Transcript of The Hard Road Leads to Freedom

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Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show. I'm Rachel Cruze, hosting this hour with Jade Warshaw, and we are taking your calls about life and money. So give us a call at 1-888-825-5225. First up, we have Sarah in Cleveland, Ohio. Hi, Sarah. Welcome to the show.

Hi, how are you?

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

Um, so my question is whether or not Chapter 13 bankruptcy is the only way, or I guess the best way, for my husband and I to get out of substantial debt.

Okay, what's going on? What are your numbers?

So over the last 3 to 5 years, we've basically accumulated $62,000 of credit card debt, $28,000 in loans between house repairs and personal loans. We have a $210,000 mortgage balance. We have about $150,000 in student loans and car leases that are about $11,000 annually.

Whew.

Okay. Yeah.

Can you, can you tell me the very first one you said in that list first? I didn't get that one written down.

Credit card is about $62,000.

$62,000. Okay. Oh my goodness. What happened that you guys got to this extent? I mean, obviously the student loans speak for themselves, but the $62,000 in credit cards, the, the $28,000 in other personal loans, what happened? Did somebody lose a job?

Well, the long story short is We had our son about 3 and a half years ago, and I had pretty bad postpartum depression. We moved back in with my parents and sold our house. And the plan was to save money and have help, but that was not emotionally feasible. So after about 8 months, we bought the first house that we could get an offer accepted on and pretty much put most of our savings down, which made our housing go more than double. So we had a We had a beautiful COVID interest rate beforehand. So pretty much our expenses doubled from there. And then just things just getting out of hand in terms of the cost of living. And I wouldn't say keeping up with the Joneses, but I would just say living like we still had half the expenses. Okay.

And you still have that house? You're still in that same house?

Yes, we just bought it about 2 and a half, 3 years ago.

What do you guys make a year, Sarah?

Our net income is $120,000.

Okay. And what percentage of your take-home pay is that mortgage?

Our mortgage is about $1,800 a month.

And you take home how much after tax?

Monthly, it's about $10,000 after tax.

Okay. So that's not the problem.

Yeah, it sounds terrible.

The mortgage is not the problem. Have you started the student loans? It's $150,000. Are you paying on those or have you not been touching those?

We are on income-driven repayment plans right now, so we pay about $200 a month for those. And then the thing that's really killing us is about $2,800, $2,900 of minimum payments between all the credit cards and like the personal loans.

$2,100 in minimums. Okay.

Okay. $2,900.

Okay.

Yeah.

And are you guys doing anything extra on the side at this point? Are you working extra hours? Are you working overtime? Tell me about Currently, not really.

We both work in business and finance. So about half the year, my husband works probably 70 hours a week. So he's not able to take on extra work. And I commute to work about an hour. So there's time loss there. I started to do some bookkeeping on the side, but that's not really lucrative.

Right.

And we do have a 3-year-old.

Yeah, you do. Here's where I'm at. I'm at, you can take the journey here and really change who you all are and who you are and how you operate as a family at a core level and clean this up. And I think it would be good for you. What I'm hearing right now, Sarah, is I understand how you got here. I'm not a fan of how you got here, but I understand how you got here. But I'm still hearing a lot of reasons why nothing can change. And I think that if you don't address that, that's gonna be the hardest part for you. You've gotta get to this point where you're like, I don't care what it takes, I'm going to fix this. I don't care if I'm exhausted. I don't care if I have to pick different side jobs that I hate because they make more. I don't care if we have to start looking for jobs.

Mm-hmm.

I don't care if we have to sell the house. I don't care. I just wanna be free. And right now, I feel like you're still, well, we can't do that because we have kids. Well, we can't do that because of this.

Yep, and the $150,000 student loans, are they government loans or are they private?

They're federal.

Okay, so they're not bankruptable. So you'd still have $150,000 of debt. And so I'm with Jade, and I'm sitting next to somebody who paid off close to half a million. You guys are at about that $250,000, $270,000 mark. And I mean, Sarah, it's gonna take you guys probably 4 to 5 years. It's gonna take a long time. to get out of this mess. But what Jade is saying is, I don't know, there's a level of, could you take the— and I wouldn't say easy route because bankruptcy's hard.

Yeah.

That's going to affect the rest of your life, right, if you end up doing that route. Just take that and be done? Or do you take some level of responsibility of, it's been a hard road, And life has thrown at us a lot of things, but we also put our names on some of this. Like, we did walk into it, maybe for difficult reasons, but we did walk into this and choose this. And there's something that changes. And Jade, you can speak to this 'cause you and Sam, I mean, walked this road completely of this amount of years, right? This isn't, you know, Sarah, unfortunately, it's not an 18-month journey of like, hey, suck it up for a year. And you guys, I mean, this would be— This is some time. This is a— This is a marathon.

So what we wanna do, have you ever, you know, have you ever played the game Jenga and you have to pull out the block and put it on top and you have to test the block first to see if it'll even move? I feel like what we need to do with this stack of debt is test and see which block we can even move to get outta the way. And I'm looking at these car leases. That's one block that I think has enough movement to get rid of it. And I'm looking at the mortgage. I wonder if it's better for you guys. I don't know if there's equity there. I wonder if it's better for you guys to sell and rent for a while. Looking at what you're paying a month, there could be something there. Do you have equity?

I think it's about $65,000.

Okay.

I could sell it for.

And then tell me about the car leases.

The car leases, one is actually up in December, which if we were going to do bankruptcy, we were only going to file myself, like my half, I guess, first. I guess we're just scared that if we both do it, then if something—

What names?

What debt?

What debt is in your name, Sarah?

About half. We are only joint on— yes, we are only joint on the mortgage and the one loan for the basement repair.

And see, that even that for me feels like it's certainly not the right move because you're just not clearing enough. In my mind, you're not going to be able to clear enough of this debt.

You're making a worse situation worse. Yes. And, you know, depending on income and everything, they may put you on a repayment plan. You know, some of this, depending on which bankruptcy chapter you guys pursue or that you're eligible for, some of the time you're back on a payment plan. You're gonna end up paying something at some point. So you might as well pay to get out of debt and avoid bankruptcy.

Yeah, I agree with that. So look at these car leases. If you have 'em and you can say, obviously the one you're out in December, that's good. Do not go back in. Start saving up for a cash car now, I would say. And then for the other one, figure out what it costs to just buy the car out and then turn around and get a loan for that and then turn around and sell that car and then save up cash for a next car.

And even with the credit card, if some of it goes to collections, you can negotiate that too down possibly.

That's right.

But call us back, Sarah, if you need us. I'm so sorry. It's gonna be a long road ahead, but it's gonna be the best road.

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Next up, we have Melody in Orlando, Florida. Hi, welcome to the show.

Hi, Rachel and Jade. Um, so I'm debt-free and I make a good income and should be on Baby Step 6 where I'm paying off my mortgage early. Great. Um, I live in a I live in a new build community. I moved in about 2 years ago and our HOA is suing the builder due to building defects. And the major issue that they're looking at is water intrusion.

Oh no.

Which is obviously a huge problem being here in Florida with all the rain and the hurricanes and so on.

Fo sho.

And I also only live in Florida because I want to be near my parents who are older and not in great health. But Florida in general So my question is, I'm wondering if I should actually try to pay off my mortgage, knowing that my house is probably rotting from the inside out, and I'm also not going to be in Florida long-term anyways. I wanted to get your thoughts on that.

Is everyone experiencing the water intrusion? Is it just a few homes? Have you experienced any issue thus far?

I have experienced some issues. It does seem to be a problem across everyone's home, to different degrees. Mine is more on the minor end, but still pretty serious. Just in general, we don't want any water intrusion. And it's probably going to be a couple of years before this litigation even ends, where we could start getting funds to fix it.

What does it take to fix it? Do you know what the solution is and what it costs, at least for you?

No, not yet, because most of the issue seems to be the front of the home. So we live in townhomes, so it's like the front, the siding, underneath it, the water waterproofing has all been nailed through. So it's basically like a whole overhaul of the front of all of the buildings, and it would have to be done at the community level because we're townhomes. Wow.

Wow.

How much do you have left on the mortgage?

So I have about $500K left on the mortgage. I bought it 2 years ago for $655K.

Okay. And And you said that Florida's not gonna be your long-term, you know, home. Do you know, do you have a timeframe on when you will probably move out? Will it be in like 2 years or like 10 years?

I mean, I hate to say it this way, it's more dependent on how long my parents are gonna be around.

Oh, okay.

Yeah, yeah, yeah.

No, that's fair.

How old are they? I don't know, but they're in their 70s.

Okay. So there's a good chance it could be, 10+ years.

Yeah, there's no real, like, definitive, you know. Sure.

Yeah.

So if that's the case, and if you think you're going to be probably not moving out of your current home, do you think you'll be there for 10 years?

Um, honestly, like, if I had to guess, probably not. Like, maybe 5-ish years, but who knows.

Yeah, because the ideal situation would be that the lawsuit goes through, they have to pay up, the, you know, the builder, to whatever degree to fix whatever issue is going on. So it's not coming out of your pocket. And then you've been paying down the mortgage. And then when you move, there's some equity there. And it's a fixed home. It's a fixed townhome, right, in that situation. So that's the ideal. And there's still something about putting money into Um, a property, like, if you— I don't know, I'm kind of even thinking, like, are you wanting to move right now? Like, if you get water damage, and, you know, I'm thinking mold, and like, who knows what else could grow in the meantime, like, the problems could— do you feel good where you are?

Well, the thing is, if I were to move, um, I probably would take a loss on the house. Um, I know, you know, Zillow's always the most accurate, but because it is a new community and it is townhomes, the most recent units just sold earlier this month. So I kind of have a benchmark already. But with the addition of the litigation and all the destructive testing that's happening, it's probably not going to be easy to sell, and let alone sell for at least what I paid for it.

Yeah. Tell us about the ones that did sell. Were those new construction that no one had lived in, or Were there people who had bought and were actually able to sell even with the water issue?

No. So those were the last few available units of the community before the builder left.

So you would be the first person trying to sell as an owner with the water damage?

So the community has been open for like, I think, 3 or 4 years. So there have been a couple units that have sold, but not Before the— not after the litigation.

Yeah, right. So now that everybody knows what the deal is, you'd have to disclose that and that would be part of it. So if I were in your shoes, you know, I think, Melody, I would kind of— I love that the HOA is going after this, but I think I would kind of own this as my own thing as well.

Yeah.

And I would have some people come out to my own townhouse and estimate, give me estimates, let me know, and just kind of gather your own information because they may be gathering it from the perspective of the whole, but there may be some things that you can do individually. I don't know, but there might be. And I'd want to know those numbers for myself. I'd want to know maybe there is something I can do that it doesn't have to be the whole line of townhomes, right? I'd want that information and I'd want to know what that cost is.

Yeah, and get all the HOA guidelines too, because sometimes with townhomes, depending on I think the HOA of what you actually own and what you can actually work on, you know, depends on the unit, depends on the part of the neighborhood.

I don't know.

I would be very specific about your townhome. And yes, is there any work you can do to mitigate some of this that could happen? And I would just want another person's professional opinion who's not in the middle of this, because this isn't always the case, but sometimes HOAs are dramatic.

Come on, somebody.

Sometimes it's like, you know what I mean? And I'm not saying there's not a problem. I'm sure there is. There's been a lot of crappy builders, you know, that just throw up stuff and it's not good quality. for sure. That could definitely be the case. But I would want to get an actual realistic perspective from an outside party who knows what they're talking about, looking at my specific home, not what everybody else is talking about. You know what I mean?

Yeah.

And it could be worse. It could be better. I don't know. But I think that news, then that information will be able to help you make some good decisions on what needs fixing and what you can do to protect your asset so that when you do sell, whether that's after your parents, before your parents, I mean, you know, whatever that situation is, at least you've done what you can control.

I agree.

Right, yeah. Our HOA guidelines do say that the, basically it's like the whole entire front and like top of the units are HOA managed. So I don't think I would be able to do anything independently. We do have engineers and construction folks hired by the HOA going around doing destructive testing on all the units. I have had them at my unit and they did discover already some water damage that they're trying to like sort of mitigate in the interim period. But it's not a long-term solution right now.

Yeah, understood.

Yeah.

Yeah. Well, to answer your question, I would just keep paying the mortgage. I mean, I would just keep paying the payments. And honestly, what I might do with the extra money that you were going to put on the payment, I might stack it up for repairs knowing that I might be the one that has to come out of pocket in some capacity to handle this. And then I'd probably hold onto that until some sort of information is given. If they're not gonna pay, then somebody's gonna have to pay, and it's probably gonna be you guys to a certain extent. So I'd want that money ready to go to make my house livable.

It's almost like upping that emergency fund enough that when, yeah, when it has to happen and it has to get fixed, and if it's coming outta your pocket, you have the money for it. Oh, it's so frustrating though. And that's the other part. We say it all the time on the show, but it's true. Homeownership is expensive.

Yeah.

Things happen. And sometimes it's stuff you can't control. Sometimes it is stuff that you control. But the expense of owning a home, it is worth it in the long run. And not that every house deals with every specific issue like Melody's, but it's another plea that when you become a homeowner, that you don't have debt, that you have an emergency fund, like you're in a good financial position to have margin as a homeowner so when things come up, because they will, that it's not a stress point, that, you know, you can take care of it. And I mean, that's always our big push with homeownership.

Yeah.

Because it's a lot.

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Well, if you haven't heard, Ramsey is taking over an entire cruise ship. So, we are doing the Live Like No One Else cruise, March 14th through the 21st in 2027. And we are going to the Western Caribbean. So, it'll be Jamaica, Grand Cayman, Cozumel, the Bahamas, so many great stops. And I just wanna tell you guys, this is more than just a cruise. This is really this like moment in time where you're trapped on a ship with all of your fun Ramsey people. And there's a lot of learning, and entertainment, and enjoyment, and great great restaurants and coffee shops and bars. And it is so much more than just you sailing individually on your own and just, you know, with your family and you're going solo. This becomes kind of this full community aspect.

Oh yeah.

And that is the fun, unique part of this cruise. So, if you have paid off all of your debt but your house and you're on Baby Steps 4 and beyond, or maybe you've even hit Baby Step 7 and you've paid off your house, this cruise is for you. So, it's all-inclusive pricing that starts at $2,105 per person. So, that's your cabin, your food, entertainment, taxes, and tips, and all of it. So, this is such a unique week, and we don't get to do it. We've only done one of these. And it was so great that we are wanting to do it again. And so, there's a few cabins left, but you guys make sure to sign up and go with us. Again, the dates are March 14th through the 21st. You can go to ramseysolutions.com/events. Get signed up, book your cabin, and join us on a wonderful, beautiful ship in March of 2027. All right, let's go to Kevin in Mobile, Alabama. Hi, Kevin. Welcome to the show.

Well, thank you. Thank you. Thank you for taking my question.

Absolutely. How can we help today?

Well, my wife and I have a college freshman who just started in the fall. We had done a good job of preparing him for college. He's real responsible. He does not owe any college tuition. He did a great job scholastically, got scholarships, and, and so we're paying for living expenses. One of The issues I have, and this is probably thanks to listening to your show, I had always assumed that it would be beneficial for young people to begin building credit history. So when he started in the fall, I thought, well, hey, I'll just add him as an authorized user on one of my credit card accounts and let him start charging just his minimal living expenses there on campus. But after listening to the show and recognizing the serious consequences that can arise with using credit cards, my question is, am I doing him a disservice teaching him to use a credit card to build credit? And is credit— building a credit file actually necessary to move forward in life?

Well, I gotta say, I love— I think you're a really good dad, 'cause I think that you're really thinking through what's best for him. And it sounds like you're really open. And so, Rachel, what I'm hearing is somebody who is wanting to build the, like, good habits, good financial habits. And if we take that as the through line and we go, okay, what's the most healthy financial habit? It's being able to live on less than you make. It's being able to delay gratification for the things that we want. It's being able to, right, kind of control, control our behavior and make sure that our money is behaving and not the opposite way around and our money controlling us. So, I think that's what you're after. And if that's the case, then I would say that a credit card would not be even necessary for him if those things that we just discussed are in fact true about him. Because he would be able to use cash to do those things. Absolutely.

And he does, he does have a debit card that he could use instead. Uh, you know, obviously, uh, as I said earlier, I would assume that using a debit card is not going to build any transactional credit history. But if, if, if that is something that is really unnecessary and not worth the risk, then I will encourage him to shred that card and just use cash.

Well, yeah, and to know, Kevin, the reason you know, that all of this whole debt product in the first place, you know, pushes messages like this, because that's a very normal way of thinking. You know, a lot of people are like, I need to build my credit.

Absolutely.

That's a very normal statement we hear. And as you look at the credit score and how it's actually calculated, right, it all has to do with debt, right? If you pay the debt on time, the types of debt you have, if you're accumulating new debt, like it's that score. And the reason, the main reason you use that score is to go into more debt, right? So, he would need a score if he's gonna go get car loans, if he's gonna get personal loans, a small business loan. You know, if he's gonna go into a life of debt, then yes, that score would be necessary. But what Jade and I, you know, what Jade laid out was beautiful to say, if you're choosing a debt-free life, where you save up and pay for things, where you actually say no to the whole debt industry, even things like a car, then there's really no reason for that credit score. The mortgage is the one type of debt that we won't yell at you for. And so, you can actually get a mortgage still without a credit score. It's called manual underwriting. And you can go through that process and still own a home.

And so, really, that credit score, man, it has been inflated so much of the importance of it. But if you kind of choose the weird path of life, like what we teach here on The Ramsey Show, and you choose a life without debt, you really, you don't need it. Now, there are moments, maybe employers or, you know, even with like cell phone companies, they may pull his credit report to see any history of how he has paid, but there just really won't be anything on that credit report. And it doesn't necessarily ding you. He may have to fill out an extra form or two, but that would be the only time that you kind of run into a situation outside of debt of why people, you know, try to have great credit history and all of that. So, if anything, Kevin, And, you know, he could even freeze his credit. And so that, you know, makes sure that no identity, you know, no one's taking debt out of his name and that, you know, even identity theft and all of that, that could take care of that. So that's probably the card I would play with him is that, yeah, why you don't need it, explain it to him.

And creating these habits in college is so healthy. Like, for an 18-year-old to be budgeting the money that he has and spending within his means is amazing. Absolutely.

Yeah, Kevin, and I would just add one more layer to that because I think Rachel, I mean, what she's saying is exactly right. And even the fact that just reframing that a zero credit score or an indeterminable credit score in the market is just as effective as a high credit score. There's no negative to it. And Rachel talked about the home, but really there's kind of 3 key areas that most people think, I need credit for this. Most people thought they needed credit to buy a home, which Rachel mentioned. A lot of people think they need it for a car and they think they need it for an apartment. And so, just kind of getting ahead of those and being able to talk with them and just tell 'em, hey, when you go to get your apartment, just know you might have to pay a little bit more down for first and last month's rent. Just know that they're gonna ask for other trade lines, your cell phones, maybe things like your insurance payments. So, being ready to be able to show those types of things and just so he knows what to expect. With a car, right?

One of the big things about this is now we're saving up and we're paying cash for cars. And just by him doing that, Rachel, yeah, he will be so ahead of the average American never getting into that car loan cycle. So that's how this works. And I think when people have that information ahead of time, it kind of just counteracts some of those things that we come up against when it's time to buy an apartment, it's time to buy a car.

That's right.

Just getting ahead of that.

Yes. No, absolutely. Because, you know, there is a life navigating without debt. And the positive side of it, too, even the numbers. Like, even, you know, Kevin running, if you go to ramseysolutions.com, we have an investment calculator. And I'm like, just throw in what the average, you know, the average family owes, I think, right now, $12,000 balances on a credit card. Wow. And it's like, throw that in an investment calculator. And instead of that being your reality, here's what your reality could be, you know, in 40 years. And same with the car loan. I mean, the average car payment on a new car is up around $900 a month. And if you just said, hey, what if you avoided that and debt was not part of your life, and you invested a car payment every month instead of paying a car dealer or a bank, what you could be. So, the, you know, the possibilities are endless. So, Kevin, yeah, just like Jade said at the top of the call, you are such a great dad. And I think that's where parents can step in. And it's not out of control or judgment with your kids, but teach them and show them like, hey, here is what this looks like, and even your own mistakes, right?

I mean, as parents, I'm like, man, that's— what a wonderful, humbling thing for your kids. Like, please learn this before, because that's one line we get all the time is, I wish I had known this stuff earlier.

Absolutely.

And if you can get it, Kevin, at your son's age, oh my gosh, to set him up for not only financially having peace, but also emotionally around money, that is such a gift. Okay, George, we hear from so many people that are trying to live out the Ramsey Plan, right? They're getting out of debt and everything, but the hard thing is there's not many banks out there that actually support the way we teach people to handle money.

Yeah, most banks, they don't want you to win with money, so they charge a bunch of nuisance fees. There's all this fine print, and worst of all, They are pushing debt products at you nonstop.

Yes, but the good thing is that Fairwinds isn't like most banks.

They're not like the other guys.

They're not like the other guys! Yeah, they are not pushing debt, and they actually want you to win with the Baby Steps. What's great, too, is they created the Smart Bundle for Ramsey fans, which includes a high-yield savings account and no monthly fee checking.

Which is huge, because it's rare to have a checking account tied to a high-yield savings account. You can get all of that with Fairwinds, and for the nerds out there, you can have up to 10 different high-yield savings accounts for different goals. So you got your emergency fund, the car upgrade fund, the vacation fund. The world is your oyster.

So beautiful. And check out the debit card, the new one, the Live Like No One Else debit card.

Oh, it's beautiful.

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It's so good. Well, and when you swipe or you tap, you know, every time you take it out of your wallet, you're remembering that you are living like no one else and you're being intentional with your money.

I've been using Fairwinds for months and months now. I love their features, the app, the customer service. It is all so good and so aligned with the Ramsey principles.

Absolutely. So y'all, we both bank at Fairwinds and we love their commitment to Ramsey values.

So check it out. You can get that smart bundle. We're gonna drop a link in the description, or you can go to fairwinds.org/ramsey today.

That's right. That's fairwinds.org/ramsey, insured by the NCUA. Well, if you're new here, like many of our listeners that have joined even in the past couple of months, you know, one filter that we use to answer a lot of our money questions on this show is through the 7 Baby Steps. And so, these 7 steps really take you from paycheck-to-paycheck living, broke, no savings, debt, all of it, to going through it, for paying off debt, getting an emergency fund, a fully funded emergency fund, you're funding retirement and kids' college, you're paying your house off early, like, getting you through that money process is the 7 Baby Steps. So, if you wanna check it out, make sure you do. There's— we'll put a link down below if you're listening on podcast or watching on YouTube, because, I mean, it's a pretty simple— you read 'em and you're like, all right, pretty simple to understand. Sometimes hard to do.

Yeah, yeah.

Because it can be a long journey, but it really does, have you get a grip on your money and actually have control over it, actually have a plan for your income, and the fastest way of building wealth long-term, it's this. So, check it out, the Ramsey Baby Steps. All right, let's go to Lonnie in Austin, Texas. Hi, welcome to the show.

Hi, how y'all doing? Thanks for taking my call.

Absolutely, how can we help?

So, I've been Dave-ish my whole life, and I recently got busy with it and I have my $1,000 emergency fund.

Good.

And I was tackling my snowballs. And while I was doing that, I had $17,000 on a credit card and the monthly payments got so bad that I just kind of stopped paying them. I figured I'd pay it later, get in touch with them. And so then when I did that, they put a lawsuit against me. They gave me to a debt collector and went to a law firm and they said that I had a lawsuit and they gave me all the paperwork. paperwork and everything. Somebody came in, I see, handed me the papers. And so I called them and I got it settled down to $8,000. And we— that I gave them all the, the numbers that they asked for, my routing information, my— all the stuff from my bank.

Oh no.

Oh no.

And they removed— like, you know, they're supposed to, you know, draft it out of my account, the $8,000, and it never moved. So then I called them. It sat there for like 2 weeks. And I called them back and, and they said that I had a zero balance. And so I was like, okay. And then I got a receipt in the mail saying that I had a zero balance and they wouldn't go after the rest of the money that I owed because we had an $8,000 agreement. So then I sit there for another 2 weeks, nothing happened. And then they called me and telling me like I had never even spoke to them. They said that I had a lawsuit pending against me and I owed $17,000.

Oh my gosh.

And then when I talked to them, I talked to the guy.

They're just idiots, Lonnie. They, they, they, they messed up. They clearly got you confused with somebody else, unfortunately, it sounds like.

Well, I do— I did have the $17,000 thing, and yeah, they might have pulled somebody else's money out of their account. I'm not sure what happened, but it's still sitting there, and they're still saying that I have a lawsuit. And I gave them all the routing information again to draft it out of my account. Still sitting there. So my question is, should I Like, go take some of that money and go hire a lawyer, or—

I, I don't think so. It sounds like— I just want to make sure I'm following your story. You got it settled for $8,000. You sent them your bank account for them to clear it. They didn't clear it, but they did send you something that said it was free and clear. Now they're coming back saying, oops, no, it's not free and clear. You actually still owe it. So what I would do is I would get on the phone, and I would call several times until I feel like I'm speaking to somebody with a working brain. And when I feel like I Then I'm going to send them probably a money order for the difference or like a cashier's check.

Do not give them any more access to your bank account, okay?

And that way you've taken it into your own hands to make sure it's paid. And then I'd want written receipt again that it's been cleared with the new date on it when it was clear. And yeah.

Yeah, so, so go renegotiate again back down to the $8,000 if you can. And sometimes they are gonna need you to have that amount of money to go ahead and just make the payment.

Mm-hmm.

Which you said you still have in that account. So, what I would do is actually get them to email you like a transcript of your conversation, or at least in writing say, yes, we are going to settle this for $8,000. So, you have it on the front end, and then send them the cashier's check, and then ask them to make sure that they send you a receipt. For after, you know, that they have collected your money. So that's what I would do.

That's exactly what I did whenever they— when we said we settled the deal and asked for my account, I said, can you do this today? And I said, no, not until you send me a piece of paper saying that this will be settled for the $8,000. They sent that.

Yeah.

And then after they— I talked to them, they sent me a receipt saying there's zero balance. And then they're calling me back and the guy that's handling my case or whatever is real arrogant and acts like I owe him money personally.

Right, right, right. Well, but they never took money out of your account, right? So you haven't lost any money, correct?

Right.

Right. So you're just having to go back through the hoops again of renegotiating, even send them a copy of that first, you know, thing, you know, the first deal that you made with them. Yeah, it is. It's, it's an absolute roundabout situation. And it kind of ends up being your part-time job, Lonnie, unfortunately, because it is—

you're dealing with—

yeah.

Yep, so obnoxious. But you did the right thing. They screwed up on their end, which just means you're just going to have this a little bit longer till you fix it again and just keep trying. And honestly, by the end of it all, I bet that your debt, your bad debt, has now been— it'll be sold to another company because that collection company is going to sell it off.

So maybe you'll get it settled for a little cheaper.

Yeah, it's just going to go round and around. And so until it is a done deal, sadly, this is part of the gig of getting out of debt. But you know, I mean, because of your situation and because of what they've chosen to negotiate, what a great thing that $17,000 went down to $8,000. I mean, we'll take it. You know, that's a win.

And when you do that cashier's check, keep that receipt that you know that you paid them. Because even if these are bozos, so they may never send you the receipt on their end, but at least you know you did it and you can file that away forever.

That's right. All right, let's go to Pete in Jacksonville, Florida. Hi, Pete. Welcome to the show.

Hi, my husband had to go in for an appointment, so you get me.

Oh, perfect. What's your name?

I'm gonna go with Patty.

Patty, perfect. Thanks, Patty. How can we help?

My husband and I are looking at buying a lake home, a second home. We are debt-free. We inherited a large sum of money, and we're just wondering if we should pull to pay for the lake home out of that money, or if we should borrow money, take out a short-term mortgage, as to keep our tax burden down.

Interesting. What'd you— how much is the amount, um, that you received in the inheritance?

Um, $2.9 million.

Wow.

How much is the lake house?

Uh, $850,000.

Okay, great. So y'all guys will have $2 million left. Um, no, I mean, our whole pile—

that's just what we inherited.

Oh, that was just the inheritance.

Okay.

How much is your net worth total?

$5 million.

Good for you guys. And you're wanting to take the mortgage out so that you're not— what was the thing about the tax bracket? What did you say?

We would have to take the money out of our pile of our investments to pay for the home, which we can do. But we're just wondering, it's going to boost us up into the 24% or more tax bracket. And we're just wondering if we take out a mortgage, then maybe we could stay in a lower tax bracket. it and just pay it off over time, if that's—

Yeah, well, the amount you would save on taxes is probably gonna be smaller than the interest you're gonna end up paying on a mortgage over time.

Mm-hmm.

So, I mean, I would run those numbers, but no, I mean, I would tell you just pay for it, Patty. Just pay for it.

Yeah, absolutely.

And if you're in that, yeah, I mean, that's, 'cause you're gonna have, if you pull the money out of these investments at any point, you're gonna have to pay taxes on 'em. And so, yeah, it's probably gonna be a lump sum of it and it's not gonna gonna feel great, but also—

No.

But also, like, it is what it is. Like, there's a part of our life of, you know, living in America that I'm like, it is that, that is the bracket. And to play the game with the government and the mortgage companies to try to get around it, usually at the end of the day, the consumer's the one that ends up paying more.

Yeah. Yeah.

Well, don't, don't— here's the thing though. It is bittersweet, but it's also, it's like mo' money, mo' problems. It's one of those things where it's like, it's a blessing to have this problem because having this problem means you have a bunch of money. And so it's kind of all in the way you look at it. You don't want taxes to shield the fact that this is an incredible blessing that you can actually pull $850,000 out of an account and pay for a house in cash. That's the business right there.

Which is beautiful. And just staying debt-free the whole time, owning it, not messing with everything. I'm telling you, in the long term, just buy it. Just buy it. Buy the property. You guys have worked hard. You've done so well. Patty, yes, part of this was an inheritance, but also you guys had some of your own hard-earned money, which is wonderful.

Love it.

And this is why you do it, for moments like this. So just keep moving forward. Get the lake house. Have fun. Enjoy it. And we all don't care for taxes. Hey, I want to talk to you for a second about love, and not love like in Titanic or something. I mean responsible love, the kind of love that moves you to take care of the people closest to you. And one of the most important ways to show that kind of love is by having term life insurance. If you have anyone depending on you—

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My wife and I had term life insurance through Zander for years, long before I worked at Ramsey, because we trust them. Getting term life insurance is a way of saying I love you when you can no longer say it yourself. Go to zander.com or call 1-800-356-4282 to find the coverage that fits your family. Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm Rachel Cruze hosting this hour with Jade Warshaw, and we are taking your questions at 888-825-1111. First up, we have Jessica in New York City. Hi, Jessica. Welcome to the show.

Hi, guys. Thanks for having me. How are you?

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

Yeah, so I'm just calling— you know, a lot of times I feel like people call and know what you're gonna say, but I've gotten myself into a little bit of a pickle. I'll start out with what I'm looking for: financial advice on how to get back up on my feet or even survive my current situation.

current situation.

Hmm.

So I've been in a 4.5-year relationship with a man who makes about $900,000 in healthcare. And I found out about 5 months ago that he was married. Um, he's been married for 7 years and I didn't know this. He claims that he has been afraid of the financial consequences of getting a divorce. Um, but, you know, actively seeing his wife, there was, and then there was me. So he is now in the process of getting a divorce, which is costing him, um, like 7 figures in alimony. And so now I decided to give him a second chance, and I'm just struggling with living with the situation, um, the betrayal and stuff. But also I'm struggling if I were to leave, um, the situation too. I can't— I don't know how to get back up on my feet because I moved cross-country to be with him. I'm 4 months pregnant.

Wow.

And I am taking care of his family. And also I filed I filed for bankruptcy last year because I didn't want to enter a marriage with a bunch of baggage. And a lot of that debt was after my mom died. I had bought a timeshare and like, it's about $40,000 and lesson learned. So I'm debating whether I should stay and see it through because now we're living paycheck to paycheck with this divorce and just the mental baggage of that. And I'm also contemplating leaving the relationship. But where do I start? I used to make, you know, $150,000. Now I make $30,000 after taxes. So I don't know. I just want some advice on any of the above.

Where are you now? Are you still living together? Like, what's the current today situation?

So we are still living together as a couple. Um, and we have fun day-to-day stuff, but this, um, financial situation and And it's not finalized with his previous ex yet through the legal system. So we're living a normal life. I take care of his family rental properties.

Help me understand that part. When you say you take care of his family, was that a health thing? Was that— what does that mean?

So parents, siblings, aunts and uncles, they have a lot of like appointments and rental properties. And I am the rental manager for 7 properties.

And so—

So you work in the family business. And that's what earns you the $30,000? That I do that for free. I make $30,000 at a remote job.

So you manage 7 properties for his family for free?

Yes.

Girlfriend.

All my bills are paid for, but yeah.

So that's the, that's the exchange. If you manage these properties, you live with him and he'll pay for everything. Is that what I'm understanding? I'm not judging, I'm just trying to That's the current situation.

I pay my student loans and health insurance, very small stuff, myself. But Jessica, that's what I do.

You in danger, girl. Like, you got it. You got to get out of this. Like, this is, this is so unhealthy for you financially. It is so unsafe for you because everything hinges, and you're feeling that.

It's like the golden hand Yes. Of a relationship, right? That you've kind of built these systems in place where he has so much control over you.

And I think that's why you laid it out that way, because you're right. And it shouldn't stop you, but you are right. If you— when you— let me say, when you leave him, you are gonna be starting over. And that feels really scary. It does. And it is. But it doesn't mean that you can't do it. You are a fully grown woman. You are smart, you're capable. There's no reason that you can't go into the world and, you know, increase your income from $30K up. You've just proven you can be a property manager. Um, there's no— there's nothing capability-wise keeping you from going to the world, into the world, standing on your own two feet.

Yeah, and I, I just feel like he, you know, there's this devil on my shoulder telling me that he is still willing to marry me and not sign a prenup, but I almost want to To see that through and have them sign a prenup. He was going to give me—

He was deceptive. He proved that he could be a deceptive person for 7 and a half years. That tells me something. He's shown you something about himself. Don't ignore that. Even though you experienced it different from what his wife experienced, you had 2 separate experiences. It was geared towards you. Don't let that make you feel like you've won some prize here. He's been deceptive for 7 years.

Mm-hmm. I mean, had a— yeah, had a whole other life. And if you can function in that mentality for 7 years, for him, and he's not done anything different, right? Gone to Arizona to a rehab center for 6 months to get help or something. Man, what? Okay, so, to prove— You know what I mean? Like, something that there's— but it doesn't sound like— I mean, it sounds like he is the same the same person. So, from the relational standpoint, I don't know how you trust someone after you find out that he has— he had a wife and kids and stuff, you know? And so, that's the relational side. And then, Jessica, I mean, and then, the baby, what a sweet baby. But man, that adds, for sure, elements.

It makes you feel like you have to stay in it.

In all of this, too. And so, and I don't know what the— laws are, but you guys aren't married. And so, it's not like there's gonna be necessarily— I think state by state, there may be different ways you can kind of pick through the law to see if there's anything from a common marriage perspective, right? 'Cause you guys have been— to get anything from him to help with the baby, that would be helpful. But yeah, I would be creating an independent solo life, Jessica, of how you would function out in the real world. And I would start those habits pretty soon, just to start before you actually— unless you're, you know, unless it's happening tomorrow, start, you know, building some skills around you for you to hold yourself up. Do you have family anywhere?

They're across country.

Where are they?

None of them know what's going on.

Are you close at all?

I'm in the Midwest.

Okay, are you close with them at all?

Yes, my dad and his side, and my aunts and uncles.

Okay.

Yeah, I call them a lot.

But they don't know about this?

No.

Man, Jessica, I may be going home.

Yeah, I think you do.

With my baby. And I'm gonna start a life. I'm gonna start— I mean, and I'm very, very aware of— Jada and I sit behind this desk, and we say that.

Sure, sure.

And you are where you are, and the consequences of what we say. And the life that you have to build, it takes years. I mean, that is a big ask from us to you of what we would advise you to do.

But you can't let this blind you from what's right.

From what's the reality of it.

You can't let the financial comfort blind you from what you know you have to do.

Yes, and I think Jessica, 5 years from now, has a better shot at creating a better life if she's dependent upon on Jessica than a man who's lied to you for 7 years and had another family.

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Next up, we have Katie in Minneapolis. Hi, Katie. Welcome to the show.

Hi. Thank you so much for having me.

Absolutely. How can we help?

I am curious if our family should focus on increasing our down payment enough to make a $550,000 home affordable, or if that would be stretching beyond what we can realistically afford. And I'm also wondering if there's some pride or lifestyle inflation influencing what I want versus what we actually need.

Oh, great questions. Okay, so how much do you guys have saved for the home now?

Currently, we are working through Baby Step 2.

Okay.

But we're looking ahead, and it's kind of feeling like the light at the end of the tunnel is not as bright Because now I'm looking at the numbers and I can't realistically afford what I actually want.

What do you want? What's the amount of the home that you think would fit your family?

So what I want is roughly a $550,000 home. We do a lot of hosting and we started our debt-free journey This, this past year, like in January we started, um, and we downsized significantly.

Okay.

Um, and I'm, I'm itching to get out now. Um, and so we, my husband, we're a single income family home. Um, and my husband brings home about $103,000 a year. Okay.

Um, and What hits your account every month, Katie?

Yeah, what hits every month, just after-tax number?

Okay, so he actually gets 3 large bonuses a year. And so we are $400— I'm sorry, we are $4,400 weekly. And then, but with his bonus, if I include his bonus amounts, that's $8,650 a month.

Total?

Yes, total.

When does he get the bonuses? Is it at the end of the year or how are they paid out? Or do they pay out monthly?

No, they pay out in 3 large sums within the first 6 months of the year.

Understood. So you could essentially take that and disperse it throughout the year and kind of get ahead of it like that. Okay, I understand. So we're looking at—

You could do that.

We're looking at when the time comes, assuming his pay is just the same. We are looking for a payment that's no more than 25% of your take-home. So if we take the $8,650 and we divide that by 4, we don't want to spend any more than $2,162 on this mortgage if that's the after-tax amount.

Right.

Okay, so then—

and go ahead. I was just— I'm trying to see if we just keep our heads down and keep saving for a large down payment so that we can get the mortgage at a more comfortable amount, if that's a good plan, or if I just really need to reel it in.

I think you may. I mean, it just depends on where you see your income going, because I'm just running the numbers here, and if they want to pull it up, I've just got you in for a $550,000 mortgage. And right now, I just guessed, I put in $300,000 down. Let's just pretend 15-year fixed, let's keep it at 6.5%, even though mortgage rates have been moving lately. And that puts you at everything all in, and this is just a guess on property taxes and homeowner insurance, but that puts them, Rachel, at $2,907. So we're already above where you wanna be, and we've already put $300,000 down. So there's part of me that, it's not impossible, but that's a very long stretch of time. I think I'd rather adjust my expectations to get into something.

Yes, I mean, on a $100,000 income, Katie, I mean, to— for what you can afford month to month, to enjoy life too. Like, some of this is, yes, us, you know, making sure that there's enough other money to invest and all of it, but it's also just to be able to live comfortably and not stress every single month that you don't have any money to take the kids to Target real quick to get something.

You know what I mean?

Just to have like margin to live life. So, yeah, I think it's— I think the expectation of the house is sadly probably gonna have to come down.

But think about this as a trade. And this is what's probably either going to give you some peace about it or cause you to switch lanes. You have chosen that a value for you is to be a stay-at-home mom. And so, because of that, we've got one income coming in. And, you know, in America right now, the cost of living is very high. And so, when you made that choice to stay home, which is great, you made that your number one priority financially. that means that everything else kind of bows at that. Do you see what I'm saying? And so, if you look at—

Right.

Thank God, and you go, you know what? I'm getting what I really wanted out of life. Because of that, I'm happy to, you know, scale back my home dreams. You may be cool with that. Or it might cause you to relook at that and go, okay, maybe I only wanna stay at home for the first 6 years, and then I wanna go back to work so that I can have a little bit of both of these. Or maybe you go, Today I want to go back to work, right? Looking at all of this together and looking at it through values and priorities will help you to know what's most important to you.

Yeah. Is this y'all's first home, Katie?

We previously sold a home, so we wouldn't qualify for first homebuyer, anything like that. But my kids are like, next year my youngest will be going to school full time. So we're, we're at a crossroads right now and I want to go back to work. But I've also been out of the workforce for 8 and a half years.

Sure. Yeah.

Yeah.

So I'm kind of— we're, we're at a pivotal point right now trying to figure out exactly where we're going and figuring out— Yeah.

How old are you guys?

Um, my husband is 35 and I'm 28.

28.

Okay.

How old are the kids?

Um, 8 and 4.

Okay. So great.

And we've paid off $50,000 this year.

Oh my gosh.

And we will be out of debt in, by July. I mean, sorry, by February.

That's great.

We have like $22,000 left.

Well done, Katie. But see, listen, if you did $50,000 in a year, and if you guys did that for 2 years, saved $100,000, right? You could maybe find, I mean, I don't have the calculator in front of me right now, but you know, you could do a $450,000 house, right? With $100,000 down.

I don't know.

I just wonder if there's the amount you guys can save in 3 years, right? Even $150,000. I don't know. I'm just wondering what you guys can continue to sacrifice.

That'd work.

Because a home, you know, it is such a long-term play. So, I almost would take another year extra of my timeline to save a big chunk for a down payment to make it work, right? Like, to me, that would be worth it.

Yeah, if you said what Rachel said, $350,000, or maybe a little bit more, assuming you guys' income goes up and you save $150,000, well then you're right at it. And again, assuming that his income goes up, it sounds like he's got some trajectory.

It could be a $400,000 house, you know? But it's tough.

Yeah, our timeline is that we should have a $51,000 down payment by July of 2028. So if we just keep our heads down, we could do it. Really get a large chunk, but I just am not sure if that's worth it or if, like I said before, if it's like a pride thing or I just need to really dial it in.

I don't think you have a choice because you cannot do the $550,000 house. So that choice is made for you. You simply cannot afford it. So I think the choice is made for you. And I do think if you lower, slightly lower the expectation of the home, Allow that over time, over the next 3 and a half years, as you save, his income is gonna go up. Possibly you'll go back to work already. That's looking a lot better for you, Kate, because you're gonna be able to afford more home that way.

Yes.

With both of those 2 things happening. So I would approach this as, okay, the next 3 to 4 years, that time is gonna pass regardless. Mm-hmm. I'm gonna do the best that I can with this time. We're gonna save up as much money as we can cuz the day is gonna come Like, if you keep doing that, you're gonna pile up money and pile up money, and the day is gonna come when you're gonna be able to buy something.

Yep, and when you buy it, hopefully, you know, you have it for quite a while, right?

Yep, yep.

And so that's it. It's like kind of that short-term sacrifice to get what you want for a longer term is worth it to me. So I don't know if that helps, Katie, but oh, I'm, It's a frustrating time. We get it. But also, it's just adjusting expectations some and probably having to save a little bit longer. Hey guys, it's Rachel Cruze. If you're working the Baby Steps, every major expense deserves a second look. Healthcare is one of the biggest expenses in most families' budgets, and that is why I recommend that you check out Christian Healthcare Ministries. CHM isn't insurance, it's a health cost-sharing ministry. That means members help pay one another's medical bills, and they've been serving Christians since 1981. CHM programs start at just $115 a month. And here's why that matters. If you are paying more than you need to for healthcare, that money could be going toward paying off debt, building your emergency fund, or reaching your next financial goal. And your monthly cost isn't based on your medical history or where you live. Y'all, a lot of families find CHM gives them more room in the budget. That's why so many members say they're better with CHM.

And right now, new members can receive a 50% credit towards their first month of membership. Go to chministries.org/budget and use promo code Ramsey. That's chministries.org/budget and promo code Ramsey. Everyone needs insurance, but it can be really hard to find a pro who isn't just looking to make money. And to find agents that actually know their stuff. And so Ramsey Trusted Insurance Pros are vetted and coached to make sure that they're market experts who have your best interest at heart. So make sure to go to ramseysolutions.com/coverage to find the type of insurance that you're looking for and connect with a Ramsey Trusted Agent there. All right, let's go to Joel, and he's in Canada. Hi, Joel. Welcome to the show.

Hey, how's it going today?

Hi, we're doing great.

So I run a concrete business and I've never took a loan in my life. I bought my house flat out. I've never took a car loan.

Wow, that's awesome. Well done.

Thank you. Um, my question though is right now I have about $200,000 a year gross profit, but I know I could double that or more if I start playing the debt game and take a line of credit. credit. It's all these big jobs I financially can't do, from paying my laborers for 6 months plus sometimes and financing all the materials. So do you think it's worth taking the extra risk to expand my company and play the debt game?

Do you think it's worth it?

Personally, yes, but it's putting a lot Yeah, yeah, and I think that's the biggest factor, and obviously, it's the unknown. And the way we coach small businesses here through EntreLeadership is really walking them through a process of where your business is, you know, where you own it outright, and you're not having to play the debt game. Because when banks and payments and all of that enter into your life, Joel, you are, you're playing a different game at that point. And some people think it's worth it, and they figure it out, and that's what they wanna do, and it's what they do. And then other people try to play that game, and their entire life is full of stress because they've outleveraged themselves. They jumped ahead and had some expectations that never really came through that they thought because they were supposed to, and all the numbers worked.

Right.

And everything was supposed to work. And the reality is it didn't. And so now they've put themselves in a situation that they could have easily avoided by going slower. And going slow for an entrepreneur is not a very fun thing, I know, because you get energy from the growth and you're seeing all the success and all of it. And you're like, why not just magnify it? And I mean, the moment you do is the moment suddenly your business is in a completely different game. And it's not one that we recommend people playing. There's just more peace and more control to go slower and move at the speed of cash that gives you a quality of life that is so much better. And it's not that you can't be successful. It may take you a little bit longer, but it's not saying that you can never get there. And there may be some things you always will say no to.

Sure.

I mean, there's stuff at Ramsey that we could go and buy this tech or whatever, and it's like, no, we don't have the money. We're not gonna have to say no. We're gonna have to figure out a different path, a different way.

Yeah. I do wonder, Joel, what is it? And let me see if I can answer this, ask this question clearly. What is the increase that you would need, like monthly and operating costs to do what it is that you're trying to do?

It's hard to say the exact amount because it's different from job to job. But a lot of these jobs, if I'm quoting them, I'd need to have financed probably $200,000.

So I'm wondering if this is something where we can go, we need like a replenishable stash of money that is like kind of there for when opportunities come. We can go over there and say, oh, this job is worth it. If we do it, there's going to be such a gain from it. And you're kind of, so over the next, however long it takes you, you're working to kind of build up this money that's there to be able to go out and do other work. And if you're able to grow slowly doing it that Does that make sense? It's almost like you're saving. It's like, it's almost like you have savings that's ready for when these great opportunities come up that you can go do them. And then when you do them, you're replenishing that money plus you've earned money, right? Something like that.

Okay. So yeah, right now I got a good amount in the bank, but I always like to have a certain amount Is to have that comfort zone, right?

How much is in the bank right now?

Around $100,000.

And I'm saying, what if you went well above that and you had the money to do the work when it came? Like you had the money to explore different opportunities in cash when they come?

Yeah, yeah, that's definitely an option. It does take me longer to build up to that point.

Exactly.

And that's kind of what I wanted to like put legs to what Rachel was saying when we're saying build slowly. It's not to say that this is the business, it never changes, but you're saving up the money to be able to do more over time versus you just taking out the $200,000 loan to do it. Let's save up $200,000 over time in the business. Now we can afford to do more of these things that come our way as opportunities.

Yep. And, you know, the calls we get, Jade, on this show of small business loans and things that go awry, and it's like, You know, I got $200,000 and the business went under. I'm not saying that's gonna happen to you, Joel, but I mean, it's just this element of like, what are you gonna choose? Are you gonna choose a slower road, but that's full of peace and autonomy, eventually, over what you need in the business? And if you need to make a pivot, you have the ability to, 'cause you own it all. Or is it that I have to be making payments, and now I'm living a life where I'm attached to this banker? and what is expected. And it's just a totally, it's a different game. And it's one that we teach people to get out of and steer away from than head right into.

Yeah, absolutely. And I mean, there's something to be said for his whole life has been built on cash and look how successful he's been.

Yes.

When you see like best practices that are working for you, like keep doing that.

Yes, that's right. Absolutely. Stay the course. All right, let's go to Christine in Connecticut. Hi, welcome to the show.

Hi, Jade and Rachel, how are you?

We're doing great. How can we help?

So, um, I remember that my parents never mentioned about having life insurance the minute we get married. Um, but I recently— well, recently I got off from this life insurance because it seems too good to be true. But the problem is I don't know if I did the right decision, and it was the National Life Group that I was in. I am new to listening to Ramsey, so I'm like learning. And I guess you can say I am on Baby Step 2. I mean, I am trying to pay off all my loans because I'm tired of it.

Good for you. What kind of insurance did you get? Do you say life? What kind of life insurance? Whole life?

Yeah, it's like the— what is it? Life insurance about when your spouse dies and all that, the death thing. Um, hold on. Um, yeah, because they said that I got pre-approved for $250,000, but I kind of seem like it's—

Term life insurance, Christine, or is it like universal life or—

Oh, whole life index universal life.

Okay, so it's a type of whole life policy. Okay. Um, and so you got that, and how much How much are you paying per month for this?

So since I started, with me and my husband, we were doing $200 and $200, so it's $400 in total a month.

Wow, that's a lot.

Yep.

It is?

Yes, it is. So, Christine, what this is, is they basically pair some type of this investment element to the insurance, okay? So rule of thumb to remember is always keep your insurance and your investments separate. The moment they combine them in a product like this, you get a crappy rate of return and you pay a lot for not a lot. I mean, not a lot of coverage. $400 in and you're only getting $250,000 versus if you did term life and let's say you got a 20-year policy, depending on your health and age and everything, it's very inexpensive. I mean, over, I mean, a fourth of what we're talking about here.

For way more coverage.

For way more coverage because it's just insurance. They're not trying to play this investment game on the side. So what I would do is— do you guys have kids?

No.

Okay. We don't have kids.

Okay.

So what I would do, Christina, is I would cancel the policy, and you may have to pay some fees and all of it to, to get out of it. Cancel it. And then I want you to go to Zander Insurance. So go to zander.com and look up a term, a term life insurance policy. Okay? Term is your key. 20-year, and you can do Now, if you had kids, I'd say get the term first, then cancel the universal. But at this point, I wouldn't worry about it, because there's no kids involved.

That's right.

But I would do it all back to back. So get life insurance. You guys need life insurance. But man, get out of this whole life, because it is a crappy, crappy product.

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All right, today's question comes from Gina in North Carolina. She says, at what point does it make financial sense to give up our 3% mortgage rate and move? We're considering moving because the cost of the HOA is $400 a month. It has doubled since we moved here 5 years ago, and I anticipate it will continue to do so. We would be moving to a home with a new mortgage interest rate of over 6%. I know we're building equity if we stay, but I feel like we can never really pay off our house if we continue to live in our current neighborhood. Okay, so this is a good question. And I'm thinking about what you're thinking about, Gina. HOAs, yeah, there is an unknown there. And I would, I feel your pain on that. So it's gone up $250. It started at $250, now you're at $400, or it started at $200, now you're at $400. I would run some numbers on this though, because if you move and now you're at 6%, you might be paying that same amount basically. Do you see what I'm saying? You're almost like just moving it from one area to another area, but either way, you're paying the $200.

And rates just went up this weekend. Yes, again. So, we don't, yeah. So, playing the rate game.

Yes. And insurance could cause your payment to go up. Like anything.

That's right, that's right.

Any of those, all those things have the ability to adjust over time, which is why we're such sticklers about that 25% rule.

Yes.

To give you breathing room to be able to absorb some of those things. of this, and the hope is that you're moving forward in the Baby Steps and you can absorb it in a better way as you go further throughout the Baby Steps as you're paying off your mortgage. So, I don't have all the details of her numbers, but just looking at this, I'm like, I would not move from 3% to 6% because of a $200 change in your budget.

That's right, that's right, 100%. Unless you were wanting to move anyways and you had the money to do it with the new interest rate and monthly payment and you wanted to, don't wait. Like, the best time to buy a home is when you are ready to buy a home. So, if you guys are wanting to move, and you have the money for it, but you're just like, oh man, I don't want to give up the rate. That's what a lot of people— I mean, a lot of people are just like, I don't want to give up the rate, so I'm not going to move, which is fine, totally understandable. But if you have the ability to, and you want to, that's the part of being wise with your money is you get to make these decisions. But if it's only because of the $200 HOA fee at that particular I wouldn't.

And you can also, too, look at things going on in your neighborhood that'll speak to why the rates may have gone up in that way and kind of project it. It's probably going to be like this for a while. Or do you know what I mean? You can sit down and, if you dare, attend one of the HOA meetings and find out what's going on over there. But unless for some reason the 3% house that you already have is like stretching you guys to the gills and you're like, this just really threw it over the edge, But then you couldn't afford a 6% interest rate anyway.

Yeah, yeah, yeah. 100%.

Good point.

All right, let's go to Grace in Las Vegas, Nevada. Hi, Grace. Welcome to the show.

Hi. Thanks, Rachel and Jade. Thanks for taking my call.

Absolutely. Did I— this is Grace, right?

Yes.

Okay, perfect. Okay, good. Sorry, I think I may have hit a different button. Sorry to the Booth. Okay. Yeah, how can we help?

So, question about inheritance. So, I don't know how direct I need to be with my dad in asking about our inheritance. And long story short, my dad has 4 kids. The 3 grew up in the household. I did not. I grew up in the States with my mom. So, I've never been entitled to any of that stuff. And it's fine, right? I've made my own way. I told the screener I'm a Baby Steps millionaire, thanks to you guys.

Wow.

Good for you.

Thank you. So I was always led to believe— sorry if I get emotional.

You're fine.

Um, but it was hundreds of thousands of dollars, which I didn't want to fight for, right? Like, I don't want to fight for, you know, like $50K. It's not going to change my life. Anyway, I got a phone call this week, and it might be more in like the millions of dollars that this inheritance might be. And anyway, I'm just like feeling conflicted because Because, you know, 2 of my siblings are trying to get me out of the will. You know, my dad's starting to get dementia. Um, but I guess as the will stands, I'm supposed to get the house and some money. So again, like, I was always of the camp of I'm not fighting for this. Like, it's not, not something I expect. You know, at the time I said it's not going to change my life, but now that it's, I don't know, a life-changing number, I don't know. Am I being greedy? Like, should I pursue that? Like, I just, I'm struggling. Like, I couldn't even sleep last night trying to figure out what I should do next.

Do you have any relationship with the siblings at all?

I do with one. Um, the oldest one has kind of been on my side of like, hey, this is about fairness. Like, it doesn't matter that, you know, she's not like— she's a half-sister. So, um, so anyway, yeah, so just with one. The other two, it's like friendly, but, you know, it— I, I mean, they have put me in my place before of, you know, you're like that midlife mistake, you know what I mean?

So see, and that's the part, Grace. Grace, I, and I hate all of this for you so much. Like, it sounds like there's a lot of emotions. It sounds like there's a lot of water under this bridge that has gone on, and I feel like that's what's clouding This discussion, and I get it. I'm not saying you wouldn't be clouded by that, because that's— there's a lot there just in the few things that you've told us. But what I would want to keep first and foremost is what you said, which is you were going throughout life and you were fine with your Baby Steps Millionaire, doing your thing. And at the end of the day, whatever happens, I would just keep in mind, it's not yours nor your siblings' money at this point. It's your dad's money and he's gonna make a plan that he sees fit. Now I do wanna know, whatever it is, like these bits and pieces that you guys do know about the will, how do you know that? Is that from your dad's mouth? Was there at one point a reading of the will, or is this just jibber jabber from the family?

It's from my, my oldest sibling. Um, so I got a call, like I said, and, uh, she was— sorry, I'm getting emotional, but, um, Again, she said— so anyway, there's a lot of properties involved, right? And pretty much they're getting the lion's share. And it's basically—

How does she know? How does she know?

Because she knows what all it's worth. She's kind of had her hand in all these things.

She helped him make the will?

No, she— I mean, she is— she knows what's in it, basically. She didn't make it, but she said Yes, basically, you know, you're supposed to get this 4th home plus, you know, whatever is in the bank, and they're trying to make it so you don't get the home. And, you know, it basically goes to the grandkids, which I don't hate that either, right?

I just wouldn't bet on what she's saying. I think I would go straight to your dad and I'd say, Dad, okay, talk to her. Your health is going, and we all know that, but you need to— I would love if you would speak to us about what your final wishes are going to be with the property. So that we're hearing it directly from you and with the spirit of what you have in mind behind it. You know, our family is messed up, and it's gonna mean a lot to me to hear your wishes from you versus one of my siblings. That's all you can ask for.

Okay, so just address it straight on. How do you bring that conversation up though?

Without entitlement.

Yeah, a lot, a lot of gratitude and humility. But just say, Dad, this is starting to weigh on me. And because it's getting dragged so deeply, and it's starting to feel really personal. And I don't want it to be. I hate that it is. But this is what I'm feeling. And I just think it's gonna be helpful and best for you, Dad. You've worked really hard. You have a lot to show for it. And I want your wishes— to be what they are. And I think that it is— it's fair for all of us to hear those together, just for your legacy to be able to be lived out the way you want it to be when you're not here anymore. And yeah, I mean, I feel like that is totally fair.

Totally.

And I would also say too, Grace, at the end of the day, does it— it feels— I think it's— yes, is the amount of money maybe becoming more motivating for you to be like, whoa, hold on. But also, what can easily be attached is someone's value to an amount of money. And Grace, regardless of if you get this money or not—

That's right.

You are valuable. That you're not some mistake, midlife mistake, like what they're naming. Because it can easily gonna start to feel like, if this money does not come to you, you have less value because of that. And I would detach that from a spiritual element as fast as possible. it's just not true. Will it be heartbreaking? Absolutely. But your value is still there.

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Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. We're taking your calls at 888-825-5225. Let's go to Rachel in Riverside, California. Hi, Rachel. Welcome to the show.

Hi. Um, can we just ask my question? Yes.

Yep. What can we— how can we help you today?

Okay, so I'm 54 years old and a widow. I've been a widow for about 6 years. Prior to my husband passing away, I was a stay-at-home mom for 17 years. So I immediately got a job and I inherited his IRA. I've been working, but work's really slowed up. So I'm trying to think about doing a 72 and start withdrawing some of the money that I have.

Okay.

And you're 54?

Yeah.

So not quite to that 59 and a half to avoid the penalty.

Mm-hmm.

So what are you doing for work now?

Right now I'm still trying to do the real estate, but I've taken some time off because it's just been really stressful.

Mm-hmm.

I jumped into work so quickly after he passed away, and now I feel like it's hitting me a little harder. Yeah. Are you there, Rachel? I'm kind of scared. Yeah, because I was kind of scared when he passed away.

For sure.

So I just immediately started working.

Now I have a pretty big It's IRA.

So—

Yeah, why are you thinking you need to— I mean, if you've got the job now, how— why are you thinking you need to start doing this?

I want to keep the cash flow.

Okay, but what kind of work is it?

Real estate.

Okay, so I'm— I would go more along the lines of, is there other work I can do versus trying to draw from this retirement earlier through a 72?

Well, I didn't have a lot of experience before we got married, and, um, and then I didn't work for 17 years.

How much is in that account?

Almost $1.8 million.

$1.8, okay. And how much are you needing to have per month to live on to feel good and secure?

Just a couple thousand dollars a month. And I have money in my savings, but I hate to deplete that.

Is your savings, is it like in a high-yield savings account or is it your IRA that you're talking about?

High-yield savings.

How much is in there?

About $200,000.

Okay, okay. 'Cause listen, Rachel, I'm just trying to figure out—

I have no debt, and I paid off my house.

Oh my gosh, amazing!

Wow, that's great.

See, I'm just wondering how we can fill the next 5 years or so.

5 years?

Yes. And if you, you know, I mean, like, if you pulled $2,000 out every, I guess it'd be every month is what you're saying that you need.

Yeah.

Yep, so, I mean, I'm just thinking, 'Cause I mean, if you did that and you pulled $2,000 out, I mean, it's gonna be over $100,000 will be gone from that savings, which is not the end of the world. You got $1.8 million in an IRA that you can live off of too, right? So it's not the end of the world. I'm just wondering, can you supplement instead of paying, you know, pulling $2,000 out a month?

Well, see, I kind of screwed up. I had gotten some job offers and then I turned 'em down because real estate was really booming.

Yeah, that's okay.

And now it's like, well, do I try again and put it out there again and try to get back?

I would, Rachel. I think you are a lot more competent and marketable than you realize. I mean, you've been doing real estate in California. You're, I mean, I think you have a lot to offer to something. And again, you're not needing this massive $300,000 a year job that you're trying to look from corporate, right? That you're trying to replace. Thank God, 'cause you've done so well with your money. though, that gives you the freedom to feel like, okay, I don't need to take this— I don't need to be looking for this needle in a haystack type job. I just need something that I enjoy. I mean, it'd be amazing, like, to find something that you love, Rachel, that you could plug into, or an environment that you love. I don't know if there's, you know, a great church and you work part-time there, part-time somewhere else. Or maybe there's— I don't know, I'm just saying, like, a receptionist at a dentist office nearby. And you know what I mean? Like, you find a group of people.

That's great.

Good people, somewhere that's a— it's an uplifting environment for you. And again, you're not, you're not having to make too much money. It's just supplementing some of this.

Supplementing. Yeah, it's just I'm pulling from my pension that I had before. Okay. Which is, it's just a small amount, but I am able to pull on that from a job I had prior to getting married.

How much comes in a month for that?

Just like $700.

Oh, Okay, yeah, it helps, but you're needed. You are gonna need some money to— I mean, realistically, how much extra? You said a couple of thousand. Be more specific for me.

Um, well, um, I, I am renting out a room, so I'm getting $1,500 for that. And okay, um, so I figure my bills, since I don't have a mortgage, my bills are really minimal. I don't have any debt at all.

Yeah, what does it cost you every month to just operate About $3,400. $3,400.

And then $300 to $400? No, Rachel.

$3,400.

$3,400.

Okay.

I was like, Rachel, Rachel.

And so you've got the $1,500 from the room rental, the $700 from the pension. And then what? I mean, obviously real estate is slow, but I mean, could we close that gap pretty— I mean, you're more than halfway there.

I could, but just the stress of real estate has been so much for me.

And I'm not saying it has to be real estate, but I do want lay this out. Like, if you were to draw from this early, doing what you said, if you did do a 72, it's not just, I get, I get to pick the amount that I want and I can do it for a limited time. The IRS is going to calculate, like the government's going to calculate what works for you and you're locked into that. You're going to be locked in for at least 5 years. So if something does change, you can't increase it, you can't decrease it. You're, you're locked in.

Right.

And if for some reason that calculation, something changes in your life and that calculation no longer works, you could, they could go back and say, well, actually, there's a 10% penalty here. And actually, that wasn't the right calculation. So, it's kind of a precarious thing.

So, I would pull out of the high yield if you have to do anything. I would leave the IRA alone. And the high yield is where I would pull some money if I need to. But I'm thinking about this too, Rachel, of just, you know, you're 54. I think just having a place to go, waking up in the morning, having a purpose, having something that you're going to is really good. It's like a very healthy thing. So, I don't know. So, I feel like you could find something and make $2,000 a month, you know, doing that. And maybe it's— and it's part-time. That's not a full-time job. That's part-time. But like, 2 to 3 days a week, you got a place you're going, you're making some money. And I just think that's a— I think that's a good mental health play for you. And then, I'm totally okay if you look up And if you're saving up in 3 years and you're like, you know what, I'm gonna retire and go be with my kids over here or whatever, you know, and you got 2 years that you gotta pull from the high-yield savings account, do that.

You can do that. You have the margin to do it. But I just think it's good for you to go find something with purpose in your life.

Yeah, I guess I'm just scared 'cause I haven't worked outside of, you know, I haven't had much work experience. They're older. They're all grown up.

Okay, where do they live?

Um, 2 live here, and then the other, um, close to me, and the other lives in Texas.

Okay, great. Yeah, I mean, well, what do you love to do, Rachel? What's— do you have a hobby or something that you just love?

I used to. I don't know anymore.

Okay.

I used to volunteer a lot, but I haven't really been doing that.

Yeah, yeah. I mean, I mean, honestly, 2000— I'm like, you go work at the library. You know what I mean?

Absolutely.

Just anything that you're out with people, you're making some proactiveness in your life, and making some money. I think it's good. You know what, Rachel? If you hold on the line, Christian is gonna pick up, and we're gonna send you Ken Coleman's book, Find the Work You're Wired to Do. And again, I'm not saying you have to have a full-time career, by any means. But let something— let some creativity kind of jog your mind. And, you know, there could be some great things in your area that you plug into. You get paid a little bit, which sustains your life, and it's a beautiful thing.

Yeah, it's a sign that's out there.

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When it comes to looking at your money and your lifestyle, even just like with our last caller, you know, knowing where your money's going is so crucial. And EveryDollar is an amazing app to help you with that. Not only is it a great budgeting tool in it, but also just your overall financial picture and the roadmap of how to get you to point A to point B, it is there to help you. And so, EveryDollar is, it's one of my go-to apps every day. I mean, I'm in there almost every day, logging, you know, tracking transactions and looking at everything. And so, it really does have an amazing way to walk right beside you when it comes to your money. So, if you wanna find some hidden margin and take control of your money, make sure to check out EveryDollar for free in the App Store or Google Play. All right, we've got Julian in Omaha, Nebraska. Hi, welcome to the show!

Hey, how's it going?

Doing great! How can we help?

Okay, yeah, so I'm basically looking for some guidance about saving for college vs. investing in a Roth IRA.

Okay. Is this for you or for a family member?

This is for me. So, I'm 17 right now and turn 18 in 2 months. I just started working at a bank. And basically they have a pretty good deal for me so that every 6% that I contribute to a Roth retirement account, they'll match it with— for 5%, and I'm immediately vested. I'm also going to be graduating in May with my associate's degree in business, and I want to go to college after that in-state. I think I'll be able to get a lot of scholarships, and my parents will help. So my goal is to save up $10,000. My goal is to graduate with little to zero debt, but I'm not really 100% sure about that, and I will work during college.

Do you know what college will cost each semester?

Yeah, per semester it was about $14,000 because per year is $28,000, but that's basically the sticker price. I think we can probably work it down a lot from there.

So $28,000 per year. That's $2,000 or so, a little over $2,000 a month. Do you see a plan for that? Cash flowing that?

Yeah, um, the FAFSA opens tomorrow, so I was gonna fill that out. I think my main goal is to just work hard and get a lot of scholarships, and I think my parents will cover maybe room and board. It's not confirmed about I haven't thought about that yet. But I think, I feel like with my ACT score and GPA and me going to like an in-state college for only 2 years instead of 4, I was just kind of thinking why, like my student aid wouldn't need to be as much for my overall costs.

Sure, yeah. I mean, I think your mindset is perfect in the sense of I'm going to be applying for scholarships and grants. One little asterisk though, the FAFSA can be very confusing and some people end up signing up for loans thinking they're scholarships. So read the fine print. Be extra, extra careful. I would have— you're such a mature kid. I'm like, oh my God. And I don't even say kid, young man. Very, very mature. And I think your parents, I mean, they obviously know you well. You're their kid. And I think sitting down with them this weekend, even, and saying, hey, Mom, Dad, I'm planning out my college life.

Yep.

I would love to know, just— and, you know, with zero expectation, but I just wanna know the plan for college on your end, if there is one, just 'cause I'm planning, so that you know, so that it's not It's not kind of, I think they're gonna do this. They may, they may not. Get a kind of a solid number from them. And then, from there, start, yeah, filling out scholarships and grants. See what you get. You can work. And I think you 100% can work your way through. Now, the prospect of what the Roth— it's probably a Roth 401 at the bank, I'm assuming, because they're doing a match. And that's a great deal.

Yeah.

But I would not do any kind of long-term investment right now. I would be concentrating on investing in your And that is getting yourself through college debt-free. And there is plenty of time to invest and build wealth. I promise you, you are going to be fine. You know, if you didn't do this for 2 years, you are going to have millions and millions of dollars at retirement. I just have a feeling.

Yeah.

I think you're gonna start early, and it's gonna be wonderful. But I want you to get— I want your number one goal to be to get through school debt-free, because that will set you up then to be able to go straight into investing. investing after college and not have to go backwards and pay off debt.

Yeah, because to your point, there is going to be— the $28,000 per year is just face value. There, you might need a car, you might need an apartment, there's going to be cost of living. And then, you know, right after school, what are you going to be getting into? You'll need to, you know, so having money, if you have extra money, saving it just in a high yield versus trying to invest it. So you've got that liquidity of getting to money when you need it.

Yeah, so I was gonna ask, like, so you think I should just stack cash for college, not touch like the Roth match at all? And then, so for my college savings account, do you think I should save it all in like a high-yield savings? Or I have everything in just like a basic savings.

Yes, I would move it to a high-yield savings. You can check out our friends at Fairwinds Credit Union. They have— you can do up to 10 high-yield savings accounts with them and with the Smart Bundle. So check that out. if you go to fairwinds.org/ramsey and open up that. I think that's a great starting place. And yeah, because if you put anything into a Roth, like a 401 or an IRA, you can't touch it till 59½ anyways. So, I want that cash to be available. And you'll get around, I mean, it should be around 3% now. Even a little, maybe, I'm not sure. I haven't checked rates, but even a little bit more this week.

Mm-hmm.

Everything's kind of been crazy. So, Um, you'll get much more in a high yield, even 3% more, you know, than basically less than 1% in a traditional savings.

Yeah. Okay, well, perfect. That mainly answers my question.

Awesome. Well done.

Gosh, I love how his mind works. Smart cat.

I know.

Smart guy.

All right, we got Elaine in Sacramento. Hi, welcome to the show.

Hi, Jean and Rachel. How are you doing today?

We're doing great.

How Good to hear. So I have a quick question. My wife and I, we are currently on Baby Step 2 and have it mapped out to where we'll be paid off within 18 months. Great.

Congratulations.

Thank you so much. Shortly after that, we intend to list our home. It's a 3-story townhome. We have a kid and a large dog, looking to expand the family. So we want to move into a single story. And so our question My question is, as we're paying off our debt, are we closing our accounts if we intend on purchasing a home right around the same time that we'll be debt-free, or is that going to hurt us because we wouldn't be able to do the manual underwriting process at that time?

That's a really good question. The credit cards, that's the end of all consumer debt? There's nothing else open?

Correct.

Yeah, we don't have— I mean, In this 18 months, we'll have paid off the student loan as well.

It's just one single loan, and I think it's totaling like $6,000 or $7,000.

Okay, and all accounts would be closed? Because what I'm getting at is— what I'm getting at, and we can work backwards, is your credit score, it usually takes like 6 to 8 months to roll to zero. And that is making sure every account is closed, there's no balance anywhere. If you have a random credit card open somewhere, it's not going to roll to zero. zero. So that's kind of the game you're playing. You want to make sure that everything is closed so that that has the ability to happen. And then from there, you would be able to do manual underwriting.

Yeah, because it has to be undetermined, that credit score. So they're basically— the credit score can't exist, like what you're saying. Like, you know this because you mentioned it in the beginning of the call, to do manual underwriting. But it takes— it's going to take, yeah, probably 6 to 8 months to do that. So it may pause your plan to move for about Mm-hmm. But at the end of the day, honestly, that is worth it. And it's gonna probably take you guys a little bit to save up an emergency fund and a down payment, you know, and you may have equity that you're rolling over too, but you could use that 6 months to pile up a lot of cash to have for a bigger down payment and an emergency fund. So, by the time it all is said and done with the Baby Steps, by the time you get to 3B, you should be good to go. I mean, how much equity do you guys have in that condo?

I mean, at this time, The neighborhood that it's— we would break even if, you know, if we were— Okay.

So you do need to save for a down payment.

Well, and that, that affects what we're saying because I was— I don't know why I was thinking that you're renting right now. Your credit score is going to remain there because you have a mortgage attached to it.

That's what I was— that's really where I was getting at. As I, you know, we can close the accounts, no problem, because we don't intend—

It's not going to go to zero.

That's true.

Yeah, yeah, yeah.

It's not going It's gonna go to zero, so what I would do, just go ahead and pay off the cards. It's not gonna tank your credit in the way that you think because you have such a major asset on there, your mortgage, that you're paying on time every month. You should have no problem in the world moving from that. My husband and I had a mortgage. It was the only thing we had. When we moved here, we got another mortgage, and so it was no problem. If you're paying your payment on time, you'll be fine.

Yep, but congrats on the progress, you guys.

Well done.

It's exciting.

People ask me all the time, George, what's your number one money-saving I'm glad you asked. Nothing makes me happier than helping another frugal friend. So here's the hack. Get on a budget. Seriously, how are you supposed to save money if you don't know how much you're spending in the first place? And that's what makes the EveryDollar budgeting app a game changer. With EveryDollar, you'll get a clear picture of your spending, and from there, it's easy to see where you can get more intentional, cut back, and save more money. How much money are we talking? Well, the average EveryDollar budgeter frees up $395 in their very first month. And if you ask me, I think you're way above average. So why are you still listening to me? Go download EveryDollar for free and start saving more money right now.

So, one thing we love to see is the comment section. Sometimes we venture in it, Jade.

Sometimes we don't. At your own risk.

At our own risk as the hosts of this show. But we do love to see you guys talk about it and talk through the calls and all of it. The engagement is part of the fun in all of this. So, we love it. So, make sure you're subscribing to the channels. Make sure you are commenting. And yeah, get in there, 'cause I think it's a fun element of— it can be the— it can be a negative part of the internet, for sure, but it can also be a positive part. And where you're— and callers, we see sometimes, you know, they're like cheering on other people, and it's great. So, get in there and engage there on, especially with YouTube. And even, you can follow me and Jade on all social medias, TikTok, and Instagram, and Facebook, and all of it.

And I'm definitely in those comments. Rest assured.

We see those. We can see those. I love to see those. All right, let's go to Melissa in Tampa, Florida. Hi, Melissa. Welcome to the show.

Hi, thanks for having me.

Absolutely. How can we help?

Um, um, I just wondered if you had any guidance or advice on how I can talk to my dad about planning for the future, um, specifically why he should put his assets into a trust versus just leaving me with a will. I've tried to have conversations with him in the past, but I always— it always feels awkward, you know? And I kind of feel like I don't want him to think that I feel entitled to it, or do you know what I mean? I just— it's not a comfortable conversation.

For you, what's the difference? What do you see the, um, the push for a trust versus a will? Does he have a large estate?

Uh, yeah, he does. I mean, in my mind he does. Like, to me he does. I don't exactly know the numbers.

What would you guess?

He has at least a couple of million. I mean, he— I know his house alone is worth close to a million and it's completely paid off. He has multiple multi-unit rental properties that he borrowed against his 401 when he was younger. And so those are now paid off. So he was able to retire He's in his early 60s. And as far as I know, he doesn't really have to touch his retirement. He just lives off of the income from the rentals. So does he have— I'm an only child.

Okay. I was wondering, because a will can be sufficient enough. I'm curious why that's not good. Like what you're seeing, it's like he really needs to do a trust versus a will. I'm just curious what you're seeing.

Yeah, I've just heard, like, I have a couple of financial advisors, like, in other parts of my family, and they've always just said, like, you don't want to go through probate, and, you know, the government's going to take, you know, 30% of the money, of your money, and it's just a hassle, and it's just all these things. But then—

I mean, if I were in your shoes, the thing I'd be worried about for me is if you had, like, minor, like if you had a young child and he was intending to leave a large sum that he would get at 18, like those are the things that I'd want to say instead of just willing him this money that he receives at 18. Can we do a trust where it pays out at, you know, a more reasonable time? Those are the things I'd be thinking about.

Okay.

But if, okay, if that's not part of this, honestly, I don't see why he couldn't have a will. I mean, yes, it will go through probate, but the state won't decide. The will will decide.

It doesn't take 30%. Where are they getting that number from?

Okay, I don't know.

No, I don't think, Melissa, I don't think it's anywhere near 30%.

I don't think so either.

Okay, so they're maybe just like exaggerating with me.

But yeah, I think so.

I mean, my concern— he does have a will now, I will say that— is that I've been trying to have this conversation with him for probably 10 years, ever since I started working in healthcare. I saw a lot of of things happened to my patients that I went to both of my parents, who are separate, and said, please get stuff in writing.

Yeah.

And it took me a really long time to get him to get a will. His third wife, finally, they did that separate but together. And my concern was that he was getting married multiple times, and that was my concern about him having a will.

Sure.

He's divorced again. So I've just said, Dad, if you get married again, can you please get a prenup?

Yeah, right. Yes. Which would be— yes. Which would be smart on his end. Yes. Going on the third wife for sure.

So, you know, I guess the other side of like me wanting him to get a trust or an LLC for his properties is that, um, like I'm worried about liability because for him, if something happens, like I feel like we live in such a sue-happy world that I just have this horror story in my mind of him getting into a car accident and somebody trying to— if his properties are part of his personal assets and not protected by a trust or an LLC, that they would try to take those things from him.

That's fair. Part of that's fair enough with the properties.

Is that fair?

Yeah.

That means a lot of real estate. An LLC would probably be smartest for him to set up just for his own protection too. happens at one of those properties that, you know, the renter or whoever can't sue him personally, they're gonna have to sell the LLC. So there's ways to do that. But that's, from my understanding, and I don't know Florida law specifically, but from my understanding, it'd be more for his benefit while he's alive than even at his death. But yeah, I mean, setting that up would be smart.

Smart.

But no, and I think it's, I think, I think on like a $2 million estate, I mean, maybe $50,000 or something through fees and different things through probate, maybe. But it's so minimal. It will not be 30% by any means. Now, there may be an estate tax, but that's over like, you know, tens of millions of dollars at that point.

Yeah, $15 million, I think, is the—

Okay.

Yeah.

Okay. The people that are the, you know, financial people that I know have just made it seem like it's gonna be so difficult for me to like do anything with his properties or manage them, or, you know, it's gonna be such a long process to go through probate and all those types of things. But I'm not really, it's not about the money to me. Like I've even told him, if you don't wanna leave it to me, leave it to my son, you know, leave it to the next generation. At the time he was married. So I was like, please just put it in writing. Don't leave me with nothing.

Now I will say if all the properties were in an LLC and through a trust or something, mostly, I think the people that are advising you, that is right. I think that would be a smoother transition.

Agreed.

It's not like it's that it's never going to happen. It may, it may be a longer process for sure, especially if there's multiple properties. So there will be some work on your end, but I don't think it's— it's not the end of the world. I would not lose sleep over it by any means.

No. And yeah, and I probably would just tell him to leave everything to your son. I think you want to have more say in what's going on and how, if that's the case, because you don't want your son to inherit $2 million at 18. I mean, that's—

yeah, no, no, of course not. I mean, you know, but I was just kind of like trying to, you know, that uncomfortable feeling of talking about it and you don't want him to read into something that's not there, right?

Yes.

Yeah, yeah. Or think that all you care about is his money. Like, I would try— I would trade more years with him for all the money in the world.

Absolutely. And he's known you his whole life, Melissa. He knows that's not true. He made you.

I know. I just— it's just, you know, it can be an uncomfortable conversation to have. He's just— he's so smart with money and he's sacrificed his entire life and now he's retired and I'm the one encouraging him. I'm like, go spend your money, enjoy yourself, do the traveling, like spend it all. You can't take it with you. You know, like I try to encourage him to really let go and now enjoy it. because a lot of his friends his age aren't like, you know, physically able health-wise to enjoy the money.

Yes, absolutely.

So like, he's lucky in that sense.

Yes. Well, you're a great, you're a great daughter, Melissa. So yeah, I think the will is in place. That's really great. Yes. If the properties were in an LLC, you know, and then that's in a trust, might be an easier process, but I think you're gonna be okay.

And if you wanna know more, you can take the will And the Wills Quiz, ramseysolutions.com/willsquiz, will tell you if you need a will or if a trust is better.

Yeah, and you guys, listen to Melissa though, for real. Everybody needs a will. Everybody needs a will. And Mama Bear Legal Forms is a great spot to do that for state-specific wills. But regardless of the amount that you have in your estate, everybody needs a will.

Hey, George Campbell here. We often talk about how being normal sucks when it comes to your money. But guess what? Normal isn't so great when it comes to your job either. Normal is staying in a job you hate, dreading Mondays, and working for people you don't even like. Sound familiar? Well, the good news is you can break free from normal because Ramsey Solutions is hiring, and we refuse to settle for the ordinary. In fact, we are anything but normal, and we are proud of it. And right now we're hiring for technology, sales, marketing, writing, copy editing, and creative roles.

So head over to ramseysolutions.com/careers Our scripture of the day is Proverbs 14:25. A truthful witness saves lives, but one who breathes out lies is deceitful. And Frank said, people can tell you to keep your mouth shut, but that doesn't stop you from having your own opinion. Oh, true that, man. It's good. All right, let's go to Josie here in Nashville, Tennessee. Hi, Josie. Welcome to the show.

Hello. Thank you for having me.

Absolutely. How can we help?

Um, I guess the biggest question that me and my husband can agree on is how can we get over the fear of losing everything so that way we can ultimately have everything that we want.

Oh, wow. Be a little more specific. What does that mean?

Okay, so he, he had quite a jump in income this year due to a job change, and now we're finally able to pay our bills on time and not be underwater on everything or scrape by between, you know, groceries and live paycheck to Great. And it's definitely not changed us completely, but now we have room to breathe and experience things that we want and be able to go out to dinner if we want to.

Yeah.

But we do have, we have a little under, right around $100,000 in debt. And we wanna be able to actually have everything that we want and set up our kids as well.

Right, okay.

It's just, I think it's just the fear of actually Actually not having that extra money now.

Well, how would— since we've been used to it, what would be the main thing that you'd be sacrificing? I mean, I'm thinking about things like, yeah, going out to restaurants, maybe like entertainment, things on the budget that you can cut back, subscriptions. What are you— is there something bigger and concrete that you're seeing yourself sacrifice? Is it vehicles? What are you seeing?

I don't know if it's necessarily anything concrete. I think I think it's just us actually having a cushion in our savings now, just in case.

Ah, so it's taking the savings.

Okay.

Okay.

Yeah.

Okay.

So how much—

we're gonna—

how much is he making a year now?

So he's on a 1099. So, and with the job that he does, he's a tour bus driver. So some months he could be around $4,000, and then depending on how many tours he does, it could be around $12,000.

Okay.

So it's a pretty big fluctuation. But it's, now that we're able to save money, we're scared to get rid of it to put it towards our debt.

What does it take, just your minimum kind of bare bones normal month budget, what's it take for you guys to get by?

About $4,900.

Okay, so we'll say $4,000. So just to start this thing off, because his income is so variable, like the first step I would take for you guys is, is to have like a peaks and valleys account because there is so much variation. And right, with the Baby Steps, you're taking every bit of extra margin and throwing it at the debt. So on a month where he makes $12,000, right, you want to be able to have that extra to throw at the debt, but you're not going to feel comfortable to do that unless you have a peaks and valleys account that has another $4,000 in it.

Right.

So I would do that, and then I would go I mean, how much do you guys have in savings right now?

Um, so we, we just recently opened a second checking account to put all of our, um, like our bill money into, our rent and our car payment, his motorcycle payment, insurance and everything like that. And we've, we fully funded for October. Um, and then in our separate savings we have $800.

Okay, gotcha.

Okay, do you work at all?

I don't. Uh, we have 2 kids, 4 and 2.

Okay, so work inside the house? the house. Go ahead, Rachel.

Well, I'm just thinking, I'm trying to map out for you guys, because the $100,000, and it's all consumer debt, right?

So about $60,000 is student loans, which I'm still in school. I do online college, so I'll end around September of next year, and my student loan should be around $60,000. Okay. And then we have my car payment, which is around $8,000, is the Total. And then his motorcycle is $14,000. Um, and then we, we moved and we started renting this place and we didn't have any furniture and we got into one of those Rent-A-Center payments. So now we owe on our furniture.

Oh, and it's still Rent-A-Center?

Yeah, it's like a local company that does it like that and we pay on it weekly so we don't lose our couch and our refrigerator.

But you never own it, right? It's just rent to own. Like, it's just rent.

We do own it. We— after Okay. If we're taking it, we will own it.

And how much is that?

Um, total is about $1,500.

Okay. And he doesn't have a car, he just has the motorcycle. There's not another vehicle?

Yeah, correct. Just the car and then my, uh, my car and then his motorcycle.

Okay. So did we get it? $6,800. Is there anything else? $1,400 and $1,500. Anything else?

Um, uh, so I have a car that was, um, it was a lemon and it was repossessed and I had planned to work something out with the bank a couple years ago. Well, they finally, you know, they took me to civil court and all that, and I'm paying on that monthly as well, and it's about $11,000.

Okay.

Okay, there it is.

Okay. So, I mean, Josie, really what it comes down to is, I think you guys having that separate account is okay for now because his income fluctuates so much. So, I'd get that $800 up to $1,000. And then from there, man, anything extra you can throw, like if he has a great month, You could throw 8 grand and get some of this stuff knocked out. Do you know what I mean? Like, you can make some big progress in some of these big months.

Yeah, absolutely.

And when you map it out, I mean, it may take you guys 18 months or so to kind of get all of this squared away, but it's not gonna be forever. So, just as quickly as this income changed, I almost would go back to the mindset, knowing emotionally, though, there's a cushion. Because if something happens, the truth is, if something does happen now, an emergency, and you got a $3,000 thing that you're like, crap, we gotta pay for this, you have the money to do it, right? Like, you could cash flow it through that month if you had to. You could pause paying off the debt to cash flow. So, that's the beautiful thing is that the money is there if you need it, right, with this great income.

Yeah.

But still have the habits of how you guys were living paycheck to paycheck so that anything extra on a month where nothing happens can be thrown at the I mean, you guys should pay off that furniture.

Gosh. Next month.

Next month. I know.

You know? It's killing us.

Seriously, seriously, pay. Like, get some aggressive goals. And I think once you kind of start seeing that momentum and stuff starts getting checked off, it's gonna feel great. You're gonna feel a lot of freedom.

Does he have a guarantee on his pay? Like, is he guaranteed at least the $4,000 and then it can go up from there? Or is there no guarantee?

No, there is no guarantee at all. So it's really just, you know, if the company gets a client that rents out the truck, then the client needs a driver, then he can go on that tour.

Okay.

So it's no guarantee. There could be a month, you know, like, because we were planning to try and go ahead because he's on a really long tour right now where he's going to be making a substantial amount where we could fund all the way through January for our monthly expenses.

Okay.

So we were going to try to do that just in case, you know, he doesn't have any anything in, you know, in between the holidays from December to January.

I wouldn't do that. And I was going to actually ask about that because there is such a fluctuation. I'm also thinking there's freed up time there too. So I feel like probably the third piece of advice in your list of homework would be what can he do if he has a month that he's not doing all of those tours that equal up to $12,000 or $13,000, right? If he has a $4,000 month, what is he going to do with that time? Or if there's an What's he gonna do with that time? And I think that's a really important part of this equation because if you don't, you are gonna tie up a lot of money, kind of earmarking it for future months. And I don't want you to do that. I think if you have that Peaks and Valleys account, you get one month in that. And then, if you're having a situation where there's multiple months of not making bank, then that means we need another, a secondary job, or we need something else coming in regularly.

To supplement that income.

Right. Yeah. I think the biggest thing was just we, we finally got comfortable for a second, and now we're scared to kind of start all over again, even though we know in the long run it's gonna feel so great. We're just, we're scared to give it up right now.

Yeah, I hear you. But also, there's a little bit of the false security because you still have all this debt. Like, you guys still owe $100,000, right?

What's scarier?

I didn't even know it was that much. until I started adding it up and I was like, how are we like—

Holy crap! Oh my gosh, yes.

Like, I felt like a normal person. Like, we've got my car payment, we've got this and that. And I was like, it can't be that much.

And it is.

It is scary.

Once you actually see it, yeah. So, I think sometimes there's a weird false security if people have a ton of cash on one side, but tons of payments. Because if something happens, those people still have to be paid.

That's right.

There's an element to that that's very real. So I understand that it feels like, oh my gosh, we can take a breath, and that feels great. But listen, stay motivated to attack that debt, Josie. Stay motivated.

Send her a copy of What No One Tells You About Money.

Oh yes, Jade's book. All right, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.