Transcript of You Can Stay Broke Or Start Changing

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Normal is broke and common sense is weird. We're here to help you transform your life from the Ramsey Network in the Fairwinds Credit Union studio. This is The Ramsey Show. All right, we're talking about your life and money. Nothing's changed. The number is 888-825-5225. That'll get you on the line. I'm here with I'm Dr. John Deloney. I'm Jade Warshaw. Let's get into it, John. Let's get involved. We got Dana in Phoenix, Arizona. What's up, Dana?

Hi. Thank you for taking my call. I really appreciate it. No problem. My question is whether or not my husband and I should accept a gift of 38,000 dollars from our in-laws when there is a major history of dysfunction around money in his family.

What's the gift for? Is it just out of the blue or is it for something specific?

They pretty regularly are trying to give us money and pay for things, but this gift, apparently, is for tax purposes. They recently met with their financial planner, tax accountant, who told them that because of their gains that they made this year in the stock market, that it would be tax advantageous for them to gift each of us $19,000. The backstory really is that his Parents have used money as a tool for control and manipulation in the past, so much so that when we were planning our wedding 17 years ago, we ended up eloping because of their behavior around money. And the money issues as well as other things led to us not having a relationship with them for 10 years.

Is it just your husband or are there other children?

He has a brother. Things They're different with his brother's relationship with his parents. They just have very different personalities and how they handle things.

So the money has not been a problem for the brother that you know of, or is it a problem for him, too?

Well, they've used the same tactics with his brother, except that his brother and his wife gladly accept money from them anytime it's offered. Since they've reestablished their relationship, my husband and his parents, six years ago, they Actually, I ended up moving to our small town two years ago. And since then, it's just they're constantly trying to give us money. We're business owners.

Give us an example of the manipulation. Tell us what that looks like. Tell us what happened either with the wedding, or tell us more.

I want a recent one. Yeah.

You want a recent one? So like I said, we're business owners. Anytime something happens, so the truck breaks down or just regular business things happen, it's, Let us pay for We'll pay for it. We'll buy you another truck. And when we say no, they tell my husband that he's being difficult. They don't understand why they won't let him let them just help.

And what does he say?

There's crying. There's a lot of emotional manipulation.

Jay's question is important. What is his next statement? If his next statement is, I love you all too much, and I'm so glad we have our relationship back. I can't let money come between us. That's one thing. If When they start crying and he says, Fine, just fine, then that's another thing. So what's his response?

His response to them is that we're just not comfortable taking the money or the help I don't know how in-depth he's got with them about because of money issues in the past, because generally, when he's tried to bring up things from the past, he's usually met with, I don't know what you're talking about, that never happened.

And what were those? I need from you, Dana, the raw and the real. Do you know what I'm saying? Tell me, When we did it, he slapped her and said that he was ungrateful. Tell me the drama part of it, because honestly, at this point, as you're telling me, it doesn't really sound like they're bad people or doing anything wrong, per se. It just sounds like they see an area they want to help, and they're confused that you don't want their help. And them being confused doesn't make them bad guys to me or manipulators. It just makes them parents that are overstepping a boundary that maybe you've laid over and over again, and they just can't see why you wouldn't want to take a gift. Tell me the toxic part of it. Is there a toxic part of it? Where when you take the money, they try to control you. Tell me that part.

Yes. I'll give you our wedding example. When we were planning our wedding, where we were getting married with a resort by a creek, and as is traditional and normal, we asked his parents to pay for their lodging. My father was paying for our wedding, and And the lodging that we offered to them, my parents asked, Do they want this house? It was the house that was right next to the creek. It had four or five bedrooms in it, and we figured that their whole immediate family and everyone could stay in that house since they were traveling. And if they didn't want that house, my parents would have paid for it. When we presented it to my father-in-law, he said, Of course, he paid for it. And then as soon as money was involved, we started getting constant phone calls telling us what to do with our wedding, how to plan the wedding, who could come, who couldn't come. I remember very specifically getting a phone call from my father-in-law asking me when I was going to send the Save the Date, and my timeline on sending them was unacceptable to him, and he specifically said to me, This isn't rocket science, Dana.

You need to send it.

Got you. Okay, now I'm starting to get it. Okay. So you had this bad thing that happened a long time ago, and it's left a bad taste in everybody's mouth. You don't want to take money anymore. And when you try to explain to them, Hey, the last time we took money, this is how you guys acted. We don't want to do that again. They're like, Don't bring up the past. What are you talking about? They're doing that, right?

Well, the thing is, we haven't really addressed the past.

Okay. So it sounds... I mean, John, jump in here because- Yeah, here's the thing.

Did your husband... Do you all just not want to take this money?

Well, the issue is mostly for our business. We're very proud of ourselves that we've built this business.

Yeah, but there's a point of that where it becomes ego.

Right. Because listen, I'm looking at 38,000, and I'm like, Tell me more because this is a lot more- I built something cool, too.

And if you want to send me 38 grand, I'm happy to take it. Here's the deal. You all have had a grenade dropped. A grenade is probably dramatic. You've had a large firecracker dropped in your living room. They offered you 38 grand. If you take it, that might come with, You're going to do Christmas here because we gave you this money. And you're all going to say, No, we don't want do Christmas there. We're going to do somewhere else. And you're going to have an adult temper tantrum on their side. Or you're going to say no to the money, and you're going to have an adult temper tantrum on their side. So they've already taken the step. So really, here's the bigger issue. You're still, no matter what decision you make, you are letting them drive the right decision for you and your husband. And at some point, you all have to decide that we decide what's best for us. And if taking the money and dealing with drama or dealing with somebody saying, You didn't send these out in the right time, shut up. Who cares?

Yeah. Okay, man. As long as you say on the front end, Hey, we just want you to know we're so grateful, and this is such a nice gift, but please, we don't want any strings to be attached, which means if it's a gift, it's a gift, and we'd be grateful to you for giving it, but we're hoping that there will be nothing else attached to it. And if there is, let us know now so we can decide. That's what I'd say.

Or they can create a 529 for their grandkids.

Yeah.

Or just say, We don't want your money.

Yeah, you could say that, too.

Because I'm willing to bet you would have started getting those emails and calls if he hadn't had to pay for his own place for that wedding. Is that fair?

Yeah.

So they're going to be like this, whether they're giving you money or not, right?

Oh, that's such a good point. Yeah.

It's just such an ongoing issue. I just don't... I know it's important to my husband. I don't want our relationship to get affected.

Dana, I don't think it's the money.

The relationship is already affected. It's already a problem. Yeah.

I don't think the money is the problem. I think their personality style and their personality traits are the problem. And money just magnifies everything, right? It magnifies you as you already are. It makes you more of what you already are. So it's more of, I don't really like their personality. They're controlling people. That's another topic.

So you're in a fight. Take the money or don't take the money, but you're going to have a fight either way.

Statistics show that half of Americans don't have enough life insurance, or they don't have any at all. I don't understand this, John. Why don't people want to take care of their family? They think they're going to die or something?

Well, I used to be one of those guys. I didn't even think about it. One of my buddies said, Hey, the only reason to not have life insurance is if you hate your wife and kids. I immediately went and got term life insurance.

That's a gut punch.

You're telling me for decades, Dave, I've sat across who've lost a spouse, they've lost somebody important to them, and they don't know what to do next.

Me too. You're going to have a crisis here. You got two options while you're sitting and talking to a young widow. She's concerned about how she's going to invest all this money properly and not mess this up, or she's concerned how she's going to eat tomorrow. That's exactly right. These are the two options. Take care of your dadgum family, man.

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All right, back to the phone lines we go. We've got Kelly, who's in North Carolina. Kelly, how can we help today?

Hi. I've got some credit card debt, and two of them are over 26,000, 26,706. I'm overwhelmed. I've tried to keep up with everything, but with the interest rate, I'm not getting anywhere. I don't know what to do. I don't know what it's called. Bankruptcy. I've called different debt things, and they want the fees. They're like, $16,000, $10,000 for fees. In my hand, I don't see that that's a rule. I don't know what to do. I don't know what it's all a bankruptcy or what to do. We've cleared off, I think, five, six cards, and they're shut down. We're shutting down as fast as we can. But the two, and we have a couple of others, but we can work those through. But the two with the Chase, I'm at Williams. I don't know what to do.

Okay, Kelly. So you told me the two that's got the 26,000 on it. Can you tell me the rest of the debt?

Yes, I can. Well, I thought I could.

Because you mentioned, you said the two combined is $2,600, 706. Then you said there's a couple of others that you can handle.

Yeah, there's one that's $8,000 with discovery. But I think that we I did handle that. And there's another one I think that we owe. Why? When I had it right in front of me, now I can't see it.

That's okay. You look for that, and I'll just verify a couple other simple questions. You said we. Is it you and your husband?

Yes.

Okay. How old are you guys?

My husband is 78, and I just turned 76. My husband had pastored for 56 years. We lived in Church Parsonage. Okay. And so then we had to move into a house, and we used a lot of credit cards.

Okay, so you guys have really been using credit cards to live on?

Yes. Okay. That is so true. It is so true.

I'm sorry, Kelly That's okay.

I need to bite my bottom lip for a minute. Yeah, I understand.

No, you're okay to be sad. You're right to be sad.

But I'm trying to, I'm trying to work it out. I don't know. Should I try to call?

No, no, no. You called the right place. You called the right place. What's your total if you had to add up all the money that you owe somebody else? How much is that?

Well, Discover, we owe $8,236. 55. Okay. And there's another small one, and I can't find it. It's like $430 or something like that. We can do that. I want to do what's right and for the Lord there.

I just- Well, listen, you're on the right track. Your heart and your mind are saying, I need to clean up this mess, and that's the first step, and we're going to help you with the rest.

We don't go out to eat. I believe you. We here at the house, I have selling stuff right and left. Like, there's something somebody's supposed to come and buy today that if they show up, we'll help.

Yeah, listen, I believe that you're doing all that, Kelly. I think you're doing all the right things. We're going to try to help you take the next step. Can you tell us what your income is every month between- Yes, I can.

Let me get my ledger here. I get $1,638. 60 in Medicare.

Okay.

We have a house rental that we get $1,012. 50 a month. My husband gets... His Social Security is $1,598. 90 a month.

$1,598? .

And then from the Southern Baptist, it's called a housing allowance, so we don't have any tax on it, and it's $382. 39 a month. Okay. And then he gets a small VA disability check of 171. 23 a month. Okay. And then he gets a small retirement, 372. 95 for teachers' retirement.

Okay. So you're almost 5,000 bucks a month, yeah?

Yeah.

Okay, good.

So I mean, I'm really How much of that do you pay?

I know you get a housing allowance, but how much of that do you pay to your home every month?

Our house payment is $2,166. 04.

Okay. That's a big part of this while you're feeling so much stress, okay? Yeah. Your housing payment's high. And can you tell me... You said you moved into that house recently. Can you tell me what the house, what you purchased it for?

Well, 19 years ago, when my husband was pastored, he had a major heart attack while preaching, and he had to have a four bypass. And We were a long ways away from the hospital, and so we stayed at a place called Annabelle House. So one of our hearts dreams that we would pay that forward. So our heart was the house that we have here has three bedrooms downstairs, and a very, very large room upstairs. Got it. So what we want to do is establish a place called the Shepherd's Home. Understood. Where people have... They can come and stay with us, and we can still minister to them.

I love Go ahead, John.

I was going to say, Kelly, can I tell you something? And I'm telling you because I love you?

Yes.

You all can't afford to do that right now. Your heart is so big, and it's like, you It was such a blessing. But you all aren't in a position to do that right now because you all can't make your basic payments, your basic bills. And that dream is amazing.

And we know that we can't do it until we get out of debt.

I know, but even if you were out of debt, sustainably speaking, I don't know there's ever a scenario where 50 % of your take home pay or 40 % If you're going to give your take home pay, you should go to housing. Because housing, the taxes are going to go up, the cost of electricity is going to go up. This is going to continue to be an escalating burden for you.

Yeah, the cost of living is going to go up, but you're on a fixed income, which that means it's going to stay the same. So we've got to get you in a position that's sustainable for you to manage the monthly payment of your rent or mortgage. And also, to your point, make some headway on these credit cards because you can't pay them off making the minimum payment.

Do you have any equity in this house that if you all sold it, you could clear your debts?

No, we don't. We don't have. We have... Well, and one of the things I didn't understand is the first year, we overpaid paid are taxes on the house. And the tax company here did a refund to the mortgage company, and I told the mortgage company, I said, We've overpaid you. You need to either give us that money back or let us apply that $7,000 overpayment to principal. And they said, No, it went back in escrow. For the following year?

Yeah, it just goes into the following year's taxes. So you're not going to lose that money. You just don't get it right now.

It's gone towards the next year's taxes.

But every month, they take out money out of our thing for the taxes. So why didn't they- Kelly, here's I want to hold you over because your problem is one that millions and millions of people are facing.

And so I want to give you a step by step plan. And I don't want to get distracted by, well, the tax over here and this over there. But I want you to hang on the line. We're going to go to a break and we come back. We're going to walk through this with you. But you're going to have to open your heart up to some significant changes in how you all are doing life so that you all can put your own oxygen mask on first and then be able to take care of the people around you.

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Love The Radio.

When was the last time you had The Radio on?

I had it on this week. I love that for you. Just listening to all country music.

I love that.

Wow, that's great. And hey, here's a flex. My son, he's 15, is like, Dad, just turn the radio on. I'm just wondering if they're done with all the playlists.

If we're reverting back? Yeah. I love it. Listen, wherever you're listening to the show, first off, we just want to say thank you for listening. If it wasn't for you guys, John and I wouldn't have jobs. So thank you so much for listening. And if this show has done anything for you, take a moment and share it with somebody. Honestly, the best marketing plan out there is just word of mouth. So if you like the show, if we said something that hit, share it with somebody, hit the little paper airplane on social, or send them a link, slide in their DMs, whatever method of choice that you have, keep sharing the show. We really, really appreciate it. It's something that you can do a Totally free and only takes a second of your time, but it has a great, great benefit. Thank you so much. Okay, we are going to go back on the line. Remember, Kelly was on the line a few minutes ago. Just a little recap, her and her husband, 78, 76 years old. They've got a decent amount of debt. So far, it looks like they've got somewhere around maybe $36,000 of debt.

We haven't gotten the exact number yet, but they're making 5,000 bucks a month, and she's looking for a way out. We were able to figure out that her house payment is 2,100 of the 5,000. So right now we're talking about what it looks like, Kelly, to sell your house, because I know that you have a dream of ministry and being able to gift those rooms to people in need in your three bedroom house.

Or is there a possibility that you, in the short term, maybe the next year, Kelly, you invited people to live with you and charged them a thousand bucks a month or $500 or $800 a month, and they could rent the rooms from you for the next year, the next two years, while you all climb out of debt and get yourselves in a better position.

Well, actually, we have a really, really large room upstairs that has a complete bathroom. It's got a couch.

It's got a clean bed and everything.

And we thought about renting that out, but everybody that we've talked to wants an outside entrance.

Sure. I can see that. Kelly, I'm going to shoot you straight.

Here's Yeah, here's where you find yourself.

I'm going to shoot you straight. You've got to sell your house. Renting is putting way more on your plate at 78 years old. It's something that you'll have to keep up indefinitely because, like I said before, you're on that fixed income. So your plan today, I'm going to just tell you right off the bat, your plan is to put your house up for sale, get on ramsey solutions. Com, and find yourself a realtor because we have the best in the business, and you got to sell this house. And after that, you've got to find something, even if you for a while, something that is only 25 % of your take home pay. That's all you can afford. So you're spending $1,250 a month or $1,500 a month. That's basically your budget there. And then from there, we're going to do a little thing called the Debt Snowball. You're going to list and you're going to go through tonight with your husband and you're going to find all the things that you owe. You're going to list them from smallest to largest, and you're going to pay the minimum payment on everything, Kelly. But the smallest debt, that's where you put all your extra extra money until you knock it out.

So it sounded like you had one that was for about $430. Let's get that one knocked out immediately. And so that's how this is going to work. And then you'll go to the next smallest debt. In the meantime, we're going to get you hooked up with every dollar. And on every dollar, you can get a free coaching call. So we're going to make sure to get you hooked up. Our phone screener is going to pick up and make sure to get you hooked up with that, okay? So you're all taken care of.

I think something else I want to call out here. If you have too much house, Right. And by the way, let's go back to Kelly. For those of you who are just tuning in, Kelly and her husband were beneficiaries of some free housing while they had a major medical emergency years ago, and they've always had the dream of being able to offer that support for somebody else. That's amazing. And they've got a math problem, which is we can't afford to pay off our debts and make our payments. So if you buy a house that's too much, usually that means, depending on what market you're in, that house is big, which means your electric bill is high, your water bill is more, to air condition and heat that place is more. So in their situation, they may be looking at a one bedroom apartment because that's what they can afford.

Absolutely.

And that also drops their utility payments. It drops everything. You're not just going to see the savings and the mortgage. You're going to see savings that come from all over the place, and that can help you get out of there faster.

Can I just say this? Because I feel like we live in a world today where everything has to be bigger and better and flashier and newer. Can I just say there's no shame in living on your hard-earned income and just living on what your income can afford you? Credit card companies will make you feel like you need more and we need extra. But to just work hard, in her case, to have worked hard for seven levels of life, right? And to just say, Okay, we worked hard for seven decades. We got $5,000. That is our income, and we are going to live on that and have pride in that and feel good about that. There is no shame in the game of that. That's right.

It might look differently than you dreamed your sevenies would look. Right. But, man, you're talking about an amazing woman, an amazing husband who are really on the edge. They can't handle another financial emergency, another health issue.

Yeah, absolutely. All right, let's go to Lucy, who's in Atlanta. All right, Lucy, how can we help you today?

Hi, Jade. Hi, John. How are you all?

Doing great.

Good. It's nice to to talk with you all. I'm very honored to speak with you. I grew up in Murphy, Tennessee, right down the road from you all, and we took a Ramsey course my senior year of high school. Got away from it a little bit, came back here recently, about three months ago, and started listening to the show. And me and my husband, we got married about a year and a half ago, both brought some credit card debt into the relationship and ended up paying that off as of yesterday. Good. So we paid off about 7,000. And so now we're on Baby Step 3, obviously saving for three to six months of expenses. But I wanted to know, I mentioned this to my dad, and he had said that it would be a good idea to reach out to you all and see what you think. Once we save up for that three to six months of emergency fund, would you recommend saving even more just in case anything happens? Like with our roof, I know that's technically what the emergency fund is for, or even putting stuff aside for travel fun items.

Okay. So, yeah, we're talking about two different things. I love the question. After Baby Step 3, so the purpose of Baby Step 3, let's just reiterate, is for emergencies. It is a fully funded emergency fund, and we suggest three to six months. Now, whether you do three or six months is largely dependent on personal factors. So if you're a single person with one income and maybe you have a health issue that flares up every couple of years, you want six months, right? You want more. You want to make sure you can cover your deductible, all of that. If you're a family, maybe you're a family and you're dinks and you both have a high income, you have stable jobs, you're healthy people, maybe you opt for three months, right? So it's up to you depending on those sorts of factors. In today's world, I'm not going to lie, for most people, I'm like, just go on ahead and do six months. I just feel like we like that security the way the world is now. I don't know. So once you get that six months, Lucy, that's really all you need. Now, from there, if you're going to continue to save up for other areas that are sinking fund areas, whether it be, like you said, we know we need a new roof, we know that's coming.

If you know something's coming, it's not an emergency. So, yeah, you need to save up. If you know you want to upgrade your car or you know that you're putting a down payment on a house. Those are sinking funds. And just a reiteration, maintenance and known maintenance, John, is not an emergency. You If you know your car is going to need new tires, save up for it. You know if you have a leak and you see it starting to form and you know like, Hey, I'm not going to run this through insurance. We're just going to pay for it. Save up for it. That's not an emergency. You see it coming, you know it's coming. So that's just a little sidebar there.

The thing that happened to me and my wife is we had to replace the roof without thinking we were going to have to. And then, of course, that's when the air conditioner went out. So we were to save up for the roof issue, and we had an emergency fund for the air conditioner. And if we had just tried to play it out, be like, just pretend it's an emergency. We'll wait till it's an emergency. They'll double and triple up on you.

And now my screen said, you never mentioned this, my screen said, When can we open fun accounts while working the baby steps. You didn't mention anything about that, so let me just hit that right quick. Yeah, after baby step three is when it's time to start having some fun again. So that's when you add back in those fun money categories.

Go to dinner, go to movies, you'll go on a trip. Go have fun.

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All right, the All New Every Dollar is here. And now it's way more than just our world-class budgeting app. There's a ton of of budget budget budget budget budget budget budget make faster progress with your money. As a matter of fact, the average person finds thousands of dollars in margin in just the first 15 minutes. Matter of fact, we've gotten some calls through here, John, already of people saying, Hey, guys, I'm in the All New Every Dollar, and I've already found X amount of margin and I'm putting it towards my debt. And so I think that's really exciting to hear. But you can start your every dollar today for free. You can get in the App Store or at Google Play. But guys, I'm telling you, you get in there, you do a quick onboarding, and don't try to skip the onboarding because that's where they find out everything they need to know so that you can have a personalized plan. So it just takes a few minutes. Give them the information, then it's going to spit back, Hey, based on what you told us, here's the amount of money that we can find you.

And I'm telling you, there is money hiding in plain sight in your budget and in your finances. You just needed somebody else to look at it. And so it'll look at it, spit back and say, Hey, we found you X amount of thousands of dollars. And then it'll tell you, Here's what you need to do to get it. And so then you can say, Do I want to do what it's telling me to do or do I not want to do what it's telling me to do? And so you go through the recommendations it gives you, and then you can say, Hey, I agree. Maybe I agree to these, but I don't agree to those. And you check the boxes, and then it'll say, okay, based on the ones you agreed to. Now, here's how much money you'll have. And it'll keep walking with you as you do what it's teaching you to do. It really is, John, as though you had myself or you in your pocket.

You don't want me there, but it's like having you or Dave or George, that's what they're talking about? But yes, it's pretty amazing.

It's pretty awesome. So if you don't know, now you know. All right, we got Eric, who's in Knoxville, Tennessee, right down the road. What's up, Eric?

Hey, guys. Thank you for taking my call.

You got a brother. What's up?

My question is, I'm 19 years old and I'm getting married next year.

Congratulations, man.

Thank you. And I feel like I've always been generally pretty smart with my money. I've never had to take out money for anything. I pay for my car in cash, And I grew up on 21 acres with my parents, and I've saved up enough money that I was able to build my own mini home at the bottom of the property.

Dude, way to go, man.

I paid cash for that and everything. What? But I'm still in school.

Hold on, hold on, hold on. You're just blown by this. You are in a better shape than most people in the country. It's incredible, dude. And I know that sounds silly. You got a paid for a car, you got a paid for a place to live, right? Right? That's amazing. Yes, sir. Who taught you this?

My parents. And I've always... I mean, I've been watching Dave Ramsey since I was 12, 13.

Lots of people watch, but very few people live it like you are, man. Well done, brother. That's cool.

So how can we help?

Well, my question is, I know later down the road, it's just 500 square feet, really small. I know later down the road, probably four or five years, I'm going to want to be able to buy a house. But me and my fiance, we have no form of credit coming in at all.

Good.

We've never had loans on anything.

Fantastic.

The only loans we'll even be taking into the marriage is she's about to graduate nursing school, so we'll have about 15K in student loans. Okay, that's good to know. I'm hoping to have that paid off in the first year. I'm still in school, so I'm just working part-time. I'm working as a pest control technician part-time. Okay, good. I'm only making about 30K. And she has a job lined up making about 75K when she graduates. So our first year of marriage, take home, should be about 100K. But my question is just when I want to take that next step and actually build a house and build a family, is there something we should be doing the build credit.

No, but I do want to address that. There's a couple of areas of this I do want to address. I agree with John. I think that you're doing a fabulous job. But I also want to say there's no rush. That is the If you can embrace that, then you're going to be home free. There's a lot of times, John, this rush is like, I get married, then I got to get the house, then I got to do... It's like you're trying to check boxes really fast. And you've got so much time, Eric, and you're in such a good position. I don't want you in such a rush that you start going back on all of the things that got you where you are today, which is, I don't borrow money, and I'm not interested in building this credit score. Those are all these things that you've done, and you've gotten great results bolts. The fruit of that is amazing. So just remind yourself, the fruit is the proof. The fruit of what you've been doing is the proof that it's been working for you. So don't go back on it. Now, here's the thing. Let's talk about the no credit score thing because you're right.

When you guys get married, you're not going to have a zero credit score because you've got the student loan open here. And so until you guys get that paid off, get that account closed, and then it's going to take another 6-8 months for your score to drop away or for your wife's score to drop away. Yeah, it'll be tough for you to buy a house with a low credit score. Does that make sense? So having a low credit score is not going to help you out. But once you pay it off and you have a no credit score, you will be able to do that. And we're always going to suggest John Churchill Mortgage. That's who I have my mortgage with. John, I'm pretty sure when you had a mortgage, that's who you had it with.

My credit score was zero. It was nonexistent. None. And they just do a process called manual underwriting. And that's the way they've done for a jillion years before they started turning us all into algorithms. And that just means I had to send them a letter from my employer. I had to send them a tax return. I had to send them proof of employment, and an actual human looked at an actual file, and they're like, Oh, this guy's got a great job. He has always paid his bills on time? No brainer. Here you go.

Got you. Does that make sense?

I'm glad you're asking this question. Here's what a credit score is. It is not... Or let me say what it's not. It is not an indicator of how much wealth you have. It's not an indicator of how well you're doing financially. It simply is a dating score for how well you've dated in the past. Except it's not asking about girls you've dated, it's asking about banks you've dated. So if I gave you five million dollars right now, your credit score would still be zero. That's a shame. It has nothing to do with your wealth. It has everything to do with, have you borrowed money from a car dealership once and you paid them back? Okay, we'll give you some points for that. Did you one time borrow from somebody else? It's just a report card for how well you've managed debt in the past. And so far, you've been a dude that just doesn't play that game. And the system can't get its hooks in you. And so it says, well, you got to have this number, otherwise you're not a wealthy person. It's not true. It's just not true. And so, Jade, I love what you said, brother.

Listen, you all come on with what was it, 110,000? Yeah. 110 grand. So let's say after taxes, you all are holding 60,000 $2,000 next year. In the first three months, you should pay off this entire student loan to be done with it. Then you all going to have $45,000. If you all can eat light, you have no bills, or very, very minimal bills, other than a cell phone bill and a small light bill or whatever. If you all could stay in this house for two years, you all could literally have $75, $85, $1,000 in cash when you all decide to move out. Would that be fun to live in 500 square feet with two people? No. But dude, if you all wait, it's like, We're going to wait till we can drink legally. Sure. The day we can buy a beer in a restaurant, we are going to go buy a house. You all be able to put 80 grand down or more, 100 grand down.

And let's not forget, there's always the option to rent. Let's say you do start hating each other's face in A hundred square feet. And that could happen. That could happen. And you're like, Man, we got to get out of here. Just know, again, pump the brakes. You don't have to buy a house tomorrow. You can always go rent a two bedroom apartment, right? And then you can still save up money like John is saying. So you have options. In no way are these people painted into a corner. No. They've got so much time, so many options, so little debt.

People always ask me, What would you go tell your 18, 21-year-old self? And I often say nothing because that guy was an idiot, wouldn't listen to anybody. But if I could get one message through to him, it would be, Slow down. Slow down. Relax. I hear that. I was so amped about having a car and having a place and have it. Slow down, man. Instead of saying, in this guy's case, just put a date on the calendar. When we are 22, we're going to buy a house. Let's see how much cash we could have in the bank by 22. Let's see if we can live in a way that we have this much money by 22. It will change everything in your life moving forward.

All of the things. 100 %. Oh, so true. All right, Hale Mary, if you could go back and change one thing you did when you were 19? What is it? He's 19? Well, he's 19. That's why I picked 19.

If you could go- I'll say 21. I left and I drove an 88 Tracel easy hatchback that was the size of a small wheelbarrel through college. So I I graduated with my student loan debt, and the first thing I did was went and bought the biggest truck I could find. And so my first year out of college, I almost doubled or tripled my debt.

Holy smokes. All right. Yeah, that's a big one. What about you? I straightened my hair instead of leaving it curly. My wasn't as big of a deal as yours.

I ruined my financial future. I ruined a photo.

I got a relaxer. Keep hanging out with us. There's more show to come.

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All right, welcome back to The Ramsey Show here in the Fairwins Credit Union studio, continuing to take calls about your life and your money. Again, if you were wondering, How can I call that show, Jade or John. The number is 888-825-5225. No worries. If you don't get on the line, you can leave a message, and we'll still schedule your call for another time. All right. Hattie is in St. Louis, Missouri. Hattie, how can we help Hi, Jane.

John. My question is, my husband and I are just getting ready to purchase our first home, and I keep hearing about doing a line of credit, a $10,000 line of credit to make a bulk payment, and then putting your paycheck into that and paying all your bills out of that to build $10,000 up again.

You've got to do me a favor. Do me a huge favor.

My mind just exploded.

Please delete Instagram off your phone for 60 days. Okay. Just get off. Just get off. Okay. For real. Just get off.

I can do that. It's Facebook, actually, but I can do that.

Whichever one it is for 60 days, and And then I want you to solve for one thing and one thing only. Okay? Okay. Peace. Okay. Peace. I was just talking to one of my oldest best friends on the planet yesterday. This is an It was an honest conversation. I was asking him a question about, Hey, if I move this here, and I move this over here, and I pay this here, and he said, Hey, you're doing a whole bunch of work for 1. 8 %. And he said, You're the guy who tells me you solve for peace, not for arbitrage. I was like, I'm getting off the phone now. You're right.

Okay.

I was going to move it to this account because this one's got 3. 4. And since interest rates just dropped, what if I moved it over to this one? And he's like, Bro, relax. And then he did a quick calculation. He's like, You're doing all this for $70. Go enjoy your life. And he was right.

Yeah, I have an accounting background, so I was like, Well, does this number actually crash? And I'm like, Okay, this works, but It doesn't really. And I just wanted to hear somebody else say, It's okay. Just make double payments. You'll be just fine.

Make triple, quadruple payments. Make stupid amounts of payments. But Jade and I will both tell you the... We can tell you what we do in our house. We borrowed We had a mortgage, and we put on a 15-year note, and we just paid as aggressively as we could.

Just make extra payments.

And make extra payments. Ta-da. How long have you been married? I wanted to make sure.

23 years.

And you all are buying your first house?

Yeah, we had some health conditions. Amazing. I just had a brain tumor in 2020, so that set us back a little bit.

Wow. How are you now? I'm great.

Well, I have MS, so I'm disabled from that, so I It doesn't work, but it's only his income, so I get really creative with the finances.

I love that. Okay, so you know this as well as I do, that stress is a multiplier of MS symptoms, right? Yes. What if you just solve for peace?

Yeah, exactly.

If you just took out one mortgage, made one payment, and then you spent the rest of your time focusing on things you love and have fun with.

Well, yeah, exactly. We just want to have the house paid for by the time that we're both 60.

Done. The shortest distance. Is this still true? The shortest distance between two points is a straight line?

I heard there was somebody who's... I need to go look in that. Because my track coach always told me that.

I know, but sometimes I feel like there is a shortcut. In this case, let's pretend like that still holds because I think it does. Don't do all the loop-de-loop, okay? You're really smart. I can tell. Like you said, you've got the background. Use your powers for simplicity. Use your powers for good.

Let me say this. Can I take this call way too deep, way deeper than you're asking it to? Yeah, go for it. I spent my career working with folks who had special needs of some shape, form, or fashion. Yeah. And one of the biggest metas that I got from working with those people over time was a fear that they were going to be a burden on other people or that I needed to contribute in some way on top of what I'm doing for my friend, my family, my community, whatever. And so I don't want to paint a picture, but I don't want you sitting at home thinking, I'm a net drain on this house, but if I figure out some way to escalate our mortgage payments, then I've proven that I'm worth being here.

Right.

I want you to help simplify the chaos in the house and be an agent of peace in your home, and your husband's the luckiest man who's ever walked the Earth.

I love that.

Thank you.

Is that fair?

Yeah, he'll tell you that, too.

Oh, I know he will, but you don't believe it unless you come with a secret plan to pay off the mortgage. You know what I mean? Yes. Just take his word for it. You're pretty amazing. You're pretty amazing. And, Jade, I've heard this song and dance on the internet. It's like, All right, this is what you do. I don't know. I'm not a dumb guy. I'm not the smartest guy in the world, but I think I could figure most stuff out. And usually I'm like, You lost me at step 17. I'm just going to make a double payment and go on with my day.

I mean, let's run this out for the folks who might be listening for the first time, So obviously, we do... Our countercultural take on mortgages is, first off, if there's a world where you can just stack up some money and pay cash all day, baby, all day, we're going to cheer for you.

People are like, I'm going to take it on a mortgage for tax savings. That's literally the dumbest thing.

If you have the money or you live in-I'm going to pay $100,000 of interest so I can get $10,000 in tax savings. Yeah, don't do it. If you can get cash, and there's somewhere in, I don't know, Kansas, where you can still find a $200,000 house that you can pay. Get You get it. Then the next level is, Hey, in a world where everybody's getting 30-year mortgages, we're always going to suggest a 15-year mortgage. At the base of that is, well, you'll get a better interest rate. But the other base of it is you're going to pay it off 15 years sooner if you just pay the payment.

And everyone says, I'm going to get a 30, I'll just pay it like it's a 15. But you won't.

You won't. There's always going to be something that pops up instead. And so we're like, Hey, set it for... Set the dial for, you can't screw this up. So 15 years is what we were going to suggest. And even if you never make an extra mortgage payment, you're still paying it off 15 years earlier, which is giving you another 15 years that you can invest more to build wealth, for your legacy, for retirement, to buy that restaurant you want to buy, whatever that thing is. So 15 years is what we're talking about now, we're always saying, Hey, the payoff of the mortgage lies in baby step six. So it's after you've paid off your debt, it's after you've saved up an emergency fund, you've been investing 15% of your income all the while. You've put a little bit aside for your kid's college. And now, after all that's rolling, now we're saying, Hey, maybe I have a little extra change I can throw over to this mortgage. I make the payment and maybe I pay another half payment, or maybe twice a year, I double the payment. Whatever that rhythm looks like, it's just about you being intentional.

You don't have to get intense about it, but just being intentional about saying, I'm going to put extra money on my mortgage. And there's some really crazy arithmetic out there that if you just make one extra payment a the quickness- Takes seven years off or something off a 30-year mortgage or something like that.

Yes.

It doesn't take a whole lot in order to really shave that 15 years down. And John, on this show, we find that if people follow the baby steps, no matter what point you lock in, if you actually lock into the baby steps, most people have their mortgage paid off in 10 to 12. It's a 10-year thing. Quicker than 15. Yeah.

And by the way, people always ask, Hey, is it okay if we get hyperintentional about... We've had the mortgage for a while. Yeah, if you got two or three years left on it and you say, We're going to go to Baby Step One, and you're going to try to have it, and you and your spouse lock arms, go knock it out. Go do it.

Get it done. Yeah. And then on the flip side of that, if you're like, Hey, all my life I had to fight, and I finally just got out of debt, and I'm not ready to put double payments on, that's also your prerogative, and nobody's going to be mad at you. The point is, you started in the best possible spot, which is a 15-year mortgage that was no more than 25% of your take home pay. And I understand that that is a tall order in today's world, in today's day and time, but it's still possible. For way too long, I struggled with sleep and woke up groggy after tossing and turning all night. But now I look forward to bedtime and I wake up bright-eyed and bushy-tailed, thanks to Casper, a company that's been perfecting better sleep for over a decade using durable, high-quality materials that actually last. My whole family now sleeps on Casper mattresses. Yes, even the dogs have their own Casper dog bed to no one's surprise. And it's not just one man's opinion. Casper customers keep their mattresses for years, and four out of five customers recommend them to friends. And with free delivery and 100-night trial, Casper is no gimmicks.

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All right, we're going to go back to the phone lines, but Before we do, I didn't say who was hosting today.

I probably should. It's me. It's you and it's me. John and Jade. John and Jade. So now you know, just in case you were wondering, John, you're on the mental wellness tip for anybody who doesn't know. You're everywhere, so everybody knows. No, they don't. I believe that they do. And then I am your money expert for today. So that's how this thing works. Two people, two chairs. All right, let's go to Nicole in Denver, Colorado. What's up, Nicole?

Hi. Thanks for taking my call. My husband and I just got married, and we both want to have children, but now we have to adopt or preferably get a surrogate. We have some debt, we have some savings, and my husband is about to start a business. So we really want to prioritize this because of our ages. I'm factoring us in, us needing some extended time to have kids. And both of these options are expensive. My question is, how do we fit a into the baby steps?

Oh, I love this question. How old are you, by the way?

I'm 30. He's 34.

Okay. So if you were calling in and you were like, Hey, we're thinking we're going to get pregnant the old-fashioned way, I would have just said, Yeah, tomorrow, whenever you're ready, right? I'm never going to tell somebody they have to wait till they're out of debt to have a baby. I'm never going to say, You have to have this financial echelon accomplished before you can start a family. I would never tell you that. Now, it is your own personal choice. I can tell you, my husband and I, we were like, We're going to pay off our debt, then we're going to start a family. That was a personal choice. I don't think anybody else has to make that choice. But in your case, it doesn't change my answer, but there are some considerations because in your case, yeah, it's going to cost a pretty penny. How much does it cost to do surrogacy in the 2025 world?

There's a huge range.

I was going to say 50 to 100 grand.

Some More than double it, 90 to 200,000. Surrogacy compensation, medical expenses, might mean multiple rounds of IVS. And then for adoption, if you're working with an agency, somewhere between 30 and 60 $2,000. So the pragmatic answer is adopt instead of do a surrogate. But I don't know how to even start saving up for this.

Okay. No matter what's your income.

What's your income? Right now, I'm in school. I'm a student for another six months. I have a part-time job. I earn about $2,500 a month. My husband gets about $7,000 a month. Okay, good. And a third of that is an untaxed disability for being a veteran. So it's helpful.

I guess, and Jade pushed back on me here, adopting kids is one of the most amazing things. By the way, that 30 to 50 of the private adoption, there's tax rebates, there's local support, sometimes there's business support. So I would check in to all of those different things. The last buddy of mine that did this, I sat down with him. He said, At the end of the day, they were out of pocket, like 11,000 bucks. Oh, wow. Yucky. And you can- Oh, that's good to know. You can do... But that was after tax breaks. And dude, who knows what tax cuts and breaks look like now, whether they're bigger or smaller, who knows? But it's worth to find all that out. And there was some upfront costs that he got reimbursed for, et cetera. But that's just a one buddy of mine. So I'm a huge fan of it. I think the challenge for me is if you get pregnant and had a kid and you had health insurance, or you didn't have health insurance, there's a fixed cost because there's medical conditions, there's NICU, there's all kinds of things that could happen. But in Inside of a bell curve, often, there's a $5,000 deductible, or a $10,000 deductible, or a, Hey, we want to cash pay this thing, and this is what it's going to cost.

When you get into $90,000 to $200,000, that to me feels like we have to do some significant planning, because that's a graduate degree, or that's a home in certain places, right? That's a huge chunk of money. And I would feel irresponsible to say, Yep, it doesn't matter. You're starting a family. Just go let it rip, because that's a ton of debt to carry into on top of your student loans, et cetera. It is.

And the reason I'm calling you guys is to, if we're doing highest cost scenario, if we do do surrogacy, just help me out. How do I even start this process? It might not be that expensive, but worst case.

It's a math problem, right?

Yeah, it's a math problem, and I'm going to make it super clear I would never recommend any debt for this. You're going to do what you're going to do, but Jade didn't tell you to go into debt for a family because there's a risk of here. There's no guarantee on any end of this spectrum. And to John's point, when you get into numbers like 200,000, 100,000, that is insult on top of injury if this doesn't go the way that we want. And sometimes in life, things don't go the way we want, although I'm praying that it does for you. So you see what I'm saying, right? I just want you to- Absolutely. I don't have to explain the risk to you.

And there's the other side of it is, again, I've got a close friend who had a really traumatic pregnancy, and there was NICU stays and ICU stays, and God knows what those bills are going to end up being. And you deal with those as they come. This is one where we're planing out the door. We know this is going to be 100 grand or 150 grand.

So real steps. Let's pretend, hey, 50,000 is what we need. That's somewhere in the middle of the adoption realm there. Yeah, I would treat it like, in many ways, I would treat it like the debt snowball. You're paying minimum payments on all your normal debt, but all the extra is going to your smallest debt. In this case, it's this adoption bill. So after all your minimums are met, now we're using our margin to stack up $50,000 as quickly as possible. And what I would do is I would say, Okay, I'm starting up my every dollar budget. I've got everything in here, and I'm seeing here's the margin that we have every single month. So let's pretend it's $3,000. I got $3,000 in margin. That's going, and I'm going to keep stacking that up until I hit 50K. Run those numbers out, see how long it's going to take. And at any point, you go, Hey, that's longer than I want. What can we do to make that go faster? Income is the issue. So we say, Okay, can we get extra jobs? Can somebody drive Uber? Can somebody pick up extra shifts? That thing. So in that way, you can control it.

But at the same time, you'll probably hit a point where it's like, this is as fast as we can go, and you just have to ride that train until it's done.

I love it. All right. Thank you so much.

Yeah, really great call. Thanks for the call. John, I actually got that call a couple of days ago, and it's true. When Sam and I were in debt, we had almost half a million dollars of debt. We were young, 23 years old, and I remember thinking, I'd rather wait for And plus, I wasn't sure if I wanted a family yet anyway. So I was like, let's just wait. He wanted to wait because it was just eating our lunch, literally.

It was chaos and anxious install in your house. Yeah.

And so for us, we had just made the decision and said, Hey, we're going to clean up this us, and then we'll feel great about having a family plus. And again, I'm not saying anybody else has to make this choice, but I had this clear picture of this is the life I want to be able to provide. And so that was a guiding light for us. I was like, I don't want to feel like I have to work. I want to feel like I'm working because I want to work if I'm not going to stay home with these kids. I wanted as many options, not just for us, but for the kids, too. So that was our choice. And yeah, I ended up having kids later in life. That was a choice we made.

But I remember the years my wife and I were trying to have kids and it wasn't happening. And then I sat down with somebody, we went to the meeting about adoption and the private versus public and all those things. And I remember my mind shifting to I'm owed this. I deserve this. And it was giving me a pass. I'm just going to go borrow on whatever this costs because I want a family. And it was this... I remember thinking, do I want to add, because this is when I still owe a trillion dollars, do I want to add that burden to a guy that's already pretty spun out because of all this money I'm carrying that I owe people? And I remember very much feeling, though, that math doesn't apply to me here. This hurts, and I want to have a family, and I want to be able to give a kid a family. All that stuff was so good and right, and yet math doesn't care. It's going to be, you're going to have $200,000 dollar mortgage on an adoption, or on a surrogacy or whatever. And so there is something about... I would never tell somebody, don't have kids if you owe money, right?

Sure. Never. Especially if you got a traditional health insurance. Yeah, sure. But if you're going to go make a 30, 40, 50,000 dollar, you can put that much money on the table, I want you holding that check because otherwise, you are setting yourself up for all additional chaos, in addition to having a kid and all the heartbreak and joy and all that comes with that. Absolutely.

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All right, you're listening to The Ramsey Show. Hey, don't just set goals in 2026. I want you to actually learn how to reach them for once in your life. And we're going to help you do that. The 2026 Ramsey See, Goal Planner is here, guys, and it's packed with monthly content from myself, from Rachel Cruz, from Dr. John Deloney sitting right next to me. And it's all there to help you stay on track with your money, with your faith, with your relationships, all of it. And finally, for the first time, you can actually follow through on your goals. It's so helpful. Now, I'm going to tell you the real deal. Every single year, we sell out of these, all right?

I thought they were already gone. Listen. There can't be that many left.

Can't be. So the point is- This is not a sales pitch.

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The only way I'll get one is if one of you send me yours, because I didn't even get one. But at the The point is, they might be already gone. So if you were thinking of getting one, go on there now and make sure you can get one. They're $49. 97 at ramsey solutions. Com/store. Or if you're watching on YouTube or the podcast, you can just click the link in the description. Now, I'm going to tell you straight up. I was making a joke before. I always get a couple of these, and I send them as gifts. It's on my gift list every year to send to other people, and everybody loves it because it's so helpful. And so, yeah, get involved. All right, next we have Sue from Chicago, Illinois, Shytown. What's up? What's going on, Sue?

Hi. Thank you guys so much for taking my call. I'm blessed to be able to speak to you guys and to listen to you guys every single day. You are.

Thank you so much. What's up?

I'm stuck. I'm 54 years old and married with a child, and I just found out that my husband no longer has savings, no longer has the college account for our child because he's gambling and there's more infidelity I just found out about. So there's that. I just started a job, thank goodness, because I had a feeling like something was up. My job will be able to pay in the future for the success that I want with our family, but I'm at a T-section.

The big question here is, do you want to stay in this marriage?

No. I hate saying that. We had an issue before where things were questionable, and he said he wanted to reconcile, and this was years ago, and I had a huge cancer scare. I'm cancer-free. It's great. It's wonderful. He did it really well since then. I don't feel for my peace and my daughter's peace moving on in her life, that it's safe to stay in this marriage.

So I think answering... Well, there's two things. One is you are right to be fearful about if there's sexual infidelity, you're right to be worried about the betrayal, worried about your health, worried about the values of your marriage being swiped out from underneath you, right? The financial infidelity, you waking up one day and realizing you all have no safety net. That's a real harrowing fear also. Whether you choose to stay in this marriage and heal it, and you all have to rebuild this thing from the ground up because it doesn't It doesn't exist anymore as it was, you still have to take the steps to go open your checking account and deposit money in your account and begin to have some financial safety because this person is very unsafe and very reckless.

Yeah, I did that with my new job. Good. Yeah. But that now has been paying for groceries and school fees. And I don't... Pennies, pennies, putting it aside could possibly eventually get down payment for- Hold on, hold on, hold on.

You're doing a very natural thing, but I want to slow you down. You're solving for seven steps down the road. I need you to solve for step one, which is I need to get me and my daughter into a safe place. Yeah. Exhale. Next step. I want us to make sure we have the apartment that we've moved into or that he's moved into. Can we afford this house? And we have to sell it. Do I have an attorney's fees?

We rent. We don't even have a house to sell.

Okay. So am I on that lease? So if I go get an apartment, a one bedroom apartment for me and my daughter for the next 18 months, because that's what I can afford right now, am I on that lease? And is he going to quit paying, and then it's going to blow up my work? It's getting those very basic things. Four walls. Do I have a place to live? Do I got food? Do I have utilities? Do I have water and heat? And do I have transportation to get to and from my job? Okay. That's what we're solving for right now. You'll solve for what's my retirement going to be, what's a pension, All of that is a problem for future you. Okay. Thank you. Anxiety is taking future stuff and dragging it into the present and trying to solve it in the present. Don't do that. You've got enough trouble right now as As you experience, and as the Bible says, you got enough trouble today, let's deal with today. If you are done with this marriage, I want you to push pause and call an attorney.

Okay.

And they will guide you. They'll have, not thousands, but a list of questions, thoughts, ideas, and they will walk you through step by step, and you won't feel so alone. If you want to try to save this marriage and reconcile, you got to call a therapist today, a licensed therapist who will walk with you. It's just too much. Your whole world exploded, right?

Yeah, it did. It really did. I'm more worried about my daughter.

How old is your daughter?

She was a junior in high school. Yeah. But she's now been... Unfortunately, it's grown up in her face, and she's very aware of everything that has happened.

Let me tell you the greatest gift you can give her. Yeah. Take her out to a diner. In fact, tell her we're skipping school this morning. Take her out to a diner so she'll know it's a special moment. I don't want you to look her in the eye and say, I'm not going to talk bad about your dad. I'm not going to run him down. You're not going to talk crap. You're not going to swear it about him. Because that's her dad, too. And she knows in her body, half of her is him. So if he sucks, then half of it, right? But I'm going to tell you the truth. I'm going to tell you I'm scared. I'm going to tell you I'm heartbroken. And I, your mom, in working to keep you and me safe. And so you're going to give her this gift. You're going to, A, give her the gift that she's not crazy, because a lot of parents try to just say, I don't want the kids to know. I don't want them to... I want to hide my tears. I want to hide everything. And what it does is it makes your kids feel nuts because their insides are melting.

So it's important for her to see, Oh, mom's a person, too. If she's sad, I have permission to be sad.

Yeah. I've never hidden anything for her, even when I got the cancer. Good, good, good. I've painted pink polka dots on my head when it was growing back, because that's what she said, what would happen when my hair grew back.

The next plan, the next important thing for her is to know my mom has a plan. I have a job. I have my own checking account. I'm going to... Your college plans may have completely changed, but I'm going to be right next to you, walking with you. It's letting her know you're not on your own, and her job isn't to take care of you. Okay? Okay. 100 %. That will be a blessing to her for you to say, I'm hurting, and here's my plan. Thank you. Okay. I would also recommend this, and I don't feel like I want you to give you another thing to worry about. I want you to go pull your credit report from all three credit bureaus today. Yes. I want you to freeze your credit.

It is.

Okay, good. Good, good, good. You weren't still ahead of it.

I did that as soon as I found out.

Excellent. That was very smart.

Excellent. What's your husband doing right now? Is he running, hiding? Is he saying here... How did you find out?

Well, I started. I got the... How do you call him? A millionaire. I just started going, Hey, can we go over the bills because I want to put all this together and make a budget. I want to make a plan. And he started And I'm listening off these bills. I'm like, Well, what bills is this? What bills? He goes, Oh, it's a loan. It's a loan. I go, It's a loan for what? It's a loan for what? And he goes, Well, I have a lifestyle to keep up with. And I'm like, I don't understand. He should be getting... He's retired and he has now a part-time job because it-It just exploded.

It just exploded. Yeah. Well, thank you for trusting us for the call. Stay on the line. We're going to hook you up with EveryDollar. It's the best budgeting app in the world. We're also going to hook you up with Financial Peace University. So you and your daughter, if you all want, you all can watch these lessons together. And I want you to begin using this app for you. Make a budget for you so you know where every dollar is going, because right now, every dollar is precious. And if it's time to call an attorney, go call one. If it's time to call a therapist, go call one.

All right, our question of the day is sponsored by YreFi. If other lenders won't help with defaulted private student loans, then YreFi might be right for you. They offer fixed rate solutions that fit real life. Reef. Find out more at yrefi. Com/ramsey. That's the letter Y-R-E-F-Y. Com/ramsey. Remember, it's not available in all states.

All right, this question is a good one. I'm going to have to process this out loud. All right, read it. It's funny because I've been wrestling with something about this.

Oh, really? Okay, I'm excited then.

Today's question comes from Gabriel from California. Gabriel writes, I need advice on whether to take on commissioned work for a very popular video game. I would get paid to make 3D digital models for game servers who have the esthetic that I'm trained in. I developed these skills over the past two years. However, here's my dilemma. I stopped playing video games several months ago due to a conviction to stop playing them and just grow up. I've been benefiting from the time away from them to connect with friends, read my Bible, and attend church activities. I've actually lost a desire to play video games, but I could make a ton of money with this side hustle. Should I take the opportunity or or walk away because I'm afraid I'll be pulled back into that world? So here's where this question is with me. I watch social media melting us culturally, and yet, every day, I post on it twice a day, right?

You're in my brain right now.

I live in it. And so I've had this weird tension with it. And the piece I've come to is if it's a sess pool, if it's constantly sending people negativity, things that way to divide people up and whatever, I can tell myself I'm going to be someone who puts good out into that world. Yeah. And so that's where I've landed right now, but I do wrestle with it, right? If they came in and said, Hey, social media is over. It doesn't exist anymore. That part of our business is over. We're going to have to do something else. I would exhale. It would cost me a lot, right?

Understood, yeah.

But I would exhale. And so there's a tension there. So this is a little bit different because he's not able to put positivity out into a negative environment. He's going to literally be participating in it, right? Yes. So part of me... I don't know. What do you think? What do you think?

I think we can look at this from two arguments. I don't think he's created a good versus bad argument. Like, video games are bad, therefore I'm not playing them anymore.

He's I found relief being out of that world.

Yeah. I think he found it more of, there's better things I could be doing with my time. This is a drain on me, so I'm not going to do it. So for him, I think it was productive versus not productive, not necessarily good versus bad. If he had said, Hey- Oh, I think they're evil.

So I quit them.

Right. I got out of video games because the chat's crazy and it's not good for kids and it's dangerous and sex trade, all these things. If he had said that argument, I would have been like, Dude, it's a moral thing for you. You have to walk away. But But since it's more of a personal productivity thing, I would say I will hold it more loosely, but at the end of the day, I would still say anything that feels like a violation of personal integrity for you, you do have to walk away from. However, I would say this doesn't really feel like a personal integrity thing. It feels more like you're getting older and you're like, I can't spend time on video games, so I'm not going to.

And he's got his lived experience where he spent too much time for too many years on them. But also, and I've I've run my mouth about video games for a long time, but I've got buddies who play with their kids. I got buddies who play with kids in college, and it keeps them connected, and they have fun, and they talk trash, and those little things. So it's fun for them. But then they set it down and they go back to their regular lives. And so, yeah, It comes down to a personal conviction at the end of the day. It almost feels like, I don't know if this is a good analogy either, somebody who has struggled with alcohol gets an amazing opportunity to make a bunch of money to be a bartender.

That's a bad idea.

It could be, right? But if someone says, Dude, I don't have any... For six months, it could pay off everything. Yeah, I wouldn't do it. I wouldn't go back in the bar.

Well, no, because he struggled with it. It was an addiction. I don't think that's a good analogy because one's like an addiction.

But he's saying, I don't want to be pulled back into that world.

I think that I don't know much about making video games. So I think it has more to do, I think, and correct me if I'm wrong, because I'm not a gamer. I think it has more to do with him than the outsider, because I don't know if you're making models for this, if you actually have to be in the game and play it.

Play the game and talk about the game.

Yeah. So if he has to be in that world in order to create for it, I think that's more where his struggle is versus, I don't want other people playing these games. I don't want other people- There you go, because it's a moral conviction.

I would tell Gabriel, if he was sitting here, and thanks to everybody, letting us think that out loud. Yeah, right. I would tell Gabriel, no amount of money is worth your personal peace and your personal integrity. And so if this is a matter of, I feel like this is an integrity issue for me, but I could make some good money in the short term, I'd say walk away. Yeah.

There's other ways you can make money.

And The other side of it is if you have just found peace, like, Man, I love doing other things in my time and good on anyone who wants to play games. It's not for me anymore. And you can go back into that world and make some quick money over six months. Knock your lights out, right?

Yeah. I'm with you on that. Yeah, I was just reading back over the question. I'm with you. If you feel like it's pulling you back, don't do it. There's other ways to make money, and there's always going to be temptations.

And we get this call from folks who listen to the Ramsey show. They buy into the message. They live their own life, but they sell whole life insurance policies, or they work at one of the big, the giant banks who take advantage of people, and they are faced with this moral dilemma But again, I think that's more of the good versus bad argument, because we're saying, Hey, debt, it is truly out to get you.

It truly is out there to try to scam you, try to trap you, all those things. I just didn't feel like... He didn't mention anything. Now, don't get me wrong, I have my own views of video games. I don't want to project that onto him. But if you're a person who... Gabriel, if you're listening to this, if you do feel like, Hey, I just think video video games, inherently, they're trying to track people. The algorithm is there to keep you stuck, keep you locked in. I just don't agree with that. If you do have a moral stake in it, I 100 % wouldn't do it because then you're compromising your own personal integrity.

I mean, that's a good question. It is a good question. And I challenge everybody in their life, if your day job at some level conflicts with what you know to be true or what you feel is to be right or true, It's easy to bomb the job, but there's something about taking personal ownership and saying, I can't be a part of this anymore. The building is on fire. I'm being asked to steal money, but I'm going to start looking for a way to transition out of this job into something else. I'm going to turn down this opportunity. And both of us have gotten opportunities to go speak at a place and we're just like, I'm going to sit this one out. Everyone has to make those choices. But the fact, Gabriel, that you're even asking this question is pretty noble. Good for you. I think so, too. Because I think it's so easy to just run for the money. Yes.

You have to have your personal moral compass, and that sometimes can look different from other people. It's like going back to the drinking thing that you said. Some people go to a party, they're like, Hey, alcohol is just not for me. I don't like who I am when I have a drink, right? And then the other person could sit right next to you and there's no moral dilemma. They're not going to act a fool. They're just going to have one or two drinks, go about their business, and it's fine, right? Different things affect different people in different ways.

And there's your third option. If I drink, I don't feel good the next Okay, that's fine. Sure, that's fine. Or I think this is wrong. I think nobody should be doing this, right? But whatever you bring to it, live it out everywhere.

Live it out everywhere. And that's the good word. I like that one. That was a good one. All right. Since we just took a question that was verbal, me reading it. Verbal.

Somebody wrote it in.

Let's do another one from social.

All the questions are verbal, by the way.

I know. That was not the right way to say it. Okay, let's do this one. This This is Sue from TikTok. She says, Why does canceling a rarely used card affect someone's credit rating? Okay, so we tell people, John, it's time for you to not only pay off your debt, but you need to cancel it. You need to close the account and be done with it, not just paid off. And so she's saying, Yeah, if you cancel this card, your credit score initially is going to go down. That's true. And that's okay. It's one of the factors that they use to measure your credit score, right? It's how many lines of credit you have open, how long have you had it open, what percentage of it are you using? All of that affects your credit score. And so when you do something that affects one of those ticks in the algorithm, yeah, it's going to ding you. But in the long run, if you just close them all and pay them all off, your score is going to roll to zero, and you're going to be a person who has a zero credit score. And that's ultimately what we want.

Stick around. There's more of The Ramsey Show coming up. Hey, you guys. Rachel Cruz here.

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Hey, welcome back to The Ramsey Show. We're here in the Fairwinds Credit Union Union Studio, taking calls about your life and your money, like we always do at this time. We got Tom in Minneapolis, Minnesota. What's going on, Tom?

Hi, John and Jade. Thanks for taking my call. I got a question around term life insurance. I'm 65, and over the years, when we had four children, over the years, I would buy life insurance, but term life insurance. And then it would... At one time, I'd probably had a million dollars. I'm down to one last policy of $250,000. There are seven years left, and the annual payment is only $711 a year. Okay. And this question, whether or not I should keep it, because I really don't need it, and it's just It's just my wife and I today.

I mean, yeah, you're right. The point is that we get to the point where we can self-insure, where that nest egg is big enough to where if something happened to you, your wife would be okay, and it sounds like you have that.

Yeah, I mean, no debt and multiple millions of dollars put away, probably seven or $8 million.

You're saying that the policy runs out in seven years?

It does. In '32, it's done, but $27 a year, it's only seven dollars a year. It's $250,000. $250,000 is not going to change our life.

No. No, but neither is $70 a month, or $70 a year.

There's no right or wrong answer on this. If you want to keep it, you can keep it. Because like you said, the $711 a year is not changing your life. The $250,000 is not saving your life. I would ask your wife, how does she feel about it? Hey, do you want this extra $250,000 coverage? Does it give you any extra level of peace? For me, I could maybe let it go and just have that conversation. If it were me, I'd probably be like, Just keep it around. I'll keep it. Let it play out. But like I said, there's no right or wrong.

. Okay, so that's it. I I know she'd say, she's always had her trust in my management, obviously, to take off, and she can't believe we're in a place that we're in today. So she just say, Hey, I don't really care.

Well, dude, let me be the first to tell you today. Well done, brother. That's awesome. Really good. The thought that you can pass away tomorrow and your wife's going to be okay, that to me is the greatest, I don't know, just as a husband, that's the greatest feeling I could have that if I cashed out tomorrow, my wife and my kids would be okay. That gives me a lot of peace. Hey, do me a favor. Call our friends at Xander. What I know about those dudes is they will tell you the truth, and they won't take money from you. They won't try to bilke you for money. They'll be honest with you. And they'd be a great person to run this policy by and just run through the numbers for you. And whether it would save you if you just quit paying on it, if you can't, they're going to answer all those specific insurance questions, so call them. They're the ones who did my life insurance policy.

Yeah, me too. So let's talk a little bit about life insurance for new listeners who are like, What the heck are they talking about? Here we're always going to suggest term life insurance. That's what I carry, that's what John carries. You can get it on a 15-year level term, a 20-year level term. Basically, the term is just what it says. You are covered during that term of years. And the level term means the price is not changing. But the point of life insurance is for anybody who depends on your income. So for instance, I work in my home and my husband works, but if I were to pass away, That's a big chunk of income that's gone. And so my family has a dependency on that, right? And same thing with Sam. If Sam were to pass away, we have a dependency on his income. So we suggest you get 10 to 12 times your income, which a lot of people think, Oh, my gosh, that's a lot of money. That could in the millions. That's a lot of money. And it is, but it's about survivorship. It's about the people who are, like I said, dependent on your income long term.

They don't just need 30,000 bucks. They need to be able to continue living until their life situation changes Or maybe you're a stay at home mom, right? And you've been staying at home. If you're the spouse in that situation, you want to make sure this mom can continue to stay home. So you need a nice nest egg in there. That's what it's there for. I won't get into the whole life thing. I feel like that's a different call, a different time for a different day. But I do want to say term life insurance is a way that you love your family well. Now, I hear it now, John. People are like, Oh, I have insurance through my job.

No, you got $10,000, dude. You have barely enough to cover the cost of a cough in these days. That's right. That's it. If that anymore. That's right.

That could barely cover your funeral, and that's it. So you need more. And trust me, it's not expensive. This guy said, he's paying $711 a year. That's nothing. For a quarter million dollars. Like Dave would say, that's a biscuit. For a quarter million dollars, right? Yeah. Yeah. So get it done. It's so easy. They'll come to your house and do the medical... They'll draw your blood at your house. It's easy. And then they'll set your term and you'll be set. So that's how this works.

If you're wondering this, too, my wife has a part-time job, but the vast majority of the income is mine. I have a policy on her. It's not near as big as mine.

Three to four times.

But if she was to pass away tomorrow, if you've listened to this show for five minutes, you know that my life would be in shambles, right? I would have to hire some support and help. There would be plane tickets. There would be parents coming and going. There would be, I need help with... My whole life would fall apart. So I'd need to hire folks to come back, fill that, and that money would add up and add up, especially when I'm in a season of grief and my income would drop because I'm on commission. So all that say is I got a policy on her. It's not, again, not near the size of mine is, but I do have one out on her because there's going to be real cost associated to me trying to figure out how to manage my life and my kids' life with her going.

That's such a good point. When you have a stay-at-home spouse or a spouse that maybe works part-time or whatever the case, there's still a huge monetary value on what it takes to... If you're the home CEO, so you're doing all the shopping and you're planning all the meals and you're taking the kids to school and you're picking the kids up. Well, who would do that if that person left? Do you have to hire a nanny? Would you have to have a babysitter there at the house six hours a day? That is all cost. So please, please, please. Term life insurance is what we're looking for. And what we were talking about earlier with Tom is the idea is that you don't have to pay a premium forever.

So he's got millions of dollars. That's right. He's now insured.

He's insured.

His wife's insured.

And that means that whatever pops up, he's got the money that he can carry that risk now. The point of insurance is to for a risk when we can't afford it, right? And so when you're walking through the baby steps, you can't carry that risk. So let the insurance company carry it. But the hope is that you get to a point, you keep walking through the baby steps where you've got a couple of million dollars stacked up or whatever your nest egg is stacked up to where when you hit a certain point, Hey, if somebody passes away, there's enough money on that nest egg that they can draw from. Or if something happens, my medical expenses will be covered as well. All that stuff is there. So that's how this works. It's just a really good thing to think about from time to time. We get calls all the time, John, of... And it's sad. When someone passes away, there was no life insurance, no will, and everything is just in a tailspin.

I've mentioned this several times over the years on this show, but a couple of times, when I was doing crisis work, I responded to calls where a husband had passed away. And there's just... I don't know how to describe it, other than there's a very particular look when a spouse just lost her husband and she looks, and I remember one person in particular said, I have to go to work on Monday. We don't have anything. And it was the most harrowing... It's like, What do you mean? They don't have any money. We don't have any insurance. We have nothing. You got to figure out. And I I got to figure... I got to go. I have to get a job now on Monday. We have no... I mean, it was just such a harrowing conversation. And then the other... I remember one other person in particular said, I don't know what to do. I don't know where anything is. I don't know if there's a will, where it is, the accounts. I don't know if we have life insurance policy. It was just a zoo. And I remember being like, Man, me and my wife, that's a big deal for us is where's the forms, where's the passwords, where's everything?

Because it's not a matter if, it's a matter when. I want that to be the last thing she worries about is what do we have and where.

Term life insurance, a will, making sure your spouse knows where all the documents are.

Many of you listen to the Ramsey Show because you're sick and tired scared of getting nowhere with your money. You work too hard to live paycheck to paycheck with no money in the bank. But here's the deal. Just listening to the show won't change that. If you want different results, you have to do something different. We've helped millions of people save money, ditch debt, and build wealth, and you can, too. But you got to have a game plan, and that begins with our get started assessment. Go to ramsey solutions. Com/startnow, take the free quiz, and get your free step-by-step action plan. If you've had it with money stress and are ready to take control of your money for good, go to ramsey solutions. Com/startnow.

Last segment, we were just talking about the importance of term life insurance. We were saying wills, making sure your family knows where all the important documents are. We actually have an online wills quiz because you might have been listening to that saying, Hey, Jade, I don't know. I'm 18. Do I need a will? Or I'm 21 and single. Do I need a will? Or I've been married 50 years. My wife already knows what we're doing. Do I need a will? You need to take the wills quiz is what I'm telling you. Okay, so here are the top questions people have about online wills. Let's talk about it. Number one, they ask, How do I know if I need a trust or if my estate is too complicated for an online will? Okay, so that's a great question. So the answer there is, if your estate is worth less than one million, then getting a will online is probably a really great option for you. So if you're worth less than a million, yeah, probably online will is good. Next one is number two, Jade, what do I need to start my will online? All right.

Making a will online or not involves a couple of big decisions. Number one, you need to know who's going to get my stuff. You need to know who do you want to take care of your minor children, if you have children, because that's going to be all part of the will. And you need to decide who do you want to make decisions if you are in some way incapacitated. Now, I'm going to tell you right now, John, when Sam and I made our will, you have to make an event out of this because it's not the most fun conversations to have. And the truth is, after a long day of work, to come home and talk about what will happen if you're incapacitated, it's not necessarily fun. But hey, pizza and wine helps a lot of things, I'm just saying.

I remember I gave my wife this big, long, Here's how I want my funeral to go. And she was like, Hey, I'm not doing chores for you. Your funeral will be as I plan it. But I wrote it down and it's in the wheel, and she's like, Just sue me. Come get me then because I don't care.

But you do. You need to sit down and you need to decide these things. And it's okay if it takes more than one evening or if you get mentally exhausted and have to come back to it later, just as long as you come back to it later. Now, number three, is an online will legally valid? Great question. Yes, an online will is legally valid, but not just any online will you find on the internet is going to legally validate your state, okay? You want to make sure your online will needs to be made to match the laws of your state, the state that you live in. That's the important part. Number four, why would I want an online will versus a traditional one made with a lawyer? Very good question. The truth is, they're just less expensive and they're more convenient convenient, and they take less time to set up. So you could just pop online, do your thug-thistle, and move on versus trying to set up something with an attorney. So if you have more questions, you can go to ramsey solutions. Com/willsquiz to find out if an online will is right for you.

All right, enough of that business. Let's go to Sarah, who's in Georgia. Sarah, how can we help today?

Hey, dear. Thanks for taking my call. I have a question about whether or not I should take out a home loan or a heloq. I bought my grandmother's house two and a half years ago, and when I bought it, I knew it would need to be renovated, like down to the studs. So that's probably going to cost about $250,000. Gosh. Yeah, it's going to be expensive. I'm in a pretty good financial situation, and I've saved up $75,000 toward that. And I've got savings, I've got an emergency fund, I've got retirement, all that squared away. But do I take out Heloq or a loan, go ahead and reno the house, and then after it's done, it will be income-producing because I can rent out the basement and bring in about $2,000 a month? Or do I wait and continue to save for the next probably four or five years until I have enough to just pay cash for all the renovations?

See, here's what I think about in these situations, and I'm going to just play this back to you and John cut in. So when I hear somebody run out the two sides of what I could do, on the one side, when they're talking about the debt, they're like, I could just get a heat lock. I could get it all done. I could have this income-producing property. And there's all these positive of positive things. But then when they talk about the cash way, it's like, Well, I could wait five years. But they're not listing all the pros on that side. So, Sara, we want to remind you of all the pros of paying cash because There are pros, and yeah, it could take longer. But the truth is, we didn't mention there would be no risk on your home, which was your grandmother's home, which is clearly a source of great pride and joy for you because you bought it. So we would eliminate the risk from that. We We would allow you to sleep better at night. We would ensure that an asset that's been in your family remains in your family. There's a lot of pros on there that you didn't list that are benefits to doing this thing in cash.

Where did you come up with the 200 number?

I've gotten some estimates from a general contractor and everything that needs to be done. And it is more expensive because essentially the basement, it'll be two full kitchens, one One for my living space, one for other living space.

And that was actually my question. Is there a path where you phase this in? Where you completely gut and renovate your kitchen with your $75,000, and you have an amazing, beautiful living space, and then you exhale for a year or two, and then you make a choice down the road. Do I want to go through and completely gut and do this? Because here's what I promise will happen. If you have a heelock, and what you're going to do is you're going to say, I want a $200,000 heelock against my home. They're going to say, Well, there's always an overage or whatever. I'm just going to give you 275, and whatever you don't use, that's fine. I promise it will balloon up because they'll be like, Well, what about these fixtures? We could get these. They're nice. And it just gets out of control on you. If you have 75 grand, you say, This is all I have. It just changes how you spend your money. But is there a way you can phase it in?

Yeah. Why does it have to be an income property? Why can't it just be the place you live?

Or an income property later, when I want to have the money to make an income property. But can you get this awesome kitchen? I'm trying to think of a third way, or a fourth way, or a fifth way, other than I've got to borrow a couple of hundred thousand dollars against an old property, which, by the way, I think that's probably when they get in the walls, they're going to find all wild stuff. And they get into the basement, they're going to find all kinds of structural... That's just what happens on those old homes. Or I can't do anything for five years, and I just got to sit here. Is there a middle ground there?

Well, So it needs new electrical and some plumbing updates. And so the thought was, in the long run, it would save money by just doing all that at once versus doing Going in and doing plumbing in one area or fixing electrical in one area, or just doing the upstairs and fixing that, and then doing the downstairs.

How much would it actually save?

I don't know the exact number.

I would want to get that because I think that's one of those things that we just think, Hey, if we just do this all at once, it'll be cheaper.

Well, that's a luxury. Let's be honest. That's a luxury for when you have money. So let's break this down to a smaller We're talking about a big house there. Let's break it down to a smaller denominator that we can talk about it, and it'll make more sense. If you had a flat tire and you didn't have any money, and you're like, Oh, man, I have a flat tire. I'm going to go buy a tire. And they said, Well, you should get all four. You'll get a better deal. You'd say, Well, I can't afford all four.

I've got enough for one tire for a new tire.

I'm just going to get the new tire that I need. And suddenly it makes a lot of sense because it's like, Why would I buy four tires I can't afford? I don't even really need the third No, the other three. I just need the one. And so when we put it like that, it's the same thing with this house. You can't afford. It doesn't matter if it's a better deal to do it all at once. You can't afford it.

And, Sarah, here's the other side. This show wouldn't exist if people didn't take They put out a four-year heelock on their house for a couple of hundred grand, and they immediately get into a construction project, and then they get sick, their in-laws get sick, or COVID shuts everything. This show wouldn't exist if everybody's plans always worked. And so we have the misfortune and the blessing of our whole job consists of people who had this great plan. It's just going to be 36 months. It's just going to be four years, and something blows up. And that's why, if you don't owe anybody money and you put 75 grand on the table, you get a brand new kitchen, they do the wiring, and they do just the plumbing in that area. And then something happens, you can take two years off, and you don't have this looming, Hey, they're going to take our house from us because we put it on the block. It's just a way to take risk off the table.

And I want to do $250,000 of work on my house. I do, too, actually. And I still got to wait and do it little by little. Okay? Buying and selling a home is a big deal, and you want an expert in your corner fighting for you to get the right deal at the right price.

That's why we only recommend Ramsey Trusted Real Estate Agents. They're handpicked pros who know their stuff, listen to your needs, and have your back from the first call all all the way to closing day. To find a Ramsey Trusted agent near you, visit ramseysolutions. Com/agent. Ramseysolutions. Com/agent.

All right, welcome back to the show. We've got Brian, in Phoenix, Arizona. Hey, Brian.

Hey, Jade. Hey, John. Thanks for taking my call.

Yeah, you bet.

I'm in my late 20s.

I'm on baby steps four and six, and I have around $40,000 that I want to spend on a car.

I'm wondering if it makes financial difference whether I choose a new or used car for the same amount.

Interesting. Yeah.

How much do you make? Around $200,000. You got some cash. What do you do for a living, dude?

I'm actually, funny enough, I'm in sales, financial advice, things like that.

Well played, man. Excellent.

So how old are you? 28. 28. And you've got a great income, killing it. What do you have in retirement? What's your nest egg?

So total nest egg is around 830,000. 310,000 is in retirement. I've got 357 in taxable assets. Okay. 30,000 cash, 13,000 HSA, and 120,000 on the home that I purchased last year.

Okay, so you're a millionaire. No, it's 830 total. Oh, okay. I thought you were saying 830 was in your retirement. Sorry, no. You're saying the total amount is 8: 30? Okay. Correct. So I do think that in this case, if you want to spend the 40,000, it's no big deal. I would spend it on a used vehicle, though.

I would. Tell me Why you don't want to?

Oh, no. The 26 RAV4 is looking pretty nice.

Okay, so if I told you you could get a 25 RAV4, and somebody turned the key in it, and backed it off the lot, and drove it right back on, and burned 10 grand of that? Because that's the difference. The moment you sign your name on a brand new car, you drive it off the lot, it's worth last year's car. And that's why we tell folks, a million A million dollar net worth is arbitrary. Dave just picked that number, but it's basically, can you walk into your house and set $10,000 on fire in the living room? And you're okay with that. You've got a million bucks. It would be dumb, and nobody would want you to do that, but it wouldn't change your life. And so that's the difference. I love RAV4s. My wife drives a Highlander. I love them. In fact, she asked me the other day if I could trade that in for a RAV4, an older I totally love that car. It's just what is driving off the lot and immediately losing that equity worth to you.

Got it. And I guess would it make sense if I were to wait another year or two and buy used, if I really wanted to, sorry, buy new, if I was able to bring it up to a million.

I did that exact thing recently. Like, literally that exact thing.

Yeah, the million is, to John's point, it's a rule of thumb. It's something that we feel like, Hey, this is the point where, to John's point, you don't care about... You can take the loss, you can take the hit. You're very, very close.

Bro, you're so far ahead of all of humanity. You're doing great, man. You're doing great.

I'm going to advise you to do a used car. If you did a new one, lightning wouldn't strike you. Worst things could happen in your life. But we're just telling you the rule of thumb that we think is that safe point where you can really feel good about it. You can feel good about driving off the lot brand new. It's like, Hey, if you're a rule follower, it's like, I followed the rules, and I did this. Do you know what I'm saying? It's that thing. Do I think it would break you? No. It wouldn't break you at all.

You wouldn't feel it at all.

You wouldn't feel it. So take that very contrasting advice.

But you put it out there. So let me ask you, what is waiting six months? What's burning a hole in your pocket right now?

My car is getting to the point. I drive a used car. It's the first car I had. It's at the point where it's a lot more maintenance And a lot more money is going into it. So I think it's ready to buy something new.

Yeah. I mean, like I say, you're doing so well. And if you think it's going to... The intellectual exercise or the discipline of I'm going to put on the calendar four months. I'm going to make myself wait four months, and then I'm going to go buy this car. If you think you need that, and that'd be good for you long term... Because you work in sales, right? So some years are going to be up, some years aren't. That's the lifestyle. So I'm in a good season right now. I'm in a season of blessing. That's awesome. I'm going to practice just holding off just because I can. That's a good- It's like somebody is sitting in a cold plunge. I'm going to do this because it makes me tough. And I think that'd be an awesome exercise. But also, if you went out today, again, you're not going to be destitute tomorrow. You're going to be fine. But you are going to have just said, Hey, Toyota dealership, I want to give you all 10 grand of my hard-earned money, really for no reason other than, I wanted this right this second.

Because here's the truth. The truth is, if you said, Hey, Jade, there's a used car I want to buy that's $50,000. I would have said, Yeah, go do it.

Because somebody else has already burned the depreciation for you.

But my point is the amount is not any risk to you. None. It fits your income. It fits your networth. And so that's the way I'm reverse engineering it in my mind. But if you want to hit that rule of thumb, that's also great.

Here's another game to play. What's your mortgage every month?

Like a $3,000.

A $3,000? Correct. Okay. So just ask yourself, is this car today worth three months of house payments?

Yeah.

And if that's a good math, if that's a good trade for you, then cool.

Yeah. Cars are an interesting thing because if you're a car person, you're like, I'm in on it all day. But then if you're like me, who's not much of a car person, the question that John just asked, I'd be like, No, it's not worth three months more. I'm that person because I like nice things, but for whatever reason, cars just don't do it for me as like, I'm willing to spend this money today.

Again, I want to run back what Jay just said. Our rule of thumb here is once you're out of debt, don't own anything of vehicles with wheels on it, toys that are You're worth more than half of your annual take home income. You make 200 grand. So technically, following that line, if you came and said, I want to buy a $99,000, we'd say, knock your light off. If you got cash for it. It's not about the dollar amount you're spending. The 40 grand is nothing for you. It's simply about, for the one year having it now, do you want to burn $10,000 or $7,000? I don't know how much a Raffle depreciates in one year. I have no idea. But do you to burn that now, or do you want to go buy a 2025, or if the model changed and everything upgraded or whatever, do you want to wait a couple more months till December, and they're going to start liquidating those cars at a lower price? Then you can pick one up there, which is what I did last year with the truck. So do whatever you want, man, and you're well within the rule of thumb.

You're there.

Yeah. This is not a problem for you.

But it's a principle as much as you're going to be in trouble of any kind. Yeah.

And that's the crazy part of rule of thumb. If you said, Hey, Jade, I want to get this $99,000 car in cash. I'd be like,.

I'll tell you this dumb, but do it. It's not going to hurt you. It'd be stupid, but do it, right? But it goes back to that principle of, Can you just eat Yeah.

Man, interesting conversation. I like it. I like it. I like it. All right. I like these social questions that we have on the desk. If you follow us on social media, you can submit questions. I guess even if you don't follow us, you can submit questions. Because that's the whole point. But if you don't want to call them to the show, and this is the way that you want to ask, you could do that. William from Facebook says, Is there an average amount or percentage you should set aside in your budget each year to fund for future maintenance and repairs on a home? He's wondering if there's an actual number that we're saying, Hey, in your budget, always budget this amount as a sinking fund.

It's like a depreciation fund.

Yeah. My answer would be no. Obviously, you've got your emergency fund, right? Three to six months. That is for the stuff that pops up that you didn't see was coming. And then beyond that, I would treat it as a sinking fund. Anything that you feel like you couldn't cash flow in a month's time. Some people, their income is enough that if they blew their tire out, they could cash flow it. Other people, if they blow their tire out, that's setting them back. So yeah, you probably need to have some a car maintenance sinking fund that you're putting $50 a month in or $25, whatever suits your budget that you're putting aside every month for that. What else does he ask for? Home repairs? Yeah, again, if you know your roof is 25 years old- And you're going to need one in two years, then yeah, start saving for it. Start putting aside for it. So yeah, that's a really good question. It's not a certain amount. There's not an amount that we say, This is the amount. It's based on your situation and your budget. And by the way, if you don't have an every dollar budget, I'm going to suggest you get one.

It's the best budget out there. It's the one that I use. It's the one that John uses, and it'll help you create those sinking funds that you need. All right, today's scripture and quote of the day, 1 Thessalonians 5: 1-1, 5: 11, Therefore, encourage one another and build each other up, just as, in fact, you are doing. All right, Vince Lombardi said, Confidence is contagious, so is a lack of confidence. That's so good.

Gosh, that's what everybody needs right now. Confidence. Is a unified... We got this.

I like that.

Yeah. That'd be cool.

It makes me think of... Gosh, I always go to Remember the Titans, and you've I've never seen it, which is-Me? Right?

I've seen it a thousand times.

Okay, but the last time I feel like I quoted it. You didn't know what I was talking about.

What'd you quote?

It was about mounting up on wings like eagles. That was the quote of the day. It was Sunshine? Yeah, and I said, Like eagles, you all. Like eagles, you all.

Yeah, I totally forgot it. Out of context. I've seen it a thousand times.

I was thinking about it again. I was like, Strong time. You had to. This one, I was thinking, Attitude reflects leadership, Captain. Anyway, Anyway, moving on.

And the math teacher brings in that film strip. He's like, I've been breaking down the other tenancy. I was like, Bro, you're running algorithms with a protractor back there? So good.

It's a classic movie. A film, really. You should really watch it. All right, Kira is in Austin, Texas. Hey, Kira, how can we help today?

Hi, Jade. Hi, John. I had a question. My employer allows us to convert our 401k to Roth, and I was wondering I'm wondering if that is a good idea to start doing. Yes.

If you got the cash, do it.

Okay. I can't do it all at once because I have quite a large 401k, and the company only matches if you contribute to the 401k not the Roth. So over time, would that be a good investment to do?

I think so. They only match it if it's the traditional 401k. They don't match it if you put it into the Roth 401(k). They don't match it if it's Roth.

Correct. So I'm still contributing to the 401(k), but I can convert it to the Roth, which is weird. But then you can't touch that for five years.

So I'm going to go with the traditional first because the equation is match beats traditional beats Roth. Match beats Roth beats traditional. There we go. So free money, nothing's going to beat out free money. So we want the free money first. And then we love Roth over traditional, right? Because when you're older and down the line, you don't want to have to pay taxes on that money. You don't want your family to have to pay taxes on that money. So if you can convert it, that's also a great thing. And yeah, I would do that.

Okay. And I could only do a little bit over time because I don't want to get out of my tax bracket when I... And you can correct me if I'm wrong, but it counts as income, right? When you convert it, and then you have to pay... I don't want to move out of the tax bracket. So if I make a large amount, I don't want to- You're over my skis on that one.

You'll have to ask a tax pro on that one.

Okay. What baby stuff are you on?

I'm on four, I think. Whatever paying down the house. Okay.

So you might want to get with the tax pro, but you should be paying. You're paying money because you're basically... Essentially, when you do a Roth, You've already paid the taxes on it.

Yeah. No, I meant when I convert it. So let's say I convert $50,000, don't I have to pay my tax bracket percentage for that $50,000 that I convert?

Yes, but that's the conversion. You're paying taxes on that 50 grand as though it was income now, and you're not going to pay taxes on it when it becomes 500 grand 30 years from now. Yeah.

So that's what I'm saying, is I I have $330,000 in the 401(k) that I could convert, but I don't want to convert all of that at once because I don't have the money to keep. Yeah, okay.

Perfect. That's about that. Here's the thing. Technically, this is a baby step seven action, what you're doing here. Okay.

So I should pay off my house before I do that?

Technically, yes, because it's almost like if you were rolling this money over to a traditional Roth, or I'm sorry, to a Roth IRA. It's almost like if you were doing that and we would save that for Baby Step 7 because of the tax implication. You're in Baby Step 4, so there's other more important things to do than to do that. Now, I wish... I'm thinking through this because this is the first time I've had this call because I love a Roth, but at the same time, you're getting this match over. So I'd almost pretend like the other one wasn't there until Baby Step 7.

Okay, so don't convert it.

Yeah, because I don't want that. Until I pay off my house. Yeah, because I don't want that tax burden on you until after Baby Step 6. Yep, that's my final answer. Is that your final answer, John?

I think my final answer would be start converting the backlog, if you will. Maybe start now. This year's income, convert it.

That's what I was thinking is doing 50,000 a year.

And what's your take home salary every year? What do you make?

For me and my husband, both or just me?

Just you at your company that you would roll to, you'd do it back to a Roths with. 200,000. 200? Okay, so you make a chunk of money. Okay.

I don't mind that. I don't mind what John said, keeping the past in the past, but from this point forward, whatever your current amount is that you're starting with it as a traditional, then at the end of the year or whatever, however you want to do it, rolling that over. I'm not mad at that.

My algorithm on that in my head is not a dollar for dollar. I'm sure somebody could whip out a calculator and make a math case one way or the other.

Well, she would have doing that anyway, on the taxes.

Exactly. But I'm saying in doing it out of order, is there's a risk to, let's say the stock market has significant troubles down the road, right? So there's a risk. Anytime you're in the stock market, you're always playing a risk game. The one thing that's not going to change is that mortgage is still coming every month. Yeah. And so I want to knock out the thing that's against me all the time. I want to take the risk off the table, and that's just a personal thing. And so I would probably roll your this year's income into the Roth, to do it back to a Roth at the end of the year. But I would... Yeah, I'm with Jade. I would save that catch up, if you will, until I've taken all my risk off the table. But that's just me. And that may be a terrible mathematical calculation. I can't do the math in my head. But that's for me just wanting to solve for peace in my house.

Yeah. The only reason I was thinking about converting it, since it grows tax-free once you pay taxes on it, it grows from it, and I still have 30 years to work.

That's why I said your current amount, whatever you're putting in there for this year, and the year's going forward, I'm fine with you getting the match and then rolling it over. Because that was a tax burden you were going to take anyway. Yeah, exactly. Whereas the big chunk, the 30 or 40 or whatever it was, that's a bigger tax burden. And I'm with you on John.

I'd rather not have a house payment.

Save the big chunk as a baby step seven action. Yeah, that's a good question.

And that will cost you for everyone who's yelling and screaming into their YouTube.

Yeah, people aren't going to agree with us on that.

It's going to cost you, and Dave may disagree with me, but it's going to cost you potential compound growth. It's going to cost you money to keep it there. If you're going to roll into a Roth and it have grown tax-free. There's going to be a penalty there. It's going to cost you something to not make that action. But it's also going to cost you money that could have paid down your house principle. Right. It's a prioritization. And that house principle never is going to go away. And so I would take that risk off the table first. That's just me.

It's a prioritization. We would say that if somebody called in today, and even though this is through her employer, if somebody called in today and said, Hey, I've got 500,000 sitting in my traditional fund. Should I roll it over? But had a pile of debt sitting there and they had payment, we would still walk them through the baby steps. And so in the baby steps, any type of conversion, any type of investing over 15 % is a baby step seven action. And so that's the way it rolls. And it's just like John said, it's keeping the priorities the priority, which is getting peace and getting your house paid off would come first in that.

But I do love the idea of the people who come after me being able to get all of my retirement with no taxes.

Absolutely. Yes, it is important to do that. If you can do it, do it. And if you can only do Roth, only do Roth. But like I said, free money, again, that's going to Trump it at this point. That's the way it works. All right, guys. Enjoyed hanging out with you today. Remember, there's only one way to financial put peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Thanks for watching The Ramsey Show. See you next time.