Transcript of You Get To Decide Your Next Financial Step

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Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show. I'm Ken Coleman, thrilled to be alongside my friend, partner in crime today, to help you. She is Jake Warshaw. The phone number is 888-825-5225. 888-825-5225. Let's go to Taylor, who starts us off in Miami, Florida. Taylor, how can we help today?

Hey, thank you all so much for having me. I'm really excited to be here. Um, I just got married last month, and I— my husband and I both are struggling to combine our finances because of all of the moving parts, and we're looking for advice from y'all.

What do you mean by all of the moving parts?

Okay, so one issue I have is I'm a contingent worker. So some weeks with the job that I have, I only bill for a 4-day week, and some days I bill for a 7-day week, which means my base income a month could be $4,400 or it could be $7,600. And it's contingent on, uh, for compliance reasons, I, I don't want to say publicly, but you just have an irregular income. Yes, it's irregular, but usually the base amount I make is $4,400, and then the most I can make is $7,600 in a month.

What about him?

Um, he is, uh, part-time for the school system. He makes $1,700 a month.

Okay, that's it.

Okay, so let's talk about why he's only part-time.

Well, he has a rental portfolio, and he manages, um, right now 4 different rental properties.

What's that bringing in?

So one of the houses, it's one of the houses has just been built and he roughly built it for $160K and he's planning on selling this one for $240K. The other two, the cash flow between the two of them, they're only paying for themselves right now.

Okay. So that takes us back to Ken's initial question and my initial concern, which is still working part-time. The truth is he's still only profiting $1,700 a month. We'll get back to that in a minute. I want to answer your first question about getting everything on the same page. So what I would do, it's not as complex as you think. You need one, you need one joint checking account that you're both paid into, and then you need one joint savings account or high-yield savings account that you're going to place your savings in. And then from there, that, that's honestly it. Obviously, if you end up with 401(k)s, each other will, you know, automatically be the beneficiary there, that sort of thing. So for now, just those two accounts. And what I would do is I would open up EveryDollar and I would budget for your minimum month. So for you, I would budget the $4,400, for him, the $1,700. And I would start with that as your kind of operating amount of money. And as you get more money, you just add it on to the budget. As it comes in, you increase it. And now suddenly you might decide, oh, well, instead of spending, you know, $600 on groceries, now we can add a little bit more to that.

Or before we didn't have, you know, money to do anything entertaining. Now we can add that back to the budget. Right. And as money flows goes in, you can increase line items or you can add line items. Or if you have any debt, obviously the extra money would go towards your smallest debt.

Okay, um, we are, we are debt-free. Both of our vehicles are paid off. We don't have any credit card debt. Um, we have a savings established together. Um, we got about between $3,000 and $4,000 in gifts from the wedding alone, and we did not take a honeymoon. Would you think that We could, or do you think that money should go into savings?

I think you need to take a honeymoon.

Okay.

Yeah, I think that's great. Is the— you said you have savings plus the money from the wedding. Is it just the $4,000 or there's more on top of that?

No, I have, uh, we have like another little, like, uh, I guess you'd call it like an emergency account with $2,000 in it together.

Okay, so it's $6,000 total. Okay, so what I would do is, I mean, I would probably plan something modest because, I mean, you only have $6,000, and then I would try if If I were, if I were you, I would probably try to keep half of this aside as I'm starting to build the 3 to 6 months of expenses. And then I do half for the honeymoon and just keep it modest.

Okay.

Yeah. What's your, what is your going to be your margin now that, you know, we've walked through, we're just operating off of $6,100. That's his $1,700 and your $4,400. How much margin do you guys have after all the bills are paid?

Meaning how much is left over after all the bills are paid?

Yeah, how much is left over?

Between $800 and $900 a month.

Okay, what's— what's— if you have no debt, where's all that money going?

Well, it— up until we just got married last month, it paid for the wedding, and now we're just now back to a spot where, um, you know, we paid for it. So, got it.

So what will it do?

So the spot where we're breaking even because we just paid all that stuff off. Honestly, I got in an uncomfortable position paying for all of that, and now I'm like, oh, I can call now.

Okay, gotcha. Well, again, you know, as he increases his income, you know, or certainly sees more value out of that, you know, the managing the rentals, you guys are in a decent spot for you to win. And the good news is you have no debt. So, you know, just walking these Baby Steps out, which sounds like you're in Baby Step 3, which is to get a fully funded emergency fund of 3 to 6 months, months, months, 3 to 6 months of expenses. As my brain falls apart. I'm gonna take that.

I like that.

Yeah, yeah.

What's the plan for you guys as residents? Are you renting now or what's up?

No, I, I purchased a house before I met him, um, and that's the house we're living in now.

So you guys have 4 properties total?

Well, really we have more than that if you include his portfolio. He had— he acquired all of his rentals and he has like a couple of lots that he, he purchased for, um, so you guys do have a lot of debt.

Well, and mortgage and, and, and, and how much mortgage debt, how much home mortgage debt do you have combined including all his portfolio?

Including all the, um, 60 plus— I'm counting it right now.

That's okay.

I have 6— there's $60K on one of the rentals, there's $120K on another, okay, and there's $260K on the house that we live in now, okay. The other things are paid off, okay.

Because when I heard managing rentals at first, I thought this was just what he did for somebody else.

Uh, no, no, no, he, he owns—

he's carrying this debt. Yeah.

He owns them, but he's positive in equity on all of them.

Understood. But they're not— and they're not bringing in— he's breaking even on rents. I'm just wondering about that.

He's charging too little. He's charging too little for rent every month. Yeah. And got close with the tenants that he has.

I'll be honest with you, this is just me. I'm not— I think there's some things you've done really well. If I were in your shoes, you guys are newly married. There's part of me I would love, because you said he's equity positive in all of them. I would love if you sold some of these in order to pay off your personal residence, because if you did that, you guys would be smoking like unstoppable.

Yeah.

Okay.

Think about that. What's your mortgage?

So all of them?

Yeah, but what's your mortgage every month?

What do you pay? Mortgage is $1,600, but I pay $2,000 because I add extra $400 to principal every month.

All right.

And that's included in my in my, like when I told you I still have $800 to $900 left over every month. That's already after calculating that.

So it'd be $2,000 total.

Correct.

I love that for you guys because if you turned around and took that money, how old did you say you were?

I'm 27.

Oh my gosh.

She's got the investment calculator out, Taylor.

I'm loving this because this is not even including like your normal 15%. I'm just saying if you took that money that you have now, you paid off the mortgage and you said, we're going to take that extra $2,000. We're going to invest it. We're going to invest it for a long period of time. Let me add this in here. I'm going to tell you what this number is just based on that. And it is— drum roll, please— you're going to have $17 million.

Yeah, Taylor.

If you do that from age 27 to age 67, you have nothing in there now. You contribute $2,000 a month, average annualized rate of return 10 to 11%. $17 million. Do the math. Buying a home is one of the biggest financial decisions you'll ever make.

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This is a paid advertisement. NMLS ID 1591. NMLSConsumerAccess.org. Equal Housing Lender. Okay, I wanna make sure that we, we lock in on the number you just threw.

Yeah.

At that last caller because—

You don't just say $17 million and speed past it like you didn't just say what you just said.

No. And I, and I, and, and as we were talking about this, you know, the reason that number is so high is—

Well, number one, the time in the market.

Yeah.

Like nothing beats time in the market. The fact that they would be starting in their 20s, in their case, 27 years old.

Yeah.

That's why it's so important, guys. When we, when we teach this stuff, if you can get it, if you can teach it to your kids, your friends' kids, your grandma, like teach it because the longer, the younger you are when you start this, that compounding interest, man, it's, it's a, what is it? The 8th wonder of the world. Is that what they used to say?

I, oh, I think that's what it is called.

Is that right? 8th wonder. And, and it's true because for them, yeah. Age 27 to age 67, not saying that they have to work until they're 67. Yeah. Because they're gonna be millionaires obviously well into their forties. Right.

Yeah.

But the point here is, is it doesn't take much. Can we talk a lot? A lot of times people think this is the sell the car show.

Yeah.

Right? Because we're always telling people to sell their cars. But in this case, $2,000 is what is setting them free. I don't even know if that's 15% of their income. I don't know how, you know, how much they're gonna make over the course of their life. All I know is today, if they paid off their house, which they had the money to do, to have that $2,000 of margin, and how powerful that is. And all of you who are watching right now need to think about that because if it's not $2,000, maybe for you it's $1,500, maybe for you it's $500. Go home today. This is everybody's homework.

All right.

Pull out an investment calculator. Go to RamseySolutions.com, pull out an investment calculator and plug in the numbers. It's going to ask your current age. So if you're 47, I'm 42, I put 42 in there. And then when do you want to retire? I'll put 62 and then start playing around with the numbers. And at the bottom where it says, what do you think your annual return will be? I want you to put 10 to 11% because that's what you should be making in the stock market. Ken, if your mutual funds are not producing at least that, which of course over the past 4 years it's been bananas, it's been in the 20s most of the time, you need to put that because the truth is, since inception, since 1926, the stock market has an annualized rate of return, which means if we take all the years and take the average of them, it's between 10 to 11%. So you can say, oh, Jade, what about 9/11? What about 2008 and '09? Jade, what about now? Right. That's fine. Yes, it does dip and do all of this, but it does it as it ticks up.

It does it like this. So we're always going up. So I want you to do that. And if you're, if you're invested now, go and look and see, oh my gosh, what are, what have my returns been? Because if you're somewhere in the 5% and 6% and 7%, you're not invested in the top, in the top 10, Ken. You need to be, you need to be doing better than that. So that's just a little, a little something something.

And here's what we're going to do to help with the homework. That Teacher Jade just threw out there, everybody, we're gonna put a link to the investment calculator that she's got up on her computer right now at ramseysolutions.com. We'll put the link in the show notes. Kelly, the producer, is gonna do that because she's amazing as well. So we got a homework assignment and we already have the cheat sheet for it.

I know.

All you gotta do is go to the show notes, click on the link, and I will, I just wanna second the motion. When you do what Jade tells you to do, you're going to, really have an on-the-ground experience with vision casting. You will—

Oh, so good.

That's what I mean. When you can see into the future and what she's gonna have you do is plug in numbers and see what is actually possible. But the possibility has power because it becomes a number and you can see it in the future with just consistent activity. So what's gonna happen is, as a result of your homework assignment for these fine folks, is they're going to now start to, visualize and set a vision for their future.

I know you're ready to preach on this because what happens when there's no—

Don't get me started. I'll take an offering.

What happens when there's no vision?

People perish. And what that means, that's straight out of scripture, and what that means is their soul, the spirit in all of us, truly begins to seep out of your body. And without getting any more of that. And so that's why it's so huge. By the way, while we're at it, there needs to be a vision. For your marriage. There needs to be a vision for your children. There needs to be a vision for your professional life. There needs to be a vision for your health.

Yes.

I mean, you will perish. And what that means is, is that you are slowly, which we all are, but this idea of never having a vision and something that I'm looking forward to is what kills people.

Kills your soul.

Long before they die. Which is what Edgar Allan Poe said, to put a bow on it, most men lead lives of quiet desperation and go to the grave with the song still in them. Sorry, I had to, you know, I'm now pulling old references.

I love it.

But that's the idea, and that's what we're talking about. All right, let's get to Bianca, who joins us now in Las Vegas. Bianca, how can we help today?

Hi, good afternoon. So I have a question. Um, my dad is selling his house that I'm currently living, living in, and, um, we're looking at me, my sister, and him getting $100,000— $100,000 each from the house. And I have 3 kids. I have 2 twins that are 8 months, and then I have a 4-year-old. I had to leave the father of my kids when my twins were 5 months. So as a stay-at-home mom, I'm trying to get back on my feet, and I'm trying to see what should I do with these $100,000 to get started.

Okay.

Wow.

Well, can you give us a little detail of what are the money problems you're dealing with? In other words, you know, we want to know what your debt is. We want to start there so we can kind of help you walk through what you should do with the $100K. So give us a picture.

Okay, so I have some school that I have to pay off, that is $12,000, and then my debt for credit cards and stuff is $3,000. And then I did buy a mentorship to get started in my business, um, that I have to pay off as well.

How much?

Um, $3,000. Okay, so $12,000 for the school, $3,000 debt of credit cards, and then my mentorship, $3,000.

So you got $18,000 of debt. Um, the $100,000, is that going to be the only money to your name, or do you already have some money saved up No, I have nothing.

I was a stay-at-home mom, um, the whole time.

How soon do you get the money?

Um, as soon as the house sells, and, um, they're taking pictures next week.

Okay.

So, um, and then also too, um, because I'm getting into like the hair business and like content and all that, I do want a room for the house that I'm gonna rent Cause I'm thinking, I'm debating whether doing a 2-bedroom and all of us sleeping in 1 bedroom and then having 1 room to have all my things, um, to travel and stuff as a traveling hairstylist.

Um, interesting.

So I'm okay. Exactly. Uh, so I'm just debating whether I should— so the houses here are like $1,600 for 2 bedrooms and for 3 bedrooms is $2,000.

To rent the room out. Is that, that's the profit on renting the room out?

No, um, for renting a house.

That's just her cost, rental costs.

Got you.

So are you generating any revenue, uh, any income at all right now as a hairdresser?

Um, currently I'm just practicing. That's the thing, I'm just practicing my, um, because it's a hair bridal business, so, um, I'm still learning, which I did hair for 14 years, but since I did color, it's a way different department. So I'm like learning a lot of stuff. Got And I, every—

Well, here's why I'm asking. Here's what I'm asking. How are you surviving right now? That's what I'm trying to get at.

My mom, my mom, she's the one helping me right now.

Okay, so you're not going into debt?

Oh, and then I do have child support too that I'm getting, $1,800.

Okay, so we have $1,800 a month coming in and mom is helping you out and you're not going into debt for living expenses is what I'm trying to get at.

No.

Okay, great.

No.

That's good, that's good. Okay, so your big question is, I'm getting $100,000. We don't know when you're getting that. We hope within 3 to 4 months. The house hasn't even gone on the market yet. And then there's, you know, time to get that. So let's just say to be safe, we're looking at 4 to 5 months at the earliest that you're getting this money. Is that fair?

Yes, that's what I'm thinking too.

Okay. And so when we get the $100,000, we want to clear the debt and then we set you up for the next level. So here's what we're— here's what we got going on. We gotta do a commercial break and we wanna be able to help you. And so hang on the line, Bianca. When we come back, Jay's gonna walk you through every penny of this $100,000 and how it can set you up for financial success. So that's the good news. You're gonna be okay. Hang on the line. We'll be back to take care of you.

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Based on average annual payment of AT&T, Verizon, and T-Mobile customers compared to 12 months on the Boost Mobile Unlimited plan as of January 2026. See website for full details. All right. We are on the line with Bianca. Bianca is going through a divorce, all the things, separating from the father of her kids. And she's getting $100,000 from the sale of the home. And so we're bringing her back because we got to walk through this. She's got $18,000 in debt. And so Jade, let's jump in here because last we talked to her, she's trying to find a place that in that $1,600 a month range for rent. And so walk her through here. What would she do with this $100,000? How does she get on stable feet with this money?

Yeah, so the $100,000, I would use that to walk the Baby Steps. So the first thing you're doing, you're paying off the $18,000 of debt. Okay, so that's gonna leave you with $78,000, around $80,000 left. And then from there on, you're going to estimate, You're going to do some research here. You're going to say, okay, what's it going to cost to rent in the area? I think you quoted around $1,600 a month. Then you're going to estimate food, transportation, all of these things, and you're going to create a budget. Right now it's kind of a make-believe budget, but you're going to go, okay, what's my cost of living? Is it somewhere around $3,000, maybe $4,000 a month? And then you're going to take that and you're going to multiply that by 6, and you're going to put aside another $18,000 to $20,000 as a 6-month emergency fund. So we've already spent $40,000 of this money and now we've got $60,000 left. Now here's my challenge to you. I would not take this money, Ken, and siphon off $1,600 a month for rent until it's gone.

I agree.

That is not a plan. I would take this money, I would tuck it away in a high-yield savings account under lock and key.

Mm-hmm.

This is where you need somebody to hold you accountable. Uh, you're not married right now, but you need a really good friend somebody who you're willing to give access to your life in the way of, I know where this money is, I know what you've told me, maybe I get an alert to my phone if you start spending this money, something like that, to where this money can just hide there until you're ready to purchase a house.

Yeah, I agree.

Right. Yeah.

You know what I'm saying?

I just don't wanna spend everything on rent. I don't wanna have to—

You're not gonna spend any of it on rent.

I have a plan for that, Bianca. So let me ask a quick question. When you say traveling hairdresser, does that just simply mean you go to the clients? Is that what that means? That means. Forgive my ignorance.

Yes, yes. So in the bridal industry, you go to the venue and do the hair there, or you travel to a salon that I have where I do daily rental.

Okay.

But I just want to have a room to do content because nowadays everything is content, you know.

Okay.

And I thought I heard that, so that means you're doing some social media stuff, right?

Yes.

Okay, let me ask you a question. Are you making any income off of that content?

So I do practice every weekend on somebody and they tip me, like, I mean, for the month I get like $100, $150 maybe on like, um, but is that, is that making money on the content you're posting?

That's, that's what I'm asking. You said content. I'm getting somewhere with this. You said I want to make my content work. Well, content doesn't work unless it's generating revenue. So are you generating any revenue?

No, I really just started 2 weeks ago.

You just started?

Yes.

Can I, can I just be a coach for a second for you?

Uh-huh.

Yes.

There's an old phrase. It's on some cheesy motivational poster somewhere that says, when you chase 2 rabbits, you lose both of them. And I just wonder, and I'm not saying that this is chasing 2 rabbits, but I wonder if you shouldn't be putting all of your energy into doing people's hair. And then we get to a point where To your point, I'm not spending any of the money. Jade's got it under lock and key, and I keep it under lock and key, and I'm able to pay for my rent by my own job. I can pay for groceries through my own job. I don't need mom to support me. And I just wonder if that's not the best use of your time.

Well, here is my, my work, my business.

I understand, but you have to put time into all the social media stuff. So again, you don't have to prove this to me. I'm just telling you, you don't, you don't have to prove anything to me. I'm not being cynical. I'm just wondering.

There's two sides of it. And I wanna clarify this. I think this is gonna help you, Bianca. If you, if you are already doing someone's hair that day for money and it's easy for you to film it, it's not taking a lot of time on your day. Yeah, it makes sense to post it online. From there, your revenue can be more so about advertising and getting people in the air. 'Cause you know, people use social media like Google now. So that's a great advertising venue. I think to Ken's point, it would be a while before you're generating any sort of revenue from platforms. Is that what you're going for?

Yeah.

Yes. So the content is not for me to be like a content creator. It's just to advertise myself. Yeah.

And again, I'm only raising it.

Put myself out there.

Got it.

And I love that, Bianca. That's why I'm saying I didn't want you to hear cynicism from me. More just Just focus, utter focus right now so that we're bringing in as much money as possible, 'cause you're a single mama, mama bear, that's gotta take care of some very important people. And so, that's just me saying, think about that right now. Every ounce of time you have for work needs to be generating money, that's all.

How many hours a week are you working currently? Because what I'm trying to get out, I'm just gonna be honest with you, you got 4 kids?

3.

3.

3 boys.

3 boys. You've, you're gonna have a $1,600 rent, cuz remember the plan is to not touch this money. So my, my, my question for you is how many hours are you working a week at this, or where do you think it will start? And if it's at a part-time level, what will you do with the other time to bring in money? I'm just throwing some questions out there for you to be thinking about.

So my goal is to work Friday, Saturday, and Sunday and just do it full-time. Right now, um, I'm just doing a couple of color clients to like be be able to help me pay the bills and my mom too. But I just basically Friday, Saturday, and Sunday, which are the busiest days to work because when I get to the point where my business will be successful, I can make up to like $1,000 to $1,500 a week.

But what will you do on the days that aren't Friday, Saturday, and Sunday? What will you do on Monday, Tuesday, Wednesday, Thursday?

Well, my plan was to stay with my kids because it pays more, it costs more to have them, um, in daycare or somebody watch them. And that's why my goal is Monday through Thursday stay with them, and then Friday, Saturday, and Sunday, um, work those days.

Can Mama not watch them while you're out working?

My mom?

Yeah, your mom.

Yes, my mom works. I literally have nobody to watch them right now. That's, that's why I chose to go. Yeah.

Okay, so here's I just wanna caution you, I want you to do whatever you can not to siphon this money slowly.

Okay.

And because what can happen is you can have a distorted view of reality of how well you're doing.

Yeah.

Because when the bills are paid and everything seems fine, it makes you feel like everything's good. But if your hair business is not bringing in the money that you really need to survive, you could look up and be in a world of, of pain in, uh, about a year or so from now. That's right.

Right.

So just, just caution that I think you're thinking through this. I want you to do a, a, a deeper level of thinking on the Monday through Thursday deal and see if there's anything you can find. Because don't automatically assume you can't find work that can pay for daycare. I don't want you to automatically make that assumption.

Yeah. And, and to that point, I'm gonna throw it out there. Maybe the best move for you right now is to go work for an established salon that needs somebody cutting hair and you're not the one trying to find clients. You got enough to deal with right now as you're going through a very traumatic time.

Yeah.

You're, you know, you need time to heal. So I would be considering if I could go make really good money or as much money as you possibly can, given your time limitations for a salon where they're generating customers for you or however that works. I'm over my skis here on this particular topic. I should be letting you talk about the business part, but I think if you could get somebody else to pay you is my point.

Agree.

Until you get established and then we find, okay, I'm going to start doing a couple, keep my hair color clients. On, you know, maybe I do on Monday night, you know, the boys are in bed at 8, maybe I do a couple, you know, I do one late night color. And you begin to build that way. And I think this is the mindset you're gonna have to have, but hear Jade well, you need to do everything in your mind. You need to almost trick your mind that that $40,000 is someone else's and you just cannot touch it unless there's some crazy insane emergency, which of course you've got to.

Yep.

But it's truly emergency money only. And I think if you do that, you will find a way. And there's no way, Bianca, that Jade and I would bet against a single mama.

No way.

Like, there's zero chance. Right? I want you to hear that. Like, there's no stopping you. I wouldn't get in front of you if my life depended on it to take care of those 3 boys. So I want you to hear that you got this. We believe in you.

Okay.

Okay? Okay, but get after it like your life depends on it, alright?

Dave, we got a lot of calls on this show where life happens. One day someone's healthy, they're working, providing for their family, and then a curveball hits.

You know, we hear it all the time. A car accident, a cancer diagnosis, a heart attack, and suddenly everything changes.

Yeah, and that's why you've always said that having term life insurance from Zander is essential because it protects your family if the worst happens.

Yeah, that's right. You need 10 to 12 times your income in coverage. No gimmicks, no whole life junk, just straightforward term life protection. But there's another piece that people often overlook, and that's long-term disability insurance.

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Buying or selling a home is a big deal. You didn't need me to tell you that. It's just such a huge, huge deal. The emotion, the money that's involved here. And the reality is, is all these differing headlines. There's clickbait on social media. Somebody always trying to tell you about the latest things. But we want you to know we're here minding the store.

What is—

what are the real trends? What are home prices at right now? What? What are we seeing with the inventory? Uh, what is the rate on the average fixed 15-year fixed rate? All of those things, we've got that for you so that you can trust the information. And, uh, you can get that by the way, by going to RamseySolutions.com/market. That's RamseySolutions.com/market, or we have the link in the show notes. All right, let's go to Nick in Wichita, Kansas. Nick, how can we help you today?

Hey guys, thanks for taking my call. It's an honor to be talking to y'all.

You too.

So basically, so basically, my wife and I bought this house about a year and a half ago with two incomes. We had planned for two incomes for quite some time, and the Lord blessed us with our first daughter. And so we kind of switched paths. So my wife is a stay-at-home mom because we'd like to expand our family a little bit further. But we know that now this house is a little bit more than we can chew. So we're looking for other options. And one thing that we're looking at is some land that we would like to buy and then build a house on. So I called the bank up and they said, "Hey, you should take out a HELOC to buy the land and then get a construction loan." And I said, "HELOC? Mm, I don't know what would Dave say." So that's why I'm kind of calling in today.

00:34:54

So before we answer that part of it, what is too much to chew, this house? How much are you running short on money? Give us that. Breakdown.

Yeah, so, uh, currently, um, with our mortgage and everything, uh, unfortunately, uh, we, we, uh, got a 30-year loan, um, and so it's 40% of our take-home pay right now, which is how much? A lot more than 25%. Yeah, take-home pay is about $65,000.

So take-home is $65,000, and what is the actual amount of the mortgage right now?

So the mortgage is a little over $1,800, but we put extra on because we wanted to pay it off earlier than 30 years.

Okay, now knowing what we know—

I'm sorry, go ahead.

Well, knowing what we know now, the $1,800 is too much, right? It's too much for you guys. So as we start thinking about what we're doing now, and you're thinking about a house with land, what is the number you need to be at? If you could wave a wand and change your mortgage payment, to the right percentage, what would it be? At 25% at max?

So 25% would actually be about $1,500. What we— the minimum payment right now is $1,800, but we actually pay more than that to make it not a 30-year loan. That's why it's at 40%. It's actually about $2,400 instead.

You said you take home $65,000. That's around $5,400 a month.

Month?

Yes.

Okay. And you said you're trying to get the more— 25% is about $1,300. So I, I wouldn't— I, I just want to, I just want to make sure we're on, we're on the same numbers because you're quoting different numbers than I have on my paper. So I just want to make sure you're off by about $300 on a lot of what you're saying, which is not a lot, but it is a lot. You see what I'm saying? So I just, I want to, I just want to make sure I'm It's fine that you're off. I just want to make sure we're tracking together. So you've been paying extra on the $1,800 mortgage. That's the paying the extra is what's put that at 40%.

Yes.

Got it. Okay, now we can move forward. Keep going. So the plan is—

Yeah, absolutely.

Somebody told you to take out a HELOC. You're— it rose your hackles. Yeah.

To buy the land.

Yeah.

And but I, first of all, Well, you know our answer to that, but I, beyond our principal answer on that, I just don't understand why, well, I do, they're trying to sell you a product.

Yeah, don't do it.

But you should be able to do the lot and the house all together in one construction loan. And it needs to be, you know, within reason for you. So can you do that? Have you found a place where you can get the lot and build a house and come in where you need to come in at, at what your monthly, what the monthly mortgage is.

Yes, yes, I think so. So the lot is about $65,000 and we put about $150,000 into a house on it. And so with the equity we have in our home now, that would bring us at a mortgage of about $150,000, maybe a little bit less. So that would— our monthly payment would be about, probably a little bit less than $1,500 a month.

That's great.

Okay, it's a much better situation. So the point is put the house on the market and do what you just said, but you don't need to get a HELOC to buy the land.

Okay. Yeah.

You're just gonna be displaced for a while.

Yeah. Well, they're just selling you the bank. That's their job.

Yeah.

I mean, right.

That's how they make money. So, but yeah, you don't need that. You just do it all in one lump sum. You've actually, have you built a home before?

I've never built a home. Neither have I. I'm, it feels—

So I'm a bit of a rookie on this.

Me too.

You know what I mean? But, but I know you can do it all in one swoops. It sounds like you have.

Absolutely.

You've researched it. So yeah, you're doing the right thing. I'm glad that you have equity that you can get out of this situation. Situation.

Yeah, absolutely, me too.

Yeah, you're looking for a construction to permanent loan. Sometimes it's called like a one-close loan because you're not doing a separate loan on the land and then a separate loan. It's, it's all together and it's, it's one close. It's going to be easy for you to do it that way.

Yeah, thanks for the call. You're a smart young man and now you know what to do. And hey, walk away from these things as we have when we've made dumb decisions, or, or maybe not dumb but risky, and then the risk comes home to roost. So learn from this. Let's go to Emily who joins us now in Philadelphia. Emily, how How can we help you today?

Hi, thank you so much for taking my call.

Sure.

Um, so my husband and I were expecting our first baby in June.

Congrats!

Thank you. And we were wondering, uh, the best way to like build wealth for our child, especially because we hope to have many children. So we wanted to make— we wanted to start now with that. And, um, I want to know like how to start this and then update it as we have more children and our salaries changes.

I love that. You know, I feel like that's kind of been a sentiment lately, people calling in and thinking about the best way to build wealth for their kids. And truthfully, and I think, Ken, you would agree, I think the best way to set your children up for wealth is for you to set yourself up to build wealth. Because when you do that, not only are they learning valuable money principles in the home, right, they're observing what you do on a daily basis. So they're seeing you save money. They're seeing how you speak about money. They're sensing the feeling about money in the house, right? So when it's healthy, that's very good for them. Not to mention, as you're building wealth, then you can do those things for them that set them up to succeed. Like, you know, pay for their college. You can help 'em with their first car payment, right? You can match the cost or, you know, different things like that. So I think that's the best place to start. And obviously as you're doing that, yeah, you're putting money in a 529 for them. Maybe you have the extra money that you're putting it aside, you know, in a mutual fund that you plan to gift them at their wedding wedding, right?

Those certain things. So let's talk about— given that, let's talk about your financial situation and where you guys are today.

Okay.

Uh, yes, so that was also kind of part of it because, um, we make about a total as a household like $200,000 per year. But, um, I am not sure if I'll be returning after maternity leave. So, okay, what will it change to then? $100,000.

Oof.

Half.

Now, how is that— because we don't have a ton of time with you, so we're going to roll through this real quick. How will that change your budget in the sense of, will it be super tight or will you still have margin?

Um, it will be pretty tight, especially because we're looking to buy a house now, but we're doing that based off of his income just in case.

Good, smart.

Um, so it will be pretty tight, so you want to like optimize what we have.

And you have no debt?

No debt, no.

Good.

Do you have an emergency fund?

Emergency fund? Yeah, we have a, uh, almost 6-month emergency fund and about, um, like $60,000 cash and $40,000 in a brokerage to put down for the house.

Very good.

And so I'm moving fast here just for Jade to give her the final coaching moment here. So, um, will we still have margin to keep investing 15% in Baby Step 4 with the reduction? You'll still be able to do that?

Yes.

And then it'll be tight. So now it's Baby Step 5, so we just aren't going to have a lot to put in there, Jade, is what I'm retiring. Yeah, you're just like 29. You're just— that's a reality. So we got to figure out some income.

Yeah, it's going to be tight because you're going to be investing 15%, you're buying a new house. That, I mean, that's what it is. But here's the thing, how old are you guys?

26 and 27.

26 and 27. You are so similar to the couple that called in earlier that was going to have $17 million. If you guys avoid debt, you continue to do this, your income continues to grow over time, you are going to retire with several millions of dollars, right? On the $100,000 income, on the $1,500 income, you're gonna have plenty. You're gonna have plenty to put that $1,500 into your investment savings.

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Official.com. Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Alongside Jade Warshaw, I am Ken Coleman. We're so excited to have you with us today. The phone number to jump in: 888-825-5225. 888-825-5225. Mason joins us now in Richmond, Virginia. Mason, how can we help Hey, how's it going?

Thank you guys so much for being here. I was looking for what advice you could give me where I think most financial advisors would say that my fiancée and I are doing really well for our age, but man, I just find myself really stressed and anxious about money all the time.

Well, give us some evidence that would say that these financial advisors are correct.

Um, so we've got, we've got about $50,000 in investments, we've got no debt, we've got new paid-off vehicles, um, we've got probably about $50 grand in cash. I mean, I think on paper we would be doing well, but there's just something in me that keeps me— there's just something in me that's telling me, hey, you're never going to retire, life's getting more expensive, it only gets more expensive.

And well, I can tell you, just keeping me up at night, I get I get it. Totally understand. But this has nothing to do with paper. This has everything to do with your past.

Okay.

And what I mean by that is somewhere along the way in the environment you grew up in or some experiences that you have lived or been adjacent to, you have developed this narrative that you're actually calling us about today. Is that true? True, or you— I don't mind if I'm wrong, but I doubt you just plucked this fear out of thin air. Where is it coming from?

That, that's what I can't tell you. My, uh, my fiancée comes from a very well-off family, and I come from a pretty middle-class family, never struggled or anything. I, I really can't tell you where it's coming from, but—

oh, I know where it is.

You just told me about it.

You actually just answered it. Uh-huh.

Yeah, you did.

You married a woman who comes from a very wealthy family, which is very different, and you've got a little bit of fear of pressure. I'm not going to be able to finish the way that I see her "Or maybe I'm not going to be able to acquire everything that they have acquired." And you are comparing your now to where they are— excuse me, you're comparing your next to where they are now. And I think that's probably what's driving you crazy. I wanna bring Jade in. What are you hearing?

How old are you?

I'm 24, she's 23.

I think Ken is exactly right. Number one, you're very— I mean, you're just getting started. My husband and I got married at 23. And Ken is exactly right. You both came from families that did fine and did well and better than fine. And you do feel that pressure of, okay, we both have a lifestyle we are used to. We want to get there right away. And you're right. You know, you've got $50,000 invested, no debt, $50,000 in cash. You've done extremely, extremely— hear me well— for 23 and 24-year-olds. You are so far above the game. I don't know if you heard the first call, call that we took where it was some folks in a similar situation. And I was explaining to them the power of compounding interest. You are in such a magnificent situation because your margin is yours to invest. And you're not a millionaire today, but I'm telling you, it ain't gonna take long, Ken Coleman.

No.

It's not gonna take long at all. And I don't know if you've sat down. Here's what, here's my advice to you. And I've said this many times before. Fear comes in two forms, rational and irrational. And what I find is the irrational forms tend to be extremely vague. So what you're saying, I'm just afraid I won't be able to retire. I'm just afraid I'm going to mess it up. I'm just afraid that we won't build wealth.

Why?

In what way? What's going to happen? So what I would challenge you to do is take that vague fear and put some, like, substantiate it a little and put some meat on the bones. Well, if you don't build wealth, why would that be? What would happen? You would lose your job. The stock market would crash and play out your worst fear. And then you're gonna look at it on paper and you're gonna, you're gonna kind of laugh at it and go, okay, that's, that's pretty silly. Yeah, right.

So let's put you on the spot. Yeah, because you're such a kind young man, and let's just put it out there. I want you to be as specific as you can on your greatest fear, the one that you lay awake at night. Be specific. What is it?

Yeah, we, uh, we'd love to move to California one day, and, uh, we— I own a home in Virginia. She'll be moving in here, and, uh, it's, it's a lot cheaper in Virginia than California. And so I just feel, hey, maybe we're never be a— be able to buy a home there. And I understand that.

Okay, hold on, hold on.

Now we're getting somewhere.

That's good, but I want specifics. So let's be specific because we're actually going to use Jade's coaching here, but we're going to give her numbers. All right, sure. So let's pick a number that's pretty realistic. What is that house going to cost in California, roughly?

Maybe, maybe $750,000 for a condo or townhome.

$750,000?

$250,000.

I think you need to up it, my guy. Let's go 1.4.

Yeah, I like that. I like that.

All right, 1.4. And how many years from now that you would be moving to California?

Any, any time frame. We, I mean, we'd love to move out there soon and just rent and buy, buy a home eventually.

Okay, let's go eventually. And, uh, let's go— let's, uh, you like 1.4? Do you want to do more than that?

Let's start with 1.4 because they can get a condo or like a smaller townhouse.

1.4, and you got no debt and all that. So your big fear, you're telling me your big fear is I'll I'll never be able to amass the amount of money I need to, to buy that house and not be house poor. Is that what I'm hearing?

Right. Correct.

All right, great. Jade, take over. This is fun. Now listen to this.

Okay, so here's what I do. I, I take the numbers and I'd work backwards. We talked about this earlier because this is vision, right? Um, you're not there today. Uh, although I didn't get your income. What's your income today?

Uh, combined it'll be $130,000.

Fantastic. Okay. So what I would start with is I'd work backwards. I'd say, okay, I want a house that's $1.5 million. Or $1.4 million. And right now I make $130K. Out of that, what do you take home every month?

It's about $8,000 every month.

$8,000. And out of that $8,000, how much is margin extra?

About $2,500.

$2,500. So I'd be looking at that and I'd say, okay, $2,500, that's my margin. I want something that's $1.4 million. I've got to figure out how much money I need to save or make I make in order to have something that's 25% of my take-home? That's the math. That's the math to solve for. And when you solve for that math, you're going to start having answers, and it's going to give you something aspirational to work towards. Because here's the thing, it is 100% not out of reach. It's just going to take some concerted effort to get there. Fair enough?

Sure.

And then what you can do, you can say, okay, that makes sense. If I take that $2,500 and let's, let's play this out. Let's say this is a 5 or 6 or 7 time horizon. What if I invested that money? How quickly could I get there if I invested it? Um, and I would play that out. I would go on Ramsey Solutions. I'd use the calculator. I'd use the mortgage calculator, and I'd use the investment calculator. That's exciting.

Punch in $2,000 a month.

Okay.

Still gives them a little bit of, of margin for other things.

And we'll do it on a— let's do it on a 5-year horizon.

Is—

do you want to do that? 31? Do we like that?

Yeah, 5 years sounds great.

Okay, 5 years sounds great. So do you have anything invested currently?

You $50,000, right? Uh, that's just in retirement accounts, nothing outside.

Oh, okay. Nothing. Okay, I won't use it. Retirement. Uh, okay. So if you started investing that today, you're gonna have $250,000 in the next 5 years. And that's just with what you have now. That's no side hustle. Right. That's no cutting back. That's nothing else.

Yeah.

So that's pretty sweet.

Wow. Yeah.

So the point is, is we're not even putting you into this timeline that you gotta move to California in 5 years. What we're trying to do is address your fear that you're never going to have enough to live the life you want to live. My friend, you're in great shape.

Wonderful.

You need to take a deep breath. You need to take those fears to somebody else besides us, talk through them. What's the source of it? No, I'm serious, because it's okay, man. But it's so huge. Jay was right to just lay these fears out on paper, very specific, and just see how silly they are or how serious they are, because sometimes they are justified. So you're in good shape, young man. Thank you so much for the call. You're way ahead of most people your age.

00:52:55

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All right, let's go to Washington, D.C. next, where Angela awaits. Angela, how can we help?

Hi, thanks for taking my call. Um, so I kind of have a twofold question. Um, my husband and I have a, you know, great jobs, um, and we're in Baby Step 7, uh, huge Dave Ramsey fans. My question is, like, I want to be a stay-at-home mom Um, but it's walking away from this high-income job worth it? And if so, in the meantime, what do I save for? What else do I do to prepare for this?

Okay, yeah, let's walk this thing back. So when would you leave? If you were to leave, how long from now?

Well, I don't have a time frame. I'm thinking September, but of course, like, whenever God tells me to, you know, we've been praying into it and stuff like that.

So Um, what's your, what's your reason? What's your reason for walking away? I know stay-at-home mom, but what— give me something specific.

Uh, my girls, they're 5 and 7. Um, you know, I don't care to bring them to before and aftercare. I want to be there on field trip.

Totally get it.

Totally get it.

The greatest reason in the world. That helps me though, because I— my, my job here is— yeah, well, here's what we want to do. We want to help you get to a place on this fall or shortly thereafter where you can make a decision. It's not for us to tell you. That's why I asked that question. That's the greatest reason in the world. How much do you make?

Right, $300K.

Okay, and how much does your husband make?

Um, $178K.

Okay, and so, um, you're in Baby Step 7. Uh, what do you— what do you guys have? What does your retirement portfolio look like? I'm looking for a What's the number?

Uh, so net worth right now is $3.1 million.

Fantastic. Great job. So you're going to go down to $178,000, uh, when you walk. And my guess is, smart as you've been, you guys are still going to have plenty of margin.

Oh yes, yes.

How much margin?

Thank God.

Yep.

Uh, it's about $2,500 a month.

Fantastic. I'm having a hard time finding any reason.

You probably just feel the pressure of it.

Well, that's what my next question was going to be, is, is this because you're afraid that, hmm, what if I want to come back and I might be throwing something away? Is it that, or is it fear of what other people are going to say?

I don't think it's fear of what anybody else is going to say, because, you know, with my, my husband and I always joke with him inside the house like we are the Joneses, right? Because our standard is different, right? We're content with what we have. So I don't care what anybody else says. I see it as a badge of honor to be able to do that with my kids.

Absolutely. So what's causing—

and I grew up in poverty. My husband and I grew up in poverty, right? I never dreamed, and he never dreamed, that we'd be making this much, right? And so would it be foolish to step away and No, no, it's not.

Not at all.

Because it's your definition of success. Yeah. It all has to do with your definition of success, your definition of importance, where you place your values of importance. It all has to do with that. And some people do, their values are in their job and what they generate and their income and their productivity and all that stuff in the workspace. And other people, their values are centered in other areas in And that is totally okay. Okay, I'm gonna give you an example. Have you seen the movie The Devil Wears Prada?

Yeah, I have.

No. Oh man. I have kids 5 and 7. I don't watch—

I get it.

You gotta watch it. But in the movie, she has this amazing job that, quote, a million girls would kill for. She's in proximity, she's making money, she's doing her thing, and she doesn't like what it's doing to her home life. She doesn't like what it's doing to her relationships around her. And so she sacrifices it. And people think she's crazy for giving up this dream job. But for her, her values are placed in other places. That's all I wanted to tell you is it's totally okay. Success for you means you're there with your kiddos. That's fabulous.

00:58:34

Let's rewind to your real fear here, which is, "We grew up in poverty." So, the fear under there is, "Will I—" So, the question, I'm making this up, but the question that comes with that reality is, "Will we have enough?" 'Will we have enough?' That's a question that is constantly rotating in your head because of your back. Yeah, it's going backwards.

Okay, great.

So here's the deal. So we have to reframe the question. And so instead of allowing the question to be, 'Will we have enough?' Now we know we'll have enough. Like your confidence when I asked you, 'What will your margin be?' It was awesome. You know the numbers.

You were like, you literally went like this.

You went, 'Oh, 25.' $500. Like, you're so prepared. I know, but I'm praising you, and I'm pointing out to you your confidence when you weren't thinking about that question. You just, boom, we're fine. So now the new question is, what is enough? And so before you make this move, you write that out. What is enough? And it's like, what we have is enough. We are the Joneses, to use your phrase. What is enough is that I get to be mom to my 5- and 7-year-old. That's enough.

Yes, it is, it is. That's where my point is. God has gotten that out of me the past year and a half.

So my point is, you're making a great decision. You're making a great decision. And here's the deal, those girls are going to be 15 and 17 in a whisper of a moment. I'm telling you, I'm on the other side of it. I'm ahead of of you. Okay, I got— my middle one's going to college in 3 months. My youngest has got 2 more years. I don't even know how that happened. Okay, my point is, um, you'll never get this time back. You can always get back in and make more money, right?

Right. It's just, it's, it's just so much, right? And it's like, what else haven't I thought of to do it? Well, it's good.

Yeah, right. Have you allowed yourself to picture what a day is going to look like? Let's, let's just assume that, uh, tomorrow, you know, uh, you're, you're out. You've checked.

You're done. I'm decluttering my house.

I'm decluttering my house and I am gonna exercise. Oh, I love that.

What are you gonna do with the girls? What are you gonna do on the first Monday when you aren't working and it's summertime and you realize, I don't have to go in today? What are you gonna do with the girls?

Oh, we're gonna go on walks. We're gonna go to the park.

Depends on how old they are.

Like, we're gonna go find something to get into, or maybe we'll try travel? I don't know, go visit family. Sounds good. I haven't really decided. Summers.

I love that for you. I love that so much. You're gonna cook meals, you're gonna— yeah, you're gonna take care of yourself.

Oh man, my husband wants to be— wants me to be a stay-at-home mom. Like, everybody wants me to.

Oh my gosh, what are we waiting on? Why are we even waiting until September?

She just needed permission.

Yeah, the chain of $300,000.

Uh, well, listen, it sounds like that's real handcuffs.

Well, by the way, that's real. It is. It is. By the way, that's why that phrase came about and why it has stuck in culture so long, because it really adequately describes the psychological situation when somebody is thinking about doing what you're doing. It almost feels stupid, doesn't it? Yes. Yes. Yeah, I get it. But what we gotta do is—

That's why I called in.

I know. Well, I hope we helped, because we have to reframe. The reason I asked you what the first Monday looks like with the girls when you're done is because that's what you have to reframe around. That's what you're deciding on. You're not deciding on being stupid and walking away from $300,000. You are deciding to make unbelievable memories that when it is all said and done, long after you stop working, you are dreaming and fantasizing on the past, the good old days. And when you go home, you are in the middle of the good old days. Man, come on, Ken. So that's— listen to that. That, that's joy. That's kind of what we wanted on this call. So Angela, you didn't need our permission. I think that, uh, hopefully you see this now as not a dumb decision, but maybe the smartest decision you'll ever make.

Yeah, that, that's powerful.

Okay, well, thanks for— thanks for walking me through that. Yes, ma'am. And help validating something. Appreciate it very much.

You're an awesome Mama. And, uh, boy, you'll never ever, ever, ever, ever regret making the move that your heart's telling you to make. That I'll stand by, and I'll fight with anybody on that anytime. Listen to your heart. It's not just a great song by Heart. Listen to your heart. I knew she was going to do it. Oh, it's such a blessing to be able to throw a bounce pass to somebody who can do something with it. There it is. ¡Gracias!

At Ramsey, we don't partner with companies chasing trends or pushing gimmicks. Trust is earned, and that's why we send people to Fairwinds Credit Union. See, a lot of banks rely on teaser rates, marketing hype, and fine print, but that's not how Fairwinds operates. They've been serving members for 75 years, and you don't last that long by cutting corners You last by serving people well. There's a reason their name is on the studio wall. They've built products that help you manage money intentionally, not pull you into debt. If you're looking for a practical way to organize your money the Ramsey way, check out the Fairwinds Smart Bundle. It pairs a high-yield savings account for your emergency fund with a checking account that doesn't drain your balance with fee after fee after fee after fee. Fee. Open your Fairwinds Smart Bundle today at fairwinds.org/ramsey and get the Ramsey Be Weird debit card. That's fairwinds.org/ramsey. Insured by the NCUA.

All right, are you aware that we have Ask Ramsey? What is Ask Ramsey? You ask, I'll answer. Ask Ramsey is an AI tool that's built and trained on our proven Ramsey principles. And today we're gonna break down the most asked questions from the week. And the big question that kind of wins the derby as the most asked question, Jade, is how do I determine the appropriate amount amount and type of life insurance that I need?

Wow. Well, first off, I love people are thinking about this, and the Ramsey principles do make it simple. When you go on Ask Ramsey, it's going to get straight to the point. They're going to say term life only. That's all you need. That's what we would say here on the show. You need a term of about 15 to 20 years. That's what we would recommend on the show. They're going to say, hey, coverage amount needs to be 10 to 12 times your annual income, which is just what we would say here on the Ramsey Show. Now, the reason is it's very straightforward. Your life insurance, guys, it has one job. The job is to replace your income if something happens to you so that your family is taken care of. Okay? If you should be beamed up sooner than you expect. Okay? And the whole point is we want you to avoid really bad policies, things like whole life, universal life policies. And just remember, if you're a stay-at-home parent, you need coverage too. You need term and life, term life insurance, even if you aren't debt-free. So that's the main thing here. Uh, life insurance is not a baby step.

You need to get it in place as soon as you learn about it, Ken. Absolutely.

So remember, Ask Ramsey can help you determine how much term life insurance you need, uh, to get from Zander based on your specific situation. Of course, you've been with us anytime. Uh, we have been partnering with Zander, uh, for a very, very long time. They are fantastic. Uh, Zander Xander Insurance absolutely can help you. What they do is, they actually shop all the different insurance opportunities for you to get you the best rate. I've known Jeff Xander for probably 15, 20 years. Yeah. Great dude, great organization. So, xander.com is the website there. And go today. You won't believe, by the way, how affordable term life is. Wow. People think, uh, that life insurance is as cheap as it is.

Yeah, it's, it's in the teens.

Yeah. So very, very important, and you got to do it. I remember early on when we got this, this teaching, this was many, many, many years ago, and we were in our 20s, Stacy and I, just newlyweds. And I remember feeling so responsible going to bed that night that if something were to happen to me, my bride— I didn't have— we didn't have kids— yeah, it was going to be okay. Absolutely. And that's the key, the peace of mind to know that if something tragic happens and unexpected, that after all the grief and all of that kind of stuff that they're dealing with, they don't have to deal with the stress of not being able to take care of themselves. That's why this is such a huge deal. And that's why, by the way, Jade, people are asking that question. They're starting to see it. So very good stuff. Kathy is up next in Denver, Colorado. Kathy, how can we help today?

Oh yeah, thank you for taking my call. What I'm calling about is my dad's finances. He's, 80, um, and has Parkinson's and recently had a fall, so I ended up having him in a nursing home so he'd have access to therapy. So he has, oh, close to $600,000 in checking. Wow. Yeah. And, um, so I'm wondering if I'm overstepping my bounds to put it in a CD. I've asked him several times, and his theory is he's going to get out and he's fine and he's gonna go back to running his business and everything's good. So he says, nope, don't worry about it. Okay, but it's, you know, it's only earning— one account's at 0.01, one's at 0.25. You have power of attorney? Uh, no, um, you know, because I'm just a kid and I don't need it.

Understood. So, so it sounds like— I, I have a feeling, um, yes, this money is of issue, but I think there's a bigger issue here, which is you've got to work on convincing him that you need more control in this situation as he's aging and hopefully as his health is declining at a very slow rate, is— was my hope here. But you said he's 80. How long has he Parkinson's?

Um, he's had Parkinson's for probably 25 years. Um, his mental state since this fall has deteriorated. Um, and he, he's— yeah. Um, I'm the only child, so I don't have like anybody else to kind of bounce ideas off of. What about his home? That's, um, his previous home? So it's— yes, it's, uh, quite rural, and so I had originally thought I would try moving him home this summer when the weather wasn't going to be an issue. But last time I talked to him here this morning, he thought he was in a hotel. So—

What is his retirement accounts like? What does he have there? I know he's got $600K in checking. What does the rest of it look like?

Most all of it's in CDs. And honestly, Honestly, I'm— I would have to go look all those up. I'm not 100% sure. My names are on the checking accounts, so I can write checks.

Um, can you just move the money and not— I mean, I'm not saying I would move it to a CD. I'd probably just put it in high-yield savings account. But can you— okay, can you move that? You— yes, your name is on the account. I honestly, I might just go ahead and do it. He's going to be none the wiser, and it's for his benefit. Um, I probably wouldn't go as far as to invest it because I feel like he needs— he would need to sign off on that.

But he has more than $600,000 is what I'm trying to understand, correct?

Yes, yes. Yeah, he's, um, what's his worth?

I mean, if you had to guess.

Oh, uh, including land? Yeah. Um, probably $10 to $12 million.

Oh my gosh.

Yeah, I, I guess the reason I'm asking this is, Kathy, I love where your heart's at, and I'm so glad you called us. I don't think you have to do much here. Does he have an estate plan? No. Oh, now that to me is the priority. You getting in charge of, you know, taking over his finances, I think that's gonna happen pretty soon anyway. He's in such good shape that I think the bigger issue is, is like, you're the only child. What kind of a will does he have?

There's no will. There's no will. He has to do that.

Like, that is priority number one, not you managing his money. You're already managing his money in the sense that if he begins to lose all of his ability to function, uh, you're already on the account, so you can do all that. But the guy's got $10 to $12 million out there. You need to get a will while he's still—

yes, coherent. Yes. Okay, okay.

That's priority number one. You know what's going to happen, Jade? Tell him— tell her what happens if, if he passes and there's no will. There's no will.

It's going to go through the courts, it's going to go through probate. There— it's just going to take forever. And you don't know how all of this is going to get divvied up. I mean, you're the only child, but I don't know what else is going on.

I don't know if there's an ex-wife. What happens if he's got a stepbrother and everybody comes out of the woodwork?

Yeah, this is scary to me. I— this is something I would be dealing with this weekend.

Not this weekend. Like, well, you're hanging up the phone with us and you're going to see Dad. Okay, now listen, you know how to talk to him, okay? But you've gotta be asking him questions like, "Hey, Dad, do you have an estate plan?" And things of this nature. And that's not gonna be fun to talk to because he's thinking about getting out. And last thing he told you, "I'm coming back to run my business," and all these things. Yeah.

You know what I might do? I might call up a lawyer and find somebody that will take this on and that will go with you to him. Great. And kind of work— Oh, okay. You know what I'm saying? So, your dad doesn't have to go anywhere. You could almost almost start wrapping this up. So I would get with the lawyer. I'd say, here's the situation, we need to get this done. He's not going to come to you. And, and try to knock, knock out and let him get, you know, the gist of the situation in order to get that started. Okay, okay.

Alrighty.

But I would, I would say this, I'd start with a question with Dad. Hey Dad, what's your plan? What is your plan? And maybe you've already had this conversation.

Have you? Um, yeah, to a certain degree. And, um, yeah, he, he's gonna get out and everything's gonna be fine. And he's— I understand.

I meant like, Dad, what is your plan upon you passing? Because that way—

I don't think he thinks he's gonna— that's gonna happen.

Wow.

Well, no, that's— I don't know how he's figured that one out. Me either. Because, you know, nobody else has.

Nobody else has gotten out of this deal alive. That's true. No, no. Well, Kathy, I'm not sure, that's a tough one, but this has got to be the sweetest, kindest, most respectful nudge. Yeah, uh, you— there's no one else to do it, and trust me, this is not going to be near as painful as what it will be if you don't get this handled. I can assure you of that.

Oh, we've had a blast. On the road, taking the Ramsey Show out on the road to see all you fine folks. We have two down. We did Charlotte and Denver. Uh, Jade and I were out with John Deloney in Denver just last week, and, uh, we're about ready to head out next week to join Rachel Cruz. It'll be Rachel, Jade, and myself, uh, uh, on April the 21st in Phoenix. And, uh, we have a few seats left, not many, but a a few, and it's your last chance to snag those. It is a live Q&A, so it's the show, and instead of phone calls, we got people in the room standing up at mics asking us questions. We have a lot of fun. The energy in the room is absolutely amazing. So if you're listening to us or watching and you're in the Phoenix area, uh, we'd love to see you April 21st. Go to RamseySolutions.com/events, RamseySolutions.com/events, and get your tickets. Gonna be fun. Are you Are you going to be enjoying any Phoenix food or sights and sounds? Have you thought that far ahead?

You know, if I could, I would try to get to a basketball game.

I know, we already checked on that. Yeah. Unfortunately, Suns will not be in town. Dadgummit. I know. We would have been there, Will. We absolutely would have been there. So anyway, it's not going to happen. Leslie is joining us in San Diego, California. Leslie, how can we help?

Hi there. So I'm looking for financial advice about I've had a lot of major changes in my life over the last couple of years, and the most recent one has actually led me to a housing issue where I'm not sure if I can even afford housing. It's a sticker shock at this point. And just, I have family and friends who are giving me advice and options and different things to do, and I'm just not sure what is really the best option for me.

Okay, maybe walk us through these options that you're getting all this advice on.

Um, so one is, is, um, all of this kind of plays into— I was doing the Baby Steps before all of this happened.

Oh, before all what happened?

Take us back. So my mom passed last month.

Oh, I'm sorry.

And I was living with her, helping take care of her.

Oh.

Um, so I was on Baby Step 2 paying off all of my debt because I— a couple years prior I was in a car accident and I got a settlement, and I— my coworker coworker was like, hey, our job pays for this. Do it, see what it says, and before you do anything with money. So I started the, you know, the Dave Ramsey Baby Steps, final planning and everything. And I was on step 2, and then my mom got sick, um, with cancer. Sorry. So I— it's funny, a week after she was diagnosed, I watched a video of your guys's, and all of them had said, in, in the instance of cancer, drop everything and save. So that's what I started to do because I wasn't sure what to do next, and I was focusing on taking care of my mom. So she's now passed, and I can't afford the place that I was renting with her. And frankly, I don't— I wasn't expecting the cost to be so close to what I'm paying now on my own for a studio compared to what we were renting.

Sure.

Okay, um, so I, I have been looking for different options, um, and you know, there, there are different things. So I saved some money, um, about $13,000 in cash over the last couple of months, um, to try and get an essay to figure out what I want to do. Um, I have— they're not blood related, but they're family, um, and they, they have offered to help me buy a home and I would pay them back, which makes me nervous because, um, rightfully so. I don't want to ruin the relationship. Absolutely. Follow—

go with your gut.

So take that off the list, shall we? Can we just delete that?

Okay. And then, um, what's next? So I have been looking at housing and I'm about $600, $800 short on just basic cost, um, whether it is rent or, you know, estimated utility cost. I do have a car loan which is pretty, pretty high. I mean, it's not too bad at $21,000, but the monthly payment on it is about $600 a month, which is, which is roughly what I'm short every month.

Sure. Yeah. Wow. Okay.

Um, I have, you know, like I said, I've saved up $13,000, so I can take a good chunk out of that and try and refinance it again. And that, that was a thought. And I, you know, continue to try and save between now and when I have to leave where I am. What about But I just—

when do you have to leave where you are? I have 2 months to find a place. Okay. 2 months. What about— because you're, you're getting back on your feet and I'm gonna ask you in a minute what type of work you're doing, but have you considered someplace where you have a roommate? Because you've just been in a roommate situation and you were able to— it was tenable for you. So what if we find another roommate situation temporarily while you're able to get career back up and going and all of these things, pay, maybe pay off this car or sell off this car.

It is crazy that a small 300-square-foot studio apartment is the same cost as a roommate.

So then why don't we do a small— so if what you're saying is I'd rather have a studio apartment than a roommate and it's the same price, that's fine.

Yeah, so that originally I was like, oh, if it's cheaper, I'll do a roommate. I mean, I don't have anyone I can do it with, but all, you know, there, there are ways to find people, you know, kind of a thing. But the price is, you know, minimal, like $100 difference maybe.

I mean, do you have to stay in that area? Do you have to stay in the area that you're in? Because it sounds like your area is super expensive.

Um, so that, that is leaving the area that I'm in.

Okay, so let's get real numbers.

Stay in the same neighborhood. That, that number would be like $3,000 a month.

Okay. But what's a one—

going 30 minutes in one direction or another gets me closer to— what are the prices?

What's a one-bedroom studio going to cost you?

A one-bedroom studio, um, about 20 minutes from where I am now is between $1,695 and $2,100.

Okay. What's keeping you in the area where you are now?

Uh, my job. So I, I do work for a construction company and my radius has been 30 minutes from that job.

Okay, I'm going back here because there was so much floating around. The $1,600— I'm taking the lowest number you just threw out at us, $1,695. Okay, that's— you're saying if you got a roommate for something bigger, it would be the same amount? Did I understand that right? Yeah. Okay, is the $1,600 a month— is that putting you $600 behind?

About, yeah. Okay, so when I factor in utilities, yeah.

So we got to get out of this car, that's what I'm thinking.

Yeah, because would the $600 in the car payment obviously make a massive difference for you, correct? Yeah, so I— you'd still be scraping in my bank account. You what?

I have $13,000 in my bank account.

Uh-huh.

Tell us, okay, that I have been essentially hoarding while we figured out what was happening with my mom.

Great. I want to— I want to get some real numbers from you before we run out of time. First off, I want to know, what are you earning from this job?

Um, before taxes, $62,000 a year.

Okay, what does that look like? What do you take home every month?

Uh, my net is about $3,000. I am putting money into a 401k.

Okay, there we go. We need to pause cause that. Uh, I think that we need to get you familiar with the Baby Steps, and we're going to make sure you leave with every dollar and everything that's connected to it, which is the, our Ramsey plan. But what I'm getting, what I'm trying to get you down to is a foundational spot. We need all of your income at your disposal. If we were to do the following things, this is going to work for you. If we pause retirement, because kind of like what you said with the cancer deal, you kind of paused and you, you stuck, stacked up money until it was time. It's the same thing with investing. You're not in a place that you're ready to invest yet. So it's temporarily pause it, get that money back in your pocket. How much money would that be back in your pocket?

Um, let's see, it's 6%, so about $200 each paycheck. Oh, there's—

well, we're at $400 already. And what I would do if I were in your shoes, that $21,000 I would look and see what it's worth. Hopefully you're not upside down. I would go on Kelley Blue Book tonight, see what it's worth private sale, and I would sell it. And then I would use the $13,000 that you have, and I'd maybe use, I don't know, $8,000 or $10,000, and I'd buy myself a car in cash. And now you've still got a little bit of money there that if you have other debt that you need to clear out, you can start using that for other debt. And I'd keep $1,000 saved. That's what I would do, because now you've got the $600 back in your pocket every month, plus the $400 from investing. I just found you $1,000. Okay, why are you not excited about this? That's a lot of money, girlfriend. I just broke you free. It's—

so my job matches my 401k, so that's why I—

you'll be able to do that later. Remember, this is just temporarily. I want you to have the money that you need to get in a situation where you can find some stability, get your legs legs underneath you, and now you're not feeling like you're in crisis mode. And when that happens, you'll be able to find ways to build up your income, and eventually you'll be able to invest again, and that match will still be there waiting for you when you need it.

Welcome back to the Ramsey Show in the Fairwinds Credit Union studio alongside Jade Warshaw. I'm Ken Coleman, so excited to have you with us today. 888-825-5225 is the phone number. We start off with Joshua in San Francisco. Joshua, how can we help today?

Hi, um, I've got about $80,000 in tax debt and $50,000 $100,000 in credit card debt, and I'm wondering if I should file bankruptcy and just kind of start over.

What's your income?

Uh, $70,000, and then combined with my wife, like around $100,000.

Okay, and that's your total debt that you just gave us? Yes. Okay, what is your mortgage or your rent?

Rent is $2,200.

Okay. What's your take-home number every month?

Um, take-home for me is probably like $4,400. Mhm. And for my wife is, uh, she— her job's a little bit seasonal. It's— she cleans Airbnbs, but it's probably around like $3,000 a month at least on average.

Okay. And what's making you think that bankruptcy is the only way out of this?

Um, because it just seems like such an insurmountable number. And now the taxes are like racking up interest and penalties and the credit cards are, you know, I used to be able to do balance transfers and kind of keep it under control, but it's just gotten out of control. And so And now, you know, it's just high interest. I can make the minimum payments, but it just seems like I'm never going to be able to pay it off. Sure. What do you do for a living? Maintenance tech for apartment buildings. Okay. And what does your wife do? She cleans Airbnbs. That's right. And does some caregiving. Okay.

I'm going to start right here and go right to what I think is one of the key things we need to address. Ask you this today is, what is the amount of income after taxes if Jade and I could just put it into your account today? Okay, what amount of money would allow you to start making progress and feel like you're actually getting momentum?

You mean like how much money?

Let's just assume I'm giving you extra income after taxes every month. I'm asking you, do you know how money extra a month, if I gave it to you in payments, what would make a huge difference for you to where you go, not only am I taking care of it, but I'm actually starting to knock this debt down. I'm making progress. I see momentum. What's that number? Additional income.

I mean, if it's 150 or 130 grand total, um, I don't know. Like, that's the problem.

You see what I'm saying? That wasn't a trap question, but I don't think you're on a budget. Am I right? Correct. So the reason I ask you that is because that's part of the issue. Your wife needs to be working at minimum 40 hours. Seasonal work for people who are broke and are worrying about bankruptcy is not an option. There is no seasonal work. You work in every season. You're working 60 hours a week. For a season, right? Mm-hmm. You said that like, that's interesting, but like you didn't believe me.

Um, I mean, we have a 14-year-old. I've, you know, I've encouraged her to get more of a regular job for many years.

Why are we talking about the— yeah, but the 14-year-old is self-sustaining. The 14-year-old can let themselves in from school school. I've, I've raised 3 kids. My youngest is 18 now. I'm not worried about the 14-year-old. That's an excuse. Why isn't she making more money?

I'm just telling you where she's at. I get it, but she's like resentful of the fact even that she has to work at all.

Well, that's a problem, but I'm trying— you called us for financial advice and you guys need more income, so let's shift. All right, I can't solve the marriage problem. I can't solve that issue.

But I can tell you this, I can tell you $3,600 changes your life without question. $3,600 a month.

So let's shift it to you, okay? Because she's resentful for working and you're calling us, she's not on the phone. So with the skills you have, can you pick up overtime or go to a second job? And what this basically means is roughly $2,500 a month or even $2,000 a month would make a big difference. Can you do that? Josh?

I could. Yeah. Well, that's our— I've worked, I've worked 2 jobs, uh, many points in my life. Great. Um, but still, like, so say I came up with an extra $3,000 a month to pay down this debt. That's even if I'm putting every dollar of that, that's $36,000 a year. It would still take me, what, 5 years, 4 or 5 years?

It's going to take you between 3 and 4 years if you go intensely to pay this off.

Right. So my question is, as an alternative to that, what if I just filed for bankruptcy, got rid of as much of this debt as possible?

What if I told you, what if I told you I spent 7 and a half years paying off $460,000 of debt? And I didn't file for bankruptcy. I think that's awesome.

I'm just kind of— I'm older now. Why are we different?

How old are you?

I'm 47.

Bro, don't be bringing that to me. I'm 51. You're not old. Here's— here—

and here's why. Here's— here's why. When you file bankruptcy, the control goes out of your hands. Yeah.

Do you understand what it looks like? I don't think you do. Go ahead, Jade, paint the picture. No, not exactly.

They're going to decide, they're going to make all the decisions depending on which chapter you file. They're gonna make all decisions. They're either gonna say, hey, we're gonna put you on a payment plan, which is honestly something you can do yourself. They're gonna look at your assets and they're gonna say, we're gonna sell off these assets and these assets, and we're gonna put that towards the debt. That's something that you can decide to do for for yourself. It's going to tank your credit. That's something that's already happened or going to happen anyway. Do you see what I'm saying? So why relinquish control when you have the opportunity here to go, okay, I can look at my assets, I can determine what I want to sell off, when I want to sell it off, how I want to sell it off. I can look and I can call the IRS and I can say, let's get on a payment plan, here's how much I can put towards it. And that's, that's what I want trying to retain for you is the dignity of being able to make your own choices and not have them come in and have your stuff sold out from under you and all the choices made for you.

That's what I'm trying to save you from. I've never experienced bankruptcy. Dave Ramsey has, and he would sit here and tell you, you can work your way through this. And I'm telling you from my experience of paying off debt, the next 4 to 5 years, they're not going to be fun. I can tell you that right now. It's not going to be something that's enjoyable. There will be enjoyable parts of life, but working 2 to 3 jobs is not going to be the enjoyable part. But what is going to feel good is knowing that you made some mistakes, you made a bit of a mess, but you're also the same person that can turn back around and clean it up. There is dignity in that, and there is something, there's a confidence that's built in that. And I can tell you on this side of it, if you allow yourself to walk through that, you're going to come out of this a completely changed person and guaranteed better for it. Guaranteed, Ken.

Oh, there's no question. I think, Joshua, what we're hearing is a guy who feels like he's ready to give up. You called us going, "I think this is my last shot. This is the Hail Mary. The clock's ticking down and I only have a 55-yard pass and I hope someone catches it and I think it's bankruptcy." And we're telling you that's not the case. You gotta believe. I do tell you, you've got a marriage issue. You guys gotta get on the same page. I get that she don't wanna do it, but I think you guys are in the "have to" stage. You're past the "want." 2.

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

If you're working the Baby Steps, the best and fastest way to do it is by using EveryDollar. It's more than just a budgeting app. The plan is built right in. You can track your progress, plus get personalized recommendations and coaching for your situation. It's like having one of us walk with you every day, showing you the next right step. You can start EveryDollar for free by downloading it in the App Store or Google Play. Play. All right, let's get to Alex right here in our backyard in Nashville. Alex, how can we help today?

Hey guys, uh, me and my wife are recently married. We have a 10-month-old. Um, we're about $35,000 in combined debt. Uh, I make about $84,000 a year before tax, and she recently started doing photography, uh, and that's bringing in, uh, kind of a slow passive income. Uh, we have about $13,000 $10,000 saved, and I'm about to receive a $10,000 bonus. So we're just trying to figure out how to navigate this debt.

Okay, $10,000 bonus. I was just writing everything down. When do you get the bonus?

I also, uh, I was supposed to get it, uh, this past paycheck, uh, but I work for the government, so, um, there's no telling. It could be next paycheck or 3 months from now, so I'm not super depending on that away. But I was wondering what the best course of action would be to do with that. I also recently found out that I have a pension from an old job that I have that I didn't know about, and I have to decide what to do with that. How much? Well, there's about $13,000 in that, and when I called them a week ago, they said that I can leave it in that fund for up to 5 years after separation from that police Department and it'll grow at a guaranteed 5%, or I can transfer it to my new retirement, or I can withdraw it and take a penalty.

Um, I would transfer it to retirement. Uh, I would not pull it out. It's— if, if it's retirement funds, I'd keep that retirement fund at this point because the penalty will be what? Not just that you're taxed on it, income tax, but will there be a 10% penalty?

Uh, I believe she said it was 20.

Oh yeah, we're keeping that locked in. So yeah, I would do— if you're able to do a direct transfer rollover, and just roll it over to an IRA, I, I would do that. So let's take that, let's take that money off the table. So we've got the $13,000 saved, we've got a $10,000 bonus that's coming at some point, we don't really know exactly when. Um, so that gives us in theory $23,000, but today just the $13,000. So are you familiar with the Baby Steps? I am.

Uh, we're on Baby Step 2, been on it for quite a while. We spent the last 2 years paying off about $80,000 worth of private student loans.

Oh wow, very Good. So this $35,000 is just the tail end. What kind of, what kind of debt is it?

Uh, $18,000 of it is a government student loan for me. Uh, $3,000 of it is a government student loan for her. $3,000 of it is a credit card that she had before our marriage. And am I missing any? Uh, yes. Oh, sorry. About $11,000 of it is a vehicle. Okay. Okay.

So yeah, I'm gonna look at this and I'm gonna reverse engineer it and I'm gonna say, how quickly do I wanna pay off this $35,000 of debt? And that's gonna inform how hard we work going forward. Is that fair enough? Yeah. So I don't know if you've gone into EveryDollar, but in EveryDollar there's a really cool feature in there. It's a financial roadmap feature where you can basically go in, plug in your numbers, and it'll say based on what you're doing if you start paying today, here's how quickly you can pay this debt off. So my question to you is, how much margin do you have to throw out this debt every single month?

Uh, well, we just recently sat down to do a complete overhaul of our finances. Um, and I would say currently, like excluding her photography, maybe $500 a month.

Okay. $500 a month. So you brought up the photography. I wanna actually talk about the photography because I think that's part of you guys breaking this thing free. You didn't include it in your $84,000 of debt, which makes me think there's not a whole lot— I'm sorry, in your $35,000 of debt, which makes me think that there's not a whole bunch of money being made from that. How much is she bringing in every month?

Well, she started it, uh, 2 months ago, and she initially was booked out, uh, every weekend for a month, and she did all those shoots for free. And now she's doing shoots for about $100, uh, a shoot, and she's doing usually 2 a day, Friday, Saturday, Saturday and Sunday.

Yeah, I want to go back into the numbers here. You have a car loan for $11,000. What's the payment on that every month?

It's about $500. Um, I wanted to— when we got married, we talked about just selling it and getting something cash. Unfortunately, there's some damage to the vehicle.

So Alex, I, I don't know why we're not talking about the $13,000. You said you're walking the Baby Steps. Well, if you're in the Baby Steps, you shouldn't have $13,000.

Yeah, $12,000 of that has to go.

You should have $12,000 at your disposal today. And if it's me, I'm gonna pay that car off. I know that's not the smallest debt that you have, or maybe it is. I can't remember what the number was.

Uh, he's got $3,000 in credit cards and $3,000 in student loans.

I don't know if you're okay with that, but I'm gonna pay that car off and get that $500 a month back. And that's gonna take care of that credit card payment fast. I'm not sure why we aren't paying the car off.

Well, the reason that we had so much saved is because originally we were living with my family and we didn't know how much money we needed because we're first-time parents. So we'd saved it up and then I just didn't know, yeah, the best way to—

No shame at all. I'm just saying, you know, I'm not cracking on you. I love that you've been responsible. I'm just saying that's $12,000 you have to, to tackle this stuff.

You know, at this point, yeah, if you wanted to pay off the car first, fine. If you wanted to do typical, uh, you know, debt snowball method, knock out the credit card for $3,000, knock out student loan and then come back and hit the car. That's fine. The point here is you've got $23,000 to pay off. And how quickly can you do that? If you throw $2,000 a month at that, you're done in 6 months, right? If you throw $1,000 a month at it, you're done in a calendar year, right?

And if the wife goes to work, Jade, full-time, and still does the photography part-time, we're only talking about a season. We're not telling her to shut the dream down. Right. Just go get a $30,000 job or something. And boy, we're out of this quick, real fast.

Right. But you guys are going to have to— I think this is your first encounter with kind of like that sacrificial lifestyle and you're going to feel it. Well, you're either going to feel it in time. You're going to feel it in your wallet. You're going to feel it in the things that you wish you were doing with your money instead, the things that you wish you were doing with your time instead. Because I can guarantee you this, Ken, nobody likes a side hustle. No. Nobody likes working extra hours and nobody likes doing it for 12 12 months. So we'll go ahead and get— that's a gimme. We'll tell you that, that, that's the truth. But if you're asking us, hey, how do we do it? That's the method. You keep $1,000 saved as Baby Step 1. You take anything else that you have saved and you apply it to your debt using the debt snowball method. That's smallest to largest by balance. You knock them out, and then from there on, now you're on to being able to take that money, save up 3 to 6 months of emergency funds. But Baby Step 2 is the kicker because that's where the where the sacrifice lies, right?

What are your thoughts?

Uh, no, I mean, that's exactly what I was looking for. Um, I guess I was just kind of looking for the green light to go ahead and just dump the $12,000 and keep the $1,000, uh, saved. And I really wanted clarification on the pension as well. And yeah, I guess I'll just move that over to my current retirement instead of throwing it at the debt.

Yeah, because most of it will get sucked up anyway if you do this. If you said there's a 20% penalty, you'll be taxed your income tax. Yeah, I would not touch that. Please just roll that over and make sure your wife's on board with this. Yeah.

What are you doing for a living now? Uh, uh, federal law enforcement. Yeah. Are you able to pick up, you know, um, part-time work, you know, in that— I am not. Okay. But I— the nice thing is I have guaranteed salary increases. So, okay, in October of this year I'm going to get a $20,000 pay raise. In October of next year it'll be the same.

Great. Well, if your wife is willing to just for a season, uh, start making more money, and, uh, boy, you guys are going to be out of this. I, I'm going to tell you right now, we've heard too many stories, so I'm going to challenge you to be out of debt in 10 months.

I think you totally have that in the bag.

That's, you know, I, I, that's going to require, again, sacrifice and stretching, you know, as far as more work, but I, I think you guys can do that. Yes, sir.

So I appreciate you guys. Yeah, appreciate you.

Thanks for all you've done to serve our community and, uh, in our country. That's great. You know, this is very interesting. You said something that I wanted to bring back to you, to young couples that are out there listening and they're new to this. Yeah. You said this is your first time— you're talking to Alex, you know, and his wife— it's your first time reaching this thing where we've got to come together and sacrifice. And you and Sam have always been the model of that. Encourage young couples.

Yeah, this is good for your marriage. Whenever you can lock arms, whenever you can band together and gang up against the thing that's trying to horn in on your marriage, your life, your relationship, your dreams for each other. That is so solidifying. And what you get the opportunity to, to prove to each other is I can count on you and you can count on me. If Sam says he's gonna do it, he does it. If Jade says she's gonna do it, she does it. That is the best thing. It builds trust and security in your marriage and wealth.

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

All right, our Ramsey Show question of the day is brought to you by Yrefi. Defaulted private student loans can leave you feeling stuck and overwhelmed, but Yrefi helps you explore refinancing options with a low fixed rate and a payment based on what you can actually afford. Visit yrefi.com/ramsey. That's Y-R-E-F-I. Tfsy.com/ramsey. May not be available in all states.

Okay, today's question comes from Brooke in Alabama. My husband and I are on Baby Step 2 with about $50,000 in debt. We are also in stork mode, meaning they have a baby on the way. I love that my husband has a generous heart, but we always go over budget with tithing and gift giving and never make progress paying off debt. I suggested that we buy smaller gifts for now so that we can be more generous in the future, but he won't consider doing this. Am I being stingy or is he being too generous for our means? Okay, so I wanna start by differentiating between the tithing and the gift giving. So if you're a tither, that means that you're a Christian person and you have the belief of giving 10% 10% of your earnings to a local church. And it sounds like they have that belief. So, I'm gonna decouple that from the gift giving because if that's a, a religious value or conviction that you have, that needs to be part of your budget, I would say, whether you are in Baby Step 2 or not. So, for most of us, myself included, even when we are in Baby Step 2, tithe is at the top of the list.

Giving is at the top of the list. We never stop tithing. I would not recommend you do that. Now, if the tithe, aside from the gift giving, if that is causing you to go over budget, that means there's something else that's wrong. Either there are other items in your budget that are overinflated, or your income is an issue, right, Ken? I mean, that, that's what I would say. Yeah. So that would be my first. I'd put my detective hat on and I'd say, okay, are we going over the budget simply if we tithe? If we stop the gift giving, are we still in the red? And if that's That's the case, we have further work to do. All right, let's talk about the gift-giving side of it. Um, in Baby Step 2, I think that you need to be very choosy, uh, parsimonious in your, in your gift-giving, because generosity generally flows out of overflow, and you don't really have that. So, I would be very thoughtful about if I'm giving, when I'm giving, and how much I can actually put towards it because you can't be putting yourself in the red being generous.

Yeah, you know, yeah, you just can't give gifts right now. I mean, if we're not— are we talking about your kids? Are we talking about the birthday?

Right, exactly. Are we talking about Christmas?

What are we talking about? But if we're talking about like, "Hey, you know, Larry—" Larry's retiring. "Larry's retiring. I'd like to get him a golf hat." cover. It's like, no, man, you're broke.

We're all chipping in for Janice, you know. She's getting—

Janice. I can tell you who doesn't need a gift is Janice. She don't need it.

She's got cats at home. She don't need anything. She's— that is so— she's knitting.

I feel like that's right. There's really— there's like hundreds of thousands of Janices that are listening to us right now. We're gonna get slack for that.

Janice, we love you. I'm also— we love you, Janice. Yeah, that's funny.

Uh, good stuff there. Let's go to Kylie now in Dallas, Texas. Kylie, how How can we help?

Kylie? Hi. Hi. How are you? Good. How are you? I'm doing well. I'm calling with a quick question regarding my husband and I. We actually have no debt, strong savings, and invest constantly and consistently, but we feel very stuck. We're hesitant to make big decisions like buying a home or spending because we don't want to make the wrong move. So, we just are looking for clarity on what we can actually afford and how to move forward confidently without overthinking everything.

Great. All right, so let's take the thinking out. Let's just look at the numbers. How about that? Is that okay? Sure. Okay, so what is your combined income?

Um, combined income is my husband makes $200K a year, um, and then he gets a quarterly bonus bonus that ranges between $20,000 and $35,000.

So let's split the difference there, right? Let's go $25,000 just for fun. It's not truly splitting, I know, for those of you keeping score. But let's say, so that's another $100,000. Correct. So $300,000.

Do you bring any income in? I do not currently.

So $300K, what do we have saved?

We have, um, around $250,000 in a high-yield savings account. Great.

What do you have in your retirement accounts?

We have $50K in a brokerage investment account and maxed out, um, the Roth IRAs, and we also max match the 401(k)s.

So what's your total investment in that nest egg right now?

What is it at, including the 401(k)? Yeah, I'm not sure.

I, I'd love to know, minus the $50,000. So the $50,000 is the only non-retirement investing that you have?

I believe so.

Okay. Yeah, I was just trying to get a full picture. The bottom line is you have $250,000 in cash in a high-yield savings account, which is way above what your 3 to 6 months emergency fund would be. And you got a great income. So what type of house, what's the price point for the house that if you had all the money right now, I don't want scared Kylie, I want Kylie who's dreaming because she can get any house she wants to get within, you know, obviously we're not talking about any house, that was poorly worded. What is the house you wanna get? Yeah. Price range. Just give me the price range.

For the school district that we would prefer to be in, the entry-level homes are probably around a million.

Okay. Okay. And so when I look at that, you know, our rule of thumb here is you don't want, uh, your monthly payment on that to be any more than 25% of your take-home pay. And of course, that's everything in, that's HOA, uh, taxes, insurance, all of that, um, is included in that price. So my question to you is, if we were to get on a mortgage calculator and plug those numbers in, you've got the two, and this is what I would do tonight. With your husband technically at your disposal. I would take the $250,000 that's in the HISA and I would knock it down to 6 months of expenses. What would you call 6 months of expenses?

Um, currently without having any debt, we're renting. Our rent is $3,000 a month, no car notes, no anything. So, um, I'll say $6,000 a month.

Okay.

Uh, okay, so it's $36,000 $36,000. We save that out. Does that feel good? We'll round it up to $40,000. That makes me feel good. Okay, so now we're playing with $210,000. So what I'd be looking at is, what's you guys' take-home pay?

Um, his take-home is, um, $6,000 after taxes, uh, paycheck.

So $6,000, that doesn't sound right on a 3— you said this man makes $300,000 a year?

Well, it's— he gets quarterly bonuses, so just from the $200 $250K, it's a little over $5,000 a paycheck. So a little under $12,000 a month take-home. Okay.

Okay, so what I would be doing is I would be looking for a mortgage of around $3,000, give or take. That would be my goal that you're paying every single month. So then what I'm going to do is I would go into a, you know, mortgage calculator. I'm using the one on Ramsey Solutions, and I'd say, okay, what do I have to put down in order to get my mortgage into that placement. And then I'd work backwards from there. Right now you got $210,000 you could throw in there. And if you wanted to get into this brokerage account, you could. That'd give you $260,000 if you wanted to. There's really no penalty in you doing that. And I'm looking at a 15-year fixed rate. If I do that, if I put $260,000 down on this million-dollar house, that gives me a monthly mortgage payment of $7,955 estimated. For you, that's too high. So then I go, okay, what if we doubled that? What if we saved up, you know, $250,000 more over the course of time? How quickly could I do that? Now I'm putting $500,000 down on this house. When I do that, suddenly my mortgage is down to $5,800, right?

So that's the game I would play, and that's going to help you know how much money do we need to have saved up in order to do this in a way that feels good, it feels right.

Right. Would you recommend in the meantime to just continue renting in the school district that we would want to be?

I would. Yeah, I would. I think that that's where you guys want to be. And all you're doing when you're renting, you're just buying time. You're buying time and you're buying money to stack up for this down payment. And I think that that's a great investment for you guys. You're going to be there in the next 2 to 3 years.

01:55:26

Dave Ramsey here. Most people stay stuck with their money because they're not paying attention. To it. Most people are living paycheck to paycheck, stressed out and broke. Don't be most people. You work way too hard to be broke and feel broke, and you deserve to have something to show for it. That's why we built the EveryDollar budget app. It gives you a personalized plan for your money that shows you how to free up extra money every month and use it to beat debt and build lasting wealth. Plus, you get real coaches guiding you through your plan step step. Look, most people hearing this will just keep hoping something changes, but not you. You're ready to make change happen starting now. Go download EveryDollar in the App Store or Google Play and start for free today.

Our scripture today is 1 Thessalonians 5:11. Therefore encourage one another and build each other up, just as in fact you are doing. Our quote of the day from David Brinkley: A successful man is one who can lay a firm foundation with the bricks others have thrown at him. I promise you, I've done that. I've done that a couple times in life. That always feels nice. Chris is up in Atlanta, Georgia. Chris, how come How can we help today?

Hey, I was calling, uh, had a question, wanted to get you guys' opinion on if the vehicle that me and my wife are looking to purchase is in line with our current financial picture.

Okay, tell us about it. How much it costs?

All right, uh, looking at two different, uh, trucks, and one of them that I really like is $45,000. Uh, dollars. Okay, okay.

What's the other one? Uh, the other one's $35,000. Okay, and, uh, what else do we need to know here?

So do you have any debt? Uh, no sir, no debt, uh, just the mortgage.

And what do you have saved up for this vehicle?

Uh, well, currently in retirement savings I have $272,000 in a traditional 401(k) through my employer. Uh, and me and my wife, we have $115,000 liquid cash in a savings account.

Mm-hmm. And what is your, uh, combined income?

Uh, last year my taxable income was $187,000. Uh, my wife makes $35,000, so after-tax bring home, uh, between $150,000 and $160,000. Right.

So you've got more than enough to cover, it looks like, the truck, plus have a good, uh, 3 to 6 month emergency fund in cash, correct? Correct. Yes, sir.

And really where the question comes from is we just We just bought my wife a new vehicle after having our first child. We did that with cash. And it was a $37,500 vehicle. We paid cash for that. And we have cash to pay— we'd be paying cash for the truck as well. It just felt like a lot of money within 2 months of each other. Yeah. Yeah.

I mean, you've got it. What would you— of the $115,000, what would you consider your 3 to 6 months of emergency?

In your emergency fund? Um, we, you know, probably $25,000.

Oh, okay. Well, it sounds like you've got the margin there. Did you have the money possibly earmarked for something else? Because usually when you're saving up, you know, a stack of money like that, you're doing it for a purpose.

Otherwise you'd be investing it, right? Correct. Yeah. And I mean, um, you know, for me, I've just always been you know, when I, as soon as I get paid, I move everything over that I don't need for the month to a savings account.

And, um, and you just said it right there, your language there, that should set you free because you said, um, what you need you keep in your account and what you don't need you move over. So that, that means you don't need this money. It's not earmarked for anything else and you're wanting to upgrade a vehicle. And what I'm looking at is the numbers of someone who can afford to do that. You don't have any debt. You've got the emergency fund of $25,000. You can spend another $45,000 and you've still got plenty of money left over. You've got a great income. It doesn't go against our rule, rule of thumb here at Ramsey, as we say, vehicles shouldn't go, shouldn't be more than half of your annual take-home pay. And that's because, you know, vehicles go down in value. And so we want to make sure that we're limiting that. So you're not, you know, you're not going against that rule. I think this is just kind of a personal—

Yeah. Are you— what's your emotion? Because you called us to get our take. What was your emotion about it?

What did you think you should do? Yeah, it just felt like a lot of money.

Um, I mean, well, it is, it is a lot of money.

Whenever we, you know, whenever we bought our house, we put 20% down. So we wrote a big check then. Um, you know, we paid cash for my wife's vehicle. We would pay cash for this one as well. Right. No, does it—

but does the 35% something like that, right? But my— I'm leaning in here. Does the 35 feel way better to you than the 45, or is it very little difference?

Well, the main reason I called, because the 45 is the truck that I want, the 35 was where my wife was going through.

Right. No, I get it. But I'm asking again, is there a different feeling in your gut, in your head, however you want to measure it? Is there a different feeling about the 35 if I paid 35 for something versus 45? That's what I'm trying to understand, right?

On my behalf, no, sir. Great. I'm very comfortable with the 45, right? That's what my wife—

okay. And that's what I thought. I thought there was— and so that's the— that's where the relationship stuff comes in. So now, to me— and again, I'm speaking from a guy who's been married almost 28 years— if Jade— if Stacy Casey and I are very separate on $10,000. I'm gonna choose $10,000 less to be in a better situation.

Maybe. I would push it a little bit because— Of course. I would, because expense, something being denoted expensive, all has to do with ratio. And— Correct.

I don't, yes, but you're discounting emotion.

Mathematically, Yes. Now, and I would put that to her because obviously numbers and facts have the ability to affect emotions. I agree. And so if she doesn't have the right numerical facts, that's fair. Do you see what I'm saying?

So I would push that just a little bit. Yeah. Again, I'm not telling you not to do it. I'm just giving you my take. And I think that what I'm trying to get out of that, and I love that you push back on this because what I'm saying is then you gotta cast vision better. Yeah, that's true. You're not casting enough to where she feels safe for some reason in her mind, she feels safe emotionally with $10,000 less. True or false? True. So we gotta cover that.

You gotta fix that. Let me ask this, cause I didn't clarify this. Are these brand new vehicles or are these used vehicles?

These are used vehicles. Okay. Yeah. That, yeah.

I, I, I hear what Ken is saying. What I, my thought is this is why you work so hard. You work so hard. I agree with that. And you stack up and you save and you scrimp and you do all all these things so that the day finally comes where you look in the lot and you go, "That's the truck I want." I get it.

"I like that one." But when the wife is going, "I don't think you need that one. This one's better." Yeah, but at the same time, I'd be like, "Come on, woman, don't kill my vibe because this is why I did all this." Only you can say that, because any dude that's got half a brain doesn't look at his wife and say, "Come on, woman, don't kill my vibe." I'm saying, "I really like that one." Chris, how comfortable are you? Yeah, Chris, how comfortable are you saying that?

I'm going to replay this and let Jade say it for me.

That's my point, which is, by the way, really smart. That's a pro move, let Jade say it. I would rewind it.

What, what's, what's your wife's name if you want to say it?

Oh boy. Uh, Ashley.

Ashley, this is, this is you and me talking over lunch. You know, you guys have done so well, you got to live a little. This is what gives people gas in their tank when they get get to take, you know, the spoils of the war and go out and do something with it and have a good time. And by the way, Ashley, you can get yourself a little something too. That's what I think. I think you've earned it.

I'm backing away from the mic, Ashley.

I'm just saying. They've done so well.

They're doing so well. I'm having fun. I agree with you, Ashley, that the $10,000, if I'm talking to Ashley, I'm going to go, "Let's walk through this. Let's walk through the 10,000 difference. You feel so comfortable with 35, so I want to walk through this with you. Let's walk through it." And not minimize her feelings. Let's walk through it and let her get all of her words out. And instead of having a counterpoint to her words, ask a question in response. There you go, Ken.

You're so diplomatic. I love it.

Well, it's not diplomatic, it's just psychology 101. And I think she, for some reason, doesn't feel safe. She's gonna get to watch this, and I actually think she should watch it, 'cause I think she'll see our heart. We're having a little fun with it. But yeah, I think it's fine for you to get the $45,000 truck. We spent all this time talking about these trucks. What are the two trucks?

Yeah. One of them is a 2022 Ford F-150 King Ranch. King Ranch, and the other one is the same at 2019, uh, and a little bit difference on the mileage as well, right?

So the 2022 is the $45,000 one, correct?

Yeah, they're—

you know, I haven't seen these newer King Ranches, but I had a friend who had a King Ranch when they first came out. That is a nice truck. It's nice. And I'm not a truck guy. If I showed up in a truck, people would be like, what happened to you?

Oh, I'd be concerned. But everybody in the studio is like shaking their head like, yeah, that's one.

Yeah, yeah, I think that's a good move. So hey, I think, uh, her favorite dinner, her favorite restaurant, her favorite cocktail, maybe a gift, maybe a gift. And, and dude, woo her on this truck. That's not manipulate, that's woo. Wooing, that's a big difference. And I think, I think if you woo, you're going to go woo woo when you get that big old King Ranch truck. Thanks for for calling, man. I appreciate it. Hey, to the rest of you, thanks for being with us. Remember this: there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.