Transcript of The Numbers Don't Lie

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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 George Campbell here with Dr. John Delony, taking your calls at 888-825-5256. 225. Eric is in San Jose to kick us off. What's going on, Eric? How can we help? Hi, yeah, thanks for taking my call.

Um, I just had a question about how to build this idea of kind of a shared ownership of budget building and, and overspending. And just to give a little bit of context, my wife comes from a family that's got kind of poor financial education and, uh, behaviors, and she acknowledges this and recognizes this. But we kind of go through this cyclical process over the years of marriage where we'll do really well one month, and then the next month it just kind of goes off the rails. And, you know, generally we're doing okay, but I kind of want to find a way to help encourage her in the moments when she's doing well, but also try to keep us on track for the long term so we don't have to keep having the same conversations over and over again.

What, what are the cause? Why does she choose to go get off track? So I, I hear a guy who's trying to be really respectful of his wife, and I honor that. That's good. But it sounds like y'all have these heartfelt conversations, y'all join allegiance, you, you get on the same plan, and then a month later she just is like, I don't care.

Yeah, I mean, I, I don't want to say it's the I don't care part. It's more of, um, just not knowing and keeping being mindful of where we're at.

But that, that's, that's a fancier way, not being mindful is a fancy way of saying, I don't care.

That's, yeah, that's fair.

Right.

And so it's, it's, it, that's the conversation you have to have. 'Cause, 'cause we're past the point of we're not on the same page. We're past the point of you, you clearly have talked to her about what freedom means and what safety means and your dream for your family. And she's actually agreed with you. And she's also agreed on, like, she knows her story. She knows why these things are wired into her. She's come from, bad, like unwise money habits, right?

Yeah.

The only thing left is I gotta go do the thing. I can Google what workout to do all day long.

It doesn't—

I gotta go to the gym. Right. And so my question for you is, what do you have any idea? Cause I don't think it's a matter of you not encouraging her enough or whatever. It's just, frankly, it's a maturity. It's integrity. It's her keeping her word. When she says, oh, I don't know. Or I did like, What does she communicate to you is the root problem here?

I think the problem is that she feels like there's a need, right, that's not being fulfilled. Um, and whether that's, uh, you know, we needed this grocery item or we needed this household thing to take care of the family. Um, and, and she's so she, she fulfills that need without really considering the budget. And I've oftentimes said, "You know, that's an important need and we can talk about that, but it has to fit within our budget constraints. And if it's not fitting in the month currently, maybe that's something we have to wait for." And that's kind of just always been a hard thing for her to hear.

Can you label this in the budget if it actually is a need for the family? It sounds like she's not buying frivolous things. It's, "Hey, we needed paper towels and we didn't factor that into the budget." Right. What's some examples of things where you guys— she goes off rails, doesn't talk to you about it, and now you're frustrated?

Yeah, because I don't think you'd be calling us if it was just, oh, we didn't have any milk, or we didn't have any paper towels.

No, true, true.

Um, I mean, examples are, you know, like, we'll go to the—

we have—

we do have a budget line item for like home needs, right? Um, whether it's toilet paper, paper towels, you know, a new broom, whatever. And so it'll be, it'll be things like that that she'll feel like, like we need, and we've already used that budgeted money for something else. And that kind of makes— doesn't have that conversation and goes out and spends that additional money without having those conversations about, hey, we're over budget, but this is a need.

So she's not checking back in with the budget to see if this actually fits, and that's the part that's frustrating you?

Or more important, she's not sitting down with you you saying, hey, we made this budget and I realized we're short. Right.

Right. She's not right. Neither is happening really in the, in the moment, you know?

And so the question, only question you can ask yourself is, are you, are you a reasonable, and I, I don't mean this in a dramatic way, I mean this in an honest way. Are you a safe person that she can come back to and be like, hey, we made this budget and I'm realizing 2 weeks into this month, we, we're gonna need these other things, or I want these other things. Are you a person that she can sit down, you're like, oh sweet, well let's get this thing out and see if we can just not go out to eat then, or we can do this other thing. Or are you the guy that throws the budget down and says, this is what it's gonna be this month, this is my militant household, we're gonna follow this. And she has that natural, like that I have, which is kind of wired in, like you tell me I can't, ah man, I'm, I'm probably gonna, right? So are, that's the only question you can ask yourself. And if you're a safe person to sit down and, and you're an open and curious person that she can come back to, then the next thing is, man, you gotta dig into the truer conversation, which is you got a wife that kind of doesn't care.

And that's a scarier conversation to have, quite honestly.

Yeah. I mean, to me, I, it could be a little both. I've, I've come on strong in the past sometimes when, you know, she's made expenses and, and didn't necessarily consult me and they're, and they're small. Um, so I think it, to your point, it could definitely be a little bit of—

Then set a dollar amount. Say anything over $50, we need to talk about beforehand.

Mm-hmm.

So set some boundaries. And if there's areas where she is buying things that are frivolous, let's shut that down. 'Cause I know in my house, if I buy ice cream, I'm gonna eat some ice cream that week. And if I don't have ice cream, I'm not eating ice cream. And so there's a piece of this where you can set your own boundaries and make sure that we're sort of removing things that we know will harm us and adding friction to those areas.

And also when y'all have that conversation, you go first and you be honest. I recognize I've, I've made this an exercise in militancy. And I say things like, you didn't consult with me. Like, you know what I mean? Which is what weak overbearing bosses often say to their employees.

You gotta loop me into it, man.

Yeah.

Yeah.

Yeah.

You didn't CC me on this. Like it, it's you coming in, being honest and saying, hey, I realize I'm not, I'm not a fun person to do life with when it comes to the budget. And I come on too strong. And this is a thing we're doing together. And so I'm gonna work on being more flexible and more honest about, oh, we do need a broom actually. And that means I'm gonna have to take $30 from my fun line because our house needs a broom more than I need another video game or whatever you're thinking.

And bring her into that. Bring her into the EveryDollar budget where we go, hey, we gotta find somewhere this money needs to come from. 'Cause there's a finite amount of income. Do you actually show her the budget? Do you have it? Is it on paper? Is it in your head? Is it in EveryDollar? How do you do this?

Um, yeah, so we have, we have a similar budget tracking program app that we both have access to. Um, it's not EveryDollar, um, but that's hurtful, but I'll continue. I'm sorry. I'm sorry.

Uh, it's just what we got used to when we started with, so, um, but, but yeah, so we both have access to it.

Um, and every, every month, you know, we'll kind of try to sit down and have, we have that conversation. She doesn't necessarily like those conversations.

Okay. So I want to paint you a picture of a future where your wife loves sitting down with you to plan the upcoming week. Like where you're, you're a person, y'all are planning laughter together. You're planning fun together. You're putting intimacy on the counter. You're like, you're, you're building a life together.

Get her favorite drink ready before the meeting.

Yeah.

And part of that is we're going to talk about what expenses we have coming up. And by the way, if you're teeter-tottering one month, it's good. And then one month you fall off. That usually means you're not giving it the full 90 days to fully like create a budget that actually works in reality.

Yeah, your budget should reflect your real life, and it's okay if you need to adjust to get there.

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Nicholas is in Scranton, Pennsylvania, up next. What's going on, Nicholas?

Hey, good afternoon. Thank you so much for taking my call.

Sure, how can we help?

So I have a truck I just bought, uh, for my business. It's my third truck. Um, I currently owe $55,000 on it and I have a pretty high interest rate. So I was wondering if I could let you guys know where my, all my assets are at and what would be the best way to, uh, just pay this off as soon as possible.

What's the interest rate?

It's a 13.7%.

Man. Why is your credit so bad?

I have a 750 credit score. I'm 23 years old, so I guess I couldn't really do any better than that.

Interesting. Okay, are the other trucks paid off?

Yes, sir.

They are.

Okay, do you have any other consumer debt?

I have a zero-turn mower, but my payments on that are about $180 a month with 0% interest, so that's not very much for me at all.

Okay, what's left on the balance?

Of the mower or the truck?

The mower.

Uh, $7,000.

Okay. All right, what's your income from this business? What do you actually take home?

Well, right, well, it all depends on the project. Um, there's some weeks I could come home with, uh, $10,000 profit. Some weeks I could only come home with $1,000 profit. It all depends on, uh, the week.

What'd you file on your taxes last year?

Uh, last year was a lot less than what it is this year. Last year was about $68,000 total. Um, I probably I'm well past that now and it's only July.

Okay. So you might clear $100,000?

I think so this year. Yes, absolutely.

And what assets do you have?

Uh, so currently I have $32,000 in my business checking. I have, uh, quite a large amount of cash. Um, and another thing I want to bring up is I have an index fund with about $100,000 and I wanted to see if it was possible to maybe— what would be like the best way to pay it off? Because I can't, it's not like it's a deposit. $30,000 into the bank all at once.

Well, how much do you have in cash? You said you have a large amount in cash.

Yes, sir, I have $55,000 in cash.

Which is as much as that's owed on the truck. Correct. So why don't we just use that?

My partner's paying. I can't deposit all that much in the bank or else I'll get flagged by the IRS, they said.

Well, I was about to tell you, ask you, like, how much are you holding away for quarterly taxes? Because you're running your own lawn business.

Yes, sir. Uh, so that gets all deducted, uh, automatically with the accounting service I have. So they have all those numbers and stuff.

I'm not worried about the numbers. Where's your retained earnings account?

In my business checking.

That's the $32,000?

Yes, sir.

So you've got— that $32,000 is basically if you clear $100,000, you're holding your 30-whatever, 5% that you're gonna have to pay in taxes. That's, that's what that money is for? It's not to repair the mower, repair the trucks, pay your guys, get gasoline?

It is for everything. It is for everything. So whatever I owe in taxes will also get taken out of that account.

Okay, well, George and I can't sit up here and tell you to continue to run an illegal business where you want to like hide cash from the government and not pay them for taxes.

No, no, no, it's not an illegal business. I have a legitimate corporation.

Okay, but you said you couldn't use the $55 cash because you have to report it, which Means you're not reporting it as income, is what we're saying. So we can't use that in the equation.

Oh, okay, I understand. So I, I was only able to deposit around $10,000, the bank had told me.

Okay, you're— because you don't want to report it to the IRS?

Correct.

Because you can deposit more than that, but the bank says, hey, we have to file a report if it's over $10,000.

Correct. Yes. So sorry for the confusion.

No, I understand now. Well, it's a hard question to answer because I would just deposit the money, report the income, and pay Caesar what is Caesar's, and then pay the truck off. Problem solved.

Yeah.

The other route is to sell off, you know, enough from your index fund to cover it, knowing that you also have to cover the taxes from the capital gains. It's either short-term or long-term capital gains. Long-term, obviously more favorable on the tax side. But this is like we're solving surface-level problems right now. There's some deeper issues like why did we go into debt for all these things? Why is the mower not a big deal? Because here's the Ramsey principle: we believe that running your business completely debt-free and growing at the speed of cash is the wisest way to actually sustain the business.

And the, the hard part for me is you literally have the cash on hand by 4 o'clock this afternoon to owe no man a dime.

It's not like you're paying a million dollars in taxes to the government. I mean, it's your income. It's not that big of a deal.

Yeah, I understand. Okay, I think I just have to— I don't know what I was so worried about.

I would work with a CPA. Do you have one that you have for the business?

I do.

Okay, I would get in touch with them and figure out what are all the taxes owed. I want to do this right. I want to be completely debt-free and report all the income and just start clean.

And real quick, George, you're better with a calculator than me. Will you figure something up for me?

I can try.

The $55,000 loan over 7 years at 13.9%?

Oh boy, now I gotta pull up an interest calculator.

I would love to know math because here, here's what I'm like, 95 grand. It was going to be what?

95 grand is what you'll end up paying if you just make minimum payments?

Correct.

Okay, and that car is— that truck's going to be worth what, $15,000 or $20,000 by then?

Yeah, I mean, it'll hold a little more value. It's a dump truck.

Okay. But let's do the math you're avoiding. You're going to pay 13.9% interest. You're going to pay $40,000 extra to not—

I definitely don't want to do that.

To not pay $10,000 in taxes.

Gotcha.

That's just bad math. Like you're sitting on $55,000 cash. You're worried about the 30% or the 28% or whatever the government's going to take out of that. And so to avoid that, you're going to pay $45,000 on a depreciating asset. Or $40,000 on a depreciating asset over— and it's going to sit around your neck like, like a, like a rock over the next 7 years.

Yeah, I understand.

And do you have a personal emergency fund for your own life?

Yes.

Is that separate from all this, or is that part of the 55K?

That's what, that's what my, uh, index fund is. That's kind of my, uh, okay, what I keep saving into eventually when I get to retirement. I did just open up a Roth last year, so I'm starting with that as well.

Okay, cool. You're doing a lot of good things. I'll give you another tip for your emergency fund. It is wise to keep it liquid, 3 to 6 months of expenses liquid, which means not in a brokerage account invested in the stock market, because as soon as you have an emergency, the market's going to take a dip 15% and it's going to gut you to try to take that money out. So just keep it in a high yield savings account making 3.5% and then you can leave the rest invested. But I would take enough out to pay off all of your debts get you the emergency fund liquid, and then move on from there to actually invest for the future, running a completely debt-free business. If you hate that life, call us back and you can yell at me. I'm fine with that. But I promise you, you're going to have so much more peace in your life if you simplify and focus on one thing at a time.

Yeah.

If you hate this, here's the deal. In 4 months, you can go take out a personal loan for $55,000 at 13.9% and put that money right back in your checking account. You'll be right in the same spot.

Yeah.

But I want you to try running a business, running your life and not owing another man a dime. And like George said, give the government their money and move on with your life.

Gotcha.

If you were, if you had a trillion dollar business and you were moving stuff around, or you had a $300 million business and there was some true tax savings you could make with moving stuff around and moving it to this state, fine. That's great. Good and awesome. You're just not there yet. I'm not there yet. George isn't there yet. We pay our taxes and we get on about our life. And I'll tell you, last year I paid so much in taxes, I had to call a buddy. I called a friend and said, I just need to tell one other human how much I'm— I wrote in taxes. And I told him and he got silent and he was like, oh man. And then he was like, oh, that means you had a good year though. And I was like, yeah. And he goes, well, okay, then get on your, like, get over yourself. But it, like, I shared it with somebody and then I got on about my life. You know what I mean?

Yeah.

Like there's, there's so much Instagrammy stuff about how to save on taxes and slap up and flip it and reverse it.

Buy a G-Wagon and depreciate 100%. I'm just, it's exhausting. So Nicholas, at the beginning of the call you told me, hey, yeah, I got a mower, but it's 0%. I want you to start thinking bigger about your life. So instead of thinking how much down, how much per month, which is broke person mentality, think wealthy person mentality. How much? Let the sentence stop there. Not how much in interest and not how much down, not how much in payments. How much total? And can I afford it in full? And if the answer is no, then we need to pause. A little bit of delayed gratification, a little bit of patience. That's how you're going to build this business the right way, because there's going to be a temptation around every corner to scale and grow way too fast. And I don't want you calling back saying, dude, I'm way overleveraged in my business.

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And for all the naysayers, Dave didn't really say how he does it. He doesn't really show why the— like, here it is. This is the, this is the opening of the books.

Dave gets so nerdy that we're like, you sure you want to share the formulas for this, Dave? This is pretty in depth and he's like, this is what I do.

Well, and I think, I think, um, and it's, it's, I'll, I'll, I'll be generous. It's nobody's fault. They just assume Dave is this old guy ripping from the hip. And I remember one time he was explaining something about the way bond rates interact with interest rates that affects the, and he said something along the lines of, and I kind of, my brain had melted by this point, but he said, all right, so algebra normally goes this way. I'm gonna take it into—

we're going to go another dimension.

We're going this way. And I was like, you know what? I'm just going to say, I trust you. All that to say is for folks who think Dave is just an old boomer who doesn't get it and he's just ripping from the hip, this is a great opportunity to see, oh, there's a ton of method behind the madness and it's got math to it and it's formulated out and it's well thought out. And Actually, you begin to see the magic of the distillation into, I'm gonna make this as simple as possible for knuckleheads like me to follow these things called the Baby Steps. But there is a method to this and here's the playbook.

And it goes deeper. And we had to convince Dave people wanted to hear the nerdy stuff. 'Cause like nobody wants to hear this. And the audience was like, uh, I would like to go deeper. Right, right.

It's become one of the flagship events now.

Oh yeah.

As everyone wants to say, okay, where's, where's this guy putting his money for real? And why is he putting it there for real?—

the decision-making, the mindset around legacy planning, because he's in that phase. It's really, really good stuff. So join us. And a lot of people ask, hey, what if I can't watch it live? There is a replay as well. So check it out, ramseysolutions.com/events. Amberly is in Salt Lake City. What's going on, Amberly? How can we help today?

Hi, um, I'm calling for some advice on my situation. Um, I'm 21 years old. I'm headed to college in the fall, and I'm trying to do it the right way. Back when I was in high school, I was able to get 55 college credits and a technical degree in automotive studies.

Wow.

I then served a mission for my church and used my savings from my technician job as a cushion when I got back. So I paid for another semester of college and bought a car in cash. I now have my associate's and about $2,000 in savings, and now I've transferred to a new college to get my bachelor's in experience, design, and management. My question today is, how do I avoid debt in college and stick to a budget while feeling like I don't have that much money to work with while in the first place, but not wanting to burn out?

Super simple.

Yeah, you asked, you asked 50 questions there in one, Amberly. I was gonna say, I'm, I'm, hey, I'm really proud of you.

The fact that you've made it this far debt-free, it sounds like, is incredible.

But not only debt-free, but you've also done something that was important to your faith. You've also kept your character about you. You're also got a vision for what you wanna do. And like all that, I'm proud of you just as a, as an old man talking to a 21-year-old. Well done, dude. You're on, on the path.

So let's look at the math of this. What is this school going to cost you each year and in total?

Yeah. Like it sounds like you went to a Lexus dealership, you got in the car and you're about to turn outta the parking lot and then you're looking out the window going, how do I do this debt-free? Like you've already enrolled in a, right? You've already enrolled in a thing. And now you're asking about the price. George and I would suggest you're doing that backwards. Like, instead of saying, okay, here's what I got, here's how much money I have—

like, we save up for the car first, then we go car shopping. But we've already went shopping, we picked the car, we signed it, and now we're like, oh, we got to pay for that.

How do I do this debt-free without any stress and without burning out, right? You get what I'm saying?

Yes.

Okay, so is this a local in-state school?

It is an in-state school, and tuition is going to be $3,500 a semester.

Nice!

That's very reasonable.

That's beyond reasonable.

OK, so $7,000 a year. Are you living at home?

No, I am renting.

Renting. OK. And are you working part-time, full-time right now?

I do have a job. It'll pay about $18 an hour with room to improve, about 33 hours a week.

Fantastic.

Dude.

Okay. And you can still do school while working those 33 hours a week?

Yes. I'm doing all night classes so that I can still work during the day.

Amberly, you're—

wow.

I hope everyone listening, everyone who's over the age of 40 who thinks it's all going away cuz this young generation, there's a jillion Amberlys out there who are Amberly. You're giving me hope for my kids. So well done, dude. You're on it.

Thank you.

How much is your rent?

$500 a month.

Wow!

This is incredible. OK, so your gross income for the month, let's call it $2,400. You take home $2,000. Is that fair?

Yeah, roughly.

OK, great. So $2K a month. Your rent is $500. That leaves us with $1,500. Now, we still have to cover other bills. You've got to eat, right?

Mm-hmm.

And you have $2,000 to your name. We're going to call that your starter emergency fund. And you have no debt. So right now, we could sock away a little bit of money each month, right?

Yes.

How much do you think you could put away into a savings account if you worked really hard?

Um, I feel like I could put at least $500.

OK, so that's $6,000 a year right there. That's a good start. But we need to cover $7,000 a year just to cover the tuition.

OK. Then I feel like I could probably do more.

—Or then you've got summer too. —There's other levers.

Yeah, you can work more in the summer. You could apply for scholarships and grants like a madwoman. Make that another part-time job. Every weekend I'm gonna apply for 5 or 6 different scholarships. And even if you get a couple out of that, that was still a pretty good hourly rate. And so that's the way to do it, is go to affordable school, check, you did that part. Work part-time, check. Get scholarships and grants, check. Now you've got an actual system here to cover the gap. Turn it into a little math equation. Know that my income will cover this portion, and then get ahead of it. When is the next bill due, and how much is that going to be? Do you know? Is it September it's going to be due?

Yes, I believe so.

September. So $3,500 by September.

I don't even mind you getting on a semester payment plan with your college. I'm gonna pay you this much per month, um, for this semester. I'm gonna pay you this much per month. Uh, usually they'll do it for $50 or $75. They put you on a semester payment plan and just make it $600 a month.

Yeah. And for a couple of years, and you can factor that into your monthly budget. That makes it simpler for you.

Okay.

Awesome. And Amberly, let's, I wanna get to the question beneath the question that you asked. Okay. Can we be honest and say you're 21 years old, you've been working hard since you graduated high school and you've largely been working, um, somebody else has been telling you what to do. And now you're entering into a phase where quote unquote you're free. And now you got two other knuckleheads saying, well, actually you gotta keep doing, living like this.

Pretty, pretty low. We're not outta the woods yet.

Right? Like, just like burnout is not being honest with the reality that you're in and you're very honest. So if you, if you are able to metabolize, I got two more hard years of scratching and clawing ahead of me. And I'm going to choose joy at work when I'm doing whatever I'm doing 33 hours a week. And I'm gonna— I'm gonna find not drudgery, but I'm studying a thing that I actually want to go do in the world. And I'm gonna choose to walk into those classes with a smile on my face. Not every day, because not every day is like that, but I'm gonna— I'm gonna choose gratitude walking into that thing. And I'm gonna keep a calendar. I know this ends in 2 years, man. That— that's going to keep you from that bitterness, that resentment, that I— I just want to break free and do whatever I want whenever I want. It's just going to keep you on that path for 2 more years.

I'd rather you do this now than the back end where you're trying to make student loan payments while trying to live your new adult life. That's right. So set up a sinking fund. $600 a month in that thing covers me no matter what.

You're crushing it, Amber.

Automate that and you're going to graduate completely debt-free, making good money. So proud of you. This is a, this is a success story in my book.

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Kayla is in San Francisco up next. Kayla, welcome to The Ramsey Show. Hi. Hey, how can we help?

Hi, I'm call— so I'm calling because I would love a professional opinion. Um, I'm 25 I'm 26 years old, currently living with my parents and paying rent to them. I desperately want to buy a house and move out. My parents keep telling me to wait for interest rates to drop, but I don't want to. I work full-time and I have worked full-time since I was 18. I have no debt. I have a pretty good credit score. I'm trying to figure out what the best next steps are for myself. Wow.

Well, you asked for a professional opinion. We can only give you amateur ones, but we'll do our best to guide you. So you said you're desperate. Where is this coming from? Do you want out because you don't like your living situation? Are you tired of mom and dad's thumb on you? What's going on?

Uh, not so much that. I just feel like I'm a little bit behind for my age. I mean, I'm gonna be 27 next year, so— oh my goodness, I didn't do the math.

26 does lead to 27.

Yeah. Okay, gosh. So you're behind who? Medicare is kicking in soon.

How many 26-year-olds do you know in the Bay Area who are homeowners that you're behind?

Well, I'm less in the Bay Area. I'm more in the Central Valley, so not quite San Francisco.

OK, any 26-year-old in California. How many of them own a home?

Probably not many. But I'm an ambitious 26-year-old.

OK, I just want to make that clear that you're not behind anyone. You're behind your own self-imposed goals. Yeah. Okay, that helps us just clear the decks right there. So you have a goal to be a homeowner in your 20s. Your parents are saying the interest rates are high, you should wait. And you're saying, "I don't want to wait.

I just want to go buy a house." Pretty much, yeah. Okay.

How much money do you have saved outside of an emergency fund for this house down payment?

So I have about $49,000 total checking and savings.

And that counts your emergency fund? That's kind of all the cash to your name?

Yeah. I have $20,000 in a 401 from my last job.

And how much is a house that you would want to buy in your area?

Right now, probably between $400,000 to $500,000, $550,000. OK.

And what do you bring home? What is your after-tax monthly income? Don't include the 401 and healthcare, but after the government takes its part,— how much would you bring home every month?

Probably about $3,600 to $3,800.

Okay, so our parameter here at Ramsey to avoid you being house poor and avoid you making a regretful decision is 25% of your after-tax monthly income going towards housing. That includes the principal, the interest, the property taxes, the insurance, the HOA. Because what happens is, Kayla, you go out and buy a house and you're like, "I did it!" That house is $2,800 of your income out of $3,800. Now you are broke. Right. That's what we want to avoid. So I'm just crunching the numbers here to show you, even with 20% down, that's $100,000 down on a 15-year at the going rate, which let's call it 5.8% on a 15-year. You're talking about $4,000 a month for that mortgage. Mm-hmm. So my question to you is, I love that you have this goal. The math says we can't do it right now.

Right. And I'm trying to figure out, like, I maybe get a second job. I— because also I don't really want to rent. I feel like renting doesn't really make sense, especially with— I mean, that's pretty much half of the mortgage every month too.

Okay, but there's also a lot less risk involved with renting. You don't have to cover the HVAC going out. You don't have to cover, you know, you're, you're covering rent and that's buying you time and patience. And so I'm not saying that to crush the dreams. I'm just showing you the math of it going, I know it stinks to rent. It may be the wisest thing to stay at home for now and keep saving for another year.

I think you should go out and get your own apartment. And, and I'm saying this intentionally, not a fancy one, like the least expensive one you could buy that's in a safe location. And, and practice. And it sounds so cheesy to say it like this, but practice the daily expenses, practice the bills coming every month, and they just rely on you. And practice, here's what it costs, here's how much money I'm gonna have at the end of every month. And practice, I can't go out to eat, or I get to go out to eat, or whatever. Like, it's getting your feet underneath you. You're like an amazing freshman in high school basketball player who's like, dude, I'm just gonna skip it all and go to, go to the go to the draft. And everyone's like, hey, you could play your sophomore year in high school, maybe go to college, get some good coaching there, and then head to the NBA. I, I mean, you're, you're a go-getter and you are clearly good at— say, man, 26, I was so underwater with how much I'd spent. That's not you, like, you're, you're on it. But there's a— there's just several steps to take.

But I, I can't, I can't parse How much of this is pent up? How much would you feel unshackled from this obsession with, I gotta get a house, I gotta buy a house, I'm behind, I'm behind, to I'm 26 and I got a full-time job and I have 50 grand to my name and I have 50 grand in my name and it's in cash and my mom comes down and says, you need to clean your room, right? Like how much of it is, if I just got away from my parents, got my own place, got my own place settled at in did my own laundry, made my own meals, went home for Sunday afternoon breakfast or Sunday afternoon lunch, whatever, that would help this sense that you're behind. 'Cause I do think at 26 you're behind 'cause you still live with mom and dad making the kind of money you make, but you're not behind when it comes to home ownership and all that, especially in the area that you're trying to buy a house.

Yeah. So that will scratch the itch of independence. If you desperately want to get out, go rent, but please, please, please don't go out and buy a house. I don't think you'd even qualify at this point. But even if the bank said, sure, Sure, we'll give you a loan. It's gonna be $3,000 a month out of your $3,800. Getting a side job is not a sustainable path to home ownership. You are going to burn out and call us back going, I need to sell this house. It was a mistake.

And I'll tell you, I bought a fancy house here in town and I just last, like, was it 2 or 3 weeks ago now, had to replace the whole central AC unit that passed inspection, that was good to go. And it just died. And that was super expensive. And if you've burned every bit of cash you have just to walk in the front door, you're in a real, real mess when the roof needs to be repaired, when the sidewalk's gotta get fixed, when the foundation has an issue, when the air— and we're just saying this is just part of owning a home and it'll appreciate over time. But man, there can be some acute challenges you have that if you don't have the cash for it, people, George, people beat us up for the 25% thing. It's us trying to say, hey, we care about the fact that life happens.

We still want you to like invest and go on vacation and enjoy your life and not just have to pay the home payment. That's all you can do with your life. Right. So I hope that helps bring some clarity to it. And I'm gonna give you my free home buying course, Kayla. So hang on the line. Our team will make sure you get that link. I hope it gives you some clear next steps at least. 'Cause I think right now what you need are just some facts. If I give you a goal, Kayla's going to go get it.

Yes, you will.

And I think that's all we need right now. And it's a lot of just emotion. And I just want independence at all costs. But I don't think the next move is to buy a house. And just the napkin math scared me looking at that. And that's the reality. So I would not wait until interest rates drop. I think your parents are wrong on that one. You should buy a house when you're financially ready to buy a house. And that's the parameter. A quarter of your after-tax monthly income will help you make sure that you're making the right decision..

And if you're California, give you like, again, this isn't us being fun ruiners. This is just us caring about you. It's a math problem. And so if we're telling you, hey, get it down to 25% of your take-home pay, that means you're gonna have to move into less of a house than you're gonna qualify for. No question.

That also means you're gonna have to double and triple and quadruple down on your down payment to bring that total of the house you're buying down, which might mean I gotta work on my career and figure out how to I gotta make 6 figures in order to make this goal happen.

Or I gotta ask myself, do I have to live in California? Because there's other places in the Midwest where I can buy the same house for half or a quarter of the cost.

Yeah, I grew up in Boston and at 20 I moved, not because of the cost of living, but part of it was, I don't know if I can sustain a life here in a high cost of living area.

What kind of life do I want?

And if home ownership's important to me, I gotta migrate south to where I can get myself a nice little townhome and afford it. And that's what I did. And now I'm on, you know, my 4th home in 13 years just because I followed these principles. But having too much house is one of the worst things you can do for yourself financially, 'cause you will not sleep well in that house. Yeah. And you'll hit that goal and go, that wasn't the goal. The goal I really wanted was freedom. And this house is actually shackles. Yeah, there you go.

That's super important. And your own house becomes a prison that you lock on the inside. And man, I don't want that for anybody. And then the HVAC breaks.

Exactly. And it's a prison nightmare. It's a hot, hot prison. Oof. Auchie.

Thanks for the call. Thanks for the call.

Yeah, for anybody wanting that free first-time homebuyer course, we're going to drop a link into the description of this episode. So wherever you're watching, go to the description, we'll drop a link there so you guys can check that out for free. Appreciate the call.

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Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell here with Dr. John Delony, taking your calls. Mark is in Des Moines up next. Mark, welcome to the show.

Hey, thanks for taking my call.

Absolutely. What's going on?

So, so my wife and I together, we make about $250,000. That's a combination of, uh, her income, my income, and then some VA money we have coming in, which we've been skating by. Things have been easy. Um, however, we have no debt other than our mortgage. However, she is burnt out at work and is looking at going back to school. Her going back to school will be covered by the GI Bill, so I'm not concerned about cash flowing that. Just trying to figure out how to or where to pull back. We've been going like crazy trying to get our house paid off and squirrel away as much money for retirement as possible. And I'm just kind of worried, you know, where I pull back. Do I pay less on the house? Do I invest less money? Do I put less into my kids' college funds. Where do I go?

So you guys are in Baby Steps 4 through 6. You're out of debt with the emergency fund. You're investing 15% in retirement. You're putting some money away for college, and you're putting extra toward the mortgage. And you're saying, hey, if my income goes down to $120,000, what does this plan look like then? Correct. What will the income go down to? Uh, about that.

So she makes $125,000, and she would be, yeah, going back to school for 2 years. So, okay, so new question.

Question, can we live and accomplish all of our goals making $125,000? Have you done the math on that and done a budget based on that to see what sacrifices must be made?

So looking at it, I do think, I mean, I think we, yeah, it looks like our expenses are about $7,000 and off of the, you know, $125,000, $130,000, we're bringing in just shy of $9,000 a month.

Great. So you still have some margin. You can still put something in college. You can still put something toward the mortgage. Correct. And this is also assuming your income doesn't go up, right, with your job. And yeah, she's gonna be out of school eventually, right, working again, right? So really we're looking at a temporary dip in income. Can we live off $125,000 for 3 years?

Correct.

That really helps clear it and go, okay, we're not losing this forever. We can make sacrifices for a couple years for her to go to school.

What does she want to Uh, she wants to go more into like the therapy side of things. What is she doing now? Uh, she's medical, so just be kind of a different specialty.

Okay. My only fear, and John will be perfect to speak to this, is that she goes with her, and if she's burnt out now doing this, who's to say she's not going to get burnt out doing therapy, which is also a very difficult field, right?

Yeah. I'm trying to hear for the question beneath the question. Do you not Do you not think it's wise for your wife to go back to school?

I have no problem with her going back. I just, we've been working so hard to try and, you know, try and do everything right.

And I feel what, what makes this step feel like you're not doing something right? Because if you, if you moralize it and make it a right or wrong issue, you can get sideways real fast. If you're trying to solve for, I must get on a track and never get off this track till the end of time. That's, that's a recipe for a pretty rigid life.

You created sort of your own prison there.

Yeah. And you locked it on the inside. If you, if, if you're creating a life with somebody, y'all are co-creating this thing. And what do we want it to feel like? What do we want it to look like? We've been busting our butt. Cause you can flip the, like what you've told us, you could flip the whole thing around and say, we worked our butts off for this exact moment. When one of us just has to say enough and tap out and go get another, stop doing boxing and go do jiu-jitsu for a while. Like, it's not like we're quitting, it's we're gonna retool for another, another exercise. Right. And so we've done all this for this exact moment. Um, that's, that's what I'm trying to get to. The thing beneath the thing here, cuz it sounds like y'all have worked your butts off. This is a perfect time to go back to school. School's already paid for.

Yeah. It's like checking every single box. So I think the hard part for you is you saw the marathon time and went, dude, we're gonna make great time. And now that time is gonna double. It's gonna take a longer time to save for college and to pay off the house. That's the part I think you just need to grieve and go, man, that would've been cool to pay off the house in 5 years. It's gonna take 8 now.

But you know, it's gonna be more awesome than that. Having a wife that loves the skin that she wakes up in every morning, having a wife that's got her spirit back, having a wife who's like engaged in a thing that she really loves. Like that's worth it 100 times out of 100, right?

Absolutely. I appreciate it.

And that's the one thing I would make sure she understands is the grass may not be that much greener on the other side. I hope it is. I hope she loves therapy, but I would have her go talk to people who are doing the things she wants to do to get a full picture of it, not just what sounds like relief.

And Mark, uh, when y'all are talking about this, um, I, I wanna— this doesn't get talked about very often. And so when you're sitting with, with your, with your wife here, okay, I'm gonna use you two as the example, but for everyone listening, Your wife has this feeling, this emotional set, like this physical, like I've gotta be done with this. And I feel like I wanna go back to school. I wanna get trained and become a therapist. The world needs more therapists right now. Like, great. Those feelings are real and valid and good. And your feelings of frustration and I wanted to hit this goal and we had a deal and suddenly like, We were both gonna like to use what Georgia said. We were both running this marathon and then you stepped off the curb and broke your ankle. Your feelings of frustration and annoyance and, oh dude, those are real too. And they're not equally valid. Like one's more, not more valid than the other. They're both valid and they both have space on your kitchen table. And so when your wife says, I've gotta be done, here's a great opportunity. We've set ourselves up for this moment.

That's true. And you saying, I'm gonna be all in 100%. And if I'm gonna be fully in this secret world, we call our marriage together, just you and me, I also have to be honest about my feelings. I'm frustrated 'cause I really wanted to get out from under this house. Both of those are true. Right? So what, we're not fighting, we're not competing. It's not my feelings versus yours. It is both are true. What's the right decision for us moving forward? And the way you've painted it, it sounds like the right decision is to have a whole and healthy wife to take advantage of this opportunity to have free tuition. And it's not like she's just saying, I'm burnt out. I just wanna stay at home and stare off into space for the next 3 years. It is, no, I'm gonna actively be participating in building something. Cuz we do have this shared vision of our life. We both still are two independent people who go to our own jobs and work real hard to serve other people. And then we come home and do this thing called life. Like, like those things all work together, but both of your feelings count.

Does that make sense? It does. I don't want you burying half of yourself just to keep the peace in your house. I want you being honest about what's going on in your heart and mind and then thing. And because I value us, we're gonna go do this thing. Or she might say, okay, what if in 2 years, what if we cut our spending to the bone and got this house paid off and then I went and did it? I can suck it up for 2 more years, right? It's— that's, that's how couples make united decisions when they're both honest and they can both hold space for each other's feelings, however uncomfortable those things are.

Perfect. I really appreciate it, guys.

You got it, brother. You got your homework.

So now And thanks, big thanks to both of you for your service.

Oh, absolutely.

And not only service in the military, but service in your medical careers, service to go be a mental health therapist. Like all that, like you've dedicated your lives to helping hurting people and I'm, I'm grateful for you.

And it's cool to think they're more present because of the plan they followed. That's it. That's it. That's what I want from my therapist, from the person, you know, performing a medical procedure on me.

I don't want my doctor to owe anybody anything. Yes.

I'm not saying that you're a bad doctor. If you have loans. I'm just saying it's nice to know that you are fully present and focused because there's nothing else on your mind that's stressing you out financially. 100%. That's pretty cool.

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.com/ramsey. Michael is in Indianapolis up next. Michael, welcome to the show. How can we help?

Yeah, great guys, thanks for having me. Um, so my wife and I actually won the lottery, um, this past weekend. Like, literally, we won Um, yeah, we won $400,000 off a scratch-off ticket.

Oh, nice! Was this a goal you guys had? Like, was this a regular kind of habit and you finally hit it?

Yeah, so no, we were on vacation. I found a $5 bill on the ground and went and bought a lottery ticket with it. The second time I'd ever played the lottery, and here we are. Wow, dude, I've seen this movie. Yeah, literally, that's what we've been saying.

And it's a verified winner.

Yeah, it went today, actually, and they verified it all and should be paid out in about 4 weeks.

What's the payout?

It's going to be close to $300,000. Wow.

Do you owe taxes after that? I know they withhold a forced amount, but you will likely owe taxes on top of that, right?

Yeah. They think it's estimated to be around $275,000 is what we'll see. At the end of everything. But we're working with a CPA and financial advisor, um, to hopefully figure out all these details so we don't make any mistakes. Oh, good.

So what do you need us for?

Oh, real quick, Michael, I gotta ask you this, a personal question. Okay. Just you and me and a couple million people listening. Okay. Here's how I think I would handle this. If I got a scratch-off ticket, let's say for $400 grand, and then I took the cash-out option, and then there was the taxes. If I scratched this thing and it said you won $400,000 and my take home, what deposited in my account was $275,000, my first impulse, and I'm embarrassed to say this, would be like, oh man. You know what I mean? My first, I, I would first be like, oh dude, I lost $125,000 even though I just got $275,000 outta nowhere. Right. Is that how you feel? Or are you a better person than me?

Uh, to be honest, we're like ecstatic about it. Cause we were hoping to buy a $250,000 house in the next 5 years. And so we kind I saw this as like a literal gift from God. Like, hey, here's your house 5 years early. Wow.

There's somebody just stumbling around right now wondering where their $5 bill is. I hope you're happy, Michael. Dang it. I'm just kidding. I'm kidding. All right. You're a better person than me. All right. Get, get the George.

You got a CPA and a smart investor. So they're gonna handle the tax stuff and investing. If you're gonna do any of that, the question is where are you at in the baby steps from a scale of we got consumer debt to we are investing 15% and saving for our kids' college.

Yeah, it's so fun calling you. So we obviously want to buy a house, but we've been paying off our debt. We actually just became debt-free 3 months ago. We paid off about $80K in 3.5, 4 years. Um, so we're completely debt-free and we're saving towards retirement, saving towards our kids' education, and now we're just trying to build up our savings for a house. And so we had about $15,000 saved up for it, and then obviously now with this money coming in it's going to change some things. And so that's just kind of what I wanted to know from you guys is, hey, what would you do with this money? Would you use it to pay off the house in full that we're going to buy?

You know, whenever that happens, 100% in cash, 100% down plan. And if you have money left over, you know, you can enjoy some of it, you can give some of it. Um, but investing some of it at this point, you're probably going to burn most of it just on this house purchase. And that's okay. You got plenty of time to build wealth. What do you guys make in a year?

Uh, I make about $110,000, $115,000. And how old are you? Uh, we are 26.

Oh my goodness, dude. So making 6 figures at 26, completely debt-free with a paid-for house. How much are you going to be investing a month? A couple grand?

Um, yeah, I don't know.

You're gonna be just fine. I'm not even gonna use the investment calculator because I think it'll break with that many zeros on the end.

From 26 to 65, I'm gonna tell you something to that I would recommend you do that I would not have listened to me at 26. Okay. Mm-hmm. We've already established you're a better person than me and you're wiser than me. And so I, I'm hoping that this would sink in. If you and your wife have been, had a goal for a $250,000 house and that was your dream and y'all had a plan for it and suddenly the world drops $275,000 in your lap. I would stick to that $250,000. I'd buy that house and I would give that $25,000 away. Cuz I think that's going to mark, this is the kind of people we are. Yeah. And yeah, that's it. It would be a, yeah. Cuz the temptation that I would've had at 26 is I wanna buy a $250,000 house. Suddenly $275,000 drops outta the sky. I'm gonna buy a $500,000 house. I'm gonna put $275,000 down. That's what I would've done. And that would not have been a, a couple of action steps towards the man I wanna become in my forties, fifties, and sixties. And so you and your wife saying, let's stick to our original plan.

We, we literally won the lottery and now we're gonna bless another family, another whatever with this $25K. And then we're gonna wake up the following day and have a house with no bills. And we're gonna be right back in the same situation, making good money, with the life we want to have, and we're gonna have real demonstrative action steps towards the couple we want to be, which is a generous couple that doesn't owe anybody any money. I, that's what I would, I would recommend you do. You don't have to do any of that stuff I just said, but, um, that'd be pretty rad.

I love it. And if you already know how to manage the money you have, then getting more of it is not gonna crush you. It, it's the people who can't manage money and then they get a huge pile of it. Well, now they're really screwed.

They make a huge mess. Yeah.

That's why we see so many lottery winners lose it in the first year or two. So way to go, man. That's awesome. Awesome. All right, let's head out to Harrisburg, Pennsylvania. Brian joins us there. What's going on, Brian? Hey, how's it going?

Good, how are you? Good. So, I got told I don't have a lot of time, so I'm going to ask my question. My fiancée has student loans. I don't have any. And I'm budgeting right now to put as much money, spare money that we have, towards the student loan. But I'm wondering if maybe I should try to split it between the student loan and savings, or just put it all towards student loans.

Well, number one, are you applying it to the student loan, or are you just saying, "I'm earmarking this in savings"?

Um, what do you mean?

Well, I don't recommend, and we wouldn't recommend, you paying off someone's loans that you're not actually, officially, legally married to.

Yeah, so we're getting married in 2 months, and I'm planning this for after we're married. This isn't—

Okay. Sweet. That's what I was going to say. I would put it in a high-yield savings account. And you guys get back from the honeymoon, you've got the pile of money, let's apply to the student loans. So it depends on where you're at in the Baby Steps. We would say have your starter emergency fund, $1,000. Obviously make sure that the wedding is cash-flowed.

You got that? I have $5,000 in emergency. Sorry, I didn't mean to interrupt you.

No, you're good. So you've got $5,000 in cash. And is the wedding all paid for? Honeymoon paid for? All that?

Um, yeah, pretty much, yeah. OK.

I want pretty much to be, it's for sure paid for. We're not going to put the gap on a credit card.

Oh yeah, we have, um, I have the money set aside for the last stuff we need. It's just a matter of, um, paying, like, signing the check. Okay.

And then once you guys are married, we're gonna just make a list of all of our debts. Is it just your fiancée's student loans, or are there other consumer debts as well?

Um, I— no car, like, no other debt on my side, and she didn't have any either. So great.

So it's just her student loans.

What's the balance?

Uh, $30,000 all in, about. Cool. So, so her student loans become y'all's debts, and y'all have to focus.

So I would not You said, should I split some into savings? Should I split some over here? We would say just attack the debts. Do nothing else but focus on these debts. And once those debts are paid off, now we can stack cash. You freed up all of those payments. That puts you in Baby Step 3, where you get 3 to 6 months of expenses saved up in a high-yield savings account. So how long will that take you guys based on the current trajectory?

I'm putting about, or my plan is about $1,000 a month towards the loans once we're married. And so it'll probably be 2 and a half years.

Is she working too? Yeah. So together y'all can only put $1,000 in? That's all y'all, that's all y'all, all the margin y'all have?

Yeah. Or at least that's what I'm budgeting as of right now. What will your household income be? Mine is before taxes about $60,000 and hers before taxes about $20,000.

$20,000. Is she working full-time?

Yeah, she'll be full-time.

Making $20,000? Yeah. I'm confused by that. That's like $9 an hour.

Yeah. Or sorry, no, that's after taxes. Sorry, I don't remember what the math was before taxes. Okay. Yeah, sorry.

Well, I would aim to try to get them paid off in less than 2 years. The average we see is 18 to 24 months to get rid of your consumer your debt. And if it's just the student loans, $30K, I would try to up that income once you guys are married. Have her making $40K, you're making $70K. Now we can knock this thing out way faster because $1,000 a month for 30 months, that's a grind, especially if that's all the margin you have.

I would put 18 months on the calendar and have a what must be true for this to come to fruition conversation and see if y'all can make that happen.

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Today's question comes from Jill in Minnesota. Jill writes, our son graduated high school last year and has not worked for the past 7 months. He says he's applying for jobs, but he stays up all night playing video games and sleeps all day. We've tried to help him and have given him plenty of time, but nothing has changed. We wrote up an agreement that gives him 2 months to find a job and start paying rent. If rent is late, his phone service and Wi-Fi privileges will be suspended. If he doesn't pay rent for 2 months in a row, he'll get a 30-day notice to find another place to live. When we reviewed the plan with him, he became angry and hurt, and I'm struggling with intense mom guilt. I don't want to enable a lifestyle that isn't preparing him for adulthood. Are we being reasonable? Um, Here's the problem with this question is I don't want to enable a lifestyle that isn't preparing him for adulthood, and I don't want to feel uncomfortable, and those two things can't coexist. Um, our mutual friend Henry Cloud has a great story. It's very similar to this, that when the, when the parent was talking to Dr. Cloud about the situation with their kid, he said, Dr. Cloud wisely said, what your kid needs desperately from you is problems because your son has zero incentive to do anything differently than what he's doing.

He has free rent. He has his free schedule. He has nothing, no responsibilities. He has to like, he's just doing what a natural inclination, this oozing through life because there's place to ooze. He's on an infinite summer break right now.

Correct. Graduates high school. What, what do 18-year-olds want to do? Do? Sleep all day and play video games. He's living the dream.

Right. And the greatest gift he could get, the greatest gift a young man like this could get is responsibility. The, the idea that I have to do a thing because there are real consequences if I don't. And so, um, I think you're not only being reasonable, I think you're being overly generous because now it's gonna turn into a year, um, where there's any true consequence here. I personally, this is just me having worked with people of this age, my, my whole career, getting into the phone service and Wi-Fi privileges brings him back to a middle schooler and you back to, I'm grounding you from your fill in the blank. And so if we're gonna truly do a tenant, um, like a, like a, a tenant, like a homeowner agreement here, we're not gonna do little, we're not gonna insert little mom and dad pokes in here. You pay your rent or you're out. Bigger than this, I, it almost feels like just to say, hey, you know what? We were wrong on this deal. We need you to move out. Like we want our house back. We want you to fly little birdie fly and it's time to go make it happen.

And then he's gonna have to go and you're gonna have to be the adult, emotionally intelligent, emotionally mature adult and say, I am gonna feel, um, sad. I am gonna feel upset. That I did a thing and my son's mad at me. That's part of being a parent. And, but I know this is the right thing.

Yeah. Right now it sounds like every time you talk to him, you just sound like his landlord. And I think at 18 you're transitioning from parent to friend. And so what he probably needs is just some guidance, someone to care about his future and show him a path out and go, hey, I noticed you're really into this. Have you tried doing this over here? Yeah. But it sounds like you've been the outside mentor for 7 months and He's like, oh, I just wanna play video games.

Yeah. Not happening. Not happening.

But I know at 18, like, there's things I love doing, but no one showed me that, oh, there's a job that I could actually do some of these things. Mm-hmm. So that's where I go, maybe he needs an outside mentor, a friend, a third party to kind of step in and get him excited about life.

Here's the way I like to frame this. Um, less like, if you don't do this, then I'm cutting you off. I'm cutting off your relationships. I'm cutting off your home. I'm cutting off these things. I like to frame these, especially, uh, with all kids, But when you're talking to an 18-year-old, here's the choices in front of you. If you want to go to college, if you choose to go to college, here's how we are going to support you. If you choose to go get a job, here is how we're going to still open up our house on Sundays for you to come over for lunch and you can sneak some laundry in. If you choose to do nothing, you are choosing to move out. You're choosing to fill in the blank. And as a parent, I can say, I can't stand that you're making that choice. Choice because I wanna be right here with you the whole time. You're choosing to leave. I don't like that choice, but that's a choice you're making. And I wanna always hand the choice, the responsibility, um, or another analogy I use a lot is I wanna, I wanna hand the weight back on the bar that is life back to them and say, you gotta learn how to lift this and get stronger because that's how life works.

I'm not gonna be there to clear the deck for you all the time. Um, and if you've waited until 18 to start enacting this, if mom guilt has haunted you his whole life, Man, it's gonna be an abrupt lesson for both of you. It's gonna be really rocky for a season, no question about it. But yeah, tough one, Jill. Yeah, I, I'm not gonna have a high school graduate just living in my house freeloading. Yeah, playing video games all night and sleeping all day, as cool as it sounds.

All right, Teddy is in Los Angeles up next. Teddy, what's going on?

What's going on, you guys? Uh, thanks for taking my call.

You got it, brother. What's up?

Uh, so my wife and I would like to get your opinion on if leaving California in pursuit of a lower cost of living and eventually buying a home would be the best decision for our family.

That's a big decision for two random guys.

Yeah, we don't know you that well. You tell us.

So you're, you're saying you value home ownership over your current location?

Yeah, I think so. And just like the, uh, the future of what our lives could be and like our family.

Now you're talking. Now you're talking.

Yeah. So there's a bigger picture here and you're going, here's what we really want. And none of these things mean we have to stay in California. You're willing to make a sacrifice, which is wise. Cuz we always tell people, you don't get a pass on math. If you can't afford to have the thing there, you don't automatically get it. And you might need to move to a lower cost of living area if your current income can't support I'm, I'm right on, on board with that. Where do you guys want to move?

Uh, my wife is down with Tennessee and I am down with no state income tax. Okay.

So any state with no income tax, like that's fine with me. And so Tennessee could be it. Texas, Tennessee, Florida, Nevada. Yeah. Okay. And do your jobs transfer easily?

I work full-time as an EMT phlebotomist in the ER right now, but I'm in school debt-free at my local community college getting my nursing degree. Oh, boy. My wife works full-time as an assistant manager at a clothing store.

Okay. So both of you would need to find jobs before you make the move. Do you have family nearby in California right now, or would you are you already kind of on your own?

Yeah, that's kind of the thing that's keeping us here is, you know, we got another kid on the way in January. We're having our second baby, and our family, her parents and my mom, they all live around us. So it's like, if we need to do something, we can drop our daughter off and it's, it's free, and we trust them, you know?

Yeah, sure. That's the thing I wanted you to weigh, because a lot of people underestimate underestimate how great their life is until they move away from family and they go, oh my gosh, I didn't know that was such a lifeline until we didn't have it.

My wife and I did that. We had two young kids and we moved halfway across the country and both of our parents lived within a few hours from each other. It was tough. And what it meant was kind of like we always say, you don't get a pass on math. Me and my wife did not get a pass on new relationships and we didn't get a pass on new friends and new, um, mentors and things like that. We just had to go, we had to go not use the default settings, which had been our parents and our neighbors. And we had to go, we had to go dig in. And I'll tell you, on this side of it, leaving family has been really hard and some parts of it have been amazing, right? So there's no, there's no scot-free. But the thing that we wanted, like you're talking about, is we wanted financial freedom. We wanted water to fall from the sky occasionally. We wanted these giant green things called trees. Like we had some things in our mind that we wanted for our kids and for our family, solving for peace. And that came at a— it does come at a cost, but on the whole, man, it's been the greatest thing we ever did.

So once you make the decision, just make peace with it and don't go, man, but remember in California— just go, this is our new life. We said this is it, we're going to move forward with it.

And so it must be true here. Exactly.

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Great. What's your question?

Um, I just kind of have a question about how the fastest and best way to get out of debt Um, me and my wife, we've been married for 4 years now. Uh, took us about a year. We paid— we spent way too much money on our wedding. We realized that after about a year after we've been married and start trying to fight our way out of it. Uh, we paid off a little over $30,000 and, uh, uh, fast forward a couple years, we bought a home. Uh, we still didn't have our debt paid off at the time, bought a home. Now we have 2 kids and we have right at $40,000, $42,000 in credit card debt. Um, we have $20,000 in— she has $20,000 student loans, um, $13,000 in a mower. Uh, I think I still owe $13,000 on my truck— no, $14,000 on my truck. Um, I make roughly— I, we, I do 4 different— I have 4 jobs and a mowing company of my own, hence the mower. Uh, I think we're gonna— and she has a little party business where she does parties all together. I think we're gonna clear right at $100,000 this year, and we're just like, we're still not getting anywhere on the debt.

So you guys make $100,000 and you have about $89,000 in debt? Yes. Plus the mortgage?

Yeah, the mortgage is $1,656 a month. We owe $215,000 on it.

Okay, so let's ignore the mortgage for now. We're gonna walk through a process called the Baby Steps. Do you guys have $1,000 for a starter emergency fund? We do. Great. Baby Step 1, check. Baby Step 2, we're gonna knock out all of this consumer debt using the debt snowball method. So you ask, what is the fastest way to get out of debt? The one that has been proven to actually work, the one that we recommend that's caused millions of people to do this thing, is called the debt snowball method, where you list the balances smallest to largest and you ignore the interest rate, which is really hard to do when you see that interest adding up. But the goal here is momentum and progress, and you're gonna knock out that smallest balance really fast. Fast with all the margin you can muster up, selling stuff, working those 4 extra jobs. She's hustling on the weekend with her side business. And once you free up a debt, you free up a payment. Now you apply that payment to the next debt. And so if you do that, making $100K and you got $89K in consumer debt, that's still going to take a while just based on the debt-to-income ratio.

So now we go, okay, what can we sell? Well, you got a mower and a truck. Could we sell those things and get cheaper versions of them and get out of those payments?

Or how much do you make on your mowing business on the side versus the—

so far, if I don't do any— pick up any other customers this year and I just stick where I'm at, I'm gonna make $22,000. But after you take taxes out, it's gonna be about— well, not taxes, but gas and supply and the payment on the mower. I got 0% interest for 48 months, so I don't have any interest.

Are you trying to impress us, David? Trying to sell me on a mower?

Uh, but, uh, we had— so all that together should be right at $15,000 cleared.

Okay, so you basically bought a depreciating asset that is 100% the valuation of your company, right? And so I would say mathematically and psychologically and time-wise and two young kids, if you stop mowing and sold this tractor, there's 0% chance you get $13 grand for it. But let's pretend you did. And you just said, I'm not in the mowing business anymore. You actually come out net neutral, which in your situation is net positive. Mm-hmm. Because if you just went and got an, like, for the time you mow, if you just went and got an hour, a minimum wage job, you'd come out net better when it's all said and done. You get what I'm saying?

Mm-hmm. So how much is the mower worth? It's brand new.

I just bought it this year. Oh, cool. Uh, it's a 2026. Yeah, it's 2026. Um, it's got 100—

I've already put 120 hours on it. Oh geez, guess how many of your customers care if you have a 2026 mower versus the 2022 edition? I have two nice mowers at my place.

What kind of—

this is like the Mazda Raptor.

It's a Skag Tiger Cat 2.

Okay, good gosh. So you want—

you wanted a nice toy and you said, I can justify it with my side business. That's fine. Kind of, yeah.

What's your main business?

Uh, I work for a Walmart distribution center.

Okay, what's your second business?

Um, I do the maintenance on our church campus, which is a total of 4 different buildings.

What makes you the most money per hour?

Uh, per hour is whenever I do landscaping jobs.

So could you just work at the distribution center and cancel those other jobs and just start hustling more lawn care jobs?

I could, but it's very flexible with my other 3 jobs. They're all here on the church campus. All of them are here. I took the place of 4 other people whenever I took on all these positions. There was 4 different people doing them. I took all of them on. It's very flexible. I maybe work here 20 to 25 hours a week, give or take a couple hours.

What do you make per hour?

And I bring home—

I think it was 17 an hour. It's $1,400 a month after Social Security and taxes are cut out.

But we're saying if you make $50 an hour doing landscaping, even with less flexibility, you'll come out ahead.

Right. But then, but I'm worried that I run into the risk of not having a client, uh, having the proper amount of clientele in order to fulfill all the area. Because this is year-round, I'm getting paid for the area.

I got you. But here's the thing, you're in an emergency situation. You're 100% leveraged without your house.

Right. And that my screen says you're $109,000 in debt, which which is $20,000 more than I factored. So where's the other $20,000 coming from? What is it now? You got $42,000 in credit cards, $20,000 in student loans, $13,000 on a mower, $14,000 on a truck. Is there anything I'm missing?

Yeah, I said $20,000 in student loans, correct? Yeah. Yep.

Okay, everything. What is the truck worth? You owe $14,000 on it. What can you get for it private party?

I think I know what I need to do. I think I need to sell the truck, but everybody in my family is like if you're working that much, you need a reliable truck. It's worth $20,000. I think I can get $24,000 out of it.

So you will net $10K, in which you could go get a truck for $10K, right? That's still reliable.

That's what I think I need to do. But so many people that I've relied on all my life—

so many people are broke, David. Yeah, you're asking broke people for advice, you're gonna get broke people answers, right? We're trying to show you a path out and you're trying to justify with reliable transportation. And so what's your truck payment?

Uh, $315 a month. And then what's the mower payment? Uh, $316— oh no, I'm sorry, they dropped it. It was at $282 a month.

Okay, but between the two, you just gave yourself a $600 net raise if you sold both of those things. Now you got some margin to knock out the student loans. Right, because now you're only $62,000 in debt, so we can start knocking out the next smallest balance.

So even though I would clear— even though I clear more money a month having the mowing business, you're saying I would still come out—

you could go get a mower on Facebook Marketplace and charge $50 a yard.

The only thing I'm worried about on that mower is that you could resell it for $9,000. Right.

Could you get your $13,000 back out of it?

No chance. I've been bet?

I think I could probably get $10,000 to $11,000.

Okay, um, so you could save up the difference and you'd still be better off if you came up with $3,000 in cash to get out of that loan and sold it. It's still wise. So don't have the sunk cost fallacy of, well, I'm underwater on the mower, so I can't sell that. I can't sell the truck because I need reliable transportation. That's the kind of stuff—

I can't give up this church job because it's flexible.

Yeah, I fully believe I can sell the truck. I don't have an issue selling the truck. It's just been and trying to listen to other people I trusted. But I see what you're saying 100% there. So you're saying I should give up the church job and the mowing business and sell my truck and then just pick up a part-time job?

No, I, I'm saying if you're going to keep this tractor and keep this mowing business, because it sounds like you're really good at it, it sounds like you're actually making some headway. You've reached that saturation point where the amount of jobs you're willing to go get barely covers your, your costs. But since you've barely covered your cost, if you found time, if you found another 22 hours in your schedule Could you fill that time with mowing jobs that would then cash flow this business in a powerful way? Get that truck, I mean, get that tractor paid off in 3 months and now you're off to the races. Right. You get what I'm saying? So don't do all 3 of those. Right. Like, cuz then you'll just be sitting at home with one job, no truck, no, no lawn mowing business, no side hustles. You gotta work extra jobs. I just want you to say like, you've gotta pick a few things and go laser focus on them instead of trying to do everything and keep a lifestyle and keep flexible. It's just too much.

Yeah, you're spreading yourself thin. So you asked us what's the fastest way out of debt? We just gave you a path out of this thing real fast. Now you got to decide if you're going to go do it. Welcome back to the Ramsey Jersey Show in the Fairwinds Credit Union studio. I'm George Campbell, joined by Dr. John Delony, taking your calls at 888-825-5225. Jeff is in Seattle, Washington. What's going on, Jeff?

Hey, what's up, George and Dr. John? Uh, I have kind of a strange financial living situation, and I have a question basically about what to do next with my savings.

All right, John is no stranger to strange. Hit us.

Okay, so I'm 38, I work full-time remotely, and I sold my house in March. It was kind of a nightmare there. And so I basically have like $900,000 in savings. I don't have any debt. I make like $220,000 last year, and I've been living in my car, uh, ever since then, which I know is, uh, not really the normal situation. And my plan is to move into a sail— buy and move into a sailboat in November. Um, but I don't know if this is like a stupid financial mistake and whether or not I should sort of spend more money on my life. I'm not really doing anything with my savings and I don't have any children or a wife or anything.

Tell me, tell me about this kind of nightmare. What was so nightmarish about being a homeowner?

Okay, so I first time I ever bought a house, I bought it well within my means. It wasn't a huge amount It ended up being $350,000 total. I think I ended up owing $200,000 when I sold it and I lost about $85,000. But the reason it was a nightmare was there was a negligent survey during the closing process that led to an absolute legal nightmare between me and the neighbors. And during that process, I was hit by a hurricane and that denial of my insurance claim led to basically lawsuit against the largest title insurance company in the country, and it basically took up all of my free time, and it was just like destroying my life. So I just figured, you know, you only get one life, and I'm gonna lose $85,000. That was not fun.

But— but you have $900,000 savings now.

How'd you get $900,000 in cash?

Well, so $800,000 of that is in the stock market. I guess I'm using the wrong terminology. Um, like a brokerage account, non-retirement. It's in a broker, it's in a brokerage account. Yeah. I'm lucky enough to have a family member who's a portfolio manager. So it's been great to not have to pay fees when I invest and he's just, you know, really good at it. And so I've been putting money in there since I was 18, right? So 20 years of that, it's about $900K. I have a bunch of money in crypto that's like really, I don't even add any into it. And then And then I know you're supposed to have less in your savings, but I have like $100,000 in my checking account just because I am lazy, I guess. Okay, so what drove you to live in your car?

Pun intended. Like why not rent somewhere? That's a very strange decision to go, I'm selling my house, I have $900,000 and I'm gonna choose to live in my car.

You know what, you have more than $1 million in liquid money.

More than that.

I mean, you've got $900,000 in the stock market, you got $100,000 in cash plus crypto. Like, you've— yeah, I guess you're not liquid.

$800,000 in the stock market.

Yeah. Okay, so why, why the car? Why not rent somewhere? Why are you scared of renting?

I think maybe I'm having a midlife crisis. Basically, I'm not just like sitting in my car in an empty field. I'm driving around the country and using Starlink to work. And I'm just like seeing all the things I've never seen before. Like I've been to, I don't know, every national park and, um, you know, just beautiful.

So this is an intentional adventure for you?

Yeah. But to be honest, like when I first went into it, I said, okay, listen, you're basically rich for your age. Why don't you like treat yourself and buy a van or an RV or something? And I just don't do that. I'm like using my car I already own. And even this sailboat, like the sailboat I'm planning to buy in November, it's $25,000. And so, I mean, the stupid financial decision in my mind is I could buy a catamaran that's about 20% of my total net worth. But you know, people do dumber stuff like that all the time. Like the last guy bought a lawnmower that's worth more than his house or something. I wasn't fully paying attention, but it wasn't that bad. I just feel like I'm—

yeah, I wouldn't make your life decisions based on what's less dumb than what other people would do. It feels like right now you've, you've you haven't been making the super intentional decisions. It just sort of been like, that sounds fun, I'll try that. So what are you really after? Like 5 years from now, where does Jeff wanna be? Is he still living in a sailboat?

Well, to be honest with you, maybe this is like past the scope of this conversation, but I don't think in 5 years I'm gonna have a job because of AI, right? I know this is like a national conversation and nobody really knows where it's going, but like, I don't think I'm gonna make it to 65 So like financially or employment-wise, or you think you'll be dead by 65? No, I, I'm, I'm in good health. I think that my profession, right? I'm, I work in software. Okay. I'm not sure that I'm gonna be able to work to 65 if I wanted to. Okay. I think that I could be laid off in 5 years.

So let's say I, I 100% agree with you like that, that, that's a very real possibility. And so I'll take you back to when I was part of a think tank with higher education and there was 6 of us on the team. And I think within 6 months, 5 of us had sold our house. Like we saw the math on the, the problem that was higher education and we're like, oh, this ends real soon. So 2 things happened. One, here I am this many years later and colleges are still kicking around. It's not clicking, right? And I was also right. Like it's, it's on not a great trajectory, but not in addition to selling my house. I also use that as a time to get my finances in order, go back to school, get trained as a mental health professional, and to begin to expand what could then come next. And so if you want to get on a sailboat and just ride the seas and just say, it's the end is coming for me and I'm not going to do anything else about it. You can do that. Or this could be an amazing— I would work— it, it could be an amazing runway for you to do your software job and go get retooled in a totally different profession and into a totally different, uh, skill set for somebody else you can help for the next 20 or 30 or 40 years of your life.

One of those feels like it's cashing out and one of those feels like I'm looking at a potential reality in front of me and So I'm going to, while I'm riding this thing as long as I can, 'cause it sounds like you got a great deal ahead of you. What must, what could be true in an alternative world, right?

I see. And I know a lot of people ask you, Colin, about how to get out of a money pit, but like there's this saying that people say you can't take it with you, right? And like, am I just gonna die with $900,000 in the bank and have like, why did I work? You know, I just, I think about this all the time.

I think you need a deeper purpose than just my work and my next toy. Do you want to have a relationship? Do you want to be married? You want to have kids? What kind of life do you want to build outside of— okay, you have— because here's the thing, it's not dumb to buy a sailboat in cash and have that adventure. It's dumb to make all of your life decisions based on the fact that it's all going to come down eventually, so why even try?

It's just a nihilistic thought. And by the way, like, I don't blame you. Like, the, the between the media and this, this emergent new technology we have and the national debt. Like there are some real challenges. I just told my son recently, I think your generation, the hardest thing you're going to have to fight is rage, not anger. Anger's right. But rage, this impulse to, you know what, what's the point? Nihilism. Let's just burn it all down. And so, yeah, like It like, give yourself a picture in 5 years. So you're laid off, you had a 5-year runway and a million dollars worth of salary over those 5 years to go retool and become this man that you want to become. What is that picture? Let's aim for that.

You know what should include relationships? Whatever you're looking for, you will find. So be real careful about what you're looking for.

You should not feel uncertain about investing, and you don't have to. That's why we created Investing Essentials, a 2-night virtual event where George Campbell and I walk you through my playbook for investing Investing and Wealth Planning will simplify everything from 401s and mutual funds to passing on wealth so you can invest with confidence. Tickets start at $199. Get yours today at ramsaysolutions.com/events or click the link in the show notes.

All right. Hey, George, I want to, um, talk about that last caller for a second.

The existential crisis? Yeah, because I think that young man tapped into—

I mean, he's 38. Um, I— all of us have to be honest about the— there's a band, and I'll say 50 to 20, 50 to— you know what, my son's 16, he's experienced addressing it. There's this, this pervasive, um, the air we're breathing. We were told a story that wasn't true. We were told a story, if you just go do these things, if you just go make money, if you just go get this degree, if you just go get this dream job, that suddenly everything, um, not only works out for you, but that you don't have any worries. And there's this this— it's not growing, it's roiling already. Just a rage and a trapped feeling of life is happening to me. I have no agency in this thing. What's the point? Right? And throughout history, these moments have happened and they've been flashpoints when there's big technology advancements that happen all at the same time, right? It happens at the Industrial Revolution and before when it's real easy to give into the rage. Rage. I feel like I'm, uh, Obi-Wan Kenobi right now, right? Like, you give into the rage and it shoots you off into directions of nihilism, of blindly following something, of wanting to burn everything down.

And I get it. I'm in the middle of it, right? And I'm— I've got a young son, I've got a daughter. I'm in the middle of it and I feel it and I get it. And also, my plea is to not let the rage take over and to exhale and to say, there's things in the world that we hate. There's things in the world that should not be this way. And anger in those moments is right. The question is, what are we going to do with that anger? Are we going to direct it to, okay, here's what I can control here. Um, here is what I'm going to stop listening to. I think a great gift for people in that young man's situation is, uh, um, again, And again, responsibility, who, who depends on you, right? And that means I gotta be vulnerable and I gotta allow people into my life. I gotta allow relationships. I've got not even just romantic relationships. I've gotta allow other people in. And that means I've gotta let myself out. I've got to have people that count on me and that I count on. And we have to find value in doing this thing called life together.

And from that comes a shared sense of purpose of, oh, I matter. I gotta show up here. My life can't just be about how much money I have in some stock market account somewhere, because that it, like, as he said, you just get to a point like, what, what are we doing? If they're, if my job's gonna go away someday, which by the way, all of our jobs are gonna go away someday.

We're gonna go away someday. The job, harsh reminder.

The job I have right now didn't exist when I was in college. There's no such thing as a podcast. There's no such thing as YouTube. Right? So the job I'm doing now, who knows what this many years later is gonna look like? Who knows? It's easy to just get trapped in that. And instead of saying, okay, you're right. Things might change someday. So, do I have my home taken care of? Right? And, and I mean, that's kind of the base of this show. You can't control what the government's doing with the X, Y, or Z. You can't control what this other country's doing. You can't control what this politician's doing. I can control, I'm going to have a group of guys over once a week. I am going to control, do I owe anybody any money? And I can control, you know what? My job is looking more and more fragile by the day. I'm going to start. I don't want to, I don't want to be doing this, but I got 2 years of night classes and Saturday classes so that I can get retooled on a whole different career or, or a less fragile career.

Like, those are things we can choose. And man, I just want to implore people, don't give in to the rage because rage always, you end up in a place that you never wanted to be. Right. And so feel that anger and then sit back and say, what can I control here and how can I best use the time, the relationships, the resources I have to go create the life I want? And for me in my house, I say it all the time, we solve for peace. What is the least chaotic world that me and my wife, our kids, our close friends can create in a world that's chaotic, right? And that just guides our investing decisions. That guides our purchasing decisions. That guides, that guides the Hey, you know what? My daughter's at a, at a church camp this week. So me and my son and my wife were like, dude, let's go see The Odyssey. 3 hours late show. Let's just go late. Let's— we did. And we stayed up past our bedtime, which screwed up my workout routine. We had a blast. The movie was awesome. We laughed as a family. We ate too much.

Like, it was— we're solving for peace, right? And, um, it almost always comes from relationships. And this idea, this question, who do I want to I want to help with my job, with my giving, with my resources, with my time? Who do I want to help lift up? And will I allow myself to be lifted up? That was beautiful.

I couldn't have said it better myself. Please, please. You know what? I should have recommended a book for him. And it's not a modern self-help book. It's the book of Ecclesiastes. I think that is the best book. If you're going through an existential crisis, it'll help you reveal what matters. 'Cause here's the TL;DR, the big quote of the book. Is everything is meaningless. And meaningless does not mean a lack of meaning. The actual root word is vapor. It's temporary. It's quick. So then you go, okay, if everything's temporary, does nothing matter, or does everything matter so much more?

So much more. You get to choose.

Yeah, you could read that as, well, nothing matters, some financial nihilism it is. Or you could say, you know what really matters? Relationships, people, meaning, purpose in my work. That's the book. So go check that one out if you're still listening, my friend.— that's a, that's a tough call, but I relate to what he's going through.

I, I, I relate to it. And not only do I relate to it, I hear it all over the place. Like that question, what's the point?

May not be, I have a million dollars and I wanna live on a sailboat, but the root of that is what's the point? What is the point of any of this? What's the point?

Yeah. And not only what's the point is not only what the point is it in the present, but if it's all just gonna dot, dot, dot down the road, why even? Right. And man, I get that and find meaning where you are.

And that's, that's my plea. Beautiful. Rant over. Tom is up in Jacksonville, Florida. What's going on, Tom? Hey, how are y'all doing? We're doing great, man. Just having an existential crisis over here. How can we help?

Yeah, not sure I can follow up with anything more meaningful than that speech, but, um, my question, I want to call— so me and my wife are starting to look for purchasing our first house. And so live in Florida and there's townhouses everywhere And I wanted to see what y'all's opinion is on buying a townhouse versus a single-family home. I, you know, you can get probably a little bit nicer of a house in a townhouse, um, and for less, but I sometimes worry about, you know, you don't own all four walls. You, um, you know, you're, you have that shared wall. So what, what do you all think in terms of that?

Townhomes are moronic, Tom. I'm totally kidding. I just said that because George is right next to me and he lived in a townhouse for a long time.

My first two homes were townhomes. And I have no regrets. No, great idea. And if that gets you your foot in the door with home ownership, lovely. And I think townhomes, people poo-poo on them for really no good reason. Sometimes it's a slightly higher HOA fee. So the key really is location. Is it a neighborhood that's going to give you decent appreciation, whether it's single-family homes or townhomes? Is it, does it make sense for your family based on the space you need? We had a, you know, 3-bed, 2.5-bath townhome with 1,900 square feet. That's like twice the size of my childhood home. And so townhomes are bigger, they're nicer than ever, they got the nice countertops. And so if you— if that's what you guys can afford and you don't want to wait to jump to the single-family home, then go for it. How much is it?

Um, a lot of them start in the high 2s. So like if we're looking at a decent single-family home in the area, you're looking kind of upper 3s and, you know, trying not to go too much past 4. But you can get a pretty decent townhome for upper 2s, low 3s. And so, you know, especially with trying to not not, you know, go above the 25% take-home pay. It's, um, that's kind of one of the big things. But one other concern is, what do you see on appreciation versus that? I know I feel like I've read that townhomes don't appreciate. Maybe the location, like you said, is one of the biggest things.

Yeah, the location will matter the most. They might appreciate slightly slower if you looked at the data. But I'll tell you the numbers on our townhome. Obviously this was during like the COVID boom, but we bought for like $300,000 and it sold for $520,000. $1.9 million, which is insane. Wow. And so to say that townhomes don't go up in value is BS. And the key is it was a very desirable neighborhood. A lot of people wanted to be in that neighborhood regardless of what kind of home it was. And so that's where I would caution you to work with your real estate agent to go, what is a great location with good schools that's gonna have decent resale value that we can afford? And so once you look at across the board, you're gonna make a smart decision that's not gonna leave you one wondering, well, we could have made 4% more. You're not doing this to make the spread. You're doing this 'cause you want a place that you can call your own. Yeah. And you're gonna build some equity in the meantime. And what we did, we paid it off. We took that 100% equity, rolled it into the next one.

And that's what will happen instead of you just renting for the foreseeable future instead of waiting for that single family home. So I hope that helps anybody out there wondering, should I do it? Should I not? Especially for young people, if you want to get that first home, a townhome could be a great option.

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

Buying or selling your home is high stakes because one bad deal could cost you tens of thousands. You don't want to overpay for your next house or sell your current home for less than it's worth. That's why Ramsey Trusted connects you with vetted real estate agents who have the experience to guide you step by step to make smart decisions, not expensive mistakes. You can find a local Ramsey Trusted agent who has your best interest at heart for free at ramsaysolutions.com/agent, or click the link in the description if you're listening on YouTube or podcast. Katie is in Milwaukee up next. Katie, welcome to the show. You You made it.

Yeah, thanks. Thanks for taking my call today.

Absolutely. What's going on?

Uh, so my husband keeps using debt to finance our lifestyle. Um, we're not— we are not in debt. Uh, we are net worth millionaires. Um, but whenever we go to buy something like a car or looking at buying our first home together, uh, he's like, we'll just get a loan for that.

Like, why?

Why would we do that? You have the cash to pay for the whole thing outright, but he would prefer to take on the payment and use his cash elsewhere?

Uh, we're not using his cash elsewhere.

Like, what's his logic behind it?

Uh, I think it's because that's what people do.

So he doesn't know any better. He's just like, well, you get a car payment. You don't— who pays full price for the car in cash? That's crazy. Is that his mentality? Yes. Yes.

How long have you guys been married? We've been married 8 years. And this has been like this the whole time?

You guys have misaligned values when it comes to money from day one? Yes.

We were married and we moved countries. We had a baby, all very kind of close together. So I was kind of elsewhere, kind of focused. Um, and now I'm kind of like, wait, we do what now? So I'm just kind of starting to pay more attention. We've had the conversation about it, but I haven't had all the numbers in front of me to kind of go, "Wait, why are we doing this again?" Now I want to work towards our house, and I know he's going to be like, "We'll just put down a small amount and we'll pay it off." He's busy taking on debt.

He's not trying to pay some off right now.

Yeah, we don't have any debt, so that's nice.

The beauty of the conversation you all have is it's actually not a number conversation. You can't outnumber him.

He's going to always have, well, you're not seeing this picture.

Well, and let's be honest, it's worked out for him.

Yes, he's been very fortunate to have great jobs. They financed a bunch of his bachelor years. He's had great travel, lived all over the world. Yeah, so lucky. And he has invested, I give you that. But we're making big decisions now because we don't have a house. We need he has not ever bought a house. I have before in a previous relationship. And yeah, I think he's a bit scared of—

there you go. And that's, that's what I'm saying. Like, the conversation to have now is the bachelor life you had is over. In fact, the first marriage that we had, when we had— we didn't have a kid, it was just us traveling around the world doing what— like, that marriage is over. And now we have a new marriage a new life that we're both co-creating together. Who do we want to be in that marriage? And that's when you— we're not talking about why you take a loan and we got the cat, because that gets, that gets to be a proxy war, gets to be a distraction from the conversation, which is I want to live a life with just you where we are never beholden to anyone, where we are always constantly free. And so anytime we take out a loan, we're now— they're our boss. This mortgage company is our boss. And this car company is our boss. And this credit card company is our boss. I want you and me to be the drivers of our destiny. And because you're a millionaire, y'all can do that. Right? But this is about you saying, here's what I want.

Here's the life I want to build. What life do you want to build? And y'all put that out on the table and discuss that. Cause y'all are— otherwise you're just going to get distracted and he's going to actually be right because all the data he has in his life up until now is it always works out, right? And so you trying to fight that is, is a futile game because for him it's always worked out.

It's the only life he knows.

And yeah, because I've got the budget and I'm kind of going, because I don't know, has he ever looked at the budget in a meaningful way? Has he? Yeah. Um, or is he just like, hey, cool, nice for you that you have the 'But I'm gonna keep living my life.' He's kind of like, 'We should go to Portugal, that'd be great.' I'm like, 'Well, how much are we gonna spend?' He's like, 'Well, it doesn't matter.' Okay, well, it's so—

well, so also part of this conversation is you haven't been part of the lifeblood of your home.

You've probably taken on responsibilities that he's had majority voting share.

Yeah, and he takes care of this part of it, and now you're saying, 'Hey, I want us to do our life together.' that's a total sea change, that's a new marriage.

Right, and I said to him, you know, we've got the EveryDollar budget, so I'm kind of starting to record stuff just so I have visibility. And I said to him, that doesn't mean that I'm gonna take all the decisions away from you, not at all, and I don't wanna do that, but I just wanna have visibility so that we can say, well, we just spent $40,000 last year on travel, is that okay? Or do we wanna spend $20,000? And so then when he's like, do you want, should we do this trip? Yes, I want to feel confident making those decisions rather than be like, can we really afford this? I mean, we can, but also I want to afford a house.

But you want to do it intentionally instead of just, he's the free spirit and you're the nerd and you guys have never really called that out. I'm guessing you guys don't have combined finances in every area.

That is correct. And that's the other thing that I've been battling for the last couple of years is, hey, let's just pull in the money we have from our previous country. Into this one. He's like, well, how much is that going to cost us?

So he has his savings, you have your savings, there's one kind of checking account that you can both pay bills out of together. Is that what happens? Yeah. So how much does he have in savings?

Uh, I just wrote it down. I looked at all of our bank accounts together.

So you have access to all of his bank accounts?

I can— yes. Okay. I can see it now. We have $582,000 in cash.

Wow, no wonder he's like, let's go to Portugal, we got money to burn. And you're going, hey, I'd like to own a home, that money could go there. And so you guys really have different— you're going in totally different directions. Yeah, it's a tug of war.

Visibility is one thing, um, and the shared decision-making. I do want to be confident in making the decision and not just leaving it to him. And we had this conversation a little while ago and he's like, why do you care 'Now I'm like, well, uh, when we moved here— and I'm not from here— when we moved here, I was 30 weeks pregnant. I had a lot going on. I was finishing our house. I was living in a new country. Um, yeah, I didn't care. It was not on the radar. But now that we're kind of like, okay, we've settled in and we're, you know, living life— and I've been working— was working for a couple of years, not, not right now.

Um, but his line of questioning was just defensive. Well, why do you care? "now." It wasn't, "Oh, I love that you want to be involved.

Let's create some goals and vision for our life together." And also, Katie, you have to be honest if you're a fun partner to do life with when it comes to these things.

Well, I want to be a fun partner. That's the thing. I, you know, he's a fun personality, and I want to be able to be, "Yes, let's do that. Let's have fun. Let's do those crazy things. Let's go on the helicopter," right? Right. But I'm not sure how much we're spending. I'm not sure, you know, about a few of these things. And I just kind of like, until I have the full visibility, I don't feel I can, I can be that fun person. Have you shared that with him?

Like, hey, I'm not trying to kill the fun, I just want to make sure that we're planning for the fun because I'm more Type A and it gives me peace to know ahead of time what we're going to do.

Yeah, I don't think he believes me necessarily because I think he thinks I'm going to put him on on a leash.

Do you put him on a leash in other ways? Have you put him on a leash before? Nope. Okay, then, then that, that's him, that's him just projecting out. He's making up stories, right? Right. But, but there's something to be said for the honesty of your biggest fear is that I put you on a leash. My biggest fear is that we have no leash and we run out.

Well, it's not even that we run out, it's just that we don't make smart decisions. And i.e., if I want to spend— let's say we find a house that's $850,000 because in our neighborhood, $850 is not unreasonable. And he's like, "I only want to spend $650." Okay, so what? I want to be able to be like, "Okay, we can't afford $850 because of A, B, and C. Wouldn't that be awesome? Let's make that decision together," rather than the fear of not being able to afford it because we don't really have a good plan.

So he can justify it when he wants to use the numbers against you and weaponize them. Recognize it. Yeah, I have a good example.

We made an investment. Okay, good. Investment with a friend, um, in a hotel without telling you.

No, no, no.

Okay, he told me over time, but it started out with 50 grand and then more and then more. We're at 200 grand with zero return in 6 years.

Oh my goodness, you guys probably need a counselor more than you need a budget. But I'd recommend both.

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Our Scripture of the Day, Philippians 1:6. God, who began the good work within you, will continue his work until it is finally finished. Michael Jordan once said, some people want it to happen, some wish it would happen, others make it happen. How's that motivation for you?

That's a good line. I like that.

Meredith is in Raleigh, North Carolina, up next. What's going on, Meredith?

Hey, yeah, um, so I am a recently divorced single mom of 2 kids, and I've discovered the Baby Steps to kind of help me get back on track. And I'm at the point where I'm almost ready to start investing my 15%. Awesome. However, I am— I'm in real estate, and I own a property management firm on the side. Every month my salary changes. I'm just curious, what's the best way to go about calculating my 15%?

Well, you know what a bad month looks like. You know what a good month looks like. Have you had any $0 months? What's been your lowest month in the last, say, 12 months?

Yes, I've had some zeros.

I run myself as an S corp, so I pay myself a monthly reasonable salary. Um, so I don't know, like, do I use the 15% from that salary or— Yeah, what'd you report on your taxes?

How much income?

Um, like $140,000. Great.

So I would base it off of that or whatever you're going to, you know, have this year. So you go, all right, $140,000, 15%, that's $21,000 a year. Every month I need to be doing $1,750 into some type of retirement accounts.

Okay, so just pick a number and like stick to it every month.

And then whatever comes in, the other way to do it is, hey, if I got whatever comes in that month, I'm investing 15% of that. If nothing comes in, nothing gets invested. If $20,000 comes in, 15% gets invested.

And do you do that based on the growth, or do I like subtract out all my business expenses?

Well, if it's business expenses, you can, because whatever you're actually taking taking home is what you want to factor the 15% on. So whatever your gross income you're taking home, you want 15% of that. Okay.

And then should I have like two separate savings, like two separate 6-month accounts, like one for business expenses and one for personal? Or is my like emergency fund only like personal?

I would keep your emergency fund and a retained earnings account with your business. So if you know there's expenses coming up, I I don't know what kind of overhead you have. Some businesses don't have much. Some, you know, I need to invest in this, I need to replace this, I need to cover the taxes here. So you can figure that out with your CPA if you have one on how much you need to set aside for your specific business. But I think having both and separate is wise. Business checking, business savings, personal checking, personal savings. Okay. Absolutely. And this is a good, for anyone with a regular income out there, I always recommend having sort of a peaks and valley fund outside of your emergency fund. Emergency fund, if you know you're going to have a great month, well, you know you're going to have more than you need for your expenses. So set that money aside in savings so that when you have a low month, you can then pull money out of that without dipping into the emergency fund. It's how farmers have lived for centuries. Centuries, yeah. Yeah, they know, like, I'm going to get the harvest once a year.

Once a year. And I need to put that money away to cover my expenses for the rest of the year. Live like a farmer. Live like a farmer. George means farmer in Greek. Fun fact. Fun fact. I always try to give you one, Jon.

That didn't feel as fun as I was hoping it would.

It's fun to me. I never said it was fun for you. It's just fun for me. There you go. Caleb is in Phoenix up next. What's going on, Caleb?

Hey guys, I want to thank you for just everything you do. My wife and I started following the Baby Steps 3 months ago, so it's completely changed our perspective on money and you guys are awesome. Love to hear that. Yeah, so my question is, I'm in a leased car right now. I hate myself now after listening to you guys. So I'm 4,000 miles over it and I've got 13 months to go. I'm just trying to figure out what I should do, whether save up money for the car, save up to pay the fees at the end, or buy a car now to put miles on it.

Ouchie. Out of curiosity, what is the fees for going over your mileage?

It's 25 cents a mile.

Oof. Yikes, homie.

Okay. And we're just going to continue down this road, literally. Because you're just driving too much.

Yeah, my, my work commute's about 40 miles a day, and that's just accumulated over the, over the time. Hmm. Well, there's 3 ways out.

None of them are fun. All of them are painful. There's early termination, which is the most expensive way to go. There is the lease transfer, where you find someone else to take it over. Good luck with that. And there's the lease buyout, which is the most popular one, where you need to come up with the full amount. So have you figured out the early buyout out?

I haven't. I put a significant amount down, and I know I only, like, owe like $6,000 left on it.

Yeah, but that's not what the early buyout's gonna be.

I would contact them and say, hey, what is the early buyout amount to get you out of this thing? And then that becomes the number to save up for. If you want to then own the car, then you can decide, I'm gonna sell this car, I'm gonna keep this car.

Got it. Does the fact that— so my payment's really low. I actually traded in a paid-off car for this So I put $10,000 down, so my payment's only $240. If I terminate this early, is that gonna hurt me because, you know, I don't get that $240 payment for a little bit longer?

It's not the $240 payment, but your balloon at the end of this with penalties alone is gonna be thousands of dollars.

Right. That's the number that really matters versus the payment. So how much do you make?

Um, about $100,000 a year. $1,000 a year. OK.

And how many months are left on the lease? 13. OK. So I would at least find out from them. If there's only 13 months left, you may be able to afford it. Do you have anything saved?

Um, no. I just paid off a bike and I've got like $2,000 left in savings. OK.

Well, we need to figure out the buyout price and that will give you the homework to figure out if this is going to be worth doing. If you're going to do it, the lease buyout is the best option financially speaking. Speaking, because then at least you own the car and then you can sell that car for what it's worth. So the hope is that you find out the buyout amount is, let's say, $20,000, $15,000, but the car is worth $30,000. So now you buy it out and you then sell it and you have all that money to go buy yourself a different car in cash. Got it. Okay, that's the fun way out.

Do you have any other debt? Uh, yeah, my wife's car. We only owe like $19,000 on, but that's it.

Caleb, I gotta stop you. I don't want to ever hear the word only in front of debt ever again. It's only $240 a month. It's only $19,000. You're right, you're right. That's, that's us justifying our decisions.

I know you've done this on the back of a napkin. How much are you projecting in fees, in mileage fees, are you gonna have to pay? Oh, it's gonna be bad.

Well, my work commute's gonna get short here in the next couple months, so I don't know what it's going to be. I just know I'm gonna stop driving this car as soon as our work location changes, is what I was planning on.

I'm just wondering if it's cheaper to Uber to work every day.

It might be, I'm not sure. I'm actually, funny enough, the bike I have, it's a dirt bike, and the new shop location that's opening up is so close that I can actually take the desert to drive there. I was gonna ride the bike to work.

Wow, that's pretty desperate. I mean, based on your payment, $240 in 13 months, that's a little over $3,000 remaining in payments. So I don't think it's going to be that big of a number, and I'm hoping the car is worth more than $3,000.

It definitely is, plus the $10,000 you've already put in it.

So let's say $13,000. There's a real chance you call them and they give you a, a smaller number than I have in my head right now, and the number I have in my head head is dramatic and caustic because that's kind of how I, how I do life.

That's what's happening in John's brain, right?

You might get a, a $3,000 or $4,000 or $5,000 number and that would be worth scratching and clawing and just buying this car and taking that. I mean, think about how stress is. You can't drive your own car just to go run down the street because, or to go to a buddy's house and you have to calculate, oh, that's gonna be $8 for me to go to my friend's house because of my—

Just too much wear and tear, so we're going to ding you for that. So these are— leases are my least favorite. And if you're thinking about it, you're going, "Well, it seems like a good deal. The payment's lower." Well, that's because you own nothing at the end of it. You're just prepaying the most expensive section of depreciation and then handing back the car.

And by the way, tell me if I'm wrong here, George. By putting $10,000 down on a lease, you just wrote them a check for the depreciation. Depreciation.

Oh, they're very happy to get some money up front.

You gave them cash for the depreciation.

They're winning on every side. And it's why you're going, well, if you know, it's the best. It's— people go, George, it's so smart, because they're covering everything. All the maintenance is covered. They're happy to sell you that, that dream. But the truth is, they are making so much money on it. It's why they push people towards leases.

And they take the car back after you've paid for all the depreciation after 2 years. They've maintained their vehicle. Now they have an asset to sell, and then they call it, uh, certified used and resell it at premium price, and minus the depreciation that you gave them cash for. They've changed the oil on their car, and now they've, they've won twice.

That's a genius scam, man. That puts this hour of The Ramsey Show in the books. Remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.