Transcript of Stop Starting Over and Break the Cycle for Good New

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Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show, and I am Rachel Cruze hosting this hour with good friend and my other co-host of Smart Money Happy Hour, George Kamel.

Excited to be with you.

Always fun, George.

New hairdo, by the way. If you're watching on YouTube, I want to call it out. The extensions are gone if you've been following the journey of Rachel Cruze.

Chopped the hair. I change my hair every 6 months, so yeah, this is the new and approved. We'll see.

I look the same as I did 4 years ago.

George hasn't changed a bit.

A man of consistency.

Always predictable, George Campbell. So yeah, give us a call at 888-825-5225 because our advice is as predictable as George Campbell's looks.

So, uh, there we go. There you go. Full circle.

All right, let's go to Hannah in New York City. Hi Hannah, welcome to the show.

Hi Rachel and George, thanks for having me.

Absolutely, how can we help?

Okay, so my question is, how can I keep my husband dedicated to paying off this debt with me when we are back at Baby Step 1 for the 4th time now and he is overwhelmed and wants to separate finances?

Oh wow, man. What's caused you guys to be on it the 4th time? What's happened?

Yeah, we've had a lot of bad luck. I'm just gonna rapid-fire a time timeline for you here. We got engaged in 2019. That's when we started this journey, uh, started paying off. We had no major, major debt. It was some credit card debt, student loans, nothing major. At that same time, we found out that his mom stole his identity, and it was mainly student loans in his name that he did not know existed, that he was getting the refund checks back to her. Um, so that kind of muffled things up, but we were working towards it. 2020 came, COVID, we got married that year, but we canceled our wedding. We kept working at it. 2021, I got pregnant with our daughter, and we lost our jobs because of COVID It was really hard here. We had to move because our landlord died. And then from there, We kind of wiped out our savings for the first time and we had to, uh, start over at Baby Step 1.

Okay, so it's been started over 4 times over the last 8 years, so it feels like every other year you're going backwards. Okay, and is that the main reason of his— him wanting to separate finances? Because maybe decisions you guys made in the midst of some of this he doesn't agree with?

No, so it's more so that he has really bad ADHD. He wants to be able to focus on— he works in sales and he wants to be able to focus on his work and not have to worry about like the bank account being too low or anything like that. Because it's basically, we were hit with something every year and it just kind of resets us. And I'm throwing all the extra money at paying off this debt. And now He's trying to focus fully and he's saying that if we share a bank account, that it's too confusing for him because he gets overwhelmed, because he doesn't know what's going in, what's coming out. And we've tried every app, every spreadsheet, everything. And it just seems like nothing's working. Uh, I've even—

and he thinks the solution is just to work on two different pages is his solution.

Yeah.

He thinks that's going to make this go better for everybody. For you to do this on your own.

That he can't concentrate on one account. Yeah, the fact that he says ADHD, so he wants to focus.

I'm like, well, those things are just already not working together.

Okay, so Hannah, how much debt do you guys have?

Uh, so currently we have— we fell back into credit card debt, uh, about 2 years ago. We have $15,000 just about on that, and then we just have my student loan debt left, which is $23,000.

Okay, how much do you guys make a year?

Uh, our take-home is $7,500. Uh, and then on top of that, he will get commission and bonuses.

Where do those go?

Uh, he just, uh, right now he just started a new job because he was laid off 2 months ago and then went right into a new job. So he worked it out that he will get a bonus at 6 months and a bonus at 12 months. That's going to be $10,000. And then he's also looking at getting settlement from his last job because he was laid off while he was on paid family leave because our son was born. Um, and he's negotiating that, but that's looking to be about $10,000 too. I want to put— throw that at the debt, and he wants to have that as kind of like an extra nest egg.

Nope.

Him more security.

It's going to disappear just like it has every single other time. So here's the, here's the napkin math, Hannah, just to give you some clarity. If you knock this out in 12 months, that's a little over $3,000 a month, which means you guys live off of $4,500 plus the extra, the bonuses, all of that. Can you guys do that?

Uh, it's a little tight because we live in New York. Um, our rent is a little bit over $3,000. Uh, that includes all our utilities, everything in it. Are you working, Hannah, at all? Uh, yeah, I work from home and stay home with our kids.

Okay, how much do you bring home?

About $1,000 a paycheck, but that's after my insurance and everything.

How many paychecks? Do you get 2 paychecks a month? Are you paid weekly?

2 paychecks a month.

And that's on top of the $7,500 or is that combined?

No, that's included in it. So his base is $70,000 and then I get the $2,000 and then he'll get commission and bonuses.

Got it. OK, so $7,500 plus is what we're working with. Have you guys tried EveryDollar, our budgeting app, yet?

Oh, we did a while ago.

Okay. I think we need to restart this process with a whole different mindset that we are doing this together. We are going to cut up the credit cards. We're going to freeze our credit because so far you've given yourself every opportunity to take a shortcut, to go backwards. And so if you make the only path forwards, you will move forward.

Yeah. I mean, I mean, where I'm at, where I just kind of want to throw everything at this and get it over with because I feel like we're paying about a thousand— well, I know that we're paying over $1,000 a month at credit cards every single month, and I just want to get it over with.

Like, okay, so that— so the fact that you guys— because it's— I mean, if you're saying what you're saying is true, and if you're as, you know, hard-bent on like, hey, we're not— we're not going into debt anymore, even if an emergency comes up, the thing about taking debt off the table is it forces you to be creative in your options. And so, it forces you then to say, "What else has to be true for us to move forward in this emergency?" So, if that is where you're at and that's not where he is, and what he's wanting to do with money is so different to the point of wanting separate finances, then at that point, you guys just are not aligned, Hannah. I mean, you and your husband are at this point, this now becomes a marriage problem, not as much a money problem.

It's not the budget's fault.

I agree. I agree.

Have you guys ever gotten—

where have you come from? Is—

have you seen anybody? Have you guys brought in a third party at all?

Uh, we— this is difficult too. Uh, we were seeing kind of like an ADHD therapist for his ADHD because a lot of it stems from that.

Does he have some— does he have medication at all?

Yeah, he's on medication for it. It's a very severe case and—

okay.

Yeah, I don't know what else to do about it. Like, it's just very hard for me.

Well, what I would do, what you can control is the safeguards you can put in place so that you can't make any more mistakes, that you can't go backwards. And that's why I'm telling you, if you cut up the cards, you don't own a credit card, you can't go into credit card debt. If you freeze your credit, you can't go into more debt. So if we at least stop that, it'll help.

And it sounds like you guys need new patterns in your marriage because his ADD, ADHD, it's affecting you is what it's sounding like more than just the money. It sounds like it's kind of coming. So you guys may need some more guardrails and processes in which you make decisions within your marriage and new communication styles almost, in general. And then that will actually bleed over to the money thing. So I'm glad you guys are seeing someone at some level, but still engage your marriage because when that heals, the money stuff will follow.

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Up next, we have Savannah in Sacramento, California. Hi, Savannah. Welcome to the show.

Hi there.

Hello. Hello. How can we help?

So, um, I'm a mom of 2 little girls and I work 2 full-time jobs, um, and I go to school full-time and I'm in about $37,000 of debt and that includes my car and everything. And I'm stuck in like this loop of like cash advances and everything. And so when I get paid, I feel like I have nothing and it goes by so quickly and I just don't know how to get out of this. Like, I want to get my debt you know, back to zero and not have to worry about any of this anymore.

Yeah, absolutely. Are you, are you single, Savannah?

Yes.

Okay. And you have your two girls. How old are they?

I have a 7-year-old and a 2-year-old.

Oh, wow. Okay. And you said you're working two jobs. Is there one that's full-time and then one is part-time, or are they both part-time?

No, they're both full-time. I work both of them at the same exact time. One's remote and one's in office, and I just do both at the same time.

Whoa, and you're in school full-time?

Yes, and I'm in school full-time.

How many hours in a day do you have? Do you have more than us? How are you doing this?

No, I, I know it's crazy. It really is crazy. I just, one of my jobs is a little more laid-back, and so I'm able to do my other, you know, because I do customer support on one side and I do property management on the other, and I've just been really blessed with my property management one.

So what's your income?

I've been able to make it work. I bring home about $6,500 $6,500 a month to maybe $7,000. It just depends because sometimes I get, you know, like lease bonuses for the property management one. So give or take, it's about $6,500, $7,000 a month.

And what's causing you to go in the hole every month and turn to these cash advance apps?

I think it was just a cycle because I just got this second job maybe 2 months ago. So I think it was a cycle with my other job that whenever I'd get paid, like, it just wasn't enough. I have my, you know, my rent, my bills, daycare. Like, I drive a lot, so gas is expensive. And I just got stuck in these. And then also my credit cards, you know, I have these minimum payments that I have to, you know, keep up with. So I just feel like I don't have enough ever. And so now I just, I need to get out of this, like, cash advance.

Have you felt, you know, have you felt different the last 2 months considering you just added a full part-time job? I'm sorry, a full-time job. Have you felt any, any relief in it at all or where that money's going?

You know, it's funny you say that because everyone asks me that and no, I don't even feel that there— that I've even made any more money.

How much extra are you making per month now with this job versus in January?

I would say it's about an extra $2,500 a month.

Okay. Are you on a super strict budget?

No.

Okay. That might be our problem, Savannah, honestly, because—

Yeah, I think so.

Because what you described, you should feel an immense amount of relief with $2,500 extra. And the fact that it's just slipping—

Yeah, disappeared.

Yep, it's going somewhere. And I'm not saying you're being irresponsible or anything like that, but I think there is something about having a plan for this money, 'cause if there is no plan, then it is gonna just disappear.

And so—

Someone else will have a plan for it, like the cash advance apps, or DoorDash, or whoever. They want your money. And so you need to want it more than they do.

Yep, so, well, we teach Savannah as a zero-based budget. So every single month before the month begins, you're gonna look at the month ahead and say, you know, in this case, it will be June, which we're toward the end of May. This is actually gonna be a great experiment. And just as a little side note, we will get you EveryDollar Premium for a year. That's our gift to you because With EveryDollar Premium, you're able to attach your bank account to it, and you're gonna cut up the credit cards. There's no more swiping. They're gonna be gone, okay? You're gonna just use your bank debit card, and you're gonna create a zero-based budget within EveryDollar. And EveryDollar, that's the way the app is designed. Some people do budgets, you know, like a 50/30, like people have like different philosophies around budgeting, but we have found the zero-based budget is one of the most effective because what you do is you take your income, And then under that, you're gonna list out everything you spend money on. And again, in EveryDollar, there's gonna be some pre-categories that everyone has, right? Rent, or your mortgage, or lights, electricity, cable, all of whatever.

So you can add, subtract some of these categories, but the goal is for that $7,000 every month has a plan, and you know exactly where it's going, including debt, including extra on the debt, because you're looking at your food category and you're like, I'm only spending, I'm making this up, $500 a month on food. Like, that's it for me and the 2 girls. Like, that's all we're spending. And we're gonna have to get creative, and it's gonna be beans and rice, rice and beans, peanut butter and jelly, ramen noodles. Like, we want nutrition, but that may come a year later when we have our money under control. You know what I'm saying? Like, genuinely.

No, I get it.

It is like stripping down to everything, and you're gonna be cutting your lifestyle, 'cause when you do the budget, you're gonna, it's gonna be very revealing of, this is where all my money's going. And there's gonna be categories, Savannah, you're gonna get pissed and you're gonna be like, get this out. No, we're cutting that subscription. We're not doing this. Because it starts to actually visually show you, like, here's some freed up money and here it is that's gonna be tackling the debt. That's where that margin's gonna go. And so, that would be my number one for sure. And then George obviously starting to pay off some of these still with the debt snowball, even though the payday, options are in there, which are terrible, and terrible interest rates and all of that. But talk to us about your debt, Savannah. How much, if you break it all down, what's all the categories of the debt?

So most, I mean, most of it's credit cards. I owe $7,000 on my car, but that one I make sure I pay that every single month, or, you know. But what made me honestly reach out is my, one of my credit cards, I got a letter from an attorney that they were going to try to, you know, sue me for the money. And I'm like, you know, what do I do? So all these credit cards, um, they're all maxed out to about $5,000, and then I have one, um, that I share with actually my dad, and that one's maxed out to $10,000. And it's not his fault, it's my fault. Um, so I just— it's a lot, you know. I need to get these credit cards under control for sure.

Yeah. And so cutting them up and them not even being an option is going to be your first bet. But then you can also, if they have gone into collections there are some great options with actually calling them and negotiating your debt. And there's actually some resources, George, that—

Yeah, well, we're gonna hook you up, Savannah. Hang on the line. We'll hook you up with Guardian Litigation. They're a partner of ours. They're a nationwide law firm, and they help people exactly in your shoes to make sure that you're not getting bullied and harassed. And they can actually help you settle these debts for what you can pay. And so we'll hook you up with that. You can go to guardianlit.com/ramsey, but we'll make sure that when you're off the line, our team connects you. To those good people. And that's part of the solution. And then the rest is how do we debt snowball these things? You know, delete the cash advance apps and go, like Rachel said, we're going to get creative. Debt is no longer an option because we're not going to be able to get out of debt if we go into it. And so that's going to be your hard line with the budget. That's going to be your hard line with spending less and making more. Clearly, you're doing a good job making more, but you're finding out there's a ceiling to that. We have to learn how to spend less too, in order to create that margin.

Right. Yeah. Yeah.

And don't let the credit card companies scare you, Savannah. I mean, if anything, if they are in collection, honestly, it's more an advantage for you because what happens is they end up selling the debt to, to another company and then they call you, the collections company, and then they end up selling it, you know, next week to another company. I mean, it's just a disaster, that whole industry. And they're going to try to freak you out, but they're going to sue you. They're going to garnish your wage. Yeah, they'll just talk it up. And honestly, if it is in collections, that gives you the power to negotiate. Now, if you have the money, people listening out there, that's not in Savannah's case, if you have the money to pay your credit cards off, you pay them off. But when you're in a case like you, Savannah, where you're like, I don't have the money to pay, then when they go into collections, then again, it's a little bit to your advantage because you may be actually be able to negotiate. And depending on how deep it is, I mean, sometimes pennies on the dollar. So you, so, but yeah, but that company, that law firm will be able to help you.

Yeah, they're amazing. And then I just want to encourage you, Savannah, you're a single mom and any single parent out there, just in general, whether you know you have your finances in order or you're stressed about them, that in and of itself is exhausting. Like that is so hard. So hard. And you are doing an incredible job setting up a life for your girls. I mean, you're gonna be doing the grunt work for the next probably 2 years to get yourself out of this. But Savannah, when we talk about changing your family tree on this show, that's what it's about. That's your whys. Fighting for these girls so that you guys have peace and control over your money. And you're a hero to say, "I'm gonna strap on that cape and I'm gonna take this journey." So we're here for you. Stay on the line though. We're gonna hook you up with everything we've talked about. And call us back, Savannah, if you need anything.

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We always get tons of questions when it comes to investing. And so if you have a lot of questions or you just want some help, make sure to get a SmartVestor Pro in your corner. SmartVestor Pros are registered investment professionals who lead with the heart of a teacher. And we have been con— and they've been connected, uh, to our listeners for years. I mean, this is something that Ramsey is so big on, is getting someone in your corner that you can trust. So SmartVestor Pros can create a plan to help you reach your goals and help you make informed investing decisions. So we will show you know, and we can even show you 5-star-rated SmartVestor Pros in your area for free if you go to ramseysolutions.com/smartvestor to find an investing pro near you. Or if you're listening on YouTube or podcast, make sure to click the link in the description. All right, let's head to Jordan in San Diego. Hi Jordan, welcome to the show.

Hello, how are you guys doing today?

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

I'm doing great. Um, so my name is Jordan. I'm from San Diego, California. I'm 24 years old and my current income is about $120,000 a year. The reason I'm calling you guys today is, feels like my entire life people have always told me, go to college, get a good job, make a lot of money and everything else will follow. I think I've done a pretty good job at getting to that point now, but it seems like the more time goes on and the more money I make, the life I always imagined myself having, having keeps going further and further out of reach. The reason I say that is, as I said, I live in Southern California, in San Diego. I look for houses in San Diego, too far out of my reach. I make a broader circle and I go further, and no matter how far I go, it still feels like houses— a mortgage is going to cost me around $3,500 to $4,000 a month, which with my income doesn't sound so bad. But I think I've finished most of the steps I want to in life, and the next thing I want to do is start a family and have kids and focus on that.

And it just feels so out of reach for me to keep contributing to my savings accounts, to pay off a mortgage, to be able to support my wife while she stays home and to take care of kids and make sure that they have some sort of support going into school. And I don't really know if I'm doing something wrong or if there's something I could do differently.

Here's what you've done wrong, Jordan. You've assumed that you have 5 years left to live and that you must accomplish all of this in the next 5 years or else. So all you need is patience. You're doing so well at 24, far better than I was. And yes, you have a high cost living area, but there's no rule book that says if you don't own a house in San Diego by 25, you screwed it up, man. And so release yourself from the guilt and from the lies that you were told that if you just do all of these things, your life's gonna be great. Those people meant well for you, but they don't live your life. And so I would just be very patient, go, you're crushing it. Let's learn to live on less than we make, put money in savings, and then do this for the next 6 years and then call us and see where you're at.

Okay. I appreciate that. Something, uh, I did wanna ask, I'm currently putting money into, um, my work TSP. Um, I work for the government, so we have a thrift savings plan. I put money into my, uh, personal investment account that I'm saving, right? And I feel like, um, obviously I'm extremely grateful for the job that I have, and I know a lot of people are in a much worse situation than me, but I feel like there's a lot of things I don't do because I'm just so addicted to saving my money. I'm so afraid of bad debt that I think there's— do you have any debt? Um, I have $7,000 remaining on my car note.

Okay.

So, um, other than that Are you working on paying that off? Yeah, I just paid off. It's, I think it's $290 a month and it's, uh, easier for me to just pay it off.

How much do you have in savings?

Um, I currently have in my individual investment account, I have around $20,000 in savings, uh, liquid cash in my savings account, I have $5,000 and then I have personal Roth IRA with $25,000. And then like I said, my TSP has another $25,000 in it.

Great. Well, you're doing great on the investment side. I would just have some focus with your financial goals. And right now my singular focus would be getting out of debt. The next focus is to have a liquid emergency fund of 3 to 6 months of expenses. And as a young single guy, this is also the best time because you have no other responsibilities, no one else to answer to. It's just you and your own goals. So you can actually make a lot of traction right now until you meet that wonderful person, start a family, maybe they'll be working too. Your income's gonna grow over that time. And so all you're seeing right now is this little tiny snapshot of your life right now. And then you see these very big goals far away, and I think you're closer than than you realize.

Yeah, and I don't think you're comparing your life to reality either, Jordan. So you either have expectations that you should be, you know, where you should be at 34 and you're 24.

Yeah.

Or you're, you know, seeing people on social media or your friends are talking, whatever it is, and what's being painted in front of you is probably not the full picture either. And so if you are in your early 20s making 6 figures, no debt, so I'm gonna count that, for you, 'cause I want you to pay off your car tonight with some of the savings. Okay, just be done with the car. And then, and you have cash, you know, saved. You have investments. Like everything that you're doing, you are doing it well. And the hard thing about building wealth the right way is that it takes time and patience. It's not gonna be as flashy as the people you see on TikTok that are like, I bought 18 VRBOs and, or VRBO, whatever they call, or, you know, Airbnbs. And like, you know what I mean? Like you're gonna see, and I make $1 million a month. Or like what all the crazy stuff you see, majority of the time, number one, is not even true, or number two, they've built their entire financial life on a house of cards. So, slow and steady wins the race, and it's not gonna be flashy, it's not gonna be exciting, but it is gonna be solid, and it's gonna be all yours, 'cause you're not gonna be borrowing money to do any wealth building.

It's gonna be you actually making decisions about your life. And so, that's what I would encourage you, that I think what you're wanting is not bad or wrong, but I think feeling like a failure because you don't have it right now. To George's point, at 24, we just want to like be like, Jordan, you're good. You are. You're doing great.

You're doing great. I think, I think one of the reasons I'm so overwhelmed now is because I have, happy to say, I've already met the love of my life. We're talking about marriage.

Oh great.

Talking about kids.

Yes.

I don't have a ring. I don't have a wedding. I don't have a honeymoon, which is obviously I'm not planning on spending an extravagant amount on it. Right. I can't imagine bringing kids into the world Um, until I feel ready, which you'll never, you'll never feel ready.

Everyone tells you not emotionally, not financially. The best thing you can do is be debt-free with an emergency fund and be aligned with your spouse on your goals, financially, spiritually, all of that. Yeah. That's the best thing you can do to be ready. Other than that, don't wait until you have a certain amount in your investment account to have a kid.

No. And go ahead and get married, Jordan, if you guys know. Do it.

What's holding you back right now? Is it finances?

I'm so afraid of not having money.

How did you grow up?

I grew up— so my dad is the hardest working guy I know. He never— he doesn't have a retirement. He doesn't have anything.

That's your fear.

Another thing. That's your fear. And I'm just— yeah, I'm so worried.

Yeah.

Like, I want— I love my dad, but I want the opposite of that.

Yes.

I want the idea where I know the bills are going to get paid. That's why I love my job. Everyone talks about owning a business. I love having I love having a stable paycheck. I love having investments made into my account automatically. And there's no other way to rather do it.

Yep.

There's just the idea of me, like you're telling me to pay off the $7,000, right? Which I know is a great idea. The idea of me losing $7,000 in cash and it goes into my car. I know it's a good idea, but it feels wrong because in my head, if I don't save, I feel like I'm failing.

Right, because at that point, from where your psychology is, is that saving is the only, the only thing you should do with money. And out of good reason, because you're looking at your parents and you're like, holy crap, they have nothing. They're not gonna, they worked so hard, but now they have nothing to show for it at retirement. But here's the deal, Jordan, there's two other parts of money that you have to engage in to have a holistic, healthy financial picture. Giving, and spending, okay? So, you may go through seasons where you're gonna be saving more. Maybe you and your soon-to-be fiancée, soon-to-be wife, you're saving up for that down payment on a home, and you guys are really like, "Hey, we're gonna pull back on lifestyle to really get that down payment." That's great. But over the course of your life, Jordan, if you have this mentality the rest of your life, that's where money can become an idol. You will hold onto it so tightly and have this sense of security that this is gonna be your answer. And then you're gonna look up and realize, "Oh my gosh, I have wasted my whole life." 'cause fear has driven my financial decisions, not a healthy balance of all of this.

So, I want you to—

I think the budget is your answer. Budget for the fun stuff, budget for some giving, and budget for the saving.

Yes.

And realize, I'm young, I got a lot of time on my hands, you're doing so good.

And you know what, hey, and Jordan, go on ramseysolutions.com and pull up the investment calculator and put in what you have right now with investments at 24, and just do the math. If you never put another dime in, what you'll have at retirement.

40 years from now, with compound growth.

You're gonna be doing great. Even where you are now, you're doing great, Jordan. So, chill, relax, enjoy the ride.

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Well, George, when it comes to investing, we were talking about, um, just the previous segment of how powerful time is. And even if you just do the boring stuff, time is on your side. So the earlier you can start, the better off you're gonna be.

Yeah. And the, the first milestones are really hard.

Mm-hmm.

And then it's like a hockey stick with compound growth. So getting to that first $100,000 invested, to $1 million is such a marathon. And then from $1 million to $2 million, you sort of blink and you're there if you do it the right way. So I want to take Jordan's numbers, who was on the call with us. He made $120 grand a year and he felt like it just wasn't enough. He was behind. He can't accomplish his goals. So he was like hoarding money to invest and couldn't enjoy any of it. And I just wanted to show the audience at home, even if he never invested another dime, where his investments would be. To help with the scarcity mindset that he was experiencing. So he's currently 24. We're going to pull up the screen here if you're watching on YouTube or Spotify or the Ramsey Network app. So 24 years old, let's go to 64. So it's a 40-year career and he currently has, he said, $25K in a Roth, $25K in the TSP. So we'll call that $50K and he's never going to add another dime. So how much will you contribute monthly? Zero.

And I'm using the Ramsey Investment Calculator. We'll put a link in the show notes to plug your own numbers in. Annual return, I'm going to go with 10%. Now, since 1950, the S&P 500, which is the top 500 companies in America, have returned about 11.8%. So, 10% is very realistic.

Let's do both. We'll go conservative, 10%.

And then Rachel will be the optimist, glass half full girl.

Always more.

Alright, I'm going to hit calculate. $2.68 million at 64 if he never adds a dime.

Basically, $2.7 million if you round it up again.

Now, at 12%, you're looking at 5.9 million.

5. That's a—

that's pretty wild.

$6 million.

That 2% over 40 years really adds to it.

I hope he hears this.

But let's go back and let's say you never do another thing.

Isn't that wild? Never do another thing.

That's compound growth. And look, the contributions, he didn't contribute anything but the $50,000 and it turned into that.

That's right. So if you could imagine continuing to invest 15% of your income.

15% of his $120,000, that's $1,500 a month.

Okay.

From 24 to 64. Let's see what happens if he continues this.

Oh my gosh.

$12 million.

At 10% rate of return. Jordan.

There you go, Jordan.

So if— and that's if you never get a raise and your spouse never works.

That's right. Yeah, yeah, yeah. That's a good point.

So let us free you.

Yeah.

Enjoy some of the money because you're going to get to $12 million and go, should have went on a vacation. Probably. That probably would have been a good idea. I got a lot of money now and don't have enough time to spend it.

Some furniture that we actually like, enjoy and want to pick out, you know what I mean? Like, it's okay.

Well, that's what happens. We, you know, we talk about this book Die With Zero, which we don't agree with everything in the book, but the concept is Do not wait until you're 70 or 80 or at the point where you pass away to then hand your kids a million bucks when they don't need it in their 60s.

That's right. That's right.

Use it. Enjoy it while you're alive.

And even giving them some too, right? But while you're alive, actually be—

give people like Jordan a leg up to be able to buy a house in San Diego at 24. If you're that boomer.

So that's right.

There you go. Some encouragement that you don't have to retire broke. And the younger you are, the more every dollar counts because it has more time for compound growth.

We hear that all the time. People are like, like, why did I not start this earlier? Why did I not get out of debt and start, you know what I mean, start the whole Baby Step process earlier?

Why didn't I start when I was 4 years old? I would've had an extra 20 years.

Not George.

But that's the idea. The best time to plant the tree was 20 years ago. The next best time is today.

It's today. Start where you are.

We all wish we could have started earlier.

That's right. All right, let's go to Oklahoma City, and we have Lindsay on the line. Hi Lindsay, welcome to the show.

Hi, how are you guys?

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

Yeah, I had a question. Um, I have a credit collection services bill, um, in the amount of $1,000 and— or $1,035, and I'm about $70,000 in debt, um, and— or $77,000 in debt. And I was just curious, I, I tried calling them earlier to see if they could make a settlement for $400 and they denied it. And I was just taking Dave's advice to do that. And so I was just curious what you guys would do.

How old is the debt?

Oh, as of April 17th.

Oh, so it's like a month?

Yeah.

Okay. Yeah, a fresh debt like that, they're not gonna be as willing to settle as one that has been sitting for 3 or 4 years because they kind of see the writing on the wall they'll be lucky to get anything out of this debt. And so, not that I would wait on purpose to pay this off, but the reason they're not gonna take, you know, $400 on a $1,000 debt is because it's only a month old.

Yeah, yeah, if it was a year or two, that's when you can really, really negotiate. What do you have, Lindsey? Do you have extra margin every month that you're trying to pay off debt?

Yeah, for sure. I mean, I've got a lot. I'm just trying to figure out where you put your money.

Yes. Okay, so will you tell— let us know. So you have that $1,000 bill, and then what's the other $77,000? What kind of debt?

Well, $70,000 of it is my car.

$70,000 is just in your car?

That's one car.

Yeah.

How much do you make a year?

$200,000— well, $225,000 base.

Okay.

And then plus commission.

Okay.

So last year I made $270,000.

Okay. Okay. Well, that's not completely out of proportion just for an income standpoint. I was nervous you're going to say you make $75,000. We get that call sometimes.

But all of your problems are solved if you just sold the car, right?

Yeah. Yeah. How are you— how do you have credit in collections making $270,000 a year?

Well, because I'm not very good at— I'm very good at my job and I'm not very good at taking care of everything else.

Okay. From like a detail standpoint and getting everything paid. Yeah, I have a problem with details. Okay, so you do have $1,000 to pay this debt though?

I do.

Okay, okay. Well, so then I wouldn't negotiate. I'd just pay that.

It's not worth the brain calories to try to negotiate and fight at this point.

Be done. And then what's the other $7,000?

Credit card debt and like, oh, some credit card debt and then a little bit of like, oh, I put something on a furniture plan, but I'm just trying to figure out how to spend my money. And I was just curious what you guys thought because Dave always talked about, you know, you guys can call a credit collections company and, you know, offer 30% and I offered more than that and they didn't settle.

Yeah, but they also— Yeah, and if they have any insight into your income as well, they're not going to be settling with you either.

So I didn't know if they did or not. Yeah, that would make more sense.

So, well, so I would say, Lindsay, I would, I would I would start to put some parameters in place, some identity statements, if you will, about who you are with money, okay? So you, if I were to like wave a wand, I would want you to say, "I'm a person that doesn't borrow money. I don't need to borrow money because I'm a really hard worker. I'm very smart and I can make a lot of money. And I am." That's part of who I am. That's part of you, Lindsay. Also, "Details are not my strength, but I am a person who works works at my weaknesses, especially when my weaknesses are costing me all this money. Like the amount of interest you're paying, Lindsay, on credit cards when you make $270,000 a year, it should be like—

That is wild. What do you do for work? I'm curious.

I'm a sales rep.

Sorry, you broke up.

I'm a lighting sales rep for commercial.

A lighting sales rep?

Yeah.

I imagine that involves some details, right? You got to know the customers, know the products.

Too many. We represent like 208 different manufacturers right now.

Sounds like you know some details. And so I think what's happened is we've been lackadaisical with our money because we can sort of out-earn our stupidity. But the problem here is not settling a $1,000 debt. The problem here is you're going to make $1,000 at work today. If you make $220 grand a year, that's about every workday you have in a year. So let's take advantage of this amazing income and go, I'm cutting up the cards. I'm only going to use money I have in the bank. I'm going to sell this car just because I know it was a mistake. I'm going to purchase something in cash, and I'm going to be a kind of person who can save up for that. And guess what? Your next few paychecks, you could buy a used car that is wonderful, that'll get you from A to B without any debt attached to it.

So you would suggest buying something, um, buying something else? I mean, obviously I know it was kind of a dumb decision, right?

What kind of car is this? America wants to know.

It's a Defender 130.

Oh, so you knew the details there. You didn't just walk up and say, I'll take any old car you got.

So here's what she wants to know.

The hardest part is going to be swallowing your pride and selling that car and buying something that is not a Defender 130 brand new.

Yeah, or if you can pay this off in a year, Lindsay, I would be okay with you keeping it, but you actually have to do a plan and say, I'm putting all of this extra money towards paying off debt. So you're going to live on nothing.

That's like $6,000 a month just going to the car.

Everything is going to be going to this car.

You're unwilling to do that. It needs to be sold tomorrow. Hey, George Campbell here. Let me pull back the curtain on something you may not know. If you're in debt and collectors are threatening lawsuits, the worst thing you can do is ignore it. That's exactly what they're counting on. Because when you do nothing, they can take you to court. And if you don't respond, they can win by default and even get access to your bank account. And that's why I tell people about Guardian Litigation Group. Guardian Litigation is not another debt relief company with some bait and switch tactic and empty promises. They're an actual law firm with real attorneys. And from day one, you get an attorney who represents you. They step in when collectors are trying to push you around and they handle it. So instead of panicking, you've got a plan for peace of mind. So if you're backed into a corner and facing imminent legal action, don't stick your head in the sand. Ignoring it will make it worse. And Guardian Litigation is who you contact when it gets worse. So go to guardianlit.com/ramsey. That's guardianlit.com/ramsey. Attorney advertising. Results may vary and no specific outcome is guaranteed.

Welcome back to The Ramsey Show and the Fairwinds Credit Union Union Studio. I am Rachel Cruze hosting this hour with good friend and co-host of Smart Money Happy Hour, George Campbell. We are answering your questions, so give us a call at 888-825-5225. And we do this show every day from 1 to 4 Central Time, so you can come and visit us. We are just south of Nashville in Franklin. We got a full house today here on Memorial Day weekend. And it's, yeah, it's always fun, and it's always fun we get to see people and interact and say hi. It's lonely. It's sometimes lonely here behind the glass.

This glass box of emotion we find ourselves in.

But when y'all are out there, we appreciate it. And George, we actually went on the road and did the show live in front of a bigger audience than once again here.

A couple hundred people. It was awesome.

And it was so fun. We did these like—

4 cities in April.

Yeah, we did these like small kind of theaters around, some in Southern California. We were in Orlando. Where were we?

Charlotte, Denver, Phoenix.

There we go.

And Anaheim area.

Already blacked out from April.

Seal Beach, to be specific.

Orlando was last fall.

I think it was last fall, yeah. I can't keep up.

It's been a wild ride for Rachel.

Yeah, May has been something, but—

But there were some great moments and the team did a great job with these events and the video side of it. And you get to see the emotion on their faces, the laughter, the tears, the awkward debates with their spouse standing next to them.

That's right, yeah. So make sure to check those episodes out, you guys. I think we have 3 out of the 4 that are out. And so you can check 'em out on the channel. And yeah, it was just kind of a fun, different way to do The Ramsey Show, but we love Loved it. Love to be in there. All right, let's go to Atlanta, Georgia, and we have Catherine on the line. Hi Catherine, welcome to the show.

Hi, thank you.

Yes, absolutely. Thanks for calling in. How can we help?

Um, several years ago, my mother-in-law moved in with me and my husband, and she's been living with us since then. And despite the mother-in-law stereotypes out there, she's actually been fabulous. Um, but while she watches our kids, um, and started that 4 years ago, she doesn't pay anything for like room and board. She has helped a lot with like household items and things like that. But when you think of the whole scope of it, I'm like, oh, that's a lot of money. And I don't know if that's something we should ask her, my husband's siblings, to help contribute to, or even my mother-in-law herself.

To contribute to like a, like paying rent and for utilities? Is that what you mean specifically?

Yeah.

Like, yeah. Like essentially like room and board. We do pay a lot of like the food too, like pretty much everyday like necessities.

And it's expected on her part?

I, I guess that would be it.

Yeah, expected not to pay, you mean?

Yeah, it's expected that she doesn't pay and that you guys get all the groceries.

And just because of childcare, how often is she watching the kids?

She watches the kids, so it's been one kid every day, or when I was working full-time, for 4 years. And then I just had a child, so it's going to be a 4-year-old and a little baby, and then it'll be 5 days a week. Okay.

Wow. And you're not paying her for that?

Correct. Yeah. Yeah.

I feel like she's kind of earned it.

You guys are getting a deal out of this, not her.

Yeah.

Because what you would pay for someone to watch those kids, I mean, you're talking about a nanny, a live-in nanny situation.

I mean, you'd pay a full salary, you know, $40,000, $50,000. $100,000 a year for that person. So you're not paying that. So I think she's probably earning her keep if you ask me.

Yeah, that makes sense.

And was anything established early on of, you know, whose decision was it for her to live with you guys?

It really was me and my husband's joint decision. She was in an abusive marriage. And so we essentially got her out of her house and for safety reasons. And she got divorced. And I was like, you stay here like as long as you need. And even if you want to stay, stay, that's fine. And that's just what it turned into for like a year and a half. And then I had my son and things just stayed the same.

Okay, so I do wonder if there's any level of you, Catherine, having a low level— you sound very pleasant and peaceful— but a low level of frustration that an urgent thing needed to be done. And I think you guys made the right decision, right? I think if anyone was in that position and their mom was, you know, in a dangerous situation, come live. But then, the fact that there was no— that that act now has become the rest of your life, as you see it, because there's no other conversation of her leaving. So, I think that's probably more of the problem that I would be— I would think for myself, Kathryn, you know, pretty intently, like, "Hey, what do I want my life and my household to look like in the next 4 or 5 years? Is it that you're gonna be working full-time until these kiddos go off to kindergarten?" "you're gonna need help." And actually, it's a gift that she's there. But, you know, when that time comes, maybe, you know, she can find her own place, or maybe it's in 12 months that that happens. I don't know what that looks like for you and what you're desiring, but I would find that.

And then, in a very kind way, obviously, you know, bring that up to your husband and be like, "Hey, I'm having this feeling. Can we just— can we talk about it? 'Cause it just feels like it's like ambiguous." And— And that ambiguity is causing probably some level of like, oh crap, this is now forever. Should she be paying towards the mortgage? 'Cause she's living here.

You don't even know. She's a roommate.

Yeah, yeah, yeah.

And I think that just was never established 'cause you sort of all stumbled into this situation and you all love each other and it all made sense. And now you're going, we probably should have some level of boundaries here about what this looks like. What is the responsibilities for everybody?

This is what the plan is.

'Cause she might also get resentful and go, wait, I just realized I'm not getting paid for this. This. This is crazy that I'm watching 2 kids 5 days a week.

And she can't create her own financial independence at all from you all. You know what I mean? Because she, you know, I don't, you know, I don't know how anyone's thinking or feeling, but I think starting those conversations and again, nothing's on fire. But when this drags out another 12 months, I would, I would not want that to happen without some conversations of just the plan. Hey, what are we desiring? What are we wanting? What's the plan going forward?

That makes sense. Ambiguity does make me anxious.

Yep. So, and that's fair.

I think that's fair. I didn't put that word to it, but that makes a lot of sense.

Yeah. Yeah, and I don't think that's mean of you or, you know what I mean, that you're a bad daughter-in-law or, you know, anything like that. But especially when you start mixing, you know, families and living situations, when it's not talked about and established and expectations, emotions, and desires, and wants, and fears, all of that is pushed out on the table and talked about. It can get messy really quickly. And some people do it well. I think we had a call, maybe this week, even about that, George, when I was on with you on Monday.

There's ways to do it well, but it takes a lot of communication on the front end, and it takes healthy people on every side of it. That's the other part.

Yes, and Catherine, you know, opening that conversation may end up in resulting, possibly, of her saying, "You know what?" I wanna create a life for myself and get some independence, which may mean she moves out and gets a job and you gotta figure out, you know, childcare stuff. I don't know what that means, but I think being true to yourself and what you guys want is gonna be the most important long-term.

There's a saying around here at Ramsey, "To be unclear is to be unkind." That's right. So, it's actually the nicest thing you can do is to communicate with clarity. Even if you go, "Oh, that didn't feel good in the moment," but at least we all know where we stand. There's no ambiguity.

Okay, that quote's good. And then what does Deloney say about resentment versus—

Oh, shoot.

Oh no, sorry, Deloney. Do we remember?

Choose guilt over resentment.

Yeah, that's it. Choose guilt over resentment. So, you're gonna feel guilty maybe trying to have this conversation. You feel bad about it, but you'd rather have that that emotion, then resentment build over the next couple years.

That's a poison.

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Hello, how are you guys doing?

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

So my wife and I, uh, we've been married for a long time, and, um, we started Financial Peace University around 2007 before we got married at Jonesboro First Baptist Church. And so we followed the Baby Steps pretty much. We're 40 and 41 now, and I've noticed that I can't seem to switch it off anymore because I'm constantly just thinking about, like, savings and investing. And we actually have a pension at our workplace, and I've noticed that our, like, a 401 and a 457 and stuff like that have actually reached to like $1.2 million already. And wow, yes, definitely gotten to the point where am I really enjoying the money that I'm saving? What— it's almost like I get anxiety when I spend on frivolous things, but I will give money away if I, you know, to people when they need it for certain things. But it's almost like I don't I don't get enjoyment out of just spending money. And I'm not sure what my plan is because we only have really— because my wife is a teacher and I'm in public safety, so we retire pretty early, like at 52 years old. So we got about 11, 10 years left to really work.

And it's going to be about $150,000 a year just for the pension alone.

So— So you're basically saying, we're good on the investment side. How do I unlock this spending side? Because even when I do spend, I don't enjoy it.

Enjoy it, right? Yeah, because I mean, we paid off our debts. Um, you got a mortgage? You know, no, we paid off our house. We follow all the Baby Steps.

Well done, you guys. As a teacher and what did you say you did?

Public safety.

Public safety. Okay, yes, well done, you guys. That's amazing.

That is— you did—

what's your wife—

now what?

What's your wife like with money?

Um, she just She really, she sticks to the plan that I just kind of go, "Hey, we need to just do this." And she just kind of steps back and just allows me to invest and just do whatever. And then, you know, we go on vacations. We enjoy just hanging out with each other, but we live very, I guess, minimally because we really don't spend that much money on just random things anymore.

Sure. Yeah.

Is there things you want to do, but you can't get yourself to do it? Experiences, things?

Well, I've always interested in the fire movement just because public safety is one of those things where I can't just leave work because things may happen that I need to be there for. So I deal with emergency management, so it's pretty much for a whole county. So it's not something I could just leave and go on vacation. So I guess my big thing right now is just focus on financial independence and retire early. But we're there.

So you want to go on more vacations but you can't due to your role?

Yeah.

If I could snap my fingers, that's where I'm going, where would you put your money if I snap my fingers today? Is it a hobby? Is it a thing? Is it upgrading the car? Is it, you know, buying back your time? You guys are doing things you don't want to do.

Probably buying back time. I mean, that's pretty much what I focus on. I've noticed that that's all I kind of think about right now is like, hmm, can I actually retire early? Because I mean, our house is You're not even part of the net worth. Our house, I don't even count the house as part of our net worth.

Sure.

Do you guys have kids, Woody? Yes, ma'am. Um, I have a 3-year-old and we've already funded his, um, 529.

And I believe you, Woody. I believe you. You have been, uh, yes, you funded your grandkids. You've got an A++ for the, for the Financial Peace University graduate.

Woody, you won the prize.

Um, okay, so you know what I think about Woody a lot when it comes to spending is is a couple of things. One, you wanna have that muscle built, right? Because like you said, you're gonna just end up hoarding, not enjoying anything. And part of the gift and the blessing of being diligent is that you reap what you sow. And you guys have sowed really well, right? You've put in a lot of patience and wisdom and sacrifice. And so, now you're gonna have the ability to do some really fun things in life, but you won't be able to have fun with those things if you don't enjoy letting go of some of this money. So, that's one thought. And then Arthur Brooks, who we just love so much, he talks about there's 5 things you can do with money, and 4 of them will actually bring you a level of happiness, okay? One, generosity, which you already mentioned in this call, which I love that about you. So yes, always looking at ways to be generous. That actually has a level of happiness in your life. One of them is buying your time back, just what George said.

So, are there things, conveniences in life, with having a 3-year-old, that maybe your wife's like, hey, I would love, "Hey, I love grocery delivery. I don't wanna go to the grocery anymore. Let's do that." Or, "Let's have someone come clean the house." Like, I don't know what that looks like for you guys, but what are things you can spend money on to actually get your time back or your wife's time back and do something productive with that time, he says. The third is to spend it on experiences with people you love. So, find, if you can find the time, I hear that your job, is very taxing in that way. But if there are moments of reprieve that you can say, "No, I can get PTO here," go enjoy those and take, you know, take your son, take another couple with you guys that you love, or I don't know what that looks like, but go and have some experiences with people you love. And then the fourth is actually saving. You actually do get a level of happiness by saving because there's progress and you've been doing that. And then the fifth thing you can do with money, it's not a bad thing, it just won't bring you happiness, it's just buying stuff.

Stuff. So, but again, there's a little bit of me, Wendy, that kind of wants you just to buy some stuff. I kind of want you to, in your budget every month, have a line item of just like—

Yeah, I would force that line item. That's the one thing you have to do in the budget is spend on this thing.

And it can be as tactical, like my husband and I, we will spend differently, okay? I will spend on probably cheaper stuff, but more stuff.

She's a quantity gal.

I love it.

And Winston's a quality guy.

Yeah, so Winston be like, "Let's upgrade the water hose," or whatever it is, right? And he's like, "There's a purpose to it. It's tactical." But he's like, "Let's go buy a nice one." a nice one. Like, that's where he'll spend. But find things that you can spend money on throughout the month because that will help you let go of some of this because it will, money can control you. It can control you on one end. If you're broke and you have no money, right? There's a level of control there because you're stressed out all the time. But it also, on the other end of the spectrum, can have the control where you have this false sense of deep security and Opening your hands and letting some money go kind of counteracts that.

Yeah.

So what has been a feature is now a bug. That's the problem. The feature was, man, you're so good at living on less than you make, so good at saving, and now that you made it, it is a bug that we need to debug.

And that's good advice. I do buy random stuff. I mean, we got 2 Teslas. I mean, I literally bought 2 back to back and then I was like, well, those are paid off. So I think giving away my money at this point is going to be what— to my family members and stuff, I think it's going to be the best bet because we put away a good bit of money into vacations too now. And so, it's kind of hard for me to shut it off because if money's just sitting around in the bank or something, I feel like I'm not getting a lot of interest off of it. So I end up just investing it. And that's all I seem to do with just standing money.

Yeah, and I think that's okay too. I mean, my husband and I, that, I mean, we'll get to a place where we have a high-yield savings account, we'll put some money in and then we'll look up and we're like, okay, you know, there's some money in there and it's just sitting there. We could invest that. And so we'll take, you know, some of that money and put it back into investment. So like, I think that rhythm is not bad. And what it sounds like, what you just said, gives me some level of relief. Maybe you're doing better than you think you are, Woody.

Yeah, I think some therapy would be the next good purchase to go, what's underneath all the scarcity mindset? How do I, you know, kind of unlock this abundance mindset now that I actually have it? Nothing is on fire and yet I always feel like something's on fire. That might be part of your wiring. I mean, you're in public safety. You're always like waiting for the other shoe to drop. Well, that might be part of it.

My parents came from a communist country, so that probably had a lot to do with it.

Oh yeah. Where'd you come from?

Well, we, I was from Vietnam. My mom, like, we escaped Vietnam after the war and everything. And so, I mean, I was a little kid, but it was just like years after and we, like lived really poor. So I, I guess that I, I can't switch it off. My brother's the same way. So yeah.

Which makes sense, right? When you can connect those dots, like you're not crazy, right? I mean, what you've lived through and experienced, you're like, there's no way I wanna, I wanna go back to that. But again, that's a good motivator to get you to a place of security and safety with money, which is what's happened. So now not still depending on that same wiring is what's gonna be key. So rewire rewiring some of that and having some peace with your money and enjoyment, uh, definitely would be the thing to be working on.

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Today's question comes from Grayson in Maine. I'm having trouble with Baby Step 2. I've saved the $1,000 emergency fund but can't seem to make any headway on paying off our debt. I have 3 daughters under 13. It's difficult for me to go fully scorched earth when I want to still give them a decent childhood and provide the things they need. How can I stop feeling stuck? What a good Dad.

The dad guilt. It's real.

Wow.

Okay, so the, I think there's a, the issue here is we are pinning getting out of debt and not spending money to bad childhood. And I think—

Good point.

You can have a great childhood and not buy your way into it.

And getting out of debt doesn't take their entire childhood. It may take 2, 3 years, but not their entire childhood. Friends. I mean, I say this about my kids. I don't know if you feel like this, George. Really, what they want is you, and you playing with them, being involved in their lives, doing things, not necessarily that cost money, but just spending time with them, being around them. There is something to— there's something to that, that I think we gloss over and think, "They just need more stuff," and just keep pushing that agenda, when at the end of the day, yeah, do teenagers want stuff? Absolutely. Not saying that. But truly, the priority of who— what is being built within them and their character is really gonna come from you and the time spent with them.

Well, and if you're in debt the whole time they're going through childhood, you're not gonna be fully present. You're gonna be stressed. There's going to be financial burdens that will take you away from letting you enjoy them as children. And so, I think a short time of sacrifice for long-term gain, especially as they enter their teenage years, which is when things really get expensive. You know, they're gonna start wanting— there's clothes, there's prom, there's all the activities, the sports, college funding, all of that, you're gonna be able to do so much easier without this debt in your life. So, some of this is just not feeling the dad guilt that you're doing a bad job. And some of it is gone. Short season.

And your parenting might look different than other people's parenting in that season. And that's okay too, right? So-and-so maybe doing X, Y, and Z with their kids, and you You're not because you are putting that money towards getting out of debt. Again, which is not forever. It's not their entire childhood. They're gonna, I promise, promise they're gonna be okay. All right, let's go to Eunice in LA. Hi, welcome to the show.

Hello, very nice to hear your voice, guys.

Oh, well thank you. You as well. Thanks for calling. How can we help?

So I've been in USA for almost 4 years.

Here.

Um, my background is about, uh, um, like meat shops, businesses, uh, back in my country from my family. And when I came here, I started working with somebody that he owns a retail store, um, in a good location. And right now he's going to retire, so he was offering for me the store for $300K. And I was, um, I have like $50,000 to give it to him as a down payment. So I'm thinking, the question is, I'm thinking if I go ahead and buy the store, I mean buy the business, or go and take that $50,000 and open my own shop. So that's my question.

Okay. Would you be able to open your own shop with $50,000, or were you going to plan on borrowing money as well to do that?

That? Yeah, I do have a friend that he can borrow for me like another $75,000 without, without interest.

Okay, Eunice, I think it's a terrible idea to borrow any type of money for anything, and especially when it comes to small businesses, and especially in the food industry. That's the number one industry that ends up closing its doors, and then people end up owing so much. And not because you're not great at what you do, it just is what it is. And so when you add debt to the picture, you add on stress, you add on a lot of risk, and you add in levels of decisions that you make in order for the business in order to pay the payment that may not be great decisions long-term for the business. So there is something about the peace of mind and moving slowly and moving with the speed of cash to grow something that doesn't lock you into a small business loan or worse, owing your friend money that he's gonna get for you. And then when the, if something happens and it, then the shop closes up, now you owe your friend money and it may take, you know, 4 or 5 years to pay that off. And so staying ahead financially is not going backwards and going into debt.

Okay, what's the net profit of the business every year?

Um, like, uh, 120K.

Okay, so they're basically valuing it at a little, uh, under 3 times that, at $300,000.

Yeah.

Okay, have you talked to him about a potential agreement where where you basically pay him income out of the profits until he hits a certain amount.

We were thinking about it, yeah.

That's a much safer way to do this. And the only way I would do it is this sort of sweat equity agreement where you pay him a certain amount of the profits, maybe it's a certain amount, a certain percentage until you hit $300,000. And at that point he's cut off.

And it's almost like you, yeah, you're paying for it. As you go versus going getting a $300,000 loan and then having the bank be the one that's, you know, in charge of it all. Because with this other agreement, you have not borrowed money at that point under your name.

Right. But actually he's offered for me like $300K under his loan. So I'm going to pay him like a seller finance.

Yeah, but that's a very different situation than you paying him out of a percentage of profits. Let's say 25% of profits to him until it's paid back. You see what I mean? Because then if the profits aren't there, you're not on the hook. And so I would have a business attorney draft this up to avoid you having— carrying all this risk.

Okay.

So if you look at 25%, you're talking $30,000 a year, so it'd be 10 years to fully pay him back. Now you guys might agree on a different percentage. Maybe it's 40%, so he gets paid in less than 10 years. But this idea that you're gonna take on a quarter million dollar debt hoping this all works out perfectly is just, you're jumping off a cliff.

Yes. Right.

Yep. So, so yeah, staying away from any debt situation and if you can, yeah, create some kind of agreement with them, what George was saying, that's, that's what we would recommend. So thanks for the call. George, we have a question from Facebook. Book. And Natalie asks, "We are planning an out-of-state move and will be paying off our debt with the sale of our home. This feels like we are cheating on the plan. So, how can we make sure that we feel the pinch and don't go back into poor money habits?" Go— that's it. That's it.

Wow, that's very self-aware. So, they're going, "Hey, we'll knock out the debt with the sale of the home, but we know we sort of shortcutted it." and it worked out.

That's right, yes.

But our behavior hasn't necessarily changed. How do we make sure it's changed? Oof, I mean, that's the honor system at that point. But one way to know that is, have you actually been budgeting? Are you living on less than you make? Is there margin every month? Have you shut down all of your debt accounts, including your credit cards?

Yep.

Have you frozen your credit so you can't get back into debt even if you wanted to? That tells me that the behavior's changed.

Yes, if there's any kind of friction you can put into place is going to be huge. And especially on the debt side. And just like what you were saying, George, closing accounts, you and your husband saying, hey, together we are agreeing we are not borrowing money. So there's going to be no avenue for debt. So we're going to get rid of the credit cards. We're getting rid of this or that and, and start living on a budget. So start practicing living on less than you make now. And that will create the habit. So pain is a great teacher, and people that have a lot of pain and sacrifices, they go through Baby Step 2, they're like, I'm done. When I'm done, I'm done.

You touch the hot stove, you're not going back. But if you bypass the hot stove, you may not have learned the lesson.

That's right, but I think you can still do it. We still, people, you know, we see people do it, but I think it's very, very wise that you're cautious about this. So put some principles.

Prove to yourself that you are worthy of trust when it comes to finances. Finances, and over time you will become that person.

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Jo.

Hey, thank you for taking my call.

Absolutely.

I am interested in your thoughts on paying off my mortgage as a whole in one payment or splitting it up in 2 years to reduce the amount of tax burden I would have to pay with a large sum.

Where's the tax burden coming from? Are you selling off assets?

Well, no, I'm just saying my income taxes. If I pay $150,000, $130,000 $100,000 in one sum, that will take me into a higher tax bracket. Where if I split the amount in $50,000 per year, then that keeps me in the lowest tax bracket. I'm retired, I'm 73 years old, I have Social Security and my 401, the funds to pay for the mortgage would come out of my 401.

Oh, so you pull it out of the 401, that's traditional, and therefore increase your income tax. Got it. Okay. How much do you have in the 401?

$700,000. And how much are you going to pull out to pay off the home?

It's $129,000 right now.

Do you have any other assets?

Well, I have $3 million in, um, property.

Oh nice. And those are all paid for?

Everything's paid for but my house. My husband died in 2018 and I got onto the Dave Ramsey program and paid off my debts, about $300,000. And then I got breast cancer.

Wow, well done.

You've been through a lot.

Yeah.

It's been a tough couple of years.

So how much do you, did you run the numbers and do you know exactly how much extra you'll be paying because of the tax bracket if you paid it off all in one lump sum?

Well, my income is $60,000 a year. So I can pay off about $40,000 safely to $50,000 safely and keep me in a lower tax bracket, the lowest tax bracket for my state.

I mean, I wouldn't wait because of the taxes. I would calculate it and go, "OK, I know it's going to be an extra, let's say, $10,000 total in what I actually will owe the IRS, and I'm OK with that for—" or the idea of being completely debt-free, not paying any more interest on my mortgage, and having that peace of mind. And so that's kind of the trade-off here. But I also wonder if there's a different way to do this. And I'm wondering if you would maybe sell one of the properties, pay off your mortgage, and sock away the rest in an investment account to sort of diversify your portfolio anyways.

That is a thought. The kids have interests in the housing properties and they're resistant wanting, not wanting me to sell it because their vacation, it's a vacation property that's worth about $250,000 that would easily pay it off.

But what are the other properties?

The other property is timberland. I live in a rural area and I grow timber. Oh wow.

And that's my crop. That's cool.

Last year we lost $100,000.

Brought in $100,000 for 6 acres of timber. Where did that money go?

That money went into a kind of an emergency fund, and I've been using that to do home repairs and, you know, roof, put a new roof on my house. And could you sell more of that? Not for another 4 years. Okay, we have, we have a plan, you know, we have it planned out because the timber market is very— it's, it's a Crop, you know, it's like gold. It goes up and down. And right now, right now with the political climate, the American woods are, you know, lumber is not doing well. Okay. As well as it could.

Yeah, well, I don't think you're in any kind of trouble. So if you decided to do this over 2 years or something, I mean, I think you're gonna be fine either way. So it would just be the peace of mind that you just have personally to say, it's worth paying a little extra and the penalty of the extra taxes just to know that I'm done, that I'm done and I can just live my life and I don't have to worry about it. And for a lot of people it's kind of worth it. And especially 'cause you're, you're gonna be fine. And, and because you have these other properties that if something ever got in trouble, you could sell.

That essentially is your nest egg at this point. 'Cause you'll have, you know, little over half a million left in that retirement account, which is awesome. But the real value here is those $3 million in properties. That's right. So that's why I asked if you can offload a little bit of that, maybe your least favorites, but it sounds like it's mostly land plus the vacation home. Right, right.

Let's go to Sophie in Austin. Hi, Sophie. Welcome to the show.

Hi, how are you?

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

Okay, so my husband and I have been together for about 16 years. We're about in debt, uh, $26,000 in medical debt. Um, he currently is not working and hasn't had a paycheck since before December. I only make part-time income.

Um, sorry, you're breaking up on us, Sophie.

Can you speak directly into your phone? Um, so I heard $26K in medical debt, he hasn't worked since December, you're working part-time.

What do you make How much are you making? Well, part-time I make about $120 a day, depending on how many days I can work. What does that turn into a month? It just depends. Sometimes it's $600 a month. Sometimes it's less than that. Come August, I'll be making $2,600 a month. Okay.

How are you guys paying bills right now?

Well, um, I don't know. I paid all of the month of May. Um, I found out, like, I've just— so my husband left. He went to a different state and just kind of left me and the kids here. It's like he kind of just threw a bomb and we're taking care of it on our own.

My parents have helped, but— oh wow. Okay, so your marriage is falling apart. He's left. Yeah. Is he wanting a divorce? Like, is he going to be going through some proceedings?

Um, we've tossed it around. It's definitely in consideration. Why did he leave? He said that he left to go work with some friends, but he's been gone about a month now and he's only sent us maybe about $700 since he's been gone, and that has basically not covered much of anything. So I've had to lean on—

you know, do you know— do you know said friends?

I know the friends, yeah.

And they're— they are really working?

Yeah, they say that they're working.

Okay, well, I mean, at this point he should just come home and work because he can do do a minimum wage job and make more than this. Yeah.

And before he left, I practically begged him to stay. I was like, "You can work here. You don't need to go work there." I think our priorities are different. And I get that we're both stressed, we're both overwhelmed, but his tendency to leave is very much a pattern. And I'm at the point where I'm like, should the kids and I just call it quits, just move out and file for divorce and start fresh and sell everything.

Do you guys own the home?

If I'm being honest, we do own the home, but the problem is, is I— since he's been gone, I've been having to deal with all these finances. Everything's in his name. My name's not on anything, and so I can't actually sell anything to help, um, and I don't have I have, all I have is $1,600. I opened up my own bank account and moved my paycheck over there. And that's all I have. And that's not enough to move out.

No, no, it's not. It's, gosh, Sophie, I'm so, I'm so sorry. So, I mean, I would make one last ditch effort in saying, if you don't, I mean, it's kind of an ultimatum. If you don't come home—

You've opted out of this family.

Let us work on this marriage together. Together, then yeah, you probably will be looking at a future where you're not together. And that will be his choice, Sophie. That's his choice to do that. And then in that case, yeah, you need some good family and community around. And— Stable income. Yep. And you'll have to go through the proceedings and then he will probably have to pay.

And, you know, the debts will be split.

But again, the prayer and the hope is that it's reconciled and you have to be able to, and I would give him that option, but he has to choose. Welcome back to The Ramsey Show. I am Rachel Cruze hosting with George Campbell. We are answering your questions. So give us a call at 888-825-5225. We're talking about your life and your money. All right, kicking us off this hour is Jason in Jackson. That's a tongue twister.

Yeah.

Hey Jason, welcome to the show. Hey, how are y'all? Hi, we're doing great. How can we help today?

So I'm basically contemplating if it's a good decision to go back to school and accrue about $65,000 to $80,000 worth of debt. Okay. Now I would be going back part-time, so I'd be remaining a full-time worker during this.

All right.

What are you going to school for?

Um, civil engineering.

Nice. It's a good field. What are you doing now?

I have an associate's in AutoCAD technology.

Okay, so you're, you're kind of adjacent to the civil engineering world now and what you do? Yes, sir.

Yes, sir. I pretty much do it. I just don't have the degree for it.

What are you making?

I make around $62,000 a year.

A year. That's a pretty good income to not have a 4-year degree.

Yeah, and I would be increasing it to about $82,000 if you had the degree.

Yes, sir. Okay, so we're going to spend $80,000 to make $20,000 more, take you 4 years to break even. That's without interest and without the payments. I'm, I'm trying to figure out how we can cash flow this thing because I love the, the goal.

Yeah, sure. Are you working for a company right now that you would probably stay at if you had this other degree? Yes, and that's a big thing pushing this.

My top out right now, my current position, isn't all that much compared to what it could be if I do go get that 4-year degree. Okay. And I would be, um, I would be increasing my top out from $77,000 to $112,000.

Okay, okay. And the company now, have you talked to their HR department? Is there any benefits of any level of tuition that's paid if you choose to stay to work with Um, so right now that's a gray area.

Hasn't happened in the past. Okay.

So definitely not something to rely on. Okay. But you— so what makes it gray and not just like, no, that's not an option? Did they kind of open a door because of a conversation you had with them?

Possibly, but nothing's guaranteed as of right now.

Okay. And what college have you gotten accepted into?

Um, Oregon State University, which is the only college in the United States that offers this program online.

There's no other civil engineering programs that are online in the country? None that are ABET accredited. Oh, interesting. Hmm. So they can charge what they want for it, it sounds like. Pretty much. How many years is this program?

Um, so you can— the max you can go on it is 10, so they don't require you to be very aggressive at it. But I'm guessing I'll be doing it since I'm— I'll be part-time, probably. It'll probably take me about 6 years. And I think estimating—

I don't love that.

It's already gonna take forever to get there and then it's gonna take you another whole bunch of time to pay it off.

That's right. Yeah. It doesn't sound like a great plan, not only from the debt aspect, but also the timeline aspect. So I'm just wondering, is there, there's no college plan colleges in Jackson or near Jackson or in your state to do it locally, to do this at all?

Yeah, there is, but it's in person, and, uh, you know, that would take away from my current income. And, uh, I do have bills, which would be the only reason I couldn't, couldn't do that for sure.

What would that— what does that option look like? I'm just curious. Would it take you 2 years to complete, or is it 4?

It would be probably about 4. Yes, ma'am.

Okay, and do they offer any tracks of having classes at night that if you did go work full-time and then you were a student? No, ma'am. It would have to be during the day? Yes, ma'am. Okay. Yeah, I don't know. I mean, yeah, Jason, I just, in good faith, I couldn't tell you. And I mean, the jump in income is, it's good, right? But it's not double. Double, right, what you would make. And if it takes you 6 years to complete and then actually, I mean, you won't see that money for—

Yeah, I'm wondering, can you just stack cash for 2 years and then pursue this?

Potentially.

And as of right now, I'm on track to be debt-free in about 5 years. How much debt do you have? $58,000.

What kind of debt is that?

So I have about $20,000 in a vehicle and then another $35,000 in house.

Oh, then on a mortgage? Yes. Wow, how is it so low?

So, um, y'all aren't gonna like this, but it's a, it's a mobile home. It was a very temporary fix to a, a problem.

That was my fear I was having. Okay, so this thing's like going down in value? Yes, yes, that is right.

What is it worth today? Um, about $64,000. I had it appraised last year. And what's the car The car is worth, let's see, and that's on two vehicles. One is on, I think it's worth $18,000 last I checked, and the other one $16,000.

Why do you have two vehicles? So one of them is a, it's a side-by-side.

Y'all consider that a vehicle, right?

I consider it a toy that is in the way of you pursuing your dream.

One is a toy then, yes.

And you won't have time to do that if you're pursuing school and working full-time. Right?

That is right, which is mainly just used around the house.

And can we do some math together? You ready for this, Jason? You're telling me you got $20K worth of these car loans and the toy, they're worth $34K total, right? Yes, sir. So you could profit $14K off of that. You could profit about $29K from your mobile home if you sold it. You tracking with me? Yes, sir. That gives you $43,000, and you go rent somewhere and use that $43,000 to start cash flowing this degree, and you save up the other $20,000 over the next couple of years because you'll be debt-free. You freed up those payments. Now we can save that cash.

Yes, sir.

I think we just found the answer. I don't think you like it, but that's, that's what I would do if I was in your shoes.

In a heartbeat.

Because everything in your life right now is going down in value, and you owe payments on it. So what if you rented for a season, worked on this degree, and finished it even sooner.

Yeah, finish it in 4 years versus 6 because you work your butt off doing it online and save a couple hundred bucks a month to cash flow the final years and you're there.

Okay. Okay. The only problem is in the small town that I am from, there is not very many rental options.

I bet you can find something, Jason.

Nobody would be willing to rent a room to you. They would.

It's just extremely high from what I've seen in the past, which is why I went with the mobile home. Option.

What's high?

Um, I think last time I looked, uh, I tried to find the cheapest. It was about $800 to rent a mobile home.

No, no, we're not talking about renting a mobile home, renting an apartment.

Oh, an apartment or a house or a room in a house with roommates.

So they're looking for a roommate. Let's just take mobile homes off the table.

Okay. Yeah, I haven't looked at that market at all, really.

Okay, so that's probably what I would do. Yes, because you're bringing home over 4 grand a month, right? Right now?

Yes, sir.

So let's keep that rent to no more than $1,000 a month. Yes, sir. And you'll be better off than being underwater in this mobile home in a couple years and it's worth nothing.

And Jason, too, your income can continue to go up. You said your— the ceiling was around $75,000, I think you said. So you still, through these, these next 4 years while you're in school, and you're going to go to school, cash flowing it the way George just laid it out, your income's going to continue to go up. So yes, I think it's a great move to do it, but you would have to cash flow, which means you're going to have to make some big decisions.

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So Ask Ramsey is our free AI tool that is built and trained on proven Ramsey principles. And we now have so many people and they're asking questions, George. So we can actually start to see some trends of questions people are asking.

It's fun. It's like being able to see people's Google searches.

Yes, I know. It's financial. But there's a lot around insurance and investing. And so one of the main questions is, how do I know how much house I can afford based on my salary and financial situation? So again, insurance and investing was asked a lot, but I just saw here the most asked question is around buying a home. So the core rule here is that your monthly mortgage payments should never exceed 25% of your monthly take-home pay. Pay. And that 25% will include your principal, interest, property taxes, homeowner's insurance, PMI, HOA fees. All of that is included in that 25%. And why we say that a fourth of your take-home pay is so that it frees up the rest of your money. 75% of the money that you have then can be going towards debt. If you have consumer debt, you can be using it for investing or saving. And so what happens is people can quickly get into a home home and it's 50% of their take-home pay and they just don't have a lot left when it comes to even just food, right? And paying basic bills.

It's a burden instead of a blessing. That's right. So that's why it's conservative. It's so that you have more money left over to pay off the mortgage early, invest for college, go on vacation, upgrade the car. So you actually have a life instead of just a house. So Ask Ramsey is a great tool, can help you determine how much house you can afford based on your specific financial situation. Go check it out for yourself. Ask your question today. Go to ramseysolutions.com or click the link in the description if on podcast or YouTube.

Yeah, it's a— have you gone on it a lot, George?

Oh, I use it a lot. It's fun. It's my only friend, is I just chat with Ask Ramsey, because it'll talk back to me.

And it talks to you. It gives you some encouragement.

It's the only one who wants to nerd out with me.

Like, "Let's crunch some numbers." "Are you wondering about this?" Those are always my follow-up. I love the follow-ups of like, "Have you thought about this?" And you're like, "Show me more. Tell me more." We love it. All right, let's go to Mary in Tulsa, Oklahoma. Hi, Mary. Welcome to the show.

Hi, thank you so much for taking my call.

Absolutely, how can we help?

Well, I am $178,000 in debt, and that probably another $20,000 will be added to that by the end of the year. I make about $125,000 a year, between $120,000 and $125,000, and I'm kind of wondering— the problem is, is my monthly cash flow low, so it's getting ahead. As it stands, I'm an LLC and I am not currently taking out enough for taxes, and that just keeps adding every year. So I'm wondering if it's time to consider bankruptcy. No. Wow. OK. Good.

For 1,000 reasons, but number one, you're not going to be able to discharge the IRS debt in bankruptcy.

How much do you owe in taxes?

Oh goodness, I owe $46,000 in back taxes, and I have yet to file 2025, which will be the most likely additional $20,000 by the end of the year.

Oh, that's where that $20,000 came from. Okay, did, did that $46,000 count in your $178,000, that number you gave us?

Yes.

Okay, what's the other debt?

So the other debt is $100,000— it will— about $96,000 in student loans, um, and then I have probably I have probably $35,000 in credit card debt. I'm paying $2,500 a month right now on credit cards. $500 to a debt relief program, which would only take about $20,000. So since bankruptcy's not an option, I'm wondering, should I throw my money at my credit cards that the debt relief would not take and increase my monthly cash inflow, or do I just need to crunch it and focus on taxes?

Well, the IRS always gets moved to the front of your debt snowball. So unless, which I don't know if you can, if you wanna go try to get a loan for that $46,000, pay off the IRS, and then you just owe a credit union instead of the IRS, it's probably a better deal. And if that's the case, then you'll just put that in your debt snowball.

The issue is that debt relief company tanked your credit. So you're, I don't know if anyone's gonna give you a dollar point, because that's how these companies work. They tell you to stop paying on the debts, give us that money instead. Collections comes after you, and they try to settle with collections. Yes. So have you talked to the IRS yet?

5 months in, um, I, I haven't. I'm on a payment plan with them, so I—

that's what I wanted to know.

So I'm good with that. Um, but it's the now taking out current taxes to not get more in yet.

Yeah, that's right. Yeah, you need to start paying your quarterlies, especially here in 2026. Mary, have you done that already? Like, have you set that up for this calendar year?

Um, no, I'm taking out— my CPA takes out monthly payroll and they take out taxes there.

Um, but they did not do that in 2025.

No, no, I did, just not enough. Um, and which is why I've not filed yet, because I was kind of shocked at how much I owed in 2024. For, uh, even with my, my, uh, write-offs. So I've just not filed yet because I know I'm going to owe more in and I can't pay right now. How long have you had a CPA? Uh, 2 years, 3 years.

And they didn't catch any of this?

Um, no, I— no, they kind of send me an email and they're like, let us know when you want to do payroll, so I'll I'll just say, hey, let's do $2,000 payroll, or let's do $3,000, or whatever I was able to submit in billing, because I'm really bad about getting all my billing submitted. So, and that's, that's kind of it. I'm not really even sure how much I need to be keeping out.

That's where I'm going. Do you need to fire your CPA? I know, it sounds horrible. What are they even doing for you? They're giving you zero advice. They're not telling you to withhold enough for taxes and pay your estimates. We're giving you more tax advice than your CPA. Has. Okay, based on what you told us, I don't know.

But how much are you making a year, Mary? Uh, I— $125,000. Yeah, $125,000.

What kind of business is this? I'm a mental health therapist and I'm an LLC, so I contract.

Okay, well, the— you're not going to bankrupt on the student loans or the IRS, so this is a moot point anyways. And I would— I wouldn't tell you to file anyways. You can clean this up, but it's going to take a lot of focus and it's gonna take some time.

Are you able to pick up extra clients, Mary, and work more?

I am. I'm really working at my max right now. I'm working about 6 days a week and I'm a single mother, so I don't want to take that extra time from my child.

Okay. Yeah, well, there's gonna— you know, I'm glad you're working that much. That's, that's encouraging because the income is gonna be the thing that's going to matter probably the most in this situation. Um, but yeah, it's gonna— it'll take— yeah, it's gonna take you 4 to 5 years to kind of clean all this up.

You're going to be throwing thousands at the debt every month and extra, more than just the minimum payments. Otherwise, this is going to be a 10 to 20-year journey.

Are you on a really tight budget, Mary?

Uh, yes, I am. I mean, I keep myself on a tight budget.

Good. How much margin do you have per month to throw debt?

I have, after everything, all necessities, I have $1,400 a month left. I currently pay about $360 a month out of pocket for counseling, and if need be, I can, I can forego that for a little bit.

Pause that for maybe a year or something if you need to. Yeah. Okay. Yeah, because I think the, I think the goal would be gosh, even $2,000 a month, it's still gonna be—

'Cause you're gonna have about $200,000 to clean up. And so if you factor in, you know, $24,000 a year, that's still 83 months at $2,000 a month being thrown at the debts. Now you're throwing a lot at the debts already. You said you had $2,500 in credit card payments, plus the IRS, plus the student loans. What do all those payments add up to a month?

Oh goodness, let's see, the IRS is $700, the credit is $2,500, and then the student loans loans are $1,000.

Okay, so $4,200 is already out the door every, every time you get paid. And my guess is you probably take home around $7,000 a month if you factor in taxes.

I, on the low end, I bring home about $10,000 with before taxes. Okay, we need to start factoring after taxes.

I think what got us into hot water is forgetting that taxes are a part of the game.

So yes, if you make that $7,000, start paying those taxes a little And the positive thing, Mary, is as you start paying off that lowest, even the credit card, that's gonna free up a couple hundred bucks a month to keep throwing at that. That's where the debt snowball momentum really happens. But yeah, you got a marathon ahead of you, Mary, but you can do this. You can do it.

Dave Ramsey here. Most people stay stuck with their money because they're not paying attention to it. Most people are living paycheck to paycheck, stressed out, and broke. Don't be most people. You work way too hard to be broke and feel broke, and you deserve to have something to show for it. That's why we built the EveryDollar budget app. It gives you a personalized plan for your money that shows you how to free up extra money every month and use it to beat debt and build lasting wealth. Plus, you get real coaches guiding you through your plan step by step. Look, most people hearing this will just keep hoping something changes, but not you. You're ready to make change happen starting now. Go download EveryDollar in the App Store or Google Play and start for free today. Day.

One of the best parts of our job is when we get to hear from people and their stories of how that— how they are winning. And we just got this great review from EveryDollar. EveryDollar $1 app. A fan said, "Just being able to use EveryDollar and see all the extra we had every single month was very motivating. We'd have thousands of extra dollars and we can just throw it at the mortgage." Absolutely amazing. Well, if you guys want to take control of your money and find some extra margin, make sure to start EveryDollar for free, and you can do that in the App Store or Google Play. All right, let's go to Brittany in Raleigh. Hi, Brittany.

Welcome to the show. Hi, thank you for taking my call. Absolutely, how can we help? Um, so we are currently on Baby Step 2, me and my husband, and we have a little over $100,000 in debt. We have personal loans, a credit card, and a truck payment. So my question is, which one do we start with? I know that Baby Step 2 calls for the lowest amount, but one of our loans has a lien on my car with it. It. So would that be where we start since it's such like a high-risk loan, or should we start with the credit card, which is the lowest amount?

What kind of loan is this? It's like a title loan, or is that a personal loan secured against the title, like from a credit union?

It's a personal loan. Okay. Yeah. And how much is that? It's $18,000 now.

And what's your other debts?

What do they to? Um, we have a credit card that's $13,000, a truck that's $36,000, a 401k loan for $15,000, and another personal loan for $28,000. Okay, what's the truck worth? Um, well, looking on Kelley Blue Book, it's worth between like $22,000 and $25,000.

And do you guys have anything in liquid cash right now in bank?

Um, we have our $3,000 emergency fund.

So how much do you guys make a year, Britney?

Um, well, I'm a stay-at-home mom currently. I do go back to work, um, during the summer at like a preschool. My husband, he makes, um, roughly $90,000 to $95,000, and he made more, and we recently moved and he took an unknown pay cut. So he was making more and it was helping with the debt, but said an unknown pay cut?

Yes. Like he didn't know that he would be making less?

Yes, it was the same company and the same job position, but he— his job runs on like the routes and stuff. He delivers food for a living, and his— when he runs routes, he gets paid for certain things, and it doesn't pay as much where we moved to.

And he didn't know that ahead of time when he was, you know, signing the paperwork?

Nice.

Hmm. Well, you got $100K in debt and about $100K to pay off. The goal would be to get out from under this truck. What's the payment on that thing?

$620 a month. Mm-hmm.

And what about the personal loan against the car?

The one with the— against the car, it's $480 a month.

Wow. So right there, you'd free up a nice chunk of change if we got rid of both of those.

Just get rid of that truck. Yeah.

What's the smallest debt that's up next based on the balance?

Balance? Um, the smallest debt that is up next would be the credit card, and it's at $13,000.

And that's all on one credit card?

Yes, it's a bank credit card.

Okay, what were y'all using it for?

Um, well, it's maxed currently, um, but it was just used for groceries, gas, just kind of making up for the loss of income that he had when we moved.

We moved about a a year ago. So you spent— okay, so every month, every month as well.

What was that used for?

Which one? The lien? Both of them on the car? Um, one was for our old house, um, where we lived. We used it to do renovations and fixing it up, and when we sold it, we didn't sell it for what we wanted to, to be able to pay that one back. And then the other one was for moving costs and Just catching up on everything.

What caused you guys to move? Um, well, it was kind of free choice move.

We decided that we wanted to, and the job— we do move for work as well.

You moved for work but you get paid less?

Uh, yeah, we— it was unexpected though. Like, we— he was told that he would be making about the same amount as he did, and then when we got moved and everything settled in and it just kind of lowered. It's not a huge significant amount, but it's definitely enough to notice.

Like $1,000 a month?

Yeah, around that, yeah.

Which is what you guys are used to living on, which caused the $13,000 in credit card debt. $1,000 a month that you lost.

Are you guys in the hole every month right now, or do you have enough to cover all the bills and debt payments and have anything left over?

We have, um, somewhat left over. I'd say we have between like $300 and $500 left left over every month.

Okay, so the goal now is to do a detailed budget and to find all the money we can in this $95,000 income and then some. That might mean he's working a second job and you're picking up more work, and you guys tag team, and he high-fives you on the way in and you go to work. Because right now we need a couple of thousand dollars a month to throw at this debt. Yes, that's the only way out. I mean, and again, getting out that truck is going to be a real blessing if you can find the amount you're underwater on, about $10,000, and then sell it. Do you guys have any other vehicle you could use right now? No.

That's your one car for the family? Well, there's a car with my lien on it and then the truck payment and the truck. So we have two vehicles, but both of them, one has a lien and one's a loan for a car, right?

But if you got rid of the truck and you took it down from $36,000 to $10,000 and you're a one-car family for for a bit, that would be— you could do that. Okay. I mean, yeah, I mean, are y'all— are you both on the same page that this is just crazy and you're never ever ever ever gonna touch debt again? Yes. Do you both— do you both feel that he feels that too? Yes. Okay. Yeah, so I mean, this is gonna be a, uh, this will be a journey, Brittany, but— and it's going to create a lot of sacrifice for you guys, meaning like that, like that kind of thing, right? You're taking from $36,000 to 10, right? And that's a sacrifice, but for 1 year, 2 years, until maybe we save up some cash on the side and buy a crappy $5,000 car for him, like that's what it's gonna be, you know? So like there has to be something drastic that changes from a lifestyle perspective and income perspective. And it's gonna cause you guys to be really, really uncomfortable. And it's gonna be hard. It's gonna be really hard, but it's doable.

Doable. That's the wild thing is that you guys may look up and be like, okay, maybe he can actually, yeah, work longer and pick up some more routes and bring in an extra $2,000 a month. And then Brittany, on the weekends, you're working somewhere, you know, bringing in $2,000 a month. And that's an extra $4,000. Just, you know what I'm saying? Like, it's these opportunities, but it costs time. It costs energy. You guys are gonna be really tired, but it's not your whole life. Lives. It is gonna be for a season of your life, probably 2 to 3 years. But then you look on the other end of this, George, and it's like, okay, we did it. But the only way out is that. That's the hard thing. I wish there was an easy button.

Well, you tried those easy buttons and there were shortcuts into more debt. And so now we gotta do it the hard way, which is make more, spend less, use the margin to knock out the next smallest debt and the next smallest debt. So no, I don't, the lean doesn't need to go to the top of the debt snowball. You just need to put these all in the debt snowball and attack the little one with a vengeance Vengeance and cut your lifestyle down to nothing.

And the good thing is too, you know, like once that credit card, 'cause I'm sure the interest rate is 25, 28%, who knows? You know, once that's paid off, you know, the interest and the payment, right, is freed up. So that's a couple, you know, hopefully $100, right, that you keep throwing at the other debt. And so you'll start to get some momentum, but it's gonna be a, it's gonna be a, a, a trip around the sun, George.

For— it's a stark reminder it's so easy to go into debt in America today. At every corner you can rob the 401k, get the personal loan, max out the credit card, get a lien against your car even if it's paid off. And then it's so hard to get out.

Take a, take a little bit of an income, you know, setback, and you just fill it in with the credit card and you just keep on moving. I mean, you see how it happens, right?

The problem is even when you make more, it doesn't necessarily doesn't necessarily mean that you're going to save more or have more because your lifestyle creeps up with it. That's right. We find that a third of people making six figures— it's even edging up to about half now— are paycheck to paycheck. Yeah. They're feeling it. Here's a good example. You guys are making great money, well above the average household income in America, and there's not much to show for it because of all these debt payments. That would give me some anger and urgency to get out of this once and for all. For your family, for those kids, for your future. You guys are worth that. So find whatever income you can, cut whatever expenses you can, and get on the same page and get on a plan to go never again.

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Our Scripture of the Day comes from Deuteronomy 8:18: "Remember the Lord your God, for it is he who gives you the ability to produce wealth and so confirms his covenant, which he swore to your ancestors, as it is today." Zig Ziglar said, "Rich people have small TVs and big libraries." and poor people have small libraries and big TVs.

Sick burn from Zig Ziglar.

There you go. What you value. The bit you read, well, and he was a, you know, big in the '80s and '90s world. Do you remember those big— The old school TVs? The old school big TVs. The gigantic boxes.

I don't even know how you got it into your house. They look like they were 2,000 pounds. No.

Oh, man. Too good. All right, let's head to Noah in Springfield, Missouri. Hi, Noah. Welcome to the show. Hi. Thank you all for taking my call. Absolutely.

How can we help? Well, I'm 19 and I'm looking at buying a house at the end of the year, and I just wanted to see what you guys would do in my situation. Well, nice.

Why are you wanting to buy?

Well, I'm thinking $200,000 is is the max that I can buy. Um, I have $34,500 saved up. Um, I'll make another $8,000. That's base pay minus my monthly expenses by the end of November. Um, the big bulk of my money is— are in CDs. They don't expire until the end of November. Um, I got a credit score of 741.

Um, okay. What kind of consumer debt do you have? Noah? None. Zero debt. Amazing. What are you making a year? Or you said $8K a month is what you're bringing home.

You said that's, that's how much you can add to the down payment fund? Yeah.

So, so I'll make that, I'll make another $8K in, what is it, 5, 6 months.

What do you make a month?

What's your after-tax income monthly? Um, $2,100 or $2,200.

That's how much you make per month? Yes. So you're making like $24,000 a year take-home?

No, it's $41,000 a year.

Okay, so you're talking— I'm just confused on the math.

Okay, I budget for— I get paid bimonthly, so $1,100 a paycheck, base pay. And that's 2 times, 2 times a month?

Month? Yes. Okay, that is $2,200 a month.

Yeah. Did you get a big tax refund?

No.

Well, here's our housing parameter, Noah, just so you understand. We recommend the mortgage payment be no more than a quarter of your after-tax monthly income on a 15-year fixed-rate mortgage. So I just crunched the numbers here for you on our mortgage calculator. A $200,000 home with $42,000 down on a 15-year fixed, you're looking at about $1,700 out of your $2,200. Okay, so that is— you're gonna be poor. You're gonna have $200 left over to basically fund everything else in your life. So you're not ready to buy a home, and I don't think you're in desperate need of a home. Are you living with family right now or renting?

Uh, I'm rent-free with family right now.

Okay, I would work on your income. That's going to be your greatest wealth-building tool. It's going to give you the ability to buy a home one day and afford the mortgage payment, but right now you should be focused on how can I make more in my career?

Okay. Yeah, because that monthly payment's gonna be kind of your make or break, Noah, just on what you really can afford. And if you keep saving up a big down payment, that'll be great, 'cause hopefully you'll continue to get raises, you know, over the next few years. And I wouldn't rush into the housing market. When you're ready to buy a home, that's gonna be a great time, but it may be in another 3 to 4 years, and that's okay. Okay, and you can rent in the meantime, or, you know, where you are. But I, and when these CDs expire, I would take them out of CDs and I would put them in a high-yield savings account. Our friends at Fairwinds Credit Union is a great, that's a great place to open an account. You can get a free checking account and they have a great high-yield savings option too. And so I would put my money in there versus a CD. And yeah, and just keep piling money, 'cause you do want a fully funded emergency fund as well on top of your down payment. So some of that $34,000, of housing can be set aside as an emergency fund.

And just continue. Yeah, I mean, I would say I love the motivation that you have, Noah, and where you are financially is amazing. Like, the fact you have no debt, the fact you have $34,000 saved, and you have a goal that you're working towards for this home, like, all of this is so great. And so, I would say, I just, I wouldn't be as urgent as maybe you are and give yourself a little bit of time to get that come up.

Okay, so just rent in the meantime?

Yeah, just rent or keep living with family. I mean, you're 19. I would just focus on what can I do to grow this career, grow this income, so I can speed up this process. Yep. But you're on the right path.

Well done. All right, let's go to Nathan in Rochester, New York. Hi Nathan, welcome to the show. Hi, thank you for having me. Absolutely, how can we help?

So, uh, about 9 months ago I bought a truck for about $29,000. I sat down recently and looked at everything again. I still owe $29,000 on it and been making my payments every month. I need help trying to figure out how to get out of this situation.

What's the interest rate? Uh, 14%. Well, that'll do it. Ouch. The interest payment you're making is probably as much as your monthly payment, so they're just washing each other out. Mm-hmm.

How much can you sell it for, Nathan?

Uh, I just got it quoted for $17,500. Why is it so low?

Did you roll over negative equity? No, I did not.

Was it for a trade-in or a personal sale? And where'd you get it quoted? Uh, it was at a local dealership.

I was looking, I was just trying to figure out what I could get it for and they evaluated it at $17,500. Who's they? The dealership? Um, yeah, the dealership, yes.

Well, that's the worst place to get it valued. I would look at the private party value on Kelley Blue Book. Mm-hmm. Because there's no way a $29,000 car, 9 months later, is worth $17,000. No, it should be more like $22,000-ish, probably. Now, obviously, you got screwed on this deal. So, they may have sold you a $17,000 car for $29,000, for all I know. Especially charging you 14% interest. Was your credit just shot?

No, I don't remember exactly what it was, but it was around the high 780s.

How did you get a 14%— I mean, I just don't understand. I understand that.

Yeah, I don't— Do you have any other debt? Like everything? No, I do not. It's that, so when I bought the truck, I was at my job, I was making $28 an hour. And then at the end of, beginning of this year, my whole company got let go. And I've taken an almost $7 pay cut at my current job.

What are you making now?

Base salary, right around $21.62 an hour. An hour. Okay, so about $44,000, $45,000 a year, probably?

Correct. Okay, well, this, uh, this truck needs to go, and so you might need to save up the amount you're underwater on just to get rid of it, and that would still be worth it. And you go get you a beater car to get you from A to B in the meantime until you can save up and buy something used in cash. But there's no other way to get out of the payments.

That plus all like the, the insurance, because I'm 21, my insurance is around $300. $1,000 a month.

Yeah, that's expensive for a young guy. A lot of risk for the insurance companies.

Yep. And with all— with the gas and everything, at the end of every month I'm scrunching up pennies to try and—

if your credit score is still good, I'd go down to your local credit union and see if they can give you a loan for the difference you're underwater on, but still try to get top dollar for it. That might be Private Party, that might be like a Carvana or CarMax, but just see how small you can make that gap you're underwater water on, get a loan for the difference, plus some to get you a beater car from A to B, and you'll be out of this thing and be able to save up and—

And your payments are gonna, it's gonna, you're gonna feel the difference of what you're doing now and it's not making a dent, right? Versus a, I don't know, a $12,000 loan from the, you know, that you pay off the difference and then go get a beater car for 6 months.

It'll have a lower interest rate for sure. And yeah. What's your payment right now? How much are you paying now?

I'm paying $586 a month.

Ouch. Plus the $300 in interest. So you're going to be—

and it's not even doing it alone.

That just hurts because, well, you're probably paying $586 in interest. So every month it's just, it's not moving the needle on the balance. And so that's, that's the issue.

I looked at the, I looked at the loan. It's a, I think it was like $11.14 a day on interest. Ouch.

Yeah. And Nathan, remember this rule of thumb too, that your— what you have in motors and wheels should be no more than half of your annual take-home pay, and you exceeded that getting a $30,000 truck while making $45,000 a year. So keep those vehicles below that so that you don't get stuck in the situation again. Thanks for the call. Thanks to everyone in the booth. George, thanks for a great show, and thank you, America. And remember, there's ultimately on the There's only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.