Transcript of Temporary Sacrifice Can Change Your Future

Normal is broke, and common sense is weird, so we're here to help you transform your life and your money. From the Ramsey Network here in the Fairways Credit Union studio, this is The Ramsey Show. I'm Jade Warshaw. Next to me, George Campbell, we'll call him GK, taking your calls about your life. 888-825-5225 will get you on the line. Call in, we'd love to hear your call. We've got Travis, who's in West Virginia on the line first. Hey Travis, what's going on in your world?

Hi. Hey, how are you today?

We're doing good. What's up?

Great, great. It's a pleasure. Um, so basically I'm living paycheck to paycheck and just not really sure what to do.

All right. Well, tell us what's going on. Is it, uh, do you feel like it's a thing where you guys are overspending, or is it, uh, you just not taking home enough money?

Um, I feel like it's not taking home enough money. Um, I have my monthly budget here and it's $1,706.21, and my monthly net is, let's see, uh, $2,016.

Okay. And that's what you're bringing in, or that's what you're spending?

Um, that is my bring-home, monthly is $2,016.

Okay. And.

Are you single? Um, I am engaged. I do live with, uh, my fiancé.

And is she bringing in any money?

We actually work at the same place and we make the same amount of money.

Okay.

So total about $4,000 coming in between the two of you if you were married and combined finances?

Um, combined finances, her budget is going to be roughly about the same, so we would just need to double it. This was just my monthly budget.

So $4,032 or give or take between the two of you, and then the $1,700 in expenses double that as well?

Yes. Yes, ma'am.

Okay, okay. Okay. So, I mean, there's, there's a couple of things going on here. George alluded to the fact that it, it is strange that you're already combining income. We would not suggest to, you know, combine income with somebody that you're not married to. Uh, I'm not going to hang out there too, too long, but the next part is, okay, how much is you guys' rent? Because that tends to be one of the biggest areas where we see encroachment on margin.

Yeah, so we actually have a mortgage, um, that was my fiancé's mortgage, and then whenever I moved in with her, um, so we, we don't actually have any rent, just the mortgage.

How much is that a month?

It is $979.

Okay. Are you on the mortgage?

I am not. No, sir.

So you're just donating to her equity right now?

Yes, pretty much. And I, I pay the, um, the other bills such as power, water, um, all the other stuff.

How come? Why is that on you?

Uh, I, I just feel like it might be helping, you know, do my part where I, you know, live here and whatnot.

Okay. When is the wedding? Just curious.

Um, August of next year.

Okay. So what I'm finding is, it seems like, based on what you're saying, there should be around $600 of margin. If we're, uh, taking home $4,000, expenses are $3,400 including the mortgage, are you seeing, are you guys experiencing that $600 of margin?

Um, I just feel like everything is really tight, like no wiggle room at all. Um, I feel like.

So you're seeing $0. You're like, man, there's nothing left at the end of the month.

Yes, pretty much. As far as on my end, yes.

Do you have any debt?

I don't really have much. Um, yes, my consumer debt is, um, total, um, with all credit cards, student loans, and everything, is $2,847.

And was that included in the $3,400 of expenses?

Uh, it was not.

Oh. Well, there's our problem. You're in the red.

Are you talking about, do you have three grand of consumer debt total?

Yes, it's total. So monthly it's, uh, $271.03.

Okay. And the $271, was the $271 included in the $3,400 of expenses?

Yes, it was.

Okay. So.

I apologize.

Here's what I think's happening. I don't know, you can tell me if I'm wrong or right, but I think that people, a lot of time, think that they're budgeting their money, and what happens is they go, "I am planning for all of my most important expenses, my rent, my car payment, my bills," and they budget that money, but then when the margin happens, that's kind of just falls in a treat yourself category and they don't budget for the margin, and as a result, it kind of gets swept away, and it's like, what happened to the margin? Because there was no plan for that money. And so my guess is, if we give you every dollar, because you're not using every dollar currently, are you?

No, I just do pen and paper budget.

There it and there it is. And I, I love that you had the thought to try to create a budget, but George and I will tell you all day, doing a budget on pen and paper, there's so much room for things to fall through the cracks, obviously in the ways that I just laid out, but also in being able to track your transactions, because something tells me, every time you go to the store, every time you come in the house after you've spent money, you're not running to your notepad and writing it down and balancing the ledger like we used to do in the '90s. It's probably just like, hopefully this works out, and then you just balance it at the end of the month and you realize, oh crap, I went over.

Yeah, yeah. I definitely feel like you're right with that, for sure.

You might be budgeting $300 for food, but in reality, your bank account says you spent $478. So that's the gap we're trying to, we're trying to find that margin that's in the couch cushions right now, and it all takes us some intentionality, and that's, that'll be one part of it. Because freeing up that $300 or $600 is great, and that'll help, but we have a, we have another issue here, which is getting this income up. So what are you doing for work right now?

Um, so I work at a factory. Uh, we just do small manufacturing. Um, I do, I just make 1710. Uh, I'm really not sure what I want to do career-wise. I live in a very rural area.

What's keeping you there?

Um, mainly, uh, just the money aspect and family. Uh, what would.

Well, it's not the money. It can't be the money.

I've been, like, not been, not been able to have enough income to be able to move. I apologize.

Oh, got it.

Okay. So we're saying, what if you move to another area where there's more opportunity to make more money, and that way you're kind of, the tail is not wagging the dog, but you're actually letting the job denote where you go because there's opportunity there?

Yeah. I, I, I could explore that possibility, for sure, and, um, see what other areas around would, um, offer more.

What's your degree in?

Um, I actually don't have a degree at all. Um.

What were you pursuing?

Uh, business.

Okay. What kind of business were you looking to get into?

Accounting.

Okay. What happened there?

Um, I just haven't been able to, I was looking at the student loan aspect, and it was going to be way more student loans than I was hoping to take out.

Okay. So did you finish out, how many credits did you get? Or did you finish a semester or two and then drop out?

Um, just one semester, yeah. Um.

Okay.

I did finish the one semester.

Because I think education is a, is a key, might be a key factor for you, even if that's getting a certification, an associate's degree, going to your local community college, and finishing some education, because I think that's going to give you a boost you need in the marketplace to go, okay, I can actually go do an accounting job. I can run the books for a small business, for example. And so it's, it's not that it's, you're living a terrible life right now, there's just not a lot of upside. As you mentioned, you're in a rural area, this is one of the only, you know, gigs in town, it sounds like. And so your opportunity to go make $20 an hour is even tight, right?

Yeah, yes, sir. I, I actually drive 50 minutes one way to work, so I'm, gas is a very, uh, big part of that budget as well.

Wow. So you're way out there.

Yes, I'm very far out.

The factory is like in the big city.

Yes. It's in a bigger, bigger city. I actually cross state lines to get to that factory job.

Well, then I really like George's idea. I'd be researching some online options, and I'd at least start pricing it out, because so much of the journey is creating a plan and saying, okay, I've got the numbers, now that I've got the numbers, let's work backwards. How can I begin to save for this program? How can I begin to stack up some money so I can start to take some courses? And nothing that George and I are suggesting is going to happen overnight or even in the next year, but if you start making those small strides towards it, you're going to look up and in five years, maybe you'll have your degree and maybe you'll be doing your first accounting job, and that's really exciting.

All right. Back to the phone lines where we have Peter, who's in Kansas City, Kansas. Hi, Peter. You're on the line.

Hey, George and Jade. Thanks for taking my call.

Absolutely. How can we help today?

My question is about the Ramsey rules for when you can buy a new car versus a used car, given that it feels like the car market has changed in the last few years. Our family is in the market for a minivan because we've got a child number three on the way, and it seems like cars are keeping their value more than they used to be in the past. Um, so the old adage of you buy a new car and you drive it off the lot and it loses 30% of its value, uh, it seems like that's not always the case nowadays.

Well, I mean, don't get me wrong, I do think certain models do hold their value better than some models. For example, an Escalade is going to hold more value than, I don't know, gosh, a.

A Kia Sorento.

Thank you. And so there is some truth around that. Hon, honestly, I don't know a whole lot about a Toyota Sienna. Uh, that being said, the principles haven't changed. Tell us a little bit more about what it is that you're trying to do with your situation, and we can.

Why does new matter so much more to you versus getting a 2018 Sienna, for example?

Um, well, my understanding is that if you buy three to five years old, that's sort of the sweet spot where you've gotten most of the depreciation out of the way, um, and you still have a vehicle that, uh, in theory, won't have too many miles on it, where the, um, repairs will not be, uh, too costly. And, you know, if it's the case that sometimes the, the new vehicle that you're buying really is not depreciating that much at all, then it's, I think, conversations online where a couple of years later it's actually increased, appreciated a little bit, specifically with the Sienna.

So what, how much is your annual income?

Um, as a family, we're around $300,000.

Okay. You guys have a fantastic income, and what's your current cars worth?

Uh, I haven't done Kelly Blue Book, but I would say close to nothing.

Okay.

Wow.

So they're old.

It's time for an upgrade.

Yeah.

So making $300 grand, how much do you guys have saved for a car?

We could buy it in cash right now. The, the new Siennas are anywhere between $50 and $60, depending on the model, which to me seems crazy, but again, they're, they're holding their value, at least from what I've seen.

But you have that cash? You have the $60,000 in addition to your emergency fund?

We do, yes.

Okay. And what's your net worth? I'm just curious. My guess is it's on the million side. Am I wrong?

Uh, probably a little, just, just a little bit under that.

Okay. How much, how much under?

Like $10 grand or like $100 grand?

Uh, I'll ballpark anywhere between $800 and a million.

Okay. So truthfully, on paper, you would be well within your bounds to buy this vehicle brand new, um, for a couple of reasons. Uh, the first rule, and I think you know this, we say that things with wheels and motor should not be any more than half of your annual income, and that wouldn't be the case here. Obviously, at $60,000, you make $300,000. It's not even, you could get two and you'd still be all right. Uh, the next part of it is, to buy a brand new vehicle, yeah, we want you to have a net worth of a million dollars, and I think you understand why, otherwise you wouldn't have asked your question. And the idea is, let's pretend the depreciation, let's pretend George and I are right about depreciation on most vehicles, which I believe we are.

Yeah. I, I agree with that. Um, but you still would say that, you know, even if the depreciation's a little bit less, we should still have a million dollars first?

I would, yeah, I would suggest that to people, because to your point, it really could change depending on the model. And let's say you put a bunch of miles, miles on it. So it's, it's more about the, the principle of it and about the opportunity of that cost for that person. For you, because your net worth is so high, again, the opportunity cost for you for that $600 is a lot different from somebody who has maybe, uh, uh, $400,000 in net worth. Do you see what I'm saying? Suddenly, the opportunity cost for them is a lot steeper because they're still trying to build their wealth.

Yeah. I, I totally see what you're saying.

And Peter, I won't bury the lead. I drive a Sienna.

I was going to say, George, when are you going to tell him?

I didn't want to admit, I didn't want to admit that I'm a minivan dad. But it was for my wife. We, we switched over from the SUV world, and I'll tell you this, Peter, this was our first car in our whole life we bought brand new, and it scared the crap out of me. But I was like, all right, it's time. And guess where that car is right now?

Is it in the parking lot?

It's in the shop right now, bud.

Tell him the story. It's crazy.

Brand new vehicle.

Oh, no.

The door just stopped working. The door lock just wouldn't unlock. My wife had to crawl through the car, and it's now at the shop. They'd never seen it before, and now they got it for a week waiting on parts. So I say all that to say, the idea that, well, if I buy new, it'll never have any issues, it's just not true. So if I was in your shoes with your net worth, and I waited long after I was a net worth millionaire to even buy a new car, because I just can't stomach depreciation. It still hurts my soul. If I, if I could tell you, hey, man, you can get 20% off if you just buy the model that's two years older, which by the way, they really don't change all that much from year to year.

Yes.

What's going on with each of them. This one has a fridge, this one has the heads-up display. It's just a car at the end of the day. Things will go wrong. You're just hauling around kids, they're going to throw Cheetos in it. So don't be too precious about it either. That's the other thing buying used. You don't feel as bad when it gets a nick when your kid bumps.

That's right.

Bumps the door open and it's someone else's car. The Cheetos get all stuck to the carpet. You go, huh, all right, it was already used. It's fine.

Yeah. I can tell you I've never had a 100% brand new vehicle. It's always been used to some extent. For that reason, I just feel like I can't stomach knowing that I would be the one taking the depreciation loss on that first year, and I can't stomach knowing that first scratch. I, I, it's like, I, I just, I just can't do it. Maybe one day I'll do it, but.

But he's right. I mean, if you cherry-pick the car, you're going to find that some of them do hold their value.

Yeah, absolutely.

In a situation like we find ourselves in with today's economy, you might see some cars hold their value really well.

That's so true.

Electric cars have now gone up in value. If you're a Tesla, you might hold your value because gas prices are so high, people are willing to pay more.

That's right.

It's all about supply and demand. And, uh, even my Tesla that I have now, I bought used, one owner, 4,000 miles, and I got over 20% off.

Wow.

Just for doing that. Just for waiting for someone else to drive it for a little while and then buy it, I'm happy to save 20% if I can.

Absolutely. And I mean, at the end of the day, you and I, we just can't ignore the calls that we get every single day when people have bought a vehicle. I mean, it's so normal. It's 2026 now.

And if we tell Peter, go ahead and buy it, the next guy listening is going to say, well, they told Peter he can go buy a brand new car.

Well, it's not just that. It's that the calls that we get coming in, they're saying, oh, I bought my car in 2024, and already they're upside down on it. And it's like, what happened? I mean, that is the majority of car calls that we get, or when we start going through people's debt when they say, hey, help me get out of this, it's always in the car, and we're always having to explain to them how to get out of an upside-down vehicle. And in many cases, they've had the vehicle for less than five years. And so there is a depreciation hit on most vehicles, and I can say that pretty confidently.

And if you do that with debt, it's even worse.

Absolutely.

Can't be underwater on a car you paid cash for. That's the beauty.

Well, if you're new to The Ramsey Show, you'll notice that every single answer that we give is formatted around our plan here and our principles. We have seven baby steps that we teach. We know that it's the shortest path to building wealth, and it's the easiest path to building peace around your money. And so if you want a little bit more, uh, information on that, uh, you can, usually there's a little thing there that you can look at in the show notes, but, um, you'll get a lot more of that out of every episode if you know what those are. All right, let's go to Frank, who's in St. Louis, Missouri. Hey, Frank.

Hey, thanks for taking my call. I appreciate you guys. Um, my wife actually called last year, and we are now debt-free.

Awesome.

Other than the mortgage, of course. So we really appreciate you guys.

Way to go. How much did you pay off? Just curious.

Uh, so we, we really didn't have that much. It was, I mean, I, I know everyone says that, but, uh, so we had $25,000, and we did that in about seven months.

Wow. That's impressive. Way to go.

So, yeah, it was right after we got married, and, uh, we just got motivated and we're like, we're not doing this. We're just going to stay debt-free. So, uh, it's been great.

Love it.

Um, but so my question is, we currently, um, we have, we're doing with like a small town bank, and there's no, um, like high-yield savings or anything like that. So there's no plans there. And I always hear of you guys, like advertising for, um, fair wins.

Yeah.

Um, and here recently, like I've been listening a lot more again, and, um, the biggest thing that really drew my attention is you can have like multiple high-yield accounts. Um, and so I'm just wondering, like we have a, a $10,000 emergency fund and, um, a couple like smaller funds just for like little things that come up. Um, would it be worth switching to fair wins, do you guys think, uh, versus trying to, like there, there are a few banks that have, um.

Listen, we're going to tell you to go to fair wins all day because we know that it's a good product. Uh, I mean, George, I know you, you do the bundle where you've got all the different ones, because for you, if you have a lot of different sinking funds, it's excellent because now you can have it separated, uh, versus some of the other ones where maybe they kind of bucket it, uh, on your view, but the actual account is not bucketed. And I actually like the difference that all the, all the different accounts are there. You can save in the different accounts for whatever it is that you're saving for, and it's really clean and easy, and there's a good, you know, nice little rate of return there on the, on the interest.

Yeah. You could even just add it to the mix right now, because I know it can be a hassle to go, okay, what are all the things tied to my bank account that are coming out? So you can just go set up an account. It's got checking and savings. You can throw your emergency fund into the high-yield portion and then throw as much as you want into checking and use that with the Ramsey-themed debit card. And then if you love it, over time, you can just make the switch. But there's nothing wrong with having a, you know, a local bank. What's cool about fair wins, and they let us know about this, they have 5,500-plus partner credit union branches. So there's probably one around you where you can basically bank using your fair wins account locally.

Yeah.

If not, beat it. And, uh, again, the customer service is great. The product's great. I've been using it for a long time now. And having access to checking and high-yield together in the online world is unheard of.

Yeah, that's nice.

So it's cool that they've combined those with the option to have up to 10 accounts. So fairwins.org/ramsey is the place to go. Frank, for you or anyone else listening.

Awesome. Thanks for the call. Next up, we have Brenda, who's in New York City, New York. Hey, Brenda, how can we help today?

Hi. I'm, I'm good. Thank you so much. Thank you so much, Jade and George, for taking my call.

For sure.

I have, um, two adults, well, young adult children, 19 and 21 years old, and I am fortunate enough to be on baby step six, just chipping away at my mortgage.

Nice.

So I have some extra funds, you know, in my, uh, account, um, at the end of each month. I contribute to, they, they each have a Roth IRA, which is invested into SPF 500, and I contribute, um, about $250 a month per kid into those accounts. Now, the question is, is that a wise thing to be doing? Because they won't be able to access that money until they're into their 60s. And also, they do also have, um, brokerage accounts, and they both have a high-yield savings account.

Way to go.

Switch it over? Should I switch it over to the high-yield savings? Because, you know, what if they need money for a house? What if they need something comes up, they can't really pull from that IRA.

Yeah.

And they kind of have time on their side. So I, I, I just, I don't know if it's silly for me to be putting money into a Roth IRA because it's 40 years from now.

I don't think it's silly at all. Remind me of their ages again.

Uh, 19 and 21.

I don't think it's silly, um, at all. Well, number one, do they have earned income?

They, well, they're both in college.

Okay.

They don't, so they have like part-time jobs.

Okay. You can invest in a Roth IRA up to your earned income.

Yeah, like, right. So like they had like, you know, dog walking and babysitting, so I was able to open, they were, they were able to open up those Roth IRAs. Um, but they're both in college now, and, you know, the 529 is secure, so that's all paid for. They, they won't have any student loans. So I'm just trying to set them up, you know, God forbid something happens to me. So.

I mean, I like what you're thinking because here's the truth. There are things coming up that are going to need money that's liquid. For instance, um, weddings. Uh, do you want to help with the down payment for their first home? So there are a lot of things that are going to pop up before 59 and a half that you're going to want to fund. And the truth is, they have their entire working life to get prepared for retirement, but they don't have their entire working life to prepare for.

Right.

You know, needing a car when they graduate. And all of these things that are kind of big expenses, but things that you could really help contribute to and help set them up in their adult life. And it's not wrong. Like there's nothing negative about putting towards their retirement, but I honestly think the bigger help for them would be those other things because, uh, they're big-ticket items. And if you can help contribute to those, gosh, that's really going to set them up, um, into their young adulthood and into their, their later years.

Okay. Yeah, that's what I was thinking because like when I was, I'm like, you know, what good is this money to them at 60 when they probably, they might need it for a house. They might need it for.

Yeah.

You know, life events or whatever that happens.

Well, I'll tell you what I do. Obviously, I got younger kids, three and one, but I focus right now on, priority is education, is making sure that I'm funding a 529 plan. It sounds like they're going to graduate college debt-free already.

Yeah. I mean, as soon as they had a Social Security number, I opened up a 529 for them. So.

Amazing.

That's awesome.

What a great mom.

Yeah. I was able to like blink and, you know, all of a sudden they're in college. And luckily, you know, it was there. It was, it was unbelievable. So it was great.

Well, they're, they're blessed to have you.

Anybody.

So the, the second thing I do.

I'm a single mom.

Outside of, uh, education, the next thing I would do is fund a, a taxable brokerage account in your name. And the reason I like that is because you retain control. You know, there's these things called UTMAs and UGMAs, and it's a custodial investment account, but they get access to it when they're at, you know, mature adult age, 18 or 21, depending on the state. And so therefore, you might hand over $100,000 to an 18-year-old.

That's not good.

That's legally theirs. And so investing in my name and my own account lets me earmark it for them, but then I can retain control. And at 25, let's say they get married, I can use a portion of those funds to cover the wedding. Or at 18, I can use a portion to cover the car or whatever it may be, a down payment.

Okay.

When they, you know, after they get married, I can help with that. And so doing it in your name is a good way to just retain that control. And if you just do a taxable brokerage account in your name, that's non-retirement. Sounds like you've already got that open.

Yeah. Well, they do, they both have accounts with, um, Charles Schwab.

And they're funding?

In their name. Well, you know, it's, it's Christmas money, it's birthday money, it's grandma money that I throw in there.

Okay. Are they doing any investing on their own? Because so far it sounds like you've been doing all the investing.

Well, they're in college. They're full-time college students. So their, their, their job now is to get educated.

That's right.

Get through college, debt-free. I love that.

Yeah.

Yeah. And once they graduate, they'll start funding it. But the key is to start building the muscle for them as well and teaching them, here, here's why I'm doing what I'm doing. Here's what this money could turn into and help them think through this so it doesn't feel like a big surprise when they find out, whoa, mom's got a hundred grand.

I mean.

What could I do with that?

I know. Absolutely. But I mean, it brings me back to the teaching we did, uh, a couple weeks back, George, about the power of time and compounding interest. And they're set up perfectly. I mean, from the moment they start to work, they're that prime example of if you can invest $500, um, you know, a month for the next 30, 40 years, I mean, you've got it locked in. So I think Brenda set them up really well to understand the power of investing and if they continue to use that muscle. And she's helping them with those kind of milestone moments. Gosh, they're going to be loaded.

Yeah. I, I remember I covered a chart here on the show of the power of a dollar based on age invested.

Yeah.

And at the age of 20, a single dollar invested will become $73 at retirement. But when you wait until your 40s, 50s, then that power of that dollar becomes $3, $4. And so you can really see visually the impact of investing early, even though it feels like it's so far away, it'll never be here. You'll be real glad when it shows up.

I know that's right.

And you have 73 extra money. Pretty impressive.

That's fairwins.org/ramsey. Insured by the NCUA. Well, George, it's no secret, we talk about the Ramsey plan around here, which is the seven baby steps. And the best way to work those baby steps is with every dollar. Every dollar is not just a budgeting app anymore, but it really is the best way to stay on track with our principles, our plan.

Hey. Thank you for taking my call.

You're welcome. How can we help?

Um, just want to make sure I'm doing, uh, everything right on my financial side. Um, so I'm 18 years old, um, working on a farm. So, um, yeah, I just started a Roth IRA about three days ago. And, uh, currently, well, actually, I've never had any debt. And, uh, yeah, just want to, um, make sure I'm doing everything right. So.

Cool. So you got no debt. Do you have any savings?

I have about 13,000 and 9,000.

Way to go.

That's great.

13,000 in, uh, money market. And I've got seven, I just put 7,500 in, in the, uh, Roth IRA.

You fully funded it.

And I've gotten. Yep.

Wow.

My God. This is impressive. You're real sharp at 18, man. I wish I knew this stuff at your age and had the means to actually do it. You're a hard worker.

Yeah.

So what's your question?

Um, so I'm a pilot and I, yeah, so I fly. And, uh, I would really like to go and get a paramotor, like a, with a net, I mean, with a, um, you know, wing across you with a fan on your back.

Is this a plane?

Start doing that.

Wait, say it again. You want to do what now?

Paramotor.

Oh, wow. I'm looking at pictures right now, Jade. This thing looks intense.

Oh, gosh. Maybe the people, maybe the booth can put a picture on the screen because you don't know what this is until you see it.

Okay. Kirby, I apologize for my, you know, idiotic, ignorant approach. It looks like you're hang gliding with wheels. Like a go-kart that hang glides.

What did you call it? A paramotor?

Paramotor.

Yes.

Paramotor glider.

I'm, listen, is this safe? Because it looks very, it looks very precarious.

You're an adventurous man, Kirby.

Oh, man. So how much does a paramotor cost?

So I'm looking at one right now. Um, one of my buddies has it. It's about, I'm guessing it's about $7,000 to get into it, but just want to make sure I can afford it before I take off and do something like that.

And is it strictly for fun or are you trying to like create a business where other people can.

Yeah.

Ride it?

It's just strictly for, no, it's just strictly for fun.

Okay.

So the problem is I fly already. I have my own airplane. But, um, yeah, I don't know. I, you know, I do that.

Kirby, you're an anomaly. You're 18 years old. You're a farmer. You're a pilot. You have your own airplane. You have money in the bank. You have money in a Roth IRA. Do you understand, like, what a cool guy?

Yeah.

So what is the current value of all the things with wheels and motors in your life?

So I have a truck. I paid 22,500 for it. Um, insurance, I think I run about, uh, $500 a year maybe on it. And, um.

Wow, that's cheap.

So, and then also I've got a third partnership in the airplane that's about $11,000.

Okay. How much do you make a year?

And about 45,000.

Okay. Man. Well, you're doing great. Can you actually afford it? Yes. Is it a lot of your world tied up in some toys right now, including the truck and part of the plane making 45? It is.

Yeah.

Now, clearly, you'll, you're frugal, you'll survive it, but that truck alone is half your income.

Yeah. Yeah, that's right.

So what does it look like to get your income up just so that things going down in value aren't such a big part of your yearly income?

So I don't know that it's, I mean, I would imagine my income would go up within the next year or two. But, um, yeah, so I'm, you know, in the future, I might be buying a house and, you know, maybe going off into the mission field too. So I'm not sure that it is a smart idea. I just want to.

And that's kind of what I was thinking. You know, uh, the $45,000 income is definitely an extremely valid point. But the other thought I had is the opportunity costs on the 7,000. I'm looking at an 18-year-old. I don't think you're living on your own, are you?

I am living, I mean, no, no, no, I'm living with my parents.

Okay. So my next thought for you is, gosh, the be, the next big step is you getting out there on your own. Uh, I would suggest renting someplace first, not necessarily immediately going into buying, but even that has expenses. First, last month's rent. Obviously, you want to make sure you've got a nice liquid six-month emergency fund. So those are the things that I'd be looking at with that money. Um, I don't think this is very far off into your future. I think you're going to be there before you know it. But I, I do tend to agree with George. It's a lot of toys. And if you're talking about going off on the mission field, gosh, they're just going to be sitting there in the hangar.

Yeah.

With nobody to use them unless you sell them off before you go.

Yeah. Yeah, that's kind of my thought.

Can you rent one of these?

Hmm. I could probably use my buddies, but I don't know. It'd probably be better for me to buy one if I did do it, but yeah.

Hmm. Okay. I'm just thinking it through if there's any other option for you to still enjoy this thing without needing to own it.

Yeah.

Outright. But based on your goals, I'm like, man, $7,000 with your income, how long would that take to save up currently? If you started from scratch, how long to save up seven grand?

Oh, I don't know. I mean, I bring in probably 4,500 a month. And if I, if I did real good at it, I could probably spend $200 a month on my necessities.

Goodness gracious. Well, you're saying insurance and everything. 200 bucks a month is your living expenses.

Yeah. I don't know. Just go, go 300 for, yeah, safe.

That is wild. So you could put away 2,200 bucks a month is what you're telling me.

I mean, he's at home.

Probably so.

Mom's cooking. So you're like, all right, I'm not paying for that. That's nice.

That's right.

I mean, it would take you, you know, four months or so to save up that seven grand. So that's kind of what the opportunity cost is here based on your future goals, the home that you want to buy, going on the mission field. I would just take all that into consideration before buying one. And if you were going to do it anytime soon, I would look for a used one that you can get a good deal on and negotiate versus buying a fancy brand new one.

Yeah. I agree with that wholeheartedly.

What an interesting question.

It's so interesting.

So many twists and turns.

Let's go to Abdul, who's in Buffalo, New York. Hey, Abdul.

Oh, hey. How you, how you guys doing? Um, huge fan of the show. I just wanted some advice. So I wanted to know whether I should, um, buy a home in cash or continue to invest in my index funds. So I've been at like a crossroads.

Wow.

Wow.

How much is in there?

So right now I have, um, 500,000 in a brokerage, um, in index funds. And I have like about 70,000 in like my 401(k) plus Roth total.

Okay. What was the brokerage for? What was that 500K earmarked for?

Um, just in my personal investment brokerage, like just to, I wanted to think about maybe FIRE.

Okay.

Oh, okay.

Financial independence, retire early. So that's, I always ask, what were you investing for? Because that tells me a lot. Because now if you use it on a house, you're going to feel bad because that was your early retirement money.

Mm-hmm. How old are you?

Right. I'm 28.

Oh, wow. You're young. Okay. So you really did go into this FIRE deal. What's causing you all of a sudden to think about buying a house with this money that, to George's point and your own point, was earmarked for retirement?

Yeah, that's a good question. I think for me, it's like a somewhat of a scarcity mindset. You know, you hear a lot on the news about like less houses on the market. And like if I always think if like, if I get a good deal, that'd be really good in terms of like securing, you know, a safe haven. So the way I look at it.

Are you single?

You have debt.

Go ahead.

Sorry. One at a time.

It's okay. One at a time.

Uh-huh. Um, debt? No, I don't have any debt.

Awesome. And you're single?

Yes, I'm single.

Okay. And what would this house cost in your area? A one that you'd actually want to stay in for a long time?

Yeah. I was looking at it on Zillow. I saw some houses like for 300. That's like for kind of like the minimum to 350, 400.

Okay. So you'd have to cash out probably 400 from this brokerage to make that happen?

Mm-hmm. Yeah.

And then you sell 100 left and then you would just rebuild from there into the brokerage account and kind of restart the FIRE journey?

Yeah. That's what I was thinking. I mean, I don't live like extremely frugally. I live within my means, I would say.

Yeah.

But, um.

And don't get it twisted. A home is a form of an investment. You're not, this is probably not going to be your forever home. So this is going to be something that you're building equity in until maybe you stair step into that next property. Maybe by then you're married. And so this is, uh, a forced savings account, if you will. And it's going to help you make further strides in the real estate market.

Yeah. With no rent or mortgage payment, think about how much more you could invest.

Absolutely.

So I love this idea of paying cash for a home if that's your goal. I think a guy as sharp as you, trust me, you're going to retire earlier than most of America. I love the idea of a 28-year-old having no mortgage payment for the rest of his life.

Absolutely.

Welcome back to the Ramsey Show here in the Fairways Credit Union Studio. We're headed back to the phone lines where we have Ashley, who's in Charlotte, North Carolina. Hi, Ashley. How you doing?

Uh, blessed. I'm way better than I deserve. How are you?

I love to hear it. Thanks for calling in. How can we help today?

Um, I'm calling you today because I have the most amazing parents. Um, they gifted me FPU, um, a while ago, uh, when I was in my first marriage in debt. Um, FPU helped me navigate divorce. I've been debt-free well since then, remarried. Paid debt-free, um, except for the house and, um, building wealth. And it's because of their support and all the financial guidance that they give me and introducing me to, um, FPU and this wonderful group of the Ramsey team.

That's cool.

And they, uh, my dad, uh, called me the week and said, "Hey, um, have you looked into Trump accounts?" And I was like, "Uh, no. That's not something we have. Uh, for the kids, we have the 529. I looked at a little one. They came out and I've talked a little bit about it on the show. And it's just not a financial vehicle that, you know, we were contributing the 529s." And he said, "Well, if you open one, you get all these freebies. And our kids don't qualify for them because of when they were born and our income." So I'm kind of missing the boat on what the freebie part was.

When were your kids born?

Um, 2017, 2019.

Okay. Yeah. So they don't qualify for the, the seed money from the government.

Yeah.

But they're still, they're, they're still saying, "Hey, it's still a worthy account to invest into."

Yeah. Like just such a great deal. Um, it says, "Well, if you open one, then, you know, we will contribute 5K a year for the next several years." And I'm like, "Okay." So I researched it and in my head, I'm like, "Okay, was that a hard we'll only contribute 5K to the kids if it's in this account." Um, we have well-established 529 accounts. So I'm kind of doing the math of like, "Hey, compound interest, does it make sense?" And, and looking at the, the Trump account, I'm kind of struggling with the, I mean, it's kind of like a mashup of, you know, stuff that's already out there between 529, what you can do there and, and other accounts.

For you, is it an either/or? Is it, I only have so much money and I can either do it in a 529 or a Trump, or are you open to doing both? I'm just curious.

Yeah. I think for me, um, if it, so that's where the struggle is. Like if it's me personally, I don't think I, you know, we wouldn't go out and necessarily open it, but if it's the, "Hey, if my parents want to gift and the only way they're going to gift is into this account."

I would not decline it.

If I had, if I had.

Yeah. It sounds like you're just a little, you're miffed because you're like, "Well, this could go to their education, which is happening a lot sooner than their retirement." So you just have a preference, but so do they.

Well, and I, and my question on 529 though is, I understand, and this is where I, you know, fact-check with you guys, is that you can, I thought you could roll over some of that into retirement accounts.

You can. Up to 35,000 you can roll over into a Roth IRA. Um, so there is that possibility. And, you know, obviously you do have the flexibility of moving it from child to child that can be used for different levels of, of education. So there's a lot of flexibility with the 529. And again, to George's point, you have the ability to use some, use these dollars for some, uh, uh, an event that's happening earlier in life than retirement. Whereas obviously with the Trump account, you know, it's earmarked for that person. It's in the child's name.

Yeah. And with the converting, you know, you mentioned the dollars from the 529 into a Roth, and I like at 18, they could convert the, the Trump account into a Roth as well, correct?

Yes.

Like, so there's like.

Now you're.

That would both be like work and tax the same in both those scenarios?

Well, the Trump account has worse tax treatment. There's more tax advantages with the 529 plan when used for education. But personally, Ashley, I'm funding Trump accounts for my kids. I got a three-year-old and one-year-old because I did math. And I went, "Okay."

Yeah.

If I just contribute this, convert it, they can convert it. You know, I'll, I'll be happy to pay the taxes on it when they're in their early 20s after they graduate college, they're filing taxes on their own. That way you can avoid the kitty tax. If they try to convert at 18, uh, it might convert at your, the parent's tax rate. And so I like the idea of waiting, converting at 22 and that money growing. Let's say there's $100,000 in there by the time they're in their early 20s. Imagine that compounding from 22 to 62.

For sure.

They're going to have like $15 million in that one account. So that's a pretty cool way to build wealth for pretty small upfront investment. So if your parents are saying, "Hey, we'd rather give there," I'm not going to block the blessing. I'm going to take that every time.

Yeah, for sure.

And you sounds like you got college covered.

That's the goal.

Yeah.

That's the goal.

And it will be the goal. However much is in there, that's the college budget.

That is the college budget.

Working part-time, scholarships.

That is it. That is it.

School choice. All of that matters. But I would take it. I know, I don't know the, the motive from your parents, if it's a political thing for them or not, but it's free $5,000 with compound growth every year. That's pretty sweet generational wealth.

Yeah. It seems like there's a little, um, we need to demystify these Trump accounts a little bit because I think this might've been the second or third call I've gotten to this tune with you, George, where it's kind of like, "Hey, do I do the 529 or the Trump account?" And I, you know, the way that we suggest investing is, you know, you kind of put on your mask first if you're the adult. So of course, in Baby Step 4, you're investing 15% into your employee-sponsored accounts, or if you're, you know, self-employed, some sort of simple 401(k), that sort of thing, right? So you put your mask on first.

And the huge advantage of this compared to any other investment account is that you, your child does not need earned income. So with a custodial Roth IRA, they can only fund it if they have legitimate earned income, whereas my one-year-old can start building wealth.

Immediately.

And so we know compound growth is the secret to building wealth. So I got the, the calculator up right here, Jade.

Yeah, let's do it.

If you invest 417 a month, that'll fund a $5,000 account. You do that for 11 years at a 10% rate of return. It's about $99,600. So let's call that a hundred grand. So now the kids, let's say they went from 12 to 22, you know, or, or 11 to 22. Now from 22 to 62, we're going to give that four, 40 years to grow, no more money invested. Just leave the hundred grand sitting for 40 years, same 10% rate of return, $5.3 million.

Easy work.

So I'm going, okay, for how much you put in there, think about that.

It's an easy, yes.

Five grand for 10, 11 years.

It's a no-brainer.

That's pretty wild to turn 50 grand into $5 million.

And if someone wants to do that for you, don't block them. Because here's the thing, 529, it has a limit on it, right? It's like, yeah, what do I want? $60,000 for college, whatever that number is. But this has the potential to grow. You don't have to move it. You can set it and forget it. It doesn't have to convert to a Roth IRA because somebody didn't go to school or go to college. This is kind of a no-brainer if you have the option.

All righty. Let's head back to the phone lines where we have Adam, who's in New York City, New York. Hey, Adam, how you doing?

Hey, what's going on, guys?

I'm doing all right.

Thank you for taking the call.

No problem.

Um, I'm 25. Um, I make 65 a year and my partner's 22, finishing college. Um, we're expecting our first baby in May next year.

Wow.

And, uh, planning to get married before the baby arrives. Um, I recently became credit card debt free and my father has offered to help, uh, pay off a little bit of my, uh, student loans, which is, uh, around 50,000.

Okay.

Um, and he also offered us to live with him, um, until we are financially strong enough to move out, um, which is pretty generous.

Wow.

Um, we could save, we could save between 3,000 to 3,500 a month if we do that.

Okay.

But we would be sacrificing some privacy and some comfort between.

For sure.

My partner and I and, uh, our upcoming family. So I guess my dilemma here is like, uh, my part, as I said, my partner and I are, um, we'll be sacrificing privacy and comfort, especially with a baby on the way.

How long would you do it?

Um, so my partner was deciding to stay with the baby after giving birth for approximately a year.

Okay.

Um, until she, she decides to go back to work. So I was thinking around an additional year.

So one year with dad?

A year and a half.

Okay.

I would say.

So from now until the baby's been on the surf for a year?

Yes.

Okay.

And how much would you save? Let's do the math on that. Maybe you've already done the math on that.

So my take-home is around 3,600. I'm also, uh, about possibly getting a second job that might not give me, uh, the same amount, but it's something additional on the side. But, um, I would say, like, to focus on the primary income, which is I make 3,600 a month.

But you said you'd save 3,500 a month by living with him?

Yes.

How does that work?

Uh, not 35 technically. That's why I said between 3,000 to 35, because my bills accumulated is not a lot actually before moving out. I don't have a lot of bills to pay. It's mostly just car insurance and subscriptions here and there.

And your student loan?

But I don't have any big expenses. And my student loan payment, which is, uh, my father has offered to take care of it until we move out and we are financially stable.

Then why would you ever move out?

Until you move out.

So if he's taking care of your life and covering your debts, what gives you any incentive to get out of there?

He'd just be paying the monthly payment or he would help you. Because obviously if you're just paying the monthly payment, it's going to go on forever. Or is he saying, "Hey, I'll try to pay these things off for you."

Um, yeah, just the, just the monthly payment on the student loans.

Okay.

And.

So here's what I'd be wondering about.

Sorry.

I, I, I, I have a couple of negotiations because I'm looking at this going, what would be the most benefit to you? It sounds like he's very willing to be generous in unique ways. And so I'd be sitting down with my partner and I'd be saying, "Okay, what is it that would really, really benefit us the most right now?" And I'd wonder, I'd say, "Okay, this 50,000 in student loans, I don't know what the deal was on that." If he'd be willing to cover those, I'd be like, "You know what? Moving in, we don't want to encroach on your space, but we do like the idea of trying to get ahead in certain ways.

Yeah.

A lot sooner.

From a financial standpoint, um, I do agree with you that it would give us a push start to stay with parents and save as much as possible. As I said, it comes with the cost.

No, no, no. I was saying not do that. I was saying instead of moving in, say, "Hey, this is an encroachment on our privacy, your privacy. I'm not sure this is a wonderful idea, but it sounds like you wanted to be generous. What would you think about just taking on those student loans for us?"

So he pays off your student loans and you move out. That would be the deal.

Right. Which is, it sounds great. And my guess, my, my question is that isn't it to, to what would be from a financial standpoint better is to, even though he's doing that and he's offering us to stay with him, is it better to just suck it up for a year, save as much as possible to speed up our saving process or sacrifice.

I don't think so because.

Save in time and move out.

Save in for what?

I don't think so because a down payment. But here's why. Because even though he's paying, let's, let's go with the first thought. You move in, he just covers the student loan bill, the monthly payment, and you guys start socking away, you know, 3,000 a month. The thing is that debt is still going to be sitting there. After a year and a half, that 50,000 debt is probably going to look suspiciously the same. It's going to look a lot like $50,000 still. So my thing is, while you have debt, we can't save for a down payment on a house. The next logical step to being a financially responsible adult is I've got to pay off this debt first.

Yes.

Which is not a bad thing. Like that's, that's fine. But if I'm looking at it, I'm going, okay, how can I get this debt paid off? That's what I'd be wondering is can dad reach over and pay off this debt and then we can stay where we're at and we can immediately start saving for the down payment?

I see.

Are you in New York City proper?

I work in New York City. I'm a New Jersey resident.

Okay. I'm just trying to think through this. Let's say that your then wife decides, you know what? It's been a year. I don't want to go back to work. I want to be home with this baby. How are you going to survive making 65K on your own working in New York City?

Most likely just living within our means. We probably won't be able to get a nice apartment. It will have to be an average or below average apartment.

Yeah.

Okay. I'm just trying to paint a realistic picture. And I'm with Jade. Rarely on the show have I found someone who said, "Hey, we're going to live at home with my parents and save money." We've had one where they called in, they were 15 grand further into debt because comfort usually doesn't then require extra sacrifice. When someone else is covering all your bills, you're like, "Oh, we can go out to eat tonight."

You just start living.

We're fine.

Yeah.

We can save a little bit less this month. So that's the, I don't know, I can't tell from this call just how disciplined of a person you are, but I know human nature. And human nature says, if everyone's covering my bills and my debt payments, I'm going to get fairly comfortable. And that's why I like Jade's plan of he pays off the debt as an act of generosity and you go start your life independently. And his generosity then doesn't stunt your growth. It actually propels you.

Yeah. I like that idea. And I also wonder about why we would stay in the city. If there's a way to get outside and, and get some place a little less expensive, that might be a route too. You know, still, still near family, but not in the thick of all of that.

Yeah. That is tough. I mean, he's, he's in New Jersey commuting into New York City, but even then, New Jersey, depending on where you're at, can be very expensive.

Well, my thought is, you know, for a $65,000 job, you can work that job in a lot of places that aren't quite as expensive. So there's a lot to sort through there. There's definitely a lot. But, um.

It is also tough with the baby on the way. We're not married yet. We're trying to figure this out. Like they kind of need some help right now.

Yeah. And it brings up that topic because we've heard this a lot, uh, whether it's because a new baby's on the way, whether it's because of student loans, whether it's just the, the affordability crisis in general, a lot of young folks, people 20-somethings, they are considering living at home for longer periods of time. I mean, we're already seeing that. And I particularly don't have a problem with it if there are very, very clear boundaries around it. I'm more for it if it's a single person. Like if you're, you know, it's just you and you're like, "Hey, I'd love to be able to pay off these student loans.

Especially when you have a kid.

Now there's a child, right? So they're kind of adding many layers to that. And I think it could get very dicey and very messy very quick, but.

I just don't want him calling back going, "Hey, we've lived with my parents for three years. Everyone's miserable. My wife's resentful of me."

Yeah.

It's a really tough way to live and we can't afford it because life got more expensive over the last three years, not less.

And that's the problem. There's got to be a very clear time parameter. There's got to be a very clear dollar amount of this is the amount that we're saving. We're doing it in this frame of time. And when that happens, we are hitting the road. And if you can add some form of accountability in there.

I'm, if I'm dad, I'm going, I want to see that $3,000 transfer to savings every month.

Yes. Every time. And I'm kicking you out regardless at the year and a half point.

I like that plan.

Alrighty. Our Ramsey Show question of the day is brought to you by Ask Ramsey, your free AI money tool that provides personalized money answers based on Ramsey principles. Go ahead and visit ramseysolutions.com/askramsey.

Today's question comes from Stella in Maryland. My husband and I are in the process of combining our finances. He has a lot of credit card debt, but we agreed to do the debt snowball and can pay it off in less than two years. What stresses me out is that multiple cards will have interest accruing as we knock them out one by one. I have offers for balance transfers at 0% APR for up to 15 months. On top of paying zero interest, the debt would be where I will see it regularly. We'll pay it off faster if I have to look at it in my account. I know that consolidating debt is a no-no when you're following the Ramsey method, but would this be a situation where it might make sense?

Yeah.

Number one, why would a credit card company bestow such a generous offering to you? I wonder why.

Try to win you over. Try to win you back.

Well, number one, they make money when you do it. It costs you money to do a balance transfer, 3% to 5% of the balance. And then 0% APR up to 15 months. What do they know about consumers who have credit card debt? They're have, they have a hard time paying it off. So what happens when you don't pay it off?

All.

All that interest gets hit. So I don't like this for a couple of reasons. Number one, you are consolidating it. So it, it's actually harder to pay off versus knocking them out one by one with a debt snowball if you're, if you're moving multiple debts into one. Uh, number two, it's shorter than your timeline. 0%, 15 months. You said it's going to take you two years or so, which means it's, you're going to run out of runway pretty fast and it's going to stress you out. So, and the third thing is not that I want anyone to pay more interest than they have to, but that interest is actually the fuel that's keeping you going on this journey for those two years.

That's a good point. And it's probably going to be kind of negligible by the time it's all said and done. I think the, if I had to weigh the, the interest that would accumulate next to the momentum and the, the intensity that you get from being able to check one off the list at a time, I think I'd rather go for I'll take the interest versus having one big clump of payment. That is not motivating. Take it from someone who's paid off 460,000. That's not motivating.

Yeah. And you can still look at the account. You don't need to do this to be able to look at it and feel it. You can see all of these debts, list them out in every dollar. Small Salar's balance, attack the small one with the vengeance, minimum payments on the rest. And both of you looking at this together, seeing the interest rates and ignoring them and just attacking the balance is what's going to actually cause you to get out of debt, not a balance transfer.

Yeah. And I'll also call out, you know, I'm actually not mad though, George, at that mindset because this is somebody who's looking at their debt. They're probably looking at every single place where they think they can save money. And this looks like, oh, this is a place I can save money. Why wouldn't I do that? And so it's, it's Stella, nobody's mad at you. We're not saying how could you? We're just saying honestly, it's easier to do it, uh, debt snowball style. And to George's point, those fees can get you. Let's go to Justin, who's in Nashville, Tennessee. Hey, Justin. How can we help today?

Hey there. Hey there, guys. Thanks for taking my call.

Yeah, no problem. What's up?

Hey there. I kind of have a two-part question here. It's, uh, should I go with a financial firm to manage all of my money and/or should I max out my 401(k) if I plan on retiring early rather than just a regular brokerage account?

Okay. It sounds like you're dealing, I, I don't know. It sounds like you're dealing with either a high income or some nice net worth going on. Um, how much do you earn every year?

I earn about 89,000 right now.

Okay. And how much do you have invested?

Uh, right now I have, I just opened up my Roth IRA. So I have about 3,000 in there. And then I have about 8,000 in a regular brokerage account. And then I actually have about, uh, 50,000 in precious metals that I currently own.

Okay. And is it, it's your goal to retire before 59 and a half and you're thinking, hey, I want to have money in a brokerage that's there for me when I'm ready?

Yes.

And how old are you now?

I'm 23. I just graduated college.

Oh, cool. Congrats.

And I'm still currently, still, thank you. And I'm still in college as well, doing my master's with an MBA online.

Fantastic. And making 90 grand at 23. That's a fantastic income. So what's got you wanting to work with an investment firm?

Uh, I've been listening to you guys here, uh, quite a bit. And right now I'm just pretty busy with work along with school, doing it full-time and just trying to figure out what the best place is to put my money for them to be able to do the right research for the correct mutual funds that I should be investing in at such an early age.

I mean, the truth is the first place, especially for where you're at, the first place that you're going to want to go is your employee-sponsored account. If you have a 401(k) through your job with a match or even if it doesn't have a match, that's the first place where you're going to want to invest. And truthfully, at that beginning phase, you don't necessarily need a company to help you do that other than HR at the company where you work to help you get it set up, right?

And they, they can't even manage it for you.

Exactly.

They can help you pick some funds inside of there, but they're not actually going to manage that portfolio. Uh, they could manage your, you know, Roth IRA and a brokerage account, but at your stage, it doesn't sound like you're needing, uh, financial advisor necessarily. You might need one just temporarily to help you choose some funds, but they don't need to manage your portfolio.

Okay. That's, I've been doing kind of my own research, uh, along with for mutual funds and been able to try to figure out what I want to allocate all of my Roth IRA into. And I know like our 401(k) plan here, the match doesn't start until I start working for an entire year. But right now it just automatically started to where it's just 3% pulling it out. I didn't know whether if I should, uh, just do that and at least I know I should at least get the match for them.

That's right.

And then after, and then after that, I didn't know if it was better off to just go to a brokerage account or that 401(k).

Well, do you have a Roth 401(k) option there or is it just traditional?

I'm not entirely sure if it is. I, I haven't talked to the, uh, individual yet. She's actually coming in on Monday, so I can discuss.

Okay. You broke up on us, but the key here is just remember these three things. Match beats Roth beats traditional. So you just told us you don't access the match for until you've hit a year. So next up, let's go to any Roth options we have. If you've got a Roth 401(k), you can just do all of your investing there. And if you haven't hit 15%.

Yeah, that's where it's, uh, with the Roth, I just, I just need to try to get set up there with her.

Well, the Roth you could set up, the Roth IRA you could set up on your own. You would not do that through your employer. But if your 401(k) has a Roth option, that you would do through your employer.

You can just begin all future investing into that Roth portion. But I, at your stage, do you have any debt right now?

Uh, right now all I have is 5,000 from a student loan that I already have 3,000 saved up for at the end of the year. I'm going to pay it off.

Okay.

And then I just, just the rest through weekly payments. And then I also have a, about an $11,000 grant, but it's not occurring any interest until 2028. So.

When you say grant, you mean debt, right?

Yeah. It, it was, uh, it was weird. It was, if I worked in the state, then it was, then it would get kind of canceled out. But it's at a 0% interest until 2028. So all of next year I'm going to, uh, have it to where I have it completely paid off before any interest does occur.

Okay.

Well, I would slow my roll on investing until I got this debt paid off. Even though you're sort of kicking the can down the road with the 0% interest, we would recommend not investing a dime until you're debt-free. And at 23 making 90 grand, man, you could attack this debt in no time and be done with it. You have three grand to your name right now.

I think that is, what was that?

You said you have, you have a couple grand in savings. Is that all the savings you have in cash?

In, in cash funds, uh, I have probably about another 3,000 just, uh, floating in my checking accounts right now.

Can I throw a crazy idea at you? And I don't think you're going to do this, but what if you sold off some of these precious metals and became debt-free today?

See, I, I thought about that, but it's also, uh, part of it is I, I earned some money through high school to where that money is kind of in my, in the back of my head to where it's kind of like I don't own it now. It's kind of just sitting there.

The, the precious metals?

Yes.

So who owns it?

You own it. The only thing is you're treating it that way so that it continues to kind of be an asset that you don't touch, but you need to touch that so you can get debt-free.

Listen, if 50 grand's going to get you through an apocalypse, then I think 40 grand will too. You might as well just be debt-free today. I would sell off some of those precious metals, be debt-free, and then power on through investing 15% instead of a measly three. Five X your investing, man.

All right, GK, you know what time it is?

I have no clue.

It is Ramsey Christmas Cash giveaway time.

That I knew.

That's what I'm talking about. I'm excited about that. It's official. The time is here. Someone, somebody out there, I don't know who it is, is going to win $10,000 in cash this Christmas. Why can't it be you? That's what I want to know. Why not you? Plus, we're also giving away $500 every single week up until then. You can enter to win every single day from now until December 20th to increase your chances to win, which is pretty amazing. So if you want to get involved, which I think you should, go to ramseysolutions.com/giveaway now to enter.

That was a mouth trumpet for you.

I appreciate that every time. Let's go to David in Milwaukee, Wisconsin. Hey, David, how can we help out today?

Hi, how you doing? Um, so I'm just, we've just been off of the big bourbon wind, so I'm very happy on that. But, um, basically I'm 20 years old. Um, I am currently homeless. Um, I am just trying to find how I can make my money go into basically beginning my apartment. You know, I'm up here in Wisconsin. It's going to get cold soon. So I'm just trying to, um, just see my options for that.

David, what happened?

So I'm 20. Um, basically long story short, um, with me only being 20, my from 18 to 20 itself has just been a lot. My family, uh, me and my mom didn't really, um, have good eye to eye sight. So, um, we just, of course, we had to split ways with that. Um, I was blessed enough to be with someone else for a little bit. And then, like I said, it just, it just got me to me being homeless. Currently, right now I have a job. I'm really good.

Okay. Good.

Okay. Okay. It's an okay paying job for my age. Um, I am blessed enough with thanks to God to like have to sleep there sometimes. I get to sleep there. So I'm not.

Do they know?

Like when the streets.

Do they know you're sleeping there?

They do not. They do not.

Okay. They don't know.

I have access, I have, I have access to the building itself, so that's not an option, like an issue, but the sleeping itself, they don't know about.

Okay. And it's like, I got to get out of there because if they find out I'm sleeping here, I'm going to lose this good job that I have, right?

Exact. Exactly. But also it's like, man, I don't want to, you know, be out there. And so yes.

Okay. And I'm guessing since, I mean, it's, let's be honest, it's pretty extreme to be sleeping at your office. So my guess is you don't have any community, any friends, no family who you could say, hey, I'm going through a hard time, you know, can I pull up the couch?

I don't. And I don't have that. And I am very, very close to being okay in life with being by myself. That is, of course, the good and bad thing with me being so young that I don't have a support system.

Yeah, you need it.

Exactly. So that's why I watch you guys a lot. I'm blessed enough to have this to be able to want to change. So that's why I'm kind of crying for the help of, you know, I need some help.

Okay.

What are you making right now?

So, okay, guys, so this is, so I started in March, okay? And since March, I have an app that I have ADP. It says year to date, I've made $26,180. Okay. Monthly, it's a fully commissioned job. So it's, it's not a net pay. So the last couple months, October, I made 4,400. September, I made 4,600. And August, I made 3,200.

And what, where does that money go? Because obvious, where's it been going?

So the money goes, uh, since, um, a year and a half ago, I had bought a car, um, which my life is totally different. Um, you guys are going to kill me, but I was young and I know. It's a 29% interest rate. I pay 650 a month.

Still?

The only good, yes, yes. The only good thing about this loan itself, I love it, but it's a Lexus. So of course.

There's nothing good about this loan. There's nothing good about it.

You're homeless driving a Lexus? Do you know how insane that is?

Yes. Yes. I know. At the time I, at the time that I had got the car, I was not in this agreement.

Right. But now we are. So that's going to be the number one thing on our list that George and I are going to help you get rid of. So start saying goodbye because we cannot have this car. So $650 a month. And, and let's keep it current to right now because we only have a limited time and I really want to be able to help you. So the 3,800, for instance, that you made this last month, tell me exactly where that money is going because 650 is going to the car. What else?

Um, so majority of it, gosh, I spend a lot of money in gas. I, I do door-to-door sales. So we go in Wisconsin different, um, you know, different cities. So I do a lot of gas. And then I have been just, uh, fixing big purchase with like a radio and like miscellaneous stuff that's been big. But also real quick, I've been, um, attacking my debt.

No, no, no, no. No, no, no. Stop, stop. Go back to what I was saying, which is the 3,800. You don't have a house or a place to live. Where is that money going? Which means you don't have utilities. You don't have, right? We need to know where that money's going.

So I let, look, I've been, like I said, debt I've been paying off. And I also like miscellaneous, like.

What other.

Um, like gas. Like gas is a really big.

I don't think you're spending $3,000 a month on gas.

What are the other debts? Let's see if we can help you. What are the other debts you're paying?

So I've been trying to just, I've been can't catch up. That's why it's been like I'm not really having that money just to sit.

Yeah. What debts?

So I've been, so it's been my phone. I've been paying off my phone, like bills that I've been passed on.

Okay. What bills?

My collection. It was like my phone, like my phone bill. I was like two months passed on that.

So you passed on the phone bill. What else?

Um, it was my collections that I paid off.

Okay.

Um, I was, I was spending about $1,000 a month of gas.

Okay.

Um, and then like other like miscellaneous things, like, um, I say like.

Food.

Food, clothes, like stuff like that.

Okay. So the only bill, the only bill you've been paying that's over is the phone bill. And then there's some collections things. Let's forget about collections for now because they're already in collections. They're already probably primed to sue you for whatever reason. So let's, let's not put any more of your money going forward towards collections right now. Let's not even put any more money going towards cell phone. If you use your phone for work, they need to be paying for it. So you honestly don't even need a personal line because you don't even have a, you don't have a home. So we've got to put the, the number one thing, first things first, which is you've got to get yourself into a place that's not the office because you cannot lose this job.

Yes.

Okay.

So what, what is stopping you from resetting this life and going, all right, I make four grand a month. Why can't you go rent somewhere for a thousand bucks, even if it's with a roommate or two?

Which I am a thousand percent I will. And, um, I basically most of my shirt guys, I know looks bad now. What I've been trying to do is clean up my mess. So now going forward, these next couple months, I'm okay. Because my only fixing expense now is my car.

Yes, but you're putting it in the wrong order. That's what we're telling you.

You need four walls first, which is housing, transportation, food, and utilities. You cover that before anything else.

So then should I, would you guys say, uh, say get my emergency fund first?

No, no, no, no, no.

Four walls first. Exactly what George said.

Go find housing and make sure you're current on that. Cover your, cover your gas and basic food. No eating out. You don't need clothing right now. It sounds like you got plenty. And your utility bills that come along with that. That's all you actually need to cover. Then if there's money left over, which there should be, we can make minimum payments on our debts. If there's extra money beyond that, let's throw extra at the debts. If you do it in that order, you'll actually have a place to live and you can fight this thing.

Yeah. When do you get your next paycheck?

I get, it's a good thing I get paid every week. So it's a consistent pay.

Okay. What day? When is it?

Every Friday.

Friday. So do you get paid today?

I did get paid today. Yes.

Okay. How much did you get?

Uh, about $1,100 today.

Okay. So $1,100. Don't spend that money. Do not give it to the phone bills. Do not give it to collections. Do not give it to your dad. Do not give it to anybody else. And let's see what we can go out there and find first and last month's rent and say, okay, let me see if I can find some place. And then by next Friday when I have $2,200, can I get myself into four walls with some heat or AC? That's what I, that's your number one goal. What would stop you from doing that?

Really nothing. But I'm actually got a question real quick. My only thing I'm thinking of is the only dilemma is because I'm so young, my credit score is only 480.

That's fine.

So that's the only thing.

You're, you're credit's a wash, but you need to find a place who where that's not their main thing. That's why I said let's do some research because you might find somebody who's renting a room. You might find something, do you see what I'm saying? That's not as corporate run. Um, and also the more cash that you have in hand for first and last month's rent, that's going to look a lot better for you.

Okay. Now, now correct me if I'm wrong. Now, real quick, since I know it's commission and it's good and bad for that, I would think I need emergency funds so I can feel comfortable enough to be able to live.

First things first, my friend. You're putting the cart before the horse. The very first thing you need is four walls. And then, and then once you get in there, then we can put $1,000 aside. You're correct. Then $1,000. Then after that, we can start getting current on what's behind. And then after that, we can start actually making some payments above the minimums to try to start paying off whatever you might have. Maybe you have, um, some debt that you did not mention here, but that's the order.

The only debt I have, other than a car, only debt I have is a $1,500 credit card. That's it.

Okay. And we're not touching that right now. So just remember, off the phone, four walls. I'm looking for an apartment. By next Friday, I'd have something. And then from there, yes, stash away $1,000 and do the step-by-step. Call us back if you need anything. And I mean that.

Uh, uh, doing wonderful. Thank you for taking my call.

Yes, sir.

Uh, just a quick question. My, my son's 23 years old. Uh, he'll be graduating this fall with his master's, and he's got $34,000 left over in a UTMA account that we set up for him to pay for his college. And, uh, it's still in a, uh, managed, it's a Fidelity balance fund. But I just wanted to know, should, would you recommend, he has started a, a Roth IRA on the side as well. Would you recommend rolling over some of that into that, or what would you recommend he do with that money going forward?

Where's he at in life? What are sort of his next goals as a 23-year-old? Is he working full-time? Is he renting? Is he married?

So, uh, he's single. Uh, he just got his first job. He did one interview and got his job.

Wow.

Awesome.

Uh, he's a, he's a wildlife biologist. Um, and the ranch that he's working on provides housing. He gets a two-bedroom, two-bath house. So all of that, all of his utilities and everything are covered. So he has no debt. Uh, his car's paid for and, uh, no, no debt at all. So.

I love that. I mean, there's part of me that likes the 34,000. Does he have a, an emergency fund of any type? I'm just curious before I go much further.

Um, I couldn't answer that.

Okay.

He does, he likes to hunt and fish, so he spends a lot of money on that.

Well, there's part of me that goes, he's got this really cool job now where housing is provided, but on down the line, there may be a situation where housing is not provided and he's kind of out there like the rest of us and, you know, has to decide if he wants to buy a house and put a down payment on. So I kind of like the idea of maybe letting the money grow for a while, knowing that there's going to be some real-world purchases that might require a hefty down payment in the future. So I don't know if I would move it over to retirement funds.

Okay. So would you leave it in a, like a balance fund like it is, or move it into mutual funds, index funds?

When you say balance, it makes me think there's a bunch of bonds in this.

Yeah. How's it invested?

Yeah. It's, it's, it's through, it's the Fidelity, uh, balance fund. That's what it's been in since day one when he was one-year-old when we started it.

Okay. Yeah. I'm not sure the exact investments inside of that, but I would want to see him in 100% equities at 23. I mean, he's got a lot of life ahead of him. And if you want the full, you know, upside of the stock market, you got to be exposed to all of it. And so you, it'd be wise to move him into, you know, the Ramsey recommended mutual funds across four types. You've got growth, growth and income, aggressive growth, and international. And so having that diversification all in equities will help that money grow for him over time. And then when it's, it's his money now legally.

Yes. Yeah. It's set up to, to, uh, pay for their college. And then they were shown the amount that was in there and, and basically whatever was left they get. So, uh, which gave him some incentive to, you know, do well and apply for scholarships. And the stock market's done so well, he's actually going to, you know, have $34,000 left when he gets his master's.

That's great.

That's incredible. So yeah, I mean, if he's debt-free with an emergency fund, then he's at baby step four where he can be investing 15% of his income and he could fully fund a Roth IRA for the year. He could set aside some for an upgrade for a car one day. He can set aside some for a down payment. These are all really good goals to have as an adult. And you've done a great job setting him up for success.

I love that.

Now talk to him and have him make the decision.

That's a good point.

Because he's in a debt now. So sit down and say, "Hey, you got 34 grand left after your master's is over. What do you think's the best use of it?" And talk him through that so he understands the critical thinking behind money and what's the best use of it.

Yeah. And it does also point to another side of this where whenever you're investing money, guys, make sure that you're taking the time to look at it, looking at exactly how it's invested, and making sure to check that the rate of return is somewhere between 10 and 11% at the very least annualized. Because that's how you know, hey, it's in active equities. Like this thing is, it's not invested in bonds. It hasn't, you know, been, uh, very, very conservatively invested to where you're barely doing better than a high-yield savings account, right? Make sure you're checking that.

It's 35% bonds.

Ooh.

So from, you know, when he was young to now, 35% of that was in bonds which weren't performing at the level the US stock market was. So that's something to look into. Now it's, you know, water under the bridge. You did well, all things considered.

Absolutely. But it's just something, you know, you want, you want to get the most bang for your buck. You're investing this money, uh, go ahead and go full in, jump into it. All right, let's go to Laurie, who's in Phoenix, Arizona. Laurie's up next. What's up? How you doing?

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

Yeah. How can we help?

Um, so my basic question is, is I am going to have a lot of medical bills coming up. Um, unfortunately, I only have about $8,500 in a emergency fund.

Okay.

And I have a $65,000 in a Roth IRA. I just want to, my question is, is what's the best way to attack medical bills that are going to be start piling up real quick?

Well, what's your deductible?

So I believe we just signed up for the insurance. I actually just got married two weeks ago, so I can get on my husband's insurance. And it is a, I believe, zero deductible, but we pay 20%.

Oh, okay. And do you know what the out-of-pocket max is for the year?

I want to say 6,800.

Okay. So that would then be my, my goal. Do you think these bills are going to exceed 6,800?

Absolutely. They are already, um, so I had, um, Affordable Care Act insurance before I got good insurance, uh, two weeks ago. So the stuff that's already coming through, like my PET scans, my MRIs, my ultrasounds, all that stuff is already adding up and probably about 6,000 right now where I'm at. And that's not even, uh, scratching the surface of what's going to come.

Okay. So you guys will, you'll have the 20% copay, you'll have the 20 split copay, and then you're on the hook for up to $6,800 for that, for that year. And you said you have 8,500 saved?

I have 8,500 in a, um, money market account. Yes. That I've been using or saving as my emergency fund.

Okay.

Are you guys combining your finances now that you're married?

We are in the process of doing that. It's just been two weeks. And, um, so we've been just processing the diagnosis and doing all the appointments and doctors and getting all this stuff on board. He's still in the process of moving in as well. So it's been a busy couple of weeks, but we're.

Yeah. That's tough.

That's a lot. What is the, what's the future look like as far as this diagnosis? Are these going to be just ongoing medical costs that we need to factor in every single month?

No, no, no. I'll be okay. Um, it's actually a reoccurrence of breast cancer that I have. And this time I will have to do some radiation. That should be it. So after the surgery, which is November 16th, and then, uh, four to six weeks of radiation after that.

Okay.

That means I'll be out of work for four to six weeks just for recovery from the surgery, but then after that, I should be able to go back to work.

Okay. I'm going to call this storm mode, which means we're, we're pausing the baby steps. Let's use the emergency fund if we have to, and then cash flow the rest. So let's get ahead of it and say, "Hey, our future paychecks are this much. We need to set aside this much a month inside of the savings because we don't know when this storm's going to be over and how much it's going to be and what the damage will be." The goal is to avoid the medical debt. If we do have medical bills to pay, we'll deal with that and try to negotiate and settle on down the road. But right now, you focus on you and your health. We're, we're praying for the best.

Yeah. Prayers for you.

Well, if you've worked hard to get out of debt, the question now becomes, what do I do with all this freedom I've created? Well, we're going to unpack what comes next live on the Live Like No One Else cruise, but you got to be there to experience. This is your week to get away, to have an incredible vacation, and hear completely brand new teachings from Dave Ramsey and myself, George Campbell, Rachel Cruz, Dr. John Deloney. All of us are going to be there. We'll be talking about things like, uh, setting new goals after getting out of debt, ways to continue building wealth, creating a legacy that lasts long beyond you, and a lot more than that.

Oh, yeah. We're doing two of those.

Yeah. And I think we're, are we doing a Ramsey show?

Ramsey Show Live a couple of times as well. Little Deloney after Dark. That's a late, I'll be asleep by then, but a lot of people stay up. That one's packed out.

Deloney after Dark. I don't know. What does that mean?

I don't know.

You'd have to be there to experience.

I don't know if I'm old enough to get in. There might be a, you know.

Adult style.

Yeah.

Also, we'll be doing the world's largest debt-free scream, which if I'm honest, that was my favorite thing that we did on the cruise last time. And of course, just a really fun time, uh, sailing and visiting all the different, uh, locations in the Western Caribbean. So if you're on baby step four, guys, or beyond, join us. It's going to be March 14th through 21st, 2027. Cabins are almost gone, so please be sure to lock yours in. Book your cabin at ramseysolutions.com/events. All right, let's go to Miranda, who's in Athens, Georgia.

Hey. Hey. How are you?

Doing all right. How can we help?

Okay. So I had a quick question. Um, we, me and my husband recently bought a house a year ago. Um, it's our first house. We put 5% down. Um, so we were planning on refinancing the home once we got like a large commission check that, you know, we just got. Um, but interest rates are going up. I didn't know if there was another way to pay money towards, we want to get rid of PMI, but it would have been nice to also lower the payment. Is there another way to do that? Or not really. Like we're just stuck with the payment that we have because interest rates are so high.

You're not stuck. You'd have to throw money at the principal to lower that, that ratio in order to get rid of the PMI. Do you know how much the amount is?

Um, like the PMI we pay each month is like 225 or something.

And what's your, your ratio of equity?

So we put 5, so we put 5% down. We bought the house for, it was $395 was the sell price. We put 5% down, and I think it appraised at $415. I don't know.

And what's left on the loan?

Um, I, I looked the other day. It was like $370 something because we've only lived in it for a year.

Okay. So you guys aren't quite there yet. Now, what's your, what's the amount you could throw at the principal right now?

Um, right now, this, like we could do $40,000 now, but next quarter we'll be looking at close to $60,000. I don't know that we're going to do it all.

Oh, that's good.

Um, but I mean, yeah.

That ought to get you there, right? Because 20% would have avoided the PMI. On the $395 house, 20% would have been $79,000. So if we can get to that, that ought to clear you of the $225.

If you get that mortgage to like $310, $315, you just throw it all at it, you can recast it, and then you can get that PMI removed.

And would that also lower the monthly payment or no? The, we still.

Yeah, the recast would. So it'll, it'll keep all of your terms, but it will calculate it based off the current balance.

Okay.

And so because your loan's a lot smaller, it'll lower the payment as well.

Okay. So would we just contact like a mortgage broker to do that?

Yeah. You can contact your, the lender you have right now.

Okay.

And say, "Hey, we're, we're looking to throw a lump sum at it, recast it, and get rid of the PMI." And they can walk you through that process. It shouldn't cost much. Recast maybe costs 500 bucks. Uh, is this mortgage a lot of your world right now? Like what's the take-home pay and what's the mortgage amount every month?

So no. Well, it's a caveat. So we get large, um, you know, quarterly, um, whatever it's called, uh, commissions. But our take-home pay is based off, basically a base salary of $125. So it, it can sometimes feel tight. Um.

Until those bonuses come in and then you're like, "Okay, we're good now." And do you set that money aside to cover the weaker months?

So this is honestly the first time, so our financial situation has changed slightly. We've made the same amount each year, but I've just stopped working. My husband got a new job. He makes more commission. So this is really the first time we're seeing this larger commission check. And I just stopped working at the beginning of October. So this is all really like new. We almost, we basically don't really know what it's quite going to look like. It's going to be fine. We know that, but we don't know like the month-to-month, I guess, how that's going to feel yet, which is part of why we wanted to lower our payment if we could.

So if you, if you do, if you do this and you get rid of the $225 a month in PMI, what percentage will the mortgage be of your, of your take-home on that base pay?

Um, let's see. Probably nearly 30%, I would say, after insurance and all of that's taken out.

Okay. Then I, I, I feel more confident in that, but I think it's going to be, I mean, it has the propensity to be pretty tight until that happens.

Mm-hmm.

But I would contact your lender because every lender varies and ask about the process for removing PMI and what that's going to take. And once you have the loan to value, can they just remove it or does it require, you know, a recast or refinance? So those are good homework points to get. And if you want a second opinion on this, you can always contact our friends at Churchill Mortgage, and they can walk you through that.

Thanks for the call. Next up, we have Dimitri, who's in Albany, New York. Hi, Dimitri. You're on the line.

Hey, how are you? Thank you guys so much for taking my call.

Absolutely.

Um, so yeah, my question is, I am currently $24,000 in debt, and I am not, I assume I know the answer, but I want to see if I should stop like all investing, including my 401(k), and pay off that debt as aggressively as possible, or if I should just continue investing and then like pay off the debt while also investing. I assume I know the right answer, but I just wanted to double-check with you guys.

Well, George and I are so confident, I think we can count to three and say it at the same time.

Oh boy. Now I'm nervous.

One, two, three. Stop investing. Look at this.

I just want to make sure. And that includes everything like.

Every single dollar. And how does it make you feel, Dimitri? Be honest.

It's a little scary because I've just invested my entire life pretty much.

Does it frustrate you a little bit?

Yeah, it does, but.

But does that mean you'll get out of debt faster because now you're mad? I kind of, I just think anger is a part of the process. It's like you need the five stages of grief with debt, and anger needs to be there. And I'm angry that I'm not able to invest every single dime because I got these payments over here. So think about on the other side of this, how quickly will you pay off your debt if you got fully focused, paused investing, and just went 100% in on the Ramsey plan? How quickly?

Um, I would like to say within two years, two to three years.

Okay. So you're telling me you can throw at max $1,000 a month towards your minimum payments and extra?

Yes. Probably.

Could you do better?

I'm very frugal. I, I, it's probably.

How much do you make a month?

Uh, a month, uh, I'm not too sure what it comes out to, but I make $84,000 pre-tax.

That's a great income. So if you pause investing, how much are you investing right now? What percentage?

20, 20% going into my 401(k).

Wow. So that's $17,000 a year you're going to get back. That's like three, over three quarters of your debt right there just by pausing investing. So now, how fast are you going to get out of debt if you actually pause investing?

Right. It could be a year.

Less than a year.

That's, that's nothing. Plus, what do you already have invested? How much is already there?

I have, I have $10,000 in one of my like Robinhood or brokerage accounts. And then I have $18,000 in my 401(k).

Okay.

And then I have, uh, $8,000 in my Roth.

Okay. So let's call that altogether $36,000. And how old are you?