. You can walk away from it, um, scrap it, right? And then you guys look for an apartment. You're renters now, but there's no mold. And when you come home, it's peaceful, and you're not, you know, battling insurance people anymore. You're not battling— do you see what I'm saying? There's, there's peace on the other side of this, and it might cost you $85,000 or $80,000 $100,000, but there's so much peace on the other side of getting rid of this mess.

I'm just afraid that, um, with the rental prices in our area— we're in Northwest Florida— um, that we won't be able to save up to buy our place for like years and years. And I've got an 11-year-old now, and I really wanted to give him a safe home, you know, out in the country would have been the dream.

And what do you guys do What's your work?

Um, so I'm a stay-at-home mom. We have 3 kids and I homeschool, and then my husband is an engineer.

And what's he earn?

And then I do all kinds of side stuff. Um, he earns right at $100,000.

And what do you earn with the side stuff?

Anywhere between like $10,000 to $20,000. Okay.

So $120,000 household income. You guys can definitely afford rent. It's not gonna be fun. It's gonna be more than you're paying now on a mobile home, but it's not outrageous. Outrageous.

Yeah, well, it feels outrageous.

What's it— what's it going to cost? What's the actual rent for a reasonable home? Nothing fancy.

Rent for a reasonable home with no mold down here is about $2,000 for a 3-bedroom. Great. And we've—

you guys bring home a 1-bedroom?

Yeah, and we don't have any other bills, like we've paid everything else off.

So it's 25% of your take-home pay. You're right there. Yeah, yeah, you're just not used to paying $2,000 for any type of housing, so it feels outrageous. But for your income and your take-home pay, you're right there. That's perfect.

And honestly, rent is the right space for you right now anyway. It's, it's passing off risk to the, the, the landlord, which is great, or to the apartment complex, which is great. You don't have to shell out any extra money for anything else because right now, once you get into an apartment that you can afford afford or a rental house that you can afford, the next thing for you guys to tackle is this $85,000 of student loans.

Yeah, yeah, definitely.

And, and I think, I, I think honestly, even though there was what we would call some stupid tax attached to this, I think this is going to help you guys get right side up and start doing things in the proper order. Yeah. Do you know what I'm saying? To where you're really able to achieve that financial peace that clearly you want, otherwise you wouldn't be crying. Right. It's setting you, it's setting you on the right path. And so that's, that's the, the learning and that's the piece that comes from all of this is, you know what, this is just putting us on the right path. Now we're doing, we're, we're, we're walking before, we're crawling before we walk. We're walking before we run, which is good.

Okay. And honestly, Beth, I, I don't want you to drain all of your savings to pay down a mortgage for a mobile home that's worth nothing. So what I would do first is negotiate with the lender. Lender, and you might— maybe a short sale is the best move. But I think you could do a negotiated settlement with the lender after explaining all of this, and they might be willing to work with you to take a much smaller amount to call it good and get you guys out. It may temporarily, but you guys are going to rent for a while. You have no other debt, and so it's not, it's not the end of the world in that case. Okay, you're not going to be buying a home in the next, you know, 6 to 12 months. Let's rent for a while. Let's rebuild. Let's get rid of the student loans. Let's build an emergency fund, then save a down payment. So yes, I know your dreams of having a home in the country and homeschooling, that's still on the table. It's just a not now. Okay. This is just a reset period. And I think you're gonna have so much peace getting out of this.

And by the way, your health and your family's health is worth getting out of this.

Yes, gotta get out of that. Y'all are right.

So you're not a failure. You're doing the most right now. And you guys were dealt a bad card. And I'm so sorry that you're having to deal with this financially, emotionally, in the midst of some chaos.

We worked so hard to raise it, you know, to do everything right. And then at no fault of our own, we're losing everything. And it's just really hard.

Hmm. Well, I hope you can—

I hope you can negotiate with that lender, explain your situation. Situation, um, because this is— I mean, yes, there were some decisions on your part, but there was also just the reality of the defects and the mold that was just out of your control. So I wish you guys the best in cleaning the mess up and getting some— a fresh start. You deserve that. Hey, summer's rolling in soon. Vacations, camps, all the fun. And if you're already thinking, man, I hope I can afford all this, you can enter right now for a chance to win $10,000 in the Ramsey May Cash Giveaway. $10,000, that's breathing room. You can fix the car, say yes to plans, stick to your budget without stress. We're giving away one $10,000 grand prize and weekly $500 prizes. No purchase necessary. Go to ramsaysolutions.com/giveaway. Today's Ramsey Show Question of the Day is brought to you by Yrefy. If you've lost control of your private student payments, your financial progress has stalled out, but Yrefy helps borrowers explore refinancing options with payments built around their real-life situations. So learn more at yrefy.com/ramsey. That's the letter Y, Y-R-E-F-Y, dot com slash Ramsey. May not be available in all states.

Indeed. Today's question comes from Justin in Iowa. He says, I'm in Baby Step 2 and I've been selling items items to help pay off my $15,000 of debt. Currently, I'm just finding free items online and selling them on various sites. While I've been doing this, I've seen some inexpensive items that I can purchase at a low price, allowing me to flip them for profit. Is this a good strategy to pay off my debt? Interesting. Arbitrage.

The ol' arbitrage move. You go to Goodwill, you find something that you you can find on eBay listed right now for 5 times the price and you flip it.

I'd love to know. I think there could be some validity to this, but maybe I'd give you, give some guardrails here because what you don't want is you've invested, even if it's $400 into a bunch of items and they've all been sitting on, I'll just say the Craigslist to incorporate all of those different sites. They've been sitting on the Craigslist for 4 and 5 and 6 months. And before you know it, you're like, ah, I thought this thing was gonna sell. It didn't. Yeah. Like that's a, I feel like that's a sticky that's a slippery slope to get in.

I like the idea of it almost as a— it's kind of like a little business. Yeah. And so if you look at it like that, you're going to invest a little bit of your own money to purchase the inventory that you're going to sell. So in that regard, what I would do is set a boundary on it in your budget to say, hey, this is how much I can purchase each month to flip, but it's going to come out of the profits from other things I've sold. Yes. I like that idea. Idea, and only after you've done all the research, because you can get starry-eyed and just start buying stuff up hoping you sell it. No, find out what is constantly selling. Yes, consistently at that price point, and then make sure that you can still ROI after all the fees and shipping and all that.

And I'd even say, in addition to— I, I don't want this to be your only side hustle. I want you to be doing something else that's kind of like guaranteed quick, quick money as well, so that you're not getting there's an opportunity that this could actually slow you down on your journey versus speed you up if you're investing too much of your profits.

Yeah, I've got a friend who was doing this for fun and she was finding like old school toys. Yeah. She was buying stuff for her kids at like consignment shops and she would find these toys, look them up on eBay and sell them for, she'd buy it for $5 or $10, sell it for $300. Yeah. 'Cause some of these vintage toys, these parents are like, I want my kid to have the exact thing I had when I was a kid. As a kid, and they'll spend crazy money on it.

And furniture flipping, that's a huge one. You can make so much on that.

Yeah, if you're handy and you can do the research. It's not, now you gotta think about how much time you're investing into it. Right, right. Your hourly rate might be $3 an hour after you poured all this into it. So make sure it's worth your time, but that's a valid business idea. Very cool. Thanks for the question, Justin. All right, Jason is with us in Houston up next. What's going on, Jason?

How you doing, Justin? Good. What's your question? Um, well, uh, my grandmother— oh, my mom passed away first week of December last year. Sorry. Thank you so much. And then my grandmother passed away the week after. Oh boy. Um, yeah, it was a tough month, definitely. And my wife's grandmother passed away in January. Oh boy, back upon each other. That's tough. Anyways, um, since my mom passed away before my grandmother, my grandmother's inheritance goes to to my two aunts and my sister and I because it goes via the lineage. So it kind of bypasses my dad. Um, my dad called me last week and wanted to know if I'd be willing to give my sister my portion of the inheritance from my grandmother's estate, uh, because she's always been a little behind and everything like that, and she needs to really start saving up for retirement, stuff like that. She has pretty much nothing saved up, and we're pretty well off, my wife and I, over here.

And, uh, how much are we talking?

About $100,000. Wow, wow, wow.

So you're gonna give somebody who has no ability to handle money the most money they've ever seen in their life, at your detriment too?

Yeah, well, my dad said he would give me his entire inheritance when he passes away, which is how much? Well, uh, he's got a house that's worth about, uh, $280,000. I think he's got $50,000 left on mortgage. So wait a second, he's saying—

and now, now, is this— is he holding it hostage? Is he saying if you don't do this, you will not be part of my inheritance? Is that what he's saying? No, no, no, no. Okay, okay, just checking on that.

He's just sort of guilting you into it, like, hey, hey, she could really use the money, you guys are doing okay, what do you think about giving it to her?

Listen, I'm gonna tell you right now, I think that's totally out of bounds that he asked that.

Isn't she already getting $100,000?

She is getting $100,000. Not only that, she was $24,000 in credit card debt, and, uh, my mom used to help her out, but she passed away, so she's not helping her out anymore.

How about this? Let's let it play out. Let's see what she does with her $100,000 and see where she is a year from now.

George, I'm not even letting it play out. Well, it's more for entertainment purposes at this point.

I'm not saying you should promise them anything. I would not be giving your sister this money, and it's not because you're cruel. No, it's because it's actually going to hurt hurt her, not be a blessing to her.

And also because it was intended for you. My sister's debt—

it— but, but here's the thing, here's the thing. The money was intended for you. There was a portion that was intended for her, there was a portion that was intended for you, and some that were intended for other family members. There is no obligation for you, whether she's doing well or not doing well. What— it doesn't— her side of this honestly matters nothing.

We don't wait inheritance based on who could use it the most.

No, it was intended for you, and it's yours. And if you wanted to do that, that would— you would have to come up with that idea in your brain. But for your dad to reach over and say, hey son, I think it'd be a good idea if you helped out Linda, that's not fair. That's neither fair nor right in any way, shape, or form.

And, um, since my mom was helping her out, my wife and I are actually— actually, we settled her debt. That she has— she has no debt anymore.

Oh my God, your sister has no debt anymore?

More? Correct. We— she had like $24,000 of credit card debt. I managed to contact her creditors and, uh, settled it for $16,000.

Wow. So where is she at now?

Uh, she works a retail job, but now she's on the level. She can't get a credit card anymore. They won't— nobody will give her credit anymore. Uh, so now she can save, you know. And is she saving? I'm hoping. I told her that I want her to invest all of the this money that she gets. And so I was going to send her information from Investor Pros and stuff in her area. How old is she? How old is she? Is— let's see, I'm 51, so she's turning 40 this year. Is there anything—

and I'm asking this in the most delicate way that I can at this point, I'm not gonna lie, I'm very irritated— is there anything that precludes her from going out in the world and, and basically doing what, what other adults do? Or is there, is there a mental problem? Is there Is there anything that's precluding her or is she just not—

it sounds like her growth is sort of stunted, right?

And we want to know, is there truly anything there that we need to be considering or is this just a person who's just deciding, I don't need to do all the things that the other adults need to do?

No, no, no. She, she wants to find a new job. She's actually going to get married later this year. Um, and her, her, her fiancé is a very level-headed guy. I like him a lot. They work in like the same area, so they work closely together.

So then why is it up to you guys to step in and save her is my question. She seems fine. It seems like she's fine. She's in a relationship, she's got a job, she's got a future spouse on the way, she's got $100 grand coming to her.

Yes, she doesn't need your help at this point.

Now, I mean, I would love—

you want to know what I'd love to do, Jason? I'd love to shift the conversation to, so what are you going to do with this $100,000 of inheritance you're about to receive? What are your goals, Jason? Yes, I want to shift So we're pretty well off.

I'm planning on putting it in an index fund in case my dad needs assistance later when he gets older. He's already 71. What a guy.

You're already thinking about other people as you build wealth. I would go read the parable of the talents in the Bible. It's a great parable that explains how you can squander wealth or how you can grow it. And there's a lot of scenarios. And some people Some people cannot be trusted with money because they will not handle it well. Your job is to be a steward of any money that comes your way. That's my viewpoint, at least. So if you were the steward of this money, what is the best use of this money? Is it to give it to someone who you know will not multiply it, but instead likely squander it? I don't think that's wisdom.

01:44:11

Yeah, and another concern of mine is I have a special needs son who's going to be needing care the rest of his life. Life, and we need to have a pretty big lesson.

Yeah, we need a special needs trust and fund it. That's what I would be doing at this point. You got your own life and she has her own life. You've already done enough for her settling her debts. I would step out and let her spread her wings.

Yep. When people hear my story of paying off debt, they say things like, "Dang, that must have been so hard. I could never do that." And I tell them, "Sure you can. It's a short-term sacrifice for a long-term gain. But do you know what's really hard? Working your whole life and never having anything to show for it." go for it, never having the long-term gain, just feeling broke and stressed and maxed all the time. And sadly, that's the hard that most people choose. Listen, you're capable of transforming your situation and living a life of freedom, but you need the right tools to do it, like our EveryDollar budget app. In minutes, it'll build you a step-by-step plan that's tailored to your money situation, and every day it finds ways you can free up extra money in budget so you can get rid of your debt and actually build wealth. So make the choice today. Short-term sacrifice, long-term gain. Choose the tool to help you get it done fast. Download the EveryDollar app and start for free today.

Welcome back to The Ramsey Show. We are now joined by a wonderful couple on the debt-free stage. It is Andrew and Megan. Welcome, guys.

Welcome. Thank you guys. Hello.

Thank you very much. Thanks for coming all this way to celebrate with us. Where are you guys from? Chicago. Chicago. Awesome. How much debt did you pay off?

Wow. I got it written down. $165,293.

Love that. Fantastic. And how long did it take to pay that off? 2 months. Okay, there's a story here. Something happened. There was some hustle going on. And what was the range of income during that time?

Uh, about $200,000 to about $230,000 depending on overtime and side hustling.

Wow, fantastic. What kind of debt was the $165,000?

We had a car in there. Car. A swimming pool. Whoa. And then our mortgage.

Whoa, just throw that in there for fun. A little bit. Yeah, that is incredible. I got to say, I just saw the photo of— was this like a backyard renovation situation? No, so we just— we—

the kids love being in the backyard. We got the pool, so we just— some lights and a little movie screen back there for summertime.

And yeah, so living the life. Look, that is awesome. And now it's actually yours, all ours. They can't repo the pool now. Nope, absolutely. I'd love to see them try. Yeah, that is awesome. We'd be in a lot of trouble with the kids. Yeah, now they're like, we need this pool now. Okay, so 22 months ago, you were sitting here with the mortgage, the pool, the car loan. What happened that made you guys go gazelle intense?

I hate saying it, but it was, he started it. He was a Ramsey fan before I knew what Ramsey was. And I said, oh, that's great, good, do your thing and I'll do mine. And we just sat down in, it was January of that year. And we were talking about kind of what our goals were and long-term goals, what we wanna do, what we wanna do for the kids in college and all of that stuff. And he mentioned Ramsey again. And so I finally— we had the book on the shelf the whole time since before we met. So I finally read it. And I'm the nerd. And once I read it, I was like, let's go. Like, spreadsheet open. We've got this. We're doing it. And so just kind of dove in headfirst.

So you're telling me that what really changed it was, number one, you guys sat down and actually had some vision for your future. Absolutely. And then it was, OK, we got to reverse engineer it. How are we going to do it? Do it. Well, here's a plan over here. And you dusted off Total Money Makeover and said, let me just read it. All right. Yeah. And that sold you. Absolutely. Yeah. Pretty much.

It's so simple that it's like, why weren't we doing this before?

And you guys floored it all the way through. It's like Baby Step 2, you said, okay, we'll do this car and this pool deal, but that's not good enough for us. We're gonna tack the mortgage onto it as well.

Yeah, we realized that kind of with where we're at in our life and the age of the kids, kids. And, you know, I know sometimes people say, I just, I want to be there for my kids and I don't want to miss things. And I didn't want to miss it, but more importantly, I didn't want to miss the future. I didn't want to see them going into debt for college or doing things like that. And so we decided to just really floor it and live on beans and rice and do, do the thing. So he was, he has always been, I'm going to throw a little extra on the mortgage, a little extra on the mortgage, which made a difference, but it didn't when we were financing cars pools.

So, how much of it was the mortgage that was left? Um, about—

probably $120,000 or so. Oh yeah, I was gonna say, yeah, no, I totally get it.

When you're that close, you're like, I'm just going for it.

And we kept seeing it go down, you know, month after month. And so, we did the pool first. We actually, we got our tax refund, uh, and paid the pool off right away. So, that was a nice jump start. We had some in savings. Um, the car, I think we paid off almost a year before my initial projection was because we just started started, what don't we need, and cutting the budget down. And so then by then, we were getting close to— the house was inching closer and closer to $100,000. And we were like, well, I mean, what if we just kept this up? And so we did. And any overtime that he could get from work, and then my side job, I just picked up as much as I could there too. And we just threw it all there.

Wow. What was the side job? I'm a nurse practitioner.

And so I do home health visits.

I love that. Oh, that's fantastic. That's a great side gig.

It's probably one of the better ones.

I bet. Yeah, because everybody— I mean, listen, if you can get it in your home, that's wonderful.

So good. And how about you, Andrew? What do you do for work? I'm a fireman. Oh, fantastic. Yep. Look at this. We got a nurse practitioner, a fireman. So what did you say about this?

I mean, obviously, they're going to— they're noticing life around here has changed. Mom and Dad, like, tell us more.

There were definitely times where they were like, Mom, Dad, why can't we go on vacation? Our people down the street are, they're getting the newer toys, they're getting— we said, no, we're gonna, we're gonna hold off on that.

You're gonna get it later on. Yeah, and they— I listen to the show all the time, and the kids are— they know the phone number, and they're like, oh, you're listening to Dave Ramsey. Like, they know all about it now, and they, they, they laugh when they hear the commercials, and it's like, what's in your wallet? They're like, not a credit card, it's a debit card. So they're on board. They're drinking the Kool-Aid.

That may have been the best part of this whole journey is that we say more is caught than taught. And you guys have set a precedent to now they're not going to turn 18 and go, well, Mom, I think I really need to build my credit and get a credit card. What do you— they know better now. Absolutely. At such a young age, you don't even need to talk about it.

You've lived it. Yeah. And I think that's a big thing. The more is caught than taught. We were wondering how we bring it in and how we teach them. And we realized that just doing what we were doing and telling them, like, no, we're putting some into savings. And this is what we're doing and why we're doing it. And they, for their ages, I think understand pretty well.

So yeah. What's the house worth? Anywhere between $400,000 and $450,000. Let's go. What do you guys have across your retirement accounts in NestEgg?

I think we're probably right at or maybe over the threshold there for Baby Step Millionaire. Yeah. Woo-hoo! Depends on how the market's doing here.

So we're very close if we're not there.

Way to go. Exciting.

So how's it feel? I mean, you don't have a payment in the world. You owe nobody nothing. Nothing.

It— I feel like sometimes it still hasn't hit me. No, it hasn't. Like, we, we have the proof. Yeah, but I'm still—

oh, you got the proof?

I see everyone else here, everyone else telling about, talking about what they're paying off and what they still have to— they still owe on their homes, and I'm like, oh, I don't know anything. Do you know the exact amount you guys have freed up in payments from the car loan, the pool payment, the mortgage payment?

Um, probably close to, if not at, about $3,000. $3,000 a month? Oh, wow. I would say closer to $3,500.

Wow. So we're talking like a $40,000 raise in take-home pay. And it's—

he last month worked some overtime, and we didn't realize how much it was until the check came in. And so instead of figuring out what goes where, we're like, what are we going to do with this money? Like, it's a great problem to have and fun to, you know, kind of plan what we'll be able to do with that for the future.

What are you going to do? What are you going to do to celebrate this? Because this is a major, major accomplishment. Accomplishment?

Yeah, so we are— well, we came here, obviously. That's the first part. What else? What else? We are going to take a trip this summer. We're going to just drive out west with the boys and kind of see as many of the sights as we can for a couple of weeks. And then ultimately, we would love to be able to live on a lake. And so we're putting money away to hopefully one day be able to do that too. I love that.

That's so cool, man. Live like no one else so later you can live and give like no one else. Absolutely. So what do you tell people? Key to becoming debt-free is?

I think it's what everyone says all the time, right? Yeah. Being partnership and having those conversations together. I think we, when we first got married, did not have joint finances. I was paying off student loans. And I said, let me just keep it coming out of my account. And then we didn't know where the money was, what was coming, what was going, who was spending what. And so finally, when we sat down and did this and got everything on the same page, it just makes so much more sense. And now there's no question about what's going on. So the communication and getting on a good budget, EveryDollar is my favorite thing. I'm on it all the time. Love that. Because we know exactly what's going on then. Both of us can see it too.

I love to hear it. Well, we'll gift you 2 EveryDollar subscriptions. You can keep those to renew yours and keep the fire going for your new savings goals. You can give them to someone else who you want to encourage to get on the same journey. That's our little parting gift to you. Thank you. Can we get the kids on the stage? Yeah. All right, what's their names and ages?

So Gavin is 9 and Leo is 7.

Love it. And they've been practicing. If they know the phone number, they for sure have been practicing the debt-free scream.

Yeah, we're very good screamers in general, so we're hoping that the debt-free part will work.

Hey, blow the audience away, guys. Okay, ready? We've got Andrew and Megan and Gavin and Leo, Chicago area. $165,000 paid off. That's the car loan, the pool, and yes, even the mortgage. They did it in 22 months making $200 to $230 with the side hustles. Count it down, let's hear a debt-free scream. Ready, guys?

3, 2, 1.

We're debt-free!

Yeah, man, that's pretty wild.

That's what I'm talking about. Listen, you know what we teach on here all the time, you know, you can be intentional. You don't have to be intense about paying off the mortgage. But man, every once in a while folks like Megan and Andrew come along and they just slam on the pedal, and I'm not mad at them for doing it.

No. And what's crazy is, yeah, they're making $200 grand, but the stats show people making six figures, okay, paycheck to paycheck. So don't tell me, well, if I made that much— no, use your income, and as you make more, keep throwing at the debt, keep working the plan, and eventually you'll become Baby Step millionaires at a young with a whole lot of life on the other side. So proud of you guys.

All right, let's cut to the chase. It's easy to get discouraged about crazy house prices and interest rates, but when you have the right real estate agent to help you buy and sell the right way, you'll have confidence to make smart decisions. Ramsey Trusted Agents aren't just experts who guide you through buying or selling. They're people you can trust to have your back from the first call to closing day. Find a Ramsey Trusted Agent near you at ramsaysolutions.com/trusted. Agent. That's ramseysolutions.com/agent.

Our scripture of the day, Matthew 6:34: Do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. Mark Twain said, "The two most important days in your life are the day you were born and the day you find out why." That's good. You gonna learn today. All right, John is in New York City. John, welcome to the show. Hey, thanks for having me. Sure, how can we help?

So to give some context, my mother-in-law, I love her to death. I love her daughter so much. She has a great income, no debt except for her car. The house is paid off, but I can't get her to buy in in on retirement or saving. Actually, I can get her to buy in for a little bit, but then it just goes completely out of the window for this reason or that reason. And admittedly, I am worried that in 20 years she will be totally— that we will be responsible for her financially. And that concerns me, of course. So I don't really know how to get her to a place to like fully buy in because she's in a a rare and unique circumstance where she has the ability to save for retirement over the next 10 years and have a good retirement, but she just won't for a multitude of reasons.

Sounds like something spooked her or scared her, or she grew up hearing something, right? There's something that's living in her psyche that is informing her, and it's clearly not the facts. I think that's right.

Yeah, she grew up pretty poor, and so I think it's one of the mentalities of, what if die tomorrow. Um, and so she'll save, you know, we did get a Roth IRA going, you know, that's great. Um, but you know, that's pretty much all she has saved for retirement.

So she will do a Roth IRA.

Oh, she has about $25,000 in it.

And so that's the only thing that we've been able to stick to mostly because I think it's automated.

Um, but so she's maxing it out every year. Yes.

But it only started 3 years ago. So, um, you know, quick napkin math in 10 years. I mean, and the way that, and frankly, um, you know, the way that she spends, Uh, you know, I mean, that, that will go in 3 months probably.

Does she have access to a 401k through her work? Yeah.

Yeah, she has access to it. Um, but it is, and we've sat down and, you know, did every single cent where it goes. And I mean, she has like $5,000, $6,000 a month.

And her, in her mind, what's the difference between, uh, her doing the Roth IRA and letting that be, you know, automated versus also setting the 401(k) and obviously that being automated. In her mind, what has she said the difference is? Is it just the amount of money or?

Yeah, yeah. It's essentially the amount of money, but she, she, she recognizes that she makes a good amount of money, but she believes that life just continues to get in the way. Um, you know, but then it's like I walk into Easter and, you know, I got a basket.

Oh, so it's not, it's not the investing, it's her parting with that being— that money being part of her day-to-day spending budget.

Yeah, exactly, exactly. I mean, it's probably $200 a day, um, and I just don't know where it goes. Um, like, frankly, I don't know where it goes. And, and I think that I will grow resentment if she has no money in 10 years, and I've just been watching this for, you know, 2 decades.

Um, where's your wife? Where's your wife in all of this? Because if you— you're a good son-in-law, you're, you're talking with her, it feels like this is something that maybe your wife should be taking the on. And, and there's part of this where you both are going to have to relinquish the idea that you can't make her do anything. Like, she's a grown woman. She can make her choices. And because of that, you can also control what you're going to do, which is if you and your wife have sat down and said, we don't believe that it's our job to fund her retirement. Let's just, we agree on that. Fine. But maybe it's our due diligence to let her know that as well, so that she can factor that into whatever plan that she has. And then from there on, you can kind of just go on about your business and say, I set the expectation and I'm aligned with my spouse, it's all good in the hood, move on. What's wrong with that?

No, and you know what, that, that is definitely a conversation where neither of us want to have it. And I think that, uh, if push comes to shove, we're both like on the fence, like, of course we'll take her in, um, but that budget will look totally different than what she wants it to look like. But I think that setting the expectation is, is probably what needs to happen. Like, personally, if it were my mom, like, I'd probably like lock marker in the closet, you know, 6 days a week, because I'd be like, what are we doing? Like, this is ridiculous. Um, because she— her take-home is, is nearly $150,000.

I mean, it's, it's just disappearing into random spending.

Exactly. Like I said, it's probably $200 a month. I think you're burning too—

I think you're burning too much energy on— yeah, just continually circling what she's not doing. I can't believe she's doing this. She's got this, why wouldn't she do— that's a lot of energy you're burning, Jon. And so, I think you need to burn more energy on, "Here's what I'm gonna do, and here's what that's gonna look like. Here's what my wife and I are gonna say. Here's what we're gonna do. This is what it's gonna look like. This is what it's gonna sound like." And if it makes you feel better, because please hear me, I get it. There is just, when you come from someone, you know, you've got parents, you care about them. And even though it's very easy for myself or George to say, it's not your responsibility because this is your family. You do feel it. So I wanna acknowledge that you do wish that you could meddle in it and go in and change it, but you can't. So if it makes you feel better, what you could do is say, uh, I just wanna make sure she knows I'm just gonna set a regular rhythm of, you know, maybe it's once a year we kind of have a state of the union and we say, hey, we just wanna, I don't, we don't know if you're interested in the investing thing yet.

We're still here if you want help because Remember, we are not funding this. And as long as you're, it's almost like the college discussion that you have with children. You set the expectations and you set it early and often. No surprise. Same thing with this. Yeah.

So I think you're gonna, you can, what you can do is support and equip your wife with some information to bring to your mother-in-law so that this conversation goes better. 'Cause it's gonna take a little bit of a persuasive argument if you can even get her to invest. But the good news is, as you found out, if you can get her to automate, it and just live on what's left, then you're golden. And so if your wife can sit with her, log into the 401k, ratchet it up, and all of a sudden she has less coming in each month, well, now she has less that will, you know, flitter away into money leaks.

And also the good news, I think I heard you say her home is paid off. She's not taking on any new debt, correct?

She just has the car loan.

Yeah, yeah, she just— and very nice car, um, and that's it.

What's left on the car loan? Do you Do you even know?

Oh my gosh, 34, probably 34.

Does she have any plans to pay that off or is she just doing the minimum payment?

Oh, minimum, yeah, the $600 a month or whatever it is. Does she have savings? Bleeding. No, and that's the thing is that we would get to like $15,000, $20,000, again, pretty easily, pretty quickly, and then it's like, all of a sudden, one of them has access to the account and it'll be like $400 in there. I'm like, what is this? And it's nothing like, on the surface of like, you know, a $12,000 handbag or whatever. I think it's just like literally $200 a day of just not good choices.

That's $6,000 a month if you're doing the math at home. So it doesn't take much to just have all these money leaks eat away at you, even when you make great money. And the more you make, the more you go, sweet, more I can blow without feeling it.

So this is going to be— we've doubled her salary. Like, we've done really good work. And you're right, I'm so emotionally attached. Like, I just, I think about it as much as I think about my own finances.

You got to chill out with That's the scary part. This is consuming you. So I mean, it's like you can't want it more than she does. And at some point she might need to feel the pain. But again, that's too late for you where you're going, well, I don't want to need to fund her retirement. So that's going to be up to your wife to go, Mom, we love you. We are not your retirement plan. And I don't know what your plans are, but it doesn't seem like you have one. And I love you too much to watch you retire broke and for you to become a burden. I want your retirement want it to be filled with dignity, filled with options and flexibility, and not you needing to live with us because you have no other option.

Yeah. Oh boy. And for anybody listening, man, if you're listening this and you're in, you know, late 40s going into your 50s, 60s, please, please, please take it upon yourself to do the right thing. Do not set up your children to have to have conversations like what John is having. It is your duty to set yourself up for life. It should not be your— when you bring children into the world, it's your responsibility to take care of them. You brought them here, you take care of them.

And there's no quid pro quo of, well, they now are my retirement plan because I raised them. No, that's selfish. That's what it is. And we're seeing a generation that is the sandwich generation. Yes. They are trying to raise their kids, they're trying to set their own financial goals, and they got to take care of mom and dad who did not prepare for retirement.

They got their own kids to take care of.

Like, hey, mom and dad, you had a 70-year heads up that one day you're not going to be able to work anymore, and you squandered it. So this is why we're seeing a generation who wants to learn financial literacy, which is probably the only silver lining here. Well, that puts this hour of The Ramsey Show in the books. Remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.