Transcript of Take Debt Off The Table For Good New

Brought to you by the EveryDollar app. Start budgeting for free today. 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. I'm Dave Ramsey, your host. George Campbell, Ramsey personality, number one bestselling author, co-host, Smart Money Happy Hour on the Ramsey Network. He's my co-host today. The phone number here is 888-825-5225. Maddie is in Sacramento. Hi Maddie, how are you?

Hi, I'm good. Thank you for taking my call.

Sure, what's up?

Okay, I am 23 years old and I have over half a million in a 529 that was funded from Social Security money given to me after the death of my dad when I was a child. Until age 18. My mom ended up paying for all of my tuition because she had the means, which is why all that money is sitting. I also have $50K in the S&P 500, and I max out my Roth, which is funded from that 529. My financial advisor, um, he told me not to get— not to open a 401K. He is into credit cards and points and that whole game, which is kind of making me question if he's investing my money well, specifically Specifically the 529.

Okay, so your question is what?

My question is, is he investing my money well?

And in the 529, I don't know what's, what's in, what's it invested in?

I have no clue. He just told me it's in a 529.

Do you have access to the account?

I do.

Okay, you can go in there and see exactly what the investments are, and that'll help you figure out— are you, are you looking for a high return and you're not getting it? What's, what's the thing you're worried about?

I'm just worried that it can be sitting somewhere else and growing at a better rate for my future.

Okay, all right. Um, well, the, the first rule of investing is you don't put money in something you don't understand or don't know. That's how you lose it.

Okay.

The second rule of investing goes with the first rule, and that is you don't hire someone that does things for you that you don't know what's going on. Instead, you hire someone that helps you decide because they teach you. So your financial advisor should have the heart of a teacher, meaning they should have this desire for you to understand what you're investing in. Yours apparently does not have that desire. How long have you used this person to manage your money?

Um, so he's actually the financial advisor for the family business, so I kind of just automatically adopted him.

Mm-hmm.

It sounds like you guys have different financial values the way you're talking about this.

Well, I mean, the credit card points thing is absurd, and then not opening a 401.

That's my only thing is he's gone, well, I can't manage that, therefore I can't make money from that, therefore I don't want her to open one. Yeah, which would be—

here's the other thing is if you don't feel good about someone that's managing your money, they shouldn't be managing your money, period. Regardless of the reason, even if they're a perfectly legitimate person and you just don't, you know, you just don't hit it off with them, you don't vibe, you don't vibe. If you're not vibing, you should go somewhere else. I mean, really. So, you know, the credit card thing scares you, you don't know what this is in, you've kind of fallen into all of this off of your parents' business. How old are you?

I'm 23.

Okay.

All right.

Well, I, you know, if you want to try to stay with him because he's a family friend and has been with you forever, that's fine. You need to sit down and get with him and go have a meeting and say, okay, I'm now actually a standalone adult. And here's what I require in a financial advisor. I require that you teach me what the, what is going on with this. And that I understand it, or we don't do it. Okay, you don't do any trades without my authorization, and I have to understand what you're suggesting to me. And so let's go through the portfolio if you want to do that. If you don't want to do that, if you want to just— if you want me to just do what I'm supposed to do and do what you tell me to do, then I need a different financial advisor because I'm not going to do what you tell me to do. You're going to do what I tell you to do. That's how this is going to work. You work for me, not the other way around. And honestly, there's a percentage of people in the financial advising world who function off of arrogance because they're very, very good at math, and, and they think they're supposed to be taking care of the little people, which is actually bullcrap, okay?

Instead, their job is to not be an arrogant jerk, but instead teach you. And that's their job. And if they're not teaching you, they're failing at their job. That's why the SmartVestor Pros and the Ramsey program that we vet. They don't work for us, but we won't send you to someone unless they have that heart of a teacher. And so, you know, what would I do if I was 23 in your shoes? I would go sit down with your existing guy, talk to him that way, because he probably still looks at you as if you're 5.

Mm-hmm.

And that needs to stop this week because you're not 5. We're— I'm, I'm $500,000 is what I am. I'm not 5. And so, um, and that's a big account. And so he needs to treat you with that kind of respect. And then I also would sit down with a SmartVestor Pro and interview them. And then after you've had both discussions, you as a woman of 23 years old and a good brain decide where you want your money to be. Now, so that's first thing, and that's a big deal. Does that sound right to you? Does that feel comfortable?

Yeah, definitely.

Okay, then, then once you've done that, I also want you— once you select someone, I want you guys to figure out what the flip you're going to do with $500,000 stuck in a 529. Because you're going to get hammered with taxes on that at some point. Uh, there is a provision to move some of it at age 30, before age 30, into— or maybe after age 30, which is it, George? It's before, before age 30, into a Roth. But the, the rules on it are very strenuous. So I want you to learn about beginning to move that into a Roth IRA as you can.

And it's up to $35,000 is the new SECURE Act 2.0. So I assume that's what he's doing.

And so the other—

you can do it up to The other $465,000 is screwed. Yeah, I mean, there's not— you can change the beneficiary.

So if Maddie, you know, has kids of her own one day, or brothers or sisters or anybody else you want to pay for college, it becomes like a legacy. You're going to pay a 10% penalty on the growth and your taxes on the growth if it's not used for education. So yeah, and you're not going to use half a million dollars for education. She's graduated, her mother paid.

That's over.

So somebody didn't think this through very well. Should have used the stinking 529 and given you the money she was going to use to pay pay for the education and at least gotten it out from under that 529.

Yeah, you've talked about that before.

I love 529s, but I very seldom run into them being overfunded, and this was a case where they were overfunded.

Mm, that's tough.

Yeah, up to a couple hundred grand, and then it's used for education, is fine, but no more than that in a 529. And so I don't— and it can't just sit there forever and grow. It gets worse. The problem gets worse and worse and worse. So Yeah, you're right, George. There's not a lot she can do, I don't guess.

Yeah, but that's why you got to know. I mean, she learned this years ago because he actually taught her what he was doing and why he was doing it. She could have understood some of this, but she just, you know, there's, there's two parties at fault here: the one that didn't teach and the one that never asked.

Well, and this is the same guy told her mother not to use the 529, and she's telling her not to do a 401k, which doesn't make any sense at all. You need to be doing your 401k.

Should have used the 529 money first. And then moved on to her own.

Exactly, exactly, for sure.

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Rochelle is with us in St. Louis. Hi, Rochelle, how are you?

I'm doing good. My question is, I am wanting to know how is it that I can do the envelope system? I'm trying to save, you know, the first $1,000, but everything is direct auto pay and direct deposit, and I feel like, do I go withdraw everything and then put in envelopes and then put it back in the bank? Um, I'm really struggling with that. And just when I get the money saved, a major thing happens, like, you know, recently. But how do I do that?

Okay. The envelopes for the $1,000 emergency fund or envelopes for other categories?

For other categories. For the first to get my $1,000 and then to do the other categories.

Okay. Um, well, the one, the $1,000 could simply be transferred into a savings account. It doesn't have to be in cash. The other categories, most people are doing the envelopes for just a couple of categories these days in the digital world.

Mainly groceries.

Groceries and maybe eating out and a couple of things like that.

Well, your light bill, you don't need to take out cash to go pay that.

You don't need an envelope for very many things. If you do need, if you want to fund your grocery category in cash into an envelope and write food on the outside of that envelope and then only buy your groceries out of that envelope, that's the system we've We taught years and years ago for a whole bunch of things. Now mainly people do it for food and a couple of other things. Um, if you want to do that, you could just take the money out of ATM. Okay, I just go up to the teller, go up to the teller window, make a withdrawal on your account for that much cash.

But how do I budget? Okay, I'm trying to get on a budget. How do I get on a budget, divide it up, and then say, okay, this is what I have to put in and this is what's in this amount.

Oh, I see. Okay. The EveryDollar app is the easiest way to do that. It's the budgeting app that we invented years ago, and it has grown into actually the full Ramsey Plan where it holds your hand and helps you decide what to do with each of the categories so that you're following the Baby Steps. But download the EveryDollar app at Apple Store or Google Play. It's free, and you can set up your budget on it. It won't take but about 20 minutes to set it up, and they'll guide you through the whole process. It's very, very hand-to-mouth, easy to understand. Even I can do it.

Okay, and then I can just leave all the money in the account and work with that.

Exactly. Or if you wanted to say, I'm going to do the grocery envelope, I'm going to do— I'm going to do cash for groceries, then you could withdraw that portion, whatever you write in every dollar, and say my grocery budget is $700. Okay, whatever, I don't care what it is. Okay, then you would go to the teller window and take out $700, or you go to the ATM and take out $700 cash, put that in an envelope, write food on it, And that transaction will show up in your bank account, which now you can track in EveryDollar.

So you track your $700 against the $700 planned. Now you have nothing left to spend because it's all in cash in the envelope. When the envelope's out, it's out. So that's the goal, is to sort of force the discipline with the envelopes.

The trick of the old envelope system that your grandmother used, your great-grandmother used— and I've got— people have sent me antique ones from the '20s.

Oh, wow.

I got one from 1913 even. And it's a little you know, a little card file, little envelope system, and you write, you know, you write a category on the outside. And when you— if you write $200 for clothing on there for the month and the shirt is on sale for $225, you can't buy it because you don't have $225. You've only got $200 cash in your clothing envelope. But you can spend up to $200 on clothing completely guilt-free. Because it's allocated to that. Now you can have that same experience digitally, but man, I tell you what, when you are doing it physically with those Uncle Benjamins in the account, they're laying right there looking at you, Uncle Ben is looking at you, you will spend less.

You will take some stuff out of that cart.

Yeah, you will not spend, you will not go, "Oh well, I'll fix it later," you know, "I'll move money." You don't lie to yourself when there's real money staring at you.

So I do miss the old days of the actual You see this TikTok trend called cash stuffing? Gen Z claims they've invented this new method of cash stuffing.

It's the envelope system.

Yeah, but I didn't want to say that they ripped it off you.

Well, they rip it off me. I ripped it off your great-grandmother.

You weren't around in 1930.

But hey, think about it. In the old days, what happened was on Friday was payday, and the boss counted out money, and you walked out with money in your hand. And when you got home— I'm talking 1930s, '40s, '50s Okay, when you got home, you counted the money out on the kitchen table and you went, that one for you, one for me, one for you, one for me. This goes in the grocery envelope, this goes in the clothing envelope, this goes for kids' activities, this is for gasoline. And you know, and the envelope system worked perfect because the whole thing was cash-based.

Now you're shopping online, it's much harder to use the envelope system for everything like you could back in the day.

Yeah, you just, you have, yeah, EveryDollar has to be the only thing that holds you accountable digitally back to that. I'll tell you the other side note, the that's just interesting. If we brought this back, there would be a revolution. People would burn Washington, D.C. down if the tax person from the IRS had to stand in the lobby of your company and you got paid in cash and you had to take your cash and hand it to the tax collector and count it out every time you got paid.— and people would realize how much money your government— how big a tick on your butt the government is, how big a parasite the government is. And they would— I'm telling you, there'd be pitchforks and torches.

Oh yeah.

If you actually saw and physically had to take possession of the money and then give it back in cash to the government—

Take it to Grant.

—every time you got paid, people would— their faces would melt off.

Just the amount of $100 bills you're just giving to the IRS for doing nothing. That hurts. It would be a Tea Party round 2.

Yeah, so it was a really brilliant idea to do income tax withholding. Just make it all behind the scenes. Brilliant psychological trick. It's like the worst magician ever. You end up with Matthew the tax collector, who was hated even in Jesus' day. Hello. Wow. So that's what you end up with. Of course, they were crooked. Oh, wait a minute. Yeah, well, that's a personal brand. That's completely different. Yeah. Yeah. Ouch. Blake's in Orlando. Hey Blake, how are you?

Hey Dave, how's it going?

Better than I deserve. How can I help?

All right, so I have a truck loan that is about $15,000. Um, and I was having a discussion with my fiancée the other day. She thinks that I should make a lump sum payment and just pay it off out of my savings that I've been holding onto for a down payment on a house. And I think that I should continue making payments over time, continuing, you know, making the minimum payments, but, you know, building on top of the principal.

You know, it's good that you get used to her being right early before you're married.

The training is complete.

When are you getting married, Blake? October. Congratulations. That's awesome. You got a good one, I think. Yeah, I've been at this 40-something years, 44 years. Years, and I'm still working on being wrong. It's hard for me. Oh man. Yeah, she completely got you. Here's the thing, you— if your truck was paid for, would you borrow on it to put a down payment on your house? No. Same thing. Okay, you follow that? You follow that logic, right? Yeah. Do you have any other debt? Pay your truck off today.

No, that's, that's the only debt between two of us.

Yeah, amazing. What does that leave you in savings?

Uh, I think using hers, that puts us—

no, no, we're not putting her money on your truck. You're not married.

No, no, I'm just saying, you know, by the time that we are married, combined savings after the truck is paid off— oh, um, we'd probably have about, uh, let me do math here, uh, about $80 grand.

Oh, you're fine, and you'll build it back up real quick.

Yeah, that's good. Without a car payment— what's the truck payment?

It's the, the monthly payment. I'm paying $500 right now. That's like $30 extra on top of the minimum payment.

Nice. I would pay it off. I tell you, here's the interesting thing, Blake. Your truck will drive different when it doesn't drag a payment book around. Feels lighter. Yeah, gets better gas mileage.

That would be incredible. Fuel efficiency increases when there's no payment.

Yeah, just get used to being wrong, brother, and you'll be all right.

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For most people, the largest transaction you make is your home, buying or selling a home. And it's a little bit complicated, and you know, not everybody knows how to do it. But the problem is, it's actually easy to pass a real estate test. I passed my real estate test, I was 18 years old, it was 1978. I took, I took the test in 27 minutes., and I got a 97. And I'm not a savant. It was that stinking easy, okay? And that means I was eligible at 18 years old to sell a house, and I sold one 3 weeks later. That should scare you, people.

The ease in which an 18-year-old can complete that transaction should scare you, right?

So if you're going to list your house, don't list it with 18-year-old Dave, okay? 3 weeks after he got his real estate test. They must have really trusted you. You were a good salesman. That's a guy I went to high school with, bless his heart. And he, uh, the transaction went fine. I— you didn't screw it up? Yeah, he— yeah, yeah. Anyway, if you're gonna buy a house, get a pro in your corner. If you're going to sell a house, get a pro in your corner. A pro is someone who's actually done a lot of transactions, like 50 or 100 this year kind of thing, okay? This is not somebody who, you know, I've done— how many houses have you sold? 4? That's not who sells your house, okay? That's not what you do. You don't want a side Tesla? No. Or I just— I, I always dreamed of being— no, I don't care. Not selling my house. Okay, this is a $500,000, $600,000, $200,000 asset here. All right, so how do you find someone you can trust that's high octane? We vet them. They're called Ramsey Trusted Agents. You can find a Ramsey Trusted Agent for free at ramsaysolutions.com/agent, or you can click the link in the description if you're listening on YouTube or podcast.

We'll take you straight there. Julie is in Greenville South Carolina. Hi, Julie, what's up?

Hey, Dave. Hey, George. My question today is about taking a dream vacation to Hawaii. My husband and I have been dreaming about taking ourselves to Hawaii, and now we have 3 kids, so we would love a family vacation to Hawaii. We've wanted this for about 12 years now and started saving On the bad side of things, we started saving only $100 a month for almost the last 12 years. Where we failed is thinking that would get us somewhere in the ballpark of $10,000 to maybe $15,000, and that would be enough to take 5 people to Hawaii for a week or 2. We failed to think for inflation.

No, you failed to save enough money. Inflation didn't have anything to do with it. You just weren't saving enough money. So you truly were dreaming. You weren't working a plan.

So the question then is now we only have $14,000 and every time we try to run the flights— What's your household income? $70,000 between the two of us.

So what does it need to be? For— how much do you need to spend on this vacation for you to get to go, actually go, not just pretend? 15 to 20. Okay, 15 to 20. You've got 14. Yep, exactly. So put some stuff on Facebook Marketplace and buy the tickets.

That's the question, is do we just say, you know what, let's take it, we've always dreamed of this, let's do it, let's find the money, let's pull it out, let's— because we're not putting anything on debt, so let's just work harder.

Wait a minute, wait a minute, wait a minute. You're not putting anything on debt?

You have debt? No, no, none.

We refuse.

You're saying you want to do this?

Oh, you mean you're not going to borrow the money for the vacation? Yeah.

How long is the trip?

How many days or nights? We right now, we want to go 7 nights.

Okay, I was just wondering what the levers we can pull, because if you go 6 nights, well, all of a sudden you can afford it. So have you done the research to actually see who has the best price?

I've been researching for 2 years consistently, thinking we had enough for 2 years, and we just keep pushing it off. And so my thought is, let's push it off another year, or let's just go to a lesser quality hotel.

Everyone's tired of hearing about this trip. I think you just need to go ahead and go. You're tired. We can't wait another year. I mean, I just— so this is just for fun, Julie. I'm— I like Costco Travel. I jumped on there, found a Maui package, 5 travelers, 2 rooms, $11,000 including flights from Greenville.

So I'm just saying, if we did that while we were talking, Julie, that's 60 seconds of research.

The goal is spring break only because children, summer sports, Julie. So we're just thinking through all the options.

Did you not hear what he just said? Yes, and he went on Costco.com. This is for the trip while you were talking.

August 4th, we're talking like a month from now, and it's a week-long trip. So I'm just saying we need to look at some options here and not kick the can down the road. Because the kids are free this summer.

So here's, here's the problem you're gonna have overall. You need to go on the trip and you need to pay cash for it, and you need to figure out a way to do it between now and spring break and stack up whatever cash between now and then to add to this so you get to do close to the trip as you want to go. But the problem is, is you have put too much psychological bullcrap on this trip. You have— your expectations are so stinking high. I don't care where you stay, you're gonna be disappointed. Because you've been dreaming of this for 12 years, and I, and I've been researching— not well, but you've been researching. George beat you in 30 seconds. I might go.

I'm excited about it.

George about to book a trip right now. Whitney, here comes George. We're going to Hawaii. Oh yeah, you know, I, I seriously think you're going to be— you've got this thing built up to being some kind of nirvana. It's nice. I've been to Hawaii a couple times. I'm not mad about Hawaii, but it's not actually my favorite place to go. Um, if I was going to spend that kind of money, there's probably a different island I would go to, honestly. But you go, it's going to be nice, you're going to enjoy it. It's— you ought to go see Diamond Head, you ought to go see Hanauma Bay, and, you know, run over to Maui, go see the Big Island if you can with the active volcano. There's some great diving there if you guys know how to do diving. And, uh, I mean, you know, it's a good— it's a good trip, it's a good trip. But no, there is no piece of travel It's like owning an item. As soon as you buy the car, stupid thing breaks. As soon as you buy the house, the hot water heater goes out. And all the little shine and all the little gloss on this dream goes away.

90% of the excitement was the fantasy of it happening.

Exactly, the anticipation. And the actual event is going to be a letdown because you've got this thing up so high in your brain.

It's going to rain, someone's going to get sick, the kids are on their phones.

Every afternoon it rains and they call it a blessing. A Hawaiian blessing. Nice way of saying it's freaking raining again. Okay, like, what are we in, Seattle? I mean, it's crazy. It's not like the pictures.

It's— they don't show that on the brochure.

Well, they, they, the famous website of the hotel, right? It's like, where is this hotel? Not the one I'm staying in. But yeah, but yeah, I want you to go and I want you to have a good time, but let's be more, um, Uh, let's have reasonable expectations as to what this trip represents and what this trip is. It'll be a fun thing to do. Your family has saved gradually to be able to do it for a long time. Uh, you've finally gotten to where it looks like you're going to be able to do it, but maybe not the Ritz-Carlton version, instead the Motel 6 version, or whatever it is. I don't know. Where were you staying on your little Costco flight?

You know, they, they only choose quality hotels, so I trust them with my whole heart. Yeah, you can upgrade, you know.

No, really, I mean, I did two trips.

I did Cabo and I did Cancún.

They don't tell you the hotel?

They will if I keep going. Oh, you gotta buy it? Yeah, I gotta keep going. I'm in airfare right now, you know, it's a whole process, Dave.

I can't— it's hotel— what's in the package?

There we go, continue to hotel. Here we go. This is very exciting for me. I feel like I'm getting 90% of the thrill.

Costco owes us big time for this freaking endorsement. Yeah.

Yeah, I don't think they even do marketing. Here we go. These are, you know, 3.5-star hotels. What is it? It's the Aston Khanpali Shores. 3.5 stars.

Okay. It's not a bad room. 3.5?

That's not good enough for Dave, apparently, guys.

But, you know, it's almost a 4-star. Yeah, yeah, you're right. It's almost a 3. You want a luxury—

but you can actually choose different hotels, which is nice. You can go down here.

And you can upgrade that.

Here you go. Waldorf Astoria, 4.5. That's gonna cost you a pretty penny.

Oh, that goes up?

That doubled the trip, that doubled the cost of the trip.

Oh, okay, now we're up to where Sharon Ramsey wants to go.

Yeah, that's the Live Like No One Else package right there. Okay, all right. But hey, go on the Ramsey cruise. That's less than half the price of Hawaii. There we go. Think about it. Could be, not with 3 kids.

Yeah, that's a lot. I don't know, it could be. How do we stack them in those cruise rooms?

Get 3 bunks, stack top Bye!

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Better than I deserve. What's up?

So I was actually calling to find out if I should use my 401 to pay off my student loan debt.

No. Okay.

You know why?

I do know why. I think pretty sure I know what you're going to say.

Okay. What am I going to say?

Um, well, the tax penalty and then also the tax lawyer income bracket would reduce what you'd get significantly.

Yeah. Yeah. So you're going to pay a 10% penalty plus your tax rate on whatever you withdraw, which is going to be like 35 or 40% when we're done. And so it's like saying, Dave, I want to borrow money at 30% interest and pay off my student loan. Then that wouldn't make sense. So how much do you have on your student loan?

I have $16,000. Okay, that's not bad.

Good. That's good news.

What other debts have you got? Honestly, um, basically an orthodontics debt of $4,800. Mm-hmm. How old are you? And a mortgage. I'm 41. Okay.

You're single? Um, recently divorced, yeah.

Okay.

And, um, you have a mortgage. What's your mortgage balance?

Well, the mortgage, it's, it's the balance is $205,000, but it's a 3-family. I live on the first floor and the tenants cover the mortgage. So I actually have a positive of around $440 a month.

When the tenants pay, they cover the mortgage. Yeah, that's good. Okay.

Um, what made you feel hopeless enough to go to your 401k to pay this off?

Um, I think the divorce kind of pushed me put some things in perspective, especially since I started now having to pay child support. Um, and also, also now paying for childcare just because I wanted my son to have more time with peers and other people besides family.

So the budget got tighter and you went, well, I don't know if I'm ever going to be able to pay this off.

What is your income?

Um, my income, my salary is $101,000 a year. Um, but my take-home ends up being around $5,651 a month.

And effectively, after the renters pay, assuming they do, you don't have a house payment because they're paying— they're paying enough rent to cover it. Um, and so why can you not knock this $16,000 out pretty quick?

Um, so that is what I've actually been working numbers, and I was— part of the problem, I think, is I was putting 12% of my 401. I've knocked that down to 4% to take advantage of my company's match.

Yeah, what I would do is just stop your 401. 401 until you're out of debt.

You're about to unplug the whole thing anyways, so pausing is way better.

If we're going to look at the consequences here.

And you'll be back to investing. And the other thing you've got to think about is all of the growth that was unplugged if you were to do that. If you put that in an investment calculator of what that amount would have grown to, it'll make you stop real quick.

Let's just stop the 401 temporarily, get on beans and rice, rice and beans, and knock out the $4,800. You need $20,000 and you get your life back, right? Right, right, right. At least that portion of your life. I mean, you've still gone through a divorce, you've still got the other heartache and the things from what you've been through. But, um, if you got $20,000 out of $100,000, you should be debt-free in well under a year.

Yeah, a year would be about a little over $1,700 a month would knock it out. 6 months, if you could get intense and do $3,400 a month, you're done in 6 months. By Christmas, this thing's over.

And then, then finish your emergency fund of 3 to 6 months of expenses. We're working right up the Baby Steps. That's Baby Step 3, and then restart your 401 at 15%, not 12, not 4, going into your 401. Make sure it's a Roth and make sure you're invested in good growth stock mutual funds, and then you're going to be wealthy. And then long term, I want you to decide if you want to live next door to your tenants or not, or in the same abode with your tenants. The good news is you're right beside your tenants. The bad news is you're right beside your tenants. And that can be a sticky wicket. Footsteps away can be a sticky wicket. All right, Sarah's in Waco, Texas. Hi Sarah, how are you?

Doing well, Dave. Thank you so much for taking my call. Sure, what's up? I am a military spouse and, um, me and my husband rely on— we currently rely on our credit score so that we can easily rent a house when we move every 3 to 4 years. That is absolute bullcrap.

Well, that is just not true. You do not need a credit score to rent a freaking house when you're in the military. I'd like to—

that's what I want your advice on. How can we prepare to rent when we, in a year and a half, um, pay off all of our debts? Um, what do we need to do to kind of prepare so that we can rent easily?

If you're going to go rent a home, your, your husband's in the military. Military, and what is his rank?

He's a staff sergeant. Great.

You walk up to the landlord, you meet them at the property, and you say, "My name is Staff Sergeant," and you're in a military neighborhood, he knows exactly what that means. Your landlord will. I promise you. Okay? He knows exactly what that means. It means that you're always going to get that amount of money every single month. Your husband's income is what's known as secure. Your landlord is going to love the fact that your husband is not going to lose his job or get laid off because some tech tycoon decides to cut stock price. Okay, so your husband has a— what's known as the ultimate steady job, a predictable environment, and he's a staff sergeant, so he's a leader. He's going to pay his bills, and Mr. Landlord landlord, Staff Sergeant So-and-so is also gonna smile and say, "We are privileged to be 100% debt-free, which means it's gonna be very easy for us to pay this rent. It also means that when you check our credit, you're not gonna see much of a credit score because we don't believe in borrowing money, and I know you're gonna like that as a landlord." That's all you gotta say, and the landlord will sign you up.

And I guess the other side, my husband does have to have a travel card with the Army, and that is in his own credit score. Is there any way that you know of that we can get rid of that?

Nope, he's stuck with that.

So my husband doesn't have a terrible credit score? Okay.

He's stuck with that. Great.

Okay, so we'll just kind of have to make the case. Yes, you're going to see this score, it's because of the Army and the travel card.

It shouldn't be a low score. It's the only thing we've got. Well, it could be, it could be, because there's very little activity on it. It's not going to tank it. Yeah.

Okay. It shouldn't, you know, it shouldn't stop you from getting a house.

If you were in corporate America, I'd have some ideas, but in the military, you're stuck with that. There's not a lot you can do. With it. But, um, but the big thing is, is you just have to get the landlord to look at the actual benefit. Why would you want to be out of debt? So it's easier for me to have money to pay bills, and the landlord's going to like that. I would love to see somebody that comes up, and I have a bunch of houses we rent out, and if somebody walks in and goes, I'm in the military, which I instantly I know is guaranteed income— oh, I'm Staff Sergeant— I know what that income level is going to be. Put that out there. And, oh, okay, I got guaranteed income. Oh, and they don't have any debt. It's gonna be fairly easy to pay this rent. Yeah, instead of like, oh, we have 6 car payments but a high credit score, or we got a student loan, a car payment, a boat payment, and 4-wheeler payment, and a payment, and a payment, and a payment, but I got an 800 credit score.

Yeah, but how you gonna pay the rent with all these stinking payments? That's what the landlord's thinking. Now, if you're dealing with some idiot that's a corporate employee at some corporate apartment complex, and they go, well, we have to look at the credit score, then you're not gonna get that one. But if you're dealing with a single-family residence and you can't make the case that you guys are the best possible renter on the planet as a staff sergeant with zero debt— oh, you can make that case for sure. This idea, I have to have a credit score in order for us to rent because we're in the military— don't ever say that out loud again.

Well, I've played this out. We actually, on my YouTube channel and on my podcast, The Fine Print, I called multiple apartment complexes and single-family homes across the country. How How many? At least 7 or 8. Okay, okay. And so every single one said, well, yeah, if you don't have a credit score, we'll just do a background check, make sure you're not a criminal, do you have steady income, and you might have to pay a slightly higher security deposit, which you'll get back.

In some cases. In some cases they didn't do that.

In some cases they don't. Even at apartment complexes that were corporate, I explained my situation, I said, I don't have a score, can I still rent with you guys? And they went, yeah, we'll just do a slightly higher security deposit. Okay, big whoop, if you follow our plan.

So did you have anyone out of 7 or 8 that said no?

No, there was one in New York that had more stringent laws, but they still said, yeah, if you come in, we can take a look and, and see if we can make this happen for you.

Okay, so, but that was the only one? Absolutely not. It's impossible to rent a house without a— no credit score. What they're looking for is a bunch of crap, because what people don't understand— I don't believe stuff out there that is not true. They're looking for bad, dumb things.

They're looking for misbehavior. They're looking for terrible scores, not a no score. That's way less of an issue.

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Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. George Dave Campbell, Ramsey Personality, is my co-host today. Ashley is in Green Bay, Wisconsin. Hi Ashley, how are you? Hey, good Dave, how are you? Better than I deserve.

What's up? Hi, so, um, for— it's kind of a long story, but I'm going to try to condense it. I'm 24, I've been living on my own, um, bad family situation I had to get away from. I've been kind of working odd jobs here and there. Currently make about $30,000 to $35,000 a year if I'm lucky. My car that I was fortunate to get recently broke down. It's not worth fixing just because it's not worth the amount of money that it would take to fix it. I'm just wondering, if I have no money in the bank, no savings, how would you recommend getting a different car without taking on debt?

Uh, what's wrong with your car? Who said it's not worth fixing?

Um, so it's had a lot of suspension issues and it has like 222,000 miles on it. It's 2011. Um, you know, I wouldn't be able to get that much out of it. And the suspension issues, they quoted me like $3,000.

And then can you drive the car? What's wrong with the suspension?

Yeah, it's, it's a lot of like different, like, um, like the, the wheel bearing. Like, there's just a lot of things that I couldn't afford to fix.

That wasn't what I asked. I asked if you could drive the car. Is it rolling? No. Why? What's broken that keeps it from rolling? Uh, suspension issues don't keep it from rolling.

The brakes are creating like a lot of heat.

That is for something. Brakes are different than suspension.

Okay, well, yeah, I mean, it's a lot of things is what I'm trying to say.

Have you gotten multiple quotes on this?

So let me stop you for a second. Okay, I'm sorry, George, just a second. I'll let you come back to that. Um, here's why I'm asking that, okay? Um, I drove junk cars for a lot of my life and turned a wrench on them, uh, old redneck style, all that stuff, right? And I don't want you to have to drive a piece of crap car the rest of your life. I want you to not have to, and I'm trying to get you up and moving again. But what— I'm not— I would say close to 100% of the cars with 250,000 miles have suspension issues. The suspension is merely what causes the car to feel like it isn't riding well. If you hit a pothole, it feels like it runs up through your back, you know, and jars your brains out, that kind of stuff. That's a suspension issue. Or when you go into a corner, it feels like it moves like 4 times as you go around the corner instead of once. That's a suspension issue. None of those things keep you from driving that car to work. And almost all worn-out cars have a worn-out suspension.

I've got a 1960 Corvette that has been renovated frame up. The suspension in the thing absolutely sucks. Yeah, okay, so the suspension doesn't bother me. The brakes you got to have fixed. The brakes are different than suspension and different than wheel bearings. And I think someone has just looked at your car and said, oh, this is gonna take more than— to put this car back the way I would do it because I'm a mechanic is gonna cost more than this car is worth. Yeah, well, we're not trying to do that. We're trying to put a Band-Aid on this sucker so this girl can get to work. That's different.

Sure, yeah. So they said in the dealership—

oh, dealership, there's your other problem. The most expensive place to get a car worked on— the most expensive place to get a car worked on is in the dealership. Dealership.

Yes, I'm aware of that. Then why did you go there? I also— if you would let me explain, I will explain it to you. Okay, try. I, I took it, I took it to another friend after I was done at the dealership, and he also told me the same thing. Um, it's gonna cost, you know, even, even though he was able to do it for slightly cheaper, the parts themselves were really expensive with everything that needed to be done.

Okay, so, um, I still don't think everything needs to be done. Okay, I disagree. Okay, I think your friend is wanting to fix your whole car, and I don't think he understands. All we need to do is get the brakes on this thing. Can you get some brakes on it for me so I can get to work? And when I get to work, then I'm gonna start stacking cash, and I'm gonna sell this piece of crap to a junkyard for $2,000 or $1,500. I'm gonna put $1,500 with it, and I'm gonna go buy a car that's twice as good as this one, which ain't much still deal, but we're going to move up in car a little bit. You've got no money. I'm trying to get you off your feet. Yeah, yep. And that's what I'm trying to do. And the dealer is not even going to come close to helping you. 100% of dealers are going to tell you, oh, you need a new car, here's 3 easy payments. 100%. A dealer to fix your car is like asking a dog if it's hungry. Of course they're going to tell you it's broken. You know, and your friend is probably looking at it going, yeah, I'm a good mechanic and I know how to fix all this stuff and it's not worth screwing with.

But he hadn't thought about the fact that you got no money to go buy a car with.

Yeah, I mean, my friend doesn't have a financial incentive to tell me anything, though.

So, you know, I didn't think that either. I think he's a good mechanic and he wants to do it, he wants to fix everything. And I wouldn't fix everything on this car. Car. I drove cars just like this when I was broke too.

Can you go back to them and say, hey, I just want to get from A to B, I don't need to do everything, what do I need to do to get this thing rolling again?

And then you go take 6 shifts at whatever it is you're doing and pick up 4 side hustles and go put your little money together and let's get this thing up and running for 4 months. Okay, I had a guy loan me a car with 400,000 miles on it when we went bankrupt. 400,000. This car was an absolute piece of crap. When I drove it into a good neighborhood, the cops followed me. They thought I was gonna steal something. This car should not be in this neighborhood. It was that bad. I drove that car for 3 months, and it was the worst experience of my life. I used to tell people I drove that car for 10 years, one 3-month period. Period. But you know what I did during that 3 months? I worked like a maniac, and I bought a $1,500 car, which was way— that's a huge upgrade— better than the blessing my friend had loaned me. That's the blessing of a beater. When the guy loaned it to me, I swear to God, we jumped— we got the jumper cables, jumped it off, and I drove it up out of the weeds.

You might be a redneck This is the loaner I was driving. The vinyl roof was torn loose across the front, so when you drove it, it filled up with air. It looked like a rolling parachute. When you come to a stoplight, your stop would settle. Oh, for 3 months. I'm emotionally scarred. This was 35 years ago. I'm still emotionally scarred from this. You're still angry at this car. I'm— Old Blue.

Old Blue. Take this thing out to the farm and shoot it, Dave. Is it still around somewhere?

It needed bullets put in it.

It's in a junkyard somewhere.

Like an old horse, it needed to be put out of its misery. Misery. Uh-oh, wait a minute, that's your— yeah, that's my territory. Anyway, the, uh, uh, yeah, that— so what I want for you, Ashley, is I want you to get out of the mindset that you're going to go take out a car payment. You're 24, you make no money, you're on your own, you got away from a toxic family situation, and the last thing you need is a car payment. In the meantime, what you desperately need is some semi-horrible transportation for a short period of time for you to work like a crazy girl and pile up cash. And no happy hours and no eating out and no nothing, no partying, no fun. Pile up cash and get you a little better car, and then pile up cash and get you a little better car, and then you'll start to be in something that's reliable. But you're not going to do it with car payments. If you, if you sign up for car payments, girl, you're going to be stuck right where you is for the next 5 years.

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Guys, um, I want to loop back for a second. If you find yourself with a low income and no money, the way out of the situation is not borrowing money to buy things. That will nail your feet to the floor and you will not be able to move. It's a trap. And that's why payday lenders, pawn shops, rent-to-own, and tote-the-note lots are in the poor end of town. They're not in the rich end of town because they oppress, they take advantage of of people with low incomes who feel trapped and desperate. I have been broke. I've never been poor. Poor is a state of mind. Poor is I'm trapped and there's no way out, so I'm forced to rent my washer and dryer at the Rent-A-L place. I'm forced to buy a car and pay 3 times too much for it at an interest rate that can't even be calculated on the Tote the Note lot, or I'm gonna borrow money at 800% interest— that's actually what it is, it's not an exaggeration— at a payday lender because it feels like I'm trapped and I'm reaching for— I'm grabbing for anything that I can get a hold of to get out of this trap.

And when you do that, someone will hand you a concrete block and you will sink. They will not hand you a life preserver. And, and so, and that includes going to a car dealer when you make $25,000 a year and you're 24 years old to get your $1,000 car worked on in the repair shop. That's 100% of the time not going to go well. They are not set up to serve that clientele. They're not set up for it. They don't even know how. Their brains don't even work that way. And so you can be angry about it if you want. That's not a bad thing. Thing, but the way out is not to borrow your way off of the bottom rung of the income ladder. The way out is to cut your lifestyle to nothing and work like a maniac and get your income up. Get your income up. Get your income up. Get your income up. You do not— when you're in a situation like that, and I have been there, you do not have have any time or margin for any kind of relaxation or luxury in a country that is full of relaxation and luxury.

Every Instagram feed is some bullcrap thing that you don't need to be messing with. You don't need to look at any kind of social media when you're in that situation. All you need to do is work. My grandmother used to say there's a great place to go when you're broke— to work, and it's the only way off the bottom. But it will get you off the bottom. It'll get you out. You're not stuck. You live in the greatest country the world has ever known. And if you simply get up and go work 6 jobs today, you can make $20 an hour at Target and FedEx throwing boxes today. Today you can make serious— you do not have to have a master's degree in finance to make a really good living today. And you can— once you get your income to where you can go buy a $3,000 car for cash, now things start to loosen up a little bit. And then you can go buy a $6,000 car for cash. And because the good news is a $3,000 car in one year does not go down in value, it's pretty well done. So you can take your $3,000, $4,000, add to that, get a $7,000.

This is how Sharon and I got out after we went bankrupt and lost everything and and had 2 little babies. We did a borrowed car to a $1,000, $1,500 car to a $3,500 car. Those are the real numbers. I remember distinctly when I bought the first $10,000 car after bankruptcy. It was several years later. Wow. It wasn't 20 minutes later, and I wasn't trying to rebuild my credit because credit had not served me well. I was done with credit. And so I went to all the way to the bottom, lost everything, started in the hole because I still owed the IRS. My net worth was not, not zero, it was negative. I owed the IRS money because you can't bankrupt those buttholes. And so I still got the IRS, I've still got this and that, I've still got these things, and I've still got 2 babies to feed, and I've still got to keep the lights on. On, and I was so scared I couldn't breathe. I didn't know what to do. And so if you're in that situation, I've been there, and I'm not going to sit here and tell you what you want to hear.

And if that pisses you off, that's awesome, because that's my job, is to piss you off so you don't stay where you are. If I can upset you and make you move off your little butt, then I did my job. Because that's what people did with me. They didn't look at me and go, oh, Dave, you need a government program. They said, you need to go make some lemons out of all that— lemonade out of all those freaking lemons you got. You got cases of lemons, boy. You need to go do something with it. These are my friends, my family. They— zero mercy. Actually, it was really great mercy because it was the truth.

The way out— you can do for—

the way out is the truth. Not say, oh well, you know, you just need—

the poor need a line of credit.

That's the last thing you need when you're broke. It's gonna keep you freaking broke. So the last thing you need is a car payment because you got a car problem. And I just— my job here is to love you so well. I remember how that feels, and I am not gonna tolerate the narrative of lies that are gonna be thrown at you. I'm a consumer advocate. Advocate. We're here— George and I are here to help you, not anything else. You're not our entertainment value. We were entertained long before we got to these microphones. Doesn't take much. So this is what you've walked into. If you walk into the Ramsey Show, don't expect anything else. Steve is with us in San Antonio, Texas.

Hey Steve, what's up? Hey guys, thank you so much for taking my call. Sure. Can you hear me? Yes, sir.

How can we help?

Okay, so I'm gonna, I'm gonna ask the question and then I'm gonna describe the situation. My question is, when should I file for Social Security with IRMAA in mind? You are familiar with IRMAA, right? Yeah.

Okay, give me the rest of the story.

I'm so confused. Okay, so, um, I'm— I turned 65 in March. No, I'm a school teacher. Uh, I got Part A covered. I filed for Part A of Medicare. The rest, uh, because I'm still with the school district, I'm taken care of. Uh, I've got Social Security coming to me when I do retire. Not much, but some. Uh, next March I will meet with— in Texas it's called the, uh, what's it called? I forgot what it's called. But when you hit a certain age and the years of service, you get full benefits. All right, so I'll get that in March. The third source of income that I'm going to have when I retire is— and I'm blessed— I won a scratch-off ticket for $500,000, and that turned out to be $280,000 after the taxes were taken out. So my question is, with IRMAA in mind, I know in 2 years' time, uh, I will be taxed heavily because of that sudden growth of income. My question is, when should— what was your, your advice for filing for Social Security? Do I wait till after that 2-year grace period, or should I file for Social Security next year when I retire?

I would wait, given that you're going to take the hit on lottery. The lottery income is going to come in. Let that purge be the rat and the snake all the way through your taxes, and then do your Social Security after that. And then you won't have to deal with IRMAA. It's not a problem because IRMAA is not affected by net worth. It's affected by income. And so, yeah, that's what I would— yeah. And by the way, what they withheld from that is not necessarily your tax rate. Your tax rate is— they withhold 24% on lottery winnings, but you may or may not be taxed that. You may be taxed more or less. So you need to get some good tax advice as well. Go to RamseySolutions.com and click on taxes. When I started, I had great ideas and I knew how to serve people, but I didn't have systems in place yet. At that time, I sold books out of the trunk of my car. It was a lot harder to start a business back then. Shopify makes it easier. Shopify is the business platform powering millions of businesses and about 10% of all e-commerce in the United States.

If you've got a product or even just an idea, Shopify makes it simple to get moving. You can build a storefront, write product descriptions, and even improve your product photos all in one place. You don't need 10 different systems duct-taped together. Shopify handles everything you need to make sales. From payments to marketing and analytics. Plus, that purple Shop Pay button is one of the best converting checkouts on the planet for fewer abandoned carts. And if you get stuck, Shopify offers 24/7 support. So if you've been sitting on the sidelines, it's time to turn those ideas into— sign up for your $1 per month trial at shopify.com/ramsey. That's shopify.com/ramsey. Ramsey. Shopify.com/ramsey. Well, we wish we could get to every every call and question here on the show. If you got a money question, you want an answer for your situation, head over the website, use Ask Ramsey. Ask Ramsey is our free AI tool that's built and trained only on proven Ramsey principles. About 3 years worth of this show we dropped into it, and we dropped all the books we've written into it. We dropped all the articles, which there's thousands of that we have on our website on different subjects, into it.

And so it's pure Ramsey, no No Reddit, no TikTok, no crap, just what Ramsey says. And if you don't want to know what Ramsey says, then you wouldn't certainly use Ask Ramsey. But if you do want to know what Ask Ramsey says, you could ask Ramsey and you will only get a Ramsey-fied answer. As a matter of fact, it's getting increasingly smart-aleck. It's starting to sound like me, it's so bad. But hey, ask your question today at RamseySolutions.com, completely free. Ask Ramsey, or click the link in the description if you're listening on podcast or YouTube. Abigail is in Vermont. Hi, Abigail.

How are you? I'm doing well. How are you? Better than I deserve. What's up? Uh, so my husband and I, we've been married for 5 years now. We bought a house, uh, right before we got married. And before we got together, I lived at home with my mom, and I ended up buying my own house on my own. Kind of spiraled into— we had a good nest egg built up, so now 5 years into marriage, we have no debt except for our mortgage. And during that time when I was living at home before we were together, I didn't have any bills or anything. So I dumped a lot of money into my retirement account. I did it as a 403 Roth. Um, so I have about $143,000 in my retirement account. Our current debate that we have is my husband really wants to take a chunk of that money and pay off our mortgage. We have, um, about $54,000 in investments, including an emergency fund. Um, our yearly income is about $110,000. $100,000. But our investments and our retirement, we, we definitely have enough that we could wipe out our mortgage. But I wasn't sure if taking that 10% penalty because it did go in Roth, if that would be worth paying the mortgage off early.

That way we are every month except for June and July, we have an extra $1,600 that we are able to throw into our investments and our mortgage. What's your mortgage What's your balance? About $125,000.

Did you keep the house you just paid off?

Uh, so the first house that I bought, we sold it and we used that money to renovate our current house. Our house was a fixer-upper, so we did all of our renovations without getting any equity.

So you only own the one house? Correct. Yep. And you have $54,000 in— and you have $112,000. Owed, and $100,000, and $100,000, and what was your income?

$100,000 and what? So $110,000 in income. Our mortgage is $125,000. Okay. We have $140,000, yeah, $54,000 in investments and emergency fund.

You got $140,000 in Roths. Yeah, your husband's wrong. There's no possible way I would pull money out of a Roth and pay off a mortgage. I want your mortgage paid off worse than he does. It's going to do amazing things for you guys, but I don't want to be stupid in paying it off. And the hit you're gonna take on this account is not worth it to pay it off. You're gonna get there. You're fat on your emergency fund. You don't need $54,000 in there. So I'd take $25,000 of that and throw it on there. Then you got $100,000 to go, and you're doing, you're doing about $18,000 a year right now, $1,500 a month, right? Roughly, yeah.

I work per diem, so when I say our yearly income's about $110,000, I'm per diem. I'm a nurse, but I have a lot of like medical conditions that kind of inhibit me from working more. And we have— do you work?

Do you make $110,000 or don't you?

We do. We do. But some years we are able to make a little more than that.

Okay, well, when you make a little more, put a little more on it. But if you don't make a little more, then you're still okay. You're fine. I mean, you put $20,000 a year on $100,000, it's gone in 5 years. And you're how old?

Uh, I'm 28, he's 34.

Yeah, and so you're going to be not even 40 and you have a paid-for house. The house is worth what today? Uh, about $220,000. Good, good. You're gonna be in great shape. Y'all are doing so good.

I would reset the conversation with them tonight, go, hey, I know you want to pay off this mortgage, let's make a plan that doesn't involve decimating our nest egg to get there. Yeah, let's use future income, a little bit of our savings. Let's have a plan. Spitshake, 3 years, 4 years, 5 years, this thing's gone.

Yeah, and your 403, make sure it's invested in good mutual funds because a lot of them aren't in 403s. B's. They get into insurance products. Be careful with those. Let's just get in some good mutual funds, good growth stock mutual funds. You should be earning 10-12% average on your money, and if you are, you're going to double that money every 7 years. And so about the time this house is paid off, you guys are going to be millionaires.

That's one way to look at it. Now, as far as paying this off, would you recommend rice and beans or just continue on the path that we've been doing?

Continue on the path that you're doing. But I would just say, every time I look at— anytime we have, quote, found money— I get a bonus, I get some unexpected overtime, I get whatever— anytime we've got some found money that the budget didn't need and that, you know, we can still have a good life while we're doing it, I'm just gonna throw all found money at it. You know, you know, your rich uncle passes away, leaves you $5,000— that's found money, right? You just throw it at it. Something happens, you get $10,000 somewhere, just throw it at it. What's gonna end up happening? You're probably gonna pay the house off in about 4 years years without doing rice and beans.

Sounds about right. Yeah, yeah, I think that's where we're kind of—

yeah, I think that— I mean, that's, that's more than $20,000 a year, but you're gonna have some found money, you're gonna pick up your per diem, different things are gonna happen, and you can still have a good life while you're doing that.

And still go on vacation, go on a date. Yeah, yeah, don't punish yourselves for no reason.

And that when you're in Baby Steps 4, 5, and 6, which is where you all are, we are intentional, not intense. 1, 2, and 3 is intense, which is beans and rice, rice and beans. You don't see the inside of a restaurant unless you're working there, and you don't go on vacation till you get your butt out of debt and have an emergency fund. Then when you move to where you guys are at, Miguel, we go 4, 5, and 6, and that's intentional. And that's when we have a life, but we also have goals. And we're, you know, found money goes towards the goal. And your husband's got a great goal of having a house paid for, because guys, when you got no house payment. You know how fast that old house payment turns into a million dollars when it's invested? I did that. I took my old house, but when I finally paid off the house, it was— it was about $1,900 back in the day, and I rounded it up, $2,500, and I put that automatic draft into a mutual fund just to see, and left it on, never put anything else in it.

How fast that one mutual fund became a million dollars was absolutely mind-boggling. Struggling. Yeah, that's the compound growth on that.

Because you're used to paying a stupid house payment.

When you pay yourself a house payment— oh, and it's investing.

My goodness. Instead of paying interest to the bank, you're paying yourself some interest.

Ding ding ding. That's amazing.

Once you, you cross that threshold under $100,000, you're like, game on, we got this.

Oh yeah, you can smell it now. Anthony's in Chicago. Hey Anthony, what's up?

Uh, hey Dave, thanks for taking my call. Sure. How can we help? Uh, so I've been recently, I graduated 2 years ago and I've accumulated or accumulated a lot of debt in those 4 years plus the new car I bought that you probably won't like. But currently I sit at roughly, I was just trying to get like some tips and like, I feel like I'm doing a good job repaying it back. And I was wondering if you can provide any more helpful tips to keep going on that aggressive edge that I've started. What's the total amount? Total debt? Total debt after like the start or right now?

The balance right now.

Today? Today it's about $50,000-ish. What's your income? It's about $66,000, but I have overtime, so it was $76,000 last year.

Good. What's the ish $50,000 on?

So we got $33,000 in a private bank student loan. We got $17,000 in federal loans. And then my car is above equity value, above my loan value. I don't care. What do you owe on your car? Uh, $15,000.

Okay, so you don't have $55,000, you don't have $50,000, you have $65,000 in debt.

Uh, correct. Yeah, okay, all right.

That's almost 100% debt-to-income ratio. So you need to get this, this income up. We might want to sell the car if you want to speed this process up, but that's the only way to do it. Spend less, make more, throw the difference at the debt, debt snowball, smallest to largest balance, and hopefully you'll be out of this thing in 2 years.

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Sarah is with us in Oklahoma City. Hi Sarah, how are you?

Hey, doing well. Thanks for taking my call.

Sure, what's up?

Um, the gist is I'm wondering— there's a lot more context, but I'm wondering if I should take money out of my 401, um, so that my fiancé can kind of get prepared and pay off some of his debt before we get married.

I'm sorry, what would you do with the 401 money?

So I am staying at home right now with our 8-month-old baby. Um, so I haven't been working since like 38 weeks pregnant. And so I don't have my own income. So he's covering everything. Very grateful for that. Um, but I also hear you also make Um, total about $35,000 a year, so it's pretty low.

So you're going back to work, I take it?

Yes, at some point soon, but that's not on the table right now. Why? And we get married in 6 months.

Why are you waiting 6 months? You have a baby, get married tomorrow.

Well, so that's where the nuance comes in.

We're Catholic and we have to be kind of in a marriage prep before we can get married in the church. So we have it set up. We've tried to keep our lives fairly separate. We wouldn't be living together, um, if we didn't have a baby, but this is where we found ourselves. And, you know, we made certain decisions so that I could stay home with our son. Um, I was in an in-between. I had left my career a few years ago. So it was just working part-time.

You're looking for a magic switch to make an impossible set of math work, and the magic switch is not your 401. 401. So this is the, the box that you guys have built for yourselves that you're trying to live in, um, doesn't fit, and the 401 is not going to make it fit. So you, how much debt does he have?

Um, he has about $28,000, and I have zero.

So that's also part of it is Yeah, well, number one, you know, I'm fairly aware of the detailed pre-marriage process that a good Catholic goes through. And it's also, by the way, for those of you that aren't Catholic—I'm not, but I'm aware of this part—the statistics of the folks that go through the pre- premarriage system that the Catholics use are very good for staying married. So the premarriage process that you're talking about is very thorough and very good. I'm a believer in what you're doing. I'm not aware of how they treat a child out of wedlock in that process. That's a little surprising to me, mm-hmm, that the priest would say, "Wait, you've had a baby, but we're still gonna act like you didn't and go through all of this detailed pre-marriage counseling as if you guys weren't sleeping together." That's weird. Mm-hmm.

Yeah, it surprises us too. So in our area, they actually don't even start marriage prep until after a child is born. So even though we've been together for a couple of years, just to allow I guess like freedom with the sacrament and make sure that it's not— that makes no sense.

Okay, I don't know. I, I don't know. I don't— that— I don't know. That's confusing to me, but I, I don't, I don't know how to speak into that.

Um, what were you doing before and how much were you making?

So immediately before he was born, um, I was just working at a brewery and some like substitute teaching. The 401k is from, um, when I was a teacher, a public school teacher, a couple of years ago. Yeah.

Okay. And what's he doing?

Only making $35,000. How much is in the 401?

Only about $13,000.

Okay. All right. If you take it out, it's $6,000, not $13,000. By the time they take the penalties and taxes out of it, might be $7,000, might be $7,000. Okay. And so it's not going to— what my point earlier is, it's not going to fix your problem. Your problem is an income problem and a marriage problem, and you need to solve both of those as soon as possible. His income going up, temporarily working 6 side hustles. Your income going up, picking up a side hustle and planning to go back to work. And decide— and you do not pay bills for someone you're not married to, period. And I, I don't know how to solve the part that is tied to Catholicism, because I don't know enough about it to speak intelligently. But, um, I do know if I were in your shoes, I would sit down and talk to a priest and figure out some process by which we got married sooner rather than later. And so if you're going to be married and you're going to have a child, and you already have a child together, then, you know, the sooner you get that together, the faster faster your all's lives are going to be knit together, the faster you're going to be able to get the debt cleared and build wealth and so on.

But cashing out this 401k doesn't fix— it's like spitting in the wind. You got $60,000 and $70,000 problems. You don't have a $6,000 problem. And by that I mean your all's incomes suck. And so, you know, the debt payments alone probably eating up half the take-home pay. Yeah, and it doesn't fix it. It doesn't fix it. It's like where it's a glancing blow at best. Okay, so yeah, yeah, interesting. So if you cash out your 401 early, you get a 10% penalty plus your tax rate. So it's typically going to be a 25% tax rate plus about a 10% tax penalty, so about a 35% hit. So roughly one-third of your money. It's like saying I want to borrow money at 35% interest to pay my fiancée's bills. Okay, number one, we don't ever pay our fiancée's bills under any circumstances. You're not married to them. Do not pay someone else's bills. It's your roommate, and legally that's where you stand. And if he decides he's just gonna say, yeah, I don't really care about priests, and I don't really care I don't really care about babies, and I don't really care about you. I'm just gonna leave.

And then you paid his bills. Now that's the other call we get on the air here.

I paid the bills, I paid his debts, and then we broke up. What now?

Because I thought we were gonna get married, I thought we were in love, and I thought we had a baby together. Oh wait, that last part you did do, but yeah, this is where you get yourself in a pinch, boys and and girls. Girls. Uh, yeah, this is a problem. It's a serious problem. All right, not aimed at her, but just because I can't get it out of my system right now, there's several pieces of research on what's called the success sequence. If you first graduate from high school and only then do you get a full-time job and only then do you get married, and only then do you have children. If you do those things in sequence, if you are a millennial, you have a 97% probability of not being at the poverty level. If you get them out of order and have babies before kids and high school and jobs and grown-up stuff, and you get them out of order, then you have a much higher probability of being at the poverty poverty level. And that's exactly what I'm talking about. That's what I'm fumbling around on here. And so after the— after the cow's already out of the barn, now what do you do?

You know, well, all I can do is try to help you from where you are at that point, and that's to return you as quickly as I can to the success sequence, which is, you know, okay, we got the baby thing out of order here. Well, let's get married as soon as possible because otherwise you end up, you know, I make really good money and I paid off all his debts and then he just left because he really didn't want a baby. And even though, you know, yeah, and this, you know, oh, when he took the car I bought for him, it's in my name and he's not paying the bill and my credit score is getting messed up. I'm gonna get repoed. What do I do now, Dave? These are the calls George and I get every week. And so I I can't— I just want to grab all of you that are 18 to 26 years old by the shoulders and yell in your face, don't shack up, period. There's no data that says this works. None. There's lots of research says you're going to get your face pounded in. You're not— your net worth is going to be 1/13 of what it should be if you're shacking up and you're 35 versus your friends that are married and they're 35.

1/13. That's more than 10x that you screwed yourself up. This stuff matters. Get it in order. Molly is in San Antonio, Texas. Hey Molly, how are you? I'm good, how are you? Better than I deserve. What's up?

Well, my husband and I are trying to come to an agreement on on pausing investing to cash buy our next house and wanted to get your opinion on that. Okay. I'll give you a little background. We are 33 and 34. We bought our house at 26 and paid it off in 5 years. Way to go. We have no debt. Wow. We have 2 kids, so we have our retirement and 529s. Um, just, you know, outgrowing our house. We want more land. We would like to build. We're just kind of—

good for you, I love it, way to go— figuring out. So what's the current home worth? Uh, about $400,000. Okay. And what would your target be for the move? How much?

Um, looking to be about $700,000 with the land. Okay, so we need $300,000.

$300. Yes. Okay, I got that. And do you have any investments or savings beyond emergency fund that are not retirement money?

Yes, we have a brokerage for the house that's about $125,000.

Okay, so you're almost halfway there. Yes. Okay, and what's your household income? Last year we grossed $190,000. Good for you, well done. Okay, and how much is in your retirement retirement with 529s and—

No, retirement accounts. Oh, just retirement. Mm-hmm. $160,000. Okay.

And how much is in the 529s?

Um, $60,000.

Okay. And how old are the babies?

Uh, about to be 7 and 2.

And you're 34, you said?

Yes, 33 and 34. Okay.

And so the argument is, do we sell stop retirement and 529 temporarily to get the other $175,000 that we need to finish this deal. Correct. And you make $190,000. So is that a 2-year plan?

Yeah, my husband works overtime and has the option to make more. So if we— I think if we did this, we would probably really crunch down.

And I mean, if you did $175,000 $85,000, um, you would need to save $85,000 a year, right, out of $190,000 to do it in 2 years. Yeah, we can do that. Yeah, so it's a 2-year plan. So if we don't stop saving for retirement, instead of 2 years, how long does it take us? 3? Yes. So we're arguing about a year That's correct. Okay. It always helps me to kind of boil it down when Sharon and I are looking at this, because it's not really philosophically some big, oh, we're not going to save for retirement. It's like one year difference if we do or if we don't. So we're really arguing about a year's worth of retirement savings, or 2 years worth of retirement savings, one 1 year on the— when we purchased the house. So would we give up 2 years worth of addition or savings in my 30s making $190,000? What would you do, George? That's kind of interesting.

I like that. I mean, I was in this exact— it's a good argument— when we paid off our first house and what you do, and we wanted to cash flow the second one, I kept investing. I kept investing at that 15% rate but not more, because, you know, once you're in Baby Step 7, you can invest 20%, 30%. %, but we kept it at 15% and the rest of it we stacked away to make—

and how long did it take you to save them to do your move up?

2 years? That was— yeah, that was a couple years, probably 3, 4 years, probably 3. So I think you guys need to decide the urgency of the house move. Does it need to be $700,000 to $650,000 work? Because you're talking— if you're investing 15% right now, that's about $28,000 of your gross income. That's what you're actually talking about. So does the $28,000— is it worth worth waiting a year? Is it worth investing for that year?

It's more like 6 months now once you talk about that one.

Yeah, if you guys actually crunch the numbers, I'm curious what the actual numbers would be based on how much you're investing now, what pausing would get you, what that next house will actually cost. Because the other part is buying a new home is just the starting point, is that $700,000 number, and then you've got the furniture and the moving costs and all the extra things that you want to do. And so it just gets— it's been cash flow that. Yeah, making $190,000, you guys will be fine because they don't have a house payment.

Nowhere in this scenario is there a house payment.

What's your emergency fund?

No payment. Emergency fund is $45,000.

Okay, you guys, I gotta tell you, you're like poster children. Amazing. Very, very well done.

When we did pay off the new babies and—

I mean, y'all are— y'all really got this nailed. You're gonna be— no matter which of these choices you take, you're gonna be very well wealthy because you're doing several things. You're very intentional. You both are having a vote. You both talk about it. We even argue about it sometimes. Um, and we both are setting detailed goals, but neither one of us are budging on the stuff. Like, I'm not going to go into debt. Neither one of us are doing stupid stuff. You're both just deciding, you know, which type of investing we want to do. Do we want to do single-family real estate that we're going to live in? Or do we want to, you know, put this money in the mutual funds for there? So, um, so George said, okay, so really it's $28,000 a year. So it's 2 years of that, $50,000, $60,000. If you pause for 2 years.

Yeah. Are you guys investing 15% Molly? I'm just throwing a number out there. I have no idea.

I did the math and I think it might be like 16 or 17%. So we could back off a little.

Yeah, you can back off a little, but I mean, yeah, so it's, it's $28,000 a year if that's the case. Yeah, it slows your savings rate by that.

I like the personal challenge of going, can we do it without pausing investing? That's just a fun challenge for me personally. I'm just a super nerd. So I would go, can we increase our income by $28,000 temporarily? That could be an interesting challenge too.

And that— then you're still done in 2 years.

Can we cut our expenses by $14,000 and make an extra $14,000? Boom, you just got to make a game out of it.

But yeah, because both are excellent goals. Okay? So there's neither one of these things put your face in the stupid column. You know what I'm saying? You guys are just doing so good. I'm so proud of you.

It's almost like you're reverting to Baby Step 3B for a time. That's kind of how I see it.

There's not a wrong answer to the argument.

Yeah, we say zero to 50%.

I can't just say, you know, Molly, you want you win, your husband loses, or husband, you win, Molly loses. I can't just— there's, there's not a wrong answer because both of these things are very smart. And you follow the Baby Steps properly, you're not going back into debt to move up, which I would yell at you for. Um, all of that, you just— everything about this conversation is so healthy and positive. I think you two are going to figure it out. Um, and also, by By the way, there's even a weirder scenario mathematically, halfway in between. Oh. We shut down investing for 1 year. And then we start. We take on the overtime and we cut over here, and then where do we end up? How much, you know, and then we're not talking even about 6 months or 8 months, we're now talking about, you know, just a few months difference and then it's irrelevant. Yeah. So that being said—

So round the middle.

You just want to hit the middle. Yeah, just hit in the middle and go.

I like to fast forward and go, "Okay, when we're 65, do we want to have $11.3 million or $11 million?" That's really what you're like, "All right, we're going to be okay." It's not worth the brain calories at this point. That's true.

That's exactly what it's going to end up to.

It's going to be good problems to have.

That's funny. Oh, Molly, it's so refreshing to talk to you today. Thank you for calling.

Hey guys, Dave Ramsey here. Every day on this show, we help people work through real money problems and figure out what to do next. Now you can get that same kind of help anytime with Ask Ramsey. Ask your money question and get answers built on Ramsey principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to RamseySolutions.com and try Ask Ramsey today. That's RamseySolutions.com. Sydney is in Lancaster, Pennsylvania. Hi Sydney, how are you? I'm good, how about you? Better than I deserve. What's up?

Oh my gosh, sorry, first of all, just so happy to be on the phone with you. Oh my gosh, I like grew up listening to you till like the This is just wild to be on the phone with you.

Well, we're honored. How can we help?

So my fiancé and I are getting married in January, and, um, we both already are living outside of our parents' house. And so we're trying to figure out what to put on our registry. Um, and a lot of people have been telling me, oh, don't do a cash fund because people want to give you things, and if you don't tell them what you want, they'll just give you crap. But both of us really just would prefer money for the future. Like, how do we go about doing that, or should we just like upgrade the stuff that we have?

Wow. Um, well, what occurs to me is, is that you might ask people to give you money, but certain ones won't. They're just not going to. Yeah, like my wife is old-school Southern Southern redneck hillbilly, whatever you want to call it, right? And the chance that she's giving you money for a wedding, for her that would be tacky. Yeah, it's outside of her value system to do that. She couldn't do it. Um, she's also the one that sends flowers to funerals when they say don't send flowers. She doesn't care. I mean, she cares, but she doesn't because she's going to do what her upbringing taught her to do, which is to bless the bride and groom with a silver platter that they will never use, of course. I mean, so it's a very Southern thing to do, or genteel thing to do, or whatever you want to call it. But I don't understand. I would take the money, but I'm with you. George, you got married how many years ago?

That was 2018, and we used a registry site. I'm sure you're using a similar one, Sydney. We use one called, I think, Zola, which is a popular one. And on there we had all the registry stuff, right, all the Target and Amazon crap. But we also had like a home down payment fund listed on there with a little cute, you know, picture. And a few people gave to that. You could do a honeymoon fund, and that's just a cash gift that people can give through that.

And can you write a little paragraph at the top saying, 'We prefer this'?

Yeah, you can say— and I— you could place it. I placed mine right at the top. I want everyone to see that first. And then the invite— GoFundGeorge. Exactly. And so the invite is a little trickier. You don't want to be like, here's the invite, also cash gifts preferred. You could.

Yeah, yeah, that starts to be a little tackier. Yeah, yeah. So put it on the registry, George says.

Yeah, if it's on there as a link and you can, you can have—

And the more practical among us will give you money, and then the ones that were with proper upbringing, like my wife, will give you something you can't So, mm-hmm, do you guys have a specific goal in mind for this money, or is it just we'd rather have money?

So yeah, that's the other thing we're trying to figure out. So we both ultimately want to do overseas missional work, like relief work, also like through church organizations. So we would love to— like, it would be so much easier if it was for a house because people would be like, oh, we could see that goal in mind. But we just don't really have any—

if you're— depends on the audience. I mean, if it's a if your friends and relatives are believers and they want to support your working for the Lord, then that might be more motivating than buying you a house.

I'd feel more convicted over getting a cupcake platter to go, you know what, I should probably support the missions they're so passionate about.

Cupcakes or Jesus? Yeah, you pick. Uh-huh. Okay.

But you can put that on the registry site. You can put a little blurb of, hey, here's, here's our heart, here's what we'd love.

Now, if you collect money to go on a missions trip, you cannot spend it on your house. That would be ethical. Oh, definitely not.

And also, Sydney, here's the fun part: you have the addresses of all these people now. I might just do a follow-up later with a separate missional ask versus trying to combine it into the wedding.

Okay, okay.

That feels better to do a support letter 6 months after you're married. Hey, thanks for the gift. Also, thanks for the cupcake platter.

Yeah, Jesus.

Yeah, so I might separate it out just so it doesn't feel like you're kind of mixing two wonderful things at the same time. That's fun.

But you know, that's a fun question.

If people are gonna think you're tacky, they'll think you're tacky. Rachel thought I was tacky because I had a QR code to give to my daughter's 529 at her birthday party instead of gifts. I went, I don't want more toys and crap for a 1-year-old.

I don't know if it's tacky, it's just strange. Yeah, it's pretty nerdy. Yeah, I just got a QR code for— how old was your daughter?

It was her 1-year-old birthday.

For her 1-year-old birthday party, you put a QR code on on your kid.

It was not on her person.

Yeah, well, same thing. Like you put a tattoo on her forehead, it's like sponsor the 1-year-old. Gosh.

Well, now I know Dave wouldn't support my daughter's 529.

Uh, no, I didn't. I wasn't invited. But yeah. Oh, that's fine. I, I'm kind of with Rachel. I don't know if tacky is the right word. Yeah, this is close family.

It's just a stranger. Nerd George. I wasn't soliciting money from strangers.

They know you, they don't think it's tacky. They I just think it's George. Can I tell you, nobody gave to the 529. Dead gum QR codes just don't work.

Backfired. Not a one. It backfired. Not a dollar. My parents, they give every year to her 529.

I know, but not through the QR code. They don't even know how to do the QR code.

You know how long it took me to figure that out?

Oh, that is so classic. Now I'm upset. That is so classic. Well, that answers the question.

This is a don't try this at home situation.

Wow. Don't DIY. Why this puppy. Oh my gosh, George, that's funny. Oh boy. All right, I got the wrong number. Here we go, here we go, here we go. Tessa's in Chicago. Hey Tessa, what's up?

Hey, thank you so much for taking my call. Sure, how can we help? So I want to start off by saying that my husband and I have gone over this, and I have very strict instructions on what I'm supposed to tell you. I am the problem. Very— I acknowledge it, I do. I'm trying to have gazelle-like intensity. I listen to Total Money Makeover every single day as a little piece of motivation for my day. Um, I'm trying to get better, but he works really hard and he lets me stay home. I homeschool our kids. Um, I'm just— I don't want to be careless with his hard-earned money. And we got ourselves into a position when, um, we bought my parents'— my childhood home. We decided to buy it and run renovate it. Um, we started off doing FPU when we got married, and we— oh, the only debt we have are mortgage, the home equity, which is the problem, and then we do have a truck payment, but his company gives him an allowance for that.

They give him an allowance whether you have a payment or not.

They do not. That's not true. It's got to be like so many years new. No, they did not.

Yes, they do. They give you an allowance whether you have a payment or not. It has to be a certain age, but it can be a paid-for truck. Yes. Okay, so that you don't have to keep the payment to keep the allowance. So don't, don't, don't say that again. Okay.

Yeah, so that's kind of unclear for me. He had told me how it works, but I still don't quite understand that.

But yeah, he gets an allowance for a truck, but it has to be a certain age. It does not require it has debt on it. It's that simple.

So we are suffocating and we're dwindling our savings. We do have our $1,000 emergency fund, but that's pretty much it. Everything else dwindles, and I don't I don't know if it's a matter of—

Where does it dwindle to?

So we are paying, our mortgage is $1,195 a month. We pay $1,000 on the home equity every month. What does he make? He makes $98,500 a year, take-home.

And you're at home full-time with the baby?

I am a photographer, so I make a little bit, but it's like $8,000, $9,000 a year. What's the truck payment?

Did he get zero?

The truck payment's $810, and he gets just under that, like $760 or $770, something like that. Yeah.

Okay. All right. Well, the truck has to get paid off and that'll give you your margin back for one thing.

You do that before pushing more at the home equity?

Whichever one's the highest balance is second. Yeah. Okay. And have you stopped your 401s?

So that was our main question. He's currently contributing 11%.

Listen, if you listen to Total Money Makeover, you already know you're supposed to stop your 401. 401, right?

That was what— I just passed that chapter, so yes, that's what prompted the phone call.

Yeah, yeah, you definitely stop it. It's a temporary stop until you get these debts cleaned up, the mess you've made, and then you, then you got margin and you can do this. But you can't do everything at once because everything at once isn't working. That's why you called.

You're going to get almost $1,000 back in every single month if he stops his 401. And then we clean up the HELOC, sell the truck, get a cash one, and you're set.

Yeah. Got your margin back. You gotta have— you gotta— truck has to be a certain age to get the $800 or to get the $700. And so then you start to wonder if that's actually worth it or not. It might not be worth it because you might be keeping a truck that's expensive that you're wearing out. You got to look at the math on that truck. But anyway, yeah, stop the 401k temporarily and beans and rice, rice and beans. Get on the EveryDollar budget, both of you. No more eating out. And no more vacations until these debts are cleaned up. You bought a house and a truck you can't afford.

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Today's question comes from Amanda in Utah. I vacation on the same cruise line twice a year. Each cruise is 14 days long. If I buy 100 shares of their stock, I will receive $250 in onboard credit per sailing, which equates to $500 a year. Even without growth, I would get my investment back in about 5.5 years. I know you don't recommend investing in single stocks, but under these circumstances, do you think it's worth it for me? Oh boy.

Get your investment back.

How do you get your investment back?

With her onboard credit of $500 a year. Oh.

Oh, so it's not just one time. Every— if you're a stockholder, one time of 100 shares, anytime you sell, I guess you buy 100 shares, you buy 100 shares, but anytime you sell you get $250 in onboard credit.

It's one of those that the juice ain't worth the squeeze here, especially with 5 and a half years to make the money back. Yeah, that's not— for onboard credit that you may or may not—

yeah, onboard credit, which is marked up crazy. Crap. Use it in a gift shop.

Yeah, a massage.

Were you on here the other day when the guy called about the million dollars in onboard art? Oh no, but that one went viral.

I saw that.

That was wild. He said his mom— his mom had been on cruises and she's buying onboard cruise art and had dropped a million bucks in it over the series of years.

She had the money, clearly.

Well, yeah, but now she doesn't. She completely broke now because it's all invested in onboard art, which I didn't even know was— I mean, I knew they had— I've been on cruises, I've seen the onboard art. I didn't— it can't be great. I don't invest in—

was she 3 sheets to the wind? How do you do that?

I mean, she had to have been like a lot of 3 sheets to the wind. That's like— she did this over a period of years. But yeah, so anyway, what do you buy on board a cruise? I mean, it's like going to Disney. They sell $9 raincoats that they— because it rains every afternoon because they control the weather.. And it rains every afternoon at Disney, and they sell you a $9 raincoat with a Mickey on it that they paid 49 cents for in China. And that's what you're buying on cruise ships. Yeah, it just— take your money. It's not like it's, you know, like you're getting mink coats or something on there. I mean, or whatever.

Well, she's saying 5 and a half years, so this must mean at $500 a year she's getting— talking— she's gonna spend almost 6 grand to buy these 100 shirts. Yeah, that's crazy.

Overall, the answer would be no. Put that $6,000 in high-yield— your onboard credit is going to stuff that's marked up at least double. And so now we're not at 5.5 years, we're at 10, 11 years. And, and it's stuff you might not have purchased anyway. And so buying something on sale that you don't need is not a good buy.

And think about it this way: if this was a credit card that said, hey, if you spend $50,000, we'll give you this many points points. We'd say that's crazy, don't do that, don't spend money to try to—

we're going to say it about this, that's crazy, that's— don't do that. Okay, there we go. Ethan's in Jacksonville, Florida. Hi Ethan, how are you? Hey Dave, how are you? Better than I deserve. How can we help?

Hey, um, so my question is, do I leave my current job? I've been here for about 2 years. And do I go work with dad for his HVAC company and potentially take it over whenever he's ready to hand it up.

Okay, well, what do you make now, and what would you make there?

So me and my wife right now—

no, what do you make at your job now that you're going to give up?

Yeah, $65,000.

And what would you make fixing HVAC for your dad?

Uh, he would start me out at the say. Mhm.

So that's what an HVAC tech makes in Jacksonville, $65,000?

Uh, roughly. It is— I mean, he's being generous, I'll say. I don't know exactly what an HVAC tech would make, but what do you—

you're not an HVAC tech now?

No, no, not— I'm not, I'm not like, you know, experienced.

How many employees does he have? He only has 2 right now.

Mm-hmm.

And how old are you?

I'm 23. And how old is he? 46, 47.

Okay, so he retires at 65, 20 years from now, and you're 43. Meanwhile, you've been an HVAC tech for 20 years working for your dad, and then you get a company of whatever size it is at the point, 20 years from today. Correct. Yeah. Um, let's pretend this wasn't your dad. Okay. Somebody offered you a job making the same amount of money you make now, and in 20 years you could have the opportunity to buy the company or be given the company 20 years from now. Would you do that?

That's a hard one, Dave. I don't think you would.

I think you could start your own HVAC business and have more than 2 employees 20 years from now.

Yeah. So I, you know, what I might do is this, I guess. I guess, do you want to— I mean, does he need the help and you want to help him? Do you want to work together? Does— what's your— I kind of feel like there's like love involved here, like you're trying to love your dad dad well?

Yeah, like, I mean, he's so— so he's my stepdad, uh, so he's been nothing but a dad to me. And, um, you know, and I want to help him out. I want to, you know, I want to do whatever I can to help him. And, and I love the trade. The trade is just— I mean, it's, it's a good trade. I worked with him when I was throughout school, so I mean, I love it.

It is a good trade. What do you do now?

I work, uh, for Mannheiser. Okay, so I work swing shift and it— I'm young but I feel old, I ain't gonna lie. You're young but what? I'm young but I feel old because of the swing shift.

Oh, oh, oh, yeah, yeah, graveyard. Yeah, that'll get you.

Okay, um, she, she— so getting on day—

getting on days sounds fun, better quality of life. Yeah, yeah, I'm going with that. Okay, so here's what I would do if I did go forward with this. Let's continue the conversation before you make a decision. Um, number one, you said you're how old, 23? Yes, sir. Yeah, so I, I would want a written game plan for clarity so that everyone, him and you and your mom and your wife, all know what you're signing up for, okay? Okay. And that's called a partnership agreement, or we can call it whatever. And I want you guys to really spend some time detailing this out, because this way, when this is over, you'll still be friends, okay? And if you don't do this, you probably kill each other, you know what I'm saying, right? Yes. So it worked out when you were a teenager, but you're not a teenager anymore. You're like a grown man and stuff. Stuff now. So you guys gonna have opinions. So I want him to progressively hand you ownership over the years. Okay, so you kind of move into ownership, ownership position, and not suddenly 100% at 20 years from now when he's 65, but instead after you've been there 5 years, he's going to give you 25%.

After you've been there another 5 years, he's going to give you another 20%, and now he's still major owner, and you're 33 and he's in his 50s. Okay, kind of think that through, how that's gonna feel for him and for you. But I want him to begin to hand you ownership in this, and then based on that ownership, you're going to get paid for the job you do plus the percentage of ownership you have of the profits. And so if the thing makes a profit after you're paid your salary and he's paid his salary salary for working there, or his income, if it makes $100,000 and you have 25%, you get an additional $25,000. Follow me? Okay. Yes, sir. Then lastly, you have to cover all the Ds. What happens in the event of death, divorce, drug use, disinterest— I don't want to do this anymore. What happens in the event of Ds? Disability. Gets hurt, they're in a wheelchair. What happens? How's that gonna take— how's that gonna shake out? What happens to the ownership? What happens to the income? Write all of that stuff down or don't do this.

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Our Scripture of the Day, Isaiah 32:8, "Generous people plan to do what is generous, and they stand firm in their generosity." Charles Buxton said, "In life as in chess, forethought wins." I gotta tell you, I love hearing all these results from the people using EveryDollar. We've got tens of millions of people now using this budgeting app, and it's following the Ramsey steps exactly. It's giving you a personalized plan, and it helps you get out of debt and into wealth faster than anything anything else out there. It's the shortest distance. Dave, just being able to use EveryDollar and see the extra we have every single month was super motivating. We have thousands of dollars extra and just throw it on the mortgage. Hey, that's pretty cool. I love it. So you get to pick when you do it on purpose. I like this. Start EveryDollar for free in the App Store or Google Play. Aaron is in Anaheim, California. Hi Aaron, how are you?

Good, Dave. Thanks for having me on the show. Sure. What's up? Well, um, got married a little over a year and a half ago and, uh, wife and I have done pretty well and we're trying to buy a house. Um, we live in Orange County specifically. Um, and it's super pricey to live here as, as you probably know. Yep. Um, our goal is to buy a home. We've been smart. Our parents have raised us right. Um, my dad put me in touch with all your, your stuff and I've been hooked to the show ever since. So it's been a pleasure and a blessing in my life and my wife's. So Yeah. So we, uh, we've been smart with our money and we feel like we've done well with it, but I'm kind of reaching a point as we get maybe a little bit closer, um, to figure out how we should move it around from here, I guess. Um, it's currently invested in the stock market. In the what? What's that mean? In the stock market. I know.

And what in the stock market?

Oh, uh, 80% is in equity investments and then 20% is in bonds and fixed incomes.

Equity investments. What's that mean? You got it in a single stocks?

No, it— well, yeah, it's kind of spread out across multiple different stocks, and the advisor that's helping me has put it in the market.

Okay, all right. Well, that's not what we teach, you know that. Yeah, that's one thing.

That's very risky.

Yeah, it is. And it's done— the bonds are worse. Yeah, the bonds are risky too. Yeah, okay. So that's where we have it right now.

I mean, I mean, we've done well with it, but the market, you know, we're concerned that it's going to come down, and when it comes down, how far is that going to set us back? And I think it's time that we maybe reconsider where we have our money right now. Okay.

Yeah, I don't time the market either, so I don't know. I would not do it based on what I think the market's going to do because most people don't have any idea.

No one could have guessed the market was going to be up as high as it was 3 years in a row these last couple years.

Yeah, in the last 5 years it's doubled, and nobody could have guessed that. Sure, if you know— if you— now that's not in the portfolio you've got, but the portfolio that I've got has doubled. Uh, yours may or may not have done that because those stupid bonds probably were an anchor on your— dragging it down. Um, anyway, uh, when— how much is in there, and when will you be buying the house?

I've got about $250,000 in it right now, um, not counting like my emergency fund and other savings that we have. And our, our goal is— I mean, we're renting for really cheap from family right now, um, a house from our— one of our family members that they own.

And, uh, why— with $250,000, why have you not bought yet?

It's so expensive, like, for a single-family home. It's not gonna go down. I know, but for our area, it's between 1.1 to 1.3.

I know, but it's not going to go down, and you have $250,000.

I'm in a sales role, and it's, uh, it's commission-based, heavily commission-based. So it's been kind of my goal to throw down as much as I can at a home. And, um, and since my rent is so cheap and I'm not really pushed up against a wall to move out, um, I mean, my wife and I have the goal of moving out, right? We don't want to take advantage of it.

But okay, so it— would you— are you going are you willing to trade the volatility of the portfolio that you have and the returns it has for zero volatility and moving $250,000 into a high-yield savings account? No, that, that's—

that was what I was kind of questioning. Yeah, is it better to have it in high-yield savings, or—

if you're going to buy within 12 or 14 months, yes.

Okay, because your heart's going to sink when 12 months from now your money's down.

You know, if the market dropped 10%, that would be like one worst drops in a year in history, in history, and that would be $25,000, which would not keep you from buying a house, right? So it's not that big a deal, but I don't know what kind of mess your portfolio is and how volatility you've got, how much volatility you've gotten yourself signed up for. But if you were just telling me you're like in an S&P 500 index fund and you're just sitting there riding the actual market. I mean, it's up 10% for the year right now, today, year-to-date. So you have any idea what your portfolio is up this year?

I'm up 8%, a little over 8%.

So you're not even keeping up with the basic S&P 500. Mm-hmm.

Yeah, probably because those bonds and fixed incomes are keeping it back right there.

Almost like what I said earlier. Yeah, you got to anchor on this. And you know what bond values do when interest rates go up?, right? To go down. Yeah, they're an inverse relationship. Exactly. So that's gonna be bad. Um, we were thinking, I mean, I guess, let me quit mouthing around the edges of this. What would I do if I woke up in your shoes? I would move it all to an HSA, or I would move half of it, or an HSA, high-yield savings account, um, and, um or I would move half of it there and the other half into just an S&P 500.

And we get the best of both worlds.

Now you got a little mix. Whatever the market does, you're gonna get. But you get— that gets rid of the S&P 500, probably half as volatile as what you've got right now. I wouldn't be in what you've got right now for anything. I don't have a dime in a portfolio that looks like that, not one. I don't play single stocks, and I for sure as crud don't play bonds.

And I would have an end goal, an end date, instead of just vibing, going, well, maybe a couple years from now. Just go, hey, 12 months from now, what are our amount of money?

And do this, you know, when I get to $400K, we're going, we're going. Or when I get to $300K, we're going. Or whatever the number is, have a name, have a name on it, and then let's go do it. Because the sense of I'm in sales and I'm scared of volatility is never going to go away. Away, that you're going to have that as long as you're in sales. And so that's not going to change based on the expense of the real estate or based on the interest rate environment. It's not going to change based on any of that. And so, um, yeah, that's, that's what I would do. I would take all the money out of that right now. I would put either all or half of it in a high-yield savings and not worry about it anymore. If I put half of it in, I'd put the other half in the most volatile thing would be an S&P 500. And I use personally an S&P 500 to park money in while I'm saving up to buy my next real estate project, which is some of my favorite investing. And so I'll let it sit there.

And so I've made 10% on my money this year, you know, that's been sitting there year-to-date, and I'm fine with that. And if it went down 4% or 5%, I'm not gonna kill me. Be fine with that. You're not desperate. But I, and I don't have to sit there and make, you know, high-yield savings rates, which is what, 3% or 4% right now?

Yeah, 3.5% about. Yeah, somewhere in there.

So that, that's the thing.

So it's a good call-out that this is— we're talking non-retirement accounts here. Yes, yes, absolutely.

And retirement accounts, we suggest putting money across 4 types of mutual funds.

Yeah, you're gonna have your aggressive aggressive growth, growth, growth and income, and international. So, it's kind of like large-cap, mid-cap, small-cap. And we're talking about the huge companies. Those are the safer bets. These are like the cruise ships. It's going to be hard for them to move much. And then, as you get down to the small-cap and these aggressive growth, it's like a jet ski. These things are moving. And sometimes, it's great. Sometimes, there's low lows. But you're riding that wave to capture it over a long period of time. And then, international, we saw this happen. International actually went up as the U.S. market went went down. So it's a good hedge against the market here stateside. So all of that helps you just sleep better at night.

So what's crypto, a pirate boat?

Oh gosh, at this point I'm not sure who the pirates are and who's taking them down. I think they're taking themselves. They're sinking, I know that. It's like 56% down.

Oh wow, what happened to you crypto bros bragging about yourself and you're off 5, 6%? 50 '66, baby! Lost half your money. They get real quiet when the crypto bros get real quiet when it's not— they took their ball and they went home. Yeah, they just go hide in the corner of TikTok over there in the deep corners of recesses of TikTok. Hey, go back where they came from.

When investment's not based on anything and it's just hype, as soon as everyone jumps off the boat—

yeah, I hadn't noticed anybody bragging about gold lately either. We'll be back with you before you know it. In the meantime, remember, there's There's really only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.