Transcript of Smart Financial Decisions Beat Big Risks

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Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union studio, this is The Ramsey Show. I'm George Campbell. My co-host today, Jade Warshaw. We're taking your calls at 888-825-5225. That's how you jump into the conversation. Dan is in Charlotte to kick us off. Dan, how can we help?

It's great talking to you all. Thank you for taking my call.

Absolutely.

So I'm in a situation where my son has consistently been in and out of debt. At one time, I had him come home and live with us so we could help him clear out his debt. I paid about half his debt off, and so now he's back in the same situation again. Um, he has some relationship problems. I think he struggles with depression, anxiety. And, um, right now he is flat broke. He, um, crashed his car while doing deliveries. So he doesn't have a car to, uh, make any money. And, um, uh, we got him through this month's rent, but, uh, we don't know how the next month's going to look and thereafter. So my question is, um, you know, I, I don't want to, I don't want to throw money away and not have him make any progress, but he does need help too. And I don't know, he doesn't seem to be able to find help on his own. And, uh, the advice I give him, sometimes he takes, sometimes he doesn't. So it's, it's kind of a mess. I'm not sure where to go with this.

You said that he needs help. Um, you mentioned anxiety and depression. I wonder, is he getting the mental health that he needs? The mental help that he needs? Is he seeing anybody? Is he doing anything on that side of the equation? Because the way it sounded, it kind of feels like that's kind of affecting this entire situation.

I think it is. Um, he's been to a few therapy sessions that he had to pay for himself. He doesn't have any health insurance, um, and so he's not able to go to those anymore. I tried to get him to seek Uh, like public assistance, um, to, um, to be able to do those things. Um, but it just doesn't seem like he knows how to navigate the systems. It, uh, you know, he's out in California, I'm here in North Carolina, so it's very hard to, you know, manage that, help him to manage that situation.

Yeah.

Um, how old is he?

35.

Oh, wow.

Has this been going on his whole adult life since he graduated high school?

Yes, it is. He's been in and out of jobs. From my understanding, he's a very hard worker, but he just can't maintain a good working environment.

What happens? What takes place?

I think he just gets overwhelmed. He's a loner type of person, and I think he gets overwhelmed with a lot of people around him. He's been doing like DoorDash deliveries and is doing pretty well at that. Um, because, you know, he's his own boss and he doesn't have to interact with a lot of people. So I think that's, that's probably the way he needs to go. But I do think he has probably some, uh, he, he has an on and off relationship. Um, and, um, it's off now. And I think that contributed to a lot of things recently.

Wow.

I mean, I'm not sure, but A lot of what you're saying, Dan, is leading me to believe that this is not at the core a money issue. I think at the core, it sounds like more of a personal issue, more of a mental health issue. However, going back to your initial question, which is, you know, you gave him the money to pay off the debt, he's right back in. How much money did you give him the first time, or that you used to pay off the debt?

It was probably around Between $7,000, $8,000, something like that.

And how much does he have now?

He has over $10,000.

$10,000. So what's his— if you could describe his lowest low, what's his lowest low been? I mean, has he been homeless? Has he been— what's that look like?

Lowest low is probably now. He's got Very sketchy living situation. He does have shelter, um, but, um—

Is it dangerous? Um, you say sketchy, are there drugs involved? Like, what, what level? If I looked into his life, would I— what would be my—

Yeah, it's not up to, um, residential standards. It's like a commercial refit that's not zoned for residential.

Okay, do you think there's any substances involved, or What do you think?

I don't think so.

Okay. Um, if I were in your shoes, if this were my kid, I mean, this is real hard for me to say, and I'm sure George has some opinions. I think I'd be invested in making sure that he stays someplace livable at the very least. What I hear that my concern would be is that his mental health would cause him to end up in a homelessness situation, and I would I would try to help prevent that. But at the same time, you've got to be clear on your boundaries, because I just wonder if some of this is allowing him to feel some of that pain to kind of shake him up. But I also don't know to what extent the mental side of this is going. So I say that very lightly, because there may be some real things that are impending, you know, impending his ability to make good choices.

Has he asked for help? Or is this you kind of stepping in, checking in?

Well, he did ask for help and we actually, I got him on a budget about a little over a month ago. And he was doing deliveries and starting to make headway, although he wouldn't always work, maybe because he got into depression that day or something relationally happened that threw him off kilter. We were making progress, but then just recently when he wrecked his car, then, you know, that kind of sunk him.

And there was no insurance?

No, the wreck was his fault, and so he doesn't have collision. It's just liability.

Yeah, I mean, I got to tell you, Dan, the way you're describing this— and I know this is a very short call, I want to start by saying that— But when the way you're describing him, I'm not picturing a 35-year-old man. It almost sounds like you're talking about somebody who's 18 or 16, or I'm not getting that sense.

His growth was stunted at some point. I'm not sure what happened or if, you know, was he fine through high school?

Well, so we had him tested as a child and he was never diagnosed as being on the spectrum, but he has those tendencies.

Yeah.

It's like socially the soft skills aren't there.

Yeah. Yeah.

Wow. Well, I'll tell you this, Dan, I wish I had a magic wand and could fix it. I'll tell you this, if you can use money to help him survive, your money cannot help him thrive. And so that would be the goal is to make sure that he isn't homeless, that he is safe, he has shelter. And as much as you can, I would put your money directly towards those things versus giving him the money.

Or even mental healthcare, putting it directly towards that.

If he can commit to going, hey, I'm going to go once a week, to see this therapist locally and see a doctor. Anything you can do to help him with his health and help him get a career, those are the 2 best uses of your time and money versus just trying to fund the misbehavior, clean up the debt before it comes back. That's just going to be a game of whack-a-mole until we can get his health and his career under control. Because right now DoorDash, here's the problem with DoorDash. If he doesn't feel like it, he's not going to do it. He doesn't want to do it. And therefore no income. I would rather where there is some expectation. Dude, you gotta wake up, shower, and be there by 8:00 AM or else you lose the job. I think he, he needs some structure in his life right now more than anything. So that's the part you can encourage him as a dad. If you have influence in his life, if he has friends, think about those kinds of people who can talk some sense into him, be a mentor for him, be a coach for him.

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Yes, sir. Hello. Good, good, good.

How you doing?

I'm doing well. How are you?

Fantastic. How can Jade and I help?

Uh, so basically, uh, I make $150,000 a year plus sometimes. Last year I made just under $200,000.

Nice.

Um, I'm in a significant amount of debt. Um, I just, uh, financially just kind of, I guess, stupid. I had to get the confidence to kind of call you guys. I mean, I'm just trying to find out where I should go and what I should do. Um, and maybe a little bit of financial advice. I've been watching Dave for a little, uh, about 6 months now. Nice.

How old are you?

I'm 34.

Cool.

Are you single?

Married?

I actually just got divorced last year in August.

Sorry to hear that. Was that part of the sort of unbridled spending? Or part of the divorce agreement?

No. So unfortunately, I mean, I grew up with not a lot of guidance in my life as far as financial. But I am the first person in my family to actually make like a substantial amount of money. Um, my family's always been on the poorer side. And then when I started making money, I was making, um, just irresponsible financial decisions when, you know, buying things that I shouldn't have been buying. And, um, we just racked up a bunch of debt and it got to a point where it put a lot of financial strain on our marriage, which caused the divorce.

I'm sorry.

And then, um, Yeah.

So this is your wake-up call.

I'm sorry?

The marriage blew up and this is your wake-up call going, what am I doing? I make $150,000 to $200,000 a year and I got nothing to show for it.

So nothing. And I'm like, and I'm living paycheck to paycheck.

So yeah, you're not alone.

You're not alone.

If it makes you feel better that the, you know, it's not a great bar to set, but a third of people making 6 figures are paycheck to paycheck.

And I just pick up on a lot of shame in your voice. I can tell that you look back on that and you feel a lot of remorse and wish that it had been been different, but this is the turning point. I mean, the truth is everybody has that point, that kind of fork in the road where they go, all right, what I was doing is not working. And you get to choose if you're going to make a change or not. And it sounds like you are willing to make a change, which is really all that matters at this point is leaving, leaving what you did back there, learning from it and going forward in a new direction. And I think that George and I can help you do that if you're open to it.

100%. Yeah. I mean, I, the main reason I wanted to reach out is unfortunately I did have a family member pass away. relatively recently, a few months ago, and I wasn't expecting anything, but he had left me an inheritance. So I mean, I just— I also wanted to— I don't know anything about investing, or I have no retirement, I have no 401. You know, I just— I was stupid, you know, I was childish and immature, and like looking back at it now, I really regret it.

How much was the inheritance?

I just— it's gonna be for $160,000. How much debt do you have? I have about rough, I've just paid off $18,000, but I still have another, I believe, $60,000.

$60,000.

Not anymore.

I know it.

You about to have zero debt with $100,000 left over. Do you see my math on that? That was a magic trick I just did.

Yeah.

I mean, this family member just gave you an amazing blessing. You got like a get outta jail free card. So the question is, are you gonna squander it or are you gonna use it to catapult you to better decisions and wealth building?

Exactly. And that's why I wanted to, you know, reach out to you guys. I don't wanna end up in the same position I'm in now.

Yeah.

Uh, I wanna leave something for my children. I have 2 girls.

Um, how old are they?

2-time cancer survivors, 9 and 13. Hmm.

So this is, this kind of boils down to, I think from here the biggest play is to, to what we said earlier, looking back and going, okay, I know what I did. Let's spend a little bit more time thinking about why you behaved in that way. So that you can recognize that going forward, because George is right. You gotta get outta jail free card. This debt is gone. But if you don't understand what caused you to behave the way you did in the past, you're gonna turn around and do it again. So make sure you spend some real time thinking about that. I'm gonna give you a copy of my book, What No One Tells You About Money, because I talk about that a lot in the book. And you're not gonna be able to go forward until you kind of start that process of trusting yourself with money and kind of forgiving yourself for what, what you did in the past and just forming a new mindset. on how you're viewing money going forward. And it's all about the choices that you make. So number one, you've got to start to get on a budget.

My guess is you've never used a budget before. Am I right?

No, ma'am, I've never— I've never— I mean, I thought about using budget apps and stuff like that. Um, when I was married, my wife did all the, uh, pay the bills.

So now, from now on, it's on you. It's on you. And as my colleague Dr. John Delony would say, we can't build from the past. We gotta start something brand new. So starting today, we're building something brand new. What's in the past is left back there. We're gonna start the behaviors that we know work. So budgeting, we'll make sure to give you EveryDollar for free. Budgeting is a huge one. That is you making a plan on paper, Anthony, before the month begins. So we are just about to go, well, we just hit October.

Mm-hmm.

So tonight, let's start planning for October with the money that you make from your paycheck. Writing down everything that you can spend your money on, all your expenses, rent, uh, car payments, everything that you might have, plus things like groceries and out to eat, things with your kids. Everything goes on there. And let's just get a baseline for what does it look to spend in a month? And then November's budget is gonna be even more dialed in. December's budget is gonna be even more locked in. That's the number one thing you can do. The number 2 thing you can do is today, like inside of your brain, inside of your heart, you have to decide that you're not borrowing money anymore. Those are 2 things you can do. They cost you nothing. You can start those behaviors today and it will change the whole outlook of how you handle your money going forward if you stick to those 2 principles, and then the rest will start to fall into place.

Okay. I agree 100%. That's what I want to do. I mean, I told myself I'm not going to be loaning anything. If I don't have cash to buy it, I'm not buying it.

Yes.

Good.

So are you willing to do some drastic measures to sort of Put some guardrails around this?

Of course. Okay. I mean, that's—

so you're willing to pay off the debt today? Are you willing to stroke the checks and hit make a payment and be done with all the debt today with that inheritance?

I don't have the inheritance yet. It's coming in in a month. So it's just getting finishing up with probate, but that's why I wanted to be prepared for it when it does come in. I want to know what to do and how to do it.

Um, can we pretend like that money is not yours? That money is $60K is allocated to the lenders.

Right.

And let's call, I don't know, 6 months of expenses for you. Is that $30K?

Uh, roughly I spend in bills a month with child support around $5,000.

Okay, perfect. I was right on the money. So $30K is not for Anthony. That's for Anthony's emergencies, right?

Perfect.

So out of the $160K, we were down to $100K after debt payoff. Now we're down to $70K after the emergency fund. Now you're a guy who has no debt, a fully funded emergency fund, and $70,000 to his name. That's pretty cool.

Yeah.

So that is not spending money. That is future Anthony money. So do you have a retirement plan through your employer?

Uh, I just— so I just transferred jobs because I'm gonna be moving at the end of October, uh, back near my dad. I'm not with my dad, but near my dad in Fredericksburg.

But, um, are you gonna be renting the current job that I'm—

Yeah, I'm gonna be renting cuz I don't— my credit's honestly really bad right now. Uh, it's in the low 5s.

Do you wanna be a homeowner again one day?

Of course. Yeah. I mean, I, I, I wanna build my own home. Like I said, I had all these goals when I was married and things just kind of waterfalled and I just got myself into a hole. I just don't even know how I got there.

Well, we're looking at future Anthony now. There's a new chapter here. So I, what I don't want you to do is make decisions trying to Impress future Anthony or fix the past. And so building that home because that was your goal 5 years ago, you don't need to do that. So do what makes sense for you where you are currently. So that's $70,000 left over that might just go in a high-yield savings account and become your down payment fund for future home.

Yeah.

So you see what we just did there? We just earmarked all of the money so that you don't touch it.

Yeah. You walked outta here, Anthony, with 5 really clear steps, and I'm gonna say 'em again for you so that you don't forget them. And so that you can listen back to this episode and really have it lock in your brain. First thing you're doing is you're budgeting. We're sending you that budget for free. Second thing you're doing is you're stopping borrowing money for good. You need to spend some time really thinking about what that means for you and just reowning that as your new identity. The next thing is you're going to take the money from the $160,000, you're going to pay off your debt, and then you're going to take $30,000, you're going to save that in a high-yield savings account. That's your, that's your emergency fund. And then you're going to take the other $70,000 and you're going to park it in a high-yield savings account. Someplace where you're not getting to it, you're not touching it, you're not looking at it, you're not ideating on ways that you might spend it. Keep it outta sight, outta mind.

Jump onto fairwinds.org/ramsey. You can have up to 10 high-yield savings accounts there, and that'll be separate from your bank so that it won't be easy to access. And on top of that, cut up the credit cards, close the accounts, and freeze your credit with all 3 bureaus because now you're a guy who doesn't go into debt. That's who Anthony is. That's his identity. Not past Anthony who had, who made some mistakes and had life happen.

to him.

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Yeah.

That's just the nature of the business, but it's trained on all of our stuff. So you know you're gonna get a Ramsey answer, not just a random one from Google. And you can ask your question today. Just go to ramseysolutions.com, click the link in the description if you're on podcast or YouTube and check out Ask Ramsey. Samantha is in Stamford, Connecticut, up next. Samantha, welcome to the show.

Hi, thank you so much for taking my call. I really appreciate it.

Absolutely.

Um, my, my question is, is around, um, the retirement of the 15%. My spouse and I are kind of in between Baby Step 4 and 5, running them in tandem. Um, and I think we're just struggling with the moral, um, of balancing, I guess, of possibly postponing some of those family vacations and memories that we would make with our 2 young children and planning for a future that we may never get to. So I'm just curious of your thoughts around that and how to balance that as a, as a family.

How young are your children? How old are they?

They are 3 and 1. Okay.

Are they in daycare?

They are, they are not. I, I actually work from home and we have some help coming in to help us through that.

So help us Help me understand, my screen says retirement is keeping you from doing these. Help me understand what's going on with the budget that there's not enough margin to kind of start setting aside to take a few vacations here and there.

Yeah, I think that we, you know, we've had our heads down and we've been trying to follow the Ramsey plan for now 3 years. And collectively, we've paid off $80,000 of debt.

Great.

And we're like at this crossroad of, okay, can we start to breathe? Or is there some flexibility in the system? Like, we just feel like we are, we are just constantly focused on the future, future, future. And sometimes these day-to-day moments of planning these vacations are put on the back burner.

So that feels more like a priority statement than it sounds like a money statement. Because what's your income?

Gross, gross as a family, it's around $230,000.

Yes, ma'am. This is 100% a priorities discussion. Unless you sit up here and tell me that your mortgage is super high, a super high percentage of your take-home, it sounds like something that you guys have to prioritize. What is your mortgage?

Um, our mortgage is $2,700 a month. Um, you know, we live in an area that has really high taxes and we get taxed on everything.

That's less than $2,500.

That's not the problem.

Because I mean, you guys are bringing home like $14,000 a month.

Uh, well, We're only netting about $10,500 because of all the money going into retirement and taxes and all that.

Okay. So then still, we got $10,500 to work with. $2,700 goes to the mortgage and you've got over $7,000 left. And you're saying out of that, you couldn't save, let's say, $500 a month put away in a savings account for a vacation?

$1,000 a month.

$1,000. If you want to go to Disney World, it's going to cost that.

Right.

We can always go to Branson.

What's stopping you? Because I, I was expecting, usually when I hear this question, I'll be honest, Samantha, usually it's a time of life thing where we've got kids in daycare, we've just started investing. And basically with kids in daycare, you're basically paying for college, right? It costs the same thing. And so it, it's just a tight season. But if you're telling me, no, I work from home, there's no daycare bill. And oh, also we make $230,000. Oh, and also we bring home $10,000 a month.

There's gotta be some major expenses here that we, we haven't accounted for yet. Uh, if I looked at your EveryDollar budget right now, what would I see that I go, whoa?

Um, probably like, probably food and leisure, like things that we account for that are like weekly treats, quote unquote treats for the family.

Like what? And I'm not saying this because it's a bad thing, because it's not. We, I just want to know what you mean by that.

Yeah. I think by that, I think it's for us, we really prioritize the family model. So it's just like weekly, spending a trip to, like, for example, the zoo or to a museum or to go out to dinner. Like, that's all part of our budget.

Yes.

That's, you know, maybe we should start pulling some of that back and putting it towards a vacation. I just, I don't know.

I think that it's exactly that. If you tell me, if you say, cuz again, I, and I stand on this because I think it's true, there is nothing wrong with the things that you just said. I, I, I'm with you. I think that you've worked hard to get to this point where you can spend money in those ways. And you clearly, uh, value family experiences. So what you can say is that, okay, some of the family experiences I, I value are the ones that are close to home when we can go to the zoo and go to the museum and go see the movie that just came out and go do this. But then you can also start to say, in addition to that, I'm gonna put a line item on the budget, or I'm gonna split this line item and say part of it's gonna be spent on close-to-home experiences, and some of them are going to be spent on out-of-town experiences by us going to travel. And just knowing that those are things that you tend to need a sinking fund for versus I'm going to be able to fund this in one or two shots.

And I think that truly is what it is. You don't need to pull back from retirement, but there probably are some things on your month-to-month budget that can pull back. And it might be that you pull back on going out to eat because I do think, and George, this needs to be said, I think that a lot of times when we hit a certain threshold with income, it kind of becomes like, ooh, I can do what I want to do. And it's not that you're reckless in the way that you're not making a budget, but you're reckless in the way that you let certain areas of the budget just inflate, inflate, inflate. And pretty soon you can start to feel like, oh gosh, I thought I'd be able to do more with my money. And it's like, you are doing more, you're just eating it. Or you're just— You know what I'm saying? So I think that's what's happening.

Here's a fun exercise, Samantha. If I said, hey, you have to put a vacation line item for $1,000 a month in that budget, what would you then cut or add to make that happen? If I said you have to get rid of something, maybe you need to add some income, what would you guys do?

Probably it would be like a grocery out-to-eat budget. We would pull back on it. Probably the Out to eat as a family budget.

So you could cut that one down. Anything else? Could you cut some subscriptions? Are there any luxuries that you could go without for a season to get kind of used to this savings muscle being built?

I mean, you might have to talk to my spouse about the NFL Sunday Ticket, but I could cut that.

Oh, see, see, you're not the only, uh, yeah, complicit.

I think you have really fun things built into your life. Again, I think your income allows for that. You just have to sometimes make some trade-offs and go, hey, We might not do the season tickets because we want to do the trip to Disney, or we might not do, you know, and it's just pulling back on those things. And the hard part is it's kind of like first class. Once you've, and I, I don't fly first class, but once you do, good luck on going back. Yeah. So you've introduced some things into your lifestyle that you really, really like. And it's going to be hard to trade those things off because you're going to feel it a little bit to do some of these other things, but your money's not infinite. It does have, it's a very good income, but it's not infinite.

Do you guys get a big tax refund every year?

Not really.

Okay.

Well, it just still seems like you guys are withholding. There's too much being deducted right now to be coming home with 10 grand out of $230,000. So that's why I'm looking, if you can kind of look at a bunch of things like reshopping your insurance, looking at the paychecks, cutting some subscriptions. I think this doesn't have to be one thing is out of the budget completely. It might just be, we're gonna give 10 things a haircut, and now all of a sudden you can find $500 to $1,000. And again, I would on paper say, what is this vacation going to cost and when do we want to go? Have you done that part yet?

Uh, yes. I mean, at high level, because I think all the young kids want to go to Disney World. So at a high level, yeah.

The 1-year-old has stated they want to go to Disney?

Well, our 3-year-old, and we were trying to get there before the 1-year-old would be charged.

Listen, can I give you a piece of advice? Don't go yet. I know you didn't ask me, but—

Samantha, I say that as a guy who is getting roped into going to Disney World with a 3-year-old and 1-year-old.

It's too soon. Go a little bit later when they get out.

It's gonna be a great time, but the memories are not for the kids at this point. It's for you guys, and it's okay to call that out. But also, you are giving these kids an incredible life. I want you to know that, that it's not about a vacation. They're gonna remember those trips to the zoo more than a flash-in-the-pan weekend traveling. And so as they get older, I think your income's going to go up. You're going to dial in the budget more. It's going to become a rhythm to save for these things. And ongoing, just keep that $500 or $1,000 going to that sinking fund on the vacation over to a high-yield savings account.

That's right.

And magically, you can afford a vacation every year. So just plan ahead for it, make the sacrifices needed, and I promise you the kids are going to be okay. They won't go to therapy over this.

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If you've heard us talk about the baby steps on this show, that's because they're the foundation of everything we teach. So if you're new to the show, start there. We're gonna drop a link in the description to the 7 Baby Steps that are the framework for every single call in the description of this episode. Check it out. Steven is in Grand Rapids, Michigan. Steven, what's going on?

Hey there guys. Thanks for taking my call. How are you guys doing?

We're doing great. How can we help?

I have a question. Me and my wife bought 40 acres where we live out in the country in 2021. And we do it at our own house, our homestead there. Um, we have 2 kids, 2 girls, and everything's going well. Um, our mortgage is $1,802 a month. And I was just wondering if it would be a smart move to sell some acres to wipe off some debt, or if I should keep it being that I got it for a pretty good price, or what I should do with it. If that would be a smart move or not.

How much debt do you have?

Uh, $240,000 right now.

Is that the mortgage or is that consumer debt?

That's the mortgage.

Oh, that's it. You only have the mortgage?

Oh no, I have, I have a truck payment, which, uh, I just, I bought a used truck. It is right now, I owe like $27,000 on it, which is like $416 a month.

Okay.

And that's not part of the $240,000?

No. No, no, that's separate.

Okay.

So it'd be about $270,000 total with the truck. And that's all I have.

Got it. All right, what's your household income?

It's right at $92,000 a year.

Okay, I, I, you know, if you wanted to, you could, but I don't see why you can't take this $92,000 income, pay off this truck lickety-split, and then be on Baby Step 6 like everybody else would do and just make big chunks at this mortgage when it makes sense for you guys and just make a regular rhythm of paying extra on it until it's gone. It's not Astronomical, especially when you look at median home prices.

Right, right.

So you got a few levers to pull.

I did get it. What was that?

You got a few levers to pull. I mean, selling the acreage is one idea. We're just trying to show you, hey, if you can pay this truck off in the next 18 months and you love the truck and you love the acreage, nothing's broken here.

Yeah.

So do you just, do you just have too much acreage? You're like, I could do without some of this. It's fine. I could parcel it off.

I'm not gonna lie. It's beautiful. It's a nice piece of property.

I love it.

Um, the one downfall is when I, when I got the loan, I got it through a financial, financial institution that does not like lock in interest rates.

Oh, is it adjustable?

It was like a hard money loan?

No, it's, it's Anabaptist Financial out of Pennsylvania. So they're kind of a conservative group. They have their own investors. They're kind of their own group. Um, and they only loan money to like conservative people. It's, it's kind of a different thing.

Never heard about this. And so what's your rate?

So right now it's like, it's like 6.25%, which is not terrible. Um, and the cool part about it is it can only fluctuate like 0.5% per quarter, which amounts to 2% a year. And it was at 3.75% when I got the loan.

So is it just an adjustable rate mortgage?

Sounds like it.

Yeah, no, it can, it goes up and down with the, I mean, but there's limits, I guess.

There's, yeah.

Yeah, it can, it can only go up 2% annually, but it can also only come down 2% annually.

I mean, you keep saying only, that's a lot. That's a lot of money on $240,000.

So how many acres would you have to sell if you said, you know what, I want to do this? How many acres would you have to sell in order to pay off The mortgage. I think you can cash flow the truck, but let's just play with this for a second. To do the mortgage, how many?

I talked to a realtor and, and in reality, I would have to sell probably about 30 out of the, out of the 40.

Oh, gosh.

Actually, like, like completely wipe out the debt. Um, you know, and that's also, I'm not sure how the capital gains thing works, but, you know, paying $4,000 an acre, you know, and now it's worth probably more like $8,000. Um, And I'm not sure like how much of that would go into capital gains or how much the government would want from that. And then that would also play an effect of how much I could actually put out the debt.

Have you thought about just refinancing to a different loan? Just a normal conventional 15-year fixed rate?

That's, that's the hard thing about it. Back when I was, I actually did go through the process and by the time I got through with it, interest rates was 8%. So I chose not to, which at this point I'm glad I didn't lock it in because I'm still below that. Um, but interest rates are still fairly high, aren't they?

I mean, you should be able to—

6.5 on a 15-year.

Yeah. In your area. Plus you have, you do have the benefit you have. I think you have a lot more options than we, you realize, because what you could also do, you could say, hey, I'm going to sell, uh, I'm not going to sell 30 acres, but maybe I'll sell 15 acres. I'll take that chunk of money and when I refinance it, I'll throw it on the loan and I'll like like knock it down majorly. There's so many things that you could do. What I see in this that feels drastic to me, I'm gonna tell you the, the 2 problems that I see that I'd wanna nullify very quickly. Number one, I don't like the adjustable rate mortgage. I think that's taking away your peace. It's taking away mine. So I'd wanna do what I need to do to fix that.

Right.

And we just gave you an options, a couple options, what you can do there. The second thing that's a glaring thing to me is the truck payment. I think you're in a situation that you don't need to borrow money anymore going forward. And I think that I would get this truck paid off really quickly. And if you do those 2 things, I think it's going to make the level of peace in your life rise to a very great level. I don't think that you have to push to pay off the mortgage immediately by selling off all of this acreage. I don't think that's the thing on fire. The problem is the adjustable rate mortgage.

Okay. Yeah, no, that makes sense. And I did, I considered doing that even just like you said, just getting the mortgage down, you know, even $100,000 off of $240,000. That's almost half. And that was, you know, I mean, and yeah, I went from $1,200 a month in 2021 being my payment to $1,800. And that's $600 every month that's just going into interest. And it just, it stinks, you know, unfortunately. It was never my intention to buy that much, but if it could become available, I'm like $160,000 for 40 acres out in the country. I don't regret it, you know, because I'm still ahead. At this point, even if I'd sell it, you know, I didn't pay that much in interest of, you know, the amount that I wanted to offer.

But you love the land.

You've said that you love the land. I also don't want to hang on and get behind.

Basically nothing's on fire now. It's just, let's get you out of this adjustable rate mortgage and let's have a plan to actually pay off this truck. So how much margin do you have every month right now? Extra money you could throw at the debt?

I could probably do somewhere between $800 and— $800 would probably be comfortable.

Okay. So this is how long that would take you. Can I, can I do the math with you? $27,000 loan, that would take you almost 3 years to pay off that car loan. Can we agree that kind of sucks when you make almost 6 figures?

Yeah.

So what if we could throw $1,500? Could you find that in your budget if you guys tighten things up?

I mean, we've done with— I got hurt at work 2 years ago and we've done with almost nothing. I have an awesome wife. She spends no money, like literally. So it's all on me. So yeah, I mean, we can do with a lot less and if that's what it takes and that's what I would do.

A budget tonight and go, hey, we have a game plan where we don't have to sell any acreage right now and I'm going to cash flow and pay off this truck in 18 months. Are you game? My guess is she goes, okay, sure. Sounds like you're the spender here so you can control this a lot more. And you guys probably, what do you bring home? $6,000 a month? What are you bringing home?

Yeah, $667.

Yep.

Okay, wonderful. And your mortgage is $1,800. That's only gonna go up until we refinance. So now between paying for everything else, let's go find that $1,500 and say 18 months from now, this truck loan is gone and we get to keep all of this beautiful acreage. And then you always have sort of like a parachute here of selling some acreage if push comes to shove.

Right.

But I wouldn't do that quite yet.

Okay. Okay. Yeah. No, I didn't know with the market being up, you know, it is worth, you know, substantially more than it was. If, you know, at some point it— but real estate, honestly, out in the country, it probably is never going to go back down to where it was. I mean, that might be a bad assumption, but yeah.

I think you bought this land though because you love it. I think you bought it because there's something about it. You want to do the whole homestead thing. And I think that you just have to remain kind of focused on what it is that you're trying to do. And I truly, truly, truly do think that the problem was the risk or like that feeling of uncertainty is the adjustable rate. It's not knowing like, what's my payment going to be? Is it going to go up? Is it going to go down? And just whenever you have that layer of risk in your life, it does, it affects just your day-to-day. It's kind of like when you have your computer and there's all the things running in the background, you have all the tabs open and it's just slowing down your performance. It's just making things cloudy. And I think that clearing that up is going to help you a lot. Close the tabs, Steven.

Close the tabs.

Yeah.

All that emotion and excitement will drive you to make decisions you probably wouldn't have made in hindsight. But that dream was too exciting when you saw that beautiful land and you pictured the homestead lifestyle.

Yeah, but you know, like we said, there's nothing on fire. He can keep the, keep the grass.

Yeah, don't sell the horse quite yet. You're not there. Hey, George Campbell here. A few years ago, someone stole my identity, and let me tell you, that is not a quick fix. It takes hours on the phone, piles of paperwork, and a whole lot of stress trying to untangle the mess. And even after that, there's this nagging paranoia because your information is already out there. And the truth is, you can do all the right things and still become a victim. That's how common identity theft is, and that's why I'm glad I had Zander's Identity Theft Protection. When my identity was stolen, their team stepped in right away. They were monitoring my information and caught the issue, and their US-based recovery specialists helped handle the calls, the paperwork, the cleanup, so I didn't have to do it all on my own. Xander also includes up to $2 million in stolen funds and expense reimbursement, and with the family plan, your kids are covered for free. You work too hard to let identity theft steal your time, your money, and your peace of mind. So go to xander.com to enroll today or call 800-356- Welcome back to the Ramsey Show in the Fairwinds Credit Union studio.

I'm George Campbell. Co-host today is Jade Warshaw. Open phones at 888-825-5225. William is in St. Louis up next. What's going on, William?

Hey guys, I, uh, very happy to be with you. Um, you as well. I just have a quick question and I'm kind of nervous. So I got laid off on Friday and I would like to kind of go into business for myself, but that'll take time to build the income up if it builds at all. And I'm just wondering if I'm in a position to do that or if I should go look for a regular job.

Man, what happened with the job?

I just didn't Didn't bid enough work, and they actually, they laid off about 50 guys before me. And then the, uh, yeah, then it, then I got my call. So—

What kind of work?

Now I'm at home. I'm a welder.

Okay.

What were you making?

Uh, so at that point I was making $36 an hour.

Nice.

Okay. And what would the business be?

Uh, so, well, I would like to do art. I like sculpting. The main business would be just regular welding and fabrication, but then also I would pursue the art on the side in a similar fashion to how I've been doing it for the past couple of years. But I'm just not sure, like, the money, you know.

So the business is welding. You do your own welding business, and as a hobby on the side that could make money one day, you would want to do sculpting.

Yes.

Okay.

Yeah, metal sculptures. So they do tie in together.

How quickly can you start getting welding, uh, work? And have you kind of looked at how many clients you need, or what do you need in order to kind of make what you were making at the old job? How long do you think that would take realistically to get back there?

Uh, I think it would take probably 18 months to get back to Maybe 12 to 18 months to get back to that, uh, working independently. But, uh, I don't know, there's also a lot— I would imagine there's lots of insurance and liability things that need to be covered there that I haven't looked into. But I've kind of—

I mean, I like the idea of you— you have a trade that you could easily turn into your own business if you have a business sense. I don't know that you do just yet, but already you saying, hey, this, this is at least a year to year and a half build. In my mind, I would go, let me get another job right now. And then while I'm working the current job, just bringing in some money to make ends meet, right? Just continuing to feed my family. Hopefully I can get another welding job making what I was. But while I do that job, I'm going to start doing the legwork for putting this business together. I'm going to start figuring out what insurances I need. I'm going to start figuring out All the kind of nuts and bolts, all the foundational things. And then I'm going to start building. I'm going to start taking some clients. I'm going to start doing some things on the side and building that up. And then when I can pull that boat close enough, George, I'm jumping right in it.

You're stepping gently instead of just hoping you can make it without hitting the water. So that's the goal here. And in the meantime, you might just need another job to get by until you can build up your book of business. And the sculpting will remain a hobby for now. Let's put that on the back burner unless you're like, oh, I've already sold multiple pieces for thousands of dollars.

What did you bring home every month when you were welding?

Uh, pre-tax or post-tax was $4,000-ish.

Okay, $4,000.

I did a lot in my— I put a lot in my 401 and stuff like that, so it, it was lower than it needed to be.

What was it? What was it just after taxes? Not after investing, but what was it after taxes?

Um, I don't have that number. Hold on.

I want that number because that's our goal. So whenever you're looking, it's that or higher, right? So as you're looking for jobs out there, because what you might find, and I don't know, you could speak to this, but you might find that if you get a job welding, they might say, well, you can't do a welding business on the side. That is, you know, a conflict of interest. So you might have to pick something that's not welding that can make you $4,000 a month so that you can go ahead and build this welding business and start building up your client base without it being a conflict. But at least we know how much you need to earn and that's kind of the goal.

Yeah. So pre-tax I was $1,440 and then with deductions of $462.15, I was netting $977.85. And I'd have to go through and do the math to break down the deductions there.

Do you have a specific skill in welding?

Uh, so I was a pipe welder, but I think I'm more— I really just did that because it was lucrative and I could subsidize doing art, um, with that. But I find myself fabricating more than anything.

So can you find some fabrication contractors and get some work in between?

Probably. I also, my expected timeline is about a 3-month layoff. I don't think it's like I'm never going back. I think there's just—

No, there's just not enough work right now.

I might not be back until January. Yeah, this is something I've been passionate about and I'm nervous because I try to live in a very risk-averse manner. I'm nervous that I'm using the layoff as a catalyst for a poor decision when I'm not there financially to take that risk.

And that's fair. I think that your spidey senses are exactly right because You're talking to 2 creatives here. We love art. We love the arts. Okay. So I love the idea that you have, and I love entrepreneurship. So there's 2 things that I love for you. I want for you, but I think your instincts are telling you a correct thing, which is there's a way to do this that's wise. And the way to do this that's wise is not just to jump in it with no net and with no plan and with no money. The way to do this is what we said. We're going to do it right. We're going to, if this is a 3-month layoff, you don't know that for certain. It doesn't sound like it sounds like you just think it is. I try to find that out for certain. Is this, how long is this going to last?

When will the paychecks run dry?

And if they can't tell you, then that's your cue. I'm going to go out and get a job. Go out and get a job. And then once you land that job, now let's start working on the welding business. And again, to George's point, I do think you need to start business first because we know that that's going to bring in some income. And then once that's bringing down the $4,000 a month, now we can start trying to go into the art welding space. But you got to play this the right way. You can't just— that's like me just saying tomorrow I am a professional vocalist.

I mean, you are very good.

Yeah, but I don't— I ain't got a job.

But you need money coming in.

I don't have any money. Exactly. So we got to do this the right way.

So how much savings do you have right now to your name?

Uh, so cash savings, I have $20,000.

Nice. And no debt?

Uh, zero debt.

Yeah.

Fantastic. Well, you've set yourself up to be in a great spot.

I've heard the Ramsey jingle. Yeah, I've heard the Ramsey jingle since I can remember.

So.

Fantastic. I never heard it called a jingle. I like that. Dave's gonna really love that. So the goal now is that's your emergency fund. Our goal is to not touch that thing if we don't have to. That's your break in case of true emergency. Hey, I'm up against a wall. The electricity's gonna get shut off unless I dip into this emergency fund. Now on the side, you can start creating a side pile that is sort of the business startup fund, 'cause you're gonna need to buy some equipment, right? You're gonna need to pay for some insurance.

Uh, yeah, actually insurance is the only thing I think I'd need.

No equipment needed?

Over the years I've been, well, I've been cash flowing.

Perfect.

Good. You own it. It's not owned by the business.

Yeah, no, I'm, I'm sole proprietor on an LLC.

That's great, man.

It's just pass-through.

And the next thing is, can I actually get some clients? Am I good enough at the sales side? 'Cause you might love welding, but man, you hate getting the jobs and you might need to either offload that to someone who can get you the jobs and pay them, or you need to be working for someone else. Those are the 2 options. Hey guys, it's Rachel Cruze. If you're working the Baby Steps, every major expense deserves a second look, and healthcare is one of the biggest expenses in most families' budgets. And that is why I recommend that you check out Christian Healthcare Ministries. CHM isn't insurance, it's a health cost-sharing ministry. That means members help pay one another's medical bills, and they've been serving Christians since 1981. CHM programs start at just $115 a month. And here's why that matters. If you are paying more than you need to for healthcare, that money could be going toward paying off debt, building your emergency fund, or reaching your next financial goal. And your monthly cost isn't based on your medical history or where you live. Y'all, a lot of families find CHM gives them more room in the budget.

That's why so many members say they're better with CHM. And right now, new members can receive a 50% credit towards their first month of membership. Go to chministries.org/budget and use promo code Ramsey. That's chministries.org/budget and promo code Ramsey. Tom is in Los Angeles up next. Tom, welcome to the show.

Hey guys, how you doing?

Doing great.

Um, my question is, um, I'm 24 years old and I'm looking to buy my first ever nice car. I've never had a car with payments. I just, I've been very diligent about saving and not wasting my money. And, uh, I just don't know if it's the right move. I've always heard cars are depreciating assets and I'm just kind of hesitant to make the move.

Well, I'm proud of you for never having a payment. Are you ready to waste some money on a depreciating asset? That's the question.

I think I am, but I'm not sure.

How much is the car?

Um, the car varies from $1,800 to $2,325 max.

Okay.

What kind of car is it? What's the year, make, and model?

It's a 2016 through 2019, um, RC 350 F Sport Lexus.

Oh, sounds nice.

So it looks nice.

I mean, you're not a debt guy, so if you didn't have car payments, I'm guessing you don't have any other debt laying around.

I have no debt.

Yeah. And, uh, I'm guessing that you've got 3 to 6 months of expenses on top of the money you need for the car.

Um, so I've saved about $55,000 so far. I have $33,000 in, uh, mutual funds, 4 separate mutual funds, and I have about $22,000 in cash. And, uh, right now I'm waiting. I just listed my work van. I had gotten a van about 4 months ago that I was using for work. But it's a V8 and gas was very expensive. So I just listed it for sale yesterday.

So—

And what's it worth?

Yeah, no, um, roughly about $10,000.

Okay. And the mutual funds, that's just in a brokerage account?

Um, I have a financial advisor that, uh, helped me set that up. So I believe so. Yeah.

But I'm not in retirement.

That's the key. Not retirement.

Okay.

Okay.

How much do you make?

Um, it varies. I have a small business and I work in the pool industry, so I work for a big company and that brings me about, $3,000 to $5,000, $3,000 to $6,000 a month. And then I have my own business on the side that brings me another $2,000 to $5,000 a month. So in the summertime I do, I did about $10,000 a month. Right now we're slow season. I'm doing anywhere from $6,000 to $8,000.

Wow. So you're making anywhere from, can we call it like $75,000 to $120,000? What's, what would be the range?

I think I'm going to make about $100,000. Last year I made about $80,000.

Fantastic.

Let's call you $90,000.

And this would be your only vehicle?

Uh, so right now I have a 2002 Ford Ranger. It's an old pickup truck. Um, and that's what I'm going to be using for work for now.

Great. I mean, it's green lights all around because our parameter is you pay cash, you buy used unless you're a net worth millionaire, and the total value of all the things with wheels and motors in your life adds up to no more than half your annual income. So you check all those boxes, right?

Yeah.

So can we go buy this waste of a depreciating asset and enjoy it?

We should, right?

Yeah.

It's not that bad of an idea. I don't think so.

I would, man.

I think you need to do it. I think you need to. I think you need to do this.

You already have— do you have one in mind? Like, you know it's out there, or it sounds like you have a range that you're willing to sort of concede for, and now you know the prices.

I'm kind of waiting for the best deal. There's a 2018 for $18,700 right now, and I really like that one, but I have to wait until I sell my van because 'Cause I have no space to store 3 vehicles.

Right. And you don't need 3 vehicles.

Okay.

Yeah.

But they'll be out there.

I have a contract waiting. So there was one other good deal that I missed out on just 'cause I couldn't get it just yet. But yeah.

And you're ready to take on the insurance, the maintenance, all of that that comes along with a luxury vehicle?

Yeah. That's the additional cost. You know, I'm young. I haven't had my license for that long. And my insurance is gonna be probably about $300 a month on top of whatever I buy for cash.

How old are you, Tom?

I'm 24.

24. How are you living? Do you rent? I'm guessing— I mean, it says Los Angeles on my screen.

Yeah, I rent a room, uh, cost me about $1,250 a month.

What's your long-term plan for, you know, living in California, in Los Angeles area?

I'm not from the United States. I moved here about 6 years ago from, uh, Greece. So, okay, long term I'm planning on retiring there.

Okay, cool, cool, cool. All right. Yeah.

Man, way to go. You've done really well and I'm glad you're walking through this slowly and wisely instead of impulsively. You've thought about it a long time. You've worked to save up for it. You might need to cash out some of the mutual funds, it sounds like, to make this happen, right?

I'd like to not mess with any of it. I don't want to touch it. That's why I'm trying to be at 25 max because I figured since I'm gonna get the $10,000 from the van, I have another $22,000 in cash roughly.

Yeah, but I want you to have some liquid cash as your emergency fund. That's the only thing.

Okay.

So keep 3 to 6 months of expenses and then anything beyond that becomes your car fund.

Okay.

Because the emergency's gonna hit, the market's gonna take a dip, and you're gonna need to dip into those mutual funds at the worst time.

Okay.

So just kind of know, I don't know what you're earmarking those mutual funds for, but I like my investments to have a goal. So do you have a goal?

I don't have a goal. No.

Well, it sounds like it was the car.

Didn't wanna waste it. I didn't, well, the car, yes, but the main reason I put it there was I, I just didn't wanna have immediate access to it. I didn't wanna spend it on anything else.

Mm-hmm.

And I wanted to, to be outta sight, outta mind, live as if I don't have it.

So let's talk about that because that's a part that, um, it is, this is a part of budgeting and a lot of times people have margin. It's just like, let me throw this in the bank. But you do wanna be intentional even with the margin. If you're in a good enough position that you can do your budget and look at that margin and say, okay, I got $3,000, what am I going to do with it? Well, I just throw it over there in the HISA. It is a good discipline to sit down and go, what, what do I want to do with this money? If I'm going to throw it in a high yield, this is what it's for. If I'm going to throw it in a brokerage, I'm doing it because I'm saving for a down payment on a house. If I'm going to split it up, I know what the split up is. And when you do that, not only do you have a greater level of control of the money, but then when you reach over to spend it, you can do that with confidence because I've earmarked this money. Yeah, specifically for that, for that reason.

Well, ideally I'd like to buy a home, you know, but it just— in California, it doesn't— it seems like it's an out-of-reach plan.

And that— well, that's why I asked you about that, because I could sense that there's some trepidation in your voice about doing this car. And I'm looking, I'm like, okay, this guy lives in Los Angeles. It would be tough for me if I know that I have home buying on the horizon, it would be hard for me to spend $25,000 on a car. So now it's a thing of priorities and it's a thing of timeline of what's most important to you. That's why I asked about that. So if you say to me, hey Jade, if I'm being honest, home buying is actually number one on my list, well then we, we might need to talk. But if you do say no, for, for this season, car's number one, home buying is like number 3 or 4, then that means that we have more flexibility. So what would you say?

I'd like to be very cautious with where I spend my money. I don't want to waste it. That's why I've been so hesitant to do the car. And ideally, yes, a house would be number one priority. It just seems like it's impossible to do it out here. You know, I was thinking about buying a house out of the country, buying an apartment back where I'm from, and have my parents help me run it as an Airbnb. And, uh, that seems like a little more doable, an apartment out there that would do quite well in the—

Well, if that's the case, Tom, if that's the case, Tom, then you need to start aligning that. Because if you sit here and say, hey, guys, my number one priority is to buy a house, then your goals have to align with that. Which means, okay, if that's my, I'm going to start shifting everything towards that. And right now that's not the case. We're talking about a car when we should be talking about, okay, what's it look like to get out of the Los Angeles area? What's it look like career-wise? What's it look like property-wise? And that's really the conversation. If I were you, I wouldn't buy this car until you start to align on what you want the next 2 years to look like in your own life. And keep that home buying thing on the table? Obviously you can't do it in Los Angeles in the next 2 years, but what does that look like for you? Because $25,000 is a lot of money if we're talking about buying a home.

Yeah, I don't know how much time I have. It's just, um, it was kind of a reactionary idea of, I'm keep saving. All I do is work. I'm working about 60 to 70 hours a week. I have 2 weeks off in the year. I'm 24, and I was like, why am I being so mature all the time?

You could go somewhere where you might be immature.

Why couldn't you go somewhere where your money gets you a lot further? You say you're in the pool business. My guess is you could do that in a lot of different places around the country. Maybe South Florida. Tennessee has a lot of pools.

I don't know.

Yeah, saying start dreaming, man. But you got a lot of time. It sounds like you are either in the moment or you are so far in the the future, we can split the difference and enjoy life today while planning for what's ahead.

Yeah.

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Visit angel.com/ramsey for details. We always love hearing from you guys. So if you would leave us a comment on YouTube or Spotify on this episode, if it helped you, something stuck out, something was fascinating, crazy, share it with a friend as well. Hit that share button. That means the world. Thank you for doing that. Sean is in Atlanta, Georgia up next. Sean, welcome to the show.

Hey, thank you for having me.

Absolutely. How can we help?

Hey, um, back around 2000, I know I'm going way back, um, I took out one of those dumb 125% second mortgages for about $25,000, and I paid on it for like 10 years. And when 2008 came, I lost my job and got another job, but I was having a hard time making that second mortgage payment. So I called them in 2010, said, hey, any way you guys can help me with this? They said no. So basically I haven't paid them since 2010.

Whoa.

Do you still have the house?

I still have my house.

Is there a lien against it? Like when you check the records?

Court records? I looked at court records. I don't see a lien. Every once in a while, uh, it's been sold numerous times to other companies. And every once in a while I will get a letter, maybe once a year, for like the privacy notice saying, hey, we might sell your information or something like that.

Okay.

But other than that, I am looking to pay my house off within the next 2 to 3 years. I only owe $68,000 on it, and I don't know what's going to come about when it comes time for this because my wife Well, my wife keeps telling me after a certain amount of time, if they don't contact you and they don't try to get their money, then you might not owe that money. And I don't know, I tried calling the real estate attorney. He's like, just call a title company and just have them do a title search.

Yeah.

Yeah. And just blew me off. And so I didn't know if that was really the right thing to do.

Yeah, because then you can see if there's anything against it or if it's totally clean. Because you're probably right, they probably kept selling it lender after lender. You're not paying anything, they just charge it off, sell it to the next one, charge it off. So, and so you may be right. I mean, I checked the, the law in your area, but it could be too old to collect. But at the same time, it could come back as a zombie later, like, hey, you owe this plus, plus, plus, plus, plus, plus.

Right. And that's kind of what I'm worried about, is if I pay my house off, are they going to come after me?

At that point, that's the part to find out. And I think some— I think right now we're sort of living with the boogeyman under the bed. Let's just put the flashlight under there and get the title search done. And you can check with your county, uh, check the Register of Deeds records for the property.

Yeah.

Have you done that?

Yes.

Have you pulled your credit report? Does anything show up there?

No.

Okay.

It doesn't pull up on my credit report. Um, Nothing like that. So I, I'm just like, I'm at a loss.

Does the company exist anymore?

Uh, according to like, I've researched the one that owns it now and they exist. Some company that just likes to buy debt and, uh, they still exist and they send me a privacy notice every year or something. Interesting.

I mean, it's possible that in all the hubbub of 2008 or '09 and after, The chaos.

It just got lost.

Maybe it did get lost or settled or forgiven and you didn't know about it.

Uh, and there might be a statute of limitations. I would ask your real estate attorney about the laws in your state to see if they can even enforce it when you do sell.

Right. That's what I wonder about, the statute of limitations. Yeah.

Worst case, I would just go, hey, when I sell it, I might owe something in a worst-case scenario.

Right. Because I took out a $25,000 loan. And now even after I paid 10 years, I still owe $25,100.

Because of that crazy interest.

Yes. It was 125%.

And my guess is it's been so long, even if it does exist, they'd probably be willing to settle at this point.

And I just, if with the interest being the way it was and what that would mean in today's money, if it were out there, I'm pretty sure someone would be trying to collect it. Do you know what I mean? That just feels— but yeah, if you do that professional title search and there's nothing there, I feel like that's about as clean as—

I would do some more due diligence and then sleep easy knowing you did everything you could and get everything in writing so that they know.

Okay.

And that you know.

And we know.

I would trust your real estate attorney over, uh, us on the air because they'll know your exact state laws and what to do about it. But I would definitely do that title search.

Listen, I'm rooting for you because that would be Pretty sweet.

It's a big win. Chad is in Fayetteville, North Carolina, up next. Chad, welcome to the show.

Hey, how you doing?

We're doing great. What's going on with you?

I got a question. Kind of want some advice on something. Uh, so 2024, my wife and I was working for a company and, uh, they were downsizing, so we decided to leave. So when I left, I drew out my 401, I paid my home off and whatever loose bit I had. Uh, I kind of want to know how to go forward with, uh, now kind of being more aggressive with my retirement going forward. I'm 48.

You guys have no debt?

Just a couple of vehicles. So 2 vehicles were $750 a month. Uh, one of them's like $10,000 left owing on it. The other one's like $12,000.

Okay.

Do you have the cash to pay those off today?

We do. So here's, here's what we got. So when I left the company, I drew out my 401 and paid off, paid off the house and all that. She had a previous property because we got married in 2021. She sold that property. Okay. So we got $40,000 out of that in equity. We put that in a short-term CD and it's been there ever since. We both went back to working right after, you know, right after leaving the other company. Uh, I opened up a 401 with this company and started it immediately. So I got like $16,000 in that 401 in that company that I'm working for now. She rolled over her, she rolled over her 401 from the previous company into an IRA. So she's like $137,000 now. Oh, good.

Uh, on top of your $16,000.

Yeah, she's got it. She's got a new 401 that matches like 3%. So she, she don't have a whole lot in this cause it didn't start for her for a year for some reason. And then I've got, I've got a pension from my old employer, uh, that they're telling me will be like maxed out at $75,000 when I retire at 67.

Mm-hmm.

But it's showing an estimation of like $33,000 right now. So, That's just sitting there.

What do you guys make every month or a year?

So right now, so I was making a lot more with my previous job, but right now I work 3 days a week for a big, pretty big company in maintenance. And I'm making, uh, like $1,700. I bring home like $1,700 every 2 weeks.

And what's that a month?

And she, uh, let's see, $1,700, $1,700, that's, uh, $3,400 a month. Okay.

And what is her gross income?

She brings home— she— okay, uh, I can tell you biweekly she brings home $600 a week after her 401. So per week, figured out that—

yeah. Okay, so you both are probably making like $40,000, $50,000?

Yeah, I'm probably making like $60,000, I think.

So you're making about $100,000 together?

Yeah, before with the other job, with the other job I was making a little over $100,000.

Well, before was before, a year, and now is now. So let's focus on what we have now. So you guys have $153,000 between the two of you in retirement. You're making $100,000. If you follow our plan, both those cars get knocked out. You have no consumer debt. You build up an emergency fund of 3 to 6 months of expenses. Then you invest 15% of your household income, which is $15,000 a year is what it amounts to. So you would be adding $1,250 a month across your life.

That's how I was saying, we've got $40,000 in the bank in a short-term CD that we're just drawing into.

Good.

Yeah.

But I would also say this.

You could do— yeah, pay off the cards today. To George's point, if you do that, and then you're gonna have to go ahead and save up another 3 to 6 months of expenses. Um, and if you do that, now we're free to start investing. If I were you, I may pause investing temporarily if you need to in order to get everything cleaned up and in order to get that 3 to 6 months saved, then turn it back on. And when you do, you're going to put aside, uh, $1,250 a month that you're investing. And when I plug that in at current age, age 48, let's say you retire at 67 with the $153,000 that's already there. I mean, gosh, that puts you at $1.8 million, which is pretty good, I think, in residency.

Plus pension, plus potential Social Security. So yeah, that's a pretty good life. But here's the thing, you have to keep investing 15% continuously and never stop. That's the goal.

Never pull it out.

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Okay, today's question comes from Kelly in Tennessee. She says, in my area, all the cars at very low prices have rebuilt titles, which means they can't be fully insured. My husband wants to purchase a car with a rebuilt title for him to drive, but I'm not sure it's a great idea. What is the Ramsey opinion on cars with rebuilt titles?

Woof.

So what, this car has been completely totaled out and they've done what they need to do to fix it?

They can legally give you a clear title for it.

Yeah.

It tells you some things have happened. There's been some trauma.

It's been busted is what we're talking about here.

Yeah, that could involve damage to the frame, suspension, airbags, flood exposure. Total loss. And so I don't think that's where I'm trying to save a buck. Absolutely not. Because you're not going to save any. If you have to get a rebuilt title, you can't afford that car.

Yeah.

And it's not going to be a savings because there's going to be something that pops up wrong with this car. I got to believe over time.

Yep. And insurance is like the number one factor Yes. So if you can't get that thing insured, the insurance company's not touching it, you shouldn't either. That's a lot of risk on you.

Yeah. It's a no for me, boss.

Yeah.

What about you?

I would never, not in a million years.

Okay.

Sorry.

Unless you're like a mechanic who just like wants to fix it up and work on it for fun and you don't really care.

Even still, that's just still quite—

That's still just too much risk.

Yeah. It's a lot.

No, thank you. Get a discount elsewhere. Abby is in Baltimore, Maryland up next. Abby, welcome to the show.

Hi, how are you?

Good, how can we help?

So I guess I'm just kind of asking for a little bit of advice or what my husband and I should do next. So he has a lot of student loan debt. However, not all of it is in his name. Part of it is in his father's name and part of it is in his mother's name. So with that being said, in total it's probably about $170,000. And so we're paying his loans in his name as well as those in his parents' name. And it's just, it costs so much a month that we cannot afford to live. So I was just seeing maybe what your thoughts were on what we can do to pay it off quickly, but also to maybe make that payment a little smaller.

What was the plan? Because these sound like Parent PLUS loans. Was the plan initially for him to pay back his parents, or did they say, hey, we'll take out these loans so you can go to school? Like, what was the plan?

Um, so I think it was just to take them out so he could go to school. I'm honestly, I've asked and they've never really given me an answer. Um, they have not only his, he has 5 other siblings that they have in their name, so we can't consolidate. Right.

Um, so are his parents broke? Is there zero chance they're actually going to pay these loans?

Um, so they would have to if we didn't pay. Um, however, we, you know, we feel guilty, like You know, those are his loans. So we just don't know what to do. They're trying to refinance them in our name. However, we aren't, we can't do that. His interest rates are so low, that would be ridiculous to do.

So there's a lot circulating here that needs clarity. The first thing is, and I listen, you're talking to someone who has been exactly where you're at. Exactly.

Okay.

And so the first thing is let's get clarity on the story.

Okay.

And for him, it's probably a little uncomfortable because he's sitting in the middle of the 2 systems that he loves most. He's sitting in between your family, you guys' family system, and the family system he came out of. And he's just in the middle feeling like he's probably not doing well for either of them because of this debt, right? So let's kind of recognize the, probably the guilt and shame that he's feeling. And yeah, when you talk to him about it, just say, hey, I don't think we can move forward effectively until we can really understand what's going on and what the expectation was and what it is today.

Yeah.

So if he can have that conversation with his mom and dad and say, what did you guys, what was your expectation? Because here's the way I viewed it. And if his expectation, I'm not trying to put words in his mouth, but if he thought, hey, my mom and dad are covering this and I'm covering this portion, he needs to assert that and say, you guys said that you were going to cover those loans and I was to cover these. And so for my family, I need to do what we said and cover the ones that I'm on the hook for. Now, if that's not the case, then we can talk about— if you don't think that was the case and the case was no, no matter what, he's supposed to pay back all of them, even the ones that aren't in his name, fine. We just need to figure out what it is.

Yeah. What do you think?

What's your gut telling you?

I do think maybe initially they were probably thinking they could help him out. Um, and then each sibling decided they wanted to go to school. And so now they can't afford to pay for, you know, 5 kids' college loan debt. So, um, I think even if that was the initial plan, they would never see it that way, if I'm being honest.

That's fair. And that's their choice, by the way. So the second thing becomes owning what's yours and what's not yours. So today, what portion of the loans are his?

In his name? So about, um, if I remember correctly, I do have a thing, but it's on my phone, so I can't look at it. It's $60,000 to $68,000 would be the round that's in his name.

So I'd be focused on those. I'd be very focused on knocking those out. And I wouldn't be making payments on the other stuff because you gotta pay off the stuff that's in your name. Cuz you guys are out here trying to have a life, have a family.

And well, and we do have a child, so that makes it even more, mm-hmm. Um, you know, we have to pay for daycare, we have to pay for a lot of other things, and it's just, we're actually living with family because we can't pay rent right now.

Wow.

Because of his living.

I'm guessing it's different family.

Actually, it's the same, so it makes it harder because they are helping us with living.

I'm screaming for you.

There's some toxic codependency here. I mean, isn't breakfast awkward?

Yeah, I mean, it is awkward. So before, um, we just moved back, so that is why we were with him. I was without a job. Um, we moved back to the I was without a job for a couple months, so that is also why. When we were not in this state, we could afford to live and save a little, but that was it.

So you're both working currently?

We were both barely scraping by. I'm about to start my new job. It took a couple months.

What's your new household income?

So our new household income will probably be about $90,000 a year. We were a little higher beforehand, but that's where we are now.

Why is it so low with all these student loans? What did he pursue?

So, um, we both have a master's degree. However, his is in athletic management, so finding a job kind of in that with only a few years of experience has been a little hard getting a higher paying job.

But it took almost $200 grand to get through undergrad and the master's for him.

Yes.

Okay, there's a lot that has to be unraveled here, and, uh, sorry, yes, what I'm hearing here, here's Here's the reality. You guys gotta get out of that house with the quickness because as long as you're living there, you won't feel like you have the cojones to have the conversations that you need to have, which is mom and dad or mom and dad-in-law. You guys made a choice and it adversely affected you and it adversely affected us. And the truth is you were the adults when the choice was made. And we were the minors. And so because of that, it really was your choice and we cannot pay for that. And that's a very hard conversation to have when you're living in their home.

Because if you stop paying, you're going to overhear the phone call with the collections place calling your parents, calling his parents. So this is just a dark situation all around. So the key is, you asked us, how do you get out of this? Well, you're going to have to up the income and then it's smallest to largest debts. Let's knock this out using the debt snowball. And I agree with Jade, I would focus on your debts for now, the debts that are in his name only, to knock those out. Then we can figure out the rest down the road. Because that sounds like it's going to take a couple years just to knock out his debts.

Yes.

So this might be a 5 to 6 to 7 year journey at this rate, if you're lucky. So that's where the income really needs to go up.

Okay.

So yeah, I think, and there's no shade on that, you guys, you're not wrong. You can't even afford to live. You certainly can't afford to pay off debts that they signed for, um, as the adults. So this is tough. Gosh, I can't say it enough. You know, if you're a parent and you're in the situation where you have kids going to college, you've got to be realistic and you've got to be the one to draw the line in the sand and say, we, we simply can't afford that. And you can't either because it would be debt. So this is you guys' chance to kind of change the story here and just Start on a new path and do it the right way and, um, not indict your children on down the line.

Oof.

And $2,000 a month in just minimum payments, that is soul-crushing.

It's soul-crushing. And I hate it for the parents too, because you know they had good intentions. It's just, that's not enough.

Well, they basically kicked the can down the road, said future us will figure this out. Let's just take the loans out. And here we are.

Doesn't work that way, my friend.

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$25 forever requires customers to remain active on Boost Mobile Unlimited plan. Welcome back to the Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell. She's Jade Warshaw. We're taking your calls at 888-825-5225. Trenton is in Milwaukee up next. What's going on, Trenton?

I'm doing all right. I wish I could do better.

We'll see if we get off the call and you have less of an Eeyore energy. I hope we can get a smile on your face, my friend.

I hope so.

What's going on?

I'm about $28,000, $29,000 in debt. I'm 20 years old. I've got zero to my name. I'm trying to come back the way I can, and I was hoping you guys could help.

Absolutely. Well, here's the good news. At 20, most people have nothing to their name. And I didn't get any financial literacy until I was in my mid-20s is when I climbed out of my debt, and I had more debt than you. So let me tell you, there is hope.

That's good.

What kind of debt is the $28,000?

Um, $22,000 of that is a car loan. Um, $2,000 of that is a Signature loan. About $650 of that is a credit card. And then the rest of it I owe to parents and grandparents.

Okay.

So just kind of personal loans to family. And what do you make?

Yes. Um, I make about $3,500 a month.

$3,500?

Yeah.

Okay, great. You're working full-time?

Yes, sir.

What do you do?

I work federally.

What was that?

I work a federal job.

Federal. Okay. Government job?

Yes, sir.

Cool. All right. So here's the good news. You can climb out of this and be debt-free by your 21st birthday if you want. How soon do you want to get out of debt?

Uh, as soon as possible. Okay. Me and my fiancée are trying to buy a duplex to make passive income.

Oh boy.

That just went off the rails in another direction, I think.

Yeah. She, uh, she, uh, just got $6,000 reimbursement. So we are saving that for Uh, a home loan.

That won't get you a Honda Civic, let alone a down payment. Mm-hmm.

No.

So, okay, we'll pause on that. Put a pause on any big financial decisions with someone you're not married to. Let's talk about your debt for a second. What is that car worth? You owe $22,000. What could you get for it if you listed it yourself?

If I listed it myself, I could get about $19,000.

Okay, great.

So you're $3,000 underwater. So that's the amount we need to aim for, plus we need some to get you a different vehicle. Would you agree this is too much car for how much money you make?

I bought it for the gas mileage, um, because I'm driving an hour and a half to work every day, or one way.

Can we agree there's $10,000 cars that get equal fuel economy?

Yeah.

Okay.

Because what I'm trying to do is free up your greatest wealth-building tool, which is your income, because that payment is crushing you based on your take-home pay. What's the payment on that?

Uh, $750.

Oh, goodness. What is the interest rate?

Uh, 13%.

Ouch. And what's the insurance cost? Because at 20 years old, it's probably up there.

It's, uh, $350.

Oh my Lord. So this is $1,000.

So yeah, $1,100 between the payment and the insurance alone.

Yeah.

It's about a third of what you're taking home.

I know we can agree that having $1,000 back in your pocket is better than the $22,000 car.

Because that alone, you'd be out of the paycheck-to-paycheck cycle. Agreed?

Yeah.

And then you'd have that money freed up to then pay off your other debts, which would take you a couple months at that point.

And I just want to clarify this even greater, Trenton. This is a third of your income. going to your vehicle. Yeah, that's the part when George said, can we agree that this doesn't make sense? It's a third of your income. You can't do anything if a third of your income is going to your vehicle. For most people, the third of their income is going to their home or their mortgage.

What is your rent?

Uh, rent is $1,205. Okay, wow.

So that car is almost as much as you're paying for housing.

Yeah, yeah.

Okay.

Okay.

We see it.

We see it. So there's one angle. I'm just showing you one option. One option is you come up with the difference that you owe, either through savings, through your income, selling stuff, side hustles, or you go down to your credit union and get a personal loan for that $3,000 plus a little more to get you a car to get from A to B for now. That's not your forever car. That might be a car you drive for a year until we can get you to a better place financially to where you can get a better car.

Yep.

So we're going to stair-step in cash from now on. Because man, at 20, if you figure this stuff out now in your early 20s, you're going to be unbelievably wealthy if you learn how to get out of this cycle at this stage.

But if you do that now, you've got an $8,000 loan instead of a $22,000 loan, and you're paying significantly less a month.

At a lower interest rate.

It's a 2025 Jetta and I bought it For $28,000, which I overpaid.

Yeah, which, I mean, the dealerships will hose young guys like you.

Yeah, they will.

Once they see a starry-eyed guy wanting a nice car, they go, we got him. $757,000. They probably bragged about it in the break room as soon as you left. That's the sad part.

But I mean, that can be your homework this weekend, Trenton. You can shop out there and see. I don't know what your— I don't like credit scores, but you would need one to get a loan. So if you have one, that's fine to get a loan for. Like I said, maybe you get an $8,000 loan You take $3,000, close the gap, sell this car, and then you take another $5,000 and buy yourself a beater. That's thing number one on your list of priorities before anything else. And then when you do that, now it's just simple debt snowball.

Smallest to largest debts, attack the small one with a vengeance, minimum payments on the rest.

Okay.

So do you have any money left over right now each month?

With everything I calculated, I have about $400 left a month. Okay.

So think about that. If we freed up that $1,100 plus your $400, that's $1,500 extra you could use to knock out the rest of the debts, which means by Christmas you could be debt-free.

That would be amazing.

Now that's some short-term sacrifice, right? Driving that beater car is not going to be fun. Selling that nice jet is not going to be fun. But on the other side of this, it's not 3 years of sacrifice, which is the other part. You can do our plan, or here's another option: you go work 60 hours a week with a side job or overtime to try to make up the difference to clean up this debt yourself.

Yeah.

So you decide which, which hard you want to go down. I think selling the car is the best move because number one, I wouldn't recommend you keep that car even if you could pay it off. We don't recommend any car, any vehicles that are worth more than half your annual income in total. And so right now you're riding that line.

And then too, you have your fiancée and it sounds like there's a wedding coming up. How are you guys planning to pay for that?

We just plan on doing a court wedding.

Okay, good.

Reason one, she's trying to join the Army and I'm also in the Army.

Okay.

Cool.

So we can do that. I don't know if you guys have a date set for that, but we can do that sooner or later, sooner than later. And then that allows for both of you guys to kind of join forces on this.

Join incomes. Yeah, you can move in together. Are you guys already living together?

We've been living together for about 5 months now.

Okay. Does she have debt?

Uh, she's got about $1,300 in credit card debt.

Okay. So once you guys get married, your debt's going to be cleared by Christmas, to George's point. Let's say you guys have a Christmas wedding and then you turn around and clear off her debt. Gosh, that looks really nice for you. And we didn't get to talk about this, but I beg of you, don't buy the dupe course.

Do not do this dupe. There's no such thing as passive income in the real estate world. I promise you. Hang on the line, Trenton. I'm gonna send you a copy of my book, Breaking Free from Broke. I can give you the audiobook version if that's better for you. Hang on the line. Our phone screen will pick up and hook that up. And both of you read that and then come up with a game plan. Hey guys, Rachel Cruze here, and I'm so excited to tell you that the brand new 2027 Ramsey Goal Planner is available now. Guys, this is the only planner with exclusive monthly content from John Delony, Jade Warshaw, and me.

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But here's the thing, these sell out every single year, so don't wait. Order your new 2027 Ramsey Goal Planner for $49.97 at ramseysolutions.com/store. That's ramseysolutions.com/store. Buying or selling your home is high stakes because one bad deal could cost you tens of thousands. You don't want to overpay for your next house or sell your current home for less than it's worth. And that's why Ramsey Trusted connects you with vetted real estate agents who have the experience to guide you step by step to make smart decisions, not expensive mistakes. Connecting is easy. Just compare agent profiles, interview your top choices, and pick the right one for you. Go to ramseysolutions.com/agent to find a local Ramsey Trusted Agent, or click the link in the description if you're listening on YouTube or podcast. Jose is in Newark, New Jersey, up next. Jose, welcome to the show.

Hello, thank you for having me.

Absolutely. How can we help?

Well, that is the question, isn't it?

It is.

I'm 63 and I'm going to retire Friday. Hey, congrats.

Does your employer know this?

Yeah. Well, actually they offered a buyout.

Nice. What was the buyout amount?

Why I decided, well, the buyout amount is, uh, it's called an ISP, uh, enhanced incentive package. And they're offering $2,200 for every year of service up to 40 years, along with another $50,000 on top of that, just to, uh, Put a cherry on top of it.

How many years of service you got?

I have 43.

Wow. And you get up to 40?

Yes, I get up to 40. Yeah. Which makes it $88,000 plus the $50,000.

So guaranteed $88,000 a year plus a one-time $50,000?

No, no, no, not a year. Uh, $2,200 per year of service up to 40 years. Uh, $88,000 one-time sum. Um, but I do have a, um, A pension. And then this is the reason I'm calling is because I'm stuck between taking a lump sum, which is, uh, all at once, or the monthly.

Okay.

What's the lump sum?

That's what I'm trying to decide. The lump sum is down now because of the, uh, the rate increase in the, um, interest. So it's down to $531. And 66, uh, $531,656.

And what's the monthly payout if you don't take the lump sum?

The monthly would be $3,500.

Do you need the money today? Like, if you were to retire today, do you need that income, or do you have other investments? What else do you have?

Well, I have 212 $212,750 in a 401. My house is fully paid off, uh, and, uh, my monthly budget is between $4,500 and $5,000.

Okay, so today you don't have the money to cover the $45,000. The $212,000 isn't, isn't enough to keep you afloat in that way.

Oh, it, it, it, I mean, temporarily for the, for a few years, because the, um, $88,000, I would get half of that upfront. And then the other, the other half over 36 months, I believe it is.

I tend to lean towards a lump sum just cause I get to invest it my way.

But—

Yeah.

Cause the rate of return, if you get that monthly payment, I would figure out what the implied rate of return is for that pension. Have you sat down with a financial advisor to actually calculate this out?

I've sat down with several, actually.

What did they say?

Uh, well, they're, they're, of course they're going to say the lump sum because they want that money too.

Because they want to— yeah, you invest the money with them, but they showed you the math on which, which is a better deal outside of, even if you invested on your own, which one came out ahead?

Well, it depends on how long I'm going to live.

Um, can you tell us that?

Yeah.

That would be very helpful in our calculation.

What's that?

Well, you have Social Security coming in as well.

I haven't activated yet, but that's another option.

Okay. And the longer you wait, the more you'll get, of course. Uh, 67 is your full retirement age. So depending on when you actually absolutely need it, if you're in good health and you're 63, there's a good chance you make it into your 80s or 90s, right?

There's a good chance, yes.

So there's a break-even point if you took it later in life at 67 or 70, that might be a better bet for you since you don't have a very big nest egg.

Okay.

So I'd also factor that in. I'm saying, hey, 7 years from now I'm gonna activate Social Security and that's gonna be a guaranteed payment of whatever plus cost of living adjustment every year. So that might be a good bet.

What am I gonna do in the meantime?

In the meantime, you can use that lump sum, 401, the lump sum. And that's where I'm going, hey, all right, you need about $60K of net income per year to live, it sounds That sounds about right. So that's where I sit down with a pro, and instead of just talking about should I invest a lump sum, come up with a more holistic plan for how long will these piles of money get me by. And if they go, hey, you know what, they'll get you by for the next decade, and then at that point Social Security will have kicked in, that plus your lump sum invested pension, you'll be okay. That's the part that's hard to figure out with you on air without crunching all the numbers.

Yeah, of course, of course. I'm going to be okay either way. I'm just trying to figure out which would be the best.

Uh, yeah, generally we say take the lump sum. Take the lump sum if you're going to invest it. Now, if you're going to just use it all, that's a bad plan. But if you can invest the lump sum, apples to apples, you would find that that lump sum in the market would likely beat your monthly payment in the long run. In the long run.

Exactly. Yeah.

Yeah. So I'm leaning towards that based on everything you've told me.

Yeah. I want to go back to—

That's what I'm leaning towards also.

The, what you got for leaving, the $88,000. Did you say that was a one-time deal? Did I understand that correctly?

That's a one-time deal.

Yes. Okay.

Yes.

And how much do you have saved currently that's liquid?

Liquid, I have about $6,000.

Oh, okay.

Is that your emergency fund? It feels low.

That's my emergency fund. Yeah, that's my emergency fund. Okay.

I would bump that up for a guy retiring on Friday. I want to have a little bit more peace that if something goes wrong, I have the money to cover it.

Yeah. I was told to take the $50,000 and use that as the emergency fund after taxes. Of course, it'd be about $38,000 or so.

And that's, that's fair. But Jose, do you plan on doing anything else that earns money? I mean, obviously you're not going to do the job at the rate that you were working before, but do you plan on doing anything else to bring in income? Because that could also be a major factor in this.

Absolutely.

So how about this? What if you go find another job as sort of an encore career that can float you by without ever touching these piles of money? That would give me a whole lot more confidence in your financial plan going forward.

Are you guys hiring?

We always are hiring.

But if you, if you use, if you did what you said and said, I'm going to take this $50K and I'm going to set that aside and that's going to be my emergency fund, Uh, the $88,000, if you can take that out as a lump, that's kind of your bridge this year to say, okay, what do I want to do with my life? And what do I want to do to kind of do that second encore deal? And then during all that time, the $212,000 continues to grow. Uh, if you decide that you're going to invest the $531,000 lump sum, that continues to grow and you've just started a completely new life for yourself.

It will. It will.

And the goal is to beat inflation. With anything you do, inflation is going to be the killer over the next, you know, 30 years for your financial plan. So that's why I say investing in the market in general is going to beat the crappy return of a pension.

Absolutely.

Which you have no control over.

No. And that's, that's an 8% return according to the, uh, to the financial experts, the pension, but it doesn't keep up with the rate of inflation. So it's going to diminish over the years. As opposed to—

yeah, there's no adjustment. There's no cost of living adjustment on the pension. It's flat.

No, there's not.

So over time, the power of that money erodes.

Yeah.

Versus having it invested or even Social Security, it will grow with inflation. So that's why I lean towards that lump sum. But again, I would sit down with whatever favorite financial advisor, it sounds like you got a bunch, and go, hey, help, help me craft a plan where I see all the scenarios.

I'm down to 2. Um, the one is, uh, their fees are 0.4% and the other one is 0.9%. So I'm leaning, given everything being equal, I'm leaning towards the, uh, 0.4%.

That's fair. And those are, those are both very reasonable rates. I mean, 1% is about the industry average in assets under management fees, and it's well worth it if you actually get to retire with dignity and sleep better at night versus trying to DIY this and just hope that you made the right decision. And so, uh, if you don't have a good SmartVestor Pro in your corner, for whoever's listening out there, jump on ramseysolutions.com, click on SmartVestor Pro, and they can take a good holistic look at your picture. They're not just picking mutual funds. If you're just using a pro for that, you're doing it wrong.

Mm-hmm.

You need to look at tax planning, insurance planning, cash flow planning, education planning for the kids, retirement planning. All of that comes into consideration, and they can see all of the blind spots that you You don't, and that's where Pro is worth every penny.

Listen guys, I've heard just about every excuse for why folks think they can't get ahead with money. So let's go ahead and settle this right now. You get the final say on what happens with your money. That's why you have to start telling your money where to go so you can stop wondering where it went. So if you're gonna start winning with money, you have to get on a budget. And the easiest way to get started and stick to it is with the EveryDollar Budget App. EveryDollar is a free app that helps you manage your money. It'll help you make a plan for every single dollar coming in and every single dollar going out every single month. And guess what? It's free. So no excuses. Download EveryDollar in the App Store or Google Play today.

Alexis is in Memphis, Tennessee up next. Welcome to the show, Alexis. How can we help?

Hey guys, um, my question today is, uh, me and my husband just welcomed our daughter into the world 4 months ago.

Congrats.

Um, and we have— thanks, thanks. Um, and you know, we're getting those hospital bills in and everything, and we're wondering, uh, Um, we have the option to pay it off in a lump sum or, um, paying it off in payments.

Well, they're giving you a sweet discount, right?

I'm wondering what's the best. Well, I don't know about a discount for the lump sum. I haven't checked that.

Don't check, just call and say, hey, I'm looking for a discount if I pay in cash in full today.

Amen.

You tell them how it's gonna go.

Okay.

And you can even suggest a reasonable discount that you'd like to see.

Could I get 30% off if I paid in full today for the full payment? And they might say, no, we can do 20%.

Okay, you'll get something.

Okay, so when, when we go to— if we go to pay in a lump sum, we would have to take that out of savings, um, and we've been trying to save for a house. So do we put that on pause and take the lump sum Yes. Or how, like, how do we prioritize that?

Yes, do exactly what you said. So what, what I'm filtering that decision through is our 7 Baby Steps, which is the foundation to be able to do anything financially in a responsible way. So the first things first is after you've saved just $1,000, the next most important thing is to pay off any consumer debt, and medical bills fall under consumer debt. After you've paid off the consumer debt, then we save up money that's considered our emergency fund, a fully funded one, 3 to 6 months of expenses.

Mm-hmm.

And then after that, then we save for the down payment on the house. So the reason that it goes in that progression is so that you can protect the savings that you actually have and so that you can move into the house with a lot of peace and freedom because you have an emergency fund. Uh, you didn't take your emergency fund and use it as your down payment. So that's kind of the basis of this way of thinking. It's, I wanna make sure that I'm looking at this from all angles so I don't rob myself of peace along the way trying to do something quickly.

Okay.

Fair enough.

Can I give you some homework too?

Yeah, please.

So before you do any of this, request an itemized bill from the hospital and your insurance explanation of benefits. And say, hey, I'm not sure that this is all correct. There might be a few errors here, some double billing. Can you guys send me an itemized bill so I can look it over? And what will happen is they'll go, ooh, we need to take some random stuff off and clean this thing up. Then you get the final bill, then you can negotiate the payment.

Okay.

How much is it? What's the lump sum today?

The lump sum is a little over $6,000.

Okay. And how much do you have saved in total?

I do have insurance being applied. Uh, we have a little over $13,000.

Okay. And is the medical debt the only debt that you have?

The only other debt that we have is, um, my husband has $1,600 left on his car.

Okay. So my plan for you, after you've done what George said, you get the itemized bill, you go over there and say, hey, I can't pay $6,000, uh, or I can pay the lump sum, but I, I need a discount so I can give you the money today. And let's say they do it for, I don't know, $4,000. $4,000. So then you're gonna say, okay, great. Now I'm gonna take the rest of the money that I have. I'm gonna reach over and pay off your husband's car. And now you're completely debt-free. And not only are you debt-free, but you've got some money to begin to pad your 3 to 6 months of expenses. So now the next step is to go, okay, what is a fair amount for 3 to 6 months of expenses? It's not 3 to 6 paychecks. It's not 3 to 6 months of your budget with all the bells and whistles. It's just kind of the way I do it is, hey man, if something happened, what would we need to make this ship continue to sail? And so whatever that amount is, times that by 6.

All the non-negotiables. We need to have food on the table, groceries, but we may not be eating out constantly.

Right. So now we stack that up, times that by 4 or times it by 5 and set that aside. Because you don't have to do the full 6 months. I know you're trying to save for a house. If you want to do it at 4 months, I'm fine with that. That. Stack that up. Now we start the down payment. And so that's the progression of this. And, uh, if you do that, you guys are gonna be sitting pretty. What do you think?

That's, that's what we want. What's your household income? That sounds great. Um, well, right now I'm a, I'm a stay-at-home mom since we had my daughter.

Wonderful.

Um, and my husband And he's making about $75,000 a year.

Okay, perfect. So now it becomes, okay, how quickly can we save up this down payment if he's making $75,000 and we have our normal bills? And then that'll give you a pretty good picture of when this house is gonna happen so that you don't go, well, I thought it was gonna be a year from now. Well, the math will show us at this rate, it might take 3 years to save up that down payment depending on the type of house you want. So that's where you guys can come up with a game plan and be aligned so that nobody You know, is a little starry-eyed or confused or frustrated that we aren't where we want to be. And the baby doesn't care. I can tell you that much. The baby's living like next to your bed, right? Right now? Are we in the nursery yet?

Not yet. No. Okay, good.

Well, you guys are reasonable people. I can tell. I can tell by the fact that you had money saved. I can tell by the fact that you don't have a lot of debt. And those are the behaviors I want you to continue. I want you to continue to avoid debt. I want you to continue to be savers, and I want you to be budgeters going into this. So if you don't have EveryDollar, we'll gift you that for free as your baby congratulations gift.

Late baby shower gift.

There you go.

Sorry we're late to the party. Thanks for the call. Peter is in Salt Lake City up next. Peter, welcome to the show.

Hi, thanks for taking the time to talk to me.

Absolutely. What's your question?

I'm, I'm 27 years old, and I just had a career-based question. I work at a local utility here. It's just pretty steady. I make a good income. I make about $140,000 a year.

Nice.

I've got a single income, 3 kids, and a 4th one coming any day now.

Congrats.

Thank you. And I'm just considering potentially taking an opportunity for a consultant company. There's a lot of demand in the power industry these days, but I'm just wondering, is it worth the potential $20,000 to maybe $30,000 pay increase to move to a job that, you know, could be— it's probably gonna be similar benefits but could be less steady overall. And, you know, if they lose a contract, I might be looking for work.

Now you're working for another company doing the consulting? You're not just out on your own doing consulting?

Correct. It'd be, you know, probably a fairly large consultant that—

Okay, there's less risk right there because it's not all on you. Someone else is going out and getting these contracts. And they're incentivized to do that. So you're saying you would make $170,000 likely?

Best case, probably $160,000 is reasonable. I don't have a job offer on the table, but looking at former teammates who have gone, that's roughly what it's been.

Yeah. I mean, if the benefits are good and the income's good, I would take it. Because the good news is power will always exist, right? You can always go back and do a job in the energy field.

Right.

But now you're a guy who was making $170,000 looking for a new job. And so that could also help increase your chances of making more in the long run.

Yeah. I mean, what's the downside? It's just a new gig and you have to kind of prove yourself in that field.

I guess the downside is I'm just kind of risk-averse and I feel comfortable and steady where I'm at. And I don't know. hesitant to, to make a jump to a place that might not be as stable.

What caused you to look at this to begin with? What caused you to kind of look up and out and say, maybe I need to look at things that pay more? Is it debt? Is it kids' college? What's— what fueled you to even be looking?

So we are Baby Steps 4, 5, and 6, you know, longtime listener. And it's mostly just looking at— it's, it's, it's Some extra money, um, that definitely motivates me.

I mean, $2,000, that's $500 per kid per month going into a 529 plan. When you look at it that way, I'm willing to work and hustle to do that.

Yeah, yeah, I guess. Yeah, I, I just, you know, if— I guess I'm always— if there's a downturn in the economy or something like that. Yeah, I think this is struggling to find it.

I think it's another kind of values and priorities play. If you, if you're saying, hey, I've got I've got these kids, college is coming up. I, I, I could use the money. Then that makes sense that you would begin looking for jobs that offer more money versus staying put and doing the safe play.

Plus increasing your skills, new experience, that's only gonna help you in the long run. And man, I mean, your field isn't going anywhere. We gotta keep the lights on around here. So I think you're in good shape as far as, you know, your job not being replaced by AI anytime too soon. Good luck, man. I'm excited for you. Congrats on the baby.

You've heard from me and the Ramsey Personalities for years, but nothing beats actually getting together in person. That's why we created the Live Like No One Else Cruise. For 7 days, We're vacationing with you and 2,500 Ramsey people in the Western Caribbean with live shows, us, new content, us, and more. If you're on Baby Step 4 or beyond, come spend the week with us next March. Choose your cabin at ramseysolutions.com/events or click the link in the show notes.

Our scripture of the day, Psalm 27:13. I remain confident of this. I will see the goodness of the Lord in the land of the living. Our quote of the day, James Madison. The circulation of confidence is better than the circulation of money. Very presidential. Thank you for that. Jane is in Chicago up next. What's going on, Jane? How can we help?

Hi, Hi, I'm trying to figure out if selling our home and paying off our debt and rent, just kind of starting over, is the best next move for our family.

Okay, tell us more. How much debt do you guys have?

I mean, not a ton. The real problem comes from we refinanced a few years ago, and now I'm just having a hard time making ends meet every single month.

So you're saying the mortgage payment is just too much? It's not the consumer debt?

Yeah, like mortgage plus everything else on top of just the whole combination. But the mortgage particularly is now more money.

What do you pay every month?

My mortgage is $3,100.

And what's your take-home between you and your husband?

I bring home about $4,000. A month. My husband gives me $300. We are not on the same page when it comes to finances. So this is—

You said he gives you $300?

Part of the reason.

Understood.

Yeah.

How much does he make?

$300 to $400. It varies. He owns his own business. And so it kind of just depends on how business is going.

Okay. So that's like his pay. That's him paying himself? Or is there other money that he's paying himself that you don't have access to? Does that make sense?

I do not have a full financial picture of his.

So he gives you $300 to cover some household bills and then says, kick rocks, pound sand, the rest is mine?

Well, not exactly. I mean, he drives, um, a truck, so there's like maintenance and other things, but I do not have a full picture yet.

Okay, okay.

But who pays the mortgage payment?

And I have, well, all the bills I mean, I pay all the bills.

Yeah.

Out of all the money that ends up in the bank account.

Out of your account.

So what I'd wanna know, obviously as it stands, if, if we just say, hey, we have $7,000 of income, obviously the mortgage is way too much. It's no, no wonder you, it's half. So that's why you're feeling that. But the second question I'd wanna know before we even start the business of combining money, because as I can tell, this is gonna be a long road. I would at least want to know from your husband if the $3,000 he's giving you, is that just— that's what he pays himself? There's no more. The rest goes towards expenses. Or is there more that he's just keeping as his own guy money that he is spending as he wills? I'd want to know that because that is going to play a huge factor in how we approach this conversation.

If you guys actually bring home after tax, monthly income is like $10,000 to $12,000, then we'd say, oh, the house is fine. It's not on fire. There's no problem. Don't sell it. But if you're telling me this is all the money to your name consistently, then yeah, $3,100 out of $7,000 is a problem.

Okay. Yeah. I mean, I, I don't think he's keeping a ton of money anywhere, like hidden or anything like that. I do think a lot of it goes back into expenses. Um, you know, I am obviously hoping to get on the same page with that. And that is a goal that I'm working towards.

But—

Do you know how much debt he has?

We need to be making like $10,000 to $12,000. Well, my biggest concern is we just have an IRS debt from back taxes from this business. Other than that, I don't think we have very much debt in general. We have $12,000 in credit card debt. I don't think he has a ton of additional debt.

How much is the back debt? How much is the IRS debt?

$50,000.

Say it again, please.

$50,000.

$50,000.

Ooh, girl. So you got $50K to the IRS, $12K in credit cards. Anything else? Car payments?

Not that I have numbers for.

No, that's all I know about.

I would pull your credit report to get a clear picture on where things are at, and I would encourage him to do the same. Even if you guys aren't on the same page, we need a full picture of what debts are out there so we can attack this thing.

So if you today, if you sat down today, Jane, let's pretend you get off the phone here, you get home from work, your husband gets home from work and you say, you know what, I've been thinking and I'm realizing I have a lot of stress about our financial situation. I wonder if you would sit down with me. I pulled some of the things from the personal side. Can you pull some numbers from your business? I just feel like I need a picture of what's going on and it will give me a lot of peace. just to see what's going on with both sides of our life. What would he say to that?

Um, probably no. I tried to have a conversation a week ago, um, and I had the— before when all the money was coming in, the business wasn't getting prioritized. And so that's kind of when things split. And he does not see like re— Combining or having that conversation.

Forget combining for a second, just so you can understand, because the truth is him having 50— him having created $50,000 of IRS debt affects you greatly. So he can't assume— and I know you know this, I'm just saying this for good measure— he can't assume that the things that he's doing as an individual doesn't affect his marriage as a whole because when he got married, he became a unit with another person. And so that's the thing, that's the part of this that has to work out, is just forget combining the money, just him understanding, hey, what you do does affect me. You can't think that your whole life over here has zero effect on me. It does. So if you say that to him, what's his response? Get out of my face, or I'm not having this conversation. What do you think he'll say?

No, I hope— I mean, I hope that would be heard. And I think if I asked for it from a business perspective, that maybe I would be able to get some numbers, probably.

And maybe you tell him, maybe you start with saying, my intent today is not to combine money. I know how you feel about that, but I do— I would like to understand what's going on over there, just so I— I'm in turmoil over here. I'm thinking about selling the house. Like, I Bob, I would really love if you could just have some transparency with me just so I can sleep at night. Right.

Especially if you're the one paying the bills.

Right. Right.

Yeah.

So I wouldn't sell the house. I think that is a last ditch effort if we realize there's no hope in the situation to make more than 7 grand ever again. But I think that what you're gonna find is that the house really isn't the problem. It just feels like a good shortcut. And it's not going to solve all the problems underneath.

Right. Okay.

So the question is, can you afford to pay off the IRS debt, the credit card debt in a reasonable amount of time, or is this going to take a decade?

Right. Well, I do, I do have a payment plan set up. We are working on it. So it should only take a couple of years assuming I don't continue to add to it. And that's my biggest concern is adding to it year after year.

Do you guys not have someone doing the books?

And that's the part. Yeah.

We don't, just because it's just a small single thing, but maybe that's something you need to look into.

It might be a small business, but you got a big problem with the IRS.

I'm going to tell you right now, you need to go on Ramsey Solutions and you need to find a tax pro that can help you with this at the very beginning to get you started. And then you need to be looking for somebody who can manage your books ongoing because the definition of insanity is doing something and expecting a different result. You guys have tried, or he has tried to manage these books and there's $50K in debt. And then you're thinking, gosh, assuming we don't keep, right? So there's not a strong sense of confidence and that's totally fine. Managing books is a completely different set of skills. So invest the money. You will save money by investing the money to have somebody do it correctly for you.

Some IRS penalties and fees would've been worth paying someone over, let alone the stress and hassle.

Well, here's where, and let me just point to this because here's the thing. Now I know what he's not doing is setting aside any sort of monthly withholding or any sort of, I'm sorry, quarterly withholding, which means that means the $3,000 that he's giving you, he doesn't even have it to give. So that means, is this business even making any money? That's what my brain goes to immediately. If we're not paying our taxes and we're not taking any income. So that it points to some deeper questions there that need to be answered.

Okay.

Have we given you enough homework?

We gave you a lot.

I'm so sorry, Jane. This is not fun.

I mean, I'm happy to have somewhere to start because I just feel very overwhelmed. So—

And call us back.

I'll start with the website.

Listen, I want— I am saying this— I want you to have these conversations that we had as homework, and then I want you to email again and call back and say, Jade told me to call back, schedule me. And we want to know what happens next so we can help you out. And help you take the next step through this. Plus, the people love a storyline.

They love the where are they now.

Yeah, they wanna know what happens.

We hope for a happy ending here, Jane. That puts this 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.