Transcript of The Best Financial Plans Don’t Rely On Debt New

This is an ad for BetterHelp. Stress from money problems doesn't just stay in your bank account, it shows up everywhere in your life. Talking to someone can help you sort it out. Go to betterhelp.com/ramsey to get 10% off. Brought to you by the EveryDollar app. Start budgeting for free today. Normal is broken. Common sense is weird. So we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union studio, this is the Ramsey Show. I'm Dave Ramsey. Rachel Cruz, number one bestselling author, co-host of the Smart Money Happy Hour, Ramsey personality, and my daughter is my co-host today. Open phones here at 888-825-5225. Lynn is in Los Angeles. Hi, Lynn, how are you?

I'm fine, thank you. How are you guys?

Better than we deserve. What's up?

Perfect. Um, I'm 77, retired, and I— about 10 years ago I took out a reverse mortgage on my home that was paid for, but of course now I owe that, and it's about $98,000 and racking up interest, of course, every month. Astronomical. And I don't use it, and I haven't used it probably in, in, in right after I first got it.

And, uh, you have By using it, you mean you haven't been receiving the payments?

I haven't been taking funds out. No, at all. One time I think I did. Well, for a while to get it up to $90,000.

Yeah. Okay. So what is the interest rate on this ridiculous mess?

Oh, I think it's about 6-something, 6%. And I know the interest. I, when I look at the, um, the statement, it's about $500 and some dollars a month. It seems like now that'd be about right. So that's, Like, yeah, that's kind of killing me. Um, but I don't know what to do. I have a traditional IRA with about $230,000 in it, and I also have a high-yield savings account with about $80,000 in it. I'm very reluctant to use my high-yield savings account to at least pay a portion of it off because I just like having that security of knowing that money is there. And I was wondering if I used my traditional IRA, would the taxes kill me?

You'll have taxes on it, but you won't have any penalty. What other nest egg do you have? Is that it? Your total balance is—

I have about another $15,000 in just my regular savings account.

What are you living on?

I have retirement, Social Security, and teacher's retirement.

Okay, cool. So how much a month do you have coming in?

About $4,500.

And you live on that?

Yes.

And you're in Los Angeles?

Yeah.

Do you, Lynn, do you have—

I have no debt. I have no debt other than that reverse mortgage.

Yeah.

Do—

what margin do you have per month? That, like, out of the $4,500, how much is left after you have all your living expenses?

Oh gosh, probably, um, Well, my son and daughter-in-law live with me and they, they chip in and everything. So I probably have about, you know, um, $28,000, $3,000 left by at the end of the month.

Oh wow.

We share expenses.

Okay. What's the home worth?

Probably about $850,000.

Okay. So at the tune of $6,000— so basically the $6,000 a year, and interest is just being added to it.

That's right.

So it's just chipping away. So if we did that for 10 years, you'd be 87. If we did it for 20 years, you'd be, uh, 97.

Right.

Okay, and that would still only be $120,000. It'd be more than that because interest is going to be on the interest, but it'd be $150,000 more. And so at that point, you're going to have, um, $350,000 owed on whatever that property is worth 20 years from today.

Right.

It doesn't bother me. I'm gonna let it sit there.

You would. Now the other thing is, though, what if something happens health-wise and I have to, say, move in with my daughter? Technically, I'm with a reverse mortgage. I have to live in that house. So then I'd have to sell it.

Exactly.

That would be my other— the only other option.

Exactly. And you probably would do that anyway. If you had a paid-for million-dollar house and you moved in with your daughter, you probably wouldn't keep the paid-for million-dollar house.

Okay. So your suggestion would be just—

I'm gonna let it ride.

If you told me—

Yeah, if you told me you had another $300,000 or $400,000 laying around somewhere, I would use $100,000 of it and pay it off for peace of mind only. But I don't want to take you down by $100,000 from $310,000 worth of money. What do you think, Rachel?

I guess I'm a little shocked just to say to keep it, but as you go out the math, well, and especially since you're not working, Lynn, and my thing is too, even with the margin though per month, you're still not gonna, it's gonna take a while to get to.

You know what the other thing is, you could do this. You could do what you're talking about. I see where you're going already. You could take like $50,000 of your $80,000 throw it at it, and then take it, run over to the credit union and get a loan and pay off that loan out of your margin in a couple of years, and you'll be back to debt-free in 2 or 3 or 4 years.

I could do that. I could also, I also thought about doing the $50,000 out of my high yield and then also maybe $50,000 out of my—

You could, but that's gonna cost you 20% or 15% or something more than the interest at the credit union. And I probably would nibble at it and say, $1,000 a month for 50 months and be done that way, or 40 months or something like that.

I gotcha.

You could do $1,000 a month.

And also, if I paid it down even by $50,000, the interest wouldn't be obviously that much.

Well, your payment per month would be less.

Yeah, it's just going to accrue at whatever the balance is. But if you ran over to the credit union and got just a simple little loan and you know, on a 4-year note or something, you probably would pay off.

Because the credit union interest rate would be—

Lower.

3, 4?

Yeah, probably 5 right now, but somewhere in there. I mean, just ask them what they would loan $50,000 on a million-dollar house. Oh my gosh, talk about a deal for a credit union, right? And, but—

Yeah, but are they going to consider the— well, I guess—

I want a ridiculously good interest rate and no closing costs is what I want if I'm you. But that's an idea. You could explore that with them. And then you could pay it off and—

Well, because the $80,000 sitting there, Lynn, technically, I look at that as your emergency funds, right? And if you did 3 or 6 months of that, it would not add up to $80,000.

Yeah, you got some extra there.

Yes, so even if you left $30,000 and threw $50,000 at it, like what you were saying, I think that gives you plenty of room to be there.

All we're doing there is not solving a financial crisis, 'cause you don't have one. We're solving an aggravation. You do have that. And we're solving, as Dr. John Delony says, we're solving for peace. And so I love the idea of you being 80 and zero debt on this house because it's aggravating you so much that you called us.

When you're home, it's the— it's a— there's a safety net there. There's something to be said when you own it outright, especially in your 80s. Yes. Yes, that if you don't get, you know, if you get in trouble or something. And the good thing is too, Len, regardless of which way you, you know, you slice it or you do it, is the value of the home now so outweighs everything. So even if you did have a crisis and you did have to sell for something, you know, you still have a good amount of equity.

Hundreds and hundreds of thousands. Yeah, you're in good shape. So yeah, this is a, it's a bad product though.

You see it on cable news.

Yeah.

Reverse mortgages, walk-in bathtubs. Stay away, people. Stay away.

If you're buying your financial products where they sell Snuggies and walk-in bathtubs, you have a problem.

Yeah.

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Thank you for taking my call. Appreciate it.

Certainly.

Um, so I had a— I'm third generation on a— in a family business. We farm and ranch. Uh, in 2018 my dad got real sick and, uh, stepped up to the plate and bought everybody out, and just me and my wife run the place now. Wow.

Um, how did you do that? I have With no sleep, uh, frankly, a big mortgage, a lot of hard work.

Yeah, yeah.

How much do you owe on the ranch?

Well, that's— I owe nothing as of, uh, last November.

Wow, you got it all paid off?

Yeah, uh, might be the luckiest person you've talked to, Dave.

How much was it for?

A little over $5.25 million.

Wow, good for you. Way to go, Eddie.

Just a few things kind of fell in my lap and we took advantage. And, um, like I said, just a lot of luck and I've got a really good partner on my side. My wife is fantastic.

Um, it sounds like you work a lot. It's not like you work to create luck. I like it.

I don't know. I think it's just luck on my end, but anyways, I got to get everything paid off and now we're stepping into a different season here. And, uh, I have a neighbor place that connects straight to us and it's, it's It's a good place. We've farmed and ranched next to each other for 3 generations and they don't have anybody in line. And they came to me here last month and asked if I was interested. And I am, I am interested. And the reason I am is I've got 2 little boys. They're pretty young. They're 7 and 4. And I got a nephew, 21, male. All 3 someday I hope will work for me. I don't want to plan anybody's life, but that's the goal. And to do that, I would need to grow the place a little bit and this would be a heck of an opportunity for me.

Yeah, sounds good. Even if you were just building a business to sell it, which you're probably— you got so much family emotion in this one, you're probably not doing that. But even, you know, it sounds like an opportunity to grow the business, period. So what's the place gonna cost?

Upfront's gonna cost $4.65 million.

What's upfront mean?

Well, that's what they want is $4.65 million, but they've got a residence on it that I'm uninterested in owning. Um, and I've talked to 2 real estate agents and that and 40 acres should bring a little over a million and a quarter. And then there's another, uh, quarter section that is detached that I'm uninterested in owning. And that should bring right around $380,000 to $400,000. Mm-hmm.

So it'd be about a million.

So you, you, you came up with $5,250,000. How fast to pay off your debt?

Uh, 2018 to now.

Okay, so you did that in, um, 8 years. In 8 years.

8 years, yes.

Okay. All right.

And now, now, and little sleep with a lot of luck is what you kept pushing to.

Yeah, I understand. I understand. So I, I don't borrow money for anything, particularly for business, because it doesn't always work out the way this last one worked out for you. I'm proud of you. I'm glad you got out, but I don't want to sign up again. For the hell you just got out of. But I do want this piece of property, so how do we do this? So the way Dave does it, I bought an office building many, many years ago for $5 million, and I didn't have two nickels to rub together at the moment, but I was making really good money like you've been doing. You've got more than two nickels. But I leased that building with a 5-year option to purchase it. For $5 million, and I closed on it at the 5-year mark. It took that. I mean, I scratched every nickel out of the corner of the couch, right, to get to do that. The good news is by the time I closed on it, it was worth $13 million. So it was a great deal, right? But I didn't have any debt.

Yes.

And I didn't have to close on it if crap went sideways. And welcome to agriculture, right? Crap goes sideways.

Yes.

And so we cannot predict this rain and sunshine thing. We cannot predict, you know, disease and everything else that you guys deal with that are the— the— Yeah.

What do you do on the land, Eddie, specifically? Is it farm? You said ranching. Like, what's— what is it specifically?

We run cattle mainly.

Cattle.

So, yeah, beef prices. Hello. Can we— can we spell volatile?

Yeah.

And so, you know, if I'm you, I'm gonna talk to them. How much cash could you scrape together to pay them for a right to buy it for 5 years? Could you give them $500,000?

Yes.

Without going in debt?

Yes. Okay.

How much could you give them now?

Cash? Probably $1.25 million, but that'd leave me with— I know, I don't want you poor.

I'm just asking how much cash you got. Okay. I'm not suggesting that, but my point is, okay, so we need 4 if we turn around. So here, you could— if you don't want to borrow money, and I don't want to borrow money, so that's how I'm trying to figure this out, okay? You're probably going to go do it the old way, because you got away with it the last time you did it, okay? But if you did it my way, a way to do it would be to option it and line up the sale of the 2 pieces of property to simultaneously close the day you close to buy it. So that gets your need all the way down to under $3 million.

Yes.

And you've got a million of that. You don't want to put it all in there today, but that's the number. So we need to—

It's easy to half.

So I need $2 million bucks. So what am I— how fast am I going to come up with that? Oh, a 3-year or a 5-year option, and I give you $500K to be applied to the purchase price, and I'm going to rent it from you. For a maximum of 5 years, and as soon as I can scrape the money together, we're gonna close on it. But I don't want to borrow money. And you talk to that old ranch that's 4 generations, and he's gonna understand I don't want to borrow money.

Understood.

They want their money now, but they can understand you saying that. So if you could talk them into giving a half million dollars now and a 3-year or 5-year option, and you scrape together the other 2, 2.5, you line up simultaneous closings on the other 2 parcels off the— and you close on all of it the same day. Hey, your actual cash need is not that high and you're gonna get there.

Well, and for them, if you really did that, that's $1.8 that you pay them with the other properties selling.

Yeah.

And then you throw in, you know, even if you threw in $200,000, it's $2 million bucks that they may get on closing day, right?

So you're getting that. No, they're gonna get their whole $4 million on closing day, $4.6. The buyer, the seller next door, Yeah, we're going to give them $4.6 million the day you close on it.

But you're closing in 5 years.

Sometime between now and 5 years.

Yeah.

And no, but I'm saying, can you parcel out now and put and sell some of those properties? Go ahead now and let them sell off those.

You can't sell off.

But can they now?

Oh, let them sell them off.

Yeah, they'd be fine if they sold them off. And then it takes it down for what you owe them.

Yeah. You got— if you guys want some of your money today, that's a good idea.

Well, because they want the cash is what you're saying.

Yeah. If they want some of their cash today, they could go ahead and get almost $2 million of it now. "Whatever the 40, and then the back track that you don't want, whatever the total of that is, let them go ahead and do that. And I do want this, but this is what the net-net's gonna be." And yeah, that actually puts half the money in their pocket now if they sell off those tracks.

Yep, which is what I just said about 45 seconds ago.

You know what?

Thank you.

I'm catching up with you. Took me a minute. It's what happens when I'm not on the air for a while.

I know, Dave, you're great though.

Running slow.

No, you're not. The mind is sharp.

It's very interesting.

I'm not this sharp.

Here's the thing.

You love a puzzle though, a real estate puzzle is what you love.

And what I love is when you take debt as an option off the table, now you gotta figure out a way to do it. And now your creativity kicks in. Now you start to think, okay, I could get the neighbor to sell off, or I could sell it off, or I could simultaneous closings, or I could do options. But if I'm just unwilling to borrow money, and I don't have the money. How am I going to figure this out? And so, you know, the way we've grown Ramsey— I mean, we've got 1,000 people working in this building and, uh, $300 million a year in revenue. 100%, the way we just talked about, we have in every case used the profits from something we were doing here to start a new something that we were doing here, and the profits from that starts the things for the— drives the next thing.

And which takes a lot more work and a lot more patience and some frustration, but so much more peace, right? Because at the end of it, there's no risk and it's sustainable. Yes.

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Good, how are you all?

Better than we deserve. What's up?

What's up?

So my question to you is just, how do I continue to honor my parents biblically, um, if they are dishonorable, especially when it comes to financial matters?

They're dishonorable, meaning they're not great with money? What they do with money you don't agree with?

Well, so I'm assisting, but they say all kinds of things to me that are just, to me, not just— are not honorable as parents, and I'm trying to still honor them biblically.

Biblically, to honor someone is not to honor everything they do. It's to honor the position of parenthood. We honor our father and our mother so that we may live long in the land, okay, to quote Old Testament, right? And so we want to honor, but if mom's doing cocaine, we don't honor the cocaine.

Or she's being verbally abusive to you, Claire.

In other words, if she's misbehaving.

Yeah.

Yeah.

So, we don't honor misbehavior, but we do honor the position. So, the same would be true where we're called biblically to honor our leaders and pray for our leaders. So, you know, I didn't agree with much of anything Joe Biden did, but I honored the position he held as president. And I prayed for him as a person, but I don't have to agree with any of his policies to do that. It's the same thing. You honor the position, not the— and that's got to do with your nobility and your dignity. But that does not mean you are enabling or allowing ridiculous interactions. And so, okay, you know, just if you get above that, go, you know, I honor— you know, you can honor fatherhood and have never met your father.

Claire, um, what's— what, what is it currently, your relationship dynamic? Because are you taking care of them financially? What's going on?

Yeah, so my, um, my mom lives overseas, so I was financially taking care of them, uh, taking care of her, um, in terms of just like helping out monthly. Um, but it got to a point where I was overextending myself too much, and I fell back into a lot of debt that I thankfully was able to pay off by just hustling, um, for the last couple of months with work and picking up as much overtime as possible. But, and I still owe a little bit more, um, because I still have to pay for some things that I shipped overseas to her that have landed. But we— I talked to her today and she got frustrated at me because I had to cut off some things financially because it just was not in my means anymore. And, um, she said some, some very hurtful things to me that I know is not true to my character, but I just— and I— it was not right. I yelled at her and I got upset because of what she was saying to me. And, you know, I, I prayed about it and I repented, and then I sent her a text, but she blocked me.

So I was just like, I don't know.

Yeah, so it's a— yeah, it's a dysfunctional relationship. And then, you know, you're trying to be generous and kind and helping her, right, from— with the financial support monthly. So it's more just about boundaries, Claire, and you having integrity within yourself to say, "I still feel good about this action of taking care of," 'cause you may, right? She may be horrible to you, but I don't know what her living situation is. And maybe you think, "I still want to be able to make sure that she's good." And that's the route you wanna take, then maybe from the relationship perspective is where the boundaries have to be, or vice versa. Maybe you look up and you're like, "I can't have a relationship anymore, and I don't feel good financially," maybe because of your numbers or just because of the whole situation.

Right.

With whatever you decide.

Yeah, the thing that happens is when we're helping someone, entitlement can set in. And she felt entitled to your money. And when you said, "I'm not able to do that," for whatever reason, it was as if you took her money away from her because she already owned it in her mind. That's what entitlement means. Okay, she feels like she already owned your money and like you stole it back from her. And that can be compounded and made even worse by cultural norms. What country is she in?

West Africa.

Yeah, for sure cultural norms are at play in this, right? Because it's much more normal there for generations to take care of each other, even if they go broke doing that, which is dysfunctional, than it would be in America, where we're very compartmentalized from our extended family. And that's a cultural norm here. One's not right, one's not wrong. It's just norm. Because that there has its roots in just sheer survival, this idea that you take care of your mom, you take care of your kid, you take care of your auntie, you take care of your—

Well, yeah, and you could look at all different cultures, right? Families living together, multi-generational, all of it. But, um, okay. So going forward, Claire, what's your gut? What are you, what are you thinking?

So moving forward, my thing was to just, I told her, I said, I cannot help for a while because I have to get financially stable and I can't help you if I cannot help myself first.

Right.

That's right.

Um, to get on a proper footing. And she seems like she understood, but at the end of the day, I really come down to, I don't think she understood really because it's, it's hard for her to comprehend that the, the more I try to explain, my financial situation to her, the more she thinks, oh, well, you make this much money, then you should be able to help me with this much. So I kind of had to stop telling her so much about it. But so I sent her some things overseas that should help her for the next 6 months to a year. Like, I— and that's what put me in debt because I spent a lot of money on things that I knew would be beneficial to her for her to sell and make money over there. So, and I told her the reason why she's upset at me is because I told her I cannot transfer transport the things from the dock to your house because she lives 3 hours away from the port. I said, you have to figure out a way, or I can talk to the shipper to, um, maybe like work something out where you can go get it little by little.

And she's just like, oh, you left me in a bind and my husband's not working. And I'm, and I'm like, okay, well, excuse my stepdad. I'm like, it's not— I didn't make him not work. So I didn't know how to respond to that. And I just like got so mad because she, she kept on telling me, you know, oh, you're, you're a good-for-nothing daughter. Like, you don't help me out, you put me in a bind, you're doing this. I'm like, in my mind, I'm like, wow, okay. So I just started I'm like, I have feelings too, you know, and it's not fair to me. She's like, it is fair to you. You need to like, you know, it was just a lot. And I, like I said, I, I didn't want to yell at her.

Yeah.

Yeah.

Well, it's, yeah. Uh, is that a pattern though with your relationship? Did that, did that shock you that she responded like that?

Or it did, it did not shock me, honestly. It was just more of like a quick instant response just because of all that's been going on. But it did not shock me. I was not like upset in a sense, but I was more hurt by what she said. Two areas that you need to clarify.

In your mind, your boundaries. And you may want to sit down with your pastor or somebody and discuss it. You need to clarify your relational boundaries as to what I'm going— what am I willing to let someone that I love say to me? How am I, you know, Mom, I'm not gonna have this discussion. If you're gonna raise your voice, we'll have to talk another time. If you're gonna cuss at me, we're gonna talk another time. Okay, and just hang up. And when you, you know, I'll talk to you as long as we can talk reasonably. We can disagree, but we're not going to be disagreeable. And that's one set of boundaries. And the second set of boundaries is what amount of money is reasonable. You putting yourself in debt does not make sense to do this. So that's not— that's unreasonable. But if you're going to ship goods over there, you need to think about how you're going to get them to her. You know, the 3-hour gap is a bit of a problem on your end. So, how'd you think that was gonna work? I don't know why it would work. It shouldn't work.

So, you probably should have gotten them all the way to her doorstep or not done the whole shipping of goods thing. One of the two, because you knew she didn't have the ability to get there. So, yeah, you set your financial boundaries and your relational boundaries, and they should be two different— they're not tied together. My financial boundaries aren't tied to my relational boundaries. I can have a quality relationship and give no money. I can give a lot of money and not tolerate misbehavior. They don't have to go together, but for sure those things. But what this does is it puts you just completely into a tornado, and it hurts. It hurts. And so, yeah, just back up and de-escalate and reset what you are willing to do Am I willing to do? And then the next time you approach a conversation, what am I willing to do with the way we talk about things, our relationship? What am I willing to do financially? Financially.

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You know, we hear it all the time. A car accident, a cancer diagnosis, a heart attack, and suddenly everything changes.

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Yeah, it's important to understand the difference between them. Life insurance steps in when you die. Disability insurance steps in while you're alive but can't work.

Work.

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Protect yourself, protect your income, protect your family. Jessica is with us in Los Angeles. Hi Jessica, how are you?

Hi, hi, I'm doing well, how are you?

Better than we deserve. What's up?

Hi, well, I wanted to ask you guys a question. A little background, I'm 32 years old and I am an attorney in LA County. I've been working hard to save up for my retirement and, you know, investments and all that. And I've been in a long-term relationship for about 3 years with my partner who's 41, and marriage is on the horizon. And I just kind of— I had, I had my suspicions, but I recently found out that, or confirmed that, he doesn't have any investment accounts or like retirement accounts. And so this really concerned me, and I just wanted some insight from you guys about, you know, how big of a red flag is this? You know, can he catch up Am I being superficial for even being concerned about this at all? So just really wanted your insight.

Wow.

Do you know why, Jessica, that he has no retirement?

I asked, and kind of the common responses might be like, you know, I was just planning to work my whole life, which it's like, you don't have that choice, right? You could get injured, have a disability. Other, other things were like, you know, I haven't had benefits in the past, maybe working for smaller employers. He's a sole proprietor now, so it's just kind of a mix of—

What does he make?

I don't know exactly.

That's 3 years, you need to know.

I know, I know. I think approximately, probably gross, $100,000 to $150,000. That would be— that's kind of my guess. He told me once.

Gross is not net. I mean, what's his taxable income? Is he making $30,000 and trying to live in LA?

Uh, I, I know I should know that, but I, I don't because, you know, he, he recently went out on his own. And so, um, when you kind of start your own business, year one is, you know, zero pretty much.

Does he have a lot of debt, Jessica?

No.

If the reason that you want to know is because you're greedy and all about money, then yes, you would be superficial. But if the reason you want to know and the reason you want a plan in place is because the way we handle money is indicative of our emotional, psychological, spiritual maturity and our character is reflected in how we handle money, then yes, this is of great concern.

Yeah. And the reason why I felt— and this might come from a selfish place, but I couldn't help but feel like all this time that I've, you know, the money that I've responsibly saved in multiple accounts and whatever, I couldn't help but feel like it would be a subsidy for someone else. And I know the whole, you know, once you're married, you're one. I totally understand that, but you can't help but feel like maybe your retirement quality of life would go down because—

Yes, but I think you would feel different, Jessica, if we painted a little bit of a dramatic picture. But if his parents were sick and he was their caretaker and like did all this and didn't have the margin to save for retirement, but he was telling you at 45, "this is his plan." You know what I mean? Like, if there was like, an effort for the reason why, and a good reason, I don't think you would feel like that. I think you'd be like, "God, you are a good man, and you're gonna be a really great husband, and I'm excited to partner with you." It wouldn't feel like a subsidy if what he was doing was honorable.

But if you're subsidizing, "I really don't wanna plan, and I kinda just wanna work for myself, even though I make half of what I would make working for somebody else." And, you know, all of this screams lack of ambition, lack of, you know—

Well, lack of planning and forethought. And when you go into a relationship with someone, right, a long-term, lifelong, and they don't have the ability to think far out in the future, and monetarily, of just taking care of—

It's not a deal killer.

—the family, you know.

It's not a deal killer, but it is not superficial for you to be concerned either, because what it's indicative of. And so, what's the source that's driving his lack of doing it? And we could go on the other side and go, "Are you obsessed with money? And all you do is think about retirement. I don't want to live with somebody like that." And no, we don't want to go that way either, right? But this idea that we're solving for peace, again, to quote Dr. John Delony, which we do over and over, I'm afraid, but I'm solving for peace. Why am I saving for retirement? So I can eat. That's solving for people's problems.

Yeah, and if I don't have a partner that's going to be— not even equal dollar amount, but equal effort, you know what I mean? In that, yeah, that's hard. And it's not a, you know, a woman versus man thing. I think the opposite would be the same. If a guy called and said, "Yeah, she has nothing. She hasn't really thought about it." I'd be like, "Golly, what is she doing?" Like, you know what I mean?

I don't wanna be a kept woman. Yes, yeah. That's an old phrase. Some of y'all have to look that one up. I will.

I will. There you go. Kelly doesn't know either.

Well, again, it's someone who doesn't do anything and is being taken care of. Yeah. Kept. Yes. You know, that's the definition. That's an old—

and that's not a stay-at-home mommy. No, I know. I hear in the comments—

I didn't say not earning income. I didn't say that. I said doesn't do anything.

Yes, that's it. That's it.

I just want to say they're allowed. Yeah. Yes. Your mother's a full-time mom for 40 years. She's anything but kept. Yes, that's right. I'll just tell you that. Don't even put that word near her. It's not even gonna be good. Hey, buying or selling your home is a big deal, and you want an expert in your corner, 'cause it's expensive. You want somebody that fights for you to help you get the best deal for the right price. The Ramsey Trusted Program is the only way to find the top high-octane, high-protein agent in your area that you can trust to make buying a home a blessing, getting your home sold, make it a blessing. It's easy. To find a Ramsey Trusted Real Estate Pro for free, just go to ramseysolutions.com/agent or click the link in the show notes and in the description. And Rachel, I, I think the later people get married, and they're getting married later and later and later, the more this type of discussion comes up. 100%, yeah. Two broke 21-year-olds don't have this issue. You know, they're like, "Game on, here we go, whatever it is, let's go," you know, and saddle up, right?

Yeah, and it's worthy of the discussion. Oh, definitely. Because if you've built a life and you've worked hard on something and you have had a set of principles financially through your 20s, even your early, you know, your 30s, whatever that is timeline-wise for you, and then you choose to get married to someone, you have built a substantial life over, you know, 1 to 2 decades of working. And it's— and I do think it would be easier to merge and mold those 2 lives when your values are the same. But when you're coming at it so separately, and your results have been so different over the same amount of working time, or hers are even— I mean, he's 10 years older than her, you know, and he has nothing, and she's 10 years, you know, the last caller. You know what I mean? Like, that's the hard part. That is— that's the tension point because it reveals who you are and what kind of partner you're gonna be.

Ratio-wise of income to savings, there should be some kind of something going on. Yes. Not dollar amount to dollar amount. It's not about the money amount. That's right. And it's not about, "I'm gonna measure your value based on your bank account." That's not it at all. But we are saying what created that. What character qualities, and are those character qualities attractive? Or are they gonna cause you to become bitter out of lack of respect?

Yes, resentment of what they're doing, yeah.

If you lose respect, right after that comes resentment. And so, you go, "Okay, I really like him. He's a lot of fun and all that, but I don't respect him." That doesn't play like that. That's right, yeah. But if it's something as simple as, "I've got to address this because I'm afraid it could go to that," that's okay. And you go, "Before we go forward with marriage, we gotta be on the same page with this. And I want to be able to respect your effort, respect your forethought, your maturity. And if we can't do that, that's gonna be a deal killer, not the fact that there's no money." That's right. Right, absolutely. No, I totally agree. That's a deal breaker. And that's really tough when you've been in something for 3 years, and you're 31 or 32, and you're an attorney.

Yes, and also knowing people's values can change. We get the question a lot, "Should I marry someone with debt?" And we're like, "Yes, you can marry someone with debt." But what is their value around that subject?

Should you marry someone that wants to stay in debt forever? No.

If you want to be out.

Not if you want to be out. You're going to be pissed off your whole life.

It's going to be hard. So, people can change their values, right, with what the decisions you make. And that's the beautiful thing. There's redemption in it, right? It's not like who you were at 21 has to be who you are forever. Thank God. Yeah. But it is, it's a more weightier discussion with people getting married later. You're exactly right, because you have built a— It's coming up more. A life, you know.

We're getting it here on the air more. The question's coming in here.

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Welcome, welcome back to the Ramsey Show in the Fairwinds Credit Union studios. Randy is with us in Green Bay, Wisconsin. Hi Randy, how are you?

How are you? Hi, Dave. I'm great. How are you? Better than I deserve.

What's up?

So I'm going to try to keep this as quick as possible. My husband and I have a varying income and recently sold one rental property, but now we're questioning whether that was the right move. We still own a duplex that cash flows, and we're also going through probate with an inherited home. We could potentially sell both properties, pay off around $225,000 in debt. And fly through almost all of the Baby Steps besides retirement savings, or should we keep them for long-term wealth building and cash flow?

Okay. So you own currently 2 properties that are rented. Did I understand that right?

We have a duplex and both sides are rented. We just—

The other home, the other home, you said COVID, what'd you say?

It'll be an inherited home and it's not rented or anything right now. We're just starting probate.

Oh, so someone passed away. Yeah.

Okay. Who passed away? My husband's mom in March.

I'm sorry.

Okay.

And so you're going to inherit her home and you're going to do what with it?

Well, we don't know if we should rent it there. Currently is about $40,000 in debt on DFP. So the home is worth around $150,000, but we would have to pay the, you know, $40,000 to keep it.

Yeah. Was that a childhood? Was that his childhood home? No. Okay. All right. And the duplex, does it have debt on it? It does.

How much?

It's about, so it's a little confusing because we have 2 properties tied up in 1 mortgage. And we did just sell an older home that my husband lived in. We sold that and it didn't knock our mortgage down. All in all, for our house on 40 acres and that duplex, we only owe around $180,000.

The duplex is on the same piece of property as your home?

No, it's in the same town though. It's very close.

It's just in the same note?

Do they have 1 mortgage on the 2 of them?

Them? Yep.

I'm sorry. Yes, they do. Okay. All right.

So $180,000 blanket mortgage across two pieces of property. One of them is your home and one of them is the duplex. And then the inherited home has $40,000 and the $200,000 and something thousand dollars in debt is what?

Is both our current properties, my car, and some consumer debt. Mm-hmm.

Okay, so it's the $180,000 plus the $40,000 is $220,000 plus a car, right?

Nope, it's around altogether $225,000.

Okay, all that. How much is the car?

The car is— I'm around— it's around $28,000, and I'm about $5,000 to $10,000 underwater depending. I've had it for sale to sell since summer of last year and it's not selling. I even have it undervalued. No, you don't, or it would have sold. The, um, my bank told me not to sell it. So for— I mean, I have it listed for $22,000 and the bank told me it's worth $24,000 and I'd be silly to sell it.

Yeah, bankers don't— bankers don't get to advise me on finance. They're just where I keep money. Um, the, uh, Last thing you want to ask is a banker about debt. That's like asking a dog if it's hungry. And so, um, so what is your household income?

It varies. So my husband works full-time. He doesn't make much, makes around $20 an hour. I stay at home with my baby, but I do work on weekends. I bartend.

So it's all over the board. How are you paying all these bills?

Our rental income is a big one. It does pay the mortgage and all of our escrow. Mm-hmm. Um, that's why we're like, we don't know if we should sell because it cash flows so well.

How much do you guys on average, would you say, Randy, bring home a month though?

Everything in total? I would say around $4,500. Okay.

Yeah. Okay. Okay. I would sell mother's house and I would pay off your car. And I would pay off your consumer debt, and I would get on a detailed written budget to where you're running this like a business, not just a wishy-washy, not just like a wish. You've kind of just been throwing stuff around and hoping it worked, and you've got to really have to get very, very practical and very detailed and live on your income. And the two of you are going to work on your careers. Y'all suck at earning money, and so you need to really get some income coming into this house. And then you can work to pay down the $180,000. But no, I wouldn't sell the duplex today. I would sell mom's house and clear this stupid car. And don't go buying $28,000 cars when you make $20 an hour.

Yeah, and hopefully they could clear what, almost $100,000 after— if she owes $40,000, it's $150,000.

Yeah, and then, well, you got to pay off the $28,000 car and the consumer debt. I didn't get all the way to the bottom of that. Yep, yep. So another $10,000 or $15,000 probably There, because the numbers don't add. But anyway, yeah, so you need to get very detailed on your monthly income and what it goes to, and begin to whittle down the $180 that you do keep at the end of the story. But everything else, I would sell Mom's house, and I would pay off your car, and then get on a detailed budget. Pay off all the consumer debt.

Cut up the credit cards. And I don't think she— she didn't give us her primary home total of what they owe and the duplex all together. $180,000.

But all together, it was a blanket mortgage, one mortgage on the two of them. On both of them. Yeah. So they've got that deal down at the credit union. Yeah. The banker helped them with that. Yeah. So yeah, blanket mortgages set you up for problems when you get ready to divest properties, when you get ready to sell a property, because most of them don't have properly done release clauses, meaning that you can sell the duplex for $180,000 and they take the whole $180,000. Against the debt, and you get nothing. Because there's no partial release clause on blanket mortgages. So there, that sets you up for a problem. And that's typical.

Is that one reason why you wouldn't sell the duplex because of that? Because it's tied in?

No, I think she's making money on it right now, and they're dependent on it right now. But if we got rid of the car payment, yep, now the cash starts to flow. And we get on a tight budget, now the cash starts to flow, and we can start to whittle it down. You might be able to keep the duplex in time. But I'm hoping it can. And I can't tell where this is out, where this, you know, we didn't get into every single dollar there. But yeah. Yeah.

So, but income is key there, Randy, if you guys and run and after you sit down and run your numbers, I think it will give you some peace of having an actual plan. Because everything is just feels so muddled together. And you're like, I don't even know like, what to do here and there. And once you've laid out a plan, then you guys are able to say, okay, I need to work X amount more per week. He needs to work X amount more per week for us to clear everything in 4 years, 3 years, you know, whatever the timeframe looks like for you guys, and to actually have a plan. And then you can, then you can shape your life around, and that actually will probably give you the motivation then to actually play all this out. Because when everything is just in your head and it just feels like there's no succinct order shorter, it feels like more like chaos.

¡Hola!

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Fan quote says, "EveryDollar is excellent. It really helped me get my personal finances in order. Now that I'm married, my wife and I use it together on our joint checking account." Helps us maintain a common vision and set of goals. There we go. That's how it works. How you want to change your family tree? You want to get on the same page with your spouse? You can start EveryDollar for free. It will help you work the Ramsey Plan, will hold your hand digitally while this happens. So check it out, EveryDollar for free in the App Store or Google Play. Nate is in Cleveland. Hi Nate, how are you? I'm doing well, and you? Better than I deserve.

What's up? Um, well, my question today is, so me and my wife, uh, we're about $65,000 in debt. Um, I recently left my full-time job and started my own business because I was making significantly more. Um, my question is, I want to get the heck out of debt. Um, and my question is, how much should I be taking home from the business but also leaving enough in the business to grow it?

Okay, so what is the business profiting? You said you're doing a lot better, that's awesome. What's your problem?

Yes, so my profit, I am consistently bringing in $2,500 to $2,800 a week. Profit or gross? Profit, what I'm bringing, and what I'm bringing home. My gross has been close to $5,500 to $6,500. Okay, what are you doing?

What kind of business?

Um, I have a mobile mechanic business.

Oh, good for you, that's awesome. Thank you. Okay, and so it costs you about $2,000 to $3,000 a month to operate, and you're Did you say a week or a month? You said a week.

A week. I, the past 3 weeks, I've brought in consistently $2,500 into my household.

After expenses. Okay. Yes. Okay. So, so you're making like $10,000 a month.

Um, close to, yeah. Yeah.

If you keep this pattern going anyway. All right. And, uh, good for you, man. You're hustling. Well done. That's awesome. Thank you. And, and so Yeah, so what do you need to put back into the business to grow it? You seem to have it operating very well already.

Well, part of this is I, I've been operating part-time about 16 hours a week since January, and the last 3 weeks I went full-time.

But that doesn't have— that doesn't mean you need to put money back into it. You're making more money.

Right. So I have about, um, $50,000 in tooling that I still have to get. Um, and I'm also getting to the point where, um, potentially in the next 2 to 3 months I could look into adding another person.

Okay, I'm not adding anybody right now. This is a whole 3 weeks old, right? So no, we don't need to— we don't Let's just put off talking about adding somebody. And by tooling, you mean purchasing tools to do the job? Yeah. So you already have enough tools to make $10,000 a month if you never bought another tool, right?

I guess that's correct. Yeah, Nate's excited.

He's excited about his business. I want you to be excited.

I'm excited too. But let me tell you, let me tell you what happens with guys like you and guys guys are like me, okay? If I go in Home Depot, I discover things I need, right, that I don't even know what they do, but I need one of them. And so what happens in your world is you can tool yourself all the way through your profit, right? And the Matco guy's making all your money then.

Yeah, been down that road and getting out of that road.

Exactly. So, or whoever, whoever's pitching you the tool. So You need to be very careful. Tools are not fun. Tools are overhead. Overhead is evil in business. And so you don't buy a stinking wrench unless that wrench is going to make you more than it costs you within the next 2 or 3 weeks.

Well, the reason why I'm talking about tooling is specifically like there are jobs that I'm currently not able to do.

So what they make Okay, you're making $10,000 a month after 3 whole weeks in business. I mean, you can get— it's okay to add some of those jobs, but I don't know when you're going to do them, right? That would be—

he's saying they pay more, right? So one job could be 2 grand, and then if you had this tool, I don't know what, double? I don't know, or whatever, whatever it is for you.

Yeah, only if you by yourself can make more money because you bought the tool, not because you can get jobs. Yeah, the tool has to make you more money because we get caught up in this thing of, I could, you know, I'm turning down work. No, you're not. You're busy already 15 hours a day, right? Unless you can make double the hourly rate because of the tool, the tool has zero value to you right now because logistically you booked up. Gotcha. So I'm doing accounting now is what I'm doing. I'm not working on cars, I'm doing accounting with you. So if you're averaging $10,000 a month with the hours you have, unless you can average an extra $5,000, don't spend $2,000 on the tool.

Gotcha.

Because it doesn't— it didn't cause your income to go up, it just meant you could go to a different kind of a job than you're doing right now. Whoop-de-doop-dee. Now, when we get ready to hire somebody 6 months from now and you've actually got some downtime that you need to fill up, some available hours in the day, and the tool adds those jobs, now that tool is gonna ROI quickly and you're gonna buy that one. Gotcha. But your goal is not to end up with a trailer full of tools. Your goal is to end up with a pile of money. Yeah, that's what the tools are for. And that, that I get, like, I'm sitting in a studio right now, it's a different world, but it's the same kind of principle, okay? When it When it comes to computers and electronics and cameras, my friends in the engineering department that work for me in Ramsey have no end to their appetite. They will buy $2 million worth of crap that this crap sitting here would already do. And I have to go, "No, we're not doing that." But then also, it's quality. Dave, you're gonna look prettier.

I'm like, "Not that much prettier." And probably not. It's just probably gonna show off my ugly a little better. But that's That's all. But I mean, this is the world you can get into where the— If you're not careful. Increase in equipment, minimal functional.

Yeah, okay, so where's the balance of putting money back into the business? Only put money back. Versus, I know, versus paying off the $65,000 that he has in his consumer, like in his household debt.

I don't think he's gonna have trouble with this, 'cause I think he needs to take most of it home right now. And pay it off. The reason is, is that putting money into the business right now is not gonna cause his income to go up. 'cause he's already fully booked. Now if you're not fully booked and you can buy a tool that causes you to be fully booked, then you put that money back in. But that's not $50,000 worth of tooling. No. That's, which was his original quote, and I'm all the way down to about $2,000 now. And so, but $2,000 at a time, then when you add somebody and you've got available logistic hours, now we can grow the scope of the business, the size of the business, with the tooling. So, you know, we're gonna tool up a little bit with cash. But you still got plenty of money, making more money than you've ever made in your whole life. It's awesome. Because you ain't afraid of work. And you're out there doing it, man. You know how to do it. This is— I got a feeling you're gonna— this business, when we talk to you in 3 years, is gonna be, you know, 6 trucks running.

And— if you're not careful, because also, I would say him, I would say you, certain personalities, you do get excited, and then you get up over your skis and you're like, that's where, well, I could borrow on this truck. I could do that. I could do that. You know what I mean? And you start to— No borrow. Right. But it can start to expand so quickly. And so, there's a level of stability that's good.

Let's pretend he was making $5,000 before he quit his job. Now he's making $10,000 and he got $65,000 in debt. He's debt-free in a year. Easy. Yep. Easy. And so, you know, Just figure out your math that way. And then what we have done at Ramsey, I've organically grown this from a card table in my living room to where we're sitting now. And organically mean I took profit from the company and I bought tools. I hired people. I used some of the, I didn't take the money home. I put it back in here. But in every case, those things have to give me a return on investment. Otherwise we're going backward, and backward ain't the plan.

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Results may vary and no specific outcome is guaranteed. Mary is in Charleston. Hi Mary, how are you? Good, Dave, how are you? Better than I deserve. What's up?

Yeah, I have a— just a— mine's probably pretty simple there. I have a question as far as our mortgage and paying it off. So we owe $110,000 on our house. It's worth about $400,000. And we pay $5,800 a month right now. Our mortgage is only almost $1,500, but we've been paying extra. And in doing that, our payoff, if we pay it off in, we have 23 months and we'll have it paid off. But if we chose to pay it off in 12 months at $5,800, then we would have to take some money out of our high-yield savings to cop it, to finish paying it off. And we have about $70,000 in high-yield savings right now. And I've proposed that we take out after 12 months, continue paying the $5,800 for 12 months, and then take out $55,000 out of our savings is what we would have. I believe that we would have to pull out and leave about $15,000 in there at that time and pay the house off. So I just want to—

so the difference, the difference is like a wise thing to do. Yeah. So the difference is, um, 12 months with your plan, or the original plan is 23 months, right? Right. So the argument is 11 months difference. Mm-hmm. And how old are you guys?

This— I'm 56 and my husband's 60. And how long you been married? For 11 years.

Okay. And how much do you guys have in your nest egg? Your retirement estate?

In retirement, we almost have a hun— we have almost close to $200,000 in 403. We've quit putting so much into it while we've decided to pay this $5,800 a month rather than the $1,500, the almost $1,500. We cut back and only—

Yeah, and your household income is what?

$160,000.

Okay, all right. So let's just back up and say both plans are in the smart column. Okay, there's no "you're so stupid I can't breathe" check mark on this one. Okay, I mean, both of these are very wise. This is an argument between, you know, minutiae. Okay, and so neither one— you said he wants to do it the other way, you want to pay it off early, but he's worried about having not as much emergency fund. Am I reading between the lines? Yeah.

And I told him I watched your show one day and I said, I think he said get uncomfortable for a while. And that's when I came up with the plan of, I even suggested we leave $1,000 in there. And he's like, oh no, I'm not.

No, no, no, no, no. That's not, that's not our plan. Our plan is baby steps 4 through 6, 4 through 7. You, you leave your fully funded emergency fund in place. And I think $15,000 is a little tight. I'll kind of come down on his side there. So maybe between the two of you is the answer, because I also think $70,000 is a little high.

Okay. Yeah.

How much are your expenses every month, Mary?

You know, not much, really. We're bringing home about $8,200 a month, and like I say, we're able to pay $6,000 $30,000 on our— and live within means and not take out of the high-yield savings or anything like that. So our expenses aren't— yeah, we don't— we're out of debt.

So if you went in the middle and just said if we lost all income, right, and we had 4 months, 4 months worth, right, that's $32,000. So maybe you do throw, you know what I mean, some at it. Um, but you guys are reasonable in the 3 to emergency fund, right? 4 to 5 months.

Yeah, you're in good shape. The $70,000 is high. The $15,000 is probably a little low. And so, here's a fun game if you want to play it. Do the $5,800 for 12 months and then keep doing it every month until you look up and the balance in the high yield— you can pull enough out of the high yield Wait a minute, that, uh, I don't like that game all of a sudden because the high yield's not paying you what your mortgage is. What's your mortgage interest rate?

It's high, it's 6.875.

And the more— and your high yield's not but 3, right?

Yeah, it's just over 3.

So I want to go ahead and pull some of the high yield now. Um, yeah, why don't we, uh, see, 15. You, you— he says none and you said 50.

I'd go, I'd go $35,000. Yeah, split the difference. That leaves you guys, again, with a 4- to 5-month emergency fund. And with what you're gonna save in the mortgage once it is paid off, you're gonna have it bumped back up in 6 months, you know.

And then you can also play my game. Okay, so you put $35,000 on it today, you pay $5,800 on it, and if you look up and he's okay with one month pulling another $10,000 out and knocking it off, and that's the last $10,000, you could every month look at it and go, "If we paid off this month, that would leave us this amount. We paid off this month, how "Leave us this amount." And both of you sit down and look at it and be laughing and giggling while you're doing it, not wagging your finger. Okay? It's like, "This is fun. Okay, are we gonna pay it off this month? Are we gonna pay it off next month?" Keep the levity. Yeah, are we gonna pay it off this month or next month or the next month? And then, you know, he's gonna look up one of those times and surprise you and go a little further, you know, go on down to $20,000 balance or $25,000 balance.

Now, Mary, I would want you you guys investing in retirement though? I mean, if you are following the Baby Steps, you guys need to be investing 15%. Are you? Because you said you pulled back some.

And I'm putting none. We pulled back.

We were doing completely—

you pulled back completely? Yeah, yeah, you got it. We still—

we're still investing 4%. We were at 15.

You need to go back to 15.

Yeah, go back to 15 even. Yeah. Okay. I was advised to cut back while we're paying the house off because our mortgage is so high. 6-point, our interest rate, and the mortgage is so high.

Yeah, but the interest, the rate of return on mutual funds and a good retirement account is higher than your mortgage.

Okay, so, okay, whoever advised you that, and your age right now, I mean, like, you know what I mean? I think it would be a little bit of a moot point though if it, you know, but if you're in your early 30s doing this, but they're in there, I mean, he's gonna turn 60, so I'm like, I want— you want some in that more than $100,000. Yeah, to be able to retire. Because that is the balance about the paid-off home, like where we are all about, yes, getting to that point, which is our baby step, you know, baby step 6. But it does no good if you have a paid-off house and you have no money to eat.

Exactly, not enough to eat.

So, like, you do want money in retirement.

Okay, so what we teach Mary to follow our plan exactly would be to start putting 15% of your household income, that's another 10% more than you're doing now, into retirement. Well, actually, emergency fund. And lower the emergency fund down to, you know, 3 to 6 months, which would be $25,000. Okay, and so I'm gonna put $45,000 onto the house. I'm gonna start putting 15% of my income away for retirement, and then I'm gonna figure out how much I can put towards the house while putting 15% into retirement. Won't be $5,800 anymore. Yep, it's gonna be more like, it's gonna be more more like whatever, $5,200 or whatever, and you're still gonna be out in 23 months. That's right. And, and you will have been all along putting money into retirement, and all along had a sufficient 3 to 6 months of expenses retirement plan, and all along all your extra money then is going towards the house. And so that's what we teach. The Baby Steps 4, 5, and 6 are simultaneous. 4 is 15% of your income into retirement. 5 is kids' college, not relevant in this discussion, and 6 is everything extra goes towards the house.

And the expense— and no more should be in savings, non-retirement savings like high yield, than 3 to 6 months. And we're gonna call that $25,000 right now and call it a day. Between 20 and 25. That's what we actually teach. If you're gonna work our plan exactly, that's what we would do. And the truth is you'll end up with more money working that than either of the plans we just we've discussed for the last 8 minutes, but it was fun discussing it.

And either way, Mary, you're going to look up in 2 years and your life's going to be great.

None of these options are in the stupid column. None of them.

And well done, Mary. I mean, to get to this point, that's a lot of hard work. So you and your husband both, that's amazing.

And it's a good, healthy discussion between someone who's debt-averse and someone who wants a pile of savings. Husband and wife. I love this discussion and the fact that they're having the discussion. And it's a healthy argument. I like it.

Chris is in Boston. Hey Chris, what's up in your Hey guys, thanks for taking my call.

I'm a big fan of y'all. Well, thank you. How can we help? So I wanted to ask the basic question of, did my fiancée and I make a poor decision on the house we just bought? And I was hopeful to kind of briefly go over my plan going forward and see if it aligns with y'all's advice slash what you might suggest I do differently. Okay, what do you—

what do you— what'd you do on the house? Tell me about it.

So the house was a $670,000 house, and we did 10% down, um, and so our monthly payment is $4,700.

Mhm. And you— what do you make?

So I have a salary of $120,000 per year and my fiancée has a salary of $70,000 per year. The big variable in that is that I work in sales and I get a bonus every quarter that can vary. Typically, it can— 3 of the quarters will vary between $10,000 and $40,000 and then 1 quarter will vary between $30,000 all the way up to maybe $100,000. $1,000.

Okay. Well, what we recommend for married people is that your payment should not be more than 1/4 of your take-home pay, and you should be well under that with the numbers you gave me.

So that's what I was— so with the outside of the bonuses, if you remove the bonuses, our take-home pay is roughly $11,540 per month.

Yeah, but we don't— we're not removing the bonuses because they're there.

Um, even on the small end, they— maybe around $60,000 per year at the small end, that would still—

that still puts you at a fourth of your take-home pay.

Um, I guess our main question was, you know, did we overindulge? Because it did drain pretty much all of our savings to get to it. Now, I did invest, um, and, and the way I did it was before listening to y'all's show and, and learning your take on it. Um, I invested in real estate before I was paid off fully on— so we do have some debt that I wanted to go over as well. And, um, so I— but I— long story short, I invested in real estate prior to paying off all of our debt, and not only— and including, um, only having 10% down on our primary residence worry me a little bit. And I know that that's not—

It's not best. And no, I would not be investing in real estate before you bought a house. And no, I would not be buying a house if you didn't, if you weren't debt-free, but you already did. So now let's get out of debt. Why don't you sell the rental and pay off the debts?

That was going to be one of my questions. We've only owned it for about a year and a few months. My thought was, selling the rental before it appreciating to its full value.

It's not going to appreciate to its full value. At what date? When does it stop appreciating?

Yeah, no, I, I, I understand that. I—

yeah, there's no end to that question.

But you just feel like the quick turn after you pay commissions and everything—

all you're doing is admitting your mistake, and that's the problem. Yeah, but when do you guys get—

but if you sold But if you sold the property, Chris, I mean, if you only had it for a year, it probably doesn't have much equity in it.

Which means it sucks. Like, it's because it should have some equity. No, it's draining him. He's not making money on it. Right. Unless you got a bunch of equity, you're not making money on it.

Yeah, but if he sells it for the same price basically he bought it for a year ago, because it hasn't really appreciated much, and he pays commission, I mean, all fees, all of it, he's gonna be under—

Can you get out even, Chris?

That's my question. Question.

We probably could get out even. Yes, we have 20% equity in it, but we do have very stable monthly income on it. We're not— no, you don't. No, you don't. And I agree with you. I agree it's useless.

You're spinning your wheels. You're breaking even at best on the monthly cash flow. By the time you include vacancy, repairs, and crap owning rental property, you have to make a lot more than you're making to break even. You are not breaking even, not net, net, net over a 12 to an 18-month period of time. When you look back on it, that's what's going to happen. I've owned $600 million worth of real estate. Believe me, you have to have more margin than you've got to break even. Now, so I would get out of that. That's what I would do. And then all of a sudden your house starts looking smarter and I would, you know, use anything I can do to clear up— what other personal debts have you guys got?

I have $20,000 student loans, $9,000 car. She has $20,000 roughly student loans.

Yeah, and you guys make a pile of money, so clean that mess up. Yeah, yeah. See, if you don't have— if you don't have this rental property hanging over your head like a hatchet, and you don't have this— any personal debt at all, all of a sudden we're not sweating the house.

Yeah, but I do hear you, Chris, with when the bonuses come, depending on the month, right? The instability is— yeah, on the low end, you said if you bring home $11,000, right, and $5,000 almost of of it's being taken by the mortgage on that one particular month, you need to have a fund. We call it the, the peaks and valleys fund. So when the bonuses do come in, throw some of it in that fund. So when there is a low month, you can pull from that fund and that the house, you know, is fine, that it is around a fourth of your take-home pay.

If you didn't have any car payments, so you wouldn't be noticing it.

Okay. Okay. Um, yeah, I mean, my plan going forward was to try and save 3 months reserves and then get to 20% equity in the house. So you would add step 1 to that, be sell the condo.

I would sell the condo, I'd get debt-free, I'd build my emergency fund. Baby steps.

Do you guys have any cash saved, Chris?

So we really did pretty much get—

put everything there. Okay, very low.

Um, but in a few days— when's the wedding? Um, in October. I— we are very lucky that we do have family help for that. We did put a small portion of our money already into it, um, but that, that wasn't a big factor. Um, but I should be in a few days, I'll be getting another one of those quarterly bonuses that will at least replenish some of that.

So the advice I gave you is what you do from today forward, okay? Had you called me a year ago, here's what I would have told you. For the rest of you guys out there, not to shame Chris, but for the rest of you guys out there, don't buy a home until you're married, number one. Number two, don't buy a home home unless you're out of debt. Period. Don't buy a home unless you're out of debt and have 3 to 6 months of expenses plus a down payment. And then don't buy a home where the payment on a 15-year fixed is more than half or more than a quarter of your take-home pay. And don't buy rental property unless you pay cash for it, which is way after all those other don't things that I just covered. So if you had done that, you would now have— you'd be planning a wedding with a pile of money sitting there and no debt. And you'd have no rental property and no house. And you'd be looking at October going, "I'm sure ready for it to come." And then the following spring after your marriage, after renting an apartment for 6 months, I would talk about buying a home.

By then you'd have a great down payment and you'd have no debt, and you'd have an emergency fund too. That changes the level of anxiety to this discussion dramatically. And when you buy a home with someone you aren't married to, you are extremely vulnerable, both of you. It is legal and financial suicide to do this. They're probably gonna get away with it, 'cause it's probably gonna work out.

They're probably gonna get— Well, they actually have a wedding date, so—

They have a wedding date. So, they don't call and they're like, "We're not sure." I mean, Saturday works for me, but the— as a wedding date. But the, you know, because she— I mean, if something happens with this relationship and everything's already exactly tied down and tight, and so we're stressing this relationship right now, and if anything, God forbid, happens, y'all are gonna find out what screwed looks like. It's gonna be a mess. Yes. So, but I'm hoping that for y'all, it just sails right on through to October and you can just execute the plan we talked about and we're gonna start selling stuff and we're gonna get this mess cleaned up. But that's what I, again, not to shame him, but you guys gotta quit buying houses that aren't married yet. It's really, the nightmare stories that come into this show.

Buy houses together when you're not married, yes.

Both your names on it. Gee, gee, gee, gee, gee. The stuff that can happen is all bad and not good. So yeah, please don't do this. Again, Chris, we're hoping for you that this all works out. We're not trying to beat you up, but you called and asked, so we're going to tell you. Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Rachel Cruz, Ramsey personality, my daughter, is my co-host today. Matthew's in Portland, Oregon. Hi Matthew, how are you?

Hi, good.

How are you guys? Better than I deserve.

What's up? Well, I'm just wondering how to, you know, attack this mess that I'm in. And basically, yeah, kind of figure out where to start.

What's going on, Matthew?

Well, I have a total of $48,090.49 of total debts. I have some goals for myself I want in the next year or so, but I want to climb out of all this before I can start doing those. What are those goals? Um, I want to be able to buy a house. Um, the house payment is kind of an interesting situation, family situation, sort of. Um, so I have really great parents who basically are giving me $300,000 for a house, and I want to be able to be secure and able to be able to buy a home, but I want to get out of all this. Debt I have before I do any of that. What do you make? Um, so I make $77,000, my wife makes about $55,000.

Okay, very good. All right, uh, okay. And so how much— the $48,000, what's the breakdown on that?

Um, it's $19,305 in student loans for my wife Mm-hmm. Um, $12,639 for one car and $11,145 for another car. Gotcha. Okay. And then $1,545 on one credit card and $3,139 on another. Okay. All right.

So when the two of you sit down at the kitchen table with the television off and you put these numbers in front of you, what do they tell you?

Um, they've probably been living above our means. That's what tells me.

Mhm. Okay. But I'm— what they tell me is, I mean, you make $125,000 a year, um, you have $48,000 in debt. I think you can attack this debt fairly rapidly. The $300,000, is this a cash gift from your Yes. And where are you living now?

Um, I'm living outside of Portland. No, I mean, are you living in a rental? I'm renting. Yeah, I'm renting.

Okay. And how much is your monthly rent? $1,470. Okay. And you're outside of Portland, Oregon, right? Yeah. Okay. What will $300,000 buy outside of Portland, Oregon?

Um, it won't outright buy anything. Oh yes, it will. I mean, it would get close.

It won't buy something you like, but it'll buy something. It will buy something, sure.

Okay, that's what I asked.

What will it buy?

Um, small piece of property, probably need some fixing up at that price. It's not too, uh, cheap up here, unfortunately.

No, I mean, that would be reasonable because the, the median household the median house price in all of America, and Portland's much more expensive than most of America, but the median house price is $400,000 right now, $400,000-something. In the Midwest, it's— I can't see that, you're flipping it, but anyway, it's like $400,000.

$615,000 in the West.

In the West, but that includes California. That includes Portland too. Okay, anyway, that's the median. So you would be— but bottom line is you're gonna be substantially lower than median. How old are you two?

I'm 29, my wife's 30. Mm-hmm.

Okay. All right. So it may not buy an outright house though in Port— like outside of Portland.

Yeah, it will. Yeah, well, it's just not a house he wants. Yeah, it definitely will. I mean, it 100% will buy one, but I'm not sure that you want to live in it, I want to live in it, or he wants to live in it.

Okay, that's fair.

I'm not saying it won't buy— I'm not gonna say it won't buy a a house. Definitely. You can find a property, 100% chance for $300 grand. None of us are going to like it, but we could find one. Okay.

Okay. Now that we've gotten that established for real.

Well, I mean, I'm, I'm still considering it even if I don't like it.

So one thing that's interesting about this money is my folks want it split in a certain way. They want a, um, a title titled a certain way when we do it?

No, I'll pass.

No, wait, wait, stop, stop. Why? Um, attendance in common title is what they would want.

I don't know what that is. I'm sorry, say it again.

Why? It's a tenancy in common title. I know. Why? I would think with them, um, so they could have it if something happened to you. No, between her and I.

Between your wife?

They don't like your wife. Oh no, I'll pass.

So I mean, they've, they've done this for all 5 of us. Um, we have 5 siblings, and their idea is that— not that they think anything's going to happen, but if it was, you know, this is their nest egg they've worked for a long time to keep and have, and giving it to us if something was to happen between us, they wouldn't want some of that going towards, you know, yeah, in a divorce or something.

I'm sorry, I completely disagree with them, and I would turn that gift down if it requires that. Yeah, if that is— if that's how— if that's a— if a gift is contingent upon splitting you and your wife, and to protect you from your wife and protect them from your wife, no thank you. They are now interfering in my household. They came across my threshold. Old.

No thank you, I'll have to pass.

And then I would not do that to Rachel and Winston in a thousand years. And if I did, Winston would bow up and he would be right.

Well, if that happened to me, I feel like I'd be pissed. I'm like, y'all, we just got married. Like, I don't know, I don't like it.

Nope, nope, nope, nope.

I have about $47,000 invested, okay, in a brokerage and I just really want to get—

if I were you, I would just start working my way out of debt. Work your debt, work your baby steps. You guys need— the two of you need to get on a budget together, and you need to be on beans and rice, rice and beans. And let's start paying off these $48,000 worth of debt with your $125,000, and then start saving towards a house. But I— you're gonna— you're gonna do it unless your wife bows up, and she should, but 'But you guys are probably gonna do this, but you shouldn't do it.

This is bad medicine.' Well, it's just bad relation— the whole relational side. It's not good.

You're insulting. You're inserting spiritual things into this that shouldn't be there. This is bad. Yeah, and sorry, mom and dad, you don't get that level of control. 'Well, if you want my money, you have to do it that way.' Okay, I'll pass on your money. I'm not— you're not driving a wedge between me and my wife. Not a chance. You don't have enough money to do that. And so, because you don't have enough money to be generous, instead you still got your fingers in everything and you can't let go. Ugh, control people. And all my siblings did it. No, I'm sorry. Hey, you get to be the first one to say, well, all the siblings didn't do it. I didn't. There you go.

Oh man.

Hey, George Campbell here. So you're thinking about buying or selling your home. It's exciting, but there's a lot to think about, and all those decisions can feel overwhelming. Well, here's the good news. You don't have to tackle the process alone. Ramsey's Real Estate Home Base is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start-to-finish guides, a podcast, and even an in-depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps toward your home goals, go to ramseysolutions.com/realestate. That's ramseysolutions.com/realestate.

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Might not be in all states. Today's question comes from Allison in Alaska. I recently discovered my husband has been opening credit cards, maxing them out, and only making the minimum payments each month. Should I put my home into a trust to ensure it cannot be touched by his decisions? All of our assets are in my name since I own them before— because I owned them before we met, and we both agreed that they need to be protected for my children to inherit. I fully understand the bigger issue of him hiding debt, but first I need to take steps to fully protect my children's future before addressing the elephant in the Oh man. Would a trust protect the home?

I don't know Alaska law. In most states, if you enter a marriage owning a piece of real estate, you will exit that marriage owning that same piece of real real estate. Now, then the question becomes, if he takes out a bunch of debt, can they put a lien on the house that she owns because he's married to her? And in some states they can. So in some states they could lien— in the event it's unpaid credit card debt, for instance, could become a lawsuit. They would become a judgment against any real estate, and his marital rights to that real estate in some states would be— it would cloud the title for her children, and putting it in a trust probably won't change that. You'd have to ask an attorney about all that. Here's the thing: when we're talking about— and when I'm teaching leaders in small business, and we coach in EntreLeadership, we coach about 10,000 small businesses— and when I'm teaching, for instance, business legal issues from a business perspective more than a legal perspective, I remind those guys that contracts are useless when you are contracting with a crook. You can't sign a contract with a crook and then yell later, "I have a contract," because it's not worth the paper it's written on.

You've heard that saying, and the reason is, is you just did a deal with someone who doesn't have integrity. So you could put the house in a trust, and according to Alaskan law, that could protect it. That's possible. But then he could just decide to sue you in divorce court because you fraudulently did the trust without his permission, even though you didn't. He could just make that crap up, and you can make up crap in a lawsuit in any state, and just file a lawsuit and just make up crap. It's called pleading. Pleadings, okay? And so what you do is just make up crap and file a lawsuit, and the only recompense the other party has is to spend thousands and tens of thousands and hundreds of thousands of dollars to disprove the lie that was in the pleading.

And that'll be coming out of her pocket.

And by the way, that's going to cost you the house in legal fees to defend against a crook. So the problem is you can't anticipate the moves of a crook, except that they're gonna be a crook. That we can establish. And now I'm talking about your husband. And so you can't fix this problem with a legal document, ultimately. You might make it somewhat safer, but you'll be under the illusion that it's done, and it's not done until the crook quits crookin'. Until the husband quits being a jerk and hiding and spending like he's in freaking Congress. Congress and running up credit card debt. So you have to deal with the problem. The elephant in the room is going to crap on whatever you try. So you got to deal with the elephant because 100% chance you're gonna have elephant crap if you don't. There's 100% chance. And it— no matter what you do, it's gonna have poop on it. So I mean, you really have to deal with it. So you got to go— you can't— there's there's no legal maneuver that makes this guy not be a problem, except divorce. And he's not a prob— and he's still a problem until the divorce is final.

And I'm not suggesting divorce, but I am suggesting that you could go do everything exactly right according to Alaska law, and he could make up a big story and file a lawsuit, and you will spend the cost of the house funding it. That's my point. Can you tell that's happened to me? Yeah. And so, I mean, people make up crap. Okay, they just lie. And the court system allows them to get away with it. Yeah.

So for you, Allison, I mean, honestly, yes, if you wanted to go and do it to make yourself feel better, that's great. But the prop— but the elephant is in the room, just like you're saying, Dave, is the thing that it does.

It has to be. All those zoo. It has to come get their elephant. He's lost. Yeah. Oh my gosh. Yeah, it's really sad. I mean, it's horrible that you're facing this, but you're trying to fix the problem without fixing the problem, and you can't. You're gonna have to fix the problem. You got to deal with the dude. The dude is the problem, not the— not your legal structure. Yeah. So you can't get a lot to unpack.

Sorry, Allison.

Yeah, so, an example of that is, okay, you do a will and you do a full estate plan. That doesn't keep someone from suing. They might not win, but by the time you finish paying— It would be very hard for them to win. You can put a very detailed thing in place, but by the time you finish writing checks to lawyers so they can send their kids to Harvard, by the time you finish writing all those checks, you ain't gonna feel like you won, although you won. And so you're still dealing with entitled little trust fund baby brats who didn't get what they wanted, and so they sue the estate. And so the problem was not how the estate was structured, the problem was you raised entitled trust fund baby brats. And so you suck as a parent. That's what that was. And so you got to go back and deal with the issue, because the legal system does not there's not legal processes or systems that protect the righteous from being sued or from having to run up legal fees to pay off something.

Yeah, but a will, that stuff holds up in court for people out there to get a will in place and to get these things.

It does hold up. You need to get a will, and it will hold up in court, but you might— And if you have crazy, if you have crazy in your family, you might spend $100,000 making sure that will is upheld. You might spend $100,000.

But still do it.

So yeah, do it anyway. It's your only shot. But don't do that and say, "This fixes the crazy in my family," because you still hadn't dealt with the crazy. That's the problem. You got to go to the root behavior when you're dealing with this. And so when I'm teaching these small business guys, I'm like, "Don't sign a contract with a crook. Here's an idea. If he's a known crook—" The guy's doing cocaine, I'm kind of worried about him. Well, then quit using him as a seller. Sub. Hello! No kidding, he's gonna steal everything off your job site, dumb butt. He's doing coke. Hello! Have some sense. You know, this is the stuff I get, all these questions on our trade leadership all the time. It's the same thing. So you got to fire the sub. That's a lot of coke. You got to get rid of it. Well, we got it. This is a great segment. We got elephant poop, we got cocaine, we got elephants in the room. Lord have mercy. There's so many metaphors Elephants here.

Yeah, there's—

now there's an elephant on cocaine.

All because of Allison's question.

Oh, poor Allison. Question of the day. Poor Allison. So, yeah, you got to deal with the husband. The husband. Wow. If we could— you know what? We'd be out of business if the husbands would behave. This— we wouldn't have any callers.

Money and marriage. That's a real—

we wouldn't have any callers. It's a real thing. Yeah, we'd have people— we'd be reduced to boring 401 questions.

All tax and estate.

Tax and estate law. That's all we'd be doing. And 401. I don't invest in my 401. This is so much more fun. We've got elephants and cocaine and just a lot more stuff in this question.

It's a lot better.

You work your butt off for your money, but your money's never going to return the favor if all you do is hope for the best. If you're ready to learn how to make your money work for you, check out the SmartVestor program. SmartVestor can help you find advisors who specialize in retirement retirement planning, charitable giving, advanced investing strategies, and more. Whatever your goals, your pro will take the time to explain your options so you never have to invest in anything you don't understand. Head to ramsaysolutions.com/smartvester to get connected. Ramsey Solutions is a paid, non-client promoter of participating pros. Learn more at ramsaysolutions.com/smartvester. Well, we wish we could get to every call in question here on the show. If you have a money question and you can't get through, head on over to our website and use Ask Ramsey. Ask Ramsey is our free AI tool that's built and trained on only proven Ramsey principles. So if you want to follow the Baby Steps and you want to know the details about any type of question, we've loaded 3 or 4 years worth of shows answered into Ask Ramsey. We've loaded the books and articles into Ask Ramsey.

Ramsey. And so it's going to sound particularly like one of us here on the show actually answered your question. And no other crap was led into the database. And so you don't have to worry about the artificial intelligence part being screwed up. Nope, it's just us. And it'll give you the same answer. So ask your question today. It's completely free at RamseySolutions.com, or click the link in the description if you're listening on a podcast or on YouTube. And you can ask Ramsey for for free. John's in Boise, Idaho. Hey John, what's up?

Hey Dave, thanks for taking my call, and Rachel. I tried using Ask Ramsey on this one, but it didn't come back with an answer. Really? What did it tell you? Plenty of issues. Well, it said unable to answer this question at this time. Interesting.

Okay, I can't wait to hear the question.

It might have been the topic, but it's pretty simple. I've got plenty of debt. I've got a lot of issues, but specifically, I know you guys tell counsel not to do debt consolidation, but you also, uh, tell us to be very wary and try to get rid of our IRS debt as quickly as possible. So I owe about $20,000 to the IRS and wondering if I should consolidate that or transfer that over to another lender and have the IRS paid off and I just deal with that lender. Yes.

Okay, the interest rate will be better, and, and they have nowhere near the power to screw up your life that the KGB— I mean, the IRS has. And so, um, the, the, the— what you're paying in penalties and interest with the IRS far exceeds a credit card rate, far exceeds a home equity loan rate, far exceeds anything else. And I'm not suggesting this, but the IRS is not bankruptable, and all other debt just about is. So if you got, if you did hit a worst-case scenario, even it turns out better, but you're not going to be there. That's not, you're going to be your problem. But yeah, I would move it. Uh, how much total debt have you got?

Oh boy, here we go. Here we go. You want the house too?

No, everything but the house. Okay, $315,000.

On what? Um, let's see, we've got $192,000 in in one school loan. Let's see, let me do that real quick. We've actually probably got about $220,000 in school loans. My wife was a, is an attorney. Okay. And she graduated recently, although we're in our 50s. Great. So is she making lawyer money yet? She is making government service lawyer money right now.

Why didn't she take like a real lawyer job and get this debt paid off?

Because she's got this bleeding heart. She's looking to make a change soon. And so we're hoping for a good change in the positive there. Good. All right.

That's sweet, but also keep you broke.

Okay. And $30,000— $35,000 in a 401k loan that I'm paying back. That's 10% interest paid back to myself. Um, Lending Club, we consolidated some other loans. Uh, that's about $15,000. My student loan is $13,000. Um, and then we've got other debt. Together we make— we bring home about $10,000 a month.

What is she being paid?

Uh, she is getting paid $80,000. She just got a raise to $90,000 and I'm getting paid $100,000, but I see only about $4,200 a month after I have everything taken out. So what is my paycheck comes on my 401, maxed out on, um, you know, maxed out on benefits and everything. Now this, this coming paycheck this Friday is going to be my first paycheck with out putting $1,200 a month into my 401.

Okay. And how are some of the benefits— are some of the benefits rip-off stuff that you need to get out of?

Um, I don't know. I haven't, I haven't delved closely into that.

Yeah, because you're not getting home with half your money even. Yeah, yeah, that's true. That's kind of crazy. Yeah. So I want to find— I want to just clean that paycheck up so we can address this thing, and then of course get her income up so we can address this thing and get this mess cleaned up. Yeah, good. Oh yeah, but yes, to answer your original question, and that question I don't remember answering it in the last 5 years, so I have answered it, but I don't remember recently answering whether I would refinance IRS debt. So it would not have been in Ask Ramsey, so now it makes sense why I didn't answer it, because it wouldn't have had the data to do it with. So, but anyway, yeah, that's the answer is yes, refinance IRS IRS debt because it's better interest rates, you don't have the penalties, and they don't have the power to, you know, suddenly come start leaning accounts and everything else. If you— non— folks, for you listening out there, the IRS can just place a lien. They don't have to ask a judge. If you have a loan with your bank, they have to sue you, win, and then ask a judge to place a a lien.

It's a 5-step process, and you're gonna get like tons of paperwork at your front door by the sheriff before that— any of that happens. With the IRS, they won't even tell you. They'll just be money disappearing out of your checking account. You won't know what happened because they have almost unlimited power. Not that often, but I have had it happen to clients, and I had it happen to me when I was going broke. Mm-hmm. They just came in and just took money, and I'm like, where's my money. We just took it. You can do that? We could do whatever we want. I'm like, yeah, apparently you can. So yeah, be very afraid of your government. Yes. So yeah, it's— especially if you owe them money. Yeah, that's, that's the thing. See, I get— get them out of your life. And that's a 5% of your situation though, John. 95% is getting organized and starting to squeeze the juice out of everything here to be able to clean this mess up as fast as possible. And get yourself where you're not broke and you're very wealthy, and then your wife can do pro bono work the rest of her life if she wants to help the hurting and not charge or something.

That's cool. That's wonderful if you want to do that. You just can't be broken doing that with $300,000, $220,000 in student loan debt. So you kind of lose your options for your heart to bleed when you do that. Yep. But, um, and I just got—

I just did Ask Ramsey because I was curious. We've answered that recently.

You You have? Okay, so what did it say?

Yeah, yeah, it's, yeah, I mean— Did it give you an answer? Yeah, and it just, you have to, which is great about it, you could type, you know, it's asking me, do I have a $1,000 starter emergency fund? Takes you through the Baby Steps. And then you get to it.

Oh, it made you jump some hoops. Yep, and then the installment agreement.

Yep. Offer and compromise, currently non-collectible. Yeah, it goes on and on. Okay. It's good.

All right, there's plenty in there. Oh, oh, okay. May have just been a freebie. Luke at the time. Yeah, might have been, might have been.

But more often than not, but we do, I mean, I feel like we've gotten that question a good bit with the IRS debt. And the answer is to anyone out there, if you have a large amount enough that you have to be put on a payment plan that you can't pay off in 30 to 60 days.

Yeah, the IRS is not an installment plan company. No, yeah. This is not, Klarna.

Afterpay. Don't do Afterpay.

Don't do Afterpay with the IRS. Yeah, you want to clear it up as fast as possible because they got power. Well, I'm glad to know Ask Ramsey's doing that. That's good. After I just did an ad for it. I know, when he said that. Oh no, it doesn't work. Yeah, oh no, it doesn't work. Well, good news is it worked for Rachel. Okay, so that's, uh, there we go.

Yeah, John, but I really do hope for you guys that y'all can get into a high-income situation, knock this debt out, and then you can, yeah, spend the rest of your life with that degree that she has and use it, you know, for good and where she wants to. To have the freedom to do that. It's just hard to have that freedom when you have $300,000 of consumer debt. Yeah.

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Our scripture of the day, Matthew 11:29: Take my yoke upon you, let me teach you, because I am humble and gentle at heart, and you will find rest for your souls. Jim Rohn said, formal education will make you a living, self-education will make you a fortune. Scott's in Twin Falls, Idaho.

Hey Scott, what's up? Hey guys, been following you guys on my Facebook videos for a long time, so good to jump in.

Well, thank you. Hey, uh, I'm engaged. Hey, when you getting married?

Super excited. And then, or sorry, September, end of September coming up. Yay. Good for you. Thank you. Uh, so listen, uh, my fiancée owns a house. Um, she's got 3 kids. Uh, the house is the house where the divorce went down, all the, you know, the bad stuff, I guess, that led us here. Um, and so we are now trying to make it decision on what to do with this house. Uh, and the realtor is recommending a short sale. Um, I don't love that idea, but I'm just, I guess, trying to decide whether to take this financial hit now for kind of a clean break, a fresh start, uh, or preserve cash, stay put here temporarily while we stabilize, even though that will delay sort of this, I guess, breaking free of that baggage. So anyway, I would love some insight.

So she owes more on the house than she can get for it?

Uh, yes sir, yes sir. Uh, anywhere from $25,000 to $40,000-ish is what the realtor is recommending. And the house is obviously in her name?

Yes. And, um, does it have the ex on it?

Um, I believe that the ex is on it. The ex has got medical issues, um, out of a job right now. We're basically not considering him as—

no, does he have to sign to sell it.

Yeah, he may. Yeah, yeah, yeah, yeah.

If he's on the deed and he's on the mortgage, if you're gonna do a short sale, he has to sign that he's not paying his bill, because that's what a short sale is. Mm-hmm. So a short sale is like a voluntary repossession, okay? It's like turning— it's like turning in a car car on a repo and not paying the difference. So if you do a short sale, or if she does a short sale— you're not involved, okay? But if she does it, technically, if she does a short sale, make sure you remember these words: it is without recourse. Without recourse. And what that means is they can't come after her for the That $25,000 or $40,000, they're accepting that the house is— if they foreclose on it, their analysis tells them, the mortgage company, that if they foreclose on it and resell it after foreclosure, they're not going to get any more for it than they're offering— than you're offering them. Okay, you see what I'm saying? In other words, if they go through all that and they lose $45,000, or they accept a buyer's offer and do a short sale, they lose $45,000. $200,000.

That's their analysis. If they think they can take it back and sell it for enough to get all their money, they would rather foreclose than take a short sale. But that means that the house is worth more than your realtor says it is. I doubt it. Right. Why is the house gone down in value in Twin Falls, Idaho?

I wouldn't think that's the case. I, I, I don't understand it, to be honest. I'm trying to get to the bottom of it.

There's something wrong with The house is fine.

I suspect that the ex, that there was some mortgage payments not being made. I'm still trying to get to the bottom of it. I feel like there's details I'm missing.

$45,000 worth of mortgage payments not made?

I doubt it. Yeah. The thing is, Dave, I've been saving. I've been following your principles. I don't have any debt. I have money set aside that I've been saving up for a house payment myself. Himself, um, before her. She have debt other than this? Only, uh, a small student loan of $5K, which I'm expecting to just kind of write off as soon as we are together. And we bought a car. Yes, sir.

And you got to pay off the car. Okay. Yes, sir. If you're going—

if you're debating on doing that, you know, I'm paying it all down right now.

So you could either pay the $45,000 and keep this house with all the bad memories and still not be shed of the ex because he's on everything. Or you can let it be— let her do a short sale before you're married. Mm-hmm. But she's gonna have the equivalent of a repo. Her credit score is gonna disappear. Now, you wish it would disappear. It's just gonna be very low.

And would that be a problem when they go to buy a house?

It's gonna be a problem when you get ready to buy something later.

Could I not do it my own? Probably have everything in my name.

You probably can, depending on Idaho law. Yeah, yeah, okay. And she probably has marital rights even if she's not on the mortgage. So you could talk to Churchill Mortgage and they can tell you, you know, if your spouse has a super low credit score in Idaho and you have the money and a good score, or no score— in your case it would be a good score— then, then, you know, can I qualify that way and get a house? I really Really, I think this lady and these 3 kids need to physically be off of that site. Yeah, I agree. I think I heard you say that clearly between the lines. And so, you know, based on their emotional well-being and being rid of the medical— the guy with medical problems, which that can mean a whole lot of bad stuff I don't even want to get into. Yeah, I'm going to ask her to put this house on the market and get it sold. I will tell you that the short sale is a long and arduous process, though. Mortgage companies don't forgive debt easily. Right. They're gonna want appraisals. They're gonna go— they're gonna drag this thing out.

It's very difficult. And real estate has appreciated in most areas enough that they don't do many short sales anymore, so they're not as adept at it as they used to be. Like, back in 2008, everybody got to be experts on short short sales. But yeah, it's where the bank agrees to accept a price that yields them less than their payoff, and they eat the difference if you do it without recourse. For God's sakes, there's no point in doing it with recourse. I'd let her be foreclosed on before I did it with recourse, because then they— that's the same thing. Is that hard for them to agree to? No, no, they pretty much— that's what a short sale usually is. Yeah, but just make sure they don't forget to put that in there. You know, like, you know, Citibank forgets to do stuff. Yeah. So that— yeah. Wow, interesting. All right, Josh is in Canada. Hey Josh, what's up with you?

Hey Dave, thank you so much for taking my call.

Sure, how can we help?

So I'm wondering if I should quit working for my family business and work on my side business that I had started to get out out of debt. My wife and I are in Baby Step 3, and I was just— it's, it's taken off more than I ever expected it to.

How long have you been doing it, and what are you making?

Uh, so I've been doing my side business for about 3 years. I've started taking it more seriously this year when we decided to just completely knock out the debt. Uh, currently it's making about $10,000 to $12,000 a month in profit. That's just before taxes though. And I'm making about $90,000 at job working for the family business.

What is your side business?

Uh, my side business is automotive and commercial and residential window tinting. So I just go to people's places and tint their windows basically. But it's, uh, it's great margins and it's just like, I'm already booking 3 weeks out at this point.

But you are a good salesman. Yeah. Way to go. I'm proud of you. Yeah. So what are the relational repercussions when you quit the family?

Family business, not the family. When you leave the family.

It's the mafia. I feel like they're gonna basically cut off the relationship with me.

Wait, for real?

Some things tell me no, but some things tell me yes. You think they'll cut off? Yeah, some things tell me, yeah. The reason being my brother left the business. He was in it for a bit, left the business, and he had moved away. There was problems. On his part too. He didn't do it like the same way. But anyways, um, yeah, he had left the business and now they don't, they just don't talk anymore. Part of that is mutual, but yeah, it's just kind of, uh, he doesn't exist.

I would give them a long runway of communication.

Yeah. Don't, don't make it sudden. Yeah. Just go, hey dad, I'm making $90,000 over here. I'm probably gonna, or I'm making $10,000 a month. I think I'm gonna go this direction. I need to know how I can do that. And help you guys and be a blessing to y'all. If I need to put 6 more months in here to help you, I will, but I'm probably not gonna be here a year from now, so let's talk about how I can do that and be a blessing to you, Dad. That puts this hour of the Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.