Debt Robs Your Life of Margin

You work so hard to be the strong one for everyone else, but you're running on empty.

“The pressure to show up doesn't just disappear, it takes over your life, and talking”

to someone can help. Go to betterhelp.com/raimsie for 10% off. Normal is broken, common sense is weird, so we're here to help you transform your life. From the Ramsey Network in the Fairwins Credit Union Studio, this is the Ramsey Show.

I'm Judy Worsha next to me, George Kaka-Kaka-Kama, never have a friend.

Hey, love it. That was a lot of sound effect. That was actually me. That came straight from the camel's mouth. Hmm, nailed it.

I know, I didn't know that, and we are going to nail it here with Marie, who is in Cleveland. Oh, hi, what's going on Marie, how can George and I help today? Hi, thank you so much for taking my call. Unfortunately, my husband of 46 years old, we were married 21 years. He died suddenly 10 months ago.

Oh, my goodness. And yeah, it's been really hard, but we are trusting in God to take care of us. We have three teenagers, 17, 15, and 13 that I'm now raising. My husband was the main breadwinner, and I was a stay-at-home mom with the kids. I homeschooled them, and I'm wondering what, how much money I need to have in the bank,

moving forward if I want to buy a home. We have no debt. We own both of our vehicles, but I am raising 3 teenagers now by myself and having to figure out in income.

“The only thing that adds an interesting twist to this is that my husband, the company that”

he worked with, they're very generous, unbelievably generous, and they have offered to continue his salary for a year. I know. I am still absolutely blown away by how God has lavishly taken care of us, but I just don't know what to do.

Another situation that's been an incredible blessing is that someone has offered to pay our

rent. We currently just rent a home through the rest of this year as well, so I am in a position where I can save quite a bit of money and potentially pay for a house and cash. I just am wondering what would be a wife's decision to have in the bank if I do find a property. Marie was there, I'm so sorry for your loss, first off, was there life insurance at

all? Yes, there was half a million, half a million okay, and have you received that? I have, I have it in a like a savings account, you know, a high yield savings account. Okay. So it is drawing a little bit of interest.

Okay, good. This is where it should be.

I so I hear two main questions, I hear, you know, how do I basically plan for life in

budgeting month to month as the years go by and also how do I set myself up to purchase a home and cash, is that right? That is correct. Okay, so I love the generosity that you're experiencing with the folks around you, the year of salary, the year of rent.

What I would do is I would go home tonight, we'll send you every dollar at no cost to you, and I would go through and I would just budget out what my expenses are. And I would not right now play in the year of rent, I would still put the rent on there just so I can see what it is, because instead of paying the rent, you'll just pay it to yourself in savings.

And that way, you'll get used to that muscle of this money comes out, and even though right now it's going to savings, you won't get used to spending it month to month, and I think that that's a good thing. And you can even keep your husband's salary on there, since they're going to be paying you a year's worth of salary.

And then after that, I'd say, okay, with this life insurance, can I draw the same amount of my husband's salary and just keep that budget going? So what did your husband earn? Well, he was self-employed, and so he did have to pull out quite a bit, quite a bit for taxes, and he didn't have very many right-off expenses, but he was earning a growth

about 140 a year.

“Okay, and that's what he took home into you all's personal budget.”

And well, that was gross, so after pulling out a tides and taxes, I would say probably

Okay, Alvin. Okay, cool.

So if you can look at that monthly amount and say, okay, this feels good for me to live

off that amount, so that's going to be somewhere around $6,000 a month. So you'll get to test that out and see how that feels and in the meantime, I would George get with a smart vester pro and start looking at the best ways to invest this life insurance. Yeah, what they can do is look at all of the assets in the picture and then show you

projections of how, what kind of runway you have for this money to work for you, because if it's invested, it's in the market, so it could go down temporarily, it could go up, and last few years in the market have been great, and that doesn't tell us that much. We don't know what the future holds, but investing it for the long haul is going to do you way better than just keeping it in a high-yield savings account.

“Now can you replace $140,000 income off 500 grand for the rest of your life?”

No, but can it buy you a whole lot of time for those maybe teens to get out of the house

and maybe you have an encore career?

Absolutely. So would you guys think maybe that it's not a good idea to look at purchasing a house just yet? I would say, if for cash, I don't think so because you really need that nest egg until you can secure what your job is going to look like in the workforce, because to Georgia's point, it's not enough to draw $140,000 off of continuously.

Do you guys have any other retirement accounts or any other savings to speak of? We had, he had a very minimal 401k. I was only around $35,000 and then I had, I mean, grand total with everything put together 401k, raw off all that. It was probably only maybe a little bit over a hundred thousand.

Okay. And then anything in savings currently that you had aside from the 500,000 payout? Not much.

We, I have managed with everything right now and sit not about 592,000.

Okay. Well, you can look at it this way. If you bought a house in cash that would alleviate having to pay a mortgage or rent. Now you'd still have taxes, insurance, maintenance and repairs, all of that to pay for, forever with a home.

So it's going to cost you a pretty penny to run this household regardless, but I like the idea of you sitting down with that smart vester provencing, hey, when would the right

“time be based on our life season with teens in the house should we just continue renting?”

What are you paying for rent right now? Um, about $1100 a month. That's amazing. That is so much cheaper than you could do as a homeowner. I know.

When you're, I know. And it's a great property as well. So I would just hang on to that right now until you know that, hey, I have this job secured, I have this income. I can support being a homeowner with real money versus draining this, this sort of nest egg.

Yeah, do you have any ideas of what you might want to do for work? Have you had any free mental space to ideate on that? Um, so I do have a background in nursing, but I, it was pretty traumatic. The way my husband died. And I just, I can't go back into the hospital right now.

So that's so interesting. Yeah, trying to avoid all of that. That's totally understandable and, you know, you have the right to take your time and think through this and luckily you, your friends and family have bought you at yours worth of time for that.

We're going to send you Ken Coleman's, um, uh, get clear assessment. It's actually find the work you're wired to do is a book and inside of it is the get clear career assessment. And that's going to help you walk through, uh, an assessment of what you're good at, what you're wired to do, and it'll show you what to do with the results of the assessment.

Okay, 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 heard all the time, uh, a car accident, a cancer diagnosis, uh, 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.

Yeah, it's important to understand the difference between them. Life insurance steps in, when you die, disability insurance steps in while you're alive, but can't work. So it replaces a large part of your income, so the bills still get paid while you get

Now, if your employer gives you free disability insurance, great, take it.

If it's, uh, discounted there at a better price, take it. But if not, Zander can help you find the right plan, whether you're single or married, it's not optional.

“If you're going to be out of work for a while, then you need to make sure the money still”

showing up. And that's why Zander is our go-to. They make it super simple to get the right coverage at the best price, no pressure, no upselling. I've trusted Jeff Zander and Zander insurance for over 25 years and so is my family.

To don't wait, it's fast, it's easy and they could make all the difference. Go to zander.com or call 800 356-4282. Protect yourself, protect your income, protect your family.

Let's head back to the phone lines where we have Max, who's in Madison, Wisconsin, Max.

How can we help out today? Hey guys, I'm a moving job at the end of this month and I'm wondering if I should use a good amount of my emergency fund to purchase my stock options from the current company I'm out, I've had a 90 day window before heading to the new company. Interesting.

90 days go into a new company. How much do you have in your emergency fund that you're thinking about using on the single stock? I have 32,000 and the stock options, there's 4,000 of them and they're exercise prices around $5 a day of the playing grand.

What would you do with the stocks afterwards? Well, it's not a publicly traded company yet, so it's kind of just an intent on their future earnings. What is it in your public? Yeah, that's standard gamble and the kind of thing I'm weighing there.

“I think they're on a pretty good trajectory, about 300 million ARR, so it's something that”

they've had a lot of discussion about and how plans to do in the future. So if they do go public, it's going to be a big payday for you. What is your 20k potentially turn into if they go public? Yeah, I don't know what they would go public at, you know, probably maybe $15 to $20 a share.

No. So you could three to four extra money would be the help for every couple of years from now. Are you, what baby stuff are you in, do you have any debt? Yeah, just mortgage.

You know, I got to tell you, if I were in your shoes, I wouldn't do this. It feels like a gamble and I think that you could take the same money and invest it and know that you're going to get the return on that money. And I certainly wouldn't want to drain my savings knowing that I'm going to go through a 90 day drive spell with no income.

George, it would. I want to have a 90 day drive spell, this is a 90 day purchase.

“Could you come up with that money outside of the emergency fund or a close to it?”

Yeah, I could, I would have to come from probably Roth or not from retirement, but from your future income or any other assets that you could that are liquid? Yeah, I possibly could. I just like the idea of you setting a guardrail for yourself of saying, hey, I'm not going to go less than three months of my emergency fund, but I'm willing to drain it down to three

months and use future income in order to purchase the options if you're going to do it. And that way you're not stuck in a large because Murphy will come knock in man as soon as you buy those stocks, you're going to have a $15,000 emergency is just how life works. Right. So I'm not mad if you do this.

They're not at all or nothing after the adoption on them. I could do, you know, half amount. No, that's good to know. Well, then you're going to go, if they do go public, you're going to go dang it, I should have gone all 20.

I could have made more.

There's there's always going to be that element to it of the what if.

So if you feel strongly about this company and even then once you do, once they do go public, I would then move those stocks into a mutual fund or index fund versus keeping it in a single stock. Correct. Right.

Just a question. Why are you leaving the company if you're expecting them to do well and go public and all this? I have a better offer at a separate company and it comes with 140,000 of RFUs and they're already publicly traded.

I'm saying that's been federal over four years, but, you know, it's our stock that's pretty well traded right now and so I think it's just a better opportunity also for my career. And maybe one other question I should have asked early. How much do you currently have in retirement? Um, my right for not probably around 350, 350K across 401K, Roth and another.

I think that if you can find a way to either cash flow this or not go beyond the three

“months, I think that that's a fair, I think that's a fair play on this.”

Otherwise, you're going to call it back three years from now. You guys told me not to get it and I could have made a hundred thousand dollars. I know. You know, it's like one of those things though, they're so, when I, when I look at all the companies out there who are trying to go public and make that transition, it's like then

you go, well, gosh, this really is a toss up. You really don't know. Yeah, I've got a friend who's in that exact situation. They have all of these, these paper stocks, I don't know worth anything yet, but one day they could be and it could be their future mistakes or it could be nothing.

Like that's basically, now it's a game of lottery.

Yeah, it's a lottery play and at that point because of his baby, let's kind of break this down what the logic is because of his baby step in many ways and because of the net worth that he's built, I think in many ways he could take that money, it's like buying a car. Can you take this and kind of just burn it and it not really affect you?

I think he's right on the line of that being the case. Yeah. He makes a great income. If he was in debt, I'm not going to say, well, don't pay off the debt that you don't talk about.

Yeah, never. Because he is in a good spot for a good financial foundation, it's a risk that he can actually take. Yeah. I agree with that.

All right. Very, very good question. All right. There is not a, oh, there it is, Dylan is in Baton Rouge. Here we go.

“I was about to say, all right, Dylan, how can we help?”

Hi.

I'm just wondering if I should drain most of my savings to pay off our only non-mortage debt.

Um, drain most of your savings to pay off your only non-mortage debt. I'm going to go with yes, but tell us more so that we can run this thing back and make it interesting. Okay, um, what the debt, the only non-mortage debt is my truck, which is that 24,524 is left owed on it.

And we have about $39,000 total in savings. What kind of savings? It's not retirement, is it? No. It's 31,000 is in a high yield savings account.

And then about $6,000 is in a regular savings. Okay. It's a no-brainer for me. I'm paying off the truck yesterday. Why haven't you paid it off so far?

Um, well, mainly because my wife is apprehensive about it because she sees the, the amount that we have in savings and dropping it down drastically, scares her. She wasn't apprehensive when you got a $40,000 truck that went down in value as soon as you drove it off the lot with a giant payment. We weren't married at the top.

Ah, okay. I see. She goes ahead. That was a previous life. That's his problem.

And now it's, it's all savings and she goes, I don't want to see that gone to your past, you know, mistakes. Right. Right. Yeah.

“I would do it and rebuild because the truth is on paper and an accounting spreadsheet.”

Yeah. You're not, you don't actually have $39,000. Yeah. You got 15. You got 15.

And so even left with 15,000, you're in a great spot. They're completely dead free, 15,000 in the bank. And then you can rebuild your savings in no time, even with just your truck payment. What's your truck payment? $6.26 a month.

Ooh. You just got a raise. Tell your wife, hey, I just got an extra $625 a month. Net. Take home pay.

Man. She's got your real happy. Yeah. She's gonna, how'd you do that? I paid off the truck.

Mm-hmm. And the truth will be told how if she's willing to immediately take that entire $6.29 and put it back into savings. Or if suddenly there becomes a need for, I don't know, some new jewelry or like a nice bag.

Yeah. That's $7,500 extra. You have in your budget every year. She wants a trip to Disney, so $7,500 will get you there for probably three days, but it'll get you there.

Right. My wife, too. We'll go at the same time, Bill. And how about that? It sounds great.

Can't wait to meet you. Can you grab some a truck pay off? Yeah. And thank you for the question. I feel like, you know, the old boat, quote, the best day of your life's the day

you buy the boat and the next best day's the day you sell the boat. The main thing on the truck. Same with the truck. Yeah. The best year life's the day you get that truck and the next best one is when you sell it or

you pay it off. I'll take the pay off. I'll take the pay off. He likes the truck. And here's the other parameter.

If all the things with wheels and motors is more than half your annual income, you got a problem. Yeah. And there's a reason that we say that because vehicles are going down in value constantly, especially if it's something that's brand new.

Oh, my goodness, never buy a brand new car people.

And let's hear a millionaire. The amount of value that's lost just in year one is astronomical. And so we're really, these are parameters. These are kind of rules of thumb that we live by and teach by here. But it's so good.

If you want to make sure that everything with wheels and motors in your life,

“that's bikes, cars, trucks, boats, you name it.”

No more than half your household income is tied up on those things. If you make 50 grand, no more than 25 grand, you make 100 grand, no more than 50 grand. Just so you don't too much of your world wrapped up and things going down in value. That's right. You can take the hit.

And if you are interested in buying a brand new vehicle again, you're looking for a

net worth of a million dollars or more, so that again, when you take that hit of depreciation

because you will take the hit like Mike Tyson, you can actually, it's a nick. It's a nick. (upbeat music) - Buying a home is one of the biggest financial decisions you'll ever make. But too many people base the decision on opinions or what the market is doing that week.

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Well, she was in that relationship. They acquired an enormous amount of debt together, although they were not married. We have about 78,000 in vehicle loan, 15,000 in credit card, and about 20,000 in a business loan. Her boyfriend took quit his job to win the owner's soul of the business,

so she could branch out and open his own. And the majority of the vehicles are upside down on their loans, because he took additional equity to start his new business. Now that they are no longer together, she is a co-signer on all of this stuff.

- Oh boy, he is the single mom of two. - And he has no verifiable or income, because the business is so new, and he is in with a partner. She is the only one that has verifiable income, and it's not that much.

So we're not sure she's contacted a couple attorneys, but nobody wants to really work with her to get it to where her name is off these loans. I know it can be very difficult, but we're wondering if she should probably file bankruptcy to get her out of all of this debt that she actually has no benefit of.

- Oh boy, and you've already run this by attorneys to see if there's anything there to maybe legally split this or do something in the in-nobody old touch it. - We really don't want to because where he is the primary loan holder and she is the co-signer, even if they get a judgment,

the banks don't necessarily want to take her off as the co-signer. - Well, they know how risky this is. They like her on there. They want someone else on the hook. - Absolutely.

Tell us about the cars. You said they're both upside down. How badly and how many are there? - There currently are three vehicles. I believe it's a 22 Chevy Silverado that has about 50,000

There was also a trailer for a motorcycle, that was motorcycle. I do not believe that has extra equity.

“I believe that is just straight for those three pieces of property.”

- Oh yeah. - We have a Hyundai, a 24 Hyundai that is only valued at 33,000. But they got an additional $7,000 to put into his business. She had a Toyota Corolla that was paid off. It's an older Corolla.

They went in and got a $9,000 loan on it. The cars not worked, but maybe about $4,000. - So they own nine and it's worth four correct. - And let's go back to the Hyundai. She owes 33, what's the Hyundai worth?

- It's worth 33, they owe 40. - Okay.

And then let's go back to the first one, the $50,000 one.

They owe 50 and what's that one worth? - It's probably worth around 45 to 50. It is a very nice Chevy Silverado Club cab pickup. - And you're telling me the trailer and the motorcycle are worth nothing?

- It's a dirt bike trailer. - Okay. - For racing dirt bikes, it would maybe be worth $3,000. - Okay. - That's our area in the market.

- We need that. And what about the motorcycle or the dirt bike? - That's probably the motorcycle and the trailer might bring four or five out of a... - But to combine them together.

- Okay, correct. - So what I'd want to know, what I'd be seeking out next is if she can sell these items, being the co-signer

“and that's what I'd want to judge to approve.”

Hey, we can't find this guy, we can't track him down. He has no income, this is destroying her credit. Can we have the ability or where he's at? - Okay. - He will not cooperate.

- Right, and that's why I'm saying can we get a judge to order it? - Okay. - That's what I'd check on, I don't know if they will because what's taking place is totally legal.

She co-signed on debt, which is honestly, and I mean, you already know this is just one of the worst things that you can do because you're on the line. That's the whole point. If this guy does it pay, I'm saying I will.

That's what you're saying when you co-sign. So there's nothing except him being a skumbag. There's nothing illegal going on here. There's nothing quote wrong going on here. So it's going to be hard, but I would at least try to say,

I'd try to go before a judge and say, this person's not paying.

Here's what it's doing to me.

“- Well, and can we sell these assets so that we can?”

- Clear that. - That is an issue we're running up against, 'cause he is making monthly payments. But at the rate that he's making next monthly payments, if he ever stops,

she doesn't know until it's too late. If he her name's on the vehicle for as well, so she can't go get something independently of him. - Yeah. - And he has come and take in her vehicle.

- Well, she was that work. - Well, how can he do that? Is she driving one of these? - He has an extra key. - Oh, she's driving one of these.

She's driving the Corolla? - She's driving the Hyundai at this time. - Okay. - Are they both on the insurance for all these vehicles? - Yeah, from what we understand, yes,

but at any time, he could take her off the insurance and she would have no knowledge. - Why is that? Is she's also on as well? - Because they are not currently together.

It's his insurance agent. - Is he trying to actively destroy her life at this point? Where's his head at?

- Basically, they have, he left her one month

after they had a child together. - He has not ordered to pay, he pays $100 a month for child support. - That's always-- - And they have told her--

- Ordered by the court? - If she can, yes, if she can pass it because he does not have verifiable income, she may end up having to pay. - Yeah.

- This is a nightmare. I'm so sorry. - 100% with his why we're wondering, if she files bankruptcy, would that get her out from under his co-signer from all of this?

So at least, she doesn't end up with all this on her lap. - Well, the bankruptcy is not gonna help much 'cause they're gonna liquidate all the cars and if they get repo, she's gonna be on the hook for the difference.

They're gonna sell it at auction for nothing and then she's gonna owe even more. While her financial life gets destroyed for seven to 10 years from the bankruptcy. So I don't love that option.

I would try to see how we can get her out of this, these individual situations, one by one

if she had to. - Okay.

- And I would try to get up, you're about 15 grand

under water and all these vehicles. Obviously, she needs something reliable to drive and obviously we need the ability to find this car and be able to sell it, which that's gonna be the difficult part 'cause he's got most of these toys, doesn't he?

- He has everything, she has access to the Hyundai and the Toyota. But, you know, she would love to sell the Toyota, she can't because of this loan that's on it. She has told him, come get the Hyundai.

I will go out and buy something that, you know, I can afford so I can make my own payment. But she can't let her credit wrap up and all of it. - Yeah, well, she could drive the carola, right? If she sold the Hyundai, she could do that?

- Absolutely. - Okay, so if we at least get out of those two,

it solves some problems here 'cause that's,

that at least alleviate some of this pain when you owe 33 on one and nine on the other,

“which means you need to come up with 12 grand”

to get out from underwater on this and then you can keep the carola. - Yeah, and what about the credit cards or those still actively going because I'd want to make sure that those are shut down

and that more money is not able to be rung up on those. - I would freeze her credit so that no accounts can be opened under her name and social security number as well. - And the same thing with this business loan, her biggest job right now is to work hard to say,

I mean, she is on the hook for this money. So let's earn $20,000 and start knocking out debt and make sure it can't come back to haunt us later on by freezing the credit. (upbeat music)

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(upbeat music) - Right back to the phone lines where Harrison is in Augusta, Georgia. I Harrison, what's up in your world? - Yes, thank you all so much for taking my call.

So my wife and I are in our late 30s with two kids in the three. I make about 3,000 years in my life makes about 30,000. And together we've got about 100,000 dollars in a mortgage debt, mostly vehicles and credit cards. And after doing our budget, we realize

in more running about a $2,200 month deficit. - Woo! - And I feel completely trapped. I have no idea what to do. I realize we've built our life outside of our financial realities

and it's just kind of snuck up on us and not just could use some help. - Yeah, my get-listen, I'm gonna tell you right now, I gotta believe that a lot of that red is in the cars and my wrong or am I right.

- Yes, you right. - So tell us about the cars, how many are there

“and tell us what the payments are, tell us what you owe on them?”

- Yeah, so I have two vehicles. I have a truck that I owe about 14,000 on, not payments about starting $325 a month. - Okay. - And then I have an SUV that's worth

that I owe about 30,000 on. And that monthly payment is $560 a month. - Okay, honestly, I'm gonna tell you that son is bad as I thought it was gonna be. Although, I still don't like the car payment.

What else is sending you guys over a thousand dollars over when you look at the budget? What do you find are the key contributors? - So, mostly, I mean, I'm paying $1,850 a month for daycare and that's killing me.

And then I mortgage is $20,100 a month. So, I really put myself in a house that we probably should not have bought. - Yeah. - What's your actual take on pay every month?

- $2,500. - Oh, wow. - That feels low is investing coming out?

I just actually paused that this week in trying to do whatever

I came to front with some cash, downloaded every dollar up and then trying to go through that and just trying to figure out funds and solutions here. - So, you said you have a 100,000 of non mortgage debt. I'm counting $44,000 in car loans.

Does that mean you have $56,000 in credit cards? - So, I have about 25,000 in credit cards. I have about 10,000 in a personal loan. - In about 5,000 in medical debt. - Have you and your wife sat down

and made an every dollar budget

“and just kind of put this on paper to get the reality of it?”

- So, I have and, you know, I've tried to talk with her multiple times and she kind of shuts down and it's hard for her to kind of see the reality. You know, I-- - Is she overwhelmed? - I'm trying to, I'm absolutely, she's overwhelmed.

- Well, the truth is,

if she's making $30,000, after taxes after everything,

that's not covering daycare. It's, I mean, it's breaking even. - $30,000, yeah, thank you. That $30,000 is from photography. Those mistakes all under the table.

But you're right, it's barely covering daycare. - But is that what's keeping her, I guess what I'm saying is regardless of how it's being paid or who she's working for, she's out making money and is that the thing that's keeping her from, obviously.

I'm not saying everybody has to be a stay-at-home wife. Just hear that. I'm just saying, I'm trying to solve a math problem here. If she were to stay home, that's something that might pull this back a little bit

and maybe she can stay home and do photography and just shift those hours to where,

“do you see that I'm saying there's more of a benefit to it?”

- Absolutely, absolutely.

'Cause if she could do that night to the weekend, she wants the kids during the day, well now we have a problem solved 'cause we've kept some income in the door while getting back our daycare money in 15, 15 months, which gets you to more like a $300 deficit.

And that's without paying off any of your debts. - Have you guys talked about that? - We have talked about it and honestly we've tried it a couple times and just did not go very well. She was, she struggled with keeping both kids at home

and trying to work and so we kind of came up with it. - Playing, you know, this is a new business. Let's get to kids and they care and give you a real shot to really grow this business and to work you go.

- How long has it been? - She's only been doing this about six months. - Okay, so here's where I'm at with this. There's three things, there's three options on the table here. And a couple of them are a must.

Number one, we have to sell the vehicles. At least one of 'em, at least the $30,000 SUV has to go out the door. The other thing is she either needs to choose between, I'm going to do this part time and stay home with the kids

and try to bring in as much as I can in part time hours or I'm going to find a job or make this job grow in a hurry to where I'm making more than $30,000. Because you guys are, and in the same goes for you too,

like you gotta find ways to get your income up, even if it's side hustling, if it's over time, you guys are up against some very scary numbers here. And you cannot, and mind you, we're not even talking about paying off debt.

Yeah, we're just talking about getting you out of the red. We haven't even found them, but these are just things to get you out of the red. This is not extra margin. - Just stay fine where you can cover all the bills.

'Cause we're now, are you using the credit cards to fund that gap?

“- Yes, yeah, that's what we've been doing.”

But see, it's coming to a head because my... - When it's about up, and at some point, it's all going to come crashing down. - And that's why I say, it's not it. And that's why I say, speaking with her,

this is not personal, it's not having to do with anything with her photography business. This is math, and this is numbers, and this is us adulting, and saying, "This is what must be done in this season."

- We need to go from, I'm scared to, I'm angry. 'Cause that tells me now we can solve the problem. And so if you can get her there, you know her better than anyone, and just level with her and say, "Hey, listen, I know.

"I'm overwhelmed too, but we're going to get through this together. "We're going to get on a plan, we have the every dollar budget, "and if you don't have the premium version, "we'll gift it to you, Harrison." If you hang on the line, that'll connect to your bank account,

that'll give you all the personalized recommendations. And I think once you see the reality, and you can look past the fear and the overwhelm, you guys will go, "Okay, we can see a path out, "and you just gotta focus on one thing at a time.

"That's the baby steps, $1,000 cash. "Do you have that in the bank right now?" - I do. - That's good. - Then it's going to be attacking all of our debts,

smallest to largest. So what's your smallest debt?

- On $420. - Great.

“Now, can we knock that out if we worked extra”

and cut our lifestyle down to nothing? - Yeah, yeah, absolutely. - So then at least you've freed up that one payment. And so now you see some light at the end of this tunnel, and it's going to be a slog.

I mean, this might be three to four years for you guys on this journey, based on your income to debt ratio. - Yeah, here's some, what do you owe on this SUV? You said you owe 30, but what's it worth?

- It's only worth about 21, so I'm under water. - Okay, that gummit. - The truck, the truck, only over 14, and it's worth probably 16. - Okay, so there's some money there.

I would probably sell that one then, and take the 2000 and put a little money with it, see if you can cash flow a couple more thousand dollars, so maybe you can get a four or five thousand dollar deal.

- That might mean kind of pausing the baby sets for a second

to stack up that cash, to get a used car to replace that truck, to get you from A to B. - Right. - And what about your work? Let's find ways to make quick money for you.

What do you do for a living? - So I worked for a building supply company running inventory and warehouses, and I also teach pottery classes on the side. - Okay, does the main job offer over time?

No, so I'm on salary. - Okay, and what about the pottery? Is that a great side hustle for you, or did you just pick it 'cause you like it? Because if it doesn't pay a whole lot,

we need to shift to doing something that really pays. - It could be, I mean, I've been doing it 20 pairs. I'm really, really good at it. I just haven't spent much time doing it, 'cause it's, you know, with the two kids at home.

- Right. - So what do you make?

- On a month on average, doing that.

- Doing pottery? - Yeah. - About 600. - And how many hours is that? - In all of that's more than two hours,

once a week, four weeks. - Okay, so that eight hours a month? - Yeah, yeah. - Yeah, I think we can pour gasoline on that. I think we could pump it up into high gear.

- Pretty good hourly right on that, if you can do more of that. - Uh-huh, and if you can't do more of that, then tack on something else. And you might be having three or four different side hustles

that bring in money here and there. Same thing with her, but the point is, you guys have got to get the heck out of Dodge. I got to hear some urgency. This is not even my situation.

And I'm feeling like I got to move. We got to make changes. We got to shift. So guys, you can do this, but you're going to have to get uncomfortable.

There's no way this is happening without you guys getting extremely uncomfortable to do it. (upbeat music) - Okay guys, let me ask you something. What would it take for you to switch your bank?

Because if you're still earning next to nothing

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Again, I'm here with George Campbell. I'm Jade Warshaw. And we're headed back to the phone lines where we have Dan, who is joining us

“from Fort Myers, Florida, Dan, how can George and I help you out today?”

Yeah. So my wife and I are starting on the process of wine our first house. And our lender is suggesting we cash out our 401ks from the down payment.

Oh, I'm trying hard not to laugh, Dan, because it's just so funny that a lender, of course, is like, hey, just cash out your retirement to make this happen. Yes, so I can get paid because I haven't in a while.

Right, right. I mean, you do know that this is a horrible idea. I mean, your red flags went up, didn't they? Yeah, yeah, that was my saw. I mean, yeah, yeah, so--

Let's play this out, just for kicks and giggles, Dan. How old are you? I'm 30.

And how much are they telling you to cash out? So I've got about 22 in my roster.

“So I wife's got about 14 or 16 in her employer match.”

OK, so 22 and 16 is what you would have cashed out if you listened to your lender. Yeah, about 36. OK, so 36 grand. And I'm just going to play that out.

If you left the 36 grand and what it would turn into, which is how much you're losing if you did this move.

And that's if you never added anything to it.

Just 36 grand letting it ride from 30 to 65, that would turn into $1.2 million. So this is not a $36,000 decision. It's a $1.2 million decision. Absolutely.

So that's the scary part. So that tells me, though, another thing, you may not be ready to buy this house. Yeah, what took place that you guys even got to the point of discussing such madness?

So yeah, so we just moved to Florida about three years ago. We make about 140. We've got-- yeah, we've got virtually no cash savings. So that's the thing. So we've got 30,000 credit cards and 20,000 of her car.

OK, I'm glad you told us that because around here, we really do-- we love home ownership. We do. We love when people are ready to make that purchase. We love when people want to invest in 401(k)s.

We love being able to say yes to these things. But there is a time that it creates a much better timeline for this to be a blessing for you versus a burden. And so the way we teach it here is there are certain things that just have to be in line first.

And one of those things is we're never

going to recommend you buy a house while you're still in consumer debt. That is just-- you're just adding insult to injury, because home ownership is expensive. Number one, you're going into debt.

Yes, it's different than normal consumer debt. But it's still debt. And it's still-- or financial responsibility for you. So we're always going to say, hey, you got to have your consumer debt paid off.

That's new, Ro-O-No. And then after that, we want you to have an emergency fund, because we all know that once you buy that house, something's going to happen. Everything's on you.

Yes, the roof is going to happen. The AC is going to happen. You're going to have pigeons that like to nest up in your gutters. That happens to us all the time. And it's like you got to have the guy come out there

and remove them. All that kind of crazy stuff. That sounds like-- That sounds like-- Yeah, there's an ice storm.

And you got to have the arborist come out, right? And when you have debt, you can't cash flow that stuff. And then if you don't have savings, you can't pull from the savings for that stuff. And then the next thing you know, Dave, what do you--

Err, not-- George? I appreciate that. She called me Dave. Oh, my lord, that's what I just said.

And I just said, Dave, the next thing you know, what are you doing? You're going into debt. Further into credit card. Credit card debt.

So this-- we don't want that domino effect to take place. That's why there's actually reason to why we teach what we teach George. So is it too late to back out of this whole thing and just keep renting for a while

“as you kind of create a better financial condition?”

No, it's not too late. So I mean, the whole story, right? So I think you've got about 10,000 in saving, to cash savings. But there's not a whole lot, but there's a little bit there.

But issue is, you know, we live about an hour and a half outside of where we were, or we're currently renting for two and a half thousand dollars a month. So I mean, we're already paying a high rental, you know, even being out to boonies.

And then you know, so we just had a kid last year, so we're trying to move closer and to town. We're into town or about rental and town, you know, closer and to town by daycare, is about three and a half a month.

And that's about what the mortgage would be to play the devil's advocate on the cash on the phone, case side of things. My wife's phone came out, grew that in under three years and like two and a half years.

So if we replayed that scenario, ideally, we'd be back at that same number within two and a half years. That's true. You'll be there, even if you didn't touch the retirement.

You'll add that if you kept where you're at. And so it's still, you're still losing that 1.2 million that you unplugged. And even though you're adding to it with the new 36 grand over time,

it's still unplugging that growth for the rest of your life, first is adding to it. So I still think it's a, and you're making a, you're also gonna pay penalties and fees as well.

Yeah, we didn't talk about that. That's, that's aside from that.

“And so I, I think you guys are tired of the commute.”

You want to be homeowners.

And the truth is, we made decisions

that just has kind of put us two steps back with the car loan and the credit cards. Like you guys are making 140 grand and you still had to turn to the credit card. So it tells me we need to get our current income

under control before we step into this new chapter. Yeah, yeah, I mean, so the income is under control. 30, but that's been there for a few years now. - That's even scary, that's a 25% APR.

pan, that's actually been living on a cash,

you know, a cash budget for a few years now. - I also want to call out another part of this. And again, I don't want to sound like I'm here to bust your bubble. That's not what I'm trying to do.

I want to give you fair numbers so that whenever this all goes down, it feels good and you can actually keep it. But with your, if you're bringing home 9,000 a month, doing a $3,500 mortgage is not good for you.

That's way too high for you. It's a $1,000 over where it should be. - Ideally, you're sitting at about $2,200,

“which means you need to have more saved up”

for the down payment to then lower the mortgage or choose a different home that's at a lower price point. So there's gonna have to be compromises. Otherwise, you're gonna be calling us back when maybe you lose one income or income goes down

and all of a sudden you're going, hey, we can't afford to stay here anymore, we need to move. Or we can't invest 15% to retirement 'cause this mortgage is killing us. - And here from this angle, you call then saying,

your lender gave you some bad advice. They have money tacked onto that. And so they're kind of driven by making a commission. George and I have nothing were completely unbiased for you. And so we're just looking at this as the numbers are,

we get no commission, we get nothing.

We can just look at this and go at the bottom line, Dan,

is you're just not ready to buy a house. You just don't have the money yet. And you can get there and I think that you can get there pretty quickly relative to the span of your life. But the day is not today.

And maybe next year you could be ready,

“but the truth is you guys have $50,000 of debt”

that needs to be paid off. You need to stack up at least three to six months of expenses and then. - So that's probably like an $80,000 swing before we even start saving up a down payment.

- Yeah, it's probably another friend. - And that, I guarantee that's not what you wanted to hear when you called in. - Yeah, really. - But I think you knew in your heart

that this was a bad decision. Hence why you called our show. - Yeah, yeah, I was thinking, you know, I've probably got to go find 80, 80 grand or so. I mean, well, that's the cool thing is my,

I'm self-employed, I don't know if I should put this. - Oh. - And I've been spending the money for you. - I'm spending the money for you. - And you know, 30 to 40,000 a year.

- Just, yeah, go bust it, man. You're income is your greatest wealth building tool. So let's use it to pay off the debt,

“get the emergency fund, get the down payment.”

If you really want that home, prove it. Pay off the debt, get yourself to the good financial spot. (upbeat music) - Hey guys, healthcare is one of the biggest stress points in your budget.

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Headed back to the phone lines where we find Samantha, who's in Miami, Florida. What's going on Samantha, how you doing? - Hi, I'm doing great. How about you guys? - Excellent. How can we help?

- I am calling because my husband and I love the day Ramsey show. We're watching all the time on YouTube, and I am trying to convince my husband to let us buy a new iPhone for me.

My iPhone does kind of work, but it's not fully functioning. Okay, doesn't work, doesn't connect to my watch, but I do tend to kind of break things. I don't think super fast to the average,

but compared to my husband here, like, he takes care of all his technology whose iPhone's like five years old. You know, mind about to turn three. - Okay.

And I want to be one. - Okay, so it doesn't connect to Apple Pay and it doesn't connect to your Iowa.

- Yes, yeah, it's three years old.

It's following a few times.

“I work in an industry where I move around a lot.”

I travel a lot, so. - By falling, you mean you've dropped it. - Yeah. - Okay, it didn't trip on his own. That's what we're asking.

Okay. - Let me tell you some of the, frequently followed out of my hand, though. - Let me tell you Samantha, if you could have been in the commercial break,

George was making fun of me because my iPhone is so destroyed. It is just, it's been, it's fallen many times. It's completely cracked. And I am on your side on doing our best

and it's still not being enough with these iPhones. So, let's talk through, if you're talking to a former Apple store employee and it hurts my heart when I see an iPhone fall, it's like dropping a baby to me almost as bad.

- I drop, I drop baby pretty quickly. - Oh gosh, Samantha drop in babies. Your own babies are other folks, babies. - Get the iPhone to the iPhone to the iPhone. - Okay, good.

- Don't get Samantha baby. All right, so I understand your husband's frustration and he's gone, why would we get you a new one

“for you to then make it an old broken one very quickly?”

- Exactly. - What's a new iPhone run these days? I haven't bought out for you. - No, the Pro Max one or the Pro, I was looking out with 1100.

- Why are you looking at the Pro Max? It's like knowing you get into car wrecks a lot going, I'll take the Porsche, please. Oh boy, 1100 dollars? - Even though, even though it's a expensive one,

I think we're around $700. - But can't you get, can't you get an older model? - I'm looking right now on Swapah, which is a, I saw my old phones on Swapah. So you can buy it an iPhone 16

and great condition for 350 bucks. - Oh, love that. - And what would be the problem with that? - That's a man, the one. - 'Cause I just wanted to do more.

- There we go, thank you for your honesty, Samantha. She just went from my phone doesn't work, too. No, I just want the fanciest latest and greatest. - It's I'm gonna get the new phone. I just want the new phone.

- Well, let's see, can you even afford it? So tell us, tell us is this something that you could do and it's just not a thing or if it's something that would really set you back. Do you guys have any debt?

- We have no debt for baby steps where I'm baby steps six. - Go, just a mortgage. - Just a house. - Okay, how much is in the emergency fund? - Oh, a year.

- A year's worth. - A year. - How much does that equate to? - That's like, well, if you include some of our investments, I guess it's just purely cash on the emergency fund in six months. - Okay.

- It was about six feet K and we also have some investments because it would at least there was a bigger emergency and-- - In a brokerage account. - We can invest. - We'll create accounts and when we do invest

almost 30% of our income. - Wow. - And we'll get you there. - What's your new work? - We're not hiring all the things. - What's your name on that? - About a million dollars a million.

- Okay, so, so it's not funny. - All boy is being a little stingy. - I have an idea, Samantha. What iPhone does your husband have? - So, he's worked pay for his

and he just got the newest one after having his for five years. - Okay, what happened to his old phone? - He cracked the screen. - Oh, see what? - Look at that.

- Here's what we really need to discuss.

- This year. You had it for five years. - But what we really need to set is a baseline. And we need to know what is a norm of keeping your phone. Like, what is the normal amount of time

that a person should keep their phone before they upgrade or just out in the lobby? - Is it? - And it was an iPhone with the single lens. - It must have been an iPhone 4 and it was working great

because they took care of it. - Okay, George, we need to hear because we don't know unless the people speak. So if you're watching this in the comments, put, what is a normal amount of time

to have your phone before you upgrade? Is it three years? Is it five years? Is it every year? - Is it as long until it just literally doesn't work anymore?

- So for the audience, is three years a fair time if you think one person said 10 years, one said five? - Five, five, five, two, three, okay. So I think that we're in, it seems like we're in the threshold in between two to five years

“you should be able to upgrade your phone.”

- I agree, Samantha. So you can't upgrade it, here's my condition if I'm your husband, day one. We're getting a screen protector on there and an otterbox case that is indestructible.

- The ugliest case is the ugliest, biggest case you can find to protect it.

'Cause the truth is, I doubt you've had screen protectors

in good cases on your phones this whole time. - Yeah, and even if she has just doubled down on it because you need it, put it inside of a bag. - I am Mr. like, I'm proudly, my phone is perfect at all times.

Take care of it, the screen protector at all times, always in a case, people who, you know how I know someone's rich, their iPhone is nude. - Oh, no case, no screen protector I go,

- 'Cause it doesn't matter if they shatter it tomorrow, they'll just--

“- I can spot a trust fund, kid, a mile away”

if they go to my phone with no case. - But it's like you can't even get a good grip on it. - It's a hold it. - You're living on the edge and you, and there's, well, total confidence.

- Total confidence, I can't just go and ride through and get a monochrome. - Be a little wash a lot with your phones, guys. It's, you're carrying a thousand dollar device. - Yeah, you wouldn't do that with your laptop.

- I've never had the brand new phone.

I've never had the most brand new phone ever. - I'm proud. - I don't even know which one this one is, but it ain't, it's got two holes. - Well, you know what's nice.

I buy old ones off, like co-workers, as they upgrade, and those sell 'em on our little forums or whatever. So ask around, I mean, Facebook Marketplace, don't get scam there, but swap us another one. There's a bunch of cell phones,

swap to sell old phones by use phones. - Okay. - So all of that really helps 'cause I don't want to overpay. - So if I go to the Apple store, I feel like I get them at the Apple store.

I get an older one. - You can get your sandwich. - They'll have them refurbished.

“- But it's cheaper on swap a hundred percent.”

- Refurbished is just a little bit cheaper than new. - Interesting, and there's more that you can choose from on there. - Yeah, and it's all, you know, legit, not a sponsor,

but, you know, it's just a side idea.

- Maybe they ought to be. - Hit us up, swap a. - Okay, so do you think it's fair that, you know, obviously some people like Samantha and myself, we drop them more often.

Even if you hadn't dropped it, even if you just had the phone for three years and you were like, you know what? I'd like to see what the newer model looks like. - If you budget for your pay cash,

I mean, you might need a sinking fund these days because I have to say these things are. If it's a thousand bucks and you need one every two or three years, you know? - And they'll let me just say.

- And they'll let me just say. - This is a loophole that a lot of people do. Do you want to know what they do? Do they, you know, when they're AT&T or Verizon? - What do they do?

- They just do the payments for it. - Oh, yeah, that's my least favorite. - They just add it into the, which is why my phone went to their contracts. - Yeah, yeah.

- But there's some golden handcuffs there.

So never think, well, it's super cheap.

I just paid every month. That's what they want you to do. - Can I tell you I got, I kind of got tricked 'cause I didn't know. So this was several, several years back.

I was going, I got a notice on my phone that was like time to upgrade. And to me when it's like, it's time to upgrade. I'm thinking, okay, I'm just upgrading my phone. It's time to just swap them.

- Swap them. - There you go. - And I didn't even realize because they just did one phone for another. And then I realized it was in my bill.

- Oh, it's not bad. - It was just automatically. And so all of a sudden one day our phone bill went down and I was like, why did our phone bill go down? And I realized I'd been paying payments on the phone

and I didn't even know it. - Wow, that is brutal. - Oh, the other thing I need to mention is that a lot of people think when my phone is broken, it doesn't work anymore.

No, it's just user error because you put so much crap on that phone, it can't function anymore. - Too much, not in every space. And so resetting your phone and cleaning it,

you'll feel like you got a new phone. Just like with a car. Get your car detailed and that car fever will go away pretty quickly. - You know what, though, some people that's just their thing.

Like, if it weren't for Sam Warsh on our house, I would have no dealings with the technology. Like, he does all that stuff. I get frustrated, one thing doesn't work. I'm like, that's stupid phone.

And he just walks by and pushes one button. And it's all fixed. - See, man, Sam, we're tech support. - Tech support, every household needs a tech support. I can tell it was you in your house.

- I can't use a, you know, a screwdriver, but I can fix your Wi-Fi, no problems. - Tech support, we need it. (upbeat music) , let me tell you something, I see all the time.

People are working hard, trying to get control of their money, and then their phone bill shows up higher than expected. Again, let me tell you something I see all the time. People are working hard, trying to get control of their money, and then their phone bill shows up higher than expected.

Again, let me tell you something I see all the time. People are working hard, trying to get control of their money, and then their phone bill shows up higher than expected. Again, and they don't even know why.

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As Gramsi is our free AI tool that's built in trained on proven Ramsi principles. And so today we're gonna talk about

“some of the most asked questions that you guys ask Gramsi.”

We get questions all the time around budgeting, paying off debt, but this time the top question was around retirement savings, George, as a matter of fact, the most asked question was this, how do I know if I have enough saved to retire?

- Well, the simple answer that you will hate is, you know you have enough saved to retire when your retirement income can cover your retirement lifestyle without depending on social security. So figure out how much you'll need to live on each month

and retirement, which easier said than done, 'cause we don't know what inflation's gonna be will social security be there, how much will it be, health care costs, all of that, but to the best of your ability, okay,

here's what I'm living on now,

here's what I think it'll be 10, 20, 30 years from now. Then list all of your expected income streams. Hopefully, if you follow our plan, you've got the 401(k)s, IRAs, maybe even a pension. And if your monthly income is close to or above

that expected monthly spending, you are probably on track.

“And if there's a gap that tells me you need to lower”

the lifestyle, you need to increase how much you're saving now or plan to work part-time in a retirement, not a bad idea. So important callouts, though, be debt free before in retirement. So work to pay off the house,

make sure you have everything paid off before you head into retirement, plan for those health care costs, be on a written retirement budget, not just vibes. - Yeah, not just to guess, that's so good.

And askRamsy, it can really help you walk through a retirement planning checklist to make sure that you have your retirement savings that can actually float you and your lifestyle in retirement. So again, ask your question today

at [email protected] or you can just click the link in the description if you're listening on podcast or YouTube again. If you want to askRamsy your question, go to ramsySolutions.com.

All right, we got Jeff, who's in Nashville, Tennessee. Hey, Jeff, how can we help out today? - There you go. - Well, I have a question of the macarure and I was wondering if you guys could help.

So I've been with the same company for almost 13 years and we're in some of the restoration cleaning industry. The plan for my future was that I'm to take over the company. We have no written contract, there's no written agreement. It's just something that somebody told me.

But lately, I've found a lot of moral and ethical disparity between my owner and my question for you is, do I hang on and wait until I can take over or is it time to just go ahead and move on?

- Ooh, I would love to know the moral and ethical 'cause that sounds very serious. Is it like crimes are being committed

“or they're just doing things in a way you wouldn't?”

- Not as far as the world is concerned. Biblically, a little bit, essentially, in this industry, I'm not about giving people money to give me work or people that give me work, me give them money back and that has started to happen.

After 16 years of this company

never spending a dollar on marketing at all.

We're now paying off a person to quote on quote, give us work that it's just not profitable. - So you're paying a marketer? - Oh no, this is paying essentially a maintenance guide to approve contracts or approve bid

so that we offer up to them. - Okay, what is that doing for the company? What's the upside? - I will quote, we have to do what we have to do to get work and that's what I was told

this is all about, however. - Am I missing something on the moral part of this or the ethical, help me understand, I feel like I'm missing something. So there's a person who's helping you get contracts

and they're approving whether the bid's are good enough. - No, essentially this is a maintenance guide that works for somebody who has the ability to approve or deny estimates for this property and my company paid that man $7,000

and an attempt to get him to approve more of our estimates.

- So it's basically a bribe.

- That's a perfect way to put it, yeah. - Okay, that makes more sense, I needed that clarity. Okay, so they're bribe in this guy, if we pay a little money on the side, you'll approve more. - To feed us more, more clientele.

- I see. - More projects. - Okay, you don't like the way that's being done, that makes sense. The part that I'm really wondering about is you said,

people are talking about me taking over the company, there's neither contracts nor paper trail for this,

in writing versus a just a vibe of like,

well, maybe when the time comes, you could take it over. - Can you have that conversation? - We've had the conversation several times. It's loose ended, there's no definition,

there's no Tom Warn, there's no payment, there's none of that stuff that's discussed and we're talking to companies that may value somewhere around $350,000. - Okay, this was a significant other in your life

and we're talking about commitment and marriage. You would go, hey, clearly she's not that into you. If she's kicking a tire, it's gone, yeah. Maybe we'll get married, we'll see about that.

- It might just be a way to keep you warm, like keep you on their side and keep you as an employee

'cause maybe they know that you don't like

the way things are going. - And you've addressed it, I sounds like, 'cause they gave you the answer of, hey, we gotta do what we gotta do. - That's it, and this has been addressed many times.

I feel they exactly liked that they're trying to keep me on a hook. - For a while until the day comes and then we just cut the lawn. So that question is, I've already kind of formed up NLLC

and before I just start really moving forward with it, my question is, do I maintain what I'm doing now? We'll try to cold start my LLC or do I just jump right into the same? - Well, that's a whole different question

“because I, you know, you, there's income on the line here, right?”

So how much are you earning now? - Yep, it's minimal, I'm at 60, I year. - 60 a year, and how quickly do you think you could generate that same profit from you starting up your own business? - I would need about six, maybe seven months.

- Is there any part of this business that you can do ethically while you're still working for your boss? - Absolutely, night and weekends. - Oh, okay, it's on conflict with any contract you signed

to, like, a non-compete. - I don't have a non-compete. - Okay, okay, that's nothing wrong with you going, hey, it's, it's my time when the time is right. I'm gonna go launch this thing on the side

but I don't think in good faith you can continue working for this person because of the soul tax. They're paying right now, the resentment building up, I mean, it's gonna eat you alive. It's a poison that you're drinking every day you stay here,

knowing this business is not being runethically.

“- You're not excited to go to work for a guy who does that?”

Who, you're not aligned with the values. And so, for that reason, I would get out as soon as possible. Even if you go work for someone else in the meantime, while you get this thing off the ground. - Do you think you could find someone else

to go work for quickly? - I, well, unfortunately, for this company, about 80% of our book and business comes through my phone. It's my contacts, my people, friends, et cetera. - Exactly. - Family, so the work for me won't stop,

it just, it will just get through everything. - What happened when you divert those leads to your new business versus them? And their business hurts even more? - Unfortunately, they're the ones calling me.

I'm not in control of who, you know, whether they choose the old company or the new company. - But you're gonna tell 'em, hey, actually start at my own thing. - If you're interested. - So, if, realistically, how many leads do you think

would come with you and how much money is that, like, how much could you have on the table

within your first 30 to 60 days?

- First 30 to 60 days with a cold start, not necessarily having everything together. I could probably pull together 25 to 40,000 in project work pretty quickly. - And that turns into how much in profits.

Does that replace your current monthly income? - All right, it would absolutely grow my current income out of the water. - I think this is gonna happen faster than you are. - I think you try this for a month or two

and realize, oh, okay, I can do this repeatedly. - Yeah, absolutely.

“And because here's the thing, you might just flip it.”

Usually it's the opposite, we say, okay, you know, do this other job while you build the business. But I think you can build the business and if you have extra time, yeah, it's sure you could work a side hustle and fill in gaps.

But I don't even think you'd need to do that. It sounds like you've got it right there. There's no non-compete, so there's nothing ethically here. - You just wanna run a business differently. And I'm off for it and you wanna do it the right way.

I think that's really, really good and we're rooting for you. (upbeat music) When you've worked hard to buy a car, the right way, you paid cash with no payments

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and you'll save 10% off your visit, up to $250. CBAC.com/Ramsi, see store for details. (upbeat music) Well, it's my favorite time of the show, George, where we get to talk about my favorite budgeting app,

which is every dollar.

“And one of our favorite things is when people share”

their stories about how every dollar is helping them win as a matter of fact, we have this from a fan. They said, it's just being able to use every dollar and see all the extra, we have every single month. It was super motivating.

We'd have thousands of dollars just, we'd have thousands of dollars extra and just throw it on the mortgage.

And hey, I think that's amazing.

And you can do the same thing too. You can take control of your money. You can change your family tree and you can live like no one else. So start every dollar for free today

in the App Store or Google Play. Matt is in Phoenix, Arizona. Matt, you are on the line, my friend. - Hey, guys, how are you doing? - Doing good.

What's up? - I am at a weird crossing point. We are babysept too. And we have no consumer debt left. We just have our mortgage,

which is up for 16,416,000, and we have 75,000 in student loans left to 8%. - Okay. - We are trying to figure out, we have 50,000 in the bank too.

- How much, we're trying to say 52, with that? - How much do you have in the bank? - 50,000. - 50,000. - 50, okay.

- We're trying to figure out if we should pay the student loan, it's right now, and the only reason I would be

second questioning it in the process of all this

is because in our mortgage is the PMI, the mortgage insurance, which is $250 a month. Our student loan payment is 17 a month. So in order to get a PMI insurance off, we would have to pay $70,000 right around there

on our mortgage to dump it off. So my thought process was, do I pay the 70 on the mortgage to drop that down, so I can roll the extra 250 towards the student loan, since it's more than double the student loan payment,

and then tackle that, or do I just keep trucking along and knock out the student loan, and then keep going from there. - It's a fair question. I mean, you're looking at what you'll receive back,

so you're looking at the payment in essence, more so than the balance itself of the consumer debt, and I understand that if I were in your shoes, because really when we're talking about the mortgage, that really is a baby six activity,

baby step six activity, and so I would continue on with the student loans, because there's $75,000 of these bad boys, you got to knock this out. The good news is you have 49,000 that you can put towards that cause,

and I would totally do that, I would totally do that. - My guess is you're knocking out a bunch of student loans in the process, right? - Yeah, that's a problem. - So you're gonna free up a whole lot of payments, too.

- Yeah, how have you done the calculation? How much is that? - It's far as interest. - If you pay off the $50,000 of the smallest loans right now, how many payments would that free up?

What is that amount to each month? - That I have not calculated. - That's a better calculation,

“I think than the minimum payment on the student loans.”

So I would definitely attack all the student loans. I know the PMI sucks, but you're gonna get there real fast, if you knock out these two loans. - What's your household income, okay? - $318,000.

- Goodness gracious, yeah. - We'll knock out the student loans and the mortgage is so good to control this. - Yeah, over the course of this year, why wouldn't that be the goal to pay to be out of baby step two?

saving up three months of expenses.

“And then from then, we can aggressively put extra towards this PMI.”

- 100% you know, we can definitely do it. We take home from, anywhere from, I'm on commission, but we take home about 14 to 17,000 after taxes every month. So we've been aggressive. We paid off 120,000 in the last 15 months.

- Excellent. - So we've been, we got everything, all the consumer stuff out of the way. The only monkey ranch here is in about 12 months. My wife is going to, we're in our verse at home,

and just raise the kids. - Okay. - And so we're gonna lose about $68,000 in income. And we would, we would take home after taxes would just be around 13 to 14,000.

- Okay. - But then after we put on health insurance and 401K and all that stuff,

we would only be saving about after bills

and utilities and mortgage. We would only be saving about two to 3,000 a month. That would be the extra play after all the bills, is what we would have to left to play with rather than,

“right now we have about 11, 10 to 11,000 in play every month.”

- So you're saying that that feels like a huge swing, bigger than I thought. So she stays home, obviously your income goes down from 17 to 13. And then you figure how much for insurance? - Well, from what I was getting quotes from the home family,

so it'd be me, my wife, and two kids health insurance, full plan was like, it was like 18 or 1900 a month. - Is that market place insurance? - So we'll call that 2000. - To your work.

Okay, that's real high for an employer sponsored healthcare plan. - It feels high, but for it now we'll take your word for it. - So I would look at the high deductible plans too, which will have lower premiums. Have you looked at those options?

- No, I just kinda got some rough numbers from the representative. - Okay, I would make sure to look at those high deductible HDHP plans, 'cause the premiums will be way lower. - Okay.

- Hopefully. - So you're down 6,000 for the month. So I see what you're saying there. It sounds like the point is just let's try to kick out as much of this debt while we have this high monthly income.

And I think that's a great play. You can obviously afford for her to stay home. You can afford those things, but it really just frames what George and I said beautifully, which is yeah, while you have this money

for the next 12 months, let's kick it into our career. - Not yet. - And soon we're dead, get the emergency fund and get that PMI knocked off. Now we have a whole lot of extra margin.

- Yeah, love it. Thank you for the call. Next up, we have Daniel, who's in Salt Lake City, Utah, Daniel. How can George and I help today? - Okay, yes, my question is that my business has debt still

and my wife and I personally do not carry any. And so it's kind of a weird spot where we're on duty step four, but the business is still, I guess, technically I have to step two. - Who runs the business?

- Trying to figure out what's I look for? - I look for mirrors. - Oh, it looks like you're in debt, Daniel. - Right, exactly, I know you know, it's very exactly where I'm done.

“So, that's what I thought you were gonna say.”

- We're on babysit number two, so the business is paid off then, right? - How much is left on that? - Yeah, 80,000. - Okay, how quickly could you knock that out?

If you guys got to. - I don't think that much here. - Okay, before, before 2026 is over, this debt is gone. And then you need to build up an emergency fund. - Yeah, I mean, a business emergency fund,

my wife and I have about $70,000 ourselves. - Okay, I would use your personal money to pay off your debts. - Is it just, is it just, are you the only two owners is it just you and your wife?

- No, I must 50% partner. So, I have a partner, I would love to do that,

but he never has the same amount of money stored up

and so we wouldn't be able to evenly split paying off the debt personally. - Could you knock out your part and have an assign agreement saying, hey, your part of this debt is done?

- Yeah, I guess, and theory. - I mean, your name is still on the debt, which is the risky part. - That's the whole thing, it's like the businesses have the debt. Tell me clearly that the debt that's left

is under his credit. - Yeah, time to pay off the debt, okay. - He's not interested in using profit to pay off the debt over time. - Oh, yeah, no, we're doing that.

Like I said, we're gonna have it done. Probably by the end of the summer, but what's, yeah, I mean, yeah. - So, if you, and how much was it again? Was it 70 or was it more?

- 80,000 worth in business debt on the credit card and a line of credit. - And it will be done at the end of the summer if you use the profits from the business?

- I would aim for that.

- Yeah, I would get on the same page for them

and go, hey, listen, I don't want this debt to hang on any longer, it's adding risk to our business. If we get real intense, we can knock this thing out. Do you guys have any reserves in the business, as well? - Yeah, I mean, well, we've got customer deposits.

You know, those are technically not our money yet either until the jobs are produced work, residential painting, companies, so you got the deposits, you know? - You do need to have some reserves. I think because if you had told me

that you were 100% owner of this business, I'd say, yeah, pay it off, reach over, do whatever

“you need to do, but because you're not full owner”

and there's another guy that's associated with this yet. As long as you guys can have this using those profits by the end of the summer, I love that. And stack up some reserves six to 12 months

is what I would do immediately.

(upbeat music) - Welcome back to the Ramsey Show here in the Fairwins Credit Union Studio, here with George Campbell, myself, Jade Worsha. We got Ryan, who's in Chattanooga, Tennessee,

just down the road. Ryan, you're up next, buddy, how can we help? - Yeah, thanks for taking the call. My question for you as a 26 year old, man, it married to my wife as 24.

I'm curious, we put a large portion of our monthly income away into savings at our time. We have little to no debt, and I'm just curious how much money is saving too much for our time. It versus being able to enjoy your 20s and 30s.

- That's a very good question. Can you clarify for us a little bit two things?

What it means when you say little to no debt,

and just how much are you putting towards retirement savings? - Yeah, so our debt, my wife has about $4,000 for the student loans. We across the board do not have any credit card debt. I do not have any student loans,

and we just have our mortgage, both cars are paid off. And we put roughly three grand a month into saving, or into investing for our retirement. - Why haven't you paid off the student loan?

- We had it set up on an automation, that was kind of whole, I guess, spectrum,

“and that's what we're playing on tackling”

within the next month or so. - Well, how much do you have saved? Have you been putting around, putting away $3,000? How much do you have in non-retirement savings right now?

- In non-retirement savings, so as before, I guess I'm merged, she's fine, so if that's a month, correlates with, I guess the 401k and our Roth IRAs. - I understood that. How much do you have saving non-retirement savings?

- So we have roughly about 25 grand in our tax bogus, liquid brokerage, out of our digital retirement. - Do you have any high yield savings money, like just any money and savings?

- Well, that is, I guess, drawing from the high yield for now, it's on a basic cash in my brokerage account. - Oh, got it, okay, so it's just sitting there. - Like a money market situation, okay, cool, cool. - All right, all right, all right, all right.

So you're wondering, are you saving too much by putting three grand away a month and two investments? - Correct, when I did my calculation, 11% over the next 32 years or so, till I've picked 60 for a time, it's like $15,000, which is great number to have

with contributing that much each month, but-- - So the 3K is 11% of your money. - What do you mean by that? - You're saving 11% as a rate of return when you calculate? - Correct, correct.

- Oh, got it. - Okay, what's your household income? Gross household income. - Yeah, we make roughly 130,000 here. - Okay, so our baby steps go as follows.

Baby step one, $1,000, you have that. Baby step two, pay off all consumer debt, which means the suit loans are paid off today, which brings your brokerage down to $21,000. - Tracking?

- Correct. - Now we need three to six months of expenses. What are six months of expenses look like for you guys? Is it more than $21 grand? - I would say, $20,000, $25.

- Great, so we'll call that good. Now we're at baby step four, 15% of household income, which for you guys, 50% is gonna be $19,500. - $1,600 a month, $16,25.

“- So that's the amount you should be putting away”

and any extra money then gets diverted to the mortgage and to enjoying your life. So you asked, how much can we use some of this to enjoy our 20s and 30s? Yes, you should be using it.

And I think investing three grand and putting every dime away into retirement is a bad idea because you have a flat tire. - And honestly, I think this is just a mental shift

every single month, if you did another 1500 extra

on the mortgage, it's the same 3000.

“You're just splitting it up and doing it in the right ways.”

So you see what I'm saying. So in many ways, you're still investing because a mortgage in many ways, it's an investment. It's definitely a four savings account at best. And so you are investing, you're just doing it in different ways.

So it's just a mentality shift there. - Sure, okay, I'm gonna tell you. - The dollars themselves don't really change. - Yeah, I guess there's, I guess it's harder for mentally, from a, I guess liquid versus the

liquid sample. - Well, let's talk, let's talk, let's talk through that. Let's talk through that because it is worth talking through that. We have found that it sounds like your goal

is to build wealth, right? - Correct. - Yes, we've done the largest study of millionaires.

And one of the things that we found is there's two,

there's two key portions of this. Number one is, these people, they invest in their 401k. That's where they build the majority of their worth. It's not, they've got all this real estate, they don't have these crazy, no.

They invest in their employee sponsor accounts. That's what they do in the other thing that they do is they pay off their home mortgage and they do it relatively quickly. And so if you can do those two things combined effort,

that is the ticket.

“That's what we have found works time and time”

and time again for millions of people. And you're right there. Like I said, the amount that you're putting towards savings doesn't change. You're just not investing at all.

So we're creating diversification in many ways. We have a four savings plan by putting it into that mortgage paying it off, having all that equity. And that's exactly what my wife and I did Ryan. We are very, I mean, you guys are earlier than we even got

started. We had to pay it off home in our early 30s, became baby steps, millionaires in our early 30s. You guys are going to get there even faster at the rate you're going.

But I would caution you to slow down a bit, move from intensity to intentionality once you're out of baby step three and you begin to invest. Because I don't want you to look back and go, oh my gosh, we have kids now, we're not going.

We didn't get to do all those trips. We wanted to do life got crazy and chaotic and complicated. So I would allocate in your budget money for vacations and trips in some little luxuries. You guys have earned it.

You've worked your tails off at 26 and 24 to be soon to be dead free, as soon as you're off this call. Yeah, I appreciate it. It is nice to know that percentage threshold of how can I still be secured for the future,

but also enjoy today's stuff. If you just do 15% until the mortgage is paid off, you're going to have so much in retirement. And by the way, once the mortgage is paid off, you can ratchet that up to 20, 30, 40, 50%,

but make sure that you're also giving and spending. You got to have all three in check, investing saving, giving, spending. So all of those in check, 15% investing, 10% giving, especially if you're a person of faith,

and then you can enjoy it. After all the bills are paid, and that's where the every dollar budget comes in. It forces me to go, oh yeah, I need to put money away for that vacation.

Yes, so we don't go wait. This savings account is just for life. No, no, no, you're marked it for vacation. So use it. One of the things that kind of makes me sad is,

we can really get into the, the, the, the, baby step to mode that just gazellintensity mode, because it feels good. We're making accomplishments. We're paying off debt.

We're saving really quickly. And it's like if that mentality continues to follow you,

you never really enjoy the fruit of the baby steps.

The whole point is to really rush it. So you can get out of those painful periods, get out of baby step two, get out of baby step three. But man, once you're, once you're in four, five and six in the house to start and to come down

and everything is really, you know, starting to take shape, you're investing your 15%. You've got to live a little. Live like no, wow, so that. You can live like no one else and give like no one else.

And you know, I got a DM the other day.

“They went, hey, can I buy this fancy coffee machine?”

I know you like coffee. And I was like, well, where are you guys at financially? They go, well, we're millionaires. We've a great income, no debt. Get the coffee machine.

Yes, feels like you're doing a bad thing, 'cause you're spending $2,000, which feels insane. You're right, it isn't insane, if you're broke. Yeah, but if you have the money, it's a small part of your world

and it increases your quality of life. Do it. And what else makes you feel better is when you know your generous. You know that you're also giving a generous portion of your money.

You feel great when you then go and spend some on yourself and on your family and on the things that you value. It is a very delicate balance. Give, save, spend.

You gotta do all three. (upbeat music) Hey guys, Dave Ramsey here. Every day on this show, we help people work through real, money problems.

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. (upbeat music) The Ramsey show question of the day

is brought to you by Why Re5. If your private student loans are in default and you're not sure what to do next, why Re5 can help you explore refinancing with a low fixed rate and a payment plan

that's based on what you can actually afford. Go to WhyRe5.com/Ramsey. Remember, that's the letter WhyRe5.com/Ramsey. And it may not be available in all states. - Today's question comes from Evan in Iowa.

I'm a husband and father of two young children currently in Baby Step 2. I do not have term life insurance and neither does my wife. While we were looking at our monthly budget,

the subject came up of when is the right time to get life insurance? Is this a financial priority? While we are paying off debt? Or should we hold off until we are debt free

and have our emergency fund in place? - Great question. - Controversche. - And the beautiful answer is that you need term life insurance regardless of what baby step you are on.

As soon as any of us relies on your income, young children, a wife, even when you're just young and healthy, it's a good time to lock it in. - It's a great, 'cause it's cheaper. - Number one, it's so cheap.

“And so, absolutely, both of you need to get term life.”

You need 10 to 12 times your annual incomes on a 20, 25 year term and you will find that it is quite affordable. And if you're a state home spouse, you definitely need term life insurance.

The tune of at least half a million, I like three quarters of a million. - Well, we had a call about that earlier. I think it was maybe our first call today. And it really is that 10 to 12 times number

is so important because ideally what you want for anybody who's dependent on your income, if you should go, 'cause we're all gonna get even up at some point, but if you should go earlier than expected, you want that person who's left behind

to not have to worry about, 'cause many stay at home moms,

they've never worked in the workforce.

- Yeah. - And so, her situation, she had, you know, some teens at home, she would stay at home, hadn't worked on a long, long, long time. And she had $500,000 payout,

which is, you're going, wow, that's life-changing money. But it's not, I never need to work again. - Right. - And so, if he had had 10 to 12 times as income in term life, he would have had

1.4 to 1.6 million dollars. - And she could have then drawn the exact amount of cash to that amount. The market would have spit off enough income for her to cover all of her expenses

“without having to worry about when is this money gonna run out?”

And they were renting. - Yes, that's right. - Think about that. 10 to 12 times her income invested, your family's covered. And so, while they're grieving your loss,

at least they're not struggling financially, figuring out what's next. So, get term life in place is under, is the place we've been recommending for decades now. I just got an extra term life policy.

- You do 15? - Well, now that I got young kids and dogs that are too expensive, I just felt better. It was like, I'll sleep better at night.

I might sleep with one eye open now 'cause I might be, I'm more dead than others. - 'Cause I'm more dead than others. - But I know my family's gonna be taking care of. And Whitney's not gonna be yelling at me.

Hopefully, hopefully looking up, hopefully looking up yelling at me. - But she's looking down, there's a problem. - But she hates when I talk about it. She is the person who's like, I don't want anyone to think about it.

- Well, neither. - And you bring up a good point because I think a lot of people avoid these types of discussions, life insurance wills because it is a mortality issue.

And it's like, oh, I don't want to think about the worst happening, but it really is a way to love your family well.

- I hope you never have to use it.

And it was just money well spent to transfer the risk of the insurance company. - Yeah. - That's the goal. The policy runs out after 20 or 25 years.

You've been following the baby steps. You've got a paid for house at the end of that. You've been investing for a couple of decades. So your next egg is caused you to be self-insured. - Yeah, that's the goal.

That's what we want to get to. - Exactly. So go check it out at zander.com as the place to go get this done, do not wait. - Don't wait.

Eric is in Kansas City, Missouri. Hi, Eric. How can Georgia and I help out today? - Yeah, I don't. - Good.

- I am recently retired at 57. First I'm at age by my child. I have a fair one cave that I am unsure what to do with it because we can no longer contribute to it but I don't want to draft from it either.

So I'm trying to figure out how to maximize my game with it. - Yeah. Well, you could do a direct transfer roll over

And I would suggest maybe getting

with a smart vester pro to help you do that. And you can find those at RamseySolutions.com. But that's easy to do. My question is, what do you plan to do with your time? It sounds like you weren't ready to retire yet.

- Well, probably the medical part of the voyage. So I mean, I'm making enough money right now or through my retirement. And disability through the VA that I don't need to draw off of my--

- When you say retirement, what is your current income coming from now? - I have, I get about 7,000 a month right now. I get 3,000 from my job that I retired from. - Like a pension? - I get money.

- Yes. - Okay.

“And another foreground from disability from the VA?”

- Yes. - Okay. And so you're saying, I don't need to touch the 401k money but I want it to grow.

So absolutely, I would do what Jade said,

do a direct roll over. So you don't want to see that money. It should not pass through your bank account. They will just transfer directly over to an IRA, which is a non-employer sponsored retirement account.

And that way, you have all of the options in the world. Way more than you even had in that 401k. But the key is, if it's traditionally, you want to make sure it's rolled over to a traditional IRA. And if it's Roth, you want to make that portion

transfer to a Roth IRA. That way you're not having any tax implications. - How much is in that 401k? Eric? - I told 400,000.

- Only 400,000. - That's a lot of money. - A lot of money, my guy. - But in Eric's case. - I feel like it's not a bill.

“- Well, you're not using it, which is good.”

And I love George's point. It sounds like it's traditional money. So it is going into a traditional IRA. But depending on what baby step you're in, I would be interested in over time,

moving that to Roth funds, if possible. And that's something else that the smart vester Pro could help you with, because if you're not touching this money, and it truly is for posterity, then you want that to be tax-free growth.

You want them to not have to pay taxes on that money, when it's transferred to them, and when they have the ability to access that. - Can I give you some mind-blowing math, Eric? - Yes, sir.

- So based on what the stock market has actually done over, you know, the last several several decades. Since 1950, we've seen a 10 to 12% average annual return. And so there's something called the Rule of 72. And it's simple.

You divide 72 by the annual rate of return. It tells you how quickly your money will double. So at a 10% rate of return, your money will double every 7.2 years. So if you're doing the math at your age at 64,

if you just leave that alone, invested at 400K, turns into 864, 1.6 million by 71, 3.2 million by the age of 77. - That's what I want to hear. - Yeah, there you go.

And that's if you never add to it, like you mentioned,

you are fine on your own with your disability income and your pension income. So if you continue to live on less than you make and let that grow, that is generational wealth. - And that's where the transfer of Roth really,

really matters for you. Plus you don't want to have retired minimum distributions if you don't need it. - Right. - So that's Marvester Pro can help you also.

- What was that? - I said, yeah, it can's kind of, you know, I would like to also contribute more into, you know, my investment instead of letting it just ride because I've got money and savings

that's not making any money, you know what I mean? - Yeah, you can invest that too. So that's Marvester Pro walk you through it and I would also ask them about Roth conversions because like Jade said,

if you can convert those strategically, so you could do a portion each year, moving from traditional to Roth, you pay some taxes. Doing it all at once is going to pump the way up in the tax brackets and cause you'd have a big tax bill.

And so that's Marvester Pro can walk you through it strategically. So that that money is then going tax-free for the rest of your life and passed onto your airs tax-free, which is going to be pretty cool for somebody in your life one day.

- Thank you. - Does that make a lot of sense for you, Eric? - Okay, good, good, good, good. Is it just you, Eric, or do you have a wife, kids? Is there anybody else?

- It's just you.

“- So what do you plan on doing with that 3.2 million?”

I mean, what do you think you'll, who's the beneficiary of that? - I try to take care of my sisters and my mom. - Okay, I love them. Yeah, you are.

That's a really good point, George. You know, he's in such a great position and there's many people who, even if you are drawn off your retirement, they're still going to be a large portion there and you do want to make sure that you're setting it up

as a legacy piece so that whoever is inheriting that is not inheriting a major tax burden. - Yeah, that's where a good financial advisor is worth

to help you think strategically about whatever it is.

“Well, if the state planning tax planning”

can go to ramsyslusion.com and click on smart investor. (upbeat music) (upbeat music) Listen, your home is your most expensive asset and now you're ready to sell, fast and for a lot of money.

But in this wackadoodle real estate market, one mistake could cost you tens of thousands of dollars. Here's the deal. This ain't amateur hour. You need a pro in your corner.

Someone who knows how to price your home right, market it well and negotiate the best deal. That's where a ramsy trusted real estate agent comes in. To find one near you, go to ramsyslusions.com/agent. That's ramsyslusions.com/agent.

(upbeat music) All righty, guys, it's me. And the ramsy cash giveaway is officially here. You can enter every single day from May 1st to May 31st. There's gonna be one grand prize winner

who's gonna get 10, G's, $10,000. 10 bands, $10,000, yes. Also bands, plus there will be one $500 weekly winner, which is pretty legit. And the good news is you can enter daily

to increase your chances of winning. So multiple times, once a day, plus be sure to check out our sale going on right now. Kick off your summer with books and assessments for just $12, that's pretty darn good.

Go to ramsyslusions.com/giveaway, now to enter. No purchase is necessary in order to win. All right, Amy, in the city I was born, Spokane Washington, what's going on, Amy? How can George and I help?

- Hi, thank you for taking my call. I'm calling because my husband said that if I could get a ramsyshow to approve of our house build, we could move forward with it. So no pressure or any--

- Whoa. - My entire future is just riding on this. - No. (laughing) - We're not pretty good, Spokane.

- Oh, a lot of green colors. (laughing) I've been known to be a green color to be fair. - Is he anywhere listening?

“Is he with the glass on the door somewhere listening?”

- No, what? - He's a, he rides bikes and he is currently listening to the show in his earpods on a bike ride. - Okay, okay. - Okay, shout out loud shout out wherever you are

on your bike. We're gonna do our best to be fair. - I wanna get you to it, I want this to be a yes. So walk us through the predicament. - I do, and we're both, I just wanna start with,

we're both very much on the same page. We're just like, we wanna be strategic and make sure this is the right choice for our family. - Absolutely. - I'll give you just a little bit of an idea of who we are.

So we're 36 years old, we've been married for 12 years. We're actually, spoken as the closest town to us, but we're in a very desired ski town nearby. And we own a house, it's, we have no debt. We've paid off our house, we took financial peace

university, we got married and really it's been fantastic. - Awesome.

- Our life, that's incredible at 36 years old.

- It feels really good, it really does. And we just built a apartment of a garage on the same property that we live in in this house right now. And so we're gonna, like, our desire is to build a house because we have a pretty big piece of property

on this same property. So it's paid for, and we would then have our house and the rental as in the apartment rental as income. - Got it. And so we're just trying to figure out,

my husband's pretty hesitant to go back into any kind of debt which I understand, it's been so great.

“I think we paid off our house about four years ago.”

And so we're just going, do we wait until we have the cash on hand, or being that I'm pregnant with our third and I don't want our baby sleeping in a closet? Do we really build the house that will function for our family better than the one that we currently live in?

And we don't want to sell our house because it will make really good income. - Okay, well, how much is it gonna cost to build this house?

- It's probably about a million.

What does a million get you as it's like a four bedroom house?

Like, what does it get? - Yep, four bedroom.

“Like I said, Geetown, it costs quite a bit to build here.”

And I think a million might be being a, you know, between one and one point two for the family that we have. But yeah, it's a four bedroom and three baths. - Okay, four, three, and what do you have saved so far

towards this? Not including emergency funds, not retirement, you know, the deal. - So, well, this can be kind of like cash on hand is 500. And that's kind of just in the bank right now

because we were needing to pull out a lot to build this current apartment that was, though, I was talking about, okay. And then in our Roth, where I went K, we have about four, 50, and then our joint account.

That, to the Roth, you know, that's our retirement. We can bring up, that's not the table. Yeah, so 275 right now and our current property is valued. We don't really know because we just built this, but I would say probably 1.5.

- How much do you guys make? What do you take home every month?

“- Um, well, 'cause that's really what this,”

that's really what this is all riding on. 'Cause I can tell you right now, if you tell me, hey, I'm looking to do a house

for 1.2 million and I just plug this

in the room solutions mortgage calculator. If you put the $500,000 cash down on a 15 year fixed at, I'll put in 5.6 for now. I don't have it on my screen what the current rates are, but that's gonna put the payment around 7,000 bucks a month.

So, as long as this is no more than 25% you're on the right track and my, unless you say something crazy in the next few minutes. - Yeah, well, what is your average? - Take home.

- We own a business and we, I would say about, it changes year to year, but I'd say about 250. - Okay, is your annual income? - Yeah. - Okay, got it.

- 'Cause yeah, I need you to be taking home.

- That puts you at my guess is you're probably taking home

around 12 to 14 a month. - Well, we pay ourselves once a year because it's a seasonal business. - So what do you pay yourselves? - 250, okay.

- We're just trying to find out your after tax monthly and come to figure out if this mortgage is gonna make sense 'cause I'm not sure if you, you know, I understand wanting to pay cash. It's not a sin if you go back to baby steps six

for a season with the intentionality of we're gonna pay this off pretty aggressively to get back to baby steps seven. - Like our plan would be five years. - Well, if you say, hey, we pay ourselves $250,000

cash in our pocket and we split it over 12 months so it's around 21,000 a month. It's getting you close, it's getting you close, but that mortgage is still creeping up, right? - But then, what would you guys say if our house,

you know, our house would rent for about 4,500 a month and the apartment for about 2,500? - 4,520,000. - So you can rent out both separately. - Both separately, yes. - You write.

“And then I think that gets you there because that's now”

considered income. - Now there's still some, you know, variables with that. So you don't want to count it 100% 'cause you've got vacancies, insurance for parents, you know, 10 and issues, all of that is gonna play a part.

But I feel like you guys are thinking about this pretty clearly. The only concern is you'd have the majority of your net worth would be in real estate. So that's the only thing to think about if you have, you know, 450K in retirement.

But I think long term, you guys are 36, so over time your retirement is going to surpass your home. And the other thing to think about is, is this the same property if you were to sell one day, could you sell them separately?

Is the land big enough? - Yes. - Yeah. - Okay, great. - Okay, so I just-- - I only could, and go ahead, go ahead. - Oh no, I was just saying like that's definitely been a huge,

and there's more land that we could, I mean, if we wanted to divide off some, we could just sell it as property too. - You could like parse it out and just sell it. - Yeah, yeah. - Okay.

- So if you tell me if I hear these numbers right, which I think I did, one rental is 4500, the other one is 2500.

and that gets you there, if you keep that in its consistent,

“that gets you just about $2,800 or $28,000 a month,”

which is right where you'd want to be for this mortgage,

but what George said is very critical.

Usually, we would not tell somebody, it's the same as somebody said, "I can buy a house, but as long as I have somebody living in the rooms, right, to make the mortgage." For you guys, that's the critical part on this,

that $84,000 is really dependent on, is this person going to be dependable, month after month, or after year. - And will there be measures here? - Income be dependable, you gotta think about that too. But you gotta green light from us,

if you check all those boxes. Congratulations. (upbeat music) - Hey guys, Rachel Cruz here, and I love summer.

There is more fun on the calendar, more time with your people,

and way more chances to make a memories.

“But what else, there's more of spending.”

Oh, between the extra groceries and gas and camp fees and family trips, it all starts to add up so fast. And before you know it, money stress starts to steal the fun out of everything. And that is why I love the every dollar budget app,

because it helps you plan your money, track your spending, and find more margin in your budget, so that you can put extra cash towards the goals that matter most. Enjoy your summer without the money stress.

Download the every dollar app in the App Store or Google Play and start for free today. (upbeat music) - Our Ramsey show scripture and quote of the day since Proverbs 22, 26 through 27.

It says, "Do not be one who shakes hands and pledge

"or puts up security for debts. "If you have nothing with which to pay, "why should your bed be taken from under you?" - Shots fired. - Shots fired for sure.

Doug Larson said, "People are living longer than ever before." A phenomenon undoubtedly made necessary by the 30 year mortgage. - That's hilarious. - Dang, 30 years though, that's a short lifespan.

Doug, come on Doug. - I mean, he lived a good long life there. Based on the timeline. - Yeah, that's for sure. We got Damon in Arkansas.

Damon, how can we help today? - Oh yes, hello, thank you for taking my call. I recently got done paying off my student loans. I didn't graduate, I didn't know what I wanted to do with my life, but I'm at a point now where I'm the sole provider

for me, my wife and our four kids. We have two children who have been diagnosed with autism, that'll test a stay at home with them. So again, I'm the sole provider, but I have a collar note for 15,000, then I have my mortgage for things.

I think I have 150,000 left on there. Should I go back to school? Should I? Should I? - What are you doing now? - What are you doing now?

- I work in a factory. - What do you make? - $17 an hour. - Okay, so that's about 35 grand a year. Is that full time 40 hours a week?

- Yes. - And what did you go to school for originally that you didn't finish? - I was a physics major. - Okay, so what would you go back to school for today

if you were to choose a different career path? - I still don't know, I see a lot of people in this factory have degrees that I would have not even gas considered would have gotten them their positions, but I almost still, like I just needed to agree in anything.

- Well, I don't want you to get a degree for the sake of getting a degree

“and then you're back where you are going, okay, now what?”

Nobody handed me a job all of a sudden. So I want you to have some aim and purpose with this and we can help with that. We'll send you our friend, Ken Collins book, find the work you're wired to do.

It has to get clear career assessment inside and I think it'll help point you in the right direction. But in the meantime, I mean, in 17 bucks an hour, you can make doing just about anything. And if you're handy and you can go into the trades,

there's a lot of money to be made there. You could triple your income within a couple of years. - Yeah, because that does bring up the bigger question which is whether you win in trades, whether you needed certificates,

whether you needed a degree. What would be the plan in your mind to pay for this?

to go further into debt for education. We value education. We just don't want you to go into debt for it. So what do you think a plan could look like? - I would like to not have any debt at all.

At some point with having my car paid off and getting my mortgage paid off.

Ultimately, I want to have no debt.

“- I think how are you getting my right now?”

- I'm curious, Damon, you're making 35K year. You've got the car payment, you've got the mortgage, you've got four kids, state home spouse. - Yeah. - How have you been surviving?

- It is a struggle every month, man. Every month is, I mean, we have a, nothing on paper budget, but essentially we just have, whoa, there are bills that we have to pay and whatever leftover, you know, is our food, our gas.

We make, I make not enough to have anything left over at the end of the month. - But you're able to cover all the bills just nothing more. You're not going into debt to cover any bills. - Yes.

- Wow, that's impressive. I just want to applaud you for making all this work

even without a budget, which I encourage you to make one

and I'm gonna hook you up with every dollar, which will give you that plan as well as they get clear career assessment. - Now, how are you able to pay off the student loans on this?

- I had a different job of getting different hours and we moved to this town where I'm at now. And I lost that job and now this is, but we had some residual income left over that we decided, like, okay, you know,

I may be able to go back to college and get a better income, let's just toss it towards these, what's left of my student loan? - I'm just, I've been paying on them for a decade. - What were you making before

on what type of work were you doing? - I was in a tipped position, so it's tough to say, on eight to 55,000 in 20, 25, yes, 1024, excuse me. And I was a cage cashier, I paid people jackpots, usually people pretty happy to see me.

- Oh, okay, well, the good news is, you've seen a higher earning potential, like you've seen, okay, I know I can go out in the world and make $55,000. I would just apply that.

“Honestly, if I were you, I might just get curious”

and start looking online and just start applying for things, you can do that for free, right? And start, Ken Coleman would say to use your proximity and see who you know, ask around, ask your friends. I'd make a list, my goal tonight would be,

I'd make a list of 10 to 15 people that I could reach out to and say, you know, what are you doing? Have you heard anything? Is there anybody hiring and what you're doing? And just start making some phone calls

and start trying to make some connections and just see what's going on in your group, in your friend group, in your church group, are people working places where they need employees? And that would be a great way just to get started,

just to see what can I pull from? And who knows, you could end up landing something where you're making a little bit more and that could lead to the next step while you're figuring out the work that you're actually

wired to do here. Very, very good question. Hang in the line, we'll send you that assessment and every dollar, Damon. All right, let's go to Caleb, who's in Fort Bragg,

North Carolina. Hey, Caleb, how can George and I help real quick? Hi, how you guys doing? We're doing good. We're right up against the clock.

How can we help you? All right, so I am currently on baby step two, but I'm going to be out of baby step two and about two and a half months. When I get out of it, I did some budgeting.

And I realize I'm going to have about $1,700 every single month, just for free. Nice. And my expenses are going to be like my six-month emergency fund is literally going to be less than baby step one.

And so I do need to buy a car. I'm looking to buy a car. And obviously my emergency fund is going to change when I have to buy insurance. So my question is, one, should I buy a brand new car

or a piece of crap and then two, how much should my emergency fund be since my expenses are so low? Very good question.

First one is, I love that you're going to free up that much margin.

“What is so urgent that you need a new car right away?”

Because if I could hold off on the new car and save the emergency fund first, I would do the emergency fund first. And you want to build your emergency fund based on your current or very quickly foreseeable monthly expenses.

It's a bare-bones budget. So this is if I took out all the bells and whistles of my budget that aren't necessity. And I said, OK, it's rent. It's transportation.

It's insurance, it's daycare. All those things that, if you hit an emergency situation, maybe you lost your job, maybe there is a diagnosis. Obviously there'd be certain niceties you'd probably

So three to six months is what I'd aim from.

“If you know you need a car, I'd save up the three months,”

do the car, and then come back and do the six months. But if the car is really just something that's a nice to have George, I would go ham on the six months, since it's just you.

And then I would start to save up for the car that you want.

And I would not go, hey, it's either going to be the worst car I've ever seen or the nicest car I've ever seen. Yes, something reasonable. What is your income? My income right now is about $4,500 a year.

$45,000? $45,000?

I was like, goodness gracious man, what are they paying you over there?

OK, so $45 a year, you're single. Yeah.

“Is this the only thing with wheels and motors in your life?”

Is this one car? Yeah, I don't have a car currently. OK, cool. So you want no more than 20k, and for a guy or age, I think 20k is even the upper upper limit.

I might shoot for something more like in the 15 range that I'll just get you for me to be. It's decent, it's used. Do not go buy a new car, don't go to the dealership, because they're going to try to get you into a giant payment.

And go, man, you get the brand new one for just a little bit more. We'll kind of pay me looking for your paying cash, your buying used. And I would, I like the idea of a $10,000 emergency fund for sure. Yeah, absolutely, absolutely.

Well, George, it's been fun, but it's also over. Oh, I'm sorry.

“Hey, remember, there's ultimately only one way to financial peace.”

And that is to walk daily with the Prince of Peace, Christ Jesus.