Transcript of Today's Habits Create Tomorrow's Progress

Brought to you by the EveryDollar app. Start budgeting for free today. Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union studio, this is the Ramsey Show. I'm George Campbell here with Jade Warshaw, taking your calls at 888-825-5353. 825. We'll try to help you take the right next step with your life and your money. Sarah is up in New York City. What's going on, Sarah?

Hi, thank you for taking my call. Um, my question, my question is, uh, my parents, they're pressuring me to sign a $250,000 HELOC, and I feel very uncomfortable doing it.

You should.

They, yeah, they already owe me $20,000.

Oh man.

So they went, hey, Bank of Sarah hooked us up last time, let's try to 10x our loan.

Why is this even a conversation? Why is this even gone beyond the point of an immediate no?

Um, honestly, uh, they, they cannot pay their debts, and I'm very worried for my little siblings.

Okay, because the siblings are living with them, you are not?

Yes. No, I'm also living with them as well. Oh wow, very hectic. I'm 23. Okay.

And how old are the siblings?

They're 14 and 8.

Okay. 14 and 8. And is the HELOC— you said they can't pay their debts. So is the HELOC supposed to be used to pay the debts? Is that the point?

Yes. But the thing is, another twist. They already took a HELOC on our primary home. They want to take a HELOC out on their rental property.

Oh, boy.

What's the rental property worth?

It's worth about $950,000.

And what do they owe?

They owe $250,000.

So they got $700,000 sitting in equity in that thing.

Yes.

Why not sell it?

Uh, they refuse. I guess they want to keep it in the family, but—

There's not going to be anything to keep in the family if they keep this up. They're going to HELOC their way into oblivion to where there's no equity anywhere. And they're going to be forced to sell it one day. So, no. The easy answer is you get to say no.

Go back to the kids, though. When you say you're worried about them, in your mind, what, what do you think is going to happen?

I'm worried that there's not going to be any money left for them and they're like, as far as inheritance goes on. Yeah. And then I also think I feel like the primary house is going to get foreclosed on because they have no cash.

But they do have the— here's the problem. What you're saying is likely true. Maybe they will get foreclosed on. Maybe they will. Destroy any inheritance or anything like that over the course of time. All those things are very possible. So hear me say that because if they don't change course, yeah, they're really setting that path for themselves very clearly.

Inheritance is the last thing I'm worried about.

Yeah. And the truth is, if they do foreclose, the truth is they do have some assets here that they have at their disposal if they choose to do so. The hard part here is these are grown adults who are going to make their own choices. And the hard part is you just having to sit back and watch despite them maybe having some better, you know, advice, them not taking the advice. That's the hard part. If you had told me, "Hey, I'm really worried that the kids aren't having food at night," or they're, you know, the lights are getting cut off and things like that, I think we'd be in a different discussion right now. But if truly your only worry is, "Gosh, when we become adults, there's not gonna be any inheritance," I don't know that there's much you can do to stop that.

Yeah, that's true. I also, I feel like the lights might come off, Because my parents, they don't work. They're both retired and they don't have any cash.

Well, you're there. Are you there without— are you there staying rent-free, or what's your deal being there?

No, I give them $1,000 every month.

So why don't you— let me say this— instead of you giving them $1,000 in cash, why don't you say, I will pay the utilities if I'm going to be there. I'm going to pay the water so that you know that those things stay on. And, you know, maybe the other bits, you pay groceries or whatever it is that you're doing. But in this I would be hard-pressed to be handing somebody my money in cash, hoping that they're doing the right thing with it, which is keeping the utilities on in the place that I'm living.

If your family's livelihood is at stake, you need to get involved. And that does not mean you need to loan them money. It means you need to be involved with the budget and paying the bills. And you might need to take responsibility because these grown adults have chosen not to.

Why are you living there?

Well, I still have like one more class left for college, so I was going to take that class. And then in December, I was thinking about moving. I have about, um, $60,000 saved. You want to know what—

you want to know what I think? I think that dysfunction is magnetic, and it has a way of pulling us in and pulling us— and not just physically, but even mental. When you're around dysfunction, before you know it, you're starting to act in dysfunctional ways, and you're starting to consider doing things that you know are dysfunctional.

It's like a vortex you get sucked into.

Like the fact that you're even calling us concerned about what do I do here lets me know, man, this dysfunction is really having a pull on you. I think I'd get the heck out of that situation. And it's not to say you don't talk to them or see them or interact with them. I'm not saying cut them off by any means. I'm just saying, you've got money, you're 23 years old, you're grown. Go and start your life and start on a healthy path.

I agree.

So they have $1,000 coming in from you, they have rental property money coming in, I assume they have Social Security. Any other sources of income?

No. Oh, they also have another rental property as well.

Where's all their money going?

Bills. They're backed up on everything.

So it's all going to bad debts they're trying to keep up with?

Yeah, he has about I think $100,000 in credit card debt.

How old are they?

My dad's 70 and my mom's 50.

Okay, so older parents.

Can she work?

I think she's gonna start working. She never worked before, but she's gonna start. She's gonna have to get a job.

No time like the present. So how much debt do they have total? Do you know between all the HELOCs and consumer debts?

I think about $800,000.

Okay, and they have at least $700,000 locked up in this rental property, number one. What's the second property worth and what is owed on it?

That's, um, debt-free. They owe about— they don't owe anything, but it's worth about $400,000.

Okay, so they have $1.1 million that they have access to if they chose to sell one of these properties or both of them.

They're not in the red, they just have a lot of risk in their life.

Yeah, that's true.

So you can show them that, hey, Mom and Dad, I'm not going to co-sign anything, but what I can help you do is come up with a plan to to get out of this if you're willing to listen to me. If you don't want my advice, fine, but that's all I'm able to help with at this point in my life.

That's true. I'm also afraid that they're going— not going to pay me back.

They're not.

They're not going to pay you back. I can tell. I— certainly they're not.

Yeah.

What makes you think they would?

I would be shook.

Because they said they would?

Yeah. I mean, you know, it's your parents, you know, I would think they would pay you back, but—

It's not about that. It's you can tell by people's patterns of behavior what they're most likely to do.

I'm sure they want to pay you back. I'm sure somewhere deep in their heart they feel for you going, man, we really need to get her money back. But they've got a thousand things going on, and you might get it back in inheritance one day. But at this point, there's still a lot of life to live for these kids and for your mom and for your dad. So in the meantime, we need to clean this mess up, and you might need to show them how bad this really is and that debt is not the answer because it got us where we are today. Another HELOC isn't going to solve anything, is it? It's all about the behavior that got us here, and they're not willing to change that, and you can't change them. No, that's why I don't want you to get involved.

Yeah, yeah, you can't change them, and I think you need to move out. I go back to my point, if I'm you, this weekend, that's my, that's my fun. I'm going out and I'm apartment hunting. You've got $60,000 saved, which is amazing. Go put it to good use.

Oh, parents, please do not put your kid in this position. This is abuse on several levels.

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Lauren is in Salt Lake City up next. What's going on, Lauren? How can we help today?

Hi, my name's Lauren. I'm working at a job at a company that I don't respect how they've treated myself and some of the employees. But I'm under a service-based repayment through a health grant through the government. And so they paid for all of my school and all things happen while I was in school. And so now I have a period of commitment time. And if I don't fulfill that commitment, Um, I would owe back 3 times to the government what was paid.

3 times?

Yeah. What was paid? Um, and so they initially paid around $280,000, and so if I don't fulfill it, then I would owe back basically $1 million. So I don't technically have any loans per se that I'm paying, but if I don't fulfill the commitment, then I would have to pay it back.

Um, I've never heard of such a thing. Have you, George?

Not 3 times the amount. And you're sure about all the fine print here? You're saying that you would owe them like $900,000 if you quit today?

Yes. So it's, it's really scary.

Um, what if you get fired?

Yeah.

Um, so if I get fired, I'd have, um, up to 6 months to find a job, or I'd get placed at another, another health site.

What's wrong with that?

Um, not necessarily anything wrong. It just would require me to move. So there's no other— they have kind of certain scores, and so, um, the nearest site to me is about 9 hours away. Um, but it's not—

it's not the job, it's the location, right? You said it's a toxic environment.

Yeah, it's a toxic work environment.

Is that one person, or is it like this whole place is corrupt?

Uh, the whole place. Yeah, there's been—

That's comforting. What program is this that you studied?

Um, I'm working as a medical— it's through a medical program, but it's through like the Health Resource Center.

Okay.

How long do you have— how long is the contract for before you're free?

Um, so I have about a little under 3 years left.

And if you move locations, like to George's point, let's say you got fired and you moved, does the term start over again or are you able to, you know, do your time, the rest of your time in the other location?

So I can do the rest of my time in another location. I think the part that my husband and I have been torn about is just that we have family where we're at and it would require us to sell our housing and kind of sort of run that fence financially.

And so, but isn't that the least of your problems? Because when you called in, you said, I hate my job., but the problem is if I leave, I owe 3x the salary. So that means, let's pretend, let's pretend that wasn't the case. Let's just pretend you hated your job and you wanted to leave. Would you still be saying, oh, well, here's the problem. You know, we have to move and, you know, housing and whatever. Do you see what I'm saying? I feel like you shifted the problem to something else just now.

Yeah, I agree with you. I think I've felt pretty stuck where I'm at. Okay.

Um, is there a way to transfer versus having to force yourself to get fired, which sounds insane? Can you just go to leadership or is there a bigger organization that handled this program that you can go to and ask for a transfer?

There is a way to transfer to another site. And so I am interviewing another site and that's kind of part of the reason that I wanted to reach out today is just to kind of see if that, if that was wise, because I'm—

How far is that away from where you're at?

Um, it would be a little under 10 hours away. Um, and so it would require a move and that's actually one of the closest sites to where I'm at now. I'm just trying to figure out with lots of little kids and a big move, if that makes sense, even if I'm going to come back here, because my husband would also obviously lose his job here as well.

It's okay. So let's, let's separate it out. It sounds like on the one hand, what I hear is you can't stay at this job, like for your own mentality. You can't stay.

You can't afford the soul tax that is to be paid.

Now, what we can't do is cloud an inconvenience with keeping us in a really bad situation. Moving is inconvenient. Even when you wanna move, it's inconvenient. So let's just put that on the shelf as being a moot point because moving is always going to be an inconvenience. So let's not let that stop us. I think the main thing here would be your husband's job. That could be a logical thing for us to consider staying or staying closer by. What type of work does he do? Is he movable? Tell us about him.

He's movable. Um, he's also in healthcare and so could get a job easily. Okay. It'd be more, you know, daycare and, and childcare. We've got 3 kids in daycare, so lots of, um, lots of movement there.

Um, and that's okay. You can do that.

We were hoping if I could stick through here that maybe I could stay at home at the end of it. Um, you'll probably—

we don't know the, the environment you're talking about, so I don't know the, on a spectrum of my boss is annoying to I'm having a mental health crisis. Racist because of this? I don't know where you're at.

Yeah, tell us.

Yeah, it's definitely more towards the latter. Um, I've watched several of my coworkers get fired, um, in front of me, and so it's been, it's been a really hard—

are they in the same program as you? What happens to them?

Um, pretty much everyone that's in the program stays until the day they can be released and then leave.

But you're saying they got fired, so do they have to move to a different location 10 hours away?

Um, yes. Yeah. So, so coworkers that do get fired or let go prior do have to move.

Do you think they got fired on purpose?

Because I think it, um, possibly. Um, I think a lot of it is the employer.

I've watched about 30 coworkers get fired, and those jokers are getting fired on purpose. I think they're seeing the same thing you're doing.

And the fact that no one's seeing this pattern going, hey, there's some toxic leadership here, if 30 people are getting quote unquote fired who are otherwise great workers. So this is a real Tough situation. There's just suck on both sides of this. And so, I would just try to make peace with this move and go, "It's an adventure. Yes, family's gonna be further away for a couple of years, but 3 years from now, this is all over." And it's a good reminder that all of these programs, they sound so amazing. Like, what a blessing to have a whole program paid for that would've cost you over a quarter million dollars. We can all agree that's awesome. The red tape, on the other side and the prison sentence and handcuffs is the part that scares me with these programs.

Can you afford to move? Tell us about your finances.

Yeah, I think so. Right now we're in a really good financial position. We make about $225,000 combined, um, and our house is almost paid off here. Um, and so we would, we would sell our house and we could, we'd probably rent where we would go. Yeah. I'm not sure that we would stay. Um, I think the part that might be hard financially is that we would possibly be living on just my income for a while, and the rent where I'm interviewing is, is more expensive because he won't be able to find a job or what. Um, it'd probably be more until we can find child care, um, because we'd be trying to enroll. But the area— a lot of these sites are in really rural areas with not a lot of resources.

Well, let's do it. Let's give you a fair order to make this move. So the first thing that you would need to do before you transfer, uh, or before you get yourself fired because you pulled the fire alarm, uh, You need to make sure he has a new job, right? Like that's thing one, because you don't want to go somewhere. If you can have him locked in and you locked in, I think that's a good thing.

And we can figure out childcare. You've got options. You could hire a nanny for 6 months if you needed to.

Mm-hmm.

Yeah, for sure.

And it'd still be worth him working.

And if you know where the transfers send you, then you can, he can start to look in those areas prior to, to prior to you actually requesting the transfer or prior to you getting fired. I don't know. I'm not going to tell you to get fired on purpose.

Trust me, Lauren, I would be contacting an employment attorney.

I know that's right.

They're going to be looking into the fine print of this. They, they can read these contracts backwards and forwards and tell you what your actual options are versus just our opinions, basically, because we've never seen it.

Yeah.

But if I'm in your shoes, I'm going to be taking the contract, uploading it to AI, talking to the employment attorney, and seeing what all of my options are. And this choosing one that is the sort of path of least resistance here that's going to involve the least amount of pain. But it sounds like either way, it's going to be a tough go for the next couple of years, whether you stay, whether you move. And, you know, 3 years feels like a long time in the scope of your whole life. You're going to go, man, remember that time we had to move 10 hours away for 3 years?

Yeah, it can feel very short too.

Yeah.

Oh man, that is wild.

The bigger lesson, let's talk about the bigger lesson that might be in this whole thing. This was golden handcuffs if I've ever seen it before.

Yeah. To sign up for something knowing that I would have to pay 3x the amount.

Yes.

And knowing that it was over a quarter million, which equals 3 times that.

And you're going into the unknown. You're going into the unknown for it. Ooh, lordy.

Yeah. That's the financial equivalent of having to hand over a kidney.

Oh, gosh.

Would not recommend.

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Hi, George! Thank you for taking my call!

Sure!

My question is, is it worth it for me and my two siblings to fix up our mother's house? It's got a lot of foundation, plumbing, roofing, the regular issues. Or should we just sell it as is?

Oof. What's it going to cost to get it back to a decent condition?

Well, uh, the foundation, the quote we got was $13,000. It needs 28 piers. But if you fix the foundation, you in turn of course have to do the plumbing and the windows and the roof and so forth.

We're basically rebuilding this house pretty much.

And she owes $8,000 on it, um, because she and my dad, God love them, you know, wanted us to have these great childhoods, so they just kept refinancing the house. And it's obviously very sentimental and every time we bring it up to her, um, you know, it's very emotional. Um, but a portion of her ceiling fell a couple of weeks ago and yeah, we had a contractor come by and, you know, put it, put some plywood up. And so now of course mom thinks, oh, okay, this is great. It'll last, last another year. And I'm like, mom, this is so unsafe.

But how old is she?

Mom? She's 78.

And when you've said to her, I feel like our options, mom, are we can start to do the work on this house or we can sell it. What does she say?

She says, where am I going to go if I sell it?

Yeah, that's what I want to know.

Well, where she would go is my sister has offered to let her live with her and her family. My husband and I have room, um, or we could find her a nice little apartment where she doesn't have to stress over these issues. But it depends on the day, honestly. When I ask her, she's, um, is she well? She just is Oh yeah. Oh, she's, she's, she's very well.

Okay.

She's, uh, yes, active. Yes.

But she has no money other than Social Security.

Um, she has $2,200 a month from Social Security and about $500 a month from an annuity. I started her on a budget and she's got about a $400 a month margin. I mean, she's just, yeah, she doesn't have the money to fix it. She's asking if we want to fix it and then We get the house when she passes.

What's it worth?

Um, the value on this, uh, Dallas County Central Appraisal District is about $265,000 to $270,000. Um, if you fix it, correct? That is if we fix it. Um, she's received a couple of, you know, these internet offers, which I tell her to stop looking at. Oh God, like, yeah, I'll buy your house in cash today.

What's the— actually, what would be the as-is price? Have you talked to a realtor about that?

Well, I've talked to two of the contractors that have been out who are builders, and one of us gave it— gave us an offer of $140,000.

Okay, so all is not lost. You could walk away from this with $120,000 probably after fees.

I think that's about what I, what I figured.

I'd still have a realtor look at it and make sure, because I mean, that guy might have just been trying to take advantage of a situation. I'm not saying he's a bad guy, but at least we have a floor.

Yeah, someone will give you $140,000.

Barely.

So now I'm gonna go, who's the highest bidder, and work with a pro real estate agent who can get rid of this thing. I personally don't think it's worth all of you chipping in all of your money to hopefully get this thing back to working condition so that one day we can keep the sentimental value of this house.

Okay.

I don't know who's gonna want it at that point, who's gonna live there. Are you gonna turn it into a rental? Because at that point, how sentimental was it?

Well, it does have— she has a lot of, um, uh, what am I trying to say? It's a big lot. So if a builder did tear it he could probably build 2 or 3 homes, the corner lot, and, you know, wow.

So you might be able to get a nice offer on this thing because the land is worth more than the house that's sitting on it.

100%. Interesting.

I don't think it's worth rebuilding. This is a lot of hassle, a lot of siblings' money tied up in this thing. Everyone's gonna want to get their money back out. So now it's gonna be a fight of when are we gonna sell this so I can get my share out. I think it's gonna cause more familiar harm than it's gonna be, you know, precious sentimental family time.

Let me, let me ask you this. Um, 'cause I would wonder, these are the questions. If I were in your shoes today and I were making the decision, I would want to know exactly what the house plus the land would be worth. And I want you to really do your due diligence on that. I'd wanna know with the fix and without the fix. And then take that margin between the new, the two amounts and go, okay, if we, how much money do we truly have to invest into this? And if it really is, a fraction of the amount that you would bank off of getting it fixed, then I'd be asking myself the question, can I do this in cash? Do I need to even include the siblings? Because that might make it easier. And to just know, hey, later on I'm getting my— this is what I put in, I'm getting that money out, plus whatever our split is or whatever, and maybe not involve as many people. Because if there's a— if you find that there's a lot of money that's going to be left on the table, there might be something that's worth doing in cash if you can afford it.

It. Now, if you can't afford any of this, it's a moot point.

Well, between the three of us, we can afford to do it. Um, my brother has expressed interest in buying the house, but my point to him was, if we fix this house up, then I want my money out. Yeah, if you get this house, I want my money back.

I just called it. I knew this would happen, Chris. This is what happens when siblings get involved financially. And but now there's so much emotion wrapped up in it, and what would Mom want? So because of that— and here's the problem, you might put $100 grand into this and some builder comes along, couldn't give a rip about it, he's going to tear it down anyways. So you don't ROI on it. He probably would have given you the same offer if you had done nothing to it. So that's why I would do all of my homework. Like Jade said, figure out here's what it would truly cost to rebuild. Here's what we could then get for it. Here's what a builder would be willing to pay for it. Here's where we're going to put mom. Here's where we're going to put her money to afford that and come up with a game plan altogether as siblings.

Okay, the harder part, of course, is the sentimental part of it. It's just hard for her to do that, and that's, you know, that's emotional, and that's something we have to work with her on. So, um, you know, as they get older, they have their routine, they know where everything is, and they like what they do, and they don't want to change anything.

Just imagine though, she's in a place where the roof isn't about to fall on her. That's pretty comforting.

She says God will provide, and I'm like, Mom, God provided you a sign by having the roof cave in. It's time to go. The ceiling— it's time to go. And she just says, we'll keep praying on it.

But I I love her, but sometimes God provides with wise counsel to avoid us bringing harm to ourselves. So it looks a lot of different ways. So that— I can't help you convince a 78-year-old woman to let go of a home. That's beyond me. But I think what you can do is show her all the facts and say, hey, Mom, we're not gonna put all this money in to fix it up, and here's what we can get for it. Here's what we're gonna do with that money. We found you an awesome place. Let's go check it out together, or you're gonna go live with, you know, one of the siblings. And she's gonna have to make peace with that because this is the life she's build for herself.

I will say, I do want to add to that part. I think you, the siblings, do have to be careful. So let's say you sell the place as is. That's her money. And so taking that, uh, what I want to make sure doesn't happen is, well, we want to preserve as much of this money as possible, so let, let Mom go live with Sister, and that way we don't have to spend money on an apartment or something like that. I don't want you guys to be thinking too much about what it is that you want out of this deal. I want you to be thinking a lot about what really will be good for your mom, for her to keep having independence, for her to feel good about her day-to-day life. Because the truth is, today it is her money if you guys have not, you know, fixed the house, right? The, whatever equity is there is hers. So just keep that first and foremost, um, and don't spend the money before it's yours, if that makes sense.

It does. Thank you both so much. I really appreciate the insight.

Absolutely. That's a sticky situation.

Yeah, that's not easy.

Oh, I can't imagine. But there, there is a piece of this too, if you got to think about long-term care expenses, you know, if she's in her 80s and she needs medical attention and we need to put her in an assisted living, that could cost you $100,000 a year and someone's going to have to pay for that.

Yeah, that is a good point too, George.

And so we need to be thinking about what assets do we have at our disposal to make sure that we can take care of her in the best way possible. Maybe they want private in-home care. That's going to cost a lot of money too. And so I like the idea of selling this thing, getting a whole bunch of money out that is now, let's give her the best life possible. Instead of having her sitting in this place that's literally falling apart.

It's dangerous where she's at. It sounds like it is.

So yeah, I'm gonna go the memories I will carry with me. It's not in the studs of the walls. Yeah, it's in our hearts. And that's a hard thing to, to sell to a 78-year-old woman who's— this has been her whole life.

Yeah, yep, yep. But she don't have any money. It's tough.

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Gigi's in Chicago up next. What's going on, Gigi?

Hi, thank you for taking my call.

Absolutely. How can we help?

Um, so I'm a 20-year-old college student and I was just wondering how much should I have in my personal savings account before I start putting it into a high-yield savings or mutual fund?

You are the most mature 20-year-old I've talked to in a long time. Congratulations, you won the prize. That's awesome. How much do you have in savings?

About $7,000 right now. Wow!

Awesome! Are you debt-free?

Yes, I am.

Fantastic! Well, you're doing better than 99.9% of America at 20. Let's keep it that way.

For real!

We always recommend having a 3- to 6-month emergency fund of your expenses, not income. Once you have that, anything beyond that I would utilize towards either short-term goals, sinking funds, or investing.

OK.

So how much are your expenses per month right now?

Right now, probably $250.

Dollars?

Dollars, yeah.

How are you doing this?

You live on campus?

Yeah, I'm on a scholarship and everything is paid for. It's a full ride.

That's so awesome!

Wow!

Are you smart or talented or both? How do you get this full ride?

I'm a Gulf County. There's this scholarship, the Evans Foundation, and they pay to send deserving caddies to school. So I caddied my whole life and I got it.

That's amazing. That's really great.

So how much time do you have left in school?

Um, 2 years. And after school I'm hoping to get a job, obviously. But, um, you know, I don't know if I'm moving out of state to get an— I need to get an apartment. I'm looking to maintain, you know, enough liquidity so that I'm like like if I need a down payment or something, like I have the ability to do that. Yeah, that's why I like— I don't want to put too much in an account where then I have to pay to take it out. So I just don't really know how much I should be putting in.

And yeah, I really like a high-yield savings for you because there are— in 2 years you do have some real expenses. You're going to want an apartment, so first and last month's rent is going to be there. And then suddenly what George talked about, your emergency fund is going to have to tick up because, well, now you have rent and— maybe, you know—

It's not going to be $250 a month anymore. It's going to be $2,500.

Exactly. And probably that $7,000 is going to be right on for what you're looking for.

Plus, there might be moving costs. There might be a car upgrade. And so for that reason, for a 20-year-old who's going to graduate in 2 years, there's nothing wrong with just stacking it up in a high-yield savings account because you have so much time on your side to invest and have compound growth work in your favor. And if you start off completely debt-free with a bunch of money in the bank making a good income, you're going to be able to invest 15% or more the rest of your life.

OK, great!

Thank you! I don't know that I would invest at this stage until you have full-time working income and you're planted somewhere. Then you'll know how to allocate that money. I've never heard someone complain that they started their adult life with too much in cash. I'd love for you to have that problem, Gigi. Great question! Way to go! Who knew a golf caddy?

I know!

Full ride!

I wish I had a time machine.

Half the parents out there are trying to get their kid to play golf. I'm like, "Hey, maybe you help the golfer." Maybe just be a caddie. That's the ticket right there. Alright, Madison is in Atlanta, Georgia up next. What's going on, Madison?

Hey, I had a question about investing for my kids.

Sure.

Specifically, they're only 5 and 3, so they get minimal income. But they do a little flower stand and they earn their own money. I make sure that they tied with it. And then I have been putting some of it originally, like their birthday money and stuff like that. We would put in, my husband works for an employee-owned company where they do stocks. So we were doing that. And then I started listening to you guys and realized it's not good to put all their eggs in one basket too. And so now I've gotten them like a 529. I mean, not a 529, I've gotten them an S&P 500. But I was curious if it's better to like go ahead and do them a 529, or I mean, I know it sounds silly, but they can even do a Roth since it's income as long as I don't put their birthday money in that. I was just curious what your thoughts were and the best course of action for them.

Great question. I love that you're thinking about this for a 5- and 3-year-old. A lot of parents out there struggle with this. Either they don't know what to do, so they do nothing, or they do the wrong thing, or they try to do 7 okay things. Here's how I see it. If you're looking at education, which I would be starting with, the 529 plan is your best bet. As far as retirement goes, it's awesome if you want to kickstart a little retirement for your kids. They should be okay if you raise them right in that regard. But school is a much bigger price tag and it's coming much sooner than their own retirement. So most people go, "Well, my kid might not go to school, so let me not save anything." And now you have all this money stuck in a retirement account while your kid goes $400,000 into student loan debt. So I'd rather you fund the 529 first, and if they don't use it all, you can change beneficiaries at any time. You can roll over up to $35,000 over to a Roth IRA over time, so that becomes a retirement account for them essentially, and it has way better tax advantages.

Okay, um, and then if you put in to a 529— because I haven't like looked into it in depth because I'm just now kind of getting started and listening to you guys and all that— um, they— if I do a 529, am I able to like invest within the 529, or does it just— yes, kind of grow?

Okay, it's just, it's just like an IRA. There's going to be a bunch of options for funds there, and there's a lot of bad funds you don't want. So I I personally avoid things like bond funds, target date funds. You want to stick to 100% equities because they're young, they got a lot of time for this to grow. So let's stick with those growth stock mutual funds and index funds.

OK, perfect. So just chunk it all in a 529 and call it a day.

And here's what I do, Madison, as well. If you have the 529 on lock and you know that, hey, based on the average stock market return, we're going to have enough to cover, let's say, an in-state school for 4 years. If you want to save for other things like, let's say, cars, wedding, a future down payment, you can use that parent taxable brokerage account to sock away money there, and that money will be super flexible.

OK, OK, gotcha. Yeah, I know that I won't have a hold of it forever, so I just wanted to take advantage of it while they would let me use part of their money to go ahead and invest.

They will thank you later.

They will.

Whatever toy they could have bought, that's going to be like 70x if they just let it ride in retirement. I like there to be a split. I agree. I think it's great to teach a kid that money money is an amoral tool and it has 3 uses: give, save, spend.

Yep, yep.

So let's teach them to do all of it. If you just teach a kid how to save, they will become a maniacal saver and have a really hard time enjoying their life.

Now that's what we do with our kids. They have their chart where they can check off the chores that they've done, and they get paid, um, at the end of the week. But the rule is you can't spend your money on payday.

Oh, I love that.

Yeah, they have to wait until the next time so that it's not like, "I got my paycheck, I go spend it." And it's gone.

It's a little delayed gratification.

Uh-huh, they have to have delayed gratification. And so that's the way it works. But yeah, we teach them they have to put 10% aside. They have a jar that they put their savings in. They have a jar that they put their spending in.

I love it. Great question. And Madison, hang on the line. I'm going to send you a copy of Rachel and Dave's book, Smart Money Smart Kids. It's really great to walk you through sort of the age-appropriate get conversations and tactical things you can do to help your kid understand money, because that's every parent's goal. Oh yeah. Especially if you follow Ramsey, you're like, how do I get my kids on this? I want them to get it early. And we already got budding entrepreneurs at 3 years old.

Oh yeah.

She's got a Roth going on. I mean, that's pretty impressive.

Yeah, that's so good.

And it's a good reminder, if your child has legitimate earned income, we're not talking tax fraud here.

That's right.

But if they have a little business, let's say they do any modeling or acting, something like that, they work for Roth. They work for your own business. You can pay them above board and they can then invest up to that amount in the Roth IRA. And can you imagine 60 years of compound growth from 5 years old to 65 years old?

I know, that's right.

That's pretty impressive. It wouldn't take much to cause you to be a multi-millionaire.

It wouldn't. And as long as you're doing that 529 first, you've kind of got both bases covered, which is really nice.

And there is a new option now with these, uh, Trump accounts. They're technically called Section 530 accounts, if you want to make it apolitical. But all it is, the government said, "Hey, we're going to create these accounts so that you can invest for your kids. Anyone can contribute up to $5,000 a year. And if your kid was born '25, '26, '27, or 2028, the government will seed it with $1,000." That's money that you didn't put in. $1,000 sitting there at that age to grow into retirement. And at 18, it basically converts to a traditional IRA for the child. So, it's a pretty cool thing.

There's nothing bad about it.

Yeah.

The tax treatment is the only terrible thing because you use after-tax dollars and you pay taxes on the way out. Oh. But there's a cool hack that I'm exploring where you can convert from traditional to Roth. OK. Once that kid's working at their tax rate, it would be super cheap to convert. Now you've got tax-free money growing for— I like George.

I like how your mind works.

Very nerdy. Very in the weeds. And if you want more info on this, I'm going to be walking through exactly how that How that works in Investing Essentials. It's a virtual event. Dave Ramsey and I, September 1st and 2nd. Investing Essentials. You can get tickets at ramseysolutions.com/events if you want to join us. As your business grows, everything becomes more complex. There was a time when Ramsey Solutions had too many disconnected systems and not enough visibility across the business. We wasted too much time chasing information instead of making decisions. That's why we got NetSuite. NetSuite brings your financials, inventory, CRM, and more together in one place. More than 43,000 businesses trust NetSuite, including Ramsey, and now they're taking the next step with NetSuite Next, making it easier to put AI to work across your entire business. NetSuite Next helps you make the most of your time, automating routine work like forecasting demand and following up on overdue accounts. With NetSuite Next, AI is built into everything you do. So you can ask it questions just like when you're talking to a member of your team. And right now you can try NetSuite Next for free. If your revenue is at least 7 figures, go to netsuite.ai/ramsey. That's netsuite.ai/ramsey. Welcome back to the Ramsey Show in the Fairwinds Credit Union studio.

I'm George Campbell, joined by Jade Warshaw, Free call at 888-825-5225. Jacob is in St. Louis up next. Jacob, welcome to the show!

Hey guys, how you doing?

Doing well. How can we help today?

Hey, so my wife and I are on Baby Step 2. We currently have $24,000 left to pay off. We've paid off $76,000 over the last 22 months.

Way to go!

Yeah, thank you, thank you. Yeah, we've really been able to make a lot of progress. The main thing is because we've been getting free childcare for our 3 kids.

How do you do that? Family?

Well, yeah, my— well, my mom was a, uh, a director at a preschool. That was kind of part of her contract.

Perfection.

Yeah, yeah, you got a built-in blessing there.

Yes, it was amazing, and we made the most of it. Um, so, um, the bummer is that, uh, kind of ended. So, uh, coming into the fall now, we're going to be paying for childcare.

Daycare.

So it's going to cost us about $2,400 per month, and that is eating up pretty much all of our margin, and it's really slowing down the snowball here.

Yeah, I bet.

Yeah.

Snow job.

Is that for all 3 kids, or is that 2 that are in daycare?

Um, so yeah, actually, yeah. So our oldest is starting kindergarten, uh, in the fall, so it's going to be for 2 kids. Okay.

And I mean, that's a fair price. Just for anybody listening, you can easily pay $1,200, $1,300, even $1,400 depending on the, the age. The younger they are, the more expensive they are. It can be up to $1,500.

That's the going rate, unfortunately. What is your after-tax monthly take-home pay?

After tax, it's about $9,200 a month.

That's a great income. So you're saying your bills, after daycare is paid from that $9,200, pretty much leave you with nothing left to throw extra at the debts?

Yeah, yeah, we have like a margin. We went through it and laid it out. Our margin's like probably about $200 to $400 right now.

How much is your home payment?

Our mortgage is like $2,700, $2,800.

Okay. How much are you paying in minimum payments?

Minimum payments are, let's see, like $700, like $750.

That's not a lot. So I, I'm finding that there's still quite a bit of money here. What, what happened? Where's it going?

Um, great question. I, I figured you'd say that because I was going, I was going through all of this. Um, so like just our needs, like our monthly needs, um, excluding daycare and mortgage, I have it like $3,200.

Right.

And that, that's the chunk that I want to know more about because like if you ranked them from most expensive, would it be, you know, we spend $1,000 $1,000 on food, then we spend $800 on this. Where is it? Where's that money going?

Yeah, um, I think like food is at like $625 a month.

Okay. Um, so I'm showing, I'm showing that you still have $2,725 to go.

Okay.

And I mean, obviously, yes, you have utilities, uh, but if you're telling me, hey, what the two items that I actually thought were going to be really high were really low. You said $625 on groceries. Stupendous. You said $750 on your minimums. I mean, obviously I wish you had no debt, but that's not that bad, right? So there's, there's money going somewhere. I would challenge you to look to where that is because I think there's probably a lot of things that are nickel and diming you because generally the big ticket items, it's either the mortgage is too much or yeah, daycare could be sucking up whatever margin you have. But I actually don't think daycare is the culprit here.

Okay.

Because I mean, even after daycare is paid, you guys are taking home well above the median household income. Uh-huh. So that's where we're going, "Well, there should be more." Right. But I think this is going to take you two sitting down, doing a very detailed budget, and instead of going, "Let's see if there's anything left over," instead, let's make a goal. "Hey, we need to find $2,000 a month—" Yeah. "—to put towards these debts with minimums plus extra, $2,000. So that's $1,300 we need to find in this budget. Where are we going to find it?" And you guys take turns going, "All right, I think I can slash this down here. I can re-shop insurance here." Oh, you know what? You're doing your 401. Let's pause that. Let's get some money back in. And if you start doing a budget audit and getting real creative, I think you're going to find way more margin than you thought. OK. And I'm going to help you with that. We're going to give you EveryDollar Premium, and it actually gives you personalized recommendations now based on your goals, where you're at, what your actual expenses are. And we'll make those recommendations just like Jade and I would do on the show.

Now, are you guys still investing?

No, we did pause that. OK, that's good.

Yeah, I think it's probably the devil's in the details, you know. It might be things that pop up that maybe you didn't budget for and you look up at the end of the month and it's like, oh gosh, we did do DoorDash or we did go to Target, do a Target run or all those little things. Coffee. I'm trying to think. It's the little things. Maybe you have a lot of subscriptions. Do you? If you have Hulu, Netflix, Disney, Paramount+, Amazon Prime, Fandango, Instacart, Instacart, you just keep going. You name it. Everything's a subscription. Everything's a subscription. So my point is, I'm talking to myself because that's me. So cut half of them off and I think you'll find some money.

When everything is $15, $20, you don't feel it in the moment, but it can add up. So I hope that helps you start to navigate this. It's a hopeful situation because you have a great income. There's not a ton of debt left. You guys have made crazy progress. So I just don't want to see you lose all of that momentum just because of the childcare.

So now for those who are listening and maybe you don't make $9,200 a month, maybe you make somewhere around $5,600 a month and you're like, I have kids in daycare, Jade and George, where my margin, like, and the truth is daycare. I do feel like sometimes the Baby Steps can really be impeded by seasons. If you're in a daycare season and you're not making, you know, maybe you're making the average income, you're going to feel that stupendously. And you're probably going to be a person who has to go out and side hustle and supplement your income in order to make that work. But the good news is And if you've ever stopped to think about it, George, the good news is if you can pay for daycare with 2 kids, you can pay for college when it's time. You can cash flow it through because it's basically the same. $36,000 a year. You know, you could go to state school.

So once they're out of daycare, just reallocate that daycare payment to their future.

Yes. You're basically paying for college twice. I don't know why anybody—

nobody talks about that. You know, that's a life hack there.

It's a life hack. There's hope. If you can pay for daycare, you can pay for college.

Jade just told you, you'll never get rid of this payment. They're like, there's hope yet. Yeah. But there is truth in that. And a lot of times people do make really good money and they go, well, I don't have any margin. Mm-hmm. And I always want, I wish I could sit down and look at their bank statement, look at their EveryDollar budget and help them. Yeah. But luckily the EveryDollar app now does that for them. So I always point people to that. It's such a great tool. That plus Ask Ramsey, which is our AI chatbot.

If you combine those two things, you will feel like you got a raise.

You could sit there for 2 hours and go, hey, give me more recommendations. Hey, here's Hey, here's how much I'm spending on groceries. How do I cut this down? Hey, here's how much I'm spending on my utility bills. How can I get this down?

And you know it's going to be through a Ramsey lens. Through the Ramsey lens.

Yeah. So I love that. But insurance is a sleeper. People don't realize that they're overpaying for insurance. So I always tell them to re-shop using an independent broker. And again, we have an awesome coverage checkup tool that walks you through all the ones you need, making sure you don't have too much insurance. Right. You don't want too little insurance. But a lot of people will reach out and say, oh my goodness, I just saved I can save $300 a month just by re-shopping because I always had whatever XYZ company for the last 10 years. And then check your Amazon.

Go through there because sometimes it just becomes a catch-all and you can look at the end of the month and just go, "What have I done?

What have I done?" It's like the little sticker on the gas station pump, "I did that." Yeah. It's your own face pointing at your Amazon account going, "How did we spend $2,000 on Amazon?" Amazon. How much of that did we need, and how much of it was just retail therapy after the kids went down? Man, it'd be like some real questions to ask ourselves.

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Jesse is in Modesto, California. What's going on, Jesse?

Hey, George, Jade, thanks for having me on. I'll get straight to the point. My wife and I, we bought a house about 4 years ago. And since then, I started listening to the show a lot more where you talk about buying a house on a 15-year fixed at no more than 25% of your take-home. Well, ours is a 30-year fixed. And it's about close to 40% of our take-home. And the question I have is, would it be wise to look to downsize from our current home even though interest rates have risen since we bought our house? Or should I try to find more work to bring up our income? I don't know if you guys have any advice on a good approach for that.

I'm glad that you're realizing the problem that this is. Um, if you said to us, I see a long-term play where my income can go up and it will stay up, uh, there might be a way to keep this if that's happening in the near future. But what I wouldn't want you to get sucked into is maybe I can side hustle my way out of this because side hustles are temporary situ— like temporary fixes. And so that's kind of where the rubber meets the road on this. Is there an upside for your careers that you do think you could get to fairly soon that would be sustainable for this?

I don't think there's anything within the next 5 years that would drastically increase to where it's going to put me up closer to that 25%. Yeah.

Give me the numbers on this. I'm curious. What's the mortgage payment and what is your after-tax monthly income?

Our take-home is probably $9,000 a month.

And that's just after taxes, or does that include—

That would be after our health insurance and our— I invest 10%. OK, so let's remove that out.

That'll help our numbers here. That is a confusing point. When we say 25% of after-tax income, we're just saying after your taxes are paid, but don't include healthcare and 401 because that can skew the numbers. That might force you to go, "Hey, you know, we're actually at 28%.

This is not a FIRE." Gotcha.

Okay, so how'd you calculate it? Uh, just—

that's just, um, all that comes out prior to I getting the deposit into my checking account.

So you did it based off the $9,000 that comes into your checking account? Correct. Okay.

And what's the mortgage payment? Uh, it's about $3,700 a month, and that's just, just mortgage.

And how much goes out of your check for investing and how much goes out for health?

I have about 10% set for investments, and then health is— it's not much, it's a couple hundred bucks. OK, so you probably—

it might be like, let's say, let's call it $10,300, for example, $10,300, which brings you to 35% of take-home pay. OK, so it's not great, but I wouldn't say this is on fire where I'm telling you, hey man, you got to sell this thing. Now the question is, do you have enough margin to do the Baby Steps, live your life, Create sinking funds, all of that?

Yeah, I mean, I would say we have a decent margin. We have no debt. Good. Besides the mortgage. I think that the only thing that after listening to your show that I started to realize is I could go up to 15% on my investments, but I want to invest for— we have 3 kids, so I want to start investing for their education. And as soon as I start thinking about all those things, I'm like, I don't know quite where we're going to get all that margin. And part of the reason, you know, I'm putting it all together why we want to be around that 25% is so you can have those margins to make those investments.

Yeah, that's true. You're getting it, man. That's exactly it. We want you to be able to live your life. And that's not because we're trying to be super legalistic and you're a bad person if it's 30% on a 30-year. We've just found that you're going to pay that house off in 15 years, worst case scenario. You're going to have extra money to cover the vacations, the car repairs, the kids' activities, whatever it is. And so that's where I'm wondering if you keep this thing for another year or two and see where we can shave, how we can make more, and then later on down the road you can decide, hey, this is— there's not a sustainable path.

And I mean, you can run real numbers on this today to get your head around what the future would look like. So I would go ahead and I would plug into my budget, how will my paycheck change once I invest the full 15%? Because the truth is, if you have no debt and you have an emergency fund, you should be doing that today. And then I'd say, okay, ideally in my ideal world, what I'd be putting into the 529. So I'm going to, you know, $300 a month. Okay, great. Subtract that. And then I'd like to be making extra mortgage payments. In my ideal world, it'd be, I don't know, $700 a month, whatever you decide. And then, then see the margin and you and your wife decide, how do we feel about this? Is this enough to take the vacations we want to take? Is this enough to, you know, be in the lifestyle that we want to be in, that we've worked hard for. And I think that will inform a lot of your decisions looking at the real numbers around it.

Gotcha. Just a real quick, I guess the reason that felt more of like an urgent fire situation is because you guys talk about a 15-year fix and we're on a 30-year, you know, well over that 25% of the take-home. Yeah.

I mean, I do think that a little more stressful. It is because a lot of times people will do a 30-year to be able to afford the house that they want. And if you're telling me that even on the 30-year, it's still 35%. Yeah, you bought more house than you should have. I mean, there's no question about that. I think that you bought more house than you could afford.

Can you guys reasonably downsize? Um, what would that look like in Modesto area?

I mean, we could probably find something. I think our house is probably worth around $600,000 right now, and we have about $130,000 in equity. Um, we could probably find something in like the $500,000 $400,000 range, so it's not like a major downsize. I never ran the numbers on what a 15-year fixed would look like.

Yeah, my guess is it would, it would be a whole big chunk of your take-home pay, and you got to think about all the fees involved with moving, selling a house, buying another house. So I don't know that I would go down that road until I know for sure that this is unsustainable, but right now Now, I'm the first guy to tell you, if I felt heart palpitations that you should sell your home, I would let you know.

It's not on fire. It's just something to be thinking about.

And you do live in a, you know, high cost of living area, and that's just part of life there. You just kind of have to make more money to have a life with some cushion. So I would be looking at your career as going, okay, can I work overtime temporarily if we need some extra margin? But long term, what does it look like to get the core income up. Do both of you work right now outside the home?

Uh, I, I work full-time. My wife works, uh, it's a per diem job, so it's, you know, kind of fluctuates.

Okay, so she got something that was more stable that paid high, you know, higher wage. That could be your ticket to making $11,000 or $12,000 a month. All of a sudden this mortgage payment is a nothing burger.

Yeah, yeah. Okay, good luck, man.

It's a fun math equation that life is.

Yes, and I think you highlighted a good point, George. You know, our rule of thumb, I think everybody knows it, but we'll say it again, 15-year fixed-rate mortgage is what we would suggest. And obviously you want a mortgage where the take-home is no more than 25%. But sometimes, you know, people run into the Ramsey principles after they've bought a house. And so they're looking at their mortgage and they're going, oh gosh, mine's 29% or mine's 32% or mine. And it's not to say that you have to run and sell your house and get it to 25%.

Lightning will not strike if you're at 28% or, and you can still go to heaven with a 30-year mortgage. So don't worry about that.

And we're not telling you if you have a 30-year, you need to refinance to a 15-year right now. We're not telling you that at all. But we are saying that if you're wondering, if it feels tight and you're wondering why, that's something that you can look at and go, okay, now I understand why it feels tight. It may not be that my income's the problem per se. I have a little bit more house than maybe I should have bought. And then you can decide the way you wanna solve the problem. But if you're looking at your life and you're going, you know what, we're kind of doing the things we wanna do. Maybe we don't have as much margin as we want, but we're ticking off all the boxes and we're going in the right direction. Yeah, it's not on fire. It's just something that be aware of.

Yeah, and it's a good reminder if you're following the Baby Steps, sometimes it feels like you're living paycheck to paycheck because you've given every dollar a name. And that can feel like, well, there's not an extra $3,000 lying around. 'Cause I allocated it towards, "Kind, college savings. This much is going to savings." And I like to automate it personally. So, by the time the money hits my checking account, it's already gone to all the different things. And all I have in that budget is the spending money left. 'Cause all my savings stuff is gone. The giving stuff is gone. And so, it can feel like that money's gone, but I like it, 'cause I'm human. I'm gonna be tempted to spend it if I see extra.

Yeah, I mean, you don't, you should not be spending everything you get. You should be doing the things that make you financially responsible.

Adult. Good luck, my friend.

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All righty. Today's question comes from Tyrone in New Jersey. He says, my wife and I have $34,000 of debt and $12,000 in savings. I'd like to drain our savings to pay everything off, but it's hard to get over the fact that we will only have $1,000 in savings and we really want to buy a house. This feels like a step backward. "Can you give me some encouragement about pulling the trigger?" Oof. Okay. This is fun.

Well, here's some reality. You guys have a negative net worth. So let's not talk about a step backwards. We're already in the negative. Yeah. We can't go much further back. So you would take your, let's say $11,000 of the $12,000, keep your starter emergency fund, the $1,000, and you would knock that debt down and you'd knock out a couple of payments along the way, probably.

Absolutely. Absolutely. I mean, I think the biggest thing is what he's talking about is it feels cushy to have $12,000. You feel exposed. It's a security thing. And what I, you know, on my sheet here it says, can you talk me into using savings to pay off debt? Yeah. My talk into it is mathematical because the person who has debt and then says, but I have $12,000 in savings. I'm like, math says you don't have any money. Math says you actually owe $22,000. That is just basic arithmetic, which is my favorite type, by the way.

Arithmetic. I haven't heard that word in a while.

It's like arithmetic. And so when you look at it for what the numbers actually are, you realize, oh crap, I'm actually putting my security in something that's false. And so that's kind of my way of thinking about it, George. I mean, I don't know if you're seeing it different.

Well, it's funny, as a guy who likes the numbers and likes the math, I think this one is the best emotional play in the whole, in all of the baby steps. Oh, we switched chairs.

Okay, go for it. Here's why.

When you have $1,000, you are a little bit scared. You're like, whew, okay, we got to get out of this debt real fast because I want to get that emergency I want to build it back up. And so that's why I actually like this one. It causes people— It lights the fire. Yes, it causes people to move faster. And part of the problem is when you've got $12,000 sitting in savings, you have comfort. And when you're comfortable, you move a little bit slower. That's a good word, George. There's a lack of urgency. And so I like the fire this thing lights under your butt when you've got $1,000 to your name. And here's the good news. Most people in a given month could cash flow any given emergency. There's very few things other than like, you know, the HVAC or like a roof needing to instantly be replaced where you need to come up with $20,000 on the spot. Right, right, right. Think about your last couple emergencies. It's likely the flat tire. It's the dental emergency. Yes. You have health insurance for that. So as long as you have good insurance in all places, you know your deductibles, you could likely pause the Baby Steps and cash flow that emergency in any given month.

That's a good point.

Yeah, I think that's a good point. And then when you think about, okay, once the debt's gone, how quickly with all those freed up payments, how quickly could you stack back $12,000 and then some? And you do the math on that and you go, oh, you want to know what? A really great play. We say around here all the time, your biggest wealth-building tool is your income. That's your biggest wealth-building tool. And so let's do what it takes to free that up and stop giving it away in monthly payments. And when you do that, that's when you start winning with money.

I hope Tyrone was listening. If not, this was a big waste. I'm kidding. I'm sure it helps somebody out there. There's a lot of people in that spot.

Yes, I think that's a very normal way to feel. And I think there's a little personal pride attached to it too. Like, I saved $20,000.

I'll tell you this though, when someone tells me I went down to $1,000, and I had this much in savings before, I go, "Oh, they're actually doing it. They're going to get out of debt." I am convinced because now I'm willing to pause the 401. I'm willing to do the side hustles. This means something to me. I'm prioritizing this. So, to me, it's more of that I'm putting a stake in the ground, line in the sand, more than it is a financial equation. Arithmetic, if you will. Arithmetic. That was fun. Thanks for indulging me. You're welcome. Donald is in Eau Claire, Wisconsin. What's going on, Donald? Donald?

Hi, I was wondering if my wife and I should sell our truck to pay off two-thirds of our debt. Wow, what's the truck worth? It's about $21,000.

$21,000? And what do you owe on it?

Uh, $8,800.

Okay, so you owe about $9,000, it's worth $21,000, so you could walk away from this thing with about $11,000, $12,000? Yes. Okay, and then you would use that money to buy a different vehicle? Do you need a different vehicle right now?

No, we have 2 vehicles at the moment and I would probably use it just to pay off most of our debt. Wow.

What's the other debts?

We have $9,000 in a personal loan, $8,000 towards my student loan, Uh, 2 credit cards that are around $2,400, and I can't remember what else. Something else in there? Um, possibly. I don't know.

Okay. Yeah, because you said the $21,000 was 2/3 of the debt.

Okay, so we're about there. Yeah, so you don't even need this truck. You could sell it, profit $12,000, and knock out some of these smaller debts with it. Yeah, speeding up the process by, I assume, several months.

Yeah, we'd probably— I did the math— I'd be around $10,000. Wow.

What's the payment on the truck?

$266. Feels like a no-brainer.

You free up a payment, you get $12,000 to throw at the smaller debts, you don't need the truck. I'm going sell it today.

Yeah, why would you not sell it? Just because you like it? Yeah. Okay. Yeah, I mean, that is part of the sacrificial nature of the Baby Steps is you let go of some things that maybe you, you like or you wish you could keep, but it's the greater good, right? You're doing it all for the greater good. So I would do this deal.

How much do you guys make? $7,800 a month. Fantastic.

After tax.

So if you sold the truck, threw that amount at the smaller debts, you have that debt remaining. With your income, how quickly would you guys be out of this whole thing completely debt-free?

Probably 4 to 6 months. Wow!

Love that! We're talking like by Christmas. Yes. Christmas is gonna hit different. And then by the springtime, you'll likely have your fully funded emergency fund, right?

I would hope so.

Think about that, man. By summer of '27, you guys have no consumer your debt, you got $20,000, $25,000 sitting in a high-yield savings account, how quickly could you go save up and go buy yourself a nice truck?

Probably within 2 or 3 months.

I mean, we're talking like 1 year from now, you're in a totally different phase of life. You're a guy who happens to life instead of life happening to him, and you can save up $2,000 a month and go buy a $20,000 truck 10 months later. That's crazy. You see that future ahead of you?

Yes. And we paid off about $80,000 or $70,000 in the last 2 and a half years.

Oh wow. So this is the home stretch. Yeah. So this is just you going, hey, let's not make this any harder than it has to be. Let's get rid of this truck. There's more trucks where it came from. So I feel real good about you selling this thing. It's not a It doesn't have a soul. It's got horsepower though, I'll tell you that much.

You know, I just love calls like this because it reminds me, I read a book by Hoda Kotb, it's called "Jump and Find Joy." Anyway, in the book she's talking about how you can be going through life and you can just stop and go, you know what? I don't wanna keep going down this path. I just wanna stop and make a change. And I love stories like this because this guy, he's gone, was going through life and he was like, you wanna know what? You know what? I don't like this. Let me stop. Let's re— just throw, throw all the cards up in the air and start going down a different path. And now you look, he's paid off $80,000. He's about to sell a truck. It's— you can just stop and go, this doesn't feel right. And I want to go in a different direction. And I just love that. And we have the plan to help people do that. And they do it every day. And I always like to say the time is going to pass anyway. So you have the luxury and you have the opportunity to—

where do you want to be 2 years from from now? You wanna still be in debt?

Yes. God willing, you have 2 years in front of you. And if you can do the same, you can, you could be the same. You could be worse off or you could be better. And all of that has to do with people in a moment just going, I'd like to make a change. I'd like to just stop. I'd like to get off this ride and I'd like to get on this ride, please.

This ride is not fun anymore. Is there a different one?

Oh, there's a different one. This ride is making me sick.

I'd like to get on a better one. It's the same person, the mayor, who made all those bad decisions, same guy's going to make the good ones.

Yes, yes, please do it. I love stories like Donald and the calls we've gotten earlier. It's so worth it, guys.

You can do this. Somebody out there is going to get a sweet truck from Donald at a great price.

I know that. At a great price. Hey, what's up guys? It's Jade Warshaw. Now I know a little something about saving money. While my husband and I were paying off over $460,000 in debt, we went over every expense in our budget to find ways to cut back. Nothing got a free pass, including our phones. And you need to be doing the same thing. And now with Boost Mobile, one of the easiest places for you to save money is your phone bill. Their unlimited plan is just $25 a month. Month, forever! With a price that nice, why would you ever go back to your old carrier? And with Boost Mobile, there's no contracts, no hidden fees, and no surprises, which makes this a no-brainer when it comes to saving money. Best part? You can keep your phone and your number when you switch, so it's not like you're making some huge lifestyle change. Listen, you need a phone, but you don't need to be overpaying every month. So whether you're paying off debt or building wealth, or you just want to keep more of your money in your pocket, this is a win. Go to boostmobile.com/ramsey and make Make the switch today.

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$25 forever requires customers to remain active on Boost Mobile Unlimited Plan. Paul is in Las Vegas up next. Paul, welcome to the Ramsey Show.

Hi George. Hi Jade. Thanks for having me.

Sure. How can we help? I had a question.

So I'm just getting into Baby Step 6. I paid off all my consumer debt. I have the emergency fund and I'm investing for my retirement. Way to go. Here's the situation on my house. I bought this house 3 years ago. It was from my in-laws at the time. They're no longer my in-laws. I bought the house from them. They had solar put on the house. Prior to me buying it. When I bought the house, I told them, I said, I'm buying the house, I don't want to assume the solar loan though, and we'll keep the solar in your guys's name. I'll continue to make the payments on it, which I've been doing. Now I'm entering Baby Step 6. I did a title search on my house, but after I purchased the house, the solar company put the lien on it for the equipment on the roof against my former in-laws. I owe $32,000— well, the solar loan is $32,000. I owe $92,000 on my house. I'm wondering, do I pay 'Do I pay off my house or do I pay off the solar?' Since regardless, at the end of the day, when I go to sell the house, I'm going to have to pay off the solar anyways.

Hmm. What's the situation with the ex-in-laws? Do you still communicate with them?

Uh, here and there. Uh, I mean, I have it set up to autopay, uh, on the solar account every single month, so I don't really have to deal with that in like the aspect of sending them money. But I'm still on good terms with them.

Okay, but you're making the payments? Correct. So what was the deal with them? It sounds like they got the best deal here. You're making the payments, there's a lien on your house, but it's in their name, but there's really no risk on their part because the lien is against—

the collateral is your house. The equipment lien, so it's not against the house, it's just against the equipment on the roof.

So they could come repo the equipment? Why not?

Theoretically, I, I have like a moral obligation, and I, I made that agreement with them that, hey, I'm gonna make the payments on this, I'm just not gonna assume it. And that's where I'm at right now. And I've continued to make those payments for over a year and a half after the divorce.

I'm guessing they don't have the money to pay this off?

Correct, they do not.

I, I'm trying to understand why— I know it's spilled milk, but I'm trying to understand why you would agree to make the payments, like why you would go that far but not say, I don't want anything to do with it, period. Do you see what I'm saying?

Because I get, I get that. And it was the—

at the end of the day, when I went to purchase, I tried to see if I could get out of the solar agreement. I couldn't. I didn't want to assume it to put more debt on my own, myself, and put more stuff on my credit. Um, and so I just, at that time, you know, I was, I was good with them. I was good with my ex-wife at that time. I was like, yeah, I'll just, I'll continue to make the payments on this.

And I made that agreement with them.

I have a lot of, a lot of respect for them. Yeah, marriage didn't end on bad terms or anything, and I don't want to screw their credit over by saying, right, right, I'm done paying it.

Do you know if this lien is actually real and recorded on your home? Because sometimes they use this as a scare tactic and it's not actually valid.

It is real and it's recorded on the home because I owned a couple properties, a couple parcels, and when I split and sold one of my parcels at the beginning of this year, it was an issue on on it, and they were trying to say, well, you can't sell it until you pay off that lien. And I was like, well, it's an equipment lien. And then they ended up letting me sell the property that was attached to it. So now when I go to sell the house, it's going to be an issue with selling that.

When do you plan on selling the house?

Probably in the next 2 to 3 years.

I kind of think you have to think of this as though you bought the house in any other way other than the way that you bought it. If you'd bought the house in any other way, you would have assumed all this, and it would be on you to take this over anyway. So I think I'd have to just—

you're already making the payments, right? So you have the money to pay this off?

Uh, it would drain my emergency fund. How much is in there? Uh, and my emergency fund is around like $38,000 to $40,000. Some of that's in a high-yield savings, and then some of that isn't. I have an account that I just have like for my house, where all my bills for my house go out of that. I put money into that every month.

I think it would simplify your life.

Yeah, I would just pay it off today and then rebuild the emergency fund and then begin attacking the mortgage with any extra margin. You may not have to pause investing. It sounds like you could do this all pretty quickly and restart from scratch here.

I'm just curious, what's the percentage on that loan for those solar panels? That's the other thing.

My home loan, I owe $91,000. My payment on it is $1,000 a month. I have 9 years and 4 months left on it. That's a 4.5%. The solar is $30,000. $32,000, it's 2.9%, and I don't know exactly, the maturity date is, uh, in 2046.

Yeah, it's like, let's get this out of our life.

I would. Okay. It stinks because you worked hard to save all that money up. You had an agreement with these in-laws, then they were the ex-in-laws, and I'm guessing there was nothing in the divorce agreement about the ex-in-law's loan, right?

No, there wasn't. It was just sort of a verbal verbal part of the thing. And that's where I'm like, I know I could just stop paying it tomorrow if I really wanted, and I don't feel right doing that. I looked into trying to do a solar exit company and I couldn't find one that was really a reputable one that I didn't feel like I was getting a scam vibe from.

Well, here's my thinking, because my guess is they act like a debt relief company where they tell you, "Hey, stop making payments and then we'll negotiate with them. It'll tank your credit, but you can get half off, something like that. So I'm wondering if you can negotiate with the solar company at this point and explain the situation and see if they might settle for a lower amount.

Yeah, well, that's the other issue is the solar company, it's out of business, so now it's just through— it's just through the lending company, which is still in business.

So it's, it's, yeah, it's a mess. You might see if you can negotiate. Yeah. And say, hey, I sort of, you know, adopted this solar loan loan. Here was the agreement. If you're willing to take, you know, $25,000, I'll pay it off today, write you a check. It's worth a try. Yeah, I would at least try that. Worst they can say is no. Correct. So that would be the route I go, but I would not make extra mortgage payments until the solar loan is taken care of. And I like your point, it's too much to rob you of your peace to go, well, I'm going to let it get repo'd, be on my roof taking down the solar and affecting my credit or whatever it would do. Who knows? Oh, that's messy. Ex-in-laws, that's about as messy as it gets. James is in Baton Rouge up next. What's going on, James?

Hey, so I have a— we're in the middle of our debt payoff and we have a car. And I guess basically my question is, from the Ramsey perspective, if interest rates matter or if it's just best to get rid of a debt?

Yeah, uh, there's two prime methods that people tend to think about when they're paying off debt. One is an avalanche method where they are thinking about the interest rate in terms of which debt to pay off first. And then there's the snowball method, which is the one that George and I and everybody at Ramsey suggests, where you're looking at the debts in terms of balance, uh, full balance owed. And so when you really look at a person who is interested in paying off all of their debt, the data does show that the debt snowball method is the way to go. And people have the most amount of success in paying off all of their debt if they use the debt snowball. And the reason for that is you get small wins quickly. Right. And so that's what I would say when it comes to paying off debts. What— tell us about yours.

Well, we, me and my wife, we started our payoff or our debt journey about 2 years ago, we reached the point where we've paid off everything but the house, the student loans, and the car. And we built up about 6 months of an emergency fund.

Why'd you— go back. Why did you stop without doing the car and the student loan?

Oh, well, it's not that we stopped. We're kind of in the middle of that.

But you stopped to build up the savings is what I'm saying. Yeah.

Well, my thought process on that was all of those are with percentages that, you know, we started our journey in the secular world. I was getting most of my advice from, you know, other financial people. And so in our mind it was get everything paid off that we can't beat in the market, right? And then build from there.

Okay, so how much do you have in savings? Savings, about, about $15,000. And what's left on the student loans?

The student loans are actually fairly fresh. My wife just graduated last year. I was working her through school.

And what's the balance? About $30,000. And the car loan? About About 18. 18, okay. I'd get rid of that car loan and use most of that emergency fund and just follow the Baby Steps as is. And it's because they work. And I know it's scary to lose your savings, but what you're really gaining is traction on the debt-free journey.

Let's give him a copy of The Total Money Makeover to read.

Hang on the line.

We'll send it your way. Thank you.

Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. I'm George Campbell here with Jade Warshaw. Stacy is up next in Tampa, Florida. What's going on, Stacy?

Hi, George and Jade. Thank you for accepting my call. Um, actually, basically I'm trying to keep from going back to a shelter.

Her. Oh my goodness, a homeless shelter?

Yeah, I recently got out of it about 3, 4 months ago. Um, I managed to save $500, um, since I got out of there. Um, but I owe the IRS and child support, and child support has already put in, um, as a call that I'm out. I I made a mistake to call the IRS and child support thinking that this child would pay them, but now they're wanting each one was $750 a month.

So IRS wants $750 a month and child support is $750 a month?

Yeah. Okay. When you call—

when you called them, what were you hoping to do?

I mean, I figured I could maybe $200 one and the other one maybe $300. Okay. You thought it'd be a much lower payment.

And they, they said, nope, this is what it's going to be?

Yes. Wow. And I— are you working right now? I am. Okay.

What are you doing for work and how much do you make?

I'm a front desk, um, for Surgeon's receptionist, um, and I make, uh, $2,500 give or take, um, a month after taxes.

Okay. Is that 40 hours a week?

Yeah.

All right, what's your living situation right now?

I'm currently, uh, renting a, um, high-efficiency, um, house.

Um, how much is that a month?

I can afford currently, uh, $1,000.

Okay, so $1,000 a month, and then if you owed this child support and IRS, that's $1,500 extra, which is all of your income gone, and you haven't even put food on on the table?

Or my phone or my bus pass, because I don't have a vehicle either. That's why I'm trying to save money.

How are you getting to work right now?

I'm literally trying to fish bus route. Uh, I think the bus.

Okay. Oh my goodness, I'm so sorry. What, what happened that got you into this situation originally?

Mental health, nervous breakdowns. Um, I have 39 years of trauma, so I unfortunately keep going into depression and attempt suicide. And do you have medical support right now? Yes, that's the other thing I need to mention. I have to go to therapy every week to keep me going. Um, that's the reason I came to Florida, to run away from home. Trauma. I literally came to Florida about 6, 7 months ago. No, about a year actually, now that I think about it. I just like 8 months in the shelter. So, um, yeah, it's, it's, it's been tough, but I refuse to go back to a shelter. I never been and I never want to do it again. That one time was more than enough, and I need to have get mentally healthy and pay off my debt. How much debt do you owe total? Um, give or take about $35,000 between the IRS and the child support.

Okay. And is there a judgment against you for these?

Uh, yes, because, um, in the divorce, my ex-husband owed property taxes, so they gave them to me, and he took my 401k, my pension, my house, my car. He took everything because I had a nervous breakdown. Down. Wow.

So your wages are being garnished for these payments to the IRS and child support?

Not yet. Um, they are in the process of it. I'm not with the IRS. I'm the IRS right now. Currently I'm trying to make like $50 payments here and there whenever I can. Um, since they removed me from that, what is it called, where they don't give you, um, it's when I was in the shelter, I was desperate and I called them and told them my situation. And they put me on something where they do not charge me interest for a little bit. Like a deferment? Yeah. And but when I got— I started saving money, you know, when they, you know, get started and catch up on everything, I called them up and I told them, okay, so I'm currently working, I want to make payment plan where that I can afford so I can pay off this debt. They removed me from that no interest thing. The gentleman that I spoke to, I told him, he told told me that she was going to do. I was like, no, don't do anything right now. It's like, I'm, I'm literally just out of the shelter. I'm just now getting on my feet. I need a little bit of time.

But unfortunately, the gentleman went ahead and removed me from that. So now I'm starting to create interest once again, um, on the IRS. And with the child support, I called them and I told them, um, that wasn't in a payment plan. Um, and they told me, and I also modified my child support because I obviously cannot no longer afford $500 a month.

Yeah, that's a huge chunk of your income. So they should adjust that, and I would fight for that.

Can you get that before— this is it. No, they said 2028 is when they can do a modification because they sent the paperwork to the shelter. However, the shelter either returned it, misplaced it, I don't know, but I did not get the paperwork. So now they're saying because they sent me the paperwork to shelter and I never responded, I'm no longer eligible for them to, um, modify my child support.

Okay, do you have a social worker that you're connected to?

A part of the shelter? Yes, I do have a sh—

uh, social worker.

I would lean on them to see what resources are available, what programs are available to help you get your head above water right now and even fight for you, because you're doing a lot. You're doing a lot to just try to fight these things, pay what you can, go to work every day, So in my mind, number one, you got to take care of you because if you don't have your mental health and physical health, you can't go to work. And if you can't go to work, you don't have an income. If you don't have an income, we're going to be back in the shelter. So that's how I prioritize it. And you need to put food on the table first. So here's what you need to focus on with your $2,500 a month. The four walls: food, utilities, housing, transportation, like your bus pass. And that might mean we don't have a car for the foreseeable future, but at least we can keep the bills paid, the lights on, we can eat. And beyond that, insurance. Any insurance you have to pay, let's make sure we have that covered. And if that means you can't pay whoever else, that's tough cookies, and we can deal with the ramifications of that later.

But the IRS is the one that is not going to go away. And so we want to get, get them off our back and see if they can lower that payment. It sounds like you've tried to talk to them, they haven't been super reasonable. Reasonable, but you simply do not have the money to pay. So at some point they're going to have to give in and go, all right, $300 a month is what we'll take on a payment plan. And same with the child support.

I did, um, when they sent me the, um, court documents indicating that they were going to start segregating my, um, uh, my check from child support, I did appeal for it and explain my situation once again. So I'm still waiting on that. I just did that last week, the appeal.

And in the meantime, look for whatever extra work that you can be doing that's within walking distance, that's within bus pass distance. Even a couple hundred extra dollars in your pocket is going to go a really, really long way to make you feel a little bit more secure in all this.

Even asking at work, is there extra work I can do over Overtime, come in on the weekends, anything to bring in a couple extra hundred bucks. That is breathing room for you. We're wishing you the best. 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. Principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to ramseysolutions.com and try Ask Ramsey today. That's ramseysolutions.com. Buying or selling your home is high stakes because one bad deal could cost you tens of thousands. You don't want to overpay for your next house or sell your current home for less than it's worth. And that's why Ramsey Trusted connects you with vetted real estate agents who have the experience to guide you step by step to make smart decisions, not expensive mistakes. Connecting is easy. You can go to ramsaysolutions.com/agents Agent.

You fill it out, compare agent profiles, interview your top choices, and pick the right one for you. So you can go to that website, ramseysolutions.com/agent, for free, or click the link in the description if you're on YouTube or podcast. Christie is in Washington, D.C. up next. Christie, welcome to the show. Thank you.

Thank you so much for having me, George and Jane. Absolutely. How can we help? Well, ultimately our question is about, uh, paying for college for 3 kids. Um, first we want to thank you, we want to thank Total Money Makeover back in 2009, my husband and I paid off $92,000 in debt in 22 months. Wow! Amazing. We did that snowball. So, thank you. That set us on a pretty good financial path, but not perfect because, like I said, our question is about paying for college. We have 3 kids. One is in her second year of college. One is going to be a senior. One is a freshman. And we're okay. Right now, but we're going to run out, basically. So our question is ultimately, what's the best path? We have some investments and we want to know what the best path would be.

All right.

Are there any scholarships involved? Are they working? Tell us all the components that need to come together. Sure. Aside from just you guys' cash.

Sure. Um, our oldest is in, um, she'll be a sophomore. She did get a number, 3 scholarships, smaller scholarships,, but basically we're paying almost full price. And our middle daughter did get a nice sports scholarship. She'll be a senior, um, uh, in high school. Okay. Um, but we already know, um, she, she has a nice sports scholarship which will pay for a little over half, but it's out of state, so it's still going to be—

oh, it's out of state? Yeah. Okay.

So it's going to be around $20,000. Per year. And then our son is a freshman in high school, kind of unknown. So we're just going— like, when we run the numbers, we're just like, we're paying— we're in Virginia, we're gonna pay, you know, basically full. We're just trying to be conservative and assume we're gonna pay full price.

Okay, so the biggest thing, the biggest thing here is college choice, right? So going out of state, although there's a scholarship there, that's a big, that's a big deal. And so I'd want to know, are there any other schools offering anything? You know, because once you have— as an athlete, I can tell you, once you have one school, it kind of does kind of open up the doors, uh, with some other schools of the same stature. So I would be looking into that. Okay. And then the other thing is, we are in in-state, nothing as of now. Okay, keep looking. Yeah, because if she's also a good student, she might find that she can get academic schools and then walk on to the team that she wants to do, uh, I had that option too. So if, if sports is a thing but she's also smart, I think there might be other ways you can play that to where she can still play, still have better scholarships and be in-state.

Because if in-state is $15,000 a year and you're paying full price, that's still cheaper than your half-off out-of-state school, right?

And I gotta say this, when it comes to sports, if she stops playing, she can lose her scholarship. Like, if she goes— does freshman year, she's like, Mom, it's too much, I— or I hate the team, I hate the coach, whatever, it doesn't play. Now she doesn't have any money and she's in an out-of-state school. So I just want to make all those things there. Now with the freshman coming up, obviously we need to start looking at maybe can we do community college first and do those gen eds there, right? So I think there's some things that we can tweak with the senior and with the freshman so that we're not spending way more than we need to and we won't run out of money as quickly. And then there's the other part where it's like, can they work a little bit? Can they start saving up a little bit to put towards this and have some skin in the game as well.

Yes, and they, and they actually are. They— good. Um, actually all three have jobs. Okay, good.

So, so how much do you guys have that you could utilize that is non-retirement money?

Okay, so, well, that's our question. So, um, long story short, after we, um, you know, did our debt snowball, we're in a good financial position. We moved from Connecticut to Virginia, and the house we bought was a foreclosure because it was a good deal. We fixed it up, we did pretty well on it, and building our dream home became possible because of that. And so what we did was kind of Ramsey-inspired— not kind of, totally Ramsey-inspired. We sold the house that we had fixed up and we moved with the three. They were really little then, so it was much easier, but we moved into a two-bedroom condo while we built our dream home.

And, um, this seems like a long story to tell us something simple.

How much do you have, Christy? Not that we don't want to hear it, but for college, just in general, because we can just look at your assets and go, okay, how much do you have that is non-retirement that we have access to? That could be stocks, that could be savings, whatever it is.

Well, um, could you sell a property?

Is that what you're getting at?

Well, yes, that's kind of what I was getting at. The condo that we lived in, we kept, and we have rented for the last 11 years. It's been wonderful, a great investment. Um, it is worth $415,000 and we owe $130,000 on it. Okay. And so our question is, should we sell that condo? And basically, I mean, we would have more than enough to pay for college.

You'll walk away with like $250,000.

That becomes the college fund, right? Uh, or it's been a very good investment.

Where's the condo? Is it even in Virginia?

Right nearby us. Yeah. Oh, it's by you. Okay.

What, what What do you get cash flow after all expenses and the mortgage is paid, all of that?

We get about $1,000 a month. Okay.

Where is that money going right now? To college. Okay. So when you say to college, where is the current college savings? 529s. Great. How much is in the 529s across all of them? Okay.

After we paid for our first year of our first daughter, we are down to about $20,000. Left, and that will get us through that, plus what we're putting in. We're, we're putting in the $1,000 from the condo, plus from our monthly budget, another $1,000. So between the two, we can pay for another full year, and then our second daughter goes in, and we can get about halfway through that year, and then we're going to run out of that $529.

Okay, it almost feels like a bit of a no-brainer, I think, to me, because knowing that there's two behind you that are coming, I would, you know, and the condo is cool. It's cash flowing. It's not like it's like changing your life, the $1,000 a month. But in many ways, this is the college fund that you should have been building from the beginning. Yeah.

So I know you love it. And now what you can see is, hey, this was kind of a secret blessing. Yeah. This helped us cash flow college. None of the kids are going to have student loans. But that also means we need to reset the conversation with the kids that we're not about to walk into the mall and just buy whatever we want. Right. Right. Right. No, we're going into this store with a shopping list. Here's what we can do. Here's what we're not going to get. Because if you give a kid carte blanche to go anywhere in the world, they're going to choose anywhere in the world. When you tell them, hey, we're going to cover 4 years at an in-state school and you're going to work your tail off and apply for scholarships and grants. Now we're all in agreement on what the plan is.

You guys, you guys set the budget ahead of time and make them align to the budget. Because my guess is you probably want to take some of this money and chuck it towards your current home, right?

Get that paid off. And your freshman's not going to be happy about this because he saw the other siblings get to do whatever the flip they wanted, right? There's gonna be a little bit of, "It's not fair, right?

Why'd they get to go out of state?" Yeah, no, I got you. And, and that's definitely— we are already having those conversations. Yeah, here's the math on this, Kristi.

You sell that condo, you pocket $250 in a high-yield savings account, even that will net you about $700 a month just from the interest off of that with no no hassle, no landlording, plus your $250,000 principal.

And then just take from that and pay as we go?

Exactly. Now you could shovel a lot of that into the 529. It doesn't have a whole lot of time to grow and have the compound growth, but it's still nice to have that grow for the next 4 years for your high schooler.

Right. And we get a tax— we do get in Virginia a nice tax break.

That's great. On top of the tax-free with withdrawals for qualified education expenses. That's personally what I would do, and the 529 plan is great for that because there's no income limits, the contribution limits are virtually unlimited, and so that becomes your glorified college savings account, that condo. So I would grieve it, say goodbye to the condo, get rid of the renters as soon as you can, and enjoy debt-free education for all three of those kiddos. It'll be worth it. Hey, George Campbell here. We often talk about how being normal sucks when it comes to your money. But guess what? Normal isn't so great when it comes to your job either. Normal is staying in a job you hate, dreading Mondays, and working for people you don't even like. Sound familiar? Well, the good news is you can break free from normal because Ramsey Solutions is hiring, and we refuse to settle for the ordinary. In fact, we are anything but normal, and we are proud of it. And right now we're hiring for technology, sales, marketing, writing, copy editing, and creative roles. So head over to ramseysolutions.com Careers and apply today. Ask Ramsey is our free AI tool that's built and trained on proven Ramsey principles.

And today we're gonna break down one of the questions we received this week. Here it is. Why should I set aside 15% to retirement before paying off my mortgage? I love this question.

We get this a lot, and one of the reasons is compound interest is really time-sensitive, right guys? And your mortgage isn't going anywhere, but the time in the market is going somewhere. We want you to capitalize on that and spend as much time in the market as you can. A dollar invested today is worth far more than a dollar invested 5 years from now. So, so important there. And the truth is, your mortgage has it has a fixed payoff date regardless of when you attack it, uh, extra hard.

Of course, we want you to do that at some point, but yeah, because the thing is, if you just made minimum payments on your mortgage on a 15-year, it's gone in 15 years, which is still way better. So we need to be investing because there's no guaranteed sort of fixed forced savings plan there like there is with your mortgage. That's right. So it is wise to do both, and the Ramsey Plan lets you do both. We recommend investing 15% once you're debt-free with an emergency fund. Any extra money you can put towards college or extra on the mortgage. If you do it our way, you have a reasonable house payment, 25% of take-home, you'll have extra to do all of this stuff with. Once the mortgage is paid off, you can invest 20%, 30%, 40%, 50% to your heart's delight and maximize your wealth.

The problem is, if you skip investing and you pay the mortgage faster, you arrive at a paid-for house, which is kind of nice, but then your retirement is very thin and that doesn't feel very good either. I'm trying to keep up. So you're scrambling to catch up. So there's a way to do this, guys, and the Ramsey Plan lets you do both.

So check out Ask Ramsey. It'll walk you through your financial goals based on your specific situation. Do it at ramseysolutions.com, or you can use the link in the description if you're on podcast or YouTube. Braylon is in Austin, Texas, up next. Braylon, welcome to the show.

Hi, thank you so much for taking my call. My boyfriend loves this show, and I've been debating back and forth on a life update— upgrade, I would say— a car upgrade. Okay, specifically tell So I'm really wanting to upgrade to a luxury car. I do work in real estate, so clients see my car from time to time. Right now I drive a 2021 Toyota Camry and there's quite nothing wrong with it. And I do not have a car payment, but I've had a really good year the last 2 years in real estate and I'm wanting an upgrade. So I wanted to hear y'all's thoughts. Is—

I want to know the number one driver. Is the number one driver, I have the money to do this and I earned it, or is the number one driver, I'm a real estate agent and I want people to think that I do really well, so I want to drive a really nice car.

It's honestly split 50/50. Like, when I get in a car, I want to feel like I'm in something really updated, and I have worked really hard, and I know I deserve that. Um, and there's a little bit of that too. Yeah, I do want people to know that they're well taken care of, and you know, I'm a great real estate agent.

Okay, what's this car gonna cost? Around $70,000. K. And what are you making a year?

Um, so far this year I've made $280K. Whoa, good job! Last year I did— thank you— last year I did $428K.

So you didn't need the car to, to smash it at real estate.

There's people driving luxury cars that suck at real estate. I just want to let you know that. Good job. I don't want you to think that the car is the difference maker, that you're going to get clients. You're already doing it in your Camry. So clearly nobody's reaching out to you because of your cool car. That's what I'm trying to say. Yeah, thank you. So I wanna free you of that. That no matter what car you drive, you're just a really good real estate agent who helps people. Yeah.

The question is, do you have $70,000 saved?

I, my net worth right now, my boyfriend does all my investing for me. So shout out Joe. He's listening right now.

Wait, did you say, I'm sorry, did you say your boyfriend does all your investing for you? Yeah. Just as a guy or is he a—

Is he just like a finance nerd and he's like, hey, I'll get you set up. He just loves investing.

He works in investment properties.

And you know, do you know how it's being invested or you're just like, here you go, Joe, you got it?

I do. I'm sat next to him when he does it. He's teaching me. So I tell my friends too.

Okay, I'm a little concerned, but let's move on to the good stuff.

What is your net worth?

My net worth is at $380,000 right now.

Good job. Total. Okay, so where did all the money go?

I would—

do you mean because you said you made $428,000 last year but your net worth is $380,000?

Um, we had some big purchases like last year, I guess. Um, I'm not quite sure, to be honest.

Your net worth is $380,000 or you have $380,000 invested?

I have three— no, my net worth. Okay, I don't know, this would be a Joe question, to be honest.

Well, that's why I wanted to make sure.

Net worth is assets minus liabilities.

Net worth, he says my net worth is $380,000. I told him I was calling today. I was like, ask him all these questions.

Okay, so you said we had big purchases. What does that mean?

Um, I bought him World Cup tickets for his birthday. Wow. But that's not—

okay, that shouldn't be— I mean, it's expensive, but to George's point, if you made 4, you know, 4-something last year, like, where did all that go? Say again?

To pay tax. Tax. Yes, that's true.

Okay, so let me ask you these questions. How much do you have in liquid cash?

I'm not sure.

See, this is why I don't like Joe doing this, because you—

if you have me— I got to ask Joe for how much I have in checking, we have a problem. Yeah. What is in your checking/savings across those two?

Probably around $70,000 right now in my checking, but then I have We have about $40,000, maybe $80,000 invested into Roth. $40,000 or $80,000? I'm not really sure on the numbers right now, and I don't have all the— I don't have the sheet in front of me, but we have a sheet of it. Okay. Braylin. Yeah.

This is what I'm going to say to you. This is aside from the car. I really want you to know you work really hard. You're really good at your job. You make a lot of money for a single individual. You should know where all your dollars are, especially if you're saying you want to buy a luxury vehicle. One of the caveats to being able to, to really spending that kind of money and feeling good about it is knowing that I am a keeper of the funds. Like, I know how I'm spending my money. I know where every dime is going. There's— you want that backing this purchase because that lets me know that you, not Joe, but you are a financially responsible adult. And so I want you to have that clarity on your numbers to feel really good about it. I don't want you to have to go to him and say, Joe, 'What do you think?' I want you to be able to look at the number, you know what I'm saying? You deserve that with all the work you've put into this.

Okay. And this is, this is new. Like, I just started this the last 2 years, so I am still learning. And I, I didn't learn— like, no one, no one taught me about money.

I totally get it. I totally get it.

The first one, and it is overwhelming, you know, working as much as I do and then having to learn about all this.

But 2 years in the process. But I'm gonna push you on this. I'm gonna push you on this. It doesn't take 2 years to do a budget and be able to look and say, here's how much I have in savings and here's how much I have in my checking. That doesn't take 2 years. I want you to know those numbers tonight.

And you, you help people with numbers all day long in real estate. You know how much your clients have in savings, but you don't know how much you have.

Okay, wait, he sent it to me. He's listening right now. Okay, good. Um, okay, like in my checking I have $50,000. Okay, and high yields I have about $75,000. That was a deduction because of tax. We had to move stuff over. I obviously had a big chunk to pay on that. Robinhood is actually $300,000.

$300,000 invested? Yes. OK, I thought so.

I thought that that was your retirement.

We're not going to touch invested money. Let's use future income. But here's the parameter. You're not going to buy a brand new car right now, even if you had $70,000 to spend on it.

That was my question, too. Leasing? Financing? What are y'all's thoughts on that?

No chance. No lease. You're going to pay cash and you're going to buy a used luxury car.

And it sounds like you've got maybe around $45,000 to spend because what I'd want for you, if you said $50,000 in checking, $5,000 in high-yield savings, and the rest is invested, I'd be thinking, okay, I want 3 to 6 months of expenses that's liquid. So I would move whatever 6 months of your expenses are into that high-yield savings. Savings. That's an emergency fund. And then whatever is left, that's kind of your car fund.

And I would separate the two. Open up a different high-yield savings account called car fund. And once you have, let's say, $40,000-$50,000 in there, you go buy yourself a nice used luxury vehicle. So what kind of car are you looking at? I'm sure you already know exactly the make, model, and trim level.

I really like the Mercedes GLC coupes or the GLE coupes. Listen, I like this for you.

So that's 70 grand new, right? Yeah. Here's the good news: Mercedes go down in value heavily. So you can go buy a 2022 version of that that's still super nice, low mileage, and you can go pay cash for that once you have the money. But you gotta get your money in order. Right now it's a mess. You make great money and you got nothing to show for it in savings. Yeah. So let's get control of that before we start buying super nice things. Yeah.

And we'll give you a copy of, uh, we'll give you EveryDollar, we'll give you a copy of The Total Money Makeover. Read that, and you don't need Joe for that. You can do that on your own, and you should.

Take a back seat, Joe. She's got this one. The problem with online investing advice? You hear so many different opinions and you're left wondering if you're even doing it right. And that's why we created Investing Essentials. Join me and Dave Ramsey at this 2-night virtual event to learn Dave's playbook for investing and wealth planning. We'll break down 401s, mutual funds, passing on wealth, and more. So join us September 1st and 2nd. Tickets start at $199. You can get yours today at ramsaysolutions.com/investingessentials. Events, or just click the link in the show notes. Our Scripture of the Day, Matthew 6:26: Look at the birds of the air. They do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? Mary Kate Ash said, aerodynamically, the bumblebee shouldn't be able to fly, but the bumblebee doesn't know it, so it goes on flying anyway. Is that true? I didn't know. Is that true? I figured it must have the aerodynamics built in.

You really think it's sitting there thinking about it?

I don't think so.

I don't know, Mary Kate.

All right, I'll take it. It's an interesting thought. It's an interesting thought. I get the principle underneath it, I respect it. There we go. There we go. Speaking of which, Kay is in Houston, Texas. What's going on, Kay?

Hey, thanks so much for taking my call today. I appreciate it.

Absolutely.

Uh, yeah, so I am going through a divorce, um, after leaving an abusive marriage, and I'm underwater every month. And I'm sorry, it's okay. I have two kids, 2 and 10 months, and I'm just trying to figure out how to manage manage all the costs coming at me. So, um, so sorry, I'm about $5,000 in the hole a month, um, after doing my budget. Once the divorce is finalized, I'll be okay. I'll be like right, right at where I need to be each month. But right now I'm having to cover my rent on my new apartment plus my old mortgage and the bills at my marital home. I had to move out of my house.

Why are you having to do rent and mortgage? Is he paying anything to the He pays half.

I'm just giving him half of everything right now. That's what our county's standing orders require, is that I pay half of all of our bills until something else is in place.

So everything is 50/50 until divorce is processed and final?

Okay. Uh, just until there's a temporary order in place. So we're working on that with our attorneys, but he's dragging his feet, you know, and making things drag out longer and getting more expensive.

Is there a cap on it? At all?

Yeah, I'm hoping to have it set in September, mid-September. Um, so I'm hoping by mid-September I can get some clarity on like, okay, maybe I can stop paying the mortgage and stuff, and then that would give me at least that. Um, but at this point I'm just—

I just— yeah. Okay, who's got the kids?

I do. I have them full-time.

Okay, so of the $5,000 that you're underwater, tell us how much money that you have to your name that you can spend on the things that are not half of the bills.

Uh, like cash? Would I have cash on hand?

Yeah, I mean, is, is the income being split or is it just the expenses being split?

No, so I— it's just expenses. So we each, like, our income— like, I, like, I'm giving— I'm paying half of the mortgage, like, on the website. Understood. But you don't get half of the income that you guys shared?

No, no.

So I just— I actually make more than him, so we just— I just stopped giving him money essentially.

Okay, so how much are you bringing in every month at the— you know, how many pay— you get 2 paychecks or 1 paycheck?

Yeah, I take— I usually get 2. I stopped my retirement, so I'm getting $4,230— I get $4,240 a month, or every 2 weeks, sorry.

Okay, so I've got $8,400 a month. $3,400 a month. And then what is the mortgage costing you, your half of it? $3,000. Wow. And then your rent? Mm-hmm.

So right now my rent is $2,000 because I did a short-term lease, but I'm hoping that'll go down a little bit when I find something longer.

Okay, so you got $3,400 left after that, and then you still have all the bills to pay?

Mm-hmm. And that's probably on his On the house, let's see, it's $415 about. No, that's average. And then on me for water and internet and electricity, it's about $450 right now. But that was because I— long story short, it should go down a little bit.

Who's living at the house? I'm sorry, who's living at the house right now? Is he still there?

Just, yeah, just myself. That's it. Just your stuff? Just my spouse.

Oh, your spouse.

Okay, so I want to make sure I understand. Towards— aside from the mortgage, the other bills that you're on the hook for are $415 for the old house, and then $450 is your kind of utilities and bills for the apartment.

So that's— and we have two car payments. Sorry. Okay, so one car payment, half of the car payment. And tell what that is. So his is $750, so half is $750, and then my total car payment is $1,300, and I'm paying that on my own right now.

Oh my goodness. And why isn't yours part of the half split? Why, why are we splitting his car but not splitting your car if this is decided by your state?

It, it hasn't been finalized yet, but at the end, like, hopefully by September, he will end up covering the home and his car. No, no, you said my stuff.

You said earlier— you said earlier that whatever the decree was said that you needed to pay, you guys had to split the household expenses, which I sounds like included the cars. And I'm saying, why only his car and not your car?

Yes, so I was paying only half and then he told me I needed to pay for my own car.

Okay, so no, no, no, either the state says—

if you have to follow the law, so does he.

Why does he get to decide right now?

Yeah, no, that's a good call out, because here's what I'm wondering.

You said you're $5,000 in the hole and you make $8,400 bringing in. That means your expenses are over $13,000 a month.

Um, based on what I put in, every dollar, that's what I was getting out.

So what are the other— let's pretend the $1,300, let's split that up now because let's, let's go ahead and do that and say, okay, yeah, we're both on $650 on that. Then what's the other major big ticket things that we're missing?

Are there a bunch of other debts that aren't accounted for yet?

No, I only have 2 cars and the house, the mortgage. There's only 2 debts. Oh, I have a credit card that I have currently, but I'm paying the minimums on that. At the moment, um, which the minimum on that is $500 because that's where I've been putting my attorney fees.

Okay, is the car in your name only at the moment? And the, the loan? No, unfortunately it's not. Okay, because I'm trying to think of a way to get you some breathing room right now, and selling that car is A1. But you should have—

but you should have breathing room because if I go through everything that you told me and I take all this out, there's still $1,135 there. Now granted, we haven't done grocery trees yet, but I'm nowhere— I'm nowhere near—

I am going to counseling regularly at this point. Okay, that's due to the situation.

Fair enough.

Yeah, that's $800 a month right now.

Okay, so now, now we're starting to get in the red.

Sorry, daycare. Okay, daycare, important because they— I did not have that cost prior, but now I have to pay for daycare and he will not pay for half of it. But again, because we did not have daycare before.

But here's the thing, we're either going to play what the state— if you, if you have to do what the state says, he has to do what the state says.

So it's your children to just take out, take out daycare that I'd be paying towards that house.

I would be talking to your attorney and saying he's not playing fair. He's not playing fair. So it's on them to, to force him to play fair. It can't just be you texting him saying please pay.

No, no, absolutely no, no. And that's what we're working on.

So let's get with the attorney and then redo the budget based on what you actually have to cover, and that will give you at least a clear picture. And then 45 days from now, we're going to know. Mhm. And in the meantime, I would be talking to my attorney to see what financial moves I can make legally to try to free up some breathing room, what I can sell, what I can move around, because going $5,000 a hole— in the hole every month is not going to work even for another month and a half.

No. If you do what George said you should do, which is split everything and do it do it fair, you're gonna be right at zero. You're not going to be far below, but you're going to be right at it. I do think counseling is really, really important for you. $800 though right now is really, really high.

I'd be trying to see what I can shave off there, or even speak with them and say, hey, and sometimes even your insurance might cover partial or full, and so maybe go through them and see, and maybe cut it down to 2 or 3 instead of or 5. Just things like that. Go through the entire budget and see what we can trim right now just to get by. That's all we're trying to do is just break even. Yes.

And to your point, go ahead, go ahead. I was going to say the things that I would— if you've calculated, this is my half, this is the dollar amount for my half, how you want to allocate it to make sure that you're doing the most important priorities, I think you have the right to do that at this point because if he doesn't pay his half of the mortgage, that's on him. If he doesn't pay his half of the car, that's on him, right? But you need to make sure the kids get to daycare, right? So I would prioritize it in that way.

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