Transcript of You Can’t Build Wealth in Financial Chaos New

Brought to you by the EveryDollar app. Start budgeting for free today. Normal is broken, common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studios, this is The Ramsey Show. I'm Dave Ramsey. George Campbell, number one bestselling author, Ramsey personality, is my co-host today. Katie Katie is in Harrisburg, Pennsylvania. Hi, Katie, how are you?

I'm wonderful, how are you?

Better than I deserve. What's up?

Okay, I have a question. So I am working insane amounts and I just can't seem to— enough is never enough. There's just never enough money for the end of the month. If I can't afford my credit card payments, what do I do? Like, do I just not pay them? Obviously I want to pay them because it's my debt and I racked it up, but what do I do? Because I know you always say pay your necessities first. Well, there's not enough money.

Help. Okay.

Well, I always say pay your necessities first because you should pay your necessities first. You should buy food before you pay your credit card.

Yes.

You should buy lights and water and pay your rent before you pay your credit card.

Yeah.

If you're running out of money, let's get to the bottom of that and figure out what's going on. You're working hard. You're not scared of work. You established that, right? So what do you, what do you make at your main job and what are you making overall?

Okay.

So my main job, I make about $3,500 a month because I get, I get paid one time a month. And then I have a second job that I make about $600 every other week. And that depends on how— that's a part-time job, but it depends on how many extra hours I pick up.

Okay.

So you got $4,700 coming in. How much is your rent?

Um, my mortgage, it's a mortgage. So my husband, my husband makes about $420 a week.

Uh, okay. I'm sorry.

Okay.

So you got $4,700 plus, uh, um, another $1,700, right?

Correct.

Okay. So, so now we're at $6,400, right?

Yes.

Okay.

And your house payment is how much?

It's $1,069.

Okay. Not the problem.

All right.

And how much are the car payments?

Um, I have my, my vehicle is, um, it's, I usually pay with my, my second job money. It's $300 every other week.

You have a $600 car payment. And what do you owe on the $600 car payment? How much money do you pay off?

$5,800.

Okay, good. And what about his car? It's, it's paid for.

Okay.

All right.

And what other debt do we have?

Um, I have a, I have a 401 loan that is $351 and the balance, it's about $4,600. That'll be paid off next December. Um, I have another loan because of my, you know, consolidation loan, cause that was a good idea. Um, but no, whenever it's, that's $671 and that will be paid off May of '29.

$671 a month?

A month, yeah.

And the balance on the consolidation loan is what?

Is, uh, $18,000.

Okay. So $18K, $4,600, $5,800. All right.

Are there credit cards on top of that?

Oh, there are.

Yeah, there are.

What's the total in credit card debt?

Around $23,000.

Okay. $18,000 plus $5,000 or $18,000 plus $23,000?

18 plus 23.

Okay.

All right.

So you've been living out of control for a while.

Yes.

And credit card has been catching your out-of-control chaos instead of fixing it.

Correct.

Yeah, because you really don't have a lot of debt until we got to that. So what do you think you're spending all this money on? Because there's a lot of money just disappearing in these numbers.

Exactly.

Exactly.

Where do you think it's going?

Well, and honestly, I live a very, very simple life.

Somebody doesn't.

Obviously.

Yes, it's definitely not me around here. I mean, as far as like food and gas and like, I mean, I don't live lavishly.

Like, I don't.

I mean, my daughter is, she's a— she does a sport, but that's about it. Like, that's honestly about it.

My oldest daughter, she's self-sufficient.

Um, she's 20 years old. She, you know, she, she pays for her own things.

She works, she goes to college.

Like, so I don't have to pay much for her. Um, she does pay for her portion of the car.

So if I— let's stop. If I take $6,400 and I pay a $1,069 house payment and I pay a $600 car payment, um, I've still got a lot of money left over.

Well, my gas bill is $300 a month. Electric bill is $500 a month. My car insurance is $300 a month.

Yeah, you still got a lot of money left over.

Yeah, yeah, exactly.

I still can't figure out where all your money's going. It's not to baton class.

Right.

Is your husband as stressed about this as you are?

Oh God, no, no. He lives his best life.

Well, that could be part of the problem.

What does his best life spend money on?

Um, I, I don't know. He takes, he takes $100 plus or minus. Um, usually it's plus a week out for his gas and whatever else he thinks he needs. Um, and that's, that's, and then if he needs more, he'll ask if he can take more. And most of the time the answer is no because I don't have it.

Yeah.

So he's getting an allowance. From you?

Yeah.

So, okay, there's a couple things that I do here that we can work on, but I still don't know the answer. Sometimes people call and I go, oh, it's your stupid car, sell your stupid car. But it's not your stupid car. You about got this car paid off in a few months. It's your stupid credit cards, but they are the— that's where it's leaking. They're the symptom, they're not the problem. Okay. If we quit paying them and you're still spending more than you make, you're still going to have a mess, right? So that's the issue. So I hear 2 things I want you to work on, and I don't know if this is going to solve it all, but it's going to get you on a path to help you solve it because you'll discover what I've been looking for with these questions and what George has been looking for with these questions. So we're going to send you the, uh, a 1-year subscription to EveryDollar to tie into your bank. And there's 2 things I want you to do. For 35, 40 years I've been doing this, 100% of the time I put someone on a detailed written budget where they spend every dollar on paper, in this case in the app, before the month begins.

When you allocate every dollar has a name of the $6,400, that's what I was starting to do in our discussion. You're going to feel like you got a raise. I hear that Every single time, because chaos always eats money. Disorganization always eats money because it takes you into drama mode, which is impulse mode with money.

Mm-hmm.

And that's where you're living. I can hear the stress in your voice. I feel bad for you and the frustration in your voice because you can't get control of it. So for the first time in your life, you're A, going to tell your money what to do. Instead of wondering where it went. And once you've come up with a plan, you don't deviate from the plan. It's your plan, so you get to tell it what it is, and it's going to be food, shelter, clothing, transportation, and utilities. And then we get to credit cards, and you're going to cut up all your credit cards as number 2.

Okay.

And number 3, he needs an actual job.

Yeah.

Why is a grown man making $10 an hour?

Well, he, he—

I, I honestly, I can't tell you exactly how much he makes. He makes— so he brings in $420. No, it's $10 an hour. Because they take $154 a week out of his—

No, he needs like a real job. This isn't about deductions. He needs to go make another $20,000, $30,000, $40,000 a year with a career. Now you have some margin to clean up this debt in under 2 years.

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

That's zander.com. Jeremiah's in Detroit. Hi Jeremiah, how are you?

I'm great, thank you.

How are you doing?

Better than I deserve. What's up? Hey, I'm a big fan of the show and I've got a decision to make.

Um, we've got a mortgage that we've been hyper-focused on paying off.

Cool.

About a $420,000 mortgage at 5%, and I've got, uh, money that I could pay it off tomorrow. And with the market correction coming, I'm wondering what is the best financial decision, uh, based on opportunity loss, right?

Opportunity risk versus the mental wellbeing of, uh, get rid of your mortgage.

When's the correction happening? I want to mark my calendar, make sure I'm prepared. Do you know the date?

No, sir. Hence the call.

Do what?

Hence the call.

I said, hence the call.

Yeah.

Why do you think there's a correction coming? Um, I guess just listening to the different, uh, financial information coming out. They believe that the market's oversold again.

If I was— Who's they?

I'm sure.

Who's they? Uh, you just hear different, uh, you know, Warren Buffetts of the world and other, you know— Warren Buffett is not selling. Due to a correction that's coming. That's not true.

Okay.

No, I mean, really, I, I don't know where you've gotten this. I, I don't know that a correction is coming, and that's why I'm disagreeing. Let's pretend though for a second that a correction is not coming and that the market, uh, since 2023, if you left your money in, it would've doubled during that time. Even if that is the situation in the next 5 years, I'm still gonna pay off my house. You wanna know why?

I would like to know.

Yeah, it's a good question. You should, you should want to know. Don't take some guy on the radio's word for something. You ought to understand it yourself. That's good. I like that. Good, good man. All right, now here's why. The data tells us that people who have paid-off homes build more wealth than people who don't. Actual data, not somebody said on the internet. We studied 10,167 millionaires, 89% of which— that's 9 out of 10 of them— who started with nothing and became millionaires in the greatest society for building wealth that has ever been known in the history of man called the United States of America. And that's what they have done, and it took them an average of 12 to 17 years. To build that first million-dollar net worth. As we interviewed them, they had a $1 to $10 million net worth on average. They all said, 86% of them said, paying off their home was a key part of them becoming wealthy because of the peace it gave them, because of the effect on their relationships, because of the effect on their career choices, because they weren't worried about some bozo taking their home.

And guess what? They also freed up a huge chunk of money each month to invest because your most powerful wealth-building tool is your income. So even if you and I are diametrically opposed on whether a correction is coming or not, doesn't matter. The answer here is still going to be the same because the data tells us your most powerful wealth-building tool is the guy in your mirror. None of them, precisely zero, said the way I became wealthy was I arbitraged my personal home by borrowing at 5% and investing at 7% to 12% to 14%, or whatever the market did right then. None of them said that's how they become wealthy. Zero. And this is wealthy people, not broke people in their mother's basement with a financial blog. These are real wealthy people, people that really did it. And so that data tells me that that's the way to go, that when God said in the Bible in Proverbs 22:7 that the borrower is slave to the lender, it didn't say except home mortgages. It said period, slave. Can you imagine the attitude at work of someone who's not a slave versus someone who is a slave?

Can you imagine your likelihood to get promoted? Can you imagine the divorce statistics among slaves versus non-slaves?

Hmm.

Oh, and guess what? Divorce is a key factor in building wealth because marriage is grand, but divorce is 50 grand. So all of this comes into play. And it's, it's a little more complicated than a simplistic arbitrage formula of, I've got a 5% mortgage and I can invest in the market at 12%. That's very naive and incomplete. That's not how life really works. And so really good question, Jeremiah. And thank you, thank you for letting me get up on my soapbox because I know right where it is.

I enjoyed that. That was fun for me personally. But a couple of good thoughts here. Number one, time in the market beats timing the market. And so you do want to be in there a long time. We invest for the long haul. So the question I have for you is, why were you investing? Was it for the purpose of paying off that home once you had the full balance? Was it just for fun? And then why do you want to pay off the home? It likely has nothing to do with if the market's going to be up or down. It's probably because you want some peace in your life.

Yeah, he did. He said that. There is a connection. To his credit, he did say that.

There's a job loss here.

So George, let me ask you something, because I've made such a good habit. I'm so proud of myself. I just don't read the trash on the internet. I hardly watch TV anymore. I'm becoming that guy. And so I certainly don't read the asinine comments that some of you trolls post after our stuff. Sometimes my friends tell me about it. Sometimes George tells me about it. I fill them in, don't worry. But I don't read them because I don't really care what you think because you're wrong. So I don't need to read your tripe. So I'm curious, because since I don't inject myself into this world, Where is Jeremiah going to get such piss-poor information?

Well, you know, on, I think especially on Twitter, there's a lot of—

Twitter?

News that flies by and there's a lot of, here's what's gonna happen. There's an AI bubble and it can't stay at record highs for this long. Something's gotta give. And so I think people are feeling the pressure of things are too good. It can't be good for much longer.

So it's basically the spirit of Eeyore has gotten loose on the internet.

Essentially, it's everything's overpriced and the AI bubble—

It's bad, everything's bad.

And Nvidia is overpriced.

And it's gotten too big, so it has to fall. The spirit of Eeyore.

When you blow up a balloon too much, eventually it could pop. I think that's the idea.

It could, or you could let it be free and let it drift away to wherever it is those balloons go to when little children lose them at the happy birthday party, right?

Wah, wah!

And there goes the balloon, right?

And eventually it pops in the solar system too.

How do we know? How do you know that, George?

That's a good question.

Were you there when it happened?

I wasn't.

All right.

I don't know. It could just fly away to the place that balloons go to. Seriously, here's the thing. I don't know about market corrections in the short term. I truly don't. And I'll guarantee you this, neither does anyone else. The only people that can be wrong most of the time and keep their jobs are economists and weather forecasters. They're the only ones. My wife is like, it's gonna rain today. It's a 62% chance of rain. Watch it for 3 more hours. It will change. Oh, and by the way, there's a 38% chance it's not going to rain.

Such an optimist, this guy.

I'm going to play golf. That's it. I mean, I'm going. So you can sit here and look at the radar. I'm not going to. But this is the way— there's a human nature thing here that's interesting. So anyway, to help you with that, because we all have the spirit of Eeyore, some of us in larger portions than others, But we all have that person who wonders about the balloon popping. We all wonder about, is that real estate prices? When are they going to come back down? I don't know. I started buying real estate. I started selling real estate in 1978. I haven't seen them come down. Just for a minute in 2008, and then they went right back up. Does anybody remember that? Anybody remember what happened when all you people came out of your houses after COVID? Y'all all were buying real estate like a Baptist after a casserole. I mean, y'all went nuts. And it just goes crazy, y'all. And so what happens to real estate? What happens to the stock market?

I don't know.

Let's look since 1970. Let's look since 1950. What's the stock market done? I started investing in my 20s in the 1980s. What's the stock market done since the 1980s? Made me rich.

About double every 7 years.

Did it go back down?

Yeah.

Did it go back up? Yeah. Did it go back down? Yeah, but overall, did it go up? Yeah. So I don't wring my hands and fret about corrections, and I don't read idiots who talk about them.

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John's in sharp Charlotte, North Carolina. Hey, John, how are you?

Doing great, Dave.

Hope you are too.

I am. How can we help?

Thanks for having me on the show.

Sure.

Um, so I am a dentist. I graduated about a year and a half ago. Um, I have $250,000 in student loans. I'm getting married to my fiancée in 4 months and she is a lawyer. Um, we can both expect to make about $200,000 this year.

And how much student loan debt does she have?

She has no student loan debt, actually.

How did she pull that off?

Uh, just fortunate, I guess. She had a big scholarship.

Wow.

To be a lawyer. Okay, cool.

Yeah.

All right.

And so you got $250,000. How much other debt do the two of you have when you're married?

So we just bought a house, so we got a mortgage of $252,000.

So total $500,000 in loans. Okay.

And you're not married yet?

Okay.

Not married yet.

Okay.

So the mortgage is technically in her name, actually.

Okay. All right, good.

Currently, but my name will be put on it.

I think I got the picture. How can we help?

I've kind of prided myself, you know, the last year and a half, uh, living frugally. I feel like I'm living the same way I did in dental school, um, driving the same truck I have since high school. Uh, now I got a little bit of money.

How much debt? Wait, wait, wait, wait. You got money? Did you not? You didn't put it on the student loan?

I mean, I have, you know, you know what I mean? An emergency fund and I've had some investments and stuff.

Okay. How much do you have in investments and in an emergency fund?

I got about $40,000 in investments, $25,000 in the emergency fund.

Gotcha.

Okay.

I'm caught up. All right, good. I'm sorry. I hate to keep interrupting you. I'm just trying to get to make sure I know what's going on.

Okay.

Yeah, yeah, yeah, you're good. I'm an avid duck hunter, and for years I've dreamed of kind of getting a jon boat to go duck hunting with, and I found a real good one for $5,000, and I feel guilty about it. So I wanted to get your take on that.

Okay, well, the— well, I think we kind of pan back from the whole situation and say, all right, what would we do in your overall situation now that we've got a decent handle on it? And, uh, of course our goal for the two of you is to, uh, once you're married, to combine your finances and have an emergency fund of $1,000. And everything above that goes towards your student loans. And you pay off those student loans like your hair was on fire with no investing.

Yeah.

No investing.

Yeah.

No 401s, no nothing. And with your great income, the combined income in particular, and I think you said 4 months you're married. then you attack that with a vengeance and you work all the time until you make enough to get this paid off. Both of you, you work like maniacs.

Yes.

You've got obviously great professional careers, but what tends to happen, and we've worked with doctors and dentists for years, doctors are worse than lawyers, but not much worse. And both of you get what's called doc-itis. And docitis sounds like this: you've gone to school longer than all of your friends. You've paid a price to get DDS after your name, or JD in her case.

Right.

And so we've paid a price to get these graduate-level professional careers, and we've held our breath And we've delayed pleasure while all of our peers are out hunting ducks, right?

Yeah, correct.

And what ends up happening is it's kind of like holding your breath. And it's all— it's happened so much, it's almost stereotypical. That's why we call it doc-itis. You get out of school right where you are, and the first thing you do is you exhale and go buy a $250,000 house. You exhale and go buy a BMW. You exhale instead of turning around and addressing the student loan debt.

Yeah.

And that's, that's very typical among people. And it's because I'm asking you guys to, after you've held your breath for 16 years, 18 years you've been in school, I'm asking you to hold it for 2 more years and clear the student loan debt so that you've got the rest of your life with a $300,000, $400,000, $500,000 household income and zero debt. But I'm asking you to do something that's very, very hard to do emotionally, and that plays right into this conversation. And so what we teach is this extreme thing, because it works, of have— continue to have no life. You said you're acting like you're still in dental school. That's good, but you're really not because you're making really good money and you've only saved $40,000. So that's okay. It's better than most. But you're really not like living on a beanbag chair. I mean, you're really not down to nothing. You've just been careful and intentional. So the $5,000 bass boat— or I'm sorry, duck boat— is not going to cause you, A, to get more ducks. You're already getting ducks with your buddy's boat. And B, it's not going to cause you to go bankrupt if you go do it.

But what I'm most concerned about is that you address the overall philosophy of this idea that somehow I've got the cat by the tail. You don't. You're a broke dentist. You're a quarter of a million dollars in debt, and bless your debt-free wife's heart for marrying you.

Yeah.

And I want you to get your head around that and then decide, is this grown man going to go buy a $5,000 boat to hunt ducks? There's nothing wrong with it. I don't blame you. It's kind of fun. I like hunting them too, but I'm a wingman. I love shooting birds, but, um, going pheasant hunting in a few weeks, but I'm not buying a boat to do it, and I've got the money. I'm just gonna fly up and use somebody else's stuff. So you can do that a lot in your area. So I wouldn't buy it because of what it represents In you. I want you to reprioritize things and who you are as a man coming into this marriage. And you're putting her first, you're putting your future first, and you're addressing the little boy that lives inside of all of us that wants cereal on the cereal aisle. And you're going to tell him no. And that's called being a man because I have bigger goals. And then I'll buy a duck boat and buy a piece of ground with ducks on it. Later in cash. You'll buy a real nice boat. And then buy some ducks.

I mean, whatever you need to do. I mean, you'll be able to do any of it you want to do at that point, right? So, but I wouldn't do it for that reason, not because the $5,000 is a deal breaker.

What do you think?

Well, it's not an affordability question. This just happened last night, Dave. My daughter wanted a popsicle before dinner, and in my head I'm going, if she eats that popsicle, she's not going to touch what's on the dinner plate. She's not eating those vegetables.

Look at you, bring the metaphor.

And so then I'm— this is kind of how we all are. That toddler still lives in all of us, and I'm going, if you get that duck boat, you're going to get pretty comfortable, those weekends are not going to be spent working overtime. You're going to be going, I got to use that boat. I got to get out on my boat. And so I like it for the dangling— dangling the carrot is good for humanity. It makes us want to go hit the goal, do it faster than we normally would have so we can get to the dessert, so we can get to that key lime pie at the end.

But it's not about a duck boat is wrong. And it's not about a $5,000 duck boat in your situation is wrong. It's about what it represents in your philosophy of life and how you're going to address the next 5 years. Because dude, if you, if the two of you take care of the next 5 years and you're making $300,000 or $400,000 and you got zero debt and you pay off your student loan, you pay off your house, you understand how fast you're gonna have $10 or $15 million? I mean, the numbers are astronomical in your favor unless you screw it up one duck boat at a time.

If you just took the student loan payments that you free up and invest that, you'd be multimillionaires. Just that alone.

Just that alone. As soon as you do that, the sooner you do that, the sooner you're a multimillionaire. So we teach people, John, to live like no one else so that later you can live and give like no one else. In the scriptures, it says, no discipline seems pleasant at the time, but it yields a harvest of righteousness. And I mean, some people, a very small percentage of the public, likes to go to the gym. The rest of us do it because of what it gets us, not because we like going to the gym. And we had a whole bunch of us run the half marathon around here, and Kelly, our producer at the time, she said, I'm not going to run anywhere. I'm like, why? She said, the Bible says only the wicked flee when no one is chasing.

That's in Proverbs. You can't argue with that. That's biblically based. Why are you running? Who are you running from? What did you do?

But to Kelly's credit, our— yeah, not this Kelly, not, not a different one. She, she's lost a bunch of weight.

Yeah.

She's now John Delony's producer.

That's why she's so healthy.

She's in great shape. I'm so proud of her. She's done a great job, but it wasn't by running while no one was chasing.

If you're waiting for rates to drop before you buy a home, here's what nobody tells you. When rates fall, every buyer who's been sitting on the sidelines makes their move at the same time you do. That means More competition, higher prices, bidding wars, all that. That's why I tell people to talk to Churchill Mortgage before they do anything else. Churchill gives you a strategy so you're not at the mercy of the market. They can show you what you can afford, not just what the bank will approve. And with their Certified Homebuyer program, your financing is completely secured before you shop, which means when rates drop and everyone rushes in, you're already ahead of the crowd. You're not scrambling for preapproval while the house goes to someone else. My husband and I bought both of our homes with Churchill, and having a real strategy, not just a rate we were waiting for, made us ready when it really mattered. So start your search with Churchill. Click the link in the description or go to churchillmortgage.com/ramseyoffer for an exclusive Ramsey audience offer. churchillmortgage.com/ramseyoffer.

Speaking of boats.

We're about to be on a big one.

We're gonna go on a big one. No ducks involved. We're talking about a major, super nice cruise. The Ramsey Cruise. The Live Like No One Else Cruise. And you only go After you're out of debt and you have your emergency fund in place, you're on Baby Step 4 or beyond. But if you're on Baby Step 4, you're out of debt except your house and beyond, you're working on your investing, you're working on paying off your home, and maybe you're Baby Step 7, maybe you paid off everything, then come celebrate with us on the Live Like No One Else cruise. All the Ramsey personalities, me and Rachel, John, George, and Jade will be there. Plus many others. Going to have a lot of musical guests like Natalie Grant will be with us. Uh, absolutely amazing lady. Uh, many, many other people will be with us. We're going to be teaching and recording the podcasts and all kinds of different things on the ship. And so you'll have events you can come to with me teaching, uh, setting goals after you're out of debt and building wealth, uh, ways to continue wealth building, ways to make sure your family isn't messed up by your wealth.

And this is not on a cheap cruise. This is not Walmart on the Seas. This is the nice boat, like Holland America. This is several notches up. Okay, this— I don't go on the cheapies, um, not even for work, not even for you folks. So there you go. This is fun, and you're gonna have a blast. It's Western Caribbean, which means Jamaica and Cozumel, Grand Cayman. Half Moon Cay, which is their island, and all that stuff. So check it all out. Baby Step 4 and Beyond, we're gonna be going March 14th through 21st. George, we had a blast. It was so much fun last time.

Just seeing the photos kind of took me back. I got excited again.

Yeah, ready to go, guys. There's not that many cabins left and only a $600 deposit to get your cabin done. So you can do that by clicking the link in the show notes or going to ramseysolutions.com/events. You better get in on this because March is going to be here in about 30 seconds and you're going to wish you did. Sabrina's in Houston. Hi, Sabrina. How are you?

I'm doing well.

How are you?

Better than we deserve. What's up?

I was wondering if, uh, we should include a car that we co-signed for with our daughter as a part of our Baby Step 2.

Yes.

Okay.

The reason is, is that you're going to pay it. That's why they wanted a cosigner because they don't think she's going to pay it.

Yeah. That's kind of been on my mind for a little while.

And how much does, how much is owed on the car?

$12,000.

Okay.

And what's your total debt other than this and other than your mortgage?

$2,000 will be paid off in, at the end of October.

Until I said this. Yeah.

Okay.

Yeah, correct. Correct. Including this, it'll be next June, I think.

Yeah. What's your household income?

About $200,000.

Why does it take till June to do $2,000? Why are you only doing $2,000 a month if you make that kind of money?

So we have our mortgage, which is $2,000, and then we have like electricity we pay, like our insurance is like $1,000.

Um, yeah, but you have $200K, right? It's, uh, you have money going into your 401 still?

Yes.

And unfortunately for my job, I can't opt out of it. Like, it's automatic.

How much is automatic?

8%.

Are you a teacher?

Um, no, I work for a local municipality.

Yeah. Yeah, okay. All right, um, but you've opted out of Social Security probably, hadn't you?

Yes.

Yeah, good. All right, which also should increase your take-home pay by $765, so it ought to be close.

Hmm, I think if you guys sat down and really did a detailed budget, you would find there's more margin than you think.

Okay.

So probably $4,000 in here to throw at the debt.

How are— when you pay off this car early, let's say you wrote a check next month and paid it off just for the fun of it. What does that do relationally with her? What's the plan then? Would you ask her to pay you back for it or what?

Probably not.

Yeah.

Um, her situation is, I mean, she's doing well. She can maintain a job really well. Um, it's just, she's still young. And doesn't have a career. Um, so—

How old is she?

She's 23.

Is she married?

Um, no.

She go to school?

Uh, yes.

Okay. Yeah.

Okay.

I like that then. Yeah. I just pay it off and it's a gift to her and we shouldn't have, none of us should have borrowed money on it. We shouldn't have cosigned you. We shouldn't have taught you to borrow money on it. You should have bought a car you could pay cash for because you're a broke 23-year-old. But the good news is that we're going to right that wrong by paying this off you and you're free. The one thing we would ask you to do, honey, is to consider the fact that, that you just got a get-out-of-jail-free card. So don't jump back in jail. Don't go into debt. We're learning to get out of debt. We want you to learn what we wish we had learned when we were your age. So I'm gonna give her that speech, right?

Right.

That goes with me paying off your car early and you don't have a car payment anymore. So that's not an excuse to go to more happy hours. That's an excuse to work on your career. Finish your degree and get out there and kill something, girl. You can do it. I mean, I'm— that's the speech I'm giving her. So I like where you are. I think you're doing great. I'm with George. I think you can tighten up your budget a little bit. Yeah.

I mean, making probably $10,000+ take-home, I think we can find $4,000 in there and make do with the $6,000 to cover all the bills.

Okay. So the numbers, George, we're seeing are disturbing, uh, on the amount of help That parents are giving their 20-somethings and their 30-somethings. They're paying for their grandkids' private schools. They're paying for car payments. They're paying for— the amount of financial codependency among parents and grown children is like crazy. It used to be that that was something you made fun of, but now it's everybody.

It used to be the exception.

I forget the numbers, but the thing I read the other day blew my mind. It's like 49% of the single males under 30 live at home still. Wow.

I do know—

An eagle that doesn't leave the nest eventually is known as a turkey.

Yeah. There's more single women buying homes than single men.

Yes.

And so that shows you something.

Yeah. And they're not saving their money. They're playing DraftKings or sports betting, and they're not saving their money. They're putting it in stupid butt stuff like crypto. This is what the data is telling us. And it's really scary trend. So I think, George, it's a good idea for us to pause a second, not to pick on Sabrina, but she does give us a jumping off place. Um, and say, uh, it's a good idea, moms and dads, To let your little eaglets fly and be free. Co-signing is a bad idea.

And you want to make sure you're helping temporarily to help them launch, not enable and give them a hammock. And that's unfortunately what's happening is they've created an expectation that I'm basically going to finance your lifestyle and we love having you home and I'm happy to fold the laundry. And what happens is you end up stunting your growth in your career and your relationships. Every area of your life eventually will suffer. Because of that, you sort of resort back to your 14-year-old self.

Yeah, I was defiant and a bit of a jerk, and so I kind of deserved it. And my dad is like, okay, genius, go figure it out.

So you got booted.

It's like, good luck with that. And there wasn't a, but we'll take care of you because you don't have a career yet. It was like, You're a freaking genius. Go act like it.

See if those wings work, Dave. You just got pushed out of the nest.

Flap, flap, flap, buddy. So yeah, that was a different— I guess the hillbilly culture is just a little different.

Yeah. I don't— it used to be something had happened if you were still living at home or you came back home, there was a life event.

There was something bad happened to you and you needed a place to heal. And that's understandable. That's a safety net, not a hammock. But yeah, moms and dads cosigning— by the way, cosigning period is stupid. It's in the Bible, Proverbs 17:18, one lacking in sense cosigns for another. I have cosigned, Sabrina, so I'm not picking on you. I had one poor gentleman cosign for me right before I went bankrupt, and he ended up having to pay the debt when I went into bankruptcy. And it took me a while to get it paid back. And we were never quite the same after that, me and him.

I can imagine.

He was nice to me. He was not, you know, he signed up for the trip, but he got to take the trip. I signed up for a couple cosigns. I got to take the trip. These things go bad. That's why they want a cosigner.

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Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. George Campbell is my co-host. Steven is in Wichita, Kansas. Hey Steven, what's up?

Hey Dave, um, a pleasure to visit with you. I've been a longtime listener, and I have to say, as a pastor, I know Proverbs 22:1 well, the rich rules over the poor, and the borrower is a servant to the lender. But here's where my struggle comes in. I didn't borrow my way into this situation. I got sick. I survived cancer twice, a bone marrow transplant, exhausted nearly $300,000 in retirement savings, and now I'm fighting kidney failure just to stay alive. So, my question is, how do we apply biblical financial wisdom when somebody hasn't been irresponsible, but has simply been overwhelmed by the circumstances beyond their control?

control?

Or how do I remain a good steward of what God has given me when the cost of surviving has taken nearly everything that we have?

Where was your health insurance?

Well, I was on Medicare and I am still on Medicare. And even with Medicare, you know, they bill me $150,000 a month and then Medicare pays their percentage. I'm paying $2,300 a month even with, with Medicare, even with a Medicare Advantage plan. Okay.

How old are you?

I'm 48.

Why are you on Medicare at 48?

Um, because, okay, so I had cancer, I beat it, and I had it again, I beat it, and the chemo messed up my kidneys. So I'm in total renal failure. Um, I'm actually looking for a very rare kidney right now. Like, my CPRA is 99.9999% worse than what Robin Roberts had. So we're really looking for a kidney.

Uh, if you were 48 and you had cancer, you should have had health insurance, not Medicare.

Well, no. Okay, so I did have health insurance, uh, for the cancer stuff, but still, even with the cancer and the insurance, I mean, I had to pay. I paid, I paid my deductibles and it ate it up.

And then— Deductible should be like $4,000 or $5,000.

Technically $4,000 or $5,000.

Not technically. That is the deductible. It just is the amount. So I'm trying to—

Do you have other people?

Yeah.

Do you have other people in the house though that, you know, are covered under the insurance as well? They have a family deductible. And I think our family deductible was like $30,000 for, you know, the one year.

That's different than $300,000.

Exactly. But this has been going on since 2013. So all the different things that have happened that led to this particular kidney failure.

Yeah.

Um, I mean, it has exhausted us.

Yeah.

You've exhausted us financially.

Yeah. Okay. Um, well, yeah. And you're just exhausted too. I mean, my gosh, what a horrible series of events you guys have been through. I'm so sorry. I wasn't questioning any of that. I was just trying to understand how we got here because Typically, if someone 48 goes through a whole series of rough spots, that's the understatement of the day, but it goes through a series of tragedies, let's just call it. You've got a deductible, you've got an 80/20 copay up until a stop loss, and the stop loss is usually somewhere around $15,000 to $20,000 on most health insurance plans, meaning everything after you pay that out, they pay 100%. And so it should not have cleaned out in a typical situation, even recurring different tragedies, back-to-back tragedies. I mean, maybe $30,000 a year, but still not to the tune that you lost $300,000 or $400,000. So I'm still not positive how we got here, but we're here. So I guess my point is that typically the normal process with insurance and the normal process with handling money biblically Uh, would be that you'd be, you'd be drained. And, um, but you wouldn't be, um, have completely been bankrupted by this.

And it sounds like it has, man. I'm so sorry.

Um, what I will say is, is that, is that there was a period of time when I had the cancer that I did not have insurance. And I guess I failed to say that. And so that kind of—

Oh, okay. Well, that would, that would be the, yeah, that would, that would be several hundred thousand dollars pretty easily. Yeah.

Did you try to fight any of this?

Um, I did. And there were some grants available, but then there were some places that were not going to budge. And that's even kind of what I'm dealing with now.

Yeah. With the kidney.

Um, yeah.

Um, I sure hope the kidney— I hope you find one and I hope that you're able to get the money together and be able to work your way through this. But your overall question was, um, if I understood it right, was it felt like you felt like biblical financial principles didn't work. in your situation. And anytime you have a situation where you have unbelievable medical bills and no insurance for a period of time, it's going to destroy your savings nest egg 100% of the time. And so, and let's be clear, insurance is not a biblical issue, okay? But we have 100% of the time recommended that folks get good health insurance and do whatever you have to do to keep it in place.

And I would also contact our friends at Chapter. They're Medicare advisors and they know the ins, the outs, what coverage you should have, which one could cover this. And so I would contact them. Steven Chapter is the name of our Medicare advisor, and they might be able to help, especially with open enrollment coming up to say, hey, can we switch you to a better plan for the future?

Yeah. Hopefully just some of the future medical bills, not the past ones, but—

Can't fix the past other than fighting them and trying to settle and all of that.

Guys, it's— Stephen brings up a really valid, um, uh, point, uh, that is, um, the number one cause of bankruptcy in North America today is not credit card debt. It's medical bills. And so, but under our current environment, I mean, um, You can get in touch with HealthTrust Financial and get health insurance in place. So health insurance is— and getting health insurance in place and keeping it in place is a necessity because you don't— you're one major medical event away from losing everything you've built over the last 10 years. And so, um, I mean, one stay, uh, in a coma situation and you're, you're, you know, you're down for a car wreck or whatever and you're down for 30 days in ICU, that's $1 million and you're broke if you don't have health insurance. And so you've got to make sure health insurance is in place. And when it is in place, then you've got 3 numbers you need to know. How much is your deductible? And in his case, he brought up a family deductible in addition to the individual deductible. What is your copay? And most importantly, in these major events, what's the stop-loss or the out-of-pocket maximum with your policy, and most of them are under $20,000.

But know those numbers. Don't just blindly sign up at HR for your health insurance and have no idea what you're getting into.

Along with that, make sure you got long-term disability and term life insurance.

Yep.

Because you don't know what life is going to throw at you.

Stephen, we'll be praying for you, man. I'm sorry. Sorry you're facing all this.

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If you're working the Baby Steps, the best and fastest way to do it is by using EveryDollar, our app. It's more than just a budgeting app. It's the plan, the Ramsey Plan, built right in. You can track your progress, get personalized recommendations, coaching for your situation, It's like having one of us in an app. Yeah, it works really good. It's like having us walk with you every day, encouraging you, saying, this is the next right thing. Start EveryDollar for free by downloading it in the App Store or Google Play. Brandon is in Pittsburgh. Hi, Brandon, how are you?

I'm better than I deserve. How are you, Dave?

Better than I deserve. What's up?

Hey, um, so my father's in a Rather bad spot financially. He's living off Social Security. And, uh, I'm, you know, on my way to be a Baby Steps millionaire, and I'd like to give— I'd like to give to him again. Um, he's asked me for money 3 times now. The first time I gave him $1,500. This time he's like, well, anything you can shoot my way, I'd be greatly appreciated. And I talked to my wife about it, and she's, you know, She's definitely not on board.

Why?

Because, well, she's never, she's never really had, you know, a decent amount of money and she's always scared of losing it. And she doesn't even like the fact that we have it in the stock market right now. So it's kind of a, kind of a slippery slope. I don't, I don't know where to go with it, Dave.

Okay. Well, um, to start with, your primary responsibility is to be aligned with your spouse. And so, um, in a situation like this, Sharon and I would be having— we would continue to be talking about it. Say, hon, this means a lot to me. I want to help Dad. We have the money to help Dad. And if— so how much money do you guys have? What is your net worth?

About $640,000.

And what's your household income?

$208,000 a year.

Okay.

So $1,000 going to dad is not going to cause your wife to be homeless.

True.

Right? But that's the emotions it's activating. And so you need— that means that you've got some work to do. The two of you have some work to do to get on the same page of actually how much money we have and what does that really mean?

Okay.

So let me give you an example. Many years ago I was teaching Financial Peace University and a guy came in and he said, I have a paid-for home and a $3 million net worth. And my wife works 80 hours a week as a real estate agent because she's afraid we're going to go broke and I can't get her off of it. And I said, okay.

Yeah.

So we sat down, the 3 of us, after the class was over. And, uh, I showed her, look, if you guys take $100,000 a month and burn it in the middle of the floor, You're not gonna go broke. So you need to quit working so much. You're not broke. You're not gonna go broke. You're fine. It's over. I want you to work only because you want to work. And you know what? It took her about a year to get her emotions regulated to the actual reality Of their numbers. And she finally slowed down and they went on a cruise and she was working, uh, you know, still selling houses, still working 30, 40 hours a week. And, uh, but she couldn't get there because her emotions had her in a different place than the mathematical reality. I'm more concerned about that for you guys than I am your dad. Your dad will figure it out.

Yeah.

And I don't want to drive a wedge between your wife and you with your dad because he hadn't saved any money his whole life.

Right.

And I'll tell you the other thing she's concerned about, and she hadn't said it. See if you think I'm wrong. Because it's hit or miss with your dad, she thinks there's no end to it. It's forever. Like every, every 3 or 4 months, it's going to be $1,500.

Yeah, yeah, that's 100% fair.

Yeah, and that— she's worried about that, and that's a fair thing to be worried about. It's a pattern here that's gonna get worse, not better, until you deal with your dad in a different way. But I'm gonna start with getting her on board with where we are in general, because even if it wasn't your dad, if it was somebody else and God said, hey, I want you to go give $1,000 to this person and help them, you can afford to do that. It doesn't even show up on the radar in your world. You make $208,000, you have $640,000, you're okay. I didn't ask you to give $100,000. I said $1,000. So I want you guys to get your emotional head around that. George, we see this a lot.

Yeah. Would she feel the same way if this was going to your local church or a nonprofit, or is this specifically tied to, you're giving money to this guy and I'm scared we don't have enough?

Um, no, I would say anybody.

Okay, so we can separate that from Dad's situation. So there's one thing over here with the scarcity mindset we need to break her out of. Now on the other side, we need to figure out what is the appropriate amount to give to Dad while we're not enabling and it doesn't spiral into oblivion where we just fund his lifestyle and the number keeps going up every year.

How old is your dad?

74.

How's his health?

Uh, on the lower— it's not great.

Not great.

No, he's got heart issues.

Yeah.

Does he rent his own place?

Yeah.

Yeah.

Him and my mom, they're like roommates.

Okay. What are the total income they have coming in every month?

Um, I don't, I don't know those numbers, but I would assume it's under $2,000.

I'd like to know if I'm going to be funding them. I want to know how much it costs to cover their bills, but I don't want to give them so much that they're just blowing it.

Yeah. Why are— does your mother have money coming in that's not in this equation and she's letting the old man starve?

Well, I know they combine, they combine a little bit because my dad doesn't work right now. Um, which is, uh, I told him, Mark, can you get a job at AutoZone somewhere? You know what I mean? He says he's applied, but he hasn't gotten, you know, he hasn't gotten, you know, A job landed. So yeah, my mom works at a diner. I know she does okay, but you know.

So it's not $2,000 unless she's not working much.

Okay.

But they're, they're struggling. That's fair. All right. So what, what we would do with anybody that we want to help, and we do this even with Ramsey Family Foundation, when we're helping a single mom in a situation or something, we sit down with them and put, make sure that they're exactly what their budget is and that they're being wise with the money that they do have coming in. And is there something they need to sell? Is there something that's unrealistic in their expectations? And then once that's adjusted to some common sense reality, then we can tell how much we need to help with actual money. But a lot of times the coaching is 90% of the fix and 10% of it's money with mom and dad. Now back over on the overall call and the question you're asking me, if I'm in your shoes, 90% of your takeaway from talking to George and me should be working with your wife and the two of you get on an adjust her emotions and your emotions to the reality of your numbers. And that's what we're looking at.

And if you do that with a detailed budget and you make her— make it clear, our household is the priority, but with the excess, we're going to fund part of it with this line item for dad over here at $750 a month. And now she knows instead of being surprised when Dad asked for money.

You know, it's, but it, the math does give people hope. I mean, I've looked at this 1,000 different times with people over the years. You're, you're exactly right, George, where you lay out a certain amount, you go, okay, $2 million a year here in mutual funds. If it's invested in decent mutual funds, then they're going to make over 10%.

Okay.

This year, year to date, it'd be 12.2% right now, year to date since January. Okay. So if you got $2 million, it's producing 10%, that's $200,000 a year. Plus you make money over here at your job. So, you know, you've really gotta be out of control to screw this up. You gotta be acting like some kind of rock star, you know, buying jets and tearing up hotel rooms or something to really screw this up. But if you'll just live like a normal person on your income and let your investments continue to grow, You've got a $200,000 a year margin for generosity and for some enjoyment of life once you've built that nest egg that way.

So let's balance it.

That's the point of living like no one else so that later you can live and give like no one else. But what your wife is experiencing, every single person experiences, including me, and that is our emotions do not keep up with the mathematical reality. we build wealth. None of us feel as wealthy as we become if we do these steps. Most people spend years changing their money habits, but never think twice about how their bank probably works against their values with nuisance fees and endless debt products. If you're being weird by sticking to the Baby Steps, you deserve a bank that helps with that. That's why Ramsey partnered with Fairwinds Credit Union. They built the Smart Bundle specifically for Ramsey listeners, not for everybody else. And it includes up to 10 high-yield savings accounts, so you can set up different funds for different needs and goals. And now they've introduced the Live Like No One Else debit card. The original Debt Is Normal, Be Weird debit card. is still available too. And every time you reach into your wallet, your card is a daily reminder that you follow a different path. Listen, if you're living like no one else, your bank should back you up.

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Today's question comes from Brett in Wyoming. I have debt in collections that I defaulted on and stopped paying on them. They still show up on my credit report. Should I include those in Baby Step 2 along with our credit cards and car loans, or do I not need to worry about paying those off since I don't want to use credit in the future and my credit score won't matter?

Oh boy.

Somewhere in between. I mean, sometimes if you can settle on 'em and just save up a lump sum real quick and get rid of them, do it. But do not just ignore them forever. They can come after you. They can sue you. It's not just gonna go away. Even though you quote unquote don't care about credit. So you can include them in Baby Step 2 and knock them out, but my guess is they're older debts and you could probably settle on them.

Yeah. What I would do, Brett, is probably a modification of that. And that is work your normal Baby Step 2 on your active debt, the ones you're current on. So clear your credit cards, your car loans, all that using Baby Step 2. Then when you're out of debt, everything but the house and the collections, Then make a new debt snowball of the ones that are in collections and save up, you know, 50% of what the first one is and call them and offer them 25 or 30 cents on the dollar. If you settle with them, get it in writing and do not give them electronic access to your checking account because debt collectors sometimes are good people, and if they're credit card debt collectors, they're not good people. They're scum. They will lie and they will clean out your account. Okay, we deal with them all the time. It is a scummy business, so don't, don't, don't mess around with them. You're playing with snakes here. But you do need to pay the debt. Just because it's on your— just because they wrote it off doesn't mean they're not going to sell it and someone else is not going to knock on your door at the most inopportune time.

So you do want to clean it up. You do want to pay your bills, even if you're settling them. for 25 or 30 cents on the dollar. And so, but do it in writing, keep the paper hard copy, and give— and do not give them electronic access to your checking account. And do it as a separate, uh, defaulted debt snowball after your non-defaulted debt snowball is completed. Ryan's in Columbus, Ohio. Hi, Ryan, what's up?

Hey, how you doing?

Better than I deserve. What's up?

Uh, so the question I have, um, real quick, I'm 24 years old. I am running an auto repair business. Um, and I am moving from the stage of solopreneur to, to my first hire. Uh, the question I have with it is in the process of moving from first stage to second stage, how do I do it from a position of strength? With the numbers, I have kept a pretty close hold on everything, running everything myself. And I think I've done reasonably well, been reasonably successful. And how do I kind of move into supporting another full-time technician, someone who can put the work through and not allow it to kind of rock my boat financially?

Yeah, great question. Great question. In business, in small business, the most difficult hire you will ever make is your first hire because it's emotional and you don't know what you're doing, and you know you don't know what you're doing, and it scares the crap out of you. And I hear all of that in your question, which means you are very wise, sir. You're very wise.

Oh yeah.

Okay.

I still want you to do it, but it's learning a new skill. Okay? So spend some time with the people interviewing them. Set the compensation package up to where they are producing more than they cost.

Mm-hmm.

All employees at the end of the day have to promote— produce more than they cost as a group. If they don't, we go broke. Because it's the largest expense line item on your, on your profit and loss statement is your payroll once you start having payroll. And so—

I spoke with George and Jade a few months ago about moving into my, uh, it might've been a year ago about building a new building, the facility I'm in now. And my question was whether I was pretty new to you guys. My question was whether to borrow a business loan or not. George told me that would be the dumbest thing I could do. Um, I followed his advice and was able to cash flow the rest of the building. Now I'm in a position where I'm a little bit cash tight and I want to expand the services I can offer, more equipment and so forth.

How much cash do you have?

Liquid cash, maybe around $40,000.

And what does a technician cost?

He's willing to start at $25 an hour, 40 hours a week, plus a little bit, so around $1,200 a week.

Okay, so $4,000 a month. So if he produced absolutely nothing, it would burn up your cash in 10 months, which is a zero possibility of that happening. You're not gonna let him sit there and produce nothing for 10 months. You'd fire his butt, right? I mean, he's got like 1 month to get things moving. So I assume you have a backlog of work that you—

You have a few days for me?

Hold on, hold on. I assume you have a backlog of work you can put on him, right?

Yes.

At this point, yes, that's not a problem at the moment. And so far, what I've seen in just a couple of days of working with him some, just we don't have a term agreement or anything, but he's done a few things for me and he's good and fast. And it scares me a little bit about keeping him busy and keeping his pay moving up to keep him happy.

Well, let's just, you know, I think you just tell him the truth. When people started coming to work for us in the early days, I'm like, guys, I'm going to tell you the truth. The truth is we all have to make money together or there won't be any money. And that's the case with you guys. You and me, dude, we got to make some money together. So there's some money. If we make a big old pile of money, I'm going to share it with you and you're going to get your raises. If we're starving to death over here, your kids are going to be skinny with mine.

Mm-hmm.

So I mean, just talk to him. You know, you're not corporate America. You don't owe somebody, you know, you're not putting a brand on them or something like you own them. You hired the guy. We hope it works. We think it's gonna work. You got $40,000 worth of pad. You're not gonna run through that. That would be silly. You've got to get the thing— got the position, has to work. You have to, you know, fill it up with work, the two of you. And pretty soon you're probably gonna put him on piecework anyway, aren't you?

Possibly. With the size of operation I'm running, it can be a bit difficult to make everything run as efficiently as possible because you have the chance of moving from one thing to the other. But we could get to that point depending on how things work.

And then that's a no-brainer because he's earning his keep on every turn of the wrench when you can get there. Yeah, that's the way to run it if you can. But you've got enough cash, you're not tight on cash, you got $40,000. You don't have $4,000, you got $40,000. You're all right, you can do this. But, and you've already got your guy picked out, you know. But be clear with him, don't overpromise. Look, I'm promising you a position here, and we've got to get the work in the building, and we got to get the work out of the building. And when we do, we're going to make enough money that you're going to have money and I'm going to have money and everybody's going to be happy.

But, um, it's a good problem to have if he's so fast that he's looking for more work. Yeah, you might hire a guy just to get more work in the door now. Yeah, that'd be your second hire.

Exactly, that, that's the whole thing. Good, good point. Hang on, I'm going to send you a copy of our latest bestseller called Building a Business You Love. It talks about the stages of business. You're in the first stage, which is called the treadmill operator, where you're doing everything by yourself, and you have to move to the second stage Because doing everything by yourself gets tiresome after a while. It's extremely efficient, but it's exhausting. You don't have to count on anybody, but it's exhausting. It's not sustainable long-term. So you've got to bring in other people in your growth curve to carry some of the weight so that you get a situation that you're still in business 10 years from now. You're doing the right thing, Ryan, and you're You're scared for the right reasons, and that's— that healthy fear will keep you wise and keep you asking questions like this. Good job.

Thank you.

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Renee is in West Palm Beach. Hi Renee, how are you?

Hi Dave, how are you?

Thank you for taking my call.

Sure. How can we help?

I'm trying to get some of your help on how to convert. I have $1,200,000 in a traditional IRA. I'd like to convert it all if possible to my Roth. I'm 60 years old. I stopped working a year ago. And I'm concerned about the conversions because I've read about the IRMAA lookback over 2 years for Medicare at 65. So, I didn't know if I should take the whole $1.2 and just divide it by 3 years and do those huge conversions, but then I would also have huge tax bills.

You'll have huge tax bills, but why are you not buying your own health insurance if you've got millions of dollars?

Um, I do have health insurance.

Yeah, I know, at 65, why would you not keep buying your own health insurance and have better coverage than freaking Medicare?

Uh, that I don't know.

Yeah, I would not. I'm 66. I'm not on Medicare. Not a chance. I'm not getting in the DMV of medicine.

Okay.

So regardless—

Because I got the money, I don't have to. And you got the money, you don't have to. So aside from the IRMAA thing, in other words, uh, on Medicare, I'm not worried about that. But the, the other thing, the other questions are very real because $1.2 million, I mean, taxes on that are going to be $300,000, right?

On the— if I converted the whole total amount?

Yeah. Yeah.

Okay.

Now, if we just did it, if we just did it in one fell swoop, you're just going to get hammered. Well, you really can't because you can't move enough to not have bracket creep anyway. You got so much money. You did such a good job saving money. So do you have other money?

Well, I have money in a taxable brokerage account that I would need to sell. To use to pay the taxes.

There, that's what I was after. How much is in that?

Um, $2 million.

You're so awesome. How did you do this?

A lot of hard work and discipline.

What was your career?

I started young. Um, I owned a— I built a medical coding and billing consulting business.

Good for you. Well done. Well done. So you already know what I was talking about Medicare before I even brought it up. Okay, cool. I'm so proud of you. You got $3 million bucks and I'll bet your house is paid for too.

Yes, it is.

And what's it worth?

Uh, I don't know. Um, around $900,000 maybe.

So you got like $4 million and you're 60 years old.

Are you single? The house needs work.

Are you single?

Yes.

Why? You're so rich. This is unbelievable. I'm kidding with you.

You can just go buy yourself another house at this point.

I'm kidding with you. Well done. Okay, now you're in— you're in such a better place to answer this question. What would I do if I woke up in your shoes? Okay, the beauty of the Roth, once you get it all in there, is from then on, all of the growth is tax-free.

Right.

And you're not subject to RMDs. At 73 and a half, you're not required to pull— start pulling money out. And when you name a beneficiary, your beneficiary on the Roth is going to pay zero income tax and zero estate taxes because your estate's not taxable at your level.

Okay.

So that's another big reason that I want to do the conversion.

Exactly. So here's the thing. If we don't convert it, let's think that through. If it's invested in good mutual funds and it's averaging 10%, 7 years from today, the $1.2 million will be $2.4 million. If you don't touch it and just let it grow. Now, $2.4 million is taxable if we don't pay this now.

Right.

But if we pay $300,000 today, Out of your brokerage. Now we've got $1.2 growing to $2.4 in 7 years, another million dollars. And now it's all tax-free. Anytime you want to use some of it, you can, or if you never touch it, it grows tax-free from now on. But it— and so my point is it's going to keep growing whether you do this or not. Assuming you don't go to spending it, and you're not going to, okay?

No.

So it's gonna keep growing. The only question is, how much do we want the taxable money to grow? I want no taxable money growing, so I'm gonna rip the band-aid off today.

Nip it in the bud.

Mathematically, I'm gonna spend $300,000 so I never spend another dime on taxes.

So you would do it all this year?

Yep.

Bite the bullet, convert the whole thing. But then, um, Dave, to come up with the $300,000 in taxes, I'd have to sell some, a lot.

Yep. In your brokerage, some of your $600,000. No, you got $1 million in the brokerage, right?

$2 million.

$2 million in brokerage. Okay. So you're gonna have to sell, you're gonna have to sell a little. You probably got some gain on whatever you're selling.

Yeah. Yeah.

So then it won't be that bad.

And you can choose the specific tax law.

Yeah, you can choose what you want to sell out of that brokerage account.

Like the highest basis ones, so you have the least amount of taxes.

Yeah.

Right.

So you can control some of that as well. But I would be working with a— do you have a financial advisor that you're working with right now on this?

Um, a little bit, and then I have more my CPA.

They probably— you probably have some underperforming stuff in that brokerage account, and you take the least per— the underperforming stuff, which is called tax harvesting, Especially if you've lost money on some of it, you're gonna take those losses when you sell, which would be amazing.

Right.

If you got some real weak spots that are losing money, I don't know what the composition of the brokerage account is, but all of that to say, and this is good, what I'm teaching you is gonna blow your CPA's mind. They're gonna, they're gonna melt down. Their face is gonna melt off because they're gonna want to try to run the bracket creep. And the problem is you've got too much money to run a bracket creep and ever get that money out. It's gonna grow faster than you can roll it out.

Yeah, at bracket creep, 15.8%.

Yeah, and it's going to grow faster than you can get the money out without breaching the, the brackets on your taxes. So you're gonna have to breach the tax— you got to breach through it anyway, okay, to get there. You're not gonna get there mathematically.

Yeah, I didn't know if it was better to do a little bit each year or just do it all at once.

And everything you don't do is growing taxable.

Yeah.

So to Dave's point, if you do it little by little each year, a big portion of that money is going to be growing.

You're going to end up spending more than $300,000 in taxes.

In the, in the long run.

Yeah. I made the number up, $300,000, but it's pretty close.

It's not a problem. It's, what do they call that? A Park Avenue problem.

Exactly. That's exactly, you've been doing some good reading.

Well, now that I've had more time this year of not working to research all the investments and I have them earning 15.8%, And I have tried to look into the tax harvesting, and I only have— the only one thing I have a loss on is $11,000.

Okay, well, we're gonna pull that, and then we're gonna pull our— and then work your way up through the least performing portions of the portfolio of the brokerage account, the, the most horrible ones. Which is also good news because you're getting rid of the underperformers. We're cutting off the bad wood, right, while we're getting rid of the tax problem over on the other thing. So I'm getting out of there. I'm 66 and I started moving everything to Roth years ago and paying it as fast as I could pay it. Every time I got anything in Roth, every time I got anything in traditional, I moved it immediately. I've got everything under the Roth umbrella now, and I hadn't even thought about the RMDs or the stupid Biden SECURE Act and what it's going to do to my heirs, where they screwed us again. Uh, but welcome to the Democrats. Uh, so I think from—

I think for my RMDs, it's 75, not 73.

It may be.

I thought I had— I thought I had even more time.

You do, you do, but you're still going to get hammered.

It doesn't—

because the thing's growing and growing and growing. So it's hard to get your head around, but it's pay me now or pay me a lot more later. That's the way that comes down. On the taxes on these situations. I've looked at them 20 times and I've surprised myself. I really hate paying taxes so bad. I was going to try to get people to roll it out slow, slow, slow. But when you look at with $1.2 million, she can't get enough out. It grows faster than she can move it. Yeah, you can crunch the numbers, get there.

You can see both differences by crunching the numbers with your CPA and financial advisor, but I think you'll find it's probably just worth it to not lose sleep over it and knock it out this year.

And get the deadwood out of your, uh, brokerage account. That's just awesomeness. You have done so good. I'm so proud of you, Millionaire Girl. Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. George Campbell, Ramsey personality, is my co-host. James is in Raleigh, North Carolina. Hi, James. How are you?

Hey, James. Firstly, I want to— um, my name is James. Hello, y'all. Firstly, I want to say, uh, congratulations on all y'all's success and thank y'all for helping tons of people around the world. Um, my question for you is, I have been following— me and my wife have been following y'all's Baby Steps and, um, we've come across a hiccup. I mentioned it to her a while ago. So, uh, when she was a little bit younger, um, her mom is kind of not the best mother. She opened up a credit card or forced her daughter to open up a credit card in her daughter's name. Uh, she kind of crept that credit card. It was, I think it was like $10,000 and she maxed it out. I basically left her with the debt. Well, we're going through and I told her a while ago, like, hey, you need to go to your mom and clear this up, have her pay you. Well, her mom doesn't really work.

And, uh, she's been stuck.

She's been stuck with the debt and she knows it was a dumb decision. Um, we both do. Um, uh, basically she has right under $8,000 left. She's just been paying the minimum payment for Quite some time now. And, uh, our only debt left is, uh, my truck payment. And then now her, or now that credit card. And also I have a house payment, but, um, okay.

That, that, wait a minute. I thought you said you weren't married.

Um, we, I mean, we, we are like, we, so we weren't married, but we ended up going to the courthouse because I was watching your thing.

Um, and so are you married?

We are now, yes.

Okay, so it's your wife, not girlfriend or fiancée?

Yes, yes. Sorry, we— I was watching your episode the other day and y'all said something. I'm like, yeah, we gotta get on this. I don't know what the holdup is because you got on somebody and so kind of straighten that out.

Good for you. Okay, so now you're married and, uh, it was just the other day. Congratulations.

Thank you, thank you.

And, um, so now it's not your girlfriend, not your fiancée, it's your wife.

Yeah.

And, uh, your wife was how old when your mother— when her mother messed her over?

22 or 20— no, 21 or 22.

So your, your wife at 22 years old signed the paperwork and handed your mother— her mother a credit card?

Correct.

Okay.

Yeah. Yeah. Her mother's scum and no question about that, but your wife was a legal adult and signed something legally and morally. Owns it. So, uh, her mother's just a bad part of the story, but otherwise we have $8,000 in credit card debt and we have a car debt. And, and your household income is what?

Uh, household income, uh, on the low side, $95,000 a year.

Good for you. And how much do you owe on the truck?

Uh, around $11,000.

Okay. And $8,000 on a credit card. What other debt have you guys got?

Uh, so just the house payment, the truck, and the credit card.

Oh, how much you owe on the house?

Um, around $280,000.

Okay, cool. Any other debt?

Uh, no, sir.

Okay.

So you guys bringing home $6,000, $7,000 a month right now? What's that number?

I am, yes, sir.

Okay. Is she not working?

Uh, correct. We have a newborn. Uh, well, not newborn anymore. He's 3 months old. Um, but yes, so we have him. So she stays at home and because daycare around here, or not daycare, but well, yeah, it's around $1,000 a freaking week nowadays.

So So she's going to stay home. So you'll be the sole income provider making $95,000 minimum.

Correct.

Okay. So out of that $6,000 or $7,000, after you pay the mortgage, the bills, how much can we allocate towards these debts on top of the minimum payments? How much could you throw at these?

You're going to get in attack mode.

Um, I mean, I can attack it. I mean, I can, I can definitely attack it.

How much?

I've been—

why haven't you? How much can you throw at it?

Uh, I mean, definitely a few hundred dollars a month.

That sucks. That's gonna take you decades.

I'm thinking of thousands of dollars a month. Yeah, probably.

I guess I haven't really—

Think about it. $1,000 a month, you're done in 19 months.

Yeah.

So let's reverse engineer it and say, hey man, I'd love to be debt-free in under a year. What would that take?

So you're, you're saying as in, uh, We should attack that and not have her confront her mother and say, hey, this is what we need to do.

You're not getting jack squat. You're better off getting a second part-time job than trying to get money out of her.

She doesn't have any money. She's a broke scumburger.

So unless you're going to try to sue her, which you won't get anywhere with that.

Yeah.

I would just take the loss and go, man, that sucks. We broke a relationship and we owe this debt, but let's just move on with our life and start just— your credit card's the smallest debt.

We know who's not babysitting your kid.

Yeah, we already— we made that decision.

Yeah, yeah, for sure. Your kid end up with a credit card.

Yeah, yeah, she's already asked for a Social Security number.

You're kidding.

No.

I would freeze that baby's credit before he was born.

She told us— she told us that she doesn't want, uh, she said she don't want a copy of this Social Security. She said she wants to hold on to it just so it's safe because she lives, uh, she lives somewhere else. And I looked at my, my girl and I told her, I said, dude, did she think we were stupid?

Yeah, really.

Your homework is to freeze your credit and her credit and that baby's credit with all 3 bureaus.

Yeah.

Because this lady's going to try to do some more damage.

This woman is bad news.

She wanted to buy him his lifetime hunter's license.

Yeah.

She's a freaking test pilot for a broom factory, man. This woman's bad news. Yeah. We gotta move on. All right. So yeah, I, I'm going to put her over to the side where she belongs, way over to the side. And then the two of you are going to get on an EveryDollar budget and you're going to live on beans and rice, rice and beans, and we're going to attack the $8,000 in debt and the $11,000 in debt right after that, working the debt snowball that you've heard us talk about here on the air, James. You can do this. I got to tell you, I think you're going to do it because, um, there's a couple of things I observed in talking to you about you. Uh, one is, is that you're coachable. And 2 is, is that you are wide awake and paying attention. Most people are neither one, and that's why most people fail. They're not coachable and they're sleepwalking through this life. And your eyes are wide open. You're like, I'm a new husband, I'm a new dad, I'm going to protect everybody from this— protect this kid from crazy mother-in-law. We got to get this debt gone.

This is grown-up adulting stuff, man. You are on fire. I really like where you are.

This is a good situation. So I'm going to send you a copy of my book, Breaking Free from Broke, James. That'll walk you through this whole process and get you fired up and, uh, get that credit card knocked out first. And if you throw $1,000, $1,500 a month at this thing, then attack the car loan after that, you're going to be done in a year, but it's going to be a year of hustle.

Yeah.

$1,500 a month and you're out in a year and that's where you need to be. And you can do that out of your income, maybe picking up some overtime, maybe selling a few odds and ends, whatever. You'll be in great shape. Very proud of you, James.

I've found reverse engineering it is far more impactful for me. Instead of going, well, how much can you throw at the debt? A couple hundred. Instead I go, I'd love to be out of this in a year. What would that take? What must be true for me to be debt-free a year from now? Now you know the number. It's going to take $1,583. Great. Now we can at least Have a mission and go find that kind of money, whether that's through selling stuff, working part-time extra, cutting our expenses down. And then you get more motivated versus let's just see what happens. You pre-decide.

You know, you could do that with like, I want a million-dollar net worth by the time I'm 30.

Exactly.

Okay, how old are you? Okay, 22. Okay, then you got 8 years. What must be true over those 8 years to be at a million by 30?

People who get there, that's how they're doing it.

They're setting a goal. And breaking down into little bite-sized pieces how to get there.

They're not just hoping.

What must be true. Listen guys, I've heard just about every excuse for why folks think they can't get ahead with money. So let's go ahead and settle this right now. You get the final say on what happens with your money. That's why you have to start telling your money where to go. So you can stop wondering where it went. So if you're gonna start winning with money, you have to get on a budget. And the easiest way to get started and stick to it is with the EveryDollar budget app. It'll help you make a plan for every single dollar coming in and every single dollar going out every single month. And guess what? It's free. So no excuses. Download EveryDollar in the App Store or Google Play today. Jerry is with us in St. Louis. Hey Jerry, what's up?

Hi, I'm actually from Effingham, Illinois.

Okay, cool.

Um, St. Louis is the biggest— one of the bigger cities close to me. That's what they were asking. So my question is Um, been following your plan for years. Uh, my wife actually even taught this, you know, she came down and was trained and she's even taught this at her previous job.

Wow.

But my question is, I, um, went to Zander, got my term life insurance. I did the 20-year term. Next year it comes due. If with the 20 years, there is such a big jump from 20 to 21. Do I even need it after I— by the time I'm done with this, I am the term, I'll be 62 and my wife is 64.

Mm-hmm.

Our investments, we have over $2.1 million. If I count my house and some ground, probably closer to 3. Do I need to reinvest, try and find something else, or is there something else that I need to do? Because I really don't want to jump from— I'm looking at my premium from $500 and some a year to close to $8,000 a year.

How much was your life insurance? What was the death benefit?

Uh, $350,000. Okay. So, and that was all—

Jerry, I love this call because I don't know if I've ever gotten to do this or not. 20 years ago, we talked you into buying 20-year level term insurance and doing your own investing with the idea that at the end of 20 years, your home would be paid for and your investments would be large enough that your wife would be okay if you died without life insurance. And here we are. You did it.

Yes.

And you didn't need to use it.

You're like a poster child, man. This is great. So if you don't— if you cancel this term insurance and you die and your wife has $2.1 million and the land and the house is all paid for, I mean, can she make it on $200,000 a year?

Oh yeah.

She's frugal. Then you're self-insured, right?

Yes.

Because $2.1 million should be creating at least a 10% rate of return if it's invested decently. Agreed?

Yes. Yes.

And you're not even using that. What does she need to live if you die tomorrow?

Right.

How much does she need to live a year if you die tomorrow?

Oh God. She's like I said, I don't know.

Well, I mean, you got to pay taxes. You got to pay your property taxes, insurance. She's got to have food, lights, water. She's going to want to go on a cruise and look for a new man. I mean, heaven forbid.

Gotta factor that in.

It'll be hard to replace you though, Jerry. I'm just saying.

That is correct. Yes. Because my thing, I mean, I am, I am—

If you died tomorrow, could she make it on $100 grand?

Yes.

And pay her bills?

We do that now. Okay.

Ah, there we go.

Between me and my wife right now, we don't, we make This year we will make about $100,000. That's it. I mean, from with our jobs. Uh-huh.

Um, so she's still working?

Really had much. Yes.

What does she make working part-time?

Uh, she makes probably about $35,000 to $40,000 this year.

Okay.

All right.

So the bottom line is the investments will create way more per year in income to her if you're not here. Than she would need. Is that right?

Yes, that is correct.

Okay, then you are self-insured, my friend. Well done.

Yes, Dave doesn't get to say that.

I know.

And just listening, I've been on here for a little while listening to your show today, and I actually got a few more things that I'm going to look into with this, um, after hearing some of the things today. But I have been lucky. I mean, we've not My father was probably Dave Ramsey 60 years ago. Brought up that we did not have debt. I've never had really debt except for my house. And I actually, my dad borrowed me the money for the house. So, I've never really had a loan type thing. If I had to do it again, I probably wouldn't have got it from him with all some of the little strings and stuff attached maybe and that kind of thing.

It's water under the bridge now, man.

Long gone. You did.

That's right.

That's water.

You have a $3 million net worth and you're 62 and 64 years old.

You won.

Well done, sir.

You might need to let loose a little bit. Come on the Ramsey Cruise with us at this point. Sounds like you guys are too frugal for being—

touchdown—

having $3 million. That's amazing.

Your wife's working a part-time job.

And a great reminder for everyone out there to get term life insurance in place yesterday. You can jump onto zander.com. Doesn't take long now.

Not that expensive. It will get expensive when you get to your 60s, so you need to get out of debt. But the point is, by becoming debt-free and building your investments, you do become self-insured, and your need for life insurance is not forever. The only whole life insurance need is the agent needs a commission for your whole life, but you don't need insurance for your whole life if you do a good job like he did. So one more whole life.

That's simple.

Yeah.

You don't need it when you got $3 million net worth. Caitlin's in Dallas, Texas. Hi Caitlin, how are you?

Hi, I'm good. Super nervous, but I'm excited. This is the first time I've ever called, but I've been listening to your show for like the past 2 years.

Well, thank you for being with us. How can we help?

Thank you.

So my husband and I just finished Baby Step 3, so we have All of our debt paid off and we have 3 months in our emergency savings account.

Way to go!

However, we are not sure— like my husband started reinvesting in his retirement. I have not because I— so we're back and forth. We want to save for a down payment on a house.

Good.

But taking 15% of our income is slowing this process So we're not sure which way to go. Do we stop investing in retirement to have the down payment and then reinvest, or do we just wait a little longer?

The eternal conundrum. How long will it take at this rate to save up the down payment? If you guys invest full 15%, how long would it take?

So our goal is a $600,000 home. Uh, 20% of that is $120,000 down payment. So we would need $5,000 At least a month for the next 2 years.

Can you do that?

Well, we've renewed our lease for 2 years, so that's the goal. Like, yes, we can do that if we stop retirement. Um, if—

So 2 years currently. Now, if you paused investing, or maybe he just invests up to the match, you split the difference, you could do it in what, 18 months, 19 months, 20 months?

Uh, I haven't calculated that, so I'm not exactly sure. Uh, 2 years is our goal because that's Up until our lease was our goal for renting this house.

That's a great goal. And if you have more, that's even better. So I would just crunch the numbers, not to be a nerd, but just to show you, okay, it's delaying it by 3 months if we invest 15%, or if we go down to 0% investing, we can get this done 6 months faster. That just sort of gives you a full range and spectrum so you can make the wisest decision for you. But the truth is it's a choose your own adventure in Baby Step 3B. Some people choose to invest nothing temporarily. We say 2 years or less. If it's gonna be more than that, you should be investing cuz that's, that's a long time to go without compound growth. But you guys might decide to split the difference. He invests and you don't, and now we shave off a few months and get into that home sooner.

Got it.

Okay. And then if we do just continue investing, um, I'm a little confused on how the— I, I understand like Roth is not taxed, it's taxed now but not later.

Mm-hmm.

Versus the 401, there's a lot of limitations on that.

Well, there's a Roth 401. Does he have that option?

Um, we do.

He does both.

He does his Roth and a 401.

So no, the 401, they have a Roth option sometimes. Most companies now offer that. He should be doing a Roth 401 as well as a Roth. Do match first, Roth second, and only after you've maxed out all of that do you do traditional.

Okay.

So that's the order. Yeah, match beats Roth beats traditional. And he sounds like he probably has a Roth 401 through his work. There's a Roth IRA that's outside of an employer, and he has access to both.

And I'd recommend doing both of those up to whatever works for your Baby Step 3B and still get you your down payment properly by the 2-year mark. So you're really doing this the right way, Caleb.

Great.

Good luck.

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Well, that's interesting. Everyone needs insurance, but it can be hard finding the pros who aren't just looking to make a buck. You need to find agents who are working for you and know their stuff. Ramsey Trusted Insurance Pros are vetted and coached to make sure they're market experts and they have your best interests at heart. And, uh, we've got folks in the Medicare space, we've got folks in the health insurance space, We've got Zander in the term insurance space, and we've got insurance professionals for property and casualty, meaning homeowners and cars all over America that have been vetted by us and are Ramsey Trusted. So connect with a Ramsey Trusted Agent on the website at ramseysolutions.com. Katie is in Pennsylvania. Hi, Katie, how are you?

Hi guys, how are you?

Better than I deserve. What's up?

I am a recovering gambling addict, about 44 days clean.

Good for you.

Thank you. I came clean to my husband about a month ago about the problem and about the credit card debt that I've racked up. He doesn't believe in credit cards. I told him about the snowball method, but he wasn't on board, so he went and got a loan. And we paid them all off and had a plastectomy. Um, but now how do I like regain his trust? Um, I mean, if anything's come good out of it, we now combine our accounts after 25 years so he can keep an eye on me. We had separate accounts for 25 years and now they're combined just so he can keep an eye on me. But how do I regain his trust?

Okay.

Um, So congratulations, 44 days sober. Good for you. I just met a gentleman in the lobby a little bit earlier who showed me his 11-year coin.

Nice.

11 years sober. Uh, different situation, but still a coin. Are you doing GA?

I am not right now. I have, um, some free sessions through my insurance at work with a counselor, and I'm going to see her, uh, every week. The closest GA meeting to me is pretty far away and it's at night and I can't drive at night, so it makes it difficult. But I am seeing a counselor.

Okay.

All right. Because if you have an admitted addiction, you need to have someone walk with you. If it's a counselor, that's fine. If it's GA, that's fine. But it requires other human relationships alongside you to bust your chops.

Right.

It's the only way you stay clean.

Okay.

Well, that, and there's like no way I'd be able to gamble right now because now he sees everything.

That does— that just, that just, that just, um, bottles it up. It doesn't heal it.

I know, I know.

Okay. So I want you to get— I want you to dig it all out and begin the healing process and put the practical things in place, which you've done. So everything you're telling me is very good. Even the tone of your voice is very good.

this.

So you're heading in the right way. The way you build trust with anyone, rebuild trust with anyone, is time.

Yeah.

You've been clean 44 days. When you've been clean 44 months, he should be treating you differently. Yeah.

Okay.

Uh, if he, you know, and, um, so anytime you do anything that it— that breaks Trust or breaks, um, relationship. Uh, the only thing is a pattern of cleanliness, uh, over time. And the longer the clean— longer you're clean, and the longer you guys are interacting and communicating and talking about money, and you're sharing what you're learning in counseling, and he's learning, you know, how to be a husband to, uh, someone who has struggled with this kind of thing. then the longer that goes on, this could be a beautiful, beautiful love story. It could be a beautiful wealth-building story 10 years from today. But to expect him to just suddenly go, oh, I think you're okay, 44 days later? Nah, I wouldn't. And you wouldn't either. That's not common sense.

Right.

But the pattern is there. So I'm going to recommend a book called Trust. Oddly enough, by Dr. Henry Cloud.

Okay.

He's one of our favorite guys that comes on the air here with us. And he wrote a book called Boundaries that made him famous. He's one of my best friends. And he's just brilliant on this kind of stuff. And the whole book talks about how to gain trust, how to regain trust after it's been broken. But it outlines this idea of a predictable pattern that's there But yeah, you said that the good thing that came out of it is now we work together on money. And so as you are giving input on money, I don't want him just babysitting you or sitting on you.

Right.

You're not an egg to be hatched. Okay? But I do want you working together with full transparency, which gives him comfort as he is regaining trust, and that's fair to him.

Right.

So that's all good. So I'll give you one more example because I've been babbling. George, before I do that, what are you thinking?

Well, the big thing, and I've heard Dr. John Delony talk about this, is he gets to set the pace for forgiveness. And so you need to ask him, hey, what does that look like? Is that we're going to do a weekly budget meeting for this long, and after 6 months, here's what might be unlocked? You're going to go to Gamblers Anonymous every week, We're going to do, you're going to follow our debt payoff plan. And if all things go to plan and he sees how much you are sacrificing and how much your intentionality is, I think that will naturally cause the forgiveness to happen, maybe even at a faster pace.

Yeah. So in other words, out of the abundance of the heart, the mouth speaks. So when he speaks about this 2 years from now, he would say something if he was talking to someone that you wanted him to tell, okay? But he would say something like, Hey, Katie had a gambling problem and we teamed up and paid off the debt in 18 months.

Right.

Not, Katie had a gambling problem and I had to pay it off.

All right.

You see that? Because you were emotionally involved in the budget process, the sacrifice process to clean up a mess, because he can't stand debt. And so he's got the willies about that as much as he does about the gambling.

Right, definitely.

Yeah. And so, and you just say that out loud to him. I know that I hit you twice. I hit you once with the gambling and twice with the debt. And so, let's work on this together. I'm willing to do whatever we got to do to make sure that I, A, I don't go back, but B, we get this cleaned up as fast as possible so we can put this in the rearview mirror and have a wonderful life going forward. Okay. So, yeah, lesser story. Not as important as yours, but when I went broke at 28 years old and lost everything, my wife had 2 little babies. And her saying was, if I asked her, I was buying and selling houses, I said, hey, I'm looking at a house over here in this area. And she would say, whatever you want to do, honey. And I did whatever I wanted to do. And I went and made a mess and I went broke and we lost everything. And the lights got cut off at the house and the water got cut off at the house. and there's 2 babies in there, and we're in foreclosure and bankruptcy.

Okay? Can you imagine that this woman was terrified and did not trust me?

Right.

She shouldn't. I was an idiot. Okay? You don't trust an idiot. That's a bad idea. And so, whatever you want to do, honey, had to be removed from her vocabulary for the rest of her life. And then when we finally started understanding the stuff we teach here, we said, okay, we're gonna have an emergency fund in place. And I discovered that as we put that emergency fund in place, and I looked up and there was $10,000 laying there, that it unlocked forgiveness in her because she felt secure again.

Right.

And to the point that to this day, now almost 40 years later, if I'm talking about doing something, And she goes, okay, I don't mind the thing we're talking about, but that look in your eye, I don't like that scheming and scamming look. I don't like you chasing a deal. Let's slow down a little bit and look at that. And that's her way of saying, you've regained trust, but occasionally you remind me of that old version of you and it scares the hell out of me. You follow me?

Uh-huh.

But we're largely healed. Like 99%, but occasionally she'll go, no, that one feels weird and I don't want to go there again. And it activates that old scar way back there. So you never quite get 100% over it, but you can get 99.9% over it. That's the moral of that story.

Time plus consistency. That's it.

You should have just answered the question 30 minutes ago with that. We'd have been done.

Okay.

You spend hours researching before making a major purchase like a home or car, but it's also a good idea to put in the work searching for the right insurance coverage to protect your biggest assets. I recommend using Ramsey Trusted Pros. Whether you're looking for car, home, or any other type of insurance, Ramsey Trusted Providers have been coached and vetted to serve you like we would. Find what you need at ramseysolutions.com/insurance. Our scripture of the day, Luke Luke 6:27-28, love your enemies, do good to those who hate you, bless those who curse you, pray for those who mistreat you. Thomas Sowell said, people say things like, the government has to do something. I say, have you ever studied what happens when the government does something compared to what happens when they don't do anything?

That's brilliant.

Yeah, it's the truth. Uh, Giselle is with us in Chicago. Hi, Giselle, how are you?

Hi, Giselle. I mean, hi, Dave. Um, how are you?

Better than I deserve. What's up?

Um, I'm 21 years old and I'm currently about $66,000 in debt. Honestly, I'm embarrassed to admit that because I know I'm young. I should be building my future, but instead I feel like I'm digging myself into a hole. A big part of my debt is my car and my RV. I'm realizing that I made some bad financial decisions last year. And well, this year I'm— I've got my first big contract. Me and my boyfriend are making over 6 fig— well, we're both making about $200,000 this year. I'm willing to get rid of my RV and my car. I just need some financial guidance. I'm also the first from my siblings to make 6 figures, and it's my first year going on to making 6 figures.

Wow.

So you make $200,000 on your own?

Uh, no, I make about $130,000.

My boyfriend as well.

Great.

And your boyfriend's not paying any of your bills?

Let's separate that out.

Uh, yeah, we go half and half on them.

But not on your debts?

No, not on my debts. Well, he gives me half for the RV. He helps me pay half of my car.

Why?

We go half on everything.

He should, he should stop that. The car is cosigned on both of our names and the RV is as well.

Okay, what's left on the RV? What's left on the car loan?

The RV, I got it when I was 19 and they really screwed me over with— I was dumb. Uh, we're paying $2,000 for rent. I didn't want to do that no more.

Um, what's left on the balance of the loan?

$30,000.

$30K on the RV. What about the car?

What will it sell for?

The sale was $37,000. I gave $7,000 down.

What could you sell the RV for?

What's it worth?

Oh, I just got an offer today for $28,000.

Sell it.

Okay.

Do you have the $2,000 difference?

Yes, I do.

Perfect.

Sell it.

There goes that payment.

Okay.

Uh-huh.

What's left on the car loan?

My car, I bought it for $30,000. I'm down to $23,000. I just bought it in February.

What's that worth?

Um, I would say about $27,000.

Do you like the car?

It's a brand new car. Uh, I like the car since it's my only vehicle of transportation.

Okay.

Are you gonna get it paid off really, really, really, really fast? Like 6 months?

That's really the goal. I know I can. I just—

Well, now that you don't have an RV payment, I think you can.

Uh-huh. So can you pretend to live like you make $50,000?

Uh-huh.

And then put the rest of it toward your debts? Because if you just do that alone, you will be unbelievably wealthy. That's called living on less than you make. And with all the margin, you can save up an emergency fund, invest for the future, and never go into debt again.

Uh-huh.

And that's my goal. I don't want to— I, I really messed up. I'm young. I'm at the point where I could fix it.

Yeah, but you make good money and you're asking good questions. Would you read George's book if we give you one?

Oh yes, of course. I've been reading your books all day at work. I'm trying not— I deleted the social media. I'm just listening to books all day. I listened to your book recently. I've been listening to a lot of books.

That's fantastic. Listen, Giselle, I'm glad you did the dumb stuff early. It took me way longer to figure this stuff out. So you're actually ahead of the curve, making 6 figures at 21. You sell this RV, get rid of the car in 6 months, save up an emergency fund. You're going to be in great shape.

Bethany's in Kansas. Hey, Bethany, what's up?

Hello.

Hello.

Hi, how can we help?

I'm honored to be talking to you guys right now. Yeah. Okay. So we, um, I work in town and have a part-time job. Um, we're on Baby Steps 4, 5, and 6. Sorry, I should have started with that. And, um, my husband farms, and this time of the year, like Fall harvest is when we finally have like substantial— well, we finally have income. Um, and we are struggling with wanting to put more on the principal of our main loan than putting like the 15% in an actual like Roth IRA.

What main loan?

And I just need a kick either way.

What main loan?

Like on our, on our mortgage.

Okay.

So the farm?

Yeah, the farm.

Okay.

So you have a business loan.

But I mean, it's not just a house, you know?

Yeah.

But you have a business loan. How much do you owe on the farm and the house?

Uh, we're down to $523,000.

Yeah. And how much equipment debt do you have?

Nothing. Like we're fine. We are like, literally that's our only thing. And now I'm just Way to go.

And what's your household income a year? What do y'all make in a year?

I mean, I usually say $100,000 together. It just depends on the end of the year and how stuff shakes out. You know, some years are good and some years are bad.

Sure, depends on the harvest. But I mean, most of the time, between your day job and his farming, you make $100,000.

Yeah, yeah, that's usually what I say.

Okay, so if you invest 15%, that's $15,000. That's, you know, a Roth IRA for each of you. But you're saying, I don't want to do that. I'd rather put that $15,000 towards the mortgage.

Exactly.

No, I wouldn't. I wouldn't. I would put the— I would work it. I'd treat it just like it's a business loan or a mortgage. It's a Baby Step 6 issue.

No.

And in order to hit Baby Step 6, you've got to complete Baby Step 4.

Yeah.

4, 5, 6. 4, 5, 6 are done simultaneously. And 4 is 15% of your income into retirement. 5 is kids' college is addressed, and 6, at some level, do something, $50 or whatever. And then 6 is we begin with any money above that that we can find. Like if you have a bumper crop one year, you throw all the extra at the mortgage. And if you have a bunch of bonuses at your work, you throw all the extra at the mortgage. And if you have to find some money in your budget, you throw the extra at the mortgage. All of that.

But I would just set an intentional goal for Baby Step 6 and say, all right, we'd love to pay it off in 7 years. Here's what that's going to take. We want to put at least this much on the mortgage each month. And then like Dave said, if you got extra, it's going to speed up the process. But that I think will tide you over. I can tell you really want to knock out that mortgage. I think what you just need right now is a goal to aim for.

Yeah. And beware of the curse of the farmer, the $500,000 combine and the buying the piece of property next door to expand for another $600,000 in debt. These are the 2 things that are going to come at you. And beware of those. Those are the things that take small farm, even large corporate farms and put them out of business. And you're a small farm.

Is it this idea that, well, we could scale and then double the income if we just did XYZ?

If we just doubled the risk and doubled the debt and doubled our chances of failure. Yeah, this is the problem. But if you're farming, you can do anything you want. Because Dave just doesn't understand farming. Well, farming's a freaking business, okay? And I definitely understand business, and you're not exempt from the rules of business just because you grow corn. Sorry. I respect farmers. It's hard work. I love you. I'm glad you're out there. But this crap that Dave Ramsey doesn't understand it— I don't understand farming. I don't farm for a living, but I do understand business. We coach 10 small businesses at Ramsey. So definitely know how to look at a freaking P&L, and I definitely know when somebody's running risk out their yin-yang, and most of you guys do. So write that, write that in your comments, okay?

A lot of the small businesses we coach are in the agricultural space, so they're dealing with some of this. And if they do it debt-free, keep it debt-free—

Some of them are. A guy I talked to the other day, one of our guys, he's not agriculture, but he's got equipment because he's running large Dirt-moving stuff. And he's got all of his equipment paid, millions of dollars worth. It's all paid off. And his profits went through the roof. And, um, his— one of his competitors just failed.

Wow.

From too much debt. And he said—

Bought him out?

He's sitting on so much cash, he bought him out for pennies on the dollar. Yeah, this is what happens when you work it the other way.

It's amazing how being debt-free gives you those kinds of options.

Shocking. That puts this hour of The Ramsey Show in the books. Folks, we'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.