Transcript of The Payment Mentality Is Keeping You Broke New

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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. And I am Rachel Cruze hosting this hour with my good friend and co-host of Smart Money Happy Hour, George Kamel. And we are taking your calls live at 888-825-5225. So give us a call. All right, kicking us off this hour in Austin, Texas, we have Tracy on the line. Hi, Tracy.

Hi, how are you?

Hi, we're doing great. Thanks for calling in.

Yeah, absolutely.

How can we help today?

So long story short, we've had some financial losses that were out of our control. You know, our income has gone down, our costs have gone up. We've blown through all of our savings trying to, you know, stay afloat. Went to credit cards to, you know, for all of our business expenses, our household expenses, all of those things. And we're still behind, borrowing from family, all of the things. Right now, we are running at about a $5,000 deficit a month, even, you know, all things considered. I'm just trying to figure out, you know, do we— At what point do you give up and file bankruptcy? You know, do we keep trying to dig out of this? Like, what is the smartest path forward with everything that's happened?

So what do you guys make? What are you bringing in a month?

Um, we— it's, it's variable, so it's about, um, $12,000 to $17,000, uh, but $250,000 a year on average.

Okay.

And you're— and you are So you guys make $250,000 a month, or I'm sorry, I'm sorry, a year. Yes. And you're still behind $5,000 a month. What are you guys spending your money on?

Well, a lot of it is going toward credit cards. So about $4,300 a month is credit cards and fees. Unfortunately, a bunch of our cards are, you know, 12% to 30% interest. So I've reached out to them for their hardship programs and tried to get the interest down so that we're able to tackle more of the debt. What part of this—

It wasn't in your control. You were saying something about how it wasn't in your control.

Yeah, yeah, yeah. One of our companies that we run, someone had embezzled money from us and it took away about 70% or 80% of our income.

How much money are we talking?

They embezzled about $1.6 million.

Oh my gosh.

Total, yeah.

Are they in jail?

No, no. It happened in a big city and they have bigger fish to fry.

What do you mean? You didn't press charges?

Uh, it's, it's, it's all— I don't know how much I can say. Um, they're, they're working on it.

Um, but do you have an attorney?

Yes, yes, we've got an attorney that's, that's working on it for us.

Um, you acted like you're like, well, it's bread, it's water under the bridge, we're moving on. Big city, what can you do?

No, we had investors, um, and it was our investors' money that was in— it was a whole situation.

But, um, okay, so it wasn't your money to begin with? You didn't go into debt $1.6 million.

No, no, no. But we managed that fund and when the fund disappeared, our income disappeared. So we, you know, we've taken on additional jobs. We've cut business expenses that we didn't need, you know, sold assets that weren't performing. You know, so we're, you know, selling everything that, you know, the, like, yeah, what's the saying? Like, sell so much the kids think they're next. So yeah. Yeah.

Okay. So what other debt do you guys have, Tracy? I'm just trying to figure out where, where $15,000 a month is going. How much is your, how much is your Um, the mortgage is $5,500.

We did take out some of our equity to try to pay down, um, pay down our assets, so, or our debt. So, um, the, the home is worth about $700,000 and we owe about $550,000 on the, on the mortgage. So, okay.

Um, so was that a HELOC you took out or a home equity loan?

Yeah, we did.

Okay.

Financed.

Um, And then we've got about $3,000 to $5,000 a month that's going out in expenses for, um, the businesses that we run out of our home. So we've got, um, you know, the $4,300 in, in debt service, um, you know, $13,000 to $14,000 in monthly expenses, kids in college, you know, all of, all of those things, um, you know, tuition, rent, and then our business expenses. So it comes out to about $20,000 a month.

Okay, is your business expenses, Tracy, not with inside the business? Why is that coming out of your income?

Your personal budget. Yeah. Well, it's kind of all in one lump now, like, because we're just trying to keep everything current. So I'd like, I'm not even taking a paycheck.

But you have a business checking account and you have a personal checking account and you're paying business expenses from the business checking?

Yes, everything is coming from the business checking. I'm not taking a paycheck from the business anymore.

But the $3,000 to $5,000 on business expenses is coming out of a business account that has nothing to do with the $12,000 you're bringing home every month, correct?

Sure.

Yeah.

Okay. I mean, yeah, and I would separate it. Okay, so then you got kids in college.

Yes.

Um, are they working?

Uh, no, have a good number.

Speak directly in your phone, Tracy. We're having a hard time hearing you.

Oh yeah, yeah, sorry. Um, they've, uh, we've got scholarships and grants, um, so there's not a lot that's coming out. It's about $1,700 a month, um, left over in, in tuitions and fees, but they are applying for scholarships like it is their Full-time job. Okay.

And what's the total amount of debt you guys carry outside of your mortgage?

Um, so the total, the total debt, we have some unpaid taxes, so it's hovering at about $270,000.

Goodness gracious. Does that include the business?

Um, yeah, those are, uh, business.

Separate that out. What, what is just for the credit cards?

Yeah, just credit cards is $152,000. Um, we owe, we owe family $30,000. And then we owe $88,000 in back taxes. We had an employee that said she was filing them and she did not. So we've had some things pile up. So we're just trying to doggy paddle through and figure it out.

Well, the key's gonna be just debt snowballing this, listing it all out, smallest to largest balance, and attacking the smallest one with a vengeance and just keeping up with minimum payments on the rest. But the income needs to go up and expenses need to continue to go down even just to work the snowball.

Yeah, I mean, Tracy, the way to do it and it's gonna be harsh, but you guys have to make a list of everything. And when the money runs out, the money runs out and we stop. We do not continue to borrow on credit cards. We don't continue to borrow from family. Whatever that $5,000 is below the line, food, shelter, utilities, transportation, you get your four walls, you pay your insurance, everything else below is a want. Like kids in college, sorry kids, mom and dad are broke. We're on the brink of bankruptcy. We can't keep paying your rent.

Like we're done.

Mathematically, we can't keep up our lifestyle. And I think there has— you and your husband, you guys have to come to a really hard reality of that we can't keep doing this. And I know that's why you're calling us, but like that has to seep so far down that the sacrifice is so deep. Like, you know, do you guys have anything owed on the cars at all? Are those paid off?

Sorry, you broke up again, Tracy.

Oh, sorry. No, cars are paid for. We drive old cars. I even tried to sell them and see if we could put, you know—

Here's another issue is this mortgage is huge compared to what your take-home pay is now, which is $12,000. It's almost half your take-home pay just in this new mortgage. So you might need to look into selling the house and downsizing if you can't solve this within 6 months.

Yeah, because you asked about when do you just file bankruptcy? Well, you sell everything, including the house, to avoid a bankruptcy. Even cash. I don't want you to right now because we don't have enough time to dig into the numbers of like a 401(k). You do all of that to avoid a bankruptcy. But the IRS goes to the top.

That's the first thing on your debt snowball right right now is those back taxes. And Tracy, I heard a lot of, well, this person, well, it was their fault. At some point, we got to look in the mirror and go, I'm responsible. I'm the one in charge here.

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Up next, we have Sally in in Los Angeles.

Hi, Sally, welcome to the show.

Hi, thanks for having me.

Yes, absolutely. How can we help?

Um, big picture, I recently sold my house and I was able to, um, get about $300,000, um, kind of tax-free because it was— I didn't have to qualify to do any capital gains on it because I lived in it in the past couple years and whatnot. And, um, now I'm sitting on this little nest egg of mine and I keep— I've invested like the first $50,000 into stock. And there's obviously some fluctuations on a day-to-day basis based on what the President of the United States sometimes also tweets. Things change and whatnot.

What do you mean, Sally?

What do you mean? What are we supposed to— I just like— I'm like, I want to move, but I feel like I'm almost playing like hopscotch here where I'm like, no, no. Can I go now? And I'm like, I— right now it's just sitting there and I'm like, I'm thrilled I have it, but I also just— I don't want to be irresponsible.

Are you needing this money anytime soon, or were you looking at this just to put away for years down the road?

I'm looking to put it away. I think that is the best solution for me. Um, I, uh, my husband and I were doing fine, pretty much. He's covering all the current expenses. We have toddler, we're, we're doing it. And I don't— we don't have any debt, um, or anything along those lines. Um, I don't feel like I can purchase anything with what I have in our current area. It's a high cost cost of living area. So that's not really an option either. It can be put away for a moment. Um, and, but I'd also like to maximize some of my earning possibilities for it as well.

For sure. So do you guys own a home?

Well, uh, he owns a home that we don't currently live in. He's renting it out. I also was renting out my old house before I sold it. And honestly, I sold it because I was like, I hate being a landlord. This is not the business for me. It gives me so much anxiety.

Yeah.

Um, So we have homes, um, we have, you know, the—

was it like—

so we have the deductions from like being homeowners. We also have deductions from being parents. And so, um, in this specific area, it's quite expensive. So it's like, I don't know if my little nugget would really make much of a dent.

Well, I think eventually you guys need to talk about homeownership. So whether that's you guys moving, back into maybe the home that he owns. Are you guys, you guys are married?

Yes, we are.

Yeah, yeah, yeah. I mean, homeownership needs to be a long-term goal for you guys. And I know that you're in an expensive area, but for your, you know, financial future ongoing, homeownership will be the cheapest route because rent will just continue to go up, right? So, so letting that be—

I totally agree.

Yes, so letting that be a goal, which this money could be used for. And I understand you're saying not right now, which is totally fine. So we always say investing you want to give it around a 4-year kind of benchmark. So to give it 4 years to do the up and down, and in that time there'll be an election, like, right, all of that, right? So you think about the timeframe that kind of feels good to ride out the highs and lows if you're going to use this money down the road. So if you're going to use it less than 5, than 4 to 5 years, I would not invest it. But if you think you're going to keep it in somewhere for 4 to 5 years, then yes, investing still for me would be the answer because we're not looking at what you're saying, a 30-day span, right? If you looked at the last 30 days, yeah, it looks insane, but that's not always the case. In fact, last year the market was what, 20?

Yeah, over, over 20%.

20% last year, which is just exactly crazy.

So I don't want to even do like a high-interest like savings account. I'm like, I just feel like that's like money left on the table.

That's right.

That's right. Yes.

So that's why the investing has a long-term— you have to have a long-term mindset. And so right now, actually, actually, which, George, you talk about this in your book, Breaking Free from Broke, when you buy low, which is what it is, you know, right now with the volatility, you're actually going to get to buy more shares, if you will. So as everything goes up, you kind of have more eggs in your basket, if you will, when the market does go up. Because over the course of, you know, the trajectory of the, of what the stock market has done since its inception, like, it does go up. The American economy overall goes up. So that just means you actually are going to be making more down the road if you buy now low. But that's kind of an investor's mindset.

Yeah, I I always like to say time in the market beats timing the market. And right now, Sally, it's stressful because you're trying to time the market.

Mm-hmm.

And only God knows what's gonna happen, right? And so it's just easier to not look at it and just know I'm gonna lock this money away and just let it ride and keep adding to it. And then 4 or 5 years from now, you're gonna look up and there could be $500,000, $600,000 in there. And now that's a serious down payment, even with the prices in LA 5 years from now. And so I would make it a goal and say, you know what, instead of going, well, we can't buy a house, just go, we're gonna buy a house and we're gonna save up $500,000 $300,000 as a down payment to do that.

Yeah, I like it.

So what is invested in? Because you said, I'm invested in stocks and that scared me. Do you mean single stocks or like an index fund?

No, index. Um, and honestly, I don't feel like the most fluid with having this conversation on that topic. I right now just have like, um, I took $50,000 of that $300,000 and it's in like VOO.

Sure.

And then the rest is just like sitting here.

Yeah, you can invest the rest in there and let it ride and keep adding to it every single month. Make it a goal, hey, we're going to add $3,000 a month to this. That's $36,000 a year growing for us with compound growth. And you can do some projections and see that 5, 6, 7 years from now, it's probably gonna be closer to $700,000 if you do it this way. And then when you have enough to where you can go, all right, we can take out a mortgage, it's gonna be 25% or less of our take-home pay, 15-year fixed. Let's go ahead and pull the trigger and get this house.

And I get it, Sally. I mean, and, and when I think about investing personally, I really, I look maybe once a year at what's going on because I would give myself a panic attack every time I looked at the The market, to your point, specifically right now—

And you only look when it's down. Nobody looks when it's up and doing great.

That's right, and that doesn't hit the news either, right? It was not like flashing all over everywhere of how amazing the last 2 years were.

They're at record highs when it's hit.

Yeah, I mean, the last 2 years have been insane. And then this year, not so great, but that's what we're seeing in the news. And so, and I get it, Winston and I actually had some money in a high-yield savings that we, I actually talked to you about this, and we pulled some of it and invested it, literally, Sally, I think like 32 days ago. It was like right before everything hit the fan. And Winston and I were like, "Oh, that's so good to see it go down." Like, we— and I was like, "This is why I don't— this is why I do not look." Because most of the stuff, you know, I'm like, just—

The vending machine ate your money.

Yes, that's how it felt. But then, I know, I go back to my brain of what I just talked you through, of what I know. And I'm like, "We're not needing this money for, you know, a couple of years. So, like, just let it ride and let it do its thing." So, that is what you would have to do. And it would be the smartest thing. I would still do what we did. Yeah, again, because I know what's happening, you know?

And if you can, Sally, I would auto-invest it. And that way it's out of sight, out of mind. I don't want to see the money. I want to just leave and go straight to that investment account. I don't want to touch it.

And the reason you can be so, you know, blinded by it, if you will, is because what you're investing in is, is, has, has a good track record, right? What we talk about with index funds or even mutual funds is you are buying you know, 200, 90 to 200 stock in a mutual fund. And even with some of the index funds, you know, it's the S&P 500 in general.

Top 500 companies.

Yeah.

So, based on market cap.

And so that's why you can kind of not have to look at it and feel like you have to manage it because it's just doing what the economy's gonna do, right? It just kind of rides that wave versus stressing about Apple or Tesla or whatever, right? If you're trying to manage single stocks and all of it. So that's kind of the beauty of that diversification method. That index funds or mutual funds give you, gives you is because there's, there's a lot of kind of safety in it. Because if it all, if it all hits right down and it, and it all kind of falls out, then the American economy is done. Done.

So we got bigger fish to fry. Every company in America goes bankrupt. We're like, all right, this is the end.

That's when Hoarder Rachel.

What's helpful for me, Sally, is when you're looking at the line graph of like returns on whatever investment you have, I never look at it less than a 3-year. Because if you look at a 1 week, a 1 month, you're freaking out, even 1 year. But when you look 3 years, 5 years, 10 years, the further back you go, the more up and to the right it goes. And so that's just a good perspective to have, that you are investing for the long term. It doesn't matter if you on paper lost $20,000 because you didn't. You didn't sell. You hung on to it.

Yeah.

So keep, keep up the ride.

I think I need to just have talked, like, get out of my way because I've never I don't come from money. I've never— I'm thrilled that I'm here today now having this opportunity. And I'm like, oh, don't mess it up.

Yes, yes.

You're doing great. You're doing better than you think.

You know, and that caution, that's a good spirit to have. I mean, honestly, to really research. Wisdom. Yes, research and understand. And you have to feel good about it. But George and I, that's what we do personally. So we would not tell you something that we wouldn't do.

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Tax season is upon us. So to get a free checklist and guide that will help you file, go to ramseysolutions.com/taxes. All right, let's head to Greenville and we have John on the line. Hi John, welcome to the show.

Hey, how you guys doing today? Hi, we're doing great.

How can we help today?

Uh, yes. So me and my wife are newlyweds, got married last year, and having a little bit of a disagreement on whether we should take a vacation this year. She's wanting to take a vacation, and I'm thinking that we should probably use this time to get a little bit more financially ahead to invest for retirement and save up for a house. And just wanted to call to get a fresh perspective.

Okay, so John, you're the money responsible guy and your wife is fun.

Rachel relates to her.

I think she does like fun. You're already losing the battle, John.

She's ready to spend and have fun. And you're like, we need to think about retirement, which is good and responsible.

She says, I'm not trying to paint my wife in a bad light. Oh no, I'm joking. I'm joking.

No, I'm gonna be probably more on your wife's team in the call. That's why I'm sorry.

Do you guys have debt? Do you have debt?

We do not have debt.

Do you have savings right now, like your emergency fund?

Yes, we do. We have about $23,000 in a savings account and then about $45,000 in a brokerage. Wow! Okay.

And are you investing 15% of the household income right now into retirement accounts?

Yes, we have about $54,000 in retirement. And how old are you guys? Uh, just turned 24.

Go on the freaking vacation, man. John, what do you mean you got to catch up? You're ahead of like 99.9% of America.

How much do you guys make a year? Uh, $115K.

Okay, how much is this vacation going to cost?

I don't know, probably, um, probably About $3,000.

OK. If I told you, "Hey, John, when you retire, you could either have $9.85 million or $9.9 million," would you say, "Yeah, I'm willing to take the $9.85 million. That's fine"?

Uh, yeah. I would probably be OK with that.

Yeah! That's what we're talking about here. You guys are going to be multi-multi-multi-millionaires if you keep living this way, but you're going to have a miserable marriage. If you keep living the way you're wanting to live. Which is, well, that money is an opportunity cost. And you're talking to the nerd of all nerds.

I was going to say, you got George Campbell to spend all of that cash.

If you guys seriously had some, "Hey, we got a lot of debt that we're walking into this marriage with. We got to clean this up." I'd understand. You went on the honeymoon. Let's take a pause on vacations until we got our mess cleaned up. But there's no mess here. You guys are doing everything by the book. You got plenty of money. You're not going to stop investing to save up for the trip, right?

No, no, I think I just get nervous because we've been really trying to save up for a down payment for a house and everything's just so expensive, so it just makes me nervous. Or I'm just, uh, I get in my own head of what could happen or anything like that.

Well, do the math. The $3,000 in vacation is going to cost you maybe half a month in your house down payment fund, right? Yes. I mean, the next paycheck you could fund this vacation.

Okay. Right? Okay, that makes me feel a little bit better.

Yeah, it's not gonna delay your home ownership goals. So don't let the fear of, well, I'll never be a homeowner, mean I'm not gonna go on a trip for the next 6 years 'cause we gotta get a house, we gotta get a house. You're so young, you're doing so great. You guys will own a home before you're 30 and you're gonna do it the right way and it's gonna be super peaceful and be a blessing in your life. But if you don't also learn how to let go and live, you are going to be miserable in that house.

I was afraid you were gonna say that. Wow.

Tell your wife she won the argument. Not that it's a competition, but you know what, I think it's 3 on 1, John. Me and Georgia.

And as punishment, she gets $500 in fun money.

Yes, he kind of let me down.

You got to upgrade the hotel room now.

Upgrade the hotel room and she gets more fun money than you feel comfortable with.

That's, that's, yeah. That's the consequences, John, you know?

Okay, okay, that's what I'll have to do. No, it's a good—

We're playing around.

I appreciate the caution and wanting it, but let me encourage you that our friend Arthur Brooks talks about 5 things you can do with money. And he said 4 of them actually can bring you happiness and 1 does not. The one that does not bring you happiness is just buying stuff. But one of the things that can buy you happiness out of the 4 is buying experiences with people you love.

And he said that's one of the best ways to spend your money.

Yes, and you go and have an experience with people you love. That actually incurs a level of happiness in your life. So we are, yep, that's George and I's marriage advice to you. Enjoy and have the goals, but you guys have them. You are on track, you are good. Nothing's going off the rails. And yeah.

And I'll be honest, I'm kind of living vicariously through them because I wish I went on more trips when we were newlyweds. "Oh, yeah, now that you're a dad, too." Yeah, we went on one great trip in 2019, and then COVID happened. We didn't travel. And then we had a baby. And now you're like, "Well, we got at least 2 good trips in." It's so true. You're going to look back and go, "Man, we got kids now. It's much harder to travel." So when you're newlyweds, I'm like, "And you're doing this great." And it's $3,000.

I'm like, "Go!

Go enjoy!" 6 figures, debt-free, emergency fund, retirement's kicking.

Let's go, buddy! Yes, so great! Well done, John! You guys have done an Fabulous job.

Fabulous. We can beat up on you because you're doing so good.

I know. I was like, your wife seems like the funner. He's like, I don't want to paint her in a bad light. I'm like, not here.

She's in the best light.

We like those people. We like her. All right, let's go to Brandon in Columbus. Hi, Brandon. Welcome to the show. Hey there. How are you guys? Hi, we're doing good. How can we help?

So I'm self-employed, make about $50,000 a year. I have about $66,000 in a high-yield savings. And then aside from a mortgage, I have about $50,000, $48,000 in debt between a truck, a garage, and then a loan to finish the garage. I'm trying to determine if it's best to kind of deplete that safety net and pay off some debt, or if there's something else I should be doing with it.

You say you make $50,000 a year? Yep. And your truck is $48,000.

You have a loan on it for $48,000. It's, it's $28,000.

Oh, I'm sorry. That's okay. And then I have a garage that I run the business out of. It's $17,000. And then a loan to finish the garage, like drywall and all that good stuff. It was $6,700 is what's left. I gotcha.

I gotcha. Okay, so, so yeah, to answer your question quickly, yes, I would. I would take it down to $1,000, which is going to make you sick.

You're gonna be like, oh my gosh, just know that it's a false safety net. Because if you lost your job today, guess who doesn't care? Every lender you owe is still going to demand that payment. And so you're going to feel a whole lot better and more peaceful taking your account from $66,000 down to whatever, $10,000 or $15,000, that you'll rebuild real quickly without those payments in your life. Okay, that's the simple answer. I didn't know— are you going to do it though? That's the biggest question on America's mind right now.

Well, that's what I think. I've asked for advice from people I know and nobody could— hey, do whatever you want to do. And so I'm like, I got to reach out to somebody else and third party and see what they say.

Yeah, because the great thing is you'll have around $14,000 still left over in that high-yield account. You won't take it all the way down to zero or to $1,000.

So you'd still be able to cover any emergency that came your way in the few months until you build it back up. And then you'll be truly free.

Are you married, Brandon? Girlfriend living with.

We have a child together. Okay.

All right. Yep. So that's, yeah, that's what I would do though, is I would go ahead and pay off all the consumer debt and then practice, you know, paying for things that you can afford, right? That we're not gonna continue to go into debt. Because if you count this $14,000 as an emergency fund, you may wanna bulk it up a little bit. Then the beautiful thing is you get to move on to investing into retirement, right? And start really looking towards the future with this money instead of having to pay for things in the past, which is what debt basically is.

Right. This is your never go into debt again insurance plan. Once you become debt-free with the emergency fund. So next time you have a project, it's not, well, I gotta take out a loan for that. I gotta take out a loan for the truck. You just learned to go, I'm gonna save and pay cash. I'm a guy who doesn't owe money to other people.

And well done on saving $66,000 though, for real. Because I mean, by tomorrow you could be completely debt-free, which is incredible for a lot of people. You know, they are having to work extra, you know, cut the expenses and it's a year-long process. Best to get out of that debt.

I might use some of that remaining savings for a wedding ring. Never too late. Just saying. You know what?

Y'all have a kid together. If she's the one, do it. Seal the deal, Brandon.

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All right, let's go to Sean in Indianapolis. Hi Sean, welcome to the show.

Hey, Rachel and George, good afternoon. Thanks for taking my call. Absolutely.

How can we help today?

So yeah, we are in the wonderful world of navigating home, auto, and umbrella insurance policy renewals, and our insurance agent recommended a product that is somewhat new to us and was hoping to see if you have a position on, is it something wise to purchase? Specifically, it is a standalone wind and hail insurance policy. For the home.

And that being a separate policy beyond just the homeowners with your roof and all of it. Okay. So what does that cover that's different than— than if hail— if hail damaged your roof? Yeah. Yeah. If hail damaged your roof, you would have insurance to help replace the roof. If you—

even if you didn't have wind and hail product, the way that it's described is that it would be specific to wind and hail and it would essentially bridge the deductible on the homeowner's policy. I believe. So something again, relatively new, and we weren't able to find a whole lot of additional information. And we're seeing if you had familiarity with that type of a product and is it a wise purchase?

How much is it extra?

It, it's low. I mean, it's less than $230 per, for the year.

For the year.

Uh, but it's essentially just covering the deductible. Is that what you're saying? It's covering that gap?

It does. Exactly.

Okay, because your homeowner's policy does cover it, but you're saying this other policy is basically a deductible insurance policy?

I like the way you said that, George, right? And it's insurance on insurance, right? So it bridges the gap of an increasing deductible on that type of peril, you know, wind or hail damage.

Oh, interesting. So how much does it actually cover? What's the dollar amount?

Up to $12,000, which would be the deductible on the homeowner's policy for such a peril.

And it costs how much a month or a year?

Well, for the year it's $230.

So call it, you know, like maybe $20 a month. Okay.

I'm just trying to figure out the break-even on this thing. I mean, you know, for the year, in 10 years you've paid $2,300 for this thing. And so if something happened in those 10 years and you needed to use more than $2,000, you're like, all right, that was a good buy. So do you guys have them? Is this like easy money for you guys to cover this thing at this point in your financial life?

Oh, most definitely.

It's not a burden at all. And in the same stretch, if you had to cover a $10,000 deductible, you'd be able to do that with no problem? We could. That's where I go, "Hmm, I might hang on to my money and just, if that happens, I pay it out of the emergency fund and move on with my life." Yeah, because there's going to be things like this.

It almost feels like an extended warranty feel to a degree of just—

It's a little bit gimmicky in that they were like, "Hmm, what else can we come up with just to make a little more money?" Yes, to kind of just tack back on to keep going.

Do you know what I mean? And it's like an, it's an easy sell, especially in the fear, you know, idea of, oh my gosh, in the middle of a hail or windstorm.

If this was an imminent threat and you didn't have an emergency fund, I might go, hey, this might be a good way to float the gap. For $200, it's like buying you some peace until you have that money. So at this point you can run some calculations. It doesn't seem like a no-brainer buy to me though. I would have some pause and go, I don't know if it's worth it. And at the same In the same breath, you could burn $230 on the kitchen table and not think about it.

Yeah, and it wouldn't matter. That's right, yeah. I think it's less about the money for you guys, Sean. It's probably more of the principle. So I would say if you did it, just be aware in the future of other things, 'cause there's all, I mean, companies are constantly looking at how they can make money off of people. It's kind of nickel and diming people, but to them, they're just making so much. And if people actually really do use it, so just, yeah, beware. I'd probably pass. I mean, we don't, I don't think, I think we would probably just—

Well, and figure out your number, 'cause some of these, policies, they'll say it's 1% deductible on wind and hail. So if your home is $300,000, you might pay $3,000 out of pocket. Well, then it wasn't worth paying $230 every single year for 10, 20 years. But if it's more than that and your house is worth $1 million, well, now it's bigger numbers. And so that's where the things I would start to weigh, you know, before you make the decision. But it's a non-fatal decision either way.

All right, let's go to Kim in Richland, Virginia. Hi, Kim. Welcome to the show. Hi, thank you. Hi, absolutely. How can we help?

I was wanting to get your assistance in potentially getting some money back from my bank. Um, my bank was— is a large bank, and they have closed multiple accounts of mine, um, back in early February. Um, I can tell you, give you the background on that if you'd like, but they've had my accounts closed and are holding my money. Since February 2nd, I've pursued numerous routes with them, numerous bank managers, numerous levels within the bank. I've also filed a claim with the OCC and the CFPB and still have had no success in getting any of my money back.

How much money are we talking?

I am not totally sure. I'm thinking it's around $5,000. The reason being, I literally filed— it's multiple accounts for people in my family, and we had all just filed our return. A little bit of tax return money coming back in, maybe $1,000 apiece. So it could be anywhere between, say, $3,000 and $6,000 depending on if those credits had come back. But I—

and why did they close the accounts now?

Um, essentially I was on 12 different accounts because I had opened accounts with all of my children, checking and savings, when they were sort of 15 and initially started working, and hadn't been tidy with my finances and taken myself off when they turned 18, 19, 20. So I have 4 kids, 8 accounts there and 4 accounts with my husband and myself, but I was central to all of them. My youngest child deposited a check that he thought was a refund check. The person that issued the refund check then called the next day and said, "Oh, that was a mistake. Can you wire us the money back?" And he knew instantly that was fraudulent. He called the big bank and said, "Hey, I deposited this check. They just called me. I think it's a fraud. I just wanted to let you know. I haven't spent the money." And they said, "That's fine. We'll take take care of it, and the next day they closed his account, which I was on, and every account that was associated with me.

Because of the fraud? Correct.

That's— um, so it wasn't great, and they didn't let me know. Um, I basically— my banking app disappeared, and I called the bank number and asked, and they said, oh, we closed all your accounts. And I said, without email, phone call, mail? Yeah. And they said, yes, that's our, that's our policy, is to close your banking app, and then you have to call us them will tell you that we've closed your account.

Okay, what did they say about the money? I mean, it's FDIC insured, so it's not going to disappear. They have to give you this money back legally.

Yes, I think it's just a delay after delay.

Are they going to mail you a check or something?

Supposedly they're going to mail a cashier's check, but every time that I speak with them, they say they're still in their, quote, closed process. How long ago was this?

February 2nd. February the So it's over 2 months now. Yes. I might send a certified letter to the bank's legal and compliance department. That's, that's more sure to get their attention versus customer service or like a branch manager who they don't have much power with.

Somebody in the— that is trying to resolve through the C— they've combined the OCC and CFPB and they are telling me they are with the bank, but that they don't have any power to force the bank to do anything within its own system. Them. So do you think the letter would have more power than that?

I mean, I'm just going to be the squeaky wheel. I'm going to hit it at 17 different angles until someone does something. You know what I mean? That's my style. I mean, you can also go to your state. Your state has a banking regulator, like a Department of Financial Institutions. And so you could kind of double up the pressure there. Okay. But again, do you need a—

do you need the checking account, Kim? The— what, like you had 4 with your husband, you said? Said. So do you guys need that to live off of? I mean, I'm assuming $5,000 spread out on all of those accounts. You don't, but—

Thankfully we did, no, thankfully we did have some in reserve at a credit union. And so we've pulled out of that to cover what was in those accounts. And of course we're still currently getting income. So I am thankful that we had that set up. I do listen to you guys. So that's what I've tried to follow up on.

You had some diversification in your banking. What's that? You had some diversification with your banking.

Is it Bank of America?

Who is It is Bank of America. Yeah, she knew it.

Ding, ding, ding. Corporate. Wouldn't put it past them.

Horrible. It is. It's horrible.

Oh man. It is horrible. It's why I don't do business with these huge banks. I love a credit union for that because they treat you like a person. And we have a great relationship with Fairwinds Credit Union. Kim, if you want to diversify now and have a secondary backup, Fairwinds is awesome.

Good people like that really do care.

Someone will actually pick up and help you, especially if you tell them Rachel and George sent me.

Yes, Kim, I'm so sorry. Yeah, I think the squeaky wheel approach is it, 'cause honestly, in a bank like that, you're just a number. It's just, you're just gonna be floating around out there. Like, they're not worried about $5,000, you know? So the more consistent you are, you know, you're 60 days out, but I mean, I would, I mean, daily probably just be calling, sending letters, doing what I can to get that, and then never bank with them again.

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Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I am Rachel Cruz, hosting this hour with George Campbell, and the lines are open at 888-825-5225. Up first, we have Matthew in Charlotte, North Carolina. We were just there last week. Hey, Matthew, welcome to the show. Hey, how are you? Hi, we're doing great. How can we help?

Uh, just trying to figure out how to stop living check to check. Um, my wife works, I work, you know, we have a house, cars, kids. And we just can't seem to get ahead. We're just treading water constantly.

How much debt do you guys have?

Um, you know, if we're not including the house, it's just the cars and probably around close to $90,000.

How much are on the cars? What's the balances of those?

Uh, my wife just got a new car because her previous car had a bunch of electrical problems. And we were kind of upside down on that one, and so they rolled that one over into the new car. And so that one's fresh, that one's at like $62,000.

Oh my God, what kind of vehicle is this?

It's a Nissan Pathfinder. Oh boy, nothing fancy. How much underwater are you? Uh, uh, I mean, I'm drowning right now.

No, is that— is it worth $40,000?

Uh, yeah, the car. Yeah, brand new.

Is it brand new? Yeah. Okay, so you said nothing— you said nothing fancy, Matthew. You guys just bought a brand new SUV, Pathfinder. So it's pretty, pretty nice. Pretty nice. Okay, so we're just gonna— let's just keep the reality where it is. You guys got a brand new—

and electrical problems do not necessitate going out and buying a brand new car.

That was an emotional decision. We don't have the— we didn't have the money to get its electrical problems fixed and it was out of warranty.

I understand.

I'm saying there was other cars you could buy. A $5,000 car. Right. So, okay. Yeah, yeah.

So I'm not trying to beat you up. I'm just trying to get to the root here, which is we need to own up to the things that we did and not go, well, we had to, because that's usually the sign you're going to stay in the cycle.

Yeah. And majority of this debt of the $90,000 is that one car. Car. So what, what is the other car? What payments do you have on it?

Um, I also had to get it recently. I got a used car, um, because my car was— I had $1,500 left on it to owe, and it required like $8,000 in work. Um, so what's the balance of this car that you have? Uh, 20.

What do you guys make a year?

Um, my wife makes about $45,000 and I brought home $96,000.

Okay, good. So you guys are clearing $140,000 a year?

Yeah, and not including my raise, my last raise that I'll be getting, which is of a $14 increase, so I'll be—

That's big, that's like $30 grand a year.

$14 an hour.

You're saying it's going up by $14 an hour?

Yeah, I'll be roughly about $50 an hour.

Okay, so what's the other debt? You got $20 on one, $62 on the other, that's $82. Is there another $8 laying around?

Yeah, between credit cards, About that, yeah.

Okay, well, the main thing I would do is get out of the $62K debt. That about solves the problem, doesn't it?

Right, but then wouldn't it tank our credit? And like, how would I go about that? I just tell the bank, hey, we can't afford it, and they take it? Here's what you need to do.

You need to come up with the difference that you're underwater on, which is going to be a lot because you guys rolled negative equity into it. It.

So how much— you might need to save up $20,000 to go sell this thing, but then you need maybe another $5,000 or $6,000 more to go get a used car for now in cash, right? But that gets you— what's the payment on that thing? About $1,200. Would $1,200 freed up change your life right now?

Uh, I would like to say it would, but I, I don't think it How much underwater are you guys every month on your bills? Electric bill is about $1,000. We don't have heat or air conditioning. We steal from Peter to pay Paul constantly. Well, you're making what?

You're taking home $9,000 a month?

Between the two of us, yeah, probably. Okay. She gets paid biweekly, I get paid weekly.

What you guys need to do tonight is have a come-to-Jesus conversation and make a budget for the first time time in your marriage where you lay out, hey, here's the next paychecks coming in, here's all the bills that are going out, we need to make sure that we're not spending more than we make. And you might, you might at least see the reality, and we're 2 grand underwater every month, and we're gonna cut up the credit cards.

Like, we're gonna give ourselves no options of going any further into debt at all, right?

Yeah, mine are in the freezer right now in a bunch of water.

Send them to hell. Forget the Burn them. They have not been—

you don't need them yet. And do you guys have any savings, Matthew? No. No. Okay.

No. Okay. What's your—

what's your wife— how, how is money between you guys in the relationship? When you— like, with the fact you're calling us, does she— is she begging you to, to change? Are you begging her to change? Like, where are you guys at?

Um, I mean, it's— I would like to say it's more her, um, constantly like she doesn't really get stuff for herself. I don't get stuff for myself. It's more or less like kids need shoes. You got $82 grand in vehicles.

I'd say that's getting something for yourself, right?

I mean, I see that as, you know, I need a safe vehicle for my wife and kids. Not when you can't afford it, Matthew.

Can we be honest? A 2018 Pathfinder would have been just fine.

Right, but then you have to worry about warranty and, you know, something happens, we don't have money to pay for it.

Not if you save $1,200 a month, you get to save up an emergency fund and have $6,000 in about, I don't know, a couple months. You create your own warranty program.

Yes, you are it. Called Bank of Matthew. Yep, yep. So do you see what we're trying to get at here? If you keep thinking like this, you're gonna stay in this cycle. We're trying to break you out of this thing by making some really deep sacrifices. Yep. So that you never say, well, I had to, 'cause if that's the case, we can't help you.

So there is a change in perspective you guys have to have to say, we are in charge of our money and our decisions. Like, we're gonna choose what our money's going to do. We are in charge. We're not just gonna let things happen and, well, we have to do this, we gotta do that. Oh gosh, we're stuck in this corner. There has to be a perspective change. And when that happens, then you actually get to look in the mirror, if you will, and say, "All right, who's gonna change our lives? We are. This is us." So, now we have to— if we don't wanna be where we are today with money, then we have to do everything opposite that we've been doing. We've not been saving. We have to be saving. We've been relying on debt. We can't rely on debt. We haven't been living on a budget. We don't really know where our money's going. We have to be on a budget. Like, I literally, Matthew, do the opposite of everything you guys have been doing. And so if you hang on the line, Christian's gonna pick up. We're gonna give you EveryDollar for a year.

You guys need to sit down tonight and do a written budget. Where does $9,000 go every single month? Like, where, line item by line item, where is this going? And then your next goal is to save up $1,000 first and foremost. That's your starter emergency fund. And then you guys need to start working your way out of debt. But there has to be a level of ownership and agree, you know, you guys have to agree that we can't keep doing this. And so if you can't keep doing this, let's do the opposite of everything we've been doing.

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Up next on the line, we We have Chris in Tampa, Florida. Hi Chris, welcome to the show. Hi, how you doing? Hi, we're doing great. How can we help today?

Well, I'm going through a now 3-year divorce and I'm having a hard time financing the rest of the divorce. We've used up quite a bit of assets during that time.

So you and your ex-wife?

Yes. Yeah. Why is it dragged out for 3 years? Soon to be.

Um, she had a, um, she had a stakehold in her company that she works for. Um, they have private shares. It's a private company. And so we had to do like long discovery process because they were unwilling to give the information So I had to hire a forensic accountant. The accountant, um, had to do a lot of digging and, you know, it just cost me probably $200,000 now over those 3 years.

Did you have that money?

I did. Now I'm out. So I've been, uh, signing up for credit cards to pay for the attorneys and the accountant.

How much credit card debt are you in?

About $30,000 now and counting because we're still litigating.

I mean, where's the end in sight here?

We were supposed to be done in February, but the stock price changes every March. So let's play this out.

What if this is another 2 years and now you're $200,000 in debt? Was it worth this?

Yeah, because every year, and this is what I tried to talk to my ex-wife about, was every year the stock price goes up and we own about 300,000 shares in the company, which if it fluctuates a dollar, that's close to another half million. $1 million a year, just if it's a dollar a share increase. We're looking at $1.7 million difference from 2025 to 2026 in the value.

But at this point, we're gambling. If you lose this thing and you're $200,000 in debt, now you're screwed.

Yeah, I'm kind of getting richer and poorer at the same time. It's a weird predicament.

Can you move this to mediation?

Mediation? We mediated 3 times now.

And so I'm confused what the holdup is. What— why is this not— what, what else do you have to have for it to be final?

Uh, for her to, I guess, give up and face reality. Um, you know, we've tried to mediate and we're so far off on the numbers that basically needs to go to trial. And the trial date just keeps on getting pushed off the docket and moved forward because of non-cooperation on their side. We wanted to get it done, sent in offers, no counteroffers were put in. So it's just drawn out. I think she's just drawing that out so that she bleeds me basically is what—

It's worked. I guess. Now you're going to crippling debt. At some point you're going to have to give up and wave the white flag. While making lawyers really rich. You have funded some really, a nice lifestyle for some lawyers.

Oh, for sure. I'm sure they're building pools in their backyard.

I mean, at some point we just needed to make this a peace treaty and cut our losses or take what you can get, come to a compromise.

Yeah, I don't know how to do that.

Is it all or nothing for you? Like what is a, let's say, what's a decent scenario that you get? Some of these shares?

Well, we— the company has a clause that clearly states how the shares get split in the case of a divorce, um, and they write a check, you know, for whatever the court determines. So it's actually— the company is very simple. It's a simple process.

Um, so then what's— but what's from the legal perspective? Why is it drug out if it's that simple of what you're saying? I don't understand why all the lawyers don't see that.

And Yeah, it was discovery. Discovery was the longest part of the process and the forensic accounting part. And then so, but it costs money, you know, that costs money. I knew that it was going to be a— she's— we hid— we had separate assets and I hear it all the time with you guys.

Oh, we lost you, Chris. Chris? Yes. Okay. Yeah.

Okay. Well, well, You said discovery was the longest. Is it over? Because you said you guys kind of found everything, but then the stocks changed over in March, so now we're in April. So what's your, what's your, what's your final— because you don't want to live 5 more years like this, Chris.

No, we're looking at possibly— so my lawyer has told me that we have a meeting in May, and then we determine what the next trial date is, and that's supposedly going to be September. November.

And they're going to keep working on this thing that whole time? Yes. So this could go a whole nother year before there's some resolution, which means you're another $100 grand in debt easily.

Yes, but I don't know how to get out of that. I mean, you're stuck in the process.

What's your net worth today? Yeah, how much are— yeah, how much do you have, Chris? How much— I mean, house, your assets, what— where are you at financially?

Um, I still have 2 properties in the Carolinas that are— I own outright. One burned down. My wife filed for divorce in February of '23, and then the house burned down a week later up in the Carolina. Okay, how much are those worth? Um, probably $50,000, and then, um, the other property's about $15,000, $16,000.

What's your total net worth?

Wait, a property? Is it, is it just land?

I had a house. I had a house and it burned down. It got set on fire.

So the land is only worth $15,000?

$50,000 for that land. And then the land across the street is about $16,000. Okay. What's your income? Those two properties. I have my own company and it fluctuates. Like last month I made like $30,000. This month I'll probably make like $5,000. So overall, I'll probably— What do you do? About $100,000. I work on medical equipment. Okay.

Man, I personally, I know this is like your sunk cost fallacy. I would cut my losses and go, you can rebuild a great life and build wealth from scratch. You're a smart guy, you'll get there. I also know that you could burn another $150 grand on the off chance You can make half a million a year. I just don't think the risk is worth it and the stress. It's going to take years off your life to keep this battle up emotionally and mentally on top of financially. Of what it is.

Yeah. And I would, I would sell those properties. I wouldn't be a long-term— well, I was going to say landlord. I don't think there's any occupancy in this situation. So I'd go ahead and just get rid of those properties. Sell them.

Fund it if you're going to keep fighting this.

Yeah. Yeah. And that's $66,000 that you'll have to help at least pay off some of this credit card debt. And I think, Chris, you have to make a decision to say, "Okay," at, you know, whatever that breaking point is for you. We're never gonna tell you to continue to go into debt. So, yourself, if you're choosing to kind of play that game, you at least, please, you at least need a point in your mind to say, "If we get to X point," point on the calendar and nothing has moved, or there's no set— there's nothing. Like, even if a trial date, you know, keeps moving out, like, you can't just live in the cycle forever and ever, like George said.

This is the same part of your brain like a gambling addict, where they just go, "Well, I just gotta double down. This time's gonna be different. I'm gonna get it this time." Yes. I just don't think it's worth it when you're a smart guy making great money.

Well, and I'm very— and it's a little confusing if it's so clear in the bylaws of the company of what happens to the shares 3 years, in the case of a divorce, how that's not—

It would have happened by now.

Yeah, and maybe I'm being naive, right? And again, I know every divorce is very different. Every state is different, every, whatever, but how it's just not spelled out like that. And then that's part of all the assets that are, you know, divvied up and everything. So, my fear is that you've been in a 3-year roller coaster that's not so scary.

It's not a battle for custody of your children. It's just about, I could have had a gigantic pile of money and I won't have that. Yeah. That sucks. I would grieve that and move on. Absolutely.

Oh, sorry, Chris. Hope that's helpful. It's probably not the advice you wanted, but sometimes it is just to cut the ties, just to get everything settled and be done and move on. Hey, you guys, did you know that there are thousands of data brokers whose entire business is collecting and selling personal information? Things like your home address, your phone number, and even your relatives' names. You guys, that is just crazy. But that is why I use DeleteMe, because those companies pull information from public records, social media, and all kinds of other places. Then suddenly all that information shows up on random websites, and removing it yourself means going site by site, filling out forms, and hoping they actually take down. It takes hours, and then it can even pop up somewhere else again. But DeleteMe's team of privacy experts removes your personal information from hundreds of those data broker sites. And within a week, you'll get a report showing what they have found and what they have removed. And they keep scanning and cleaning up your data year-round. So take back control of your privacy. Go to joindeleteme.com/ramsey and get 20% off your annual plan.

That's joindeleteme.com/ramsey. Com/ramsey. If you're working the Baby Steps, and the best and fastest way to do it is by using EveryDollar. So this is more than just a budgeting app. It really is a plan that is built right in. And so you can track your progress and you can get personalized recommendations and coaching for your situation that will help you free up money even faster. So it's like you having one of us walking with you and, you know, telling you what we would do if you had called The Ramsey Show. That is the hope. So make sure to check out EveryDollar. You can start EveryDollar completely free by downloading it in the App Store or Google Play. Play. All right, let's head to John in New York City. Hi John, welcome to the show.

Hi Rachel, hi George, thanks for having me.

Absolutely, how can we help today?

So I work for a very, very small family business and we don't have a 401(k) retirement plan, so the owner is offering me something called deferred equity. So this would be a small percentage every year that I'm there, but I don't get paid unless the business is sold. And if I leave, I get nothing. Is that too much risk for me to take on, or is it a wise retirement choice?

No, I would not bank on my retirement for that. I would be doing some other things with investing. But would that just be an added, I don't know, benefit?

Do you have to make contributions to it, or are they just gonna give this to you regardless?

They're going to give me 1.25% retroactive to when I started.

So when would you even get that payout? You'd have to be still employed there when they sell it in order to make anything.

Correct. And so I guess the idea is I would get first dibs on the business if that, you know, when that day comes, and I could use that deferred equity as a down payment on the business. Or if I choose not to do that and someone else buys it, then I would get paid out.

Are they planning on selling the business? Is that part of the long-term plan? Eventually.

Is that 30 years from now or 3? Because there's a big difference. Well, exactly.

I have no idea. It could be— I think realistically maybe around 10 years, but who knows?

Well, I mean, if it costs you nothing, take it. I still would prefer a retirement plan that's actually yours instead of basically a promise.

Yeah. Is there an option of he would give you like a traditional 401(k) situation or this, or is it that this is the retirement package? That's it.

This is basically a way to keep— I'm essentially running the business right now, and, and by, um, by providing this, uh, it's a retention plan forward to— it's a retention plan. Okay. What do you make? I gross a little over $80,000, and I have— I get health insurance and a company vehicle.

Okay. And what kind of industry is this?

It's— I'm not going to say exactly what it is, but it's very niche. And it will— I can guarantee it will always be around.

Do you want to take it over one day?

I could. I would— I think if the circumstances were right, I would like to. It's something my family has been involved in for nearly 100 years. So how old are you? I could carry that on. I'm 35. Okay, you got any debt?

Just the house. Awesome. Are you investing currently?

Very, very little. Just whatever fraction I have on my Roth IRA.

Is it because money's too tight? It's too tight right now. Hmm, well, that worries me because you need to build wealth on your own, and if this equity doesn't happen, you're going to retire You're broke. Yeah. So that's where I go, we have another fish to fry, which is why can't I invest 15% of my income? Why can't I fully fund a Roth IRA? I would at least be doing— that's the bare minimum, is you funding a Roth IRA every single year without fail in order to set yourself up.

In order to do that, I need to make more money, which is something that I plan on negotiating because I know that it's there.

Can you make six figures doing this elsewhere?

Yes, but I don't know. I would probably have to relocate to do it.

I might be willing to do that. Are you single? No, I'm married. Okay.

What does she, what does your wife do?

Is she working? She works part-time for college.

Okay. Do you guys have kids?

Not yet, but we're planning on it. Okay.

I would, she needs to go full-time. She needs to be working and you guys need to be funding 15% of your income into retirement. That's your answer, right?

Oh, I agree.

Yeah. So I think you both need to sit down and say, okay, what do we want our lives to look like? And run some numbers. You can use like even just the Ramsey investment calculator to say, hey, right now if we fund 15% of our income into retirement, where are we going to go?

'Cause if you make $100,000 household, you could fund 2 Roth IRAs, you and your spouse. And if you can't do that, it tells me either your expenses are too high or the cost of living is too high, in which case you should go move. 'Cause if you move somewhere where the cost of living is lower and you can make 6 figures, it's a no-brainer. I would not hang on to these golden handcuffs of a promise of equity at 1% per year that you might use as a down payment to buy the business one day if you can even afford it. There's just way too many variables there for me to be comfortable with.

And if they're giving that to you as a benefit and you're loving it, given the job and you and your wife sit down and she works more and you guys kind of figure out, okay, here's what we can do for the next couple of years, then yeah, take the, take the benefit they're giving you. It's no harm to you. It's just going to be an extra thing you have in your back pocket. But I would not at all have the confidence that it's actually going to play out.

I would work on negotiating that to say, hey, I'm going to vest 3 years in, I can take that equity out and you could pay me that. Yeah, if I do leave. Absolutely.

All right, let's head to Zoe in Des Moines. Hi Zoe, welcome to Hi, how are you? Hi, we're doing great. How can we help?

Yeah, I was wondering if I should sell the car that I have currently. So there's like just under $12,000 left on it and the payment is like $275 a month. And if I take what I have over $1,000 in my savings and just leave that $1,000 emergency fund and then what I got back in a tax refund one I could knock it down, the loan would be about $6,500 instead. So I'm just trying to decide if I should get rid of this one, get a different car and have no payment, or if I knock it all the way down to $6,500 and pay it off before the end of the year, if that's okay.

Yeah. How much do you make a year?

Like $40,000. Okay. What's the car worth? $16,000.

Oh, so you would make money on on it?

Yeah. Yep.

And you could— how quickly could you pay it off with the $6,500? Take you, you said, to the end of the year?

Definitely by the end of the year. Yeah. Okay. Do you like the car? I do. Yeah, I don't like the debt.

Sure.

Well, I mean, use that as fuel. If you don't like the debt, let's aggressively just pay the debt off. But the car is not inherently the issue here. It is a lot of car. I mean, it's worth $16K and make $40,000. That's a pretty big ratio, but it's not on fire. We wouldn't tell you, hey, you gotta sell. And if the car was worth $30,000, I would say, yeah, this needs to be sold tomorrow. But you could, if you wanted to, you take your debt down to $6,500, you sell it for $16,000, leaves you with $9,500 to go buy a new-to-you car. You could do that, but it's a lot of effort to then just have a different car that you might like less. Yeah, okay.

So I would aggressively just pay it off off. I probably would too, just from the hassle standpoint. When you look at the numbers, I mean, you could try to earn an extra grand and have this paid off, you know, in— well, I guess which would be close to the end of the year. Sad we're already there.

I know, in my head it's still February.

I know, that's what I was thinking too. Um, yeah, so I think it's— it is either way, Zoe. I think it's fine. I think it would probably be a personal choice at this point. If you do keep it, be gazelle intense, pay it off as soon as you can. But if you're you're like so tired of it, which it kind of sounds like you are, and you're just like, I don't care about the hassle, I will sell this thing, I will go down to, you know, a different car and just be done with it in 30 days. Yeah. And have no payments and you'll be happy, you could do that too. But it's $275 a month.

So all things considered, it's not a make or break in your budget likely, but I mean, it's still eating your lunch at $40K after taxes. You're like, oof, I could do a whole lot more with that $300 if I didn't have that. Have it. So I would use it to fuel it to get rid of it faster, but no harm, no foul if you want to sell it.

The Ramsey Show question of the day is brought to you by Yrefi. Defaulted private student loans can leave you feeling stuck and overwhelmed, but Yrefi helps you explore refinancing options with a low fixed rate and a payment based on something that you can actually afford. So visit yrefi.com/ramseyshow Yrefy.com/ramsey. May not be available in all states.

Today's question comes from Patrick in Michigan. "Do you think it's a good idea for my 19-year-old daughter to buy a small home while she goes to college? I would be a co-signer and she would rent out the extra rooms and manage it. She would use the rental income to pay the mortgage, but I could potentially be her backup. Does this sound like a solid housing plan for for her? Oof. I don't think so. Just shivered. It sounds like you saw a TikTok that sounded really cool where it was like, just, it's easy, buy an investment property, your daughter lives in it, and you can rent out the rooms. It's a money-making scheme. I don't want to combine these things. These are good things, buying an investment property, but you're doing it in a bad way by co-signing and forcing yourself to buy in that area. That's right. Who knows if it's going to be a good area. Yeah.

And it's usually a college town, right, is where you're buying. And so majority of the renters in that area are probably gonna be college students. So no, I mean, I would ask the question, would I buy an investment property in this area regardless if I had a child there or not?

Yep. And I wouldn't co-sign. If you wanna do it, just buy it outright yourself. That's right.

And let her manage it for a fee or something. You know what I mean? Like if you wanted to like have something.

But he probably, I don't know if Patrick has a primary primary home with a mortgage on it, but I would not go get another mortgage. So if you can buy it in cash and you're just excited about this prospect of owning some property out there for whatever amount of time, I would— you can go for it, but I would not do it the way you're describing here.

All right, let's head to Logan in— is that Lafayette? Lafayette. Lafayette, isn't it? Hey Logan, welcome to the show.

Hi, thank you guys for taking my call. Absolutely, welcome. How can we So I'm kind of in a little bit of a pickle right now to where I'm trying to stick to the Baby Steps and make meaningful progress towards paying off my debt. But I just feel like, you know, that $1,000 I saved, like, I will push it up to about $3,000, and then I kind of feel bad for having that much money not to be used somewhere else, and I just pay off my debt to get back down to $1,000 emergency fund. So I think it's just I need like a clear goal in mind while paying off my debt, and that's where I— why I'm asking you guys is how can I stick to that Baby Step 2?

Um, well, that kind of is your goal, is each individual debt that you're paying off is what you're looking at, and that's going to be your goal is the next smallest debt. Is there something that's happening something in your life that you're gonna need more in that emergency fund? Or is it just the idea of having $1,000 that makes you nervous? Or what causes you to keep bumping it up?

Well, 'cause I moved out with my girlfriend in August of this past year. I used to live in a different state, and then we got jobs over here in Indiana. So that's where we've been for like the last 8 months. My girlfriend was actually in a pretty bad car accident in October and she did not have health insurance. So she just has a mountain pile of debt too that she's trying to pay off. So that's why I was thinking that I probably will need a little bit more just in case if she's unable to pay something off or pay her bills, then maybe I could step in and help that way.

But how much debt do you have?

Right now, I actually just paid off my credit cards. It was about $5,000 worth of credit cards about 2 months ago. I just got the auto loan, which I did about a $2,500 payment today. Nice! It should be around $19,800, I believe.

So about $20,000 left on the car? Yes. What do you make a year?

I make about $41,000. Oof!

Man, that's a lot of car. For your life. Yeah. What's the car worth?

I'm gonna be honest, I got it at a pretty bad interest rate too, but the car is worth probably around $11,000 to $13,000, give or take, traded. Did you roll over negative equity? I did not.

I'm wondering private party value, if you can get closer to that $20,000 and you just save up $5,000 or $6,000 over the next couple months. And just sell it and get a different car.

That was my plan too, but I think the main issue with that is me and my girlfriend, we all— we work different shifts.

So can you share one car?

I don't— I mean, we probably could, but I feel like it'd be more of a hassle just because I go to work at 12:30 and she goes to work at 4:30. So it's going to be kind of hard to But y'all currently share one car?

Uh, we do not.

No, she, she has her own car.

Okay, wait, so what's the— what, what's the problem? I don't understand about working different shifts.

You're not going to be using her car. I'm saying get a different car. You save up $6,000 or whatever the difference you're underwater in, and then save up enough to get a different car, a cheap car, and then you'll have a different car and with no payment. And then you can stack up that emergency fund really quick.

Yeah, so basically instead of paying off $20,000, then just save up $10,000, cut your timeline in half, save up $10,000, pay off the negative equity, and then go get yourself a $4,000 car.

Let's say you sell yours for $15,000, you owe $20,000, right? So use part of your $10,000 to cover that, that's $5,000, and then you'll have $5,000 left to get a new-to-you car.

So you just cut your whole timeline in half, basically, of getting out of debt.

So, sh— So instead of just making extra payments on my car, just save up the $10,000 in cash and just do it that way? Yep. That's what I would do.

How quickly could you do that if you got real aggressive, working multiple jobs, overtime if you can, all of that?

Probably by the end of the year, give or take.

Okay, that's not a bad timeline. And now it's, hey, I can survive on a $1,000 emergency fund until the end of the year. Yeah, versus— And if something comes up, you just stop the Baby Steps and stack up cash really quick.

Yeah, instead of all of 2027 still paying off this car, do you know what I mean? It just, it shrinks down that timeline. And then after that car, you have the new car, the old one's sold and all of that, then you start saving up an emergency fund.

And at this point, truthfully, you're not in a place to support your girlfriend.

Yeah, you don't have the money, you're broke.

Yes, I'm broke.

So that's not a reality where you can cover her rent for her for any amount of time.

How old are you guys? She's 20 and I'm 21.

Okay. Do you have health insurance?

Sorry, say that again. Do you have health insurance?

My dad pays for it. She has her own. Okay.

Okay. So Logan, I think what you're doing in your thought process of taking care of her is very honorable, but I would keep finances as separate as possible because there is no legal marriage here. There's nothing that protects you in any of of this. 'Cause there's a, yeah, I mean, I hope not, but there's a good chance that, you know, you guys, 6 months down the road, aren't together anymore. And if you, you know, went into debt or started giving, you know, all this money to her. Covered her bills for 6 months. Yeah, you know, that's $10,000, $12,000 that you don't have going to someone that you're not married to. And so, it sounds really harsh. And again, if you're in a position to help pay for her and you want to, and even if she leaves, or you leave, and it's, you know, you look back years from now, and you're like, "Oh, wow," and you feel good about it still, then that's one thing. But we just have talked to some people, they pay on, you know, people's student loans, and they're, you know, they're commingling lives. And so, what happens is, you end up commingling money, naturally, because you basically are acting like you're married, but you're not.

And so, I would just give you a word of caution. You guys may need to set up some pretty hard boundaries when it comes to money.

And if she can't pay rent for foreseeable amount of time, she needs to go find somewhere she can afford it or go live with family while she heals. But you can't foot the bill for her.

Yeah, that makes sense. But it's also a fact that I've actually, I've had a hard time saving over the years as well to where I've actually never had probably more than like $4,000 cash at one time as well throughout my working life for the last 4 4 years.

Yeah.

And would you say that's due to having a little bit of debt?

Yeah, that's just doing stupid decisions when I was 18, 19 years old and translating to now. Yeah.

So let that fear be the fuel to get out of debt faster with that $1,000 going, hey, I'm not safe. I want to be at a place where I got $20,000 saved up to protect me. And that's where you'll be if you follow the plan. Yeah.

And Logan, you're on the right track. And I mean, being 21 and starting this plan is Amazing. There's people 41 that are starting this. You don't know—

Wish I knew it when I was his age.

I mean, you are ahead decades. If you do this stuff, Logan, stay out of debt, live below your means, have this emergency fund, get out of debt, bump it up to a fully funded emergency fund, start investing in retirement, literally walking the Baby Steps, you will retire a multimillionaire. Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I am Rachel Cruze with George Campbell, and we are taking your questions at 888-825-5225. All right, in Armadillo, Texas, we have Katrina on the line.

Amarillo! Amarillo!

But it was so, I'm like, is there an Armadillo, Texas?

'Cause there needs to be.

Are armadillos? I literally was thinking, Katrina, can you confirm?

My gosh, Amarillo, I'll never live that down.

Katrina, dadgummit. I know. Oh my gosh, Katrina, she's so relatable. No, I love it. Katrina, welcome to the show. How can we help?

So I'm just kind of been chasing my tail, um, like an armadillo. Or a cat, like Katrina Cat.

Oh, there we go. Thank you.

Thank you for helping that out. You're fine, you're fine. So I have been chasing Mattel for a while, um, a series of bad luck with my family. You know, Dave, he talks about Murphy's Law. Well, Murphy moved into my home and has affected me, my grown daughter, her good friend, and my husband, and it's been heck. Like, we are trying to balance out the bills, and basically we're on payment plans for everything. And we have, according to our budget and EveryDollar, it looks like it's gonna be okay, but it's never okay because we're paying payment plans on everything, which is more expensive. For example, I just paid last month a $678 water bill bill.

So there's unexpected things that come up.

Are you behind on utilities?

Is that what you're saying? Yes, on everything. On everything.

Okay, so what's happened in life, Katrina, when you said Murphy moved in?

Well, um, I worked for a place that was grant funded, and my grant was ending. And fortunately, it took me a while, but I've got another job and it's good. Um, my daughter works at the same place. Okay, how old is she? She's 22. She— before this, she had her own place.

Okay, so she's living with you now because she can't afford her own place? Yes, because of this new job doesn't pay what she was making.

Yeah, it doesn't. It's not even a living wage. And then—

and that's the same place you're working?

Was working. Okay, we both worked at the same place. And what was it?

What were you guys doing?

Um, I was helping with healthcare navigation and she was helping with finding people homes. I worked for HUD. Worked for HUD.

Okay, what are you making now?

I am making about $4,500, I think, a month.

Is that your household income?

No, just mine. My husband makes about $2,400 bring home.

What does he do?

He works for the state. He works for Workforce Development. He's been there for 20-something years.

And he makes 30 grand? Yeah. Yeah. That doesn't make sense. Yeah, it's—

and he says he had a raise and then they had a cut, and that was another thing that messed us up. They gave him a promotion and gave him a raise and then demoted Demoted across the board because of funding.

Demoted everybody. What does he do?

What's his role? He's a workforce development specialist, so he helps people find jobs. Hmm.

Okay, so your take-home pay is $6,900, and what's the total balance of all the consumer debts that you guys owe? Consumer debts?

Everything but the mortgage. Okay, that would be close to like $200,000.

$100,000, give or take. That does not include the mortgage?

Uh, no, that does include— okay, um, let me— it's going to be about $150,000, I think. $100,000. And my mortgage, about $144,000, but it's less now because I've paid it.

Okay, so you have $150,000 in debt aside from the mortgage. Break down some of those debts for us.

Um, about $70,000 is, um, is, uh, student loans, of course.

Whose are those?

They're mine. They're evil.

How long have you had them?

Since 2012. Okay. We have some credit cards, and then we have about a $30,000— no, sorry, $20,000 $20,000 left on a car. We've paid one car off.

Okay, and what's on the credit cards?

It was basic living expenses.

But I mean, you got $70,000 in student loans and $20,000 on a car loan. That's $90,000 out of the $150,000. So where's the other $60,000?

Is that all credit cards? I think, uh, no, it's not $60,000. I, I didn't math correctly. I'm sorry. Closer to $15,000, sorry. It's all good.

That definitely helps. $150,000 was a worse number. So you got just about $105,000 and most of it is those pesky student loans. And then we got this car loan. So if you laid out your debt smallest to largest, I'm guessing one of these little credit cards is the first one that needs to go?

Yes, it would be.

Okay, and right now you're saying when you do the budget, there is money left over on paper? Yes. How much is left if nothing crazy happened in a month?

Um, about $400.

And what payment plans are you guys on?

You said utilities. Um, just utilities and, uh, of course my mortgage.

Okay, yeah, okay, so, but you're able to pay your mortgage every month, correct?

I'm paying 29 days behind.

Mind. Okay, so I think our first goal is to get caught up. So we want to get out of this payment plan with the utilities, and we want to be caught up to the mortgage. Okay, Katrina, that's our—

in paying your four walls before any debt payments kept. Yes.

So food, shelter, yeah, which utilities and house is this. So this is your, this is your A1 before anyone gets paid. Okay, credit cards could go.

The car payment would be the next priority after the four walls because you've got to get from A to B to get to work. But outside of that, if the student loans and credit cards can't get paid one month, I'd rather those go default than your utilities and your housing.

Yeah, they haven't been getting paid. Who's not been getting paid? I know I said those have not been getting paid.

The student loan or the credit cards?

No, the, uh, just stopped.

So, so you have $7,000.

How much is your daughter bringing in a month? Uh, whatever $11 an hour is.

Okay, so she needs to go be working 24 grand a year somewhere.

Yeah, somewhere else too, you know what I mean? Be looking for a job. And you mentioned a friend. Is there a friend living with you all?

Yes, yes, uh, just a family friend that was, uh, a roommate with her. And is she working? He lost his job. He lost his job too, but he just now recently found a good one.

Yeah, they need to be paying rent.

They were, and then they— he— I don't make her do it, but he does. And he was paying, and then he had to stop because he lost his job, but he's got a good one now. Like, we're at the starting level. Everything's okay now. We just need to get out of this chasing our tails.

Yeah. Okay, so the $7,000 a month, Katrina, that you guys have, you guys have to pay the mortgage on that and, and making sure that the car is paid for and your utilities. That's all you guys have to do, and you're going to be eating rice and beans, beans and rice. I mean, the whole bit, right? There's like, the food budget is nothing. Like, we are, we're gonna eat, but it's like, that's low. We're doing nothing else but catching up. And that needs to be your goal probably for the next couple of paycheck cycles.

On top of your husband getting a better job. I mean, that solves a whole lot of problems if he can double his income by doing some work that pays him what he's worth.

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.

Com.

Kyle in Lansing, Michigan is up next. Kyle, welcome to the show. Hey Rachel, thanks for taking my call. Absolutely, how can we help today?

Well, um, we— a few months ago we, um, lost my mom to an unexpected heart attack.

Oh my gosh, we're so sorry.

How old was she? Um, 79. I'm so sorry. Lost my dad 5 years ago, uh, to cancer. And I recently came into a sizable amount of money, and I just want some opinions on how to not lose it.

Okay, what does a sizable amount of money mean?

It's a touch over $2.5 million. Wow.

Okay, was this from mom's estate or what?

It is.

Yeah. Okay, wow. So your parents did well, obviously.

Well, yes. Did you know about all this? Is this a surprise to you?

Yes and no. Um, I have two siblings. Uh, we always knew I knew they were comfortable, but just not to this scale, I guess. Yeah.

You didn't know just how comfortable. Right, right. Wow.

Oh my gosh. Wow.

What kind of, how is this $2.5 million divvied out? Is this in cash? Is it in an asset?

For the most part. Most of it's all, most of it's at like an Edward Jones. Okay. There's about $500,000 in IRA we gotta get out in 10 years. The rest is in cash. Wow. Okay. What do you make? Between my wife and I, we're about $200,000. Fantastic. And how old are you guys?

I'm 45.

My wife's 47. Okay. And how are you guys financially? We're pretty good. Yeah, we just built a new house, just under $500,000 in that. Net, which we borrowed the money from my mom to build and since has been forgiven. Oh wow. We still have our old house that we're getting ready to sell, you know, painting and putting new carpet in and sprucing it up. And that's somewhere in the neighborhood of $300,000. Okay.

So the payment to her, that $500,000, it just went away when she passed. That doesn't take out of your $2.5 million.

Well, it's part of the $2.5 million.

Oh, okay. Okay, so would it be $2 million left, or was it supposed to be $3 million but now it's $2.5 million?

No, there's just a little over $2 million left. Okay, after the house. That's what we're working with.

Gotcha. $2 million, and you guys have no debts whatsoever? Nothing. No.

But then when you sell this house, it goes back up to $2.3 million in a sense, right? Yeah, yeah, yeah, with everything. Okay, that's great. Um, and yeah, cash on hand for you guys, where are you guys Is that?

Well, we just moved about $70,000 over into a money market because it was sitting kind of stagnant into just a savings account. And our financial advisor asked us to move that because that's not doing anything there. Is that your emergency fund or is that earmarked for something else? Or something else? No, it's just money, just extra money. Okay. Okay. Yeah.

And how much do you guys have in retirement for you?

I actually have a pension through work. My wife is about, she's a little over $200,000 in a Roth. And I've got about, I don't know, $55,000 in a Roth, I guess.

Okay. All right, that's great.

So you guys are in what we call Baby Step 7. You've got no debts whatsoever, house is paid for, which puts you in a really unique place because you have a lot of options now. And there's only 3 things you can do with money, and that's to give it, save it, spend it. And we would recommend doing all 3 with reasonable ratios. Okay, so I would be giving a portion of this money. That's up to you guys, it's a matter of the heart. I would be enjoying some of it. What's the thing you guys really want to do, the thing you want to upgrade? Maybe it's a car, maybe it's a thing in the house house and then invest the rest of it and build generational wealth so that you can be able to do this for your kids one day. Which, by the way, do you have kids?

Yeah, we have one 6-year-old. And that's— I've always been kind of a saver, I guess. My parents, they beat it into you when you're a kid, save, save, save. We've got a new house. We don't need to do anything else there. We've got good vehicles. I mean, neither one of us have any desire to buy new vehicles. Right. And I want to make sure that this opportunity is there for my daughter when I'm gone.

Yeah.

So I just don't want this to trickle away in the next 30 years or 40 years.

I have a good feeling it won't, just based on how you're talking to me. You're probably going to be handing over $10 million to your daughter at this rate.

Yeah, for sure. I hope you're right.

Because I mean, the money, if you just let it sit without adding anything to it, would double every 7 years.

Okay.

Yep.

So by the time, you know, if you think about that, $2 million to $4 million to $8 million to $16 million. Do you see where we're going with this? Yep. Yep. Yep. And so I, yeah.

And so since you are a natural saver, Kyle, you know, I would sit down with your financial advisor and kind of you guys map out, but part of this too is, you know, create good memories too with your daughter. You know, if there's, you know, go on a great trip every year with some of this, you know, and like have some experience and live life well. Make sure, you know, she's paying for college. This could be part of, golly, her wedding funds, you know, even paying for her first starter home or something. You know what I mean? I'm like, where she never would have debt. Like, there's some big things that you guys can do with this money that's really wonderful. And you have the time for it, for her specifically, considering she's 6. But enjoy some of this too. Yeah, and it doesn't have to be just stuff. I wouldn't just be like, oh, go buy a bunch of stuff. You can, you guys can afford it, but find some experiences that you guys can do together as a family.

We actually just got back from a Disney, 3-day Disney cruise.

Oh, great! So that was a lot of fun. That is fun, yeah. So like, make memories together too. You know, I think your mom, you know, you just kind of think through, okay, what would my parents want for my nuclear family? And I think they would want peace for you guys. And financially, you know, being debt-free and doing what you guys have done, you've created that. Um, you know, create some great memories is what I would say as well. But I think this money, yeah, as you play it out mathematically, um, is going to be plenty for you all in retirement. Um, and yeah, and to be passing on something to her as well.

All right, have you funded college?

Uh, she has about— my mom started a 529 for her and she's got about $28,000 or $29,000 in there.

Oh, that's awesome. That's great. I was gonna say you could do something called super funding. It's already kind of super funded at 6 to have $30,000 is awesome, but you might You might want to put another $10,000 or $20,000 in there and then never touch it again and just let it ride. And she'll be just fine.

That was part of our last meeting with our financial advisor. And he advised us to not just dump a bunch in. He said, just trickle a little bit in, you know, a couple thousand or a few thousand dollars a year.

Yeah, because you guys could just pay out of pocket too if she ends up going, you know, you wouldn't get the— obviously the—

Yeah, super funding is basically instead of funding a few grand a year, you just put in $10,000 now and then never add to it. Because mathematically, that'll be the best way if you can lump sum it now and then you won't have to add as much over time in total contributions. So that's one thing you can do, but that's such a tiny portion of this. That's what I was going to say.

Yeah, it's a drop in the bucket.

And so I would be investing most of this so that you can create generational wealth. And I would at least be maxing out, you know, all of your tax-advantaged retirement accounts first. And then once you run out of options there, move to non-retirement in a taxable brokerage account. And so you got a lot of options on the table, and I would work with your financial advisor if you trust them to walk you through the best method to invest those dollars. But man, you got a, a great problem to have, and what a wonderful legacy.

Does your, does your wife work, Kyle? She does, she does. Yep. Okay. Yep. And, and you obviously are working. Yep. Yep. Um, I was going to say, yeah, I probably wouldn't change much unless, you know, one of you wanted to stay home and be a stay-at-home parent, you know, if something like that, like there's a big lifestyle shift, you which you guys could do if you wanted, if that's like a value that you guys have. That's one beautiful gift of this money that could happen. But I definitely wouldn't change, you know, at least for you or her, you know, somebody to still be producing an income, you guys kind of living off of that for your primary source. Just to, there's kind of a groundingness there. And then you kind of have this other fund over here that's growing. Wing. But when you wanna do something big, it's available to you, you know, to be able to take out some money and enjoy it when the time comes. So, what— That's wild.

Man, like you just said— I mean, they make $200 grand. If they just put $2 million in there and the market does 10% this year, it just replaced their income. Their whole income. That's pretty wild. I know.

That's when, if you hate your jobs, you know, you can go do something for less money and you're good.

Like, you know what I mean? That's a freedom fund right there.

But to have like that, still that purpose, there's something in that That's beautiful. So, wow, what an amazing testimony, you guys, of God. That does. That's how to do it right. And money doesn't change the family tree out of this idea of like, oh my gosh, we're suddenly rich. It just, it gives opportunities to do amazing things for others and your family. When people hear my story of paying off debt, they say things like, "Dang, that must have been so hard. I could never do that." And I tell them, "Sure you can. It's a short-term sacrifice for a long-term gain." But do you know what's really hard? Working your whole life and never having anything to show for it. Never having the long-term gain. What do you gain? Just feeling broke and stressed and maxed all the time.

And sadly, that's the hard that most people choose.

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Short-term sacrifice, long-term gain. Choose the tool to help you get it done fast. Download the EveryDollar app and start for free today. Well, George, you know, we wish that we could get to every call and every question. In a perfect world. But it's hard.

We live in a fallen world. We do. We can't get to all of them.

We live in a fallen world.

24 hours in a day.

You know, we call some cities armadillo instead of Amarillo. You know, sometimes that happens. So, we're not perfect. We're fallible creatures. We are. But here's the thing is most of our advice is consistent, right? What we talk about on this show is what it is. And for those of you listening and have been listening forever and ever, amen, you could probably answer can answer the questions just as well as me and George.

Or that you think you could. Or you think you could.

No, but you know, that is a great thing because we are able to use technology because of that, because of so much content that is out there to feed an AI system, if you will.

A language learning model, as they say. And we—

oh, thank you. And we created Ask Ramsey. So, it is our own version of Ramsey AI. And you can actually go in ask your question like you were calling the show, talking to one of us, and you will get the answer that we would say on this show because this has been fed, if you will, by, I mean, hundreds of these episodes. Yes, of everything, you guys. So, if you have a question about your life and your specific situation, head over to ramseysolutions.com and ask your question in the Ask Ramsey box. It's right there for you. Or if you're watching on YouTube or listening on podcast, we'll put a link down below. But, you know, technology, you love it, you hate it. Hate it. And this is a—

This is a love it.

This is a love it because you're able to spread the information and help people, you know, if you're not able to get through. Right now, all of our lines are booked up.

And even like the DMs. I go in my Instagram DMs, I'm like, "It's 3 paragraphs or 17 numbers." I'm like, "Go use Ask Ramsey." It will walk you through all of it.

Because it will like take all your numbers and do what you need. It really is amazing. So again, check it out at ramsaysolutions.com. All right, we have another Another person calling from Charlotte, George. We were just there last week. That was a great event, by the way.

We had a great time. Thank you to everyone who came out.

Yes, we're gonna be in Anaheim next week, George and I are.

End of the month? Yeah. Oh my gosh, it's already here. I think it's sold out.

Denver, there's a crew that's gonna be there tomorrow. John Delony, Jade Warshaw, and Ken Coleman. And then Ken Coleman, Jade Warshaw, and myself are gonna be in Phoenix next week. So I think there's still some tickets to that one. I think all the other shows are sold out. Oh, sweet, jump on it. Yeah, go to ramseysolutions.com for tickets. Ramsey Show Live. So a little plug for that, 'cause I see Charlotte on our board, and we had such a fun time.

And then people go, when are you coming to Charlotte? And we're like, dude, we were just there.

Just there. I know, I know. But, uh, but we are excited to talk to Phillip. So hey Phillip, welcome to the show.

Hi George and Rachel, how are you guys doing?

We're doing great.

How can we help? Um, so, uh, me and my wife currently live in a mobile home, um, out here near Charlotte, and, um, my in-laws are currently— we're about to receive an inheritance of $100,000 $1,000. Wow. Um, and they sat us down the other night and, um, told us they wanted to pay off our mobile home. Um, I was just calling in to get an answer as to whether there will be any kind of gift tax or, um, or can they just, you know, put that money in their account and pay it off? Or so this is—

you're getting this inheritance while they're still alive, is that the idea?

Well, well, my, uh, my, uh, wife's grandmother, she's, uh, very sick. She's He's not expecting to make it.

So the inheritance is going to your wife's parents and then they want to gift it because they don't need it?

Yes, yes. They got it. They want to help them sell their house.

So is the $100,000, Phillip, going to pay off the mobile home or they want to, in addition, pay off the mobile home?

Yeah, it will. Our mobile home payoff is like $31,100, somewhere around there. Okay. So that would completely pay it off.

Yes, so are they, sorry, are they using the $100,000 for that though? They are, yes. They are, okay. So you guys would be left with about $70,000 in cash with the paid-off mobile home. So yes, they can do that. You can, yeah, each individual parent can give each individual child $18,000 a year without a big— $19,000 now.

Big upgrade. Is it $19,000? They upped it to $19,000. This time? Okay. For 2026. So that's $19,000. Oh, I had $18,000 in my head. That's the annual gift tax Exclusion. And so if the in-laws are married, you guys are married, that's potentially $76,000 in gift exclusions, which just means they don't have to file the gift tax form that goes against their lifetime, you know, estate exemption. And so that you can do up to that much. Now you guys will not owe anything in taxes. It's them that have to deal with, hey, if they give over that $76,000 threshold, they'll have to file a form.

That's all. Okay. Okay. Thank you.

Absolutely. So just make sure they're aware. Mhm. And if they have, you know, a tax pro they work with, just say, hey, just so you guys know, if you do the full $100,000 this year, you might need to file a form for that extra, you know, $24-ish grand. Um, okay. Yeah.

Philip, are you guys— do you guys have plans to move out of that home at all?

No, no, we're not. We're, we're staying. We're here for the long haul.

So, um, what long haul? Until it's worth nothing?

For the foreseeable future.

Because that's the part that worries me is that mobile home's going down in value.

Yeah, make sure you guys are saving on the side, Phillip, that one day, you know, if you guys, yeah, from a value standpoint, from the value of the mobile home, it will start going down. So making sure that you guys have some money saved that if you need to upgrade and/or go buy a house or something, you know, that you guys have, you're not building any equity right now, if you will. And that's where a lot of people build a lot of their wealth from a home perspective. Is in their equity in their home. So just be thinking about that on just the side that maybe you put, I don't know, maybe this other $70,000 away for, who knows, you know, maybe a down payment down the road. So just be thinking about that. I'm so sorry, yeah, for the loss, but I'm thankful that, yeah, you guys can put this money to good use. All right, let's head to Colton in Asheville. Hi, Colton, welcome to the show.

Hey, thanks for taking my call. So, I've got a question about my retirement account. Basically, my financial advisor's wanting me to do something that just doesn't make any sense to me. I was hoping I could get your advice. I worked for a company for 2.5 years, and during that time, I went through Financial Peace University, and I realized that instead of putting my retirement into a pre-tax account, I should do the after-tax 403(b). So, I've got 2 accounts. There. Um, I don't work there anymore, but they are changing from Transamerica Retirement Solutions to some other company. And so they called me and said that, like, they wanted me to keep my money with Transamerica. Like, Transamerica called me, and so they want me to pull it out of that account and then put it into a Roth IRA with them. And I thought that sounded a little sketchy, so So, I called my advisor and he said, "Don't do that, but let's pull it out and put it into a normal IRA here at Edward Jones." But I'm most likely going to be going back to work with that company, like in the next few weeks, and it'll be a long-term position.

So I don't know if it even makes any sense to take it away from that company or just let them change to their new retirement solution company and keep it with them and start investing back into it.

Well, I would just hang on tight until we know what's going to happen in the next few weeks. If you go back to that job, just— you just reopen that 403(b) and keep investing. But it's not bad advice to say once you leave a job, you should do a direct rollover rollover to an IRA because you don't have control over that anymore. The employer doesn't want to manage this old fund. It's like keeping your stuff at your ex's house, and it can be getting dinged with fees at the same time. And the IRA gives you basically unlimited options to invest, where your employer plan might have 10 to 15 funds to choose from.

Yeah, so Colton, we do always suggest, yeah, when you leave a company, you roll over your 401(k) or 403(b) to a traditional IRA.

That's great if it's traditional 401(k) money or 403(b). That's true.

If it was Roth, yes, that be different. But since you may be going back there, instead of dealing with all the hassle—

Just wait it out. If you don't go back, I would roll it over. You can do it through your advisor. You can do that on your own. There's a lot of options here, but they're not giving you bad advice. An example is my wife worked at Ramsey for 9 years. When she left, we rolled over her money. She had some in traditional, some in Roth. We rolled over the Roth side to a Roth IRA, rolled over the traditional side to a traditional IRA. It was a direct rollover, so we didn't see the money. It was not in our bank account, we moved it directly to avoid any taxes.

Yep. So good. Well, yep. Hope that helps, Colton. And yeah, good luck with all the transitions. I hope you kind of get settled and feel good about where you end up.

All right, let's cut to the chase. It's easy to get discouraged about crazy house prices and interest rates, but when you have the right real estate agent to help you buy and sell the right way, you'll have confidence to make smart decisions. Ramsey Trusted Agents aren't just experts who guide you through buying or selling. They're people you can trust to have your back from the first call to closing day. Find a Ramsey Trusted Agent near you at ramsaysolutions.com/agents. Agent. That's ramseysolutions.com.

Our scripture of the day comes from 1 Peter 4:8. Above all, love "Love each other deeply because love covers a multitude of sins." Tina Fey said, "There are no mistakes, only opportunities." Thank you, Tina Fey. What an original, you know?

Who knew? She's a poet and a comedian.

We love Tina Fey and Amy Poehler. Alright, let's head to Phoenix, where we're going to be next week. Hi, Emily! Welcome to the show!

Hi! How are you guys doing?

We're doing great! What are you doing next Tuesday night? Emily? I'm not sure.

Probably working. Probably working.

Okay, well, we'll have Christian pick up at the end of the call. And if you are open, I bet we— I think, yeah, we can snag you two seats to our Ramsey Show Live.

It's at the Mesa Art Center, April 21st, 7 PM. We can even have you at VIP at 5 if you're free. Oh my goodness, that'd be amazing.

Okay, okay, stay on the line. Christian will pick up. We'll get you tickets.

Rachel makes dreams come true.

Hey, Emily, I did this 2 weeks ago. John Delony and I were hosting, and a guy called in from Charlotte, and I said, "We're gonna be there next week in Charlotte," and he was like, "Really?" So I got him 2 tickets, met him in the signing line. He said, "I'm the guy you gave the tickets to." So Emily, I hope I meet you next week. Outrageous generosity. Yes, George won't be there, but Jade Warshaw and Ken Coleman will be. But all right, Emily, how can we help today?

Okay, so right now I'm a massage therapist. I make about $58,000 annually, but I'm currently $65,000 in debt. Right now, we— the last 6 months we've been staying at my mother-in-law's house just to save some money and get caught up. But I just recently found out that there's— the house is an older house, so it's covered in like mold. So we're trying to— we're trying to get out as soon as possible. But my main concern— so in 2018, I went in with my family and we bought a multi-generational house. But then, of course, ended up badly. So, um, we all— like, two people are living there currently, but the other, um, we all left. But my main concern is, um, because I was— I brought it up to get refinanced, to possibly them buying me out, but they're just not budging at all. Or even to like, if we could sell the home and each split it the three ways. But yeah, they're just not budging at all. So I'm just kind of— I don't know what I can do.

Is that the $65,000 in debt? Is the home situation, or is that above?

Yeah, that's a different thing. That's my own. Some is in 43, I think, is in credit cards, a $9,000 personal loan. And then also, I believe it's $13,000 for my car loan. Okay.

Was there an agreement when you guys bought this home of how this all works?

Yeah, we didn't sign it on paper, but essentially we're supposed to get the home and then the next person was like— there was 3 different families. And then the next person, we were going to use equity for another home and then that one would build equity and we'd get another. So essentially we thought we were going to have 3 different homes, but it didn't end up panning out that way.

So you guys are just riding on vibes right now and it's just, well, we don't want to do that and we didn't sign anything.

Yes, exactly. And like they won't budge. Like they, they, it's like I'm trying to get out of it and just—

How much do you own of this home or what percentage?

And there's still $250,000 left. The home currently is $425,000 worth.

And what's the plan for the people that are living there now?

What are they saying? They're just saying, it's mainly my mother, she just doesn't, she thinks it should be a forever home that all the, 'cause I have 4 sisters, so it's like all of us.

You ain't living forever in a mold-covered home, I'll tell you that much. I mean, it's gonna crush her health. Does she not understand that? Stand that?

Um, no, so it's currently like, um, my mother-in-law's, um, is the one—

mother-in-law has the mold? Yeah, yeah, she's— the other home is different. Okay, gotcha. Um, okay, and you're married, Emily. How much do you guys bring home a month, you and your husband combined?

Um, I make $58,000, I believe he makes $50,000 as well, but right now he's like— our finances are separate. He's trying to pay off his stuff while we're at his mother's, and then I'm trying to pay off Okay, how much?

What kind of debt does he have?

Um, he also has a car loan himself, and then he also has, I believe, $9,000 in credit cards.

Okay, why are you guys doing it separately? I—

that's always been that way. I don't think we've ever combined money.

How long have you guys been married?

Uh, we've been married, um, 2023, but we've been together for 13 years.

Okay. Um, well, what I would probably do if I were you guys— I'm trying to think— your cars, loans, everything. Um, what did you rack up $43,000 of credit card debt with?

Um, well, I have two small children and it was just like, um, one thing after another. He did lose his job for like two years, so it was just trying to— so he lost his job for two years?

Your, your ex-husband or your current Husband? Oh, my current husband. And you help float his financial life? Yes. But we're not combining finances, only when he needs help? Yeah. Okay. So, what I would do, Emily, is that this is a bigger question. It's more of a shift in the relationship. But what we find, couples who work together and say, "Hey, this is our household income. Here are our household bills. Your debt is my debt." Like, we're in this financial life together. Together, they win faster. They get out of debt faster. They build wealth faster. When you're trying to do your own thing, it's gonna take you both longer. But when you have synergy, not only from a mathematical perspective, but also a teamwork perspective, it does. It just goes so much faster. So that's a really big conversation, 'cause you guys have done your own thing for about 15 years with money. But what I would do, I would, I would really, yeah, I would push you I want you guys to combine and work together, and you guys list out your debts together. You know, like his $9,000 in credit card debt, your $9,000 personal loan.

Together, you guys like make a plan and say, "Hey, what if we lived on $60,000 and we had $40,000, $45,000, you know, this year to pay off debt? You know, what could we knock out?" And you start together doing a plan, and you guys could be out of debt in 2, 2 and a half years, if you really, really focused on this. But you couldn't do that separately. You would be slowly doing it because you're paying some bills over here, he's paying some, so. It's all disjointed right now. Yes, so I would, yeah, I would have a relationship conversation and combine your money.

Got it. Okay.

And what is your share of the house that you co-own? Own? How much would you actually get if they bought you out?

I'm really just asking, I'm just the $43,000 for credit card. I own a third of the mortgage and the deed.

So you own a third of the house. If they were to buy you out, how much would you net?

I just wanted the $43,000 is what I just asked for.

I'm not sure. You just want the $43,000 even though you own more of of it. Exactly. Okay.

I just want to get out of what—

Well, I mean, the one thing you can do is to get a real estate attorney and you can do something called a partition action where a court can order and force the sale of the home. Uh, but you need to kind of get some details down. What's the home actually worth? Get the home appraised. And then what's your share? How much are you wanting? And then present a formal written buyout offer. 'Cause right now nothing has been written down. It's all just messy, dysfunctional family dynamics.

And it'll continue to get messier as time goes on, honestly, Emily.

So organization Communication is your best friend right now. That includes getting on the same page with your husband, combining the finances, attacking your debts as one. That will help all of this. Got it.

Well, thank you so much. Thank you. Absolutely.

Absolutely, Emily. Thanks for the call. Yes, thank you. Um, yeah, that's— yeah, hold on the line too, Emily, if you're still there, and we can see if we can get you tickets to Phoenix. And bring your husband. This is a perfect way to get on the—

you know what? Yes, ask your question. Hey, our finances are "Here's why," and have the jury weigh in. Yeah, and have him there too.

We can all talk it out in the Ramsey Show Live. That's why we love this event.

But anyway, he's so kind. Ken, Jade, and Rachel can solve pretty much any quandary.

So kind. I believe in you guys. You know, but this is the warning call of when people commingle, from a family perspective, real estate. They have this dream that, "Hey, let's buy a piece of land. We'll plot it out and everyone can build a home." Well, when one person—

We'll have 7 homes one day.

And when one person wants to move out of town, out of state because the spouse, you know, got a job and they got to sell the home to a stranger. It messes up the whole thing. Or this, you know, we're all gonna go in on a home together and you can have this equity, I'll have this, and it's gonna be great. Will it though? It does, yeah. It rarely works, you guys.

I can count on zero fingers how many calls we've gotten where like, "This was the biggest blessing in my life that I co-owned it with my mother-in-law, my sister." I know. And now, three of them want out, one of them doesn't.

I mean, it's a nightmare. It's a tangled mess. Nightmare. And so, yep, just a warning, you guys, for all of that. But George, great show. Thanks to everyone in the booth. And thank you everyone for listening. And remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.