Transcript of Wealth Doesn't Happen By Accident

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 Jade Warshott. Next to me, Rachel Cruz. We're taking calls about your life and your money for the next hour or so, so hop in on the phone lines where John is there from Tulsa, Oklahoma. Hey, John, you're up on the line.

Hi, ladies.

I would like to introduce myself real quick. I am the president of the First National Bank of the Perpetually Screwed. I am married to the CEO of the First National Bank of the Perpetually Screwed. And let me explain why I say that. So I found out maybe a few months ago, we've loaned out maybe $45,000 to 3 people.

Oh, okay. Now I get it. You're the bank. You're okay. I was like, where is he going?

How did you find out later that you loaned $45,000.

Were you loaning money without telling your wife and she doing the same?

No, she did it to us. And now I said yes to two of these people and it was $18,000. Um, who are these people? So one is our father-in-law, one is a friend who's a teacher who doesn't get paid in the summer, and then another is a close family friend. And I did not authorize III. Um, and so now we're about $40,000 to $45,000 of our emergency fund is loaned out.

Okay.

And now we've hit a financial snag of our own and we need that money. I don't know what to do. Yes, we are in couples counseling about this and other things, but we— I, I don't know what we need to do aside from maybe rice and beans until This stuff gets paid back for maybe 5 to 7 years. Um, what is the solution here? Cause we, we need some of this money now.

And yeah, how much do you guys make a year?

Uh, it's about, uh, I'm, I'm around 69 and she's around maybe 80.

Okay.

Last time I checked.

And well, so I was supposed to make $10,000 more and then my company cut my overtime. That was kind of the cushion of this fall. And so I just, I'm kind of stuck here. We need this money now.

What happened that caused you to need this money right now?

Yeah. Cause just losing overtime doesn't feel like enough of a—

we've, we've had some home expenses pop up. Like what? Um, I know it's going to sound really kind of, you know, it's not dramatic, but we're building a pool. And the patio is also, turns out, has dry rotted and needs to be replaced. And so we had money set aside for this, but now it's just overages out the wazoo. And so I'm just like—

How much money are the overages, John? How much are they?

It's maybe, as of last night, it's about $15,000.

Okay.

And how much was your emergency fund? Total before the $45,000 was spent?

So the, um, I— the emergency fund, I think, is gone. I think I, I, I'm not really the one who does the books.

You think it's gone?

I, I think the emergency fund is gone.

Okay, so they're right there. Let's hang out right there because that's the problem in all of this. There's a lot of individual things that we could point out, but I think the main problem that at least I'm seeing, Rachel, is there's kind of a lack lackadaisicalness about the money. You don't even know how much was in the fund, but you were okay. You okayed $38,000 of loans and didn't even know how much was there to begin with. And then you're looking up going, well, this— well, hold on. I'm just going by what you said. And then you're saying we're building a pool in the midst of this and without an emergency fund, without an emergency fund, or at least we don't know how much was in the emergency fund. So this points to just, um, what I'm just going to call— there's no intentionality here. It's almost like you guys are doing pretty well. You're making $150,000 a year, you've got a cushion, and now we can just kind of do whatever we want. And I think that's kind of what's taken place.

Yeah. You know, and I thought there was still— granted, I, I knew there was more than $18,000 in the emergency fund and you probably felt, but it was vibes.

I'm saying it was gone on vibes because it was like, yeah, there's probably more than that. We can go ahead and do this. And the way we teach here is there's there's so much power in knowing exactly how much money you have and assigning, and this is how I'm going to spend it and this is where it's going to go. And we're thinking about it ahead of time. Now what's happened, so let's fast forward to the loans. What's happened here, and this is a separate issue, we've taken money and we've loaned it to family and friends, which is, loaning is not really an act of generosity because it's not a give, right? It's, Giving is, I don't expect anything in return. I'm giving this to you. This wasn't an act of generosity. This was an act of a bank, which you called that out, and now you're on the hook. And unfortunately, if you push on your family and friends to give you this money back, maybe before they expected to, maybe before they can, so that you can keep doing this pool, it is gonna have an effect.

Yeah. I mean, that's, that's part of the risk of when you go into debt.

Mm-hmm.

And you borrow. Or you're the lender to people in your life because, yeah, this happens.

Borrower slave to the lender.

Yeah, absolutely.

And we have, we have had the conversation now where I'm like, there is a reason banks would not give these people money and they had to come up with it.

Yeah, it's a seriously, it's a great point.

So that is why I say I'm the president of the First National Bank of the Perpetually Screwed.

Well, you learned a lesson.

Okay. These people could not qualify for bank loans.

Yeah. So what's going to have to happen, John, is for I mean, honestly, what I would do out of just my sanity is I'm like, I wouldn't expect this money back, to your point.

That's right.

And you said 7 to 8 years, you threw out like a number of years of what you expect. I would not hold on to that for 8 years, okay? So, this is what we would call a massive stupid tax. If they end up writing you a check later in life, then fine. But I would move about my life. I would say, "That was so stupid that we did that. And now we have to figure out how to find $15,000 to cash flow." a home project that we started with no money, right? Extra, safety net-wise. So we gotta learn that lesson too, John, that when you have no margin, you know, even if you had $20,000 and that's all you had and you allocated $20,000 or something, you still don't have enough money to do the project. You don't need to spend all of your money on one thing. And so, I would look to say, hey, we're gonna have to pause everything for now. And I mean, I would scrape together and find, you know, $3,000, $4,000 a month of whatever you can to be cash flowing your way through the debt contru— the debt construction and the projects that you have going on.

But I would not be holding my breath for your family or friends to pay you back. And to your point, Jade, I wouldn't originally go to them either because that's gonna, Yeah, I mean, like, you could have a right to.

You could.

Yeah, but it's—

It's not gonna help the relationship.

No, I mean, you're done at that point.

This whole thing makes me, I've heard your dad, Dave Ramsey, quote this scripture a lot, and it's so true. He says, "Suppose one of you wants to build a tower. Won't you first sit down and estimate the cost to see if you have enough money to complete it?" It is, yes. That's just wisdom. That's Luke 14:28, for anyone who's interested. And that's so much of what we teach guys, budgeting, and just sitting down and knowing where every single dollar is going. Otherwise, you'll wonder where it's going, where it went, right? And that's exactly, uh, what's happened to John here, is they make good money, $150,000 a year, and something so slight as, I no longer get overtime, and I've lent out some money, and I started a tower or a pool. Yeah, without counting the cost. And that's why, gosh, guys, if I don't tell you anything else, budgeting is so, so important. Knowing where every dollar goes, so, so important.

I appreciate your humor though, through the pain. I appreciate your attitude.

Let me tell you what I get asked all the time. When should I get term life insurance? How much do I need? Is it affordable? Those are the right questions to be asking. So let's take a quick review. The fact is, term life isn't a baby step. So if anyone is dependent on your income, you need to have 10 to 12 times your income in life insurance now. And most people are surprised by how affordable term life really is, even if you're not in perfect health. Look, Look, I understand the hesitation since most insurance companies make it more of a hassle than it needs to be. Not at Zander Insurance. They're not an insurance company. They're a broker that works for you. That means they'll shop and compare the top term life companies to find the most competitive options on the coverage for your family. For almost 30 years, I've recommended Zander for straight answers, competitive rates, and coverage that actually protects your family. Call 800-356-4282 or go to Zander.com for a quick and easy quote. That's Zander.com.

Alrighty, back to the phone lines where we have Chris Christie in Providence, Rhode Island. Hey, Christie, how can Rachel and I help today?

Hi, um, I was just hoping to have any tips or tricks and help working through the anxiety of not having any money while we pay off a debt. Like, I know we're supposed to put as much money as we possibly can towards paying off those, uh, that debt, but it just fills me with anxiety to take my, my, uh, my accounts down to like just a couple of dollars in the bank until the payday.

Okay, can I tell you something? I, number one, I love this question and I'm so glad you called in because I think this is something that gets overlooked a lot. And because of that, it, it can cause a lot of heartache and pain. And Christy, you are dealing with something that I myself and my husband Sam dealt with. First off, number one mistake, Rachel, is people forget to budget for a cushion. They budget every dollar and they're like, yes, I did it, zero-based budget, and everything's going to debt and minimum payments, and they forget to put a line item in the budget of, you know, it's a little bit different for everybody, but let's just say $100 that you just leave in there so that in case something happens that you forgot about, you're not at zero. Your bank account should never be at zero. It should never be at $3.

Zero-based budgeting.

Yeah, zero-based budgeting does not mean zero in your bank account. Yes. So you can have, have a good cushion in there. Yes. So when those things come up, it doesn't take you into the negative. Is that what you're saying?

Yes. A subscription is bound to come out that you forgot about, right? And then next thing you know, you're overdrawn and then it just creates this cycle to your point of, stress and anxiety. So that's thing number 1. Thing number 2, I want to make sure, did you do Baby Step 1 first or did you just skip it and go to Baby Step 2?

So yeah, I did Baby Step 1 and didn't really stop that. Like, I have $100 of my paycheck going into a separate savings account that I don't even know how to get money out of that.

Oh, help me understand. Are you— you're still doing that?

Yes, so we did. We saved $1,000 and then for my, my paycheck is automatically deposited and I separate it into a checking account and then that savings account. So $100 goes into that savings account.

Okay, just as extra cushion.

Yes.

Okay.

What I would do is I would cut off the $100 going to a separate account because the account that you have there, that's Baby Step 1. You want that money separate from your checking account. I think it's very important to have that. And then on your budget that's associated with your checking account, you want to delineate, okay, I have $1,000 every month in my budget, my EveryDollar budget that is aligned to a cushion. And the reason for keeping it in that checking account is because if something happens, then it's there. You don't want it, you don't want to have to move it from someplace else because the transaction now has already happened. Yeah, maybe you overdrew, maybe the card was declined, right? That's why you want to have it in the checking account. Does that make sense?

Yes, yes.

Christy, how much debt do you guys have to pay off?

Um, right now it's around $200,000.

Is that consumer debt?

Uh, we have about 3 credit cards that we still have to pay. I have a student loan and we have a HELOC.

Oh, okay.

How much is the HELOC?

Um, it's around $30,000.

How much do you guys make a year?

Uh, Close to $200,000.

Oh, okay.

So you're doing that right by including the HELOC in your debt snowball. How quickly have you projected that you'll pay off this $200,000 in debt?

Uh, so I'm hoping to have the credit card debt paid within the next 2 years.

Is that based on a calculation or is that based off a vibe?

It's based off of vibe.

Okay. I, I, Christy, you're the best.

You can pick up on, on Christy.

Yeah, I try.

Well, Christy, you're my people, man, because I— what the things that you're doing, I recognize them because I've done these things. And so many people listening are doing exactly what you're doing, which is why I love your questions and I love the things that you're bringing up. Do you know what will give you so much peace, Christy, and so much motivation? Is if you sit down—

You're gonna tell me to make a budget.

Well, calculate it out. Calculate it at your current income. Okay, $200,000 a year, minimum payments plus extra payments. Use one of our calculators. You can go to ramseysolutions.com. Maybe they'll put it in the lower third on the screen here. But do the calculation based as things are today. And then once you see that number, once you see, okay, 24 months, maybe that's the time period, you can then, now you have options. You can decide, am I happy with that? Am I not happy with that? And if you're not happy with it, then you can start to brainstorm. Okay, what would make me happy? I want to do it in 18 months. Okay, how much money do I need to fill that gap? Right? And now you're reverse engineering it to, to have control and do what you want to do. Oh, I cannot tell you, that will give you so much peace and so much hope and so much motivation. And a lot of times, Kristi, it's like a $500 difference a month could really move the needle, change the game. $1,000.

You guys, what do you bring home every month? Probably around $12,000-ish.

Uh, yeah, yeah, yes.

Okay, because I'm just like, okay, I mean, I just did quick math and I was like, okay, let's—

$12,500, something like that.

Yeah, what could you, you know, if you, if you could pay $4,000 every single month, that'll take you 4 years. If you could pay $8,000 a month, that's 2 years, right? So you just kind of like start looking at the numbers saying what has to be true for us to be done completely in 2 years? What would that look like? And if $8,000 feels like there's no way we can live, you know, on the rest, then what do you have to do to get $8,000? Is that an extra $1,000 a month that you guys work extra? Like, right? You start to create this pattern, but you know it's done in 2 years or whatever timeline you pick. And I think that lowers the anxiety because there's actually facts in front of you and numbers that you see. And Kristy, just remember this too. We teach this in the Baby Steps. If something comes up during your debt snowball journey and you have to have tires and some plumbing fixed in your home or whatever it is, and it's more than $1,000, you just pause everything. And instead of that $8,000 going to debt, maybe $2,000 of it stays with you and you fix the emergency.

And then you go back to it. You know what I mean? Like there's some ebb and flow to this. To life that is very real, but you, but that doesn't have to cause you to lose progress or lose sleep at night 'cause you, 'cause you have anxiety about the unknown.

That's a really good point. I, I like what, what Rachel said there. You guys have a really great income and therefore if you did need to cash flow it, you actually have a nice income to pull from. Some folks, you know, if you're making $60 grand, right, it feels even scarier for them because the cushion, the amount of extra margin is far less generally. And so I wanna encourage you that you're really in a good position to work the plan and work it to the fullness and you can really trust that it's going to work for you. Um, and all of this that Rachel and I have said, we haven't talked about side hustles, we haven't talked about overtime, none of that. And all of those options are available to you. Do you have kids?

Uh, uh, okay.

I have kids and two are still in the house, but I want them gone. They won't go anywhere.

Oh, they're grown, grown, grown adults in the house. Okay. Got you. But the good news is, you know, you're not in that phase.

No childcare.

Yeah.

Yeah.

And so you've got—

how old are you?

Uh, 56.

Okay.

Do you have that time? Do you have money in retirement, Kristi? You and your husband?

Yes. My husband and I both have 401s and I have a pension.

Okay, good, good, good.

So then, yeah, this just becomes— and I'm stealing this from Dr. John Delony— how do you want your life to feel, right? How do you want it to feel when you come home? How do you want it to feel when you're on vacation? How do you want it to feel when you're laying in bed at night and everything's quiet?. And having this debt paid off and going quickly about it, I think, is really going to give you that feeling that you want. You've worked hard for 56 years. You want to feel the peace that should be associated with the hard work that you've done.

Yeah, it's just, it's really just getting in that mindset. And then, you know, for example, my sister the other day called me and said her electricity got shut off because she forgot to pay it. Oh, and, um, like, okay, can you afford to get it back on? And, and she could afford maybe half. And since we had the money, I'm like, all right, well, I'll give you the money, but it's, it's also money I don't think I'll ever see again.

Yeah.

So that's what makes me anxious. If I had taken my, say, my, my, uh, checking account down to, say, $100, I wouldn't have had that money to give her to pay that.

And I know it's not my responsibility to take care of it.

Sure. No, but when your sister's lights get shut off, I hear that you want to help. Yeah, yeah, yeah, I get that. So that's why, again, there's always buffer in your checking account, everyone. Hear Jade loud and clear. There's always gonna be buffer, okay? And then you also have your $1,000. You need an operating expenses knowing that there's a revolving door in your life and your checking account does not need to be at zero.

Never!

Yeah, and even if it needs to be more than $100, I don't care what it is, but it's like, okay, here's enough that makes sure that it's the catch-all for everything so we don't overdraft. And then again, you guys, your $1,000 is separate. And if something comes up, you pull out of that if it's an emergency.

Yes. ¡Hola!

Let me tell you something I see happen way too often. People fall behind on their bills and they wait. They hope it will work itself out. It won't. That's why I recommend Guardian Litigation Group. Here's the deal. If you've missed payments collectors are calling, or if you're getting letters threatening legal action, that's not something to ignore. That's the moment to deal with it, because when you do nothing, it escalates. They can take you to court, and if you don't respond, they can win by default, and that gets expensive fast. Guardian Litigation isn't a call center. They're an actual law firm. From day one, you're assigned an attorney to represent you, so if things do escalate, you're not scrambling and you're not hit with surprise legal fees. Guardian Litigation only gets paid when the debt is negotiated and you accept the settlement offer. This isn't about shortcuts. It's about dealing with the problem before it gets worse. Go to guardianlit.com/ramsey today. That's guardianlit.com/ramsey today.

Attorney advertising.

Results may vary and no specific outcome is guaranteed. Okay, Rachel, before we move on, I wanna go back to the cushion discussion right quick because I think that is something that does get missed sometimes because it's not like a core part of teaching. Like it's kind of just an assumption, but some of us are still learning. And so I wanna hit that for just a second. So if you're in Baby Step 2 and you're thinking, okay, Jade, how much cushion? 'Cause you and Rachel didn't tell me how much. Here are some things I want you to think about in determining your cushion 'cause it is gonna be a little different for everybody. Depends on how much you make, all of those things. Here are some things that will help guide you in the right direction. Number 1, in Baby Step 2, this is not an emergency fund, okay? It's not. The purpose of the cushion is not to be an emergency fund. So you already have the $1,000 saved. So if you were thinking of getting up into that range, you were wrong. This is just a cushion, okay? Number 2, a good way to think about it is this is— this money is here in case something happens that I didn't expect in my budget.

What's the worst could happen? Your Amazon subscription for $120 comes out, right?

Yep, yep.

Or Grandma's birthday, right? All of those things are kind of under the $150 range.

Yes, yes.

So that's a fair place to start in your life. Look at what's really something that I could honestly forget that I didn't budget for, and you'll find that it's usually pretty low-dollar things.

Yes, totally, totally.

The third thing you need to consider is, that money then is going to, if you don't touch the cushion, it's going to accumulate over time. So you could look up and go, "Oh gosh, I have $400 here," or, "I have $800 here. That's a lot of money." At some point, you do need to drain it back down.

Yeah.

Move it over to, you know, savings or move it toward the debt, whatever Baby Step you're on, and keep it at the established cushion amount. So what I did once I learned I needed a cushion is if I got to the end of the month and I didn't touch the cushion, I would move it onto the debt, and then the next month, it's built in there again, okay? So, don't let this thing accumulate, and then you're like, "Great, now we have money to go, you know, on that cruise." And then the third thing I just wanna say, this is on your honor, okay? This is back when we were in elementary school, the teachers would say that when you take a test, "You're on your honor." We're not trying to police you. We want you to get out of debt, and we want you to do it quickly. So, that's why we're saying this. It's not to like shake a finger at you, but also, don't hold $800 in your account when you're trying to get out of debt. You need that to put towards the debt. So that was my teaching. That's it.

Love it.

Do you have anything to add?

No, I think it's great. Rachel Cruze? I think covering the basics again for people as they're in it, 'cause a lot of you are on Baby Step 2, getting out of debt. And so you're in the middle of all of this. So these are important things to remember, 'cause if you don't, it derails you. And if something does come up, you're like, well, crap, we're negative $75,000. And that's just more demotivating than anything. So keep yourself in check with all of it so that you can keep throwing good money at the debt to get out as quickly as possible.

And if you're beyond Baby Step 2, it's not nearly as big of a deal. Yeah, it's not as big of a deal. Okay, great. That being said, guys, we answer a lot of questions here on the show, whether it's about cushions, whether it's about investing, whatever it is. And the truth is, we do wish that we could get to every question that you guys have on the show, but we can't. So if you do have a question and you want an answer for your situation, just go over to our website and use the Ask Ramsey tool. Ask Ramsey is our It's a free AI tool. It's built and trained on proven Ramsey principles. You'll get an answer the exact same way that we'd answer it right here on the show. So ask your question today at ramseysolutions.com or go ahead and click that link in the description if you're listening on podcast or YouTube. Alrighty, we got Chris who's in Iowa City, Iowa. Hey Chris, how can Rachel and I help?

Hi, I'm looking for some advice. I was very much raised on the Dave Ramsey principles. My dad was very strong. He actually taught a class using those books. I was homeschooled. Um, my husband and I, we got together 8 years ago. We are both previously divorced. He's been divorced twice. And just shortly, like maybe 2 or 3 months after we moved in together, he got laid off of his job and hasn't had a job since. That was 8 years ago. He does some— yeah, he does some small odd jobs, like land, maybe 2 landscape jobs a year. Year, snow removal in the winter, but nothing solid. I clean houses for a living, like at least 4 or 5 houses a week. We do manage a property in our town, but that's $800 a month. It barely covers his child support because he has children from a previous marriage. Our house is halfway paid off, but it's a house that I had from my previous marriage, and like I just took over the payments. And I use my child support that I receive to pay off like the house payment every month. And like, we're just barely scraping by.

And Chris, what does he do during the day?

Sits at home on his phone. He like— his excuse is very much a religious thing. Like, he says that God blessed me to be able to work so he can be available to the church ministry. Like, he volunteers for like church basketball games, sets up chairs at church. He's on a few missions trips and like people donated money towards that, but like he doesn't provide hardly any money to our household.

Sounds like a 19-year-old.

How old are you guys?

That's another issue. He's 52 and I am 32, so I feel like I made a very bad choice in the beginning.

Are you married?

Yes, you are.

When did y'all get married? You said you—

8 years ago.

Okay, so he hasn't worked any of the years you've been together?

That is— no, I'm like, I thought it was a fluke at the beginning. Like, he lost his job and he blamed it on, you know, he was going through a very messy divorce.

Okay, so Chris, what are you gonna— so Chris, it's been 8 years.

Yeah, that's a long time.

So you've been, you've been putting up with this this for 8 years. What do you, what do you think you should do?

I feel like I'm very much in a trauma bond relationship, like my parents, my pastor. I've gone to counseling with my pastor and my husband, and I'm like, they're all like, you know, if he's not going to change, like, what else can we do?

What do they suggest? No, no, what do they suggest when you're in counseling?

Either we separate and I'd be better off, or he needs to get a job. And—

but then, so what, you're gonna have to make a decision. So, Chris, you have to make a decision. You're either gonna live with this for the next 30 years.

Yeah, because Rachel and I are going to tell you the same thing your counselors told you.

So, you're either going to live with it for 30 years, or, or you make a different decision. You give him— there's an ultimatum. And I hate to, like, dangle that, like, you're— but it's been 8 years. "He sounds like a 19-year-old who's in home from college for the summer." Like, do you know what I mean?

And let me add this. Let me add this to what Rachel said, because this is the crux of all of this. You went to the counselors, they told you one thing, and you said, "Ah, I'm not ready to do it." Then you're coming to us saying the same thing. We're telling you the same thing. If you choose to stay, you can't complain anymore, because you've chosen it at that point. "So, for these 8 years, I don't know when the first time was a counselor— that a counselor told you, 'Hey, this is your choice,' but you made it. And then, you made it the next year. And then, you made it the next year, and the next year." "He's not gonna change." "He's not gonna change." And I'm always—

I'm very cautious to ever, like, you know, throw out, like, "You have to, you know, divorce him," unless you're physically in danger or something, right? 'Cause I mean, we're gonna get off this call in about 4 minutes, and this is your life. Like, you have to— "but you know, you have to make these decisions. But you need to know, Chris, like, it's— you will choose this every single day for the rest of your life. And he's not honoring you." If you wanna talk scripture, it says, "Yeah, one who takes care of his own— who doesn't take care of his own household is worse than an unbeliever." And so, he's not doing any level— it's so interesting that this is his position, 'cause I feel like, Jade, 2 shows ago, we had to untangle another level where it was like, that she's forced to stay stay home and she has no rights.

Like, like, you know what I'm saying?

It's so funny that, like, you get both ends of the spectrum with people. Um, so yeah, and I would— and I would assume, Chris, the mayor— I mean, I think this is probably one small area of a marriage that probably hasn't existed for a really long time, right?

Yeah, I know there's—

there's many layers, and he's unwilling to change.

Yeah, yeah. And there was other, like, anger management and things that he's gone through, and some of that has gotten better, but it's the finances that really keep pulling me back. And then we have like savings from like our tax return or like we sold a vehicle, like we bought one and sold it for more than we bought it for. So we have some savings, but then he has it in a safe and says, no, we're not going to use that. That's for emergency.

And that's the thing.

But then he'll turn around and ask me for $20.

But you're focused on the wrong thing. You're focused. It's very easy to get distracted on things like the money in the safe or, you know, uh, how many houses you're cleaning per week. But the big issue is this is a marriage, a foundational marriage issue, and you have to decide, am I going to continue on the ride or am I not?

As a dad of young kids, I'm starting to think a lot more about the world they're growing up in and how I'll help them make sense of it as they get older. And that's why I like World Watch, a video news service for preteens and teens. Because one thing I know for sure, if you don't teach your kids how to understand the world, somebody else will. And these days, that could be TikTok, YouTube, Instagram influencers, or whoever happens to show up in their social media feed. World Watch's 10-minute videos help young people understand what's happening in the world through a Christian worldview without all the outrage, negativity, and noise that is everywhere these days. The reporting is factual, engaging, and designed specifically for preteens and teens. And World Watch creates opportunities for something every family needs more of: meaningful conversations. Instead of just reacting to headlines, kids learn how to think about what's happening in the world, and parents get a chance to keep those conversations going at home. Because when my kids are old enough, I want them informed, not overwhelmed. And right now you can get a 30-day free trial. Just go to WorldWatch.News news/ramsey or use promo code Ramsey to get started.

That's worldwatch.news/ramsey.

All right, back to the phone lines we go, where we have Kelly, who's in Detroit, Michigan. Hey Kelly, happy to have you on the show.

Hi, thank you so much for having me.

How can we help?

I am calling because I find myself in a unique situation. My husband has just been promoted to a level at work where he is eligible for a company car.

Okay.

However, there is a caveat with that, that since he has a spouse, the spouse has to either buy or a new car manufactured by that company every 4 years in order for him to stay enrolled in the program. I currently have a 14-year-old Corolla that has been paid off since day one, and the idea of this makes me very nervous, but I'm not sure if it would actually be better financially or not.

That's very strange because if your car is paid off and they're saying you can have one for free but the spouse has to lease one, then it's a break-even— like, it's no longer a deal.

Correct. And he doesn't get the car from the company, he just has access to it. So heaven forbid if he's fired or if he leaves, then he gives it back.

You have a lease?

Yes.

So what do you think?

I— we both need new cars, and I can recognize that. We're both driving old cars that are coming to the end of their life cycle. But I don't know that buying or leasing a new car every 4 years is the answer. Even if his car insurance, gas, everything is completely covered, I'm having a hard time stomaching the thought of buying a new car every 4 years.

Yeah, I would look at the loss that if you bought a new car this year, just say 2026, and you sell it in 2030. Well, I guess you can't really prove, but like on an average of what a car depreciates, and you could see that's the amount of money that's wasted. Does that cover gas? And if your husband operated his own vehicle, right? And I think you come out ahead that way. How much do you guys make a year?

About $300,000 combined.

Okay, what's your net worth?

Oh, good question. I'd say maybe— we don't have any debt, if that helps. Okay, yeah, around $500,000, $600,000.

Okay, good for you guys.

Generously.

Yeah, generously, we'll round up. Um, yeah, I, I don't think it's going to be worth it financially when you look at what the money you would lose on a new car every 4 years. I think you would be probably— I haven't run the numbers, so you need to. I think you'd be far better off with him just having his own vehicle.

100%. Because I just want to make sure I'm understanding this. He gets a company car, but the only way he gets the company car is if you lease a car every 4 years or buy every 4 years?

Correct.

Okay. And you currently, you're like, my car is paid for in cash. So now you would be— you guys would be going back into debt to get a car because now you're— does that make sense?

Yes. I don't know if we would end up going into to debt. We've also talked about just leasing, the absolute cheapest option.

But leasing is the most expensive way to operate a vehicle. Let's— and we can break that down if you need us to, but leasing is no better than financing.

Yeah, but even if you bought the new car in cash and you guys just cash flowed a new car, again, when you sell it, the depreciation, depreciation, I think will be more than what it would take if he just kept his car, right? Because you could go buy, you know, a $20,000 used car and replace your 14-year-old car and be done for another, you know, 8 years, right?

Yeah, and then you have to think about what you want because that plays heavily into this. If you just said, if this were off the table and you said, "Hey, let's buy a new car, what would you choose?" That's gonna be a completely different choice than saying, "Okay, I have to," knowing now that I have to do this every 4 years, I need to pay for it upfront, like, right? Great. Now you're going to choose a, you know, a Ford Focus because you can pay for it in cash. And you know what I'm saying? So it just— I feel like it— the tail is wagging the dog on this. And I think that you guys should be in control of your money. So I would lean towards— I think I would lean towards not, because it's causing you— it's forcing you down a pathway.

Okay, I, I agree. I'm trying so hard to be respectful of his progress and excited and supportive And I know how badly he wants to participate, so that's a huge factor. But I've been saying everything that you both have.

Yeah.

Well, what about after 4 years? So can you opt out after, like, let's pretend, okay, so today you did say we're at the point where I actually do need a car. What if you participated and said, okay, well we're gonna take cash and I'll buy my new car. You'll get your company car. We'll do that for 4 years. And then after that you reevaluate and if you decide it no longer works for you guys, there's, that feels like that could be an option.

That's true.

Yeah, I agree with that. I think it just kind of goes back to with what you said about not actually having a choice then, because if I could pick anything in the world, I know what I would get, and it would be on my list of options.

Yes. Yeah, yeah. Well, so I think either way, Kelly, you're— I don't think anything is going to take you guys into bankruptcy or something. Do you know what I mean? Like, it's a, it's a car, um, and everything will be done with cash if you end up going either route. And so that's the only thing I would say. You're not quite at the million net worth where we'd say yes, go buy a new car. Again, we just talked about all the depreciation and is it worth it, is it not? I don't think it's gonna be the end of the world. I just don't like someone dictating. It's part of being out of debt. It's like the autonomy. I get to decide things. And it's one thing if he just gets a company car and they give him one and he didn't get like it, but it is what it is. That's fine. But for you then to turn around and have to go purchase something that you don't really even want in the first place, Um, that would be, that would be tough. So again, I don't think either way is going to be a massive issue.

I just think it's a stupid program. Yeah, to make you do this.

It's, it's, it's a forced behavior. You have to choose if it works for you guys or not. Uh, but that's a choice. I mean, there's not a, there's not a wrong choice, I don't think, at this point.

Uh, personally, I would not lease it though.

No, definitely don't lease. If you're going to do it, we're a problem.

That's right, that's right.

Uh, thank you for the call. Good question. Let's go Andrea, Andrea, Andrea in Manhattan, New York. Tell me how to say it.

Uh, it doesn't matter, I'm open.

Uh, let's go. What about Andy? Can I call you Andy?

Yes, ma'am.

All right, let's go with that.

Perfect.

How can we help?

Thank you for taking my call. My question is, after listening to your show for a while, does my husband and I have sufficient life insurance?

Oh, good question. How much do you guys make a year?

$400,000.

Okay. How much life insurance do you guys have?

Uh, he has total with his work life insurance and then the private policy, he has $1 million. And then the same for me.

I also have $1 million.

Okay.

$2 million.

Yeah.

We say 4 to 5 times your annual income. Is that right?

Okay. Yeah.

Yeah.

No, uh, for stay-at-homes.

For stay-at-homes. That's right. For working, if you are working, 10 to 12, if you're bringing it home.

So we need more.

Yeah.

I would double it then. Gosh, Jade.

Thank you.

Yeah.

That's right.

4 to 5.

It'd be like that. Oh, Oh, did we make it clear for you? Do we need to say it again just in case?

Can you say it again? Yes. So we each have a million. That's not— the answer was not— that's not enough.

No, because that would mean that you make $400,000 or that you make $100,000 a year, right? I mean, 10 times that would be a million bucks. So he makes $400,000. If you did 10 to 12, that household income is $400,000 collectively.

I do not stay home. I work, he works. Collective household income is $400,000.

So I would split that out and I would just multiply both of your incomes by 10. If you're both working, it's 10 to 12 times your income. If you are a stay-at-home parent, it's 4 to 5. It's kind of half of that is the way we look at it. But, but yeah, 10 to 12 times for you guys. So yeah, it would probably need to be double.

So $2 million for you, $2 million for him.

How old are you guys?

49.

Okay. Are y'all in pretty good health?

Yes.

Okay, I would do it as soon as possible because term life, it's pretty inexpensive. And you guys, I mean, with— at 50, you're getting up there where it starts to kind of, you know, you will pay higher, you'll pay a little bit more. Um, but I would do it before I'm 54, 55. Um, yes, as quickly as possible.

Now, and call Zander Insurance. They're going to help, you know, you shop out the best ones for you. And just look for a 15 or 20-year level term. And also just know, Andy, that the point of this is is to get to the point of self-insuring that you don't need to continue. So ideally you would only have to take out one term of this. And if you continue doing the Baby Steps the way we teach, you could drop it in 15 or 20 years because you've built your nest egg so that you don't need to rely on it anymore, which is really the whole purpose of building wealth through the Baby Steps is you have that security that, man, we've built so much wealth that— Yeah, that we're good come what may. Come what may. All right guys, remember that Zander Insurance, that's where you want to go. They're going to help you shop all the different insurances that are out there. That's what I use, that's what Rachel uses, and they will take such good care of you.

If you've had your phone 2 or 3 years, there's a chance it's unlocked. So bringing your own phone is a great way to unlock savings on your wireless bill. You can switch to Boost Mobile to get unlocked. Bring your own device and save big. See, the big wireless companies count on you staying right where you are, paying more than you should every single month. They make it sound complicated to switch. It's not, by the way. Away. And meanwhile, your bill keeps going up. That's not inflation, that's them taking advantage of you. But Boost Mobile is different. They make it simple. You bring your phone, keep your number, and get unlimited wireless for just $25 a month. And that price is locked in forever. No contracts, no hidden fees, no surprises. So if you're tired of wasting money on your phone bill, this is your chance to do something about it. Go to boostmobile.com/ramsey, get unlocked, and keep more of your hard-earned money. That's boostmobile.com/ramsey.

$25 forever requires customers to remain active on Boost Mobile Unlimited Plan. All right, welcome back to the Ramsey Show here in the Fairwinds Credit Union studio. Taking your calls about life and money. We've got Omar in San Antonio, Texas on the line. Hey Omar, hello, what's up?

Well, I've been listening to you guys for, uh, close to a year now, just little clips here and there on Facebook and YouTube. And lately I, um, I finally got a decent paying job and I started looking more and more into the show, watching longer videos and stuff like that.

I love that.

And Yeah, I guess now I'm ready for a little more guidance on what to do with my position I'm in right now.

Okay, what's going on?

So I'm 22, um, I finally got a decent job. Like I said, I'm taking home about $85,000 a year. My fiancée, um, she's bringing home about $20,000, $24,000 a year. And, uh, we got about $85,000 more or less in debt right now.

How much?

About $85,000.

$85,000. What does the $85,000 consist of?

Um, $46,000 in the truck. Oh, $15,000. Yeah, I, uh, rolled over negative equity and I was— I—

yeah, okay, terrible.

Yep, $15,000 on a boat that I, uh, do make money off of because I'm a charter captain on the All right, um, $18,000 on my RV.

Lots of vehicles here, sir.

A lot of toys, Omar. We know what kind of guy you are.

I gave up rent to have the RV thinking I'm paying a lot more in rent when I can be paying towards something I'll eventually own.

You know, that's a common thing that I hear, and we'll get to that in a minute, but, uh You're not alone in that thinking, but we'll talk about why that's not a great choice later on. Tell us, is there anything else that you're leaving out? I think there's a couple of things missing here. $46,000. Oh no, you're getting close.

Yeah, I think that's about an average there. Close number, yeah.

Any credit cards?

No, I paid those off last month.

And no student loans or personal loans?

No.

Okay, good. Well, the good news—

Well, yeah, can I get— Yeah, our rule of thumb is says you should have nothing that, or you shouldn't have everything combined with motors and wheels, that includes a boat, all of it, that is more than half of your annual income. And you are at your annual income, Omar. So half of this has to go to make sense financially. So I don't know what that looks like for you. I'm curious, what would the truck bring if you were to sell it? I know there's negative equity in it, which sucks, but what would it bring?

$25,000.

Ooh, okay.

That's hurtful.

How about the boat?

The boat, I might be able to break even on it.

Great. Okay.

I have $15,000 in cash.

Okay, great.

And that's really what I don't know what—

And what about, and the RV?

I don't know if I can get rid of it with that.

And the RV you're living in?

Yes.

If you were to sell it, do you know how much it would be worth?

I do not on the top of my head, but I picture it won't be— it's somewhere around that number as well, $18,000.

You bought it used, I'm assuming?

Yes, from a dealer.

From a dealer. And how long have you been in it?

Um, 8 months.

Okay, so I'm glad that you haven't been in it too, too long for it to really depreciate too, too heavily on you. If I were in your shoes I would be looking at the boat because it's break even and I'd be looking to get out of the RV. And here's why. You might be thinking, well, Jade, I live in the RV, but the RV is the same as one of these vehicles. It's going down in value every moment that you hold on to it. And so you're flushing money in a greater way down the toilet. A lot of people feel like when they're renting, they're throwing money down the toilet. But with the RV, you're throwing even more because you're, you're you're footing the bill for the depreciation on it. So I actually would get out of that and I would go back to renting.

And then, and then if you sold your, just let's pretend, okay? So what Jade said, say the boat's gone and the RV's gone, just for fun, okay? In this scenario, say you sell the truck for $25,000, then you have $21,000 in the hole, okay? And let's say you go down and you get a loan from the credit union for $21,000. You take your $15,000 that you have saved, and let's say you go buy a $7,000 car. I don't know. Yeah. Yeah, and you go and take the 8, throw it at the 21, then you only have $13,000 of this loan left to pay off. That feels like a totally different world, Omar, than $85,000 making $85,000. But it's gonna require you living on less than you make and getting rid of stuff that goes down in value. Wealthy people, long-term, invest in things that make them money. And when they have the cash to buy something and they can afford it, they go and buy it and it doesn't hurt. It doesn't sting. It's like, oh yeah, it's just, it is what it is. Yeah, it's fine. 'Cause I want you to get an RV and a boat and a truck and all the things eventually.

You just can't afford it.

You're broke.

Yes.

So you got— so to make some extreme— yeah, so to make some extreme changes, it's going to be extreme. You're going to be moving and selling a boat that you're making some side income on, um, which will hurt a little bit at first, but once those payments are freed up, I bet that's the amount of money you make on the boat a month.

I bet you. Tell us, tell— let's, let's hear some real numbers. When you have your truck payment, your boat payment, and we won't include RV because that's rent, but What are those two payments together, truck and boat?

Uh, $1,090 for the truck and $250 for the boat.

Okay. So I mean, we're $1,300, almost $1,400. I mean, a month. Do you make that in boat rent, whatever you do with the boat?

Yes.

Okay. So you just will do it without the risk.

Yep. Yep. So, so with that, the $15,000 I have saved, I was considering paying the boat and then I'd have no more boat payment, but I'd be making, you know, potentially more profits on the boat.

So pay off the boat with the $15,000. How would— and then get out of the RV, and then that still leaves the truck. So what would— how would you solve for transportation then?

I mean, you still—

you're still $70,000 —yeah, you'd still be driving this truck that's going underwater more and more every day, and you'd still be paying $1,090 a month for it.

Let's say this, John. If you didn't know anything on the boat, and you had no emergency, you had no cash saved, and you had a boat, and you told us, "I have a boat worth $15,000," we'd say, "Sell it." Yeah. To help get out of debt. Absolutely. Like, the boat's not necessarily the problem in that scenario, but it's like, sell everything. Sell every— you know, what is it? Sell so much stuff, the kids think they're next, right? Like, you're going crazy at this.

I saw that clip. Yeah, yeah.

The idea of like, just get rid of stuff. Like start getting rid of stuff. This stuff is supposed to be bringing you fun and peace and joy and it's not, Omar. I mean, you're calling us. You're as much debt as you make every single year. Like that's a lot.

You wanna know what this is like? And just gimme a minute to paint this as a picture. You have this house that you've built, right? With a truck, a boat, and an RV. And the house catches fire, which is this. This is a hot mess. This is a flame, okay? And you're going back into the house on fire trying to save stuff. And we're saying, you wanna know what? Go ahead and let it burn and then take the insurance money and buy something new, build something completely brand new. And you're wanting to go back in and go into the fire where all the stuff's gonna be damaged and you're risking, keeping the risk, trying to salvage this stuff. And we're like, dude, Dude, burn it up and start over. Does that make sense? Yes, perfect sense. You know what I'm saying? Hopefully that helped you out a little bit because we want you to start something fresh that's intentional, that you can build a foundation of wealth and peace on. And you're trying to build on the old rickety foundation that didn't make sense, that you admit, hey, I made a lot of mistakes here, that's why I'm calling in.

Let's do it right. Let's do it fresh.

This show is sponsored by BetterHelp. Summer is a time when people get away from it all. Whether it's relaxing or going on vacation, we've all been sold this lie that if we could just escape from everything, then our lives will magically fix themselves. But here's the truth: a vacation won't fix what you won't face. If you're burned out, if you're anxious, if you're struggling, your problems will be waiting for you when you get back. And this is why I recommend BetterHelp. BetterHelp is an online therapy platform that fits into your life. You can talk with a licensed therapist by phone, video, or messaging from anywhere. There's no commuting, no sitting in a waiting room, just a safe place to process what's going on in the comfort of your own home, in your office, in your car. All of BetterHelp's therapists follow a strict code of conduct. You can message your therapist and schedule sessions right in the app, and if the first therapist isn't the right fit, you can switch at any time for no extra cost. This summer, don't ignore what's coming to the surface. Sometimes the strongest thing you can do is stop running from things and start dealing with them.

Go to betterhelp.com/ramsey to get 10% off. That's betterhelp, H-E-L-P, .com/ramsey.

Back to The Ramsey Show, where we have John in Milwaukee, Wisconsin. Hey John, what's going on in your world?

Good afternoon. I'm 62 years old, and until 3 weeks ago, I was making $93,000 a year, and my position got eliminated. Oh no. I'm wondering— oh yeah, no problem. I, uh, I'm wondering if I have solid plan for retiring at this point, or if I need to go back to work. Okay.

How much do you have in retirement?

I have about $700,000 total, but $500,000 of that I want to do Roth conversions starting next year. And with my wife working full— I mean, she works part-time. With that, I think we could stay in the 12% tax bracket and do the conversions for the next 5 years.

Okay, and pay the taxes, and you would have enough money?

I do have enough cash to pay the taxes.

Okay, how much, how much money do you have cash available? Well, $250, $200. And is that just sitting in like a high-yield savings account or a brokerage account, or where is that?

High-yield savings. Okay, great. Do you guys have any other, um, streams of income? Obviously there'll be some Social Security. Does anybody have pensions or any other money coming in that we should know about? No.

And how old are you guys, John? I'm 62, she's only 56.

Okay, you said she works part-time. What's she bringing in?

Uh, she brings in $30,000 a year. Okay, so it might be a little tight living on the $30,000 for those years, but can you— can you— zero debts? Yeah.

Okay, you— and house is paid off?

Yes, it is. Okay. How many years would you plan on living on just hers before you—

5 more years from then out, then I would start collecting Social Security.

And you guys have run that budget out on EveryDollar budget to see, okay, here it is. Because you were making, I mean, making $93,000 a year is a big drop.

Yeah, it would definitely be a big change, but, uh, we ran it out and looked doable. It's not— yeah, a little tight maybe.

Is this your strategy, or have you talked with like a, a SmartVestor Pro or a professional?

I have not talked to a professional.

That's why I'm calling you. Okay, I would speak with a SmartVestor Pro because there's a lot of ins and outs of this, especially when you factor in the Roth conversion. I think that's the part that there's a lot of strategy around that that they'd want to talk through in detail.

And I would just want to make sure, because I'm just thinking, you know, you're 62, praying you have 30 years, maybe 40 if you get to the 102 mark. But I'm like, you know, you pray for that. And the amount of growth that's going to happen in that account will probably mathematically be more than the taxes you'll pay here in the next 5 years. So there's enough time that if you do make the conversion, it probably will mathematically be in your favor. But there's also, you know, the reality of life and to say, "Okay, is that gonna be worth it?" You know, if you know his, you know, family history, your own health, all of that. And so, I would factor in a lot of those other scenarios too, as you're thinking through this. But yeah, to do something like this and to take your lifestyle this drastically down for 5 years in order to do it, I think you still will come out ahead, but I would want you to sit down with an investment professional, a financial planner, to run the numbers and look at some estimates of what the returns would look like to make sure that this is the smartest thing.

Okay, that sounds like a good plan.

Yeah, so if you go to ramsaysolutions.com, check out our SmartVestor Pros. There should be one there in the Milwaukee area, one or two, and just, yep, I would run it by, 'cause I would want to, I just don't want you, paying taxes on the conversions when you could just be pulling out the money, paying taxes on it today and living off of it. You know what I mean? Like, 'cause I think there's enough in there. I don't know. I just would wanna run out a couple of scenarios with them.

Unless for some reason it was like strictly a legacy play for those inheriting the money. Yes. 'Cause there is a piece there. That's right.

That's right. Yeah. So if, yeah, if you were wanting to keep all, keep a lot of this and pass it down to your kids, kids, that's a good point, Jade, then yes, then the conversion would be great. But if you're planning on using this money while you're alive, most of it, and living off of it, yeah.

It might not be.

Yeah, I would just double-check.

Smartvestor, for sure. That's a really good question. And I think we do get that question a lot, which is why going back to, and I think it's important to highlight this, going back to what we teach, our platform for investing, like our strategy for investing is so important to know because it will avoid a lot of this, which is when you have the opportunity and you've met the criteria to start investing, which for the Baby Steps, it means you're out of Baby Step 1, you've saved $1,000, you're out of Baby Step 2, you've paid off your debt using the debt snowball, and you're out of Baby Step 3, meaning you've saved 3 to 6 months of expenses. Now at Baby Step 4, you can invest 15% of your income. But how do I do it to avoid what we're talking about here? You want to start first with your employee-sponsored retirement fund. If you have a 401 through your employer and there's a match, meaning free dollars, start there. But honestly, guys, if there's a Roth option within your 401, that is a fabulous place to start and actually max that out. Now, if there's not a Roth option and there's just a match, invest up to the match.

But then, guys, immediately go to a Roth IRA. You want to max it out. I think this year is $7,500, and then you have the— yeah, $7,500. And then there's a catch-up contribution, I think up to $8,000. Max out that Roth because those are dollars that you've already paid the taxes on and then it's gonna continue to grow tax-free. And when you get to the point of retirement, if you have most of your money in Roth funds, this is money that's gonna grow tax-free. There's no—

Go ahead. You don't have this problem. Yeah. Of having to try to convert it later in life where you're gonna be paying taxes on that much, on $500,000 is what he's gonna end up paying taxes on and spreading it out over 5 years.

And there's no required minimum distribution, meaning if you don't wanna touch it, you don't have to.

You don't have to.

No. Which is so great.

If you do pass it to the next generation, I think it is up to 10 years. Within 10 years they have to use it. But again, what a sad problem for your children to have that they have to get the money out. You have to use—

you have to spend money that you didn't make. Yeah, it's real. Very good question though. Let's go to Lauren in Omaha, Nebraska. Hey Lauren, how are you doing today?

Oh my God. Hi, you guys. This is so cool. I'm doing great. It's great to talk to you. My question is, and it seems kind of straightforward, but there's a lot of context that I would like to be able to provide. Um, I'll let you guys ask though. Ultimately what I want to know is, um, how do I prioritize saving for my son? I only have one child. He's, um, I had him with a previous relationship, not my current husband. Um, but I was a single mom for a really long time And just this year I got to the point— I'm sorry, I might start crying, but that's all right. I got— I just this year got to the point where I'm actually making like a decent income, and my husband and I, who I've only been married to for about 4 years now, um, we're doing really well.

And Lauren, that's awesome from where you've come from as a single mom. Yes, it was hard.

Yeah. And, and, you know, I sacrificed, um, I worked, I worked the whole time. I never took benefits or welfare or anything like that. And, and, you know, um, his dad and I— so my son's dad and I started saving for him when he was a baby, but I never really was able to contribute to it. And I just feel so far behind in my own life that I feel like I'll never be able to give anything to him.

Oh, Lauren, no, girl, you've already— well, number one, you've already given him so much. You've already given him so much of your example. So from a numbers perspective, let me ask you this. When his dad was saving for him, what was he saving in or for?

So we both contribute to the same account. It's just in a normal, like, credit union account. Okay. You know, there's like no return on it. And I've tried to get him to, you know, like, we're going to meet this month and discuss our options for where to put it. And, you know, we're like civil with each other. So it's fine. That's all good. But there's only about $6,000 and it's mostly in a CD. There's like a little bit that's not, but it's mostly in a CD.

How old is your son, Lauren? He's 14. 14, okay. So here's what I would do. If there was $6,000 to his name, I would be thinking through the first big purchase is probably gonna be a car at 16. What does that look like? Does he contribute some? Do you use some of this money that your husband saved for that? Next is college. You guys could open up a 529 and start funding funding, some college funds, some money for him for that. Anything beyond that, if you wanna do any level of investing or anything, you can do an UTMA. It would be in his name. He'd get it at 18. I probably wouldn't do that at this point. But those, I think those are the two big things, Lauren. And hey, you've done a great job.

You're not as behind. You're really not behind.

You're doing great.

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.

Back to the phone lines. We head where we have John in New York City, New York on the line. Hey John, how can Rachel and I help?

Hi, I'm trying to figure out if I made a dumb decision and if I need to sell my home. Right now I'm trying to do house hacking, but when I account for all the income, it mortgage payments, it comes out to about like 38 to 40% of my income. And, uh, yeah, I'm trying to see what you guys think.

Okay. So tell us, explain it to us in real numbers, what you have going on and what's happening. Absolutely.

So my mortgage payment is $5,000 a month. Um, I make $5,800. Bonuses can be up to $3,000 usually. My wife brings in $2,200 and then the rental income is $2,250. 15. So that puts us at about $13,000 a month after taxes. Okay.

And the house hacking part, you're in the house and you have, is it a shared space or how does it work?

It's a two-family home. We live in one unit and then we rent the other unit out.

Okay. And you said you pay the, you told us the mortgage $5,000 a month, but how much is the whole, like what'd you pay for the property?

We bought it for $668,000. It's supposed to have appreciated about 7%. So if I were to sell it today, it would $187,500, which would be a $20,000 loss versus what I put down when I bought it last year.

Yeah. Yeah. Um, do you, do you guys like that? Do you like the situation you're in, or is it all miserable? You don't like the house, you don't like living next to the people that are renting from you. Like, how does it feel day to day?

The tenants are great, our neighbors are fantastic. The house is 113 years old. Year to date, we've put like $14,000 in maintenance and repairs. Thank You know, with, with my bonuses, we've been able to, to cover it without debt. I do have $48,000 in debt, but that's student loans and car payments. Um, and so I don't know, because if I account for the rental income, right, the, the cost of the house is 38% of all of that. But if I were to assign the entire rental income and subtract it from the $5,000 mortgage payment, then what's left over would be essentially my housing cost would be about a fourth of my income. So do I Do I account rent as my full revenue or do I just not do that?

Yeah, I would count rent as income as part of the equation.

Yes. And I, I just wanna get clarity on my end on something. You said the mortgage is $5,000 a month. Is that the total mortgage is, or is that your portion of the mortgage? That's the total.

So that's, okay. Uh, mortgage, interest, taxes.

Got it. Okay.

And so it's not, it's not terrible. It's above the 25%, but it's not, um, yeah, I mean, in it, no, I don't think you necessarily made a terrible decision. The idea of owning a piece of property though that is dependent upon other people paying rent, that's the problem. That puts you at risk for sure. Nothing's on fire right now, but if you guys want out of that and say, yeah, we want a more stable, we're good renting for a few years till we get another great down payment and we'll just go buy a single-family home and do our own thing, you could totally do that. But yeah, I don't think anything's on fire right now, but you are very dependent on that other unit being filled. And the risky thing is, is if that family moves out, you're gonna be pretty urgent to put some people in and may not have the bandwidth and the margin to find someone that's great too, right? That's part of the debt complex is like, there's like tons of urgency to keep this ball moving. 'Cause once it stops, you go under.

Right, and I, again, let me just clarify a number just to make sure I'm right on this because I don't think the numbers are the issue. I think the, the dependency on the renters are the issue. But just to clarify, the mortgage is $5,000. They're paying $2,215 of it, right? Correct. And you're on the hook for $2,785 of it? Correct. Okay. And then plus maintenance, but bringing in your $13,000, you are below 25%. Because 25% of your $13,000 is around $3,200.

Right. But, but the $13,000 accounts for the rent.

Right. But I'm just saying, if you're, if you're figuring it the way we do, which is, hey, your mortgage, your mortgage, or in your case, your portion of your mortgage shouldn't be any more than, uh, 25% of your take-home pay. You've got your wife's $2,200, you've got your $5,800, and you've You've got money coming in from another source for $2,215, right? You've got that money coming in. Correct. And now that's your income. And then your mortgage, if you're at 25%, could honestly be up to $3,200. And yours probably might be that way, like you said, with repairs and things like that. But the ratio feels correct. Pointing back to Rachel, I think that she's exactly right. The problem is not the ratio. The problem is you're dependent on them paying that because if some, for some reason they don't pay the $2,215, you lose the tenants. It takes you a long time to find new ones. Now you do encroach on that ratio and now it does feel like an issue.

So I guess my last question would be, is it okay to pause the debt payment? Because like I mentioned, I have $48,000 in debt that I'm trying to snowball. Is it okay for me to pause it right now, build at least some kind of emergency, emergency fund that would cover their rent in case they were to leave me for 1 or 2 months and then resume payment afterwards?

I probably wouldn't. I think I would probably stick to paying off debt. And for some reason, when does their lease—

when are they up to renew? They just renewed, um, so it would be until October 1st, 2027.

Okay, yeah, I would just start paying off debt. And then for some reason, if something happens, pause the debt snowball and build up. Because again, even if you had to pay the full— a little over $5,000, you could still make that work. It's going to be a lot. It'd be tight, but it could be possible, right? So I would just keep throwing money at the $48,000 of consumer debt. And if something happens, then pause the debt snowball, build up some money until you have time to fill the unit again. And then, yeah, and then long-term too, John, you and your wife decide like what's worth the inflexibility, if you will, of having having people next to you and having to depend on someone else for you to pay the mortgage on this place too. So, um, from a long-term perspective, I would not recommend someone do this, but for you, nothing is on fire. And again, it's not, it's not at a crazy percentage, even if you had to pay both units.

It's not. That's a really good question though. And it, it's one of those things that I feel like we get, uh, all the time. People enter into real estate and they have that the intent is to build wealth and by way of building wealth, maybe they're creating a lifestyle of peace or whatever it is, but it ends up being more of an anxiety or more of a stressor to them. And I think that when that happens, you do have to reevaluate.

Yeah, the whole house hacking idea, it's funny. I'm like, on paper, the concept, sure, it could make sense. You could hear it and be like, okay, yeah, yeah, someone else is paying basically your mortgage while you're building it. Yada, yada, yada. But then I'm like, yeah, but then you got other, you got the crazy Smiths next door that are, that you're dependent upon, right? That they are one of the ones that is holding your financial peace, basically. And if they go away, then yeah, then you're like, you're stuck with it. And so, that's one of the problems about the get rid, if it sounds too good to be true, it probably is, 'cause you usually don't factor in real life risk. You don't factor in people in the situation, just them, just people, right? The relational side of everything, like none of that fits in an Excel sheet. You really do have to play out your life to say, okay, there's other factors here. And yeah, with the, it sounds too good to be true, it probably is, is really, oh, it's more real than ever, I feel like.

And if you are gonna do something like this, because I do like create, I like when people are creative about finding ways to make money and things like that. And so if you are gonna do it, you do have to look at the total mortgage and say, that total mortgage, does it fit within the parameter? Yes. And it's just gravy for somebody to be paying you, then it's like, hey, yeah, do it until you can't stand the people anymore.

Yeah, well, we had a guy call, and he did that. He had a home he owned, and it was right at that 25%. It was great. And he still had student loans to pay off. So he's renting out, he's having roommates, basically. 3 of the rooms, yes. And so he's making rental income that not only could he pay the mortgage, but it's all going towards the debt. So like things like that, you're exactly right. You can still get creative with this. But when you're dependent upon somebody, especially in a housing situation, to pay their portion for it to work for you, that's just a level of risk. It gets very, very stressful. I don't know if it's worth it. Yep.

Yeah, yeah, yeah. And if you're interested in real estate, always check out our real estate pros. They can help you out. You can find those at ramsaysolutions.com/realestate. But again, we're all about paying cash and we're all about handling that 25% rule.

A lot of banks are happy to hold your money, but Fairwinds Credit Union helps you make progress. Most people spend years focusing on their financial goals and never stop to ask whether their bank is helping them get there or just holding on to their money. The real goal is building an emergency fund, paying cash for your next car, saving for a home, looking at your finances and actually feeling some peace. That's why I love Fairwinds. Their Smart Bundle gives you up to 10 free high-yield savings accounts to help you stay organized as you save for different goals. Plus early direct deposit and no monthly fees. And you get support from real people who want to help you win with money. You can even get the Ramsey Debt Is Normal Be Weird debit card, which is linked to your free Fairwinds Spend Smart checking account to tell the world you think differently about money. So look, if you're working the Baby Steps, your bank should be helping you move toward financial Freedom, not just park your cash. Go to fairwinds.org/ramsey to open your Smart Bundle and start making progress today. That's fairwinds.org/ramsey, insured by the NCUA.

Question of the Day is brought to you by Yrefy. If you keep putting off dealing with private student loans, now's the time. Yrefy helps borrowers explore fixed-rate financing options and affordable payment plans. Go to yrefy.com/ramsey. That's the letter Y-R-E-F-Y dot com slash Ramsey. And it may not be available in all states.

Today's question comes from Victoria in Hawaii. We have 3 children and they are all in music programs. Last year we spent $5,800 on lessons alone. "We are currently paying off debt and my husband wants to stop all music lessons in order to become debt-free. This is something that I've always wanted to provide for my kids, so it would be hard for me to see them stop. Should we give up this expense to get out of debt or should I continue pushing for music lessons?" Ooh. Oh man, okay, so it's close to like $500 a month. Uh-huh. I mean, here's the bottom line with all of this, is it's math, right? So the faster you, or the deeper you sacrifice and you cut everything that is not a need, the faster you are going to get out of debt. So my question, I guess, would be more of, okay, when you guys look at this timeline, how much debt do you have? Do you have, you know, $15,000? Do you have $500,000? Like— And how much do you make? And how much do you make? All of it, yes. So that plays into a lot of this because if $500 bucks a month is going to slow your debt snowball down 3 months— Who cares?

I would be like, just take the music class. Like, it's 3 months, you know, but the extra job you're working, that's 3 more months. So, like, you have to account for all these other things that you're stretching out your debt payoff. But if it's gonna be longer, I don't know, you would have to pick the timeline and decide. So, it's not a need. So, if you cut the music lessons, you can always pick them back up. 6 to 8 months after, you know what I mean, from now, once you're debt-free, you can always just pick it back up. And depending on the age of your kids, like, I don't know, my kids do piano, but they like, one of them stopped for probably 5 months and she's getting, I don't know, it's just not that hardcore for us, but it's good for them to do. It's that kind of feeling. So I don't think it's a need. And $500, again, in some people's world, that's a lot. It could be everything, yeah. It's a lot. So I understand it's an important value for you guys, but you also are broke. Broke. So you have to kind of realize what can we really afford with the lifestyle that we've chosen to live that's gotten us into debt in the first place.

Yeah, I think it's absolutely— I, I couldn't have said it better myself. And I do think that that does bring up a values question. And I, I want to throw this in here because I want to know your answer, Rachel. So a while back I did a post on a couple of things that I, I would not give up in Baby Step 2. Oh, that's good. Yeah, because we're always talking about cut everything, stop everything. And one of the things I think we can both agree on would generosity in the form of, especially like that, if you're a Christ follower, that base, like, hey, I do 10% to my local church, or even 10% to a charity. If you're not, that's fine, cool. But having generosity, I never let go of that. Um, the other thing I put on there is if you need help and you need counseling, like therapy or something, therapy, yeah, budget for counseling. Like, there are certain things that I think are at a, a primal need that totally you don't want to let go, and they may feel like luxuries, but based on your values or based on what is truly a need at a moment, you gotta do it.

One of the things I said is anything that, like, a date night, and I'm not saying you have to go out every, you know, once a week or, but like having a special night that if you have to pay for a sitter, that you're valuing your marriage and valuing your bonds. And I was wondering if you have anything that you would add to that.

Oh, that's a good one. Um, that I would not cut out.

I put you on the spot, but no, no, no.

I was gonna say I'm in my health era, Jade. Ah. Ah, um, so I wouldn't do— so I mean, if I had like a personal trainer or something a little bit above and beyond, I probably would cut that for a season.

But you got to do your basic appointments.

But I— if I did— if I needed a gym membership, I would keep that. Yes, like things like that, to say I'm going to keep these classes going, um, more for my own sanity.

Yeah, because you need it for just as much your mental health as your physical health.

So I would say that. I love the date night idea, because I'm like, even just take me to Chili's.

Chili's, we don't have to get crazy here.

That's all I need, all I need. I would say that. And then as we're thinking about the kids, and like we do rec sports, so they're not expensive. It's not, I mean, you pay like a— Yeah, an initial registration fee. Yeah, and that's about it. And if it was time to sign up for that, for like fall soccer, I would probably go through with that. I would say the kids can still play at the YMCA.

So we can find another way to make that money up.

Yep, yep. So there would be a couple of things, but an ongoing expense like that, this specifically, $500 a month. It's a lot. That's ongoing. That feels, yeah, that feels like a lot.

It's a good question. It's a good conversation to have.

I weigh my hair, Jade. Say what? I got grays early in life. I'd get my roots done. I would. I would keep that. I'd keep my hair appointments. Well, somebody called in.

That's a good one because somebody called in and asked about that in Baby Step 2. And that's another one we can add to the list. You may have to find a cheaper person to go to, but— Yes, there's always options to make it less expensive. But you do, if you have a job or a corporate job, you do have to do what you have to do to show up. To show up in a professional manner.

Hey, let me ask you this, 'cause you and Sam, remind me the timeframe, 8? Uh-huh, 7 and a half, yeah. 7 and a half years. Would you say if someone is looking, 'cause I mean, you guys were like half a million dollars, like you are looking at a sprint, not 9 months, not 18 months, like 7 years. Do you give more grace to sustain a lifestyle to get you through that than like the 18?

Oh, hex yes.

Okay, see, that's good to know, because for people out there have hundreds of thousands of dollars of student loans, right? And you're looking out and you're like, "It's gonna take 4 years." You may be looking at that and thinking, "Okay, I have to live that out for 4 years." Again, 9 months, I carried a baby for 9. You can do anything for 9 months. Like, shut up and get ready. But the long term is harder. That's hard.

I'm so glad you said that, which does point to something that we should highlight, which is most people people, when we talk about the Baby Steps, Baby Step 2 is what we're talking about, paying off all your debt minus your mortgage. The average person who's doing it, they're doing that in 2 years.

18 to 24 months.

18 to 24 months. That's like, you know, a drop in the bucket, right? So to her point, you can sacrifice and do anything for that length of time. If you're beyond that, I do think it's important, especially if you're like 4 years, 5 years, to your point, I think it's important to hire highlight, and if you can do it ahead of time, I think that's even better, to kind of highlight what your milestones are gonna be and say, okay, you know, once I get to the 3-year point, or once I've paid off $200,000, we are going to do X, Y, Z. Yeah. And then once I get to that point, then I'm gonna let myself get my nails done again. And then, yes. And live your life because the truth is your life is still your life and you wanna enjoy it to a certain extent. And today, tomorrow isn't promised. And so balancing that and knowing that, Okay, there's a certain responsibility that I can hold for 18 to 24 months, but beyond that, I do wanna make sure that I'm in my life a little bit. Yes. And I'm still, uh, otherwise your mental health is gonna get nasty.

Yeah.

Right, right, right. Absolutely. Absolutely. Oh, so, so good.

That's a really good question. Alrighty. Uh, let's go to these social questions. I really like these because it's a way that you guys can contact us. If you follow Rachel online, myself, any of the personnel or even the Baby Steps Community, which is our Facebook group. You can drop your questions in there and we'll see them there and we can answer those. So this comes from Hannah on Facebook. She says, "We're rebuilding our emergency fund due to some unexpected home repairs. It will take us 5 to 7 months to rebuild if we continue our retirement investments or 2 months if we temporarily stop them. Does it matter which way we choose?" Oh, I'd go 2 months.

I would too. Contact HR, just say pause, 2 months, be done, press play again. Yeah. And I wouldn't drag it out because who knows what else is gonna come up? 7 months, stuff could happen. Yeah. I don't know, that's stretching it for me.

I 100% agree. And I actually think that that's the way the Baby Steps work. As you work through them, if something happens and you have to take a step back, which is not a negative, the whole purpose of the emergency fund is there in case something happens. So it's not a negative, because if you go back and you have to redo it, then you're back to that step.

Now, if it's like 30, 60 days with retirement funding, you could probably get away with that. Yeah, yeah, yeah. Just to keep going. But 7 months, no, I would pause and get it done in 2. I love that one.

Okay, one last question. Annie from Instagram says, "How do you balance working the Baby Steps and still enjoy life?" Because time flies and your kids are growing up quickly. I feel like we got that. That's what I was talking about, I know.

Yeah, I mean, I still think there's things that you can do with your kids. And again, I'm gonna base this on the 18, 18-24-month timeframe, that that flies. It really does. It goes so fast, and you can still enjoy your kids without having to spend money on them. That's the other thing. You can. There is stuff that you can do, you guys, and your kids wanna be with your kids. Like, I always go back to that. They wanna be with you. It's the smallest things. Like, I think I've told the story, but this was, I guess, at Thanksgiving. We took our kids, we put all the bikes in Winston's truck and went to the high school to down the road. And they literally made this whole loop and this whole thing around. And they are, it was the best. They were so happy. They were fine. Fine. Cost nothing. Yes. So listen, it does not take that much, honestly. So, you can enjoy your life with your kids and get out of debt. And the beautiful thing is, when you're not a stressed parent and not have anxiety about money, you're gonna be more peaceful to be around.

Welcome back to The Ramsey Show here in the Fairwinds Credit Union studio. I'm Jade, this is Rachel, and we have Emily from Auburn, Alabama on the line. Hey Emily, what's up in your world?

Hi guys, how are you?

Excellent, doing great. How are How are you?

Fantastic. Great. I will jump right into it. I am 29 years old, and about 2 years ago I went through a divorce. And at the time, my ex was active duty military and I was a police officer. So truly just both very challenging careers, and we just drifted apart. Long story. But, um, 2 years later, or, well, going through that, I realized that going from a 2-income I did not have any kids, to one income. I was like, "Wow, cops don't make any money." So after keeping my job as a cop for, I was a cop for 6 years and I had to work so many part-times and so much overtime that it felt like every single month I was just breaking even. So my degree is actually in sales and business marketing. So I went back into sales. I got a remote job. It was a very hard decision because again, I loved my job. Job. It was so fulfilling. I felt like that was my calling, like I felt like God— that was what God had made me to do. But I need to make a change because I was wearing myself out.

I was stretched too thin and it was not sustainable. So I got a job, um, working from home, sales, and I make double the amount of money. I get to sit at home. I like had a dream job that I bet everybody would want. But now on the other side of things, I was able to pay off all of my debt. I was able to my house. Um, so the only debt that I have is my house. So where's the problem? So I just am so unfulfilled. Like, I wake up every day and I'm like, uh, this is like— for work-life balance, it's great, but this is, this is like not my call. You dread it. You dread it every day. Yes, exactly, exactly.

Okay, what were you making as a police officer?

So my base was about $55,000. Okay. And, and then I was in like a very specialized unit, so we were on call all the time. I worked so much overtime. And then on top of that, I would work like part-time, um, as like a higher security essentially.

Okay. So you would make what doing all of that?

So my last year as a cop, my W-2 was like $82,000. Okay.

And how many hours did that— because you said you worked a lot of overtime, so how many hours a week?

If I had to guess, so just normal hours was 48 hours, and then on top of that, I was probably working another 20 to 25 hours.

Okay. To get to the 82. Yeah. Okay. Wow. And then what are you making now at this role?

I'm making $150,000.

Okay. So are you, are you essentially saying, because you left the cop position cuz it was stressful, it was a lot, it was just overwhelming.

And you didn't make a lot, right? You didn't make enough.

Yeah. So you're saying, you know what, I'd actually, I'd go back to the overwhelming overwhelm to be doing what I love instead of having maybe a cushy schedule, but I just don't like— I just dread it.

Is that what you're saying? Yeah, exactly. Okay. Um, my question is, I just like, I can't fathom going back to making so little amount of money and barely like having any personal time. So it's just like such a hard—

well, would you have to do the OT?

Do you have to go back into exactly what you were doing, or could it look a little different?

So my house now, my only debt is— I, my mortgage would be like, um, my mortgage is about $2,200 a month now. And that would— I feel like going back to being a cop on that salary would feel suffocating.

Do you have, um, how much more, how much more do you have on the mortgage? Like how close are you to—

so I literally just bought it about 3 months ago.

For 300.

So I still have like 297.

Um, okay, forgive me, Emily, I don't know how well— I don't know how all this works. I wonder if the overtime you were doing that you made an extra 30 or something, um, I'm wondering, could you do that and not be a full-time police officer, or you have to be a full-time police officer in order to do that? Like, I'm wondering if you can kind of scratch your itch and, and do some things, uh, like every other week, still plug back in and make sure the security stuff. Yes, just to, um, that is definitely—

it's called a reserve officer. Okay, definitely an option. And I've asked my former employees and they're like, as soon as one becomes available, because the city only allows like a certain amount in their budget every single year and they're all filled. So yeah, I have been waiting for like 6 months for them to have an opening because I do think that would perfect. Yep. But I just feel like, yeah, I'm like, oh my gosh. Yeah. And that's not the way.

Yeah, that's no way to live.

No. There's a point that the diminishing returns of the extra money you make takes, you know what I mean? It's not even worth it to a point of like, I'm miserable every Monday as I'm doing what I'm doing. So you don't want to live your life like that long term by any stretch. You know, if you hold on the line, Emily, we're going to get you Ken Coleman's book, Find the Work You're Wired to Do. There's a great assessment in the back and I'm just waiting I'm wondering from a creative perspective, what about being a police officer and all those things that you enjoyed, pulling out that part of you and finding a position, a job that maybe you're not even thinking about, but you're able to use that skill set and your mind in that way. But it may not have to look like you're working 60 hours a week, right? And making half of what you were making when you're working 40, right? It needs to make sense. Make it make sense, right? So we'll give you that for sure after this call, 'cause I'm hoping that maybe can steer you. There's an assessment in the back to generate some ideas.

Yeah, I like that idea.

I'm just thinking through other things that are maybe just way more abstract of your mortgage. So the main problem is the mortgage payment. That's what's keeping you, 'cause you go, if I go back down to 55, Now my mortgage is too big a chunk of my, you know, my life here. So if you did a play, if you did a play while you're waiting for that security role or whatever that was to open up, if you did a play where you're like, hey, I'm gonna just save up and chunk away as much money as I can. Mm-hmm. And then maybe I can put like a lump sum on this mortgage and kind of recast it to where that payment makes more sense.

And then I can go back to the cop role and not, and not have to do overtime and not have to do overtime.

That's something that might work too. Again, again, there's a level of sacrifice to that, obviously, but if we're looking at this long-term, maybe that is worth it to you. So just another thing to throw in the hat there. But I agree with Rachel.

Did you come from a family, Emily, of public service?

No, I'm the first and only one.

Okay. What did you love about it? What, what was so great?

You guys, it was just so fun and you just get to like put bad people in jail and like chase them and like just the adrenaline, like it was just So fun. Yes. Like justice. Oh my gosh.

Yes. I wonder if you're an Enneagram 8. I don't know. I'm trying to think of like, like your personality. I am.

I am. And you are. That's me, girl.

Some 8s are some of my best friends. A lot of my girlfriends are 8s. Commanding. I just wonder if, yeah, like what kind of role can you have in that, right? That you find justice. I don't know. Like that scratches all those itches, um, to find a fulfilling career. I don't know, Emily. I, and, and you're still you know, I say so young, I don't mean that, you know, demeaning by any means, but you have a lot of time on your side, yeah, to kind of figure out this path. And you've set yourself up so well financially in order to do that, which is amazing. I mean, you're debt-free. You've done it all the right way. I mean, it's amazing. So you can have the options, which is wonderful. That's why you do all the hard work on the front end. So I'm proud of you. Yeah, and I hope you kind of, I hope you find that next step. Sorry we weren't, I wish we had magic career to pull out of our hats.

Well, I think the resource is really gonna help her. Yes. Because it'll help you identify those skills that Rachel was talking about, and it will suggest other career fields that you can use that same juice that gets you going, uh, just in other career fields that maybe you hadn't thought about.

Hey guys, George Campbell here. You ever feel like you make good money and still have nothing to show for it? You run into Target for one thing and somehow walk out $87 later with toothpaste and emotional support Candles? Just me? Okay. Well, that's the problem. Most people don't pay attention to how they spend their money, so it does whatever it wants. And that's why we created EveryDollar. It's a budgeting app that helps you create a simple plan for your money. EveryDollar's simple, it's clear, and it helps track where your money's actually going. Plus, you get daily lessons, to-dos, and reminders along the way. It's like having a money coach in your pocket. Your money's been freelancing long enough. It's time to give EveryDollar a full-time job. Go download EveryDollar for free on the App Store or Google Play.

Play.

Alrighty, Ashley is on the line who's in Omaha, Nebraska. Hey Ashley, how can Rachel and I help today?

Hey, we are a military family, and so we move around every 2 to 3 years, but we've been saving. Okay, well, I've been saving pretty much ever since I got a job, and then I convinced my husband to save with me. And so we keep building up our house down payment, and we know Dave always talks about waiting until you live somewhere for 5 years, but is there ever a point where it's like you have such a high down payment that you can ignore that rule.

Tell me why you guys move every 2 to 3 years, did you say?

Oh, we're in the military.

Military. Okay, gotcha. How long will you guys— well, is it your husband or you? Myself. Yourself.

My spouse.

Your spouse. Your spouse. Okay. Um, no, you're fine. Sorry. Um, how long will he be in service for, do you now?

Well, originally we were going to get out in like 3 to 4 years, but now the talk is to stay in the full 20, which is why that's when I was like, oh well, shoot, long time to wait to buy for sure.

How much longer is that for you guys? How many more years?

It would be 15, another 15 years. Another 15. Okay.

I know, Ashley, we have—

I mean, depending on where we The thing is, like, we have like a 50% down payment, so it makes us antsy sometimes of like, oh, we could just, I don't know, you know what I'm saying?

Yeah, no, for sure. Well, the thing is, you don't have to, well, number one, you could just leave it alone and just, you know, I would hate to keep it in just a high-yield savings for 15 years. Yeah, no, no. Part of me would open up a brokerage account, put that in, and you just kind of have it earmarked as, down payment for when you actually do settle. Because I probably would not advise you, Ashley, to buy a house if you're only going to be there for 2 years. I would just— the exhaustion of selling it and turning it around. I mean, because yeah, you're going to use probably 15% to commissions, all of it. So, I don't think it would be— I don't think it's worth it. But I also don't want you to keep saving. Like, put it in a brokerage or something and then go enjoy life. Like, you know what I'm saying? Like, there's, you're in a great position, so don't feel like you have to keep putting money away for something that's not going to be happening for 15 years. You've done the work. Walk away from the accounts.

And then in 15 years, the growth on that, who knows?

You'd have something in cash, probably, probably, which would be insane.

That's true. I think, yeah, that's probably what our problem is, that we keep it in a CD because we keep thinking like, oh, this makes me— we'll be there long term. And then Aha, we move again. So, but yeah, I have— I've heard of a brokerage account, but I'm going to have to—

yeah, you can do it, um, Fidelity or Vanguard. I mean, you can honestly just open up your own on, on a website. I mean, they make it pretty simple these days. And I would just get an index fund, um, you know, it'll have 500, you know, stocks within there, which is awesome, um, and it really just follows the S&P. And you kind of just park it in there and don't look at it because, well, you guys are military, you know. So, you know, foreign affairs start happening and the market dips and then you're gonna be mad and pissed. You're like, "Jade and Rachel just told me to put it in there." So this is a long-term play. I would look at it as a long-term investment for the house. And then go rent somewhere great. And I would even say, which I'm a spender, Ashley, even if you guys, you know, got to a point that you're like, "Oh gosh, we need like $10,000 for something, something, something." I don't know, you use some of it. Like, if you—

Yeah, enjoy your life. 15 years is a long time.

It's a long time. So, I would, yep, I would just park it somewhere that's gonna have way more growth long-term, and earmark it as the house fund. And I would rent, though. I would not go through the process of buying a home— I wouldn't. —and turning around and sell 2 years later. That's a quick turnaround. I'm sorry, but thanks for your service, for you and your husband, everything you guys do for this country. We really, really appreciate it. That's such a good point you made, Rachel.

All the closing, costs, like when you buy one, the closing costs, when you sell one, the realtor fee, like all that adding up over time, over 3 or 4 different locations is pretty brutal.

It doesn't always, yeah, and depending on the market, I mean, you know, your house is not gonna appreciate maybe even that much in 2 years. That's right, right. So, you may actually end up losing money by doing that. But I know, I could see, and I assume they have kids, and because she said, "Our family moves," like, to wanna have your own place. But the reality is, you know, because of what you guys do, it's not going to be your own place in 2 years anyways. And don't keep— other military families that are listening, or people that do move around for even career, don't keep a house in another city and try to rent it. Don't be a long-distance landlord. If you leave a city, sell your home and use the equity to buy the next home. Don't be having like 3 or 4 houses around the country of all these places you've lived.

Good, good, good advice. All right, thank you for the call. We've got Kira next, who's in Philadelphia, Pennsylvania. Hey, Kira.

Kira. Hello, how are you ladies today?

Doing all right, how about you?

Doing well. Um, all right, I'll get into it. Um, so a little background. About 4 years ago, 5 years ago now, my husband and I got out of debt. We had paid off $125,000 in 23 months. Um, since then we've had 3 babies and my husband had 2 surgeries, 2 serious surgeries. And we are on Baby Step 3B and we're feeling discouraged. I'm a stay-at-home mom, so one-income family. My husband makes $85,000 a year before taxes. He's in sales, so he can make more than that. But I'm looking to try and bring in some extra money if I can. I love to cook. I love to bake. And I mean, I've been told I'm good at it. I don't know. Yeah. I was wondering what your suggestion would be to kind of start some sort of side hustle. I mean, I don't know how far I could take it and I don't know what the logistics or like the rules are for cooking for people. You know, I don't, I haven't looked that far into it, but I would like to start maybe making meals for people and selling them once a week. Like, what are your thoughts?

How can I go about starting that? Well, I have two examples of real life examples. There's a mom that goes to our kids' school bakes. And everyone just literally uses her for birthday parties. I mean, she's always doing stuff and she'll have holiday baskets that you can come and buy. And she's kind of created this community that people go to her for cookies and cakes and all of it. And so, and she's just, you know, she's a mom and she's awesome, but she's kind of created this network. And I don't know how much she makes. She's never told me, but everyone goes to her. So, that's one. And then, we have people, they live in a neighborhood that connects to our neighborhood. And they were— he was a chef in Nashville and ended up coming home with his wife, and they do like sourdough breads. They, during the winter, when we have snow days, they make these like basket meals, and they sell it on Facebook. And so, people are like literally lined up outside their house to get soups and like, they make the most incredible food. And they have killed it. I mean, they have stands set up.

I mean, like, Like they, it is prime. So I'm like, those are just two examples in my own personal life. And again, I don't know if they have business license. I mean, I don't know all the ins and outs, but that, those are two women who are home doing life, but they've like, they're really good at this thing. And over time, word of mouth in a community gets out and it's amazing.

Yeah, I love those ideas. I think the best side hustles are based on things that we already love and that we're already good at and that we can set the fees and the hours, right? Just that. With cooking, I do think in the area you'll want to check out like what the regulations and what the laws around having like a cottage setup is, usually what it's called, um, because it could be different. When I did things like that when I was in South Florida, it has to do with the scope, uh, of what you're doing. And sometimes it'll require things like you have to put the nutrition ingredients on the box, or you have to have— it'll— there'll be some regulations for what you need to to do, and it's probably, I don't wanna say this, but it's probably pretty easy to curtail some of that, some of that if you're really starting small. But once word of mouth picks up, you probably wanna make sure that you're following those guidelines, um, and making sure of that. Yeah. But the biggest thing that I would say aside from legal and all those things is make sure you're running this.

If it's supposed to be a side hustle, run it as a business and make sure you're keeping track of what you're spending on product and make sure you're pricing things in such a way that you're actually making a profit. And you can look back on this and go, I actually made a profit. I didn't just break even, or I didn't just do this thing for— put in a bunch of sweat equity and make sure you're factoring in your time in that, in that cost, right? Because the dollars and cents might make sense, but if it's taking you, you know, 15 hours to make a certain amount of money, then it's no longer worth it. So factor Factor in all of those things and make sure you're doing due diligence there.

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

All right guys, we say it all the time that buying or selling your home is a high-stakes game because one bad deal could cost you tens of thousands of dollars. And the truth is, you don't want to overpay on your next house, or you don't want to sell your current home for less than it's worth. That's why Ramsey Trusted connects you with the vetted real estate agents who have the experience to guide you step by step to make smart decisions, not expensive mistakes. Connecting is easy. Just compare agent profiles, interview your top choices, and then pick the one that's right for me— for you. So find a local Ramsey Trusted agent who has your best interest at heart for free at ramsaysolutions.com/agent, or simply click the link in the description if you're listening on YouTube or podcast. All right, Marielle is in St. Louis, Missouri. Hey Marielle, how are you?

Good, how are you?

Doing all right. How can we help?

So, um, I'm a public school teacher, so, uh, we have pensions.

Thank you for your service. As public school moms, we appreciate you. Yes, absolutely.

Thanks. Um, So, currently in Missouri, I am forced to put in 14.5% into my pension, contributed to my pension program. And my husband is military, so we move around a lot, and we will not be in Missouri long enough for me to be vested into my pension. So, that money has to go somewhere. It can't just stay with Missouri's PEERS program, PRS program. So, my problem is because we're moving to another state and I'm not invested. My question is, should I move that into a traditional IRA and let it grow, or should I pull it out, take the fees, which would probably go from— I think I'll have only like $11,000 in there, and we'll be pulling out, I think after fees it's going to be a little less than $8,000, but that would get rid of the last of our debt and kind of jumpstart our emergency savings. Um, And I would have a pension in our next state. He has his military pension plus all of his retirement accounts, plus I have other retirement accounts. So our retirement looks really good.

You really want to cash this out, don't you?

Well, I wouldn't, and I want you to ask more questions because I, I don't know, every state could be different. But I know that in many states their retirement system will let you leave the money in pension. You wouldn't necessarily have to move it. So if you wanted to let it stay until it's vested, you could do that. So I would check on that option.

Um, in the state of Missouri, you have to work 5 years in the school system in order to keep that.

Okay, okay, then I would roll—

I would just roll it to an IRA, honestly. Um, okay. Yep. And I wouldn't take the— I wouldn't pull any money just in as a standard principle out of, out of retirement unless it was to avoid a foreclosure or bankruptcy. So let that just grow. And you guys, yep, yep. So yeah, I would roll it to an IRA. And that's what I would tell anybody even who was at a company, right, that left their company and their 401. You roll it towards a traditional IRA and just keep it in there. Yeah, really good question. Okay. Yes. But, um, yep, thanks for you and your husband too. Oh, two tough jobs, military and teacher.

So we appreciate you for Sure, great, great question. All right, next we have Drew, who's in Greenville, South Carolina. Hey Drew.

Hey, how are y'all? Excellent, how can we help today? Good. Well, my wife and I are on Baby Step 2 and are relocating for an upgrade in employment, and we have a house and we're trying to sell it, and it looks like we're going to be clearing about $50,000, and I'm wondering if we should use that as a 20% down on our next house, or if she— if we should just crush off the remaining debt that we have and get a pretty good jump start on Baby Step 3 by renting instead.

Wow. Plan B, I would say go ahead and pay off your debt. How much debt do you have?

$22,000. Okay, what's it in? It's in a car and just a little bit of a student loan left.

Okay, how much do you guys make a year? $85,000. Okay, great. Yes, I know. I'll be honest with you. I would, yeah, I would pay off the debt, get an emergency fund, and then save at least 5% for the down payment. Because what happens, and you may have felt this already, I don't know, but having no emergency fund, debt still that you're paying these payments, and owning a home, there's so much that can just go wrong. It is a way more peaceful process. It's a longer process, process, but it's way more peaceful to have no debt, everything's paid off, you guys have a fully funded emergency fund, and then you go and buy a home, and you're a homeowner with that under your feet. That is a much more stable position to be. Awesome.

Okay, that's what I figured we'd be ending up doing. Awesome. So great.

Well, glad we affirmed it. For sure.

Great call. We've got Christine next, who's in Los Angeles, California.

Hey, Christine. Hi, how are you ladies?

Excellent. How can we help out?

Well, I currently own a condo. I'm single, or divorced anyway, and, um, I'm just trying to decide if I should sell it or sell it and rent or keep it and just kind of like struggle with it a little bit. It's kind of expensive.

Is that the reason you're even considering it? I was going to say, is it the expense? Is it debt? Why are you even considering selling it?

Um, it's a lot. It eats up a lot of my monthly income. And I, I have been paying for my daughter's expenses. She just graduated college, and so I've been, you know, paying that for the last 4 years, and it's put me in debt.

And now I'm just like, uh, are you still paying them? Are you still paying her expenses? No. Okay. No, I'm not.

How much consumer debt do you have?

I have $17,000 in credit card yet.

Okay. And is that it? That's it. Okay. How much do you make a year?

Um, my, my gross is like $123,000, I think, but I take home $109,000.

That's after taxes. After taxes. Okay. Um, and how much is your condo payment each month?

Um, the payment, the mortgage and insurance, um, is $3,200. Okay. And my taxes. And then my HOA is $600 $1,600.

Okay, so you're at like $3,800 basically. So that's close to that 25%. Yeah, that's not, that's not wild. Do you like the condo? Is the only reason you want to sell it is because you have this debt? Because it's not a massive part of your, um, take-home pay.

You said you bring home $9,000?

$109,000.

So around $9,000 a month?

Yeah, yeah, $9,000 a month. Okay. Okay, sorry. Yeah, it's a digger.

It's a bigger— yeah, bigger piece than we were thinking.

Uh, okay.

I was like, yeah, I think ideal for you would be somewhere— yeah, ideally for you would be somewhere around like $2,300 or $2,200, and we're creeping up to $4,000. Uh, yeah. Okay.

Yeah, you'd feel that. Sorry, I was doing it on $12,000 a month. I know, I was putting you— I was putting your, uh, your gross in. My bad.

Uh, the debt's not the issue here. Like, I mean, obviously we want you to clear out the debt, but that's not going to make a change. I I don't think— unless you're paying $1,000 a month and you feel like that would give you everything you need once the credit card debt is gone. But I don't feel like that's it. Am I wrong or am I right?

Well, I feel like I got into that— well, I don't feel like it. I got into that because I was trying to pay— I was paying like $1,500 a month towards my daughter's school and living expenses. And so if— so if I didn't have that, then it would be a lot easier.

But you don't have that because you stopped paying those expenses. How long have you been outside of that rhythm of life?

She just graduated and like moved out on her own, so like 2 months, a month. Yeah, yeah, uh, yeah.

I mean, if we're— I hate to be like too legalistic on this, but it really is a parameter for a reason. And so I think that you're feeling the effects of that, and you were feeling it before because you were going into debt to help her. It's not like you were using cash flow money to help her. You were going in debt to do it. So I think that you're going to keep feeling that until you find a place of living that meets your, meets your standard of income a little bit better. Okay, so what's— what'd you pay for the condo? Like, what do you owe on it and what's it worth? Let's say that. What do you, what do you owe And what's it worth?

I owe about $485,000. Mm-hmm. And it's probably worth about $650,000. Okay.

So that's an easy— that's kind of a no-brainer, I think. Yep.

And then that could be a great down payment, the rest after you pay off your debt and emergency funds, for somewhere else. Yes. Maybe a different location, but that's a little bit less.

That's what I would do.

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

All right, our Ramsey Show scripture and quote of the day, Romans 8:31: What then shall we say in response to these things? Well, if God is for us, who can be against us? Then Jen Sincero said, you can have excuses or you can have success, you can't have both. Perfect for what we teach around here.

Pretty good, pretty good. Love that, love that.

All righty, let's wrap it on up. We got Lisa who's in Atlanta, Georgia on the line. What's up, Lisa?

Hi there, how are y'all today?

We are doing fabulous, how are you?

I am doing Well, tell us how we can help you be better than okay. Alrighty. Um, my husband recently passed. Oh, Lisa, I'm sorry. Thank you. And, um, he did have life insurance and we both do, and we have always just had small policies that were enough to basically pay off the house because we were both gainfully employed. So basically I know that the life insurance is coming. It's, you know, we owe $100,000 on the house. It's about $200,000 in life insurance. And part of me wants to go ahead and just pay the house off and get that done. But I am close to retirement in the next, you know, 2 to 3 years. And I probably won't stay here. I don't think this is going to be my retirement home. So I'm wondering if I should pay it off or if I should sit tight and wait to decide what I'm gonna do. January 1st.

How long, tell us again, how long it's been since he's passed? Under a month. Yeah, for that reason, I think I'd wait. We tend to teach not to do anything, like not to make any major financial moves after something like that life-altering, you know, a loss like that, just because there's just, I mean, you're in a cloud right now.

You're grieving. Yeah, you're absolutely grieving, Lisa. So yeah, I would not make any big financial moves for 9 months to a year. I would just sit and, and, and be sad and miss him. How long were you guys married for?

36 years. 36.

I'm so sorry. Was it sudden, Lisa? No. Okay. Oh, so tough. That is, that is a— just horrible. And so, yeah, the grief you're in, I— yeah, I wouldn't, I wouldn't do much. Are you okay with retirement? What, what kind of money do you guys you guys have?

Um, um, we're, we're in decent shape, not, not fabulous because we were normal for way too long. Um, but you know, we did kind of get it all together. Good. And decent. I mean, you know, I've got—

how much is that?

How much is in retirement? I've got $500K in my retirement and, um, you know, and obviously no debt and except the house.

And how much is What's your house worth? Uh, about $350,000. Okay, good. So, um, and you're going to retire, you think, in 2 years? Is that what you said?

Probably about 2 years, yes.

Okay. And where do you think you're going to go? Do you know?

That's what I'm debating. Um, I may stay here but downsize. Okay. Or, you know, and move, you know, kind of move closer into town. We're kind of rural. Okay. Um, or we— I mean, we, we've talked— we also talked about Tennessee and we talked about Florida as well because they're cities we like in both places. Yes. Do you guys have kids?

No. No. Okay. Yeah, at least if I were you, if you were my mom and I was— and I was talking to you, I would just put this $200,000 in a high-yield savings account and I wouldn't touch it. And honestly, because you haven't— and I mean, after the year of the grief. In the next year, you're gonna be retiring. There's two major events happening in a pretty fast period of time of these 2 years. So, I probably would— I wouldn't do anything. I would just stay where you are. And after you retire, then you can look up and see how much you have left on the house after the 2 years, decide where you wanna go, sell the $350,000. In a perfect world, you would buy around that same mark so that you could add your $200,000 of his life insurance insurance to your $500, right? And that could be $700. That would be wonderful. So that's probably, that's what I would do. And if you go to Fairwinds Credit Union online, their whole, their customer service is amazing. And so if you don't have a bank that has a good high-yield savings, I would definitely recommend them.

But I would, I would probably just put that $200 in there and let it sit. Yeah, and just grieve and make your next move for the next chapter of your life, Lisa, of retirement and all. So, I hope that's helpful, and I'm so sorry. That's so heartbreaking.

Thank you for trusting us with that call. That's so special. All right, we got Shane, who's in Los Angeles, California. Shane, you're up next. Shane, are you there?

Hi, this is Shane. Can you hear me? Yep. Sure can. Excellent. Great. The question for myself is, I am— is it okay to loan my parents money, just given the circumstances I'm in now?

Tell us more. Tell us the circumstances you're in and tell us how much money they want you to loan them.

Of course. They would like me to loan them $5,000. I currently rent a room from them. I pay about $200 a month. Months. And the last year I actually went through a divorce and they weren't— they didn't ask me to pay any rent, so I was living free. But now that I've kind of established myself, got a job, I'm actually paying them $200 a month in rent. And they currently have a home that they're paying off. I would say they're about 70% of the way through paying it off. They actually want to buy an additional home and they're asking me to loan them $5,000 for that down payment. And no, I've heard your conversations, your videos, and I'm kind of in a little pickle because they've helped me out so much. But you don't have any money, do you? Oh yes, I do. I've been able to save up. So right now I have about $30,000. $22,000 is in my retirement and I have $8,000 as an emergency.

I mean, if they need $5,000 to buy a house— That's wild. They don't need to be buying a house if they can't afford a $5,000 swing. That's not good for them. Like, if we're talking about a $10,000 car and they need half the money to buy a car, that's one thing. If you can't spend— if you don't have $5,000 that makes or breaks a deal on a house, you don't need to be buying the house.

I know, that's right. Plus, you are— the whole point of you being in there was to get back on your feet. That was the whole point. Right? So yeah, yeah.

Um, what are they going to do with their current home? What's the plan? Is it to rent out the next home they're gonna buy or something?

Um, so they're gonna be living in the current home. Um, they, they're gonna try to rent that second home. Okay. So that's informed them that it's a risk because, you know, yeah, it's just a lot.

When do you move out, Shane? When do you move out?

That's a great question.

I would just exit myself from this, from the conversation. Yes, sir. Exit the chats because you're getting tied up. I think because it's weird, once you go back home, you're getting tied up in the family business stuff again. Oh yeah. And it's like, if you had been out in your own house with your own people, you probably wouldn't even be a part of this conversation. But it's because you're at home, and I get it. I respect the fact sometimes you need to reset. Life throws you things. I'm not, I'm not, there's no shade there. But I think now that you've told me, hey, I got $30K saved, I feel like it's probably just time for you to move on. Yeah.

How old are you?

I am 24. 24, okay.

Yeah, I would say, I would not loan my parents money. I do not think you have any obligation because they've been kind to you. They, yeah, you're their son. They chose to bring you in. I mean, it's fine. Like, it is what it is. But yeah, I think the sooner the sooner you, yeah, you get on your own, Shane, I think probably the better off you're gonna be. If you do decide against our advice to give them $5,000 of your $30,000, then give it to them. Don't have strings attached, 'cause they're gonna loop you into this home and then try to pay that rent and you're gonna be all entangled in their mess and don't do it. If you're gonna do it, just give it and be done with it. But I wouldn't, I don't think that you're obligated to by any means.

I mean, that calls back to our very first call, I think it was, of the day where the people had loaned family members and friends money. Yes, that's right. And then they came on hard times and they needed the money back. And it was like, oh, this is so awkward. That's exactly right, yep. So that just highlights why the principle is.

The bookends of the show, people. Yes. Don't lend your friends and family money.

Give them money. And if for some reason you move back home, you need to put a time limit on that mess and say, it is from here to here, and here is the clear goal. Goal that I have that I'm trying to accomplish. Alrighty then, well, that was a great show, Rachel. Uh, and remember guys, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.