Stop Living in Financial Chaos

[MUSIC] >> Brought to you by the EveryDollar app. Start budgeting for free today. [MUSIC] >> Normal is broken, common sense is weird. So we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studio, this is the Ramsey Show. I'm George Campbell, joined by my writer, Dye, Dr. John Deloney, and we're taking your calls in triple eight, eight, two, five, five, two, two, five. John, are you doing alright? >> I need a moment. >> This is a lot going on. We're good though, man, let's dance. >> This should be a fun show. >> I'm not your writer, Dye. I would probably show up. >> I said it facetiously. >> Okay. >> That's a $10. >> That was a big word? >> Thank you, I want to call it. >> I'm sure you're using Chad GVT. >> Don't need two PhDs to that. >> You want to have Alabama College, so let's don't stretch. >> Okay, roll time. >> Adam's in Green Bay, Wisconsin. >> What's going on, Adam? >> Hey guys, good afternoon. Thanks for having me on the show today. It's a pleasure being on and looking forward to it. >> Absolutely. >> Got a question for you. So, I'm within about 12 months of being completely debt free, which is great. You have been sacrificing for about 15 years, you know, I'm at my wife. Yeah, probably 12 years ago, and we've just had her nose down to the grindstone. We've been doing the right things, following the show, doing the baby steps. The last thing we got to do is pay off the mortgage. So, if we're working hard enough on it, we'll probably have it paid off in about 12 to maybe 14, 16 months, something like that. >> Awesome. >> So, I don't know if this is going to be a little maybe Pep Rally or for a reassurance check or what, but I'm getting a little nervous because now I'm able to forecast what the next year looks like. And it's looking like I'm going to have about an extra 700 bucks per month to use after I free up that mortgage. So -- >> What's the mortgage payment? >> Well, the mortgage payment is actually, thankfully, I bought the house quite some time ago. The mortgage fee is $600 every two weeks, so -- >> So, $1,200 a month or so? >> About $1,200 a month, but you know, that's escrow with my property taxes and homeowners insurance. >> Got. So, the principal on interest side, you'll save 700 a month is what you're saying? >> Correct. >> Correct. >> Yeah. >> I was like, man, there should be more margin with the paid off house. Do you guys have any extra margin now outside of the extra -- because you're paying extra on the mortgage, right? >> Yeah. We are. >> Yep. >> Yep. So, and that's -- we're living this lifestyle now where we got some extra, we're already saving $400. And this is after everything is -- all the baby steps are covered, everything's paid off, we're doing the right things, we're making sure -- we're kind of spreading ourselves thin on purpose just to make sure 401Ks and IRAs and all that. >> Yeah, if you're doing it right, it's not just like a huge pile of money sitting in the bank account every month. You already have a pay for it. >> Correct. >> Correct. So, you're investing 15%, you're putting some money away for college if you have kids and you're throwing extra at the mortgage. >> Yes, exactly. >> What's your question? >> Yep. We're right on track. Well, my question is, you know, the light at the end of the tunnel is looking dimmer than expected. And I don't know if I'm just -- I need to maybe take a breath and just realize I am doing the right things and everything. But $700 extra dollars a month is not going to move the needle a whole lot. It's going to give us some breathing room, however, we've been sacrificing so heavily that we've neglected some things around the house. You know, a floor we need to be fixed or, you know, we may need to -- we're looking at buying a shed to put some stuff in and, you know, these things are going to take quite a bit of time to stave up and pay cash for. So, once they start adding all this stuff up in my head, I'm like, oh boy, we're going to be dead by the time we -- Well, you've actually done all the things you need to do as an adult. Kind of. Yeah. And some of the stuff is, you know, you guys would probably slap me a little bit and go, well, you don't need a new car, so let's not worry about that. But that's in the future, you know, one day maybe I do on a new boat or a new car. And if I'm just saving up for cash to pay for all that stuff, it just seems like it's going to take an eternity to do that. Sure. Well, there's levers you can pull here. I mean, there's your income side and the expense side, and it sounds like you guys have been pretty good on the expense side, living fairly frugally. Mm-hmm. So how much do you guys make? Well, we take home about 5,400 a month. My wife is a stay at home mom. We have a four and a half year old daughter. Awesome. So, I'm currently, you know, providing the income for our family. And we live a pretty frugal lifestyle, thankfully about the house in 2009. And, you know, it's quadrupled in price since then. So I'm fortunate enough to pay a mortgage that is a lot less than if you were to get one today. Yeah. That's what I'm wondering. So after the mortgage is paid, you should have 4,200 bucks left over today. Well, yeah. Yeah. To pay for the bills and, you know, then we got a little. I think you can squeeze more margin out of this. And I think you're also not realizing your income is going to go up over time as a household, especially if your wife ever returns to work. Is that a game plan? Well, that was one of the questions she actually said, you know, you should maybe ask them if they think it's a good idea to, you know, see where to look for a job or not. As a husband, and we kind of live more of a traditional lifestyle, I liked that she to stay at home mom. I'd prefer that. And I would rather take that burden off her shoulders if possible. So I think I know what you're going to say, and if I had to guess, it would be, well, if you want to live a little bit more lavish of a lifestyle, you just need to find ways to make more income. Well, don't voluntarily take that weight on your shoulders and then complain about it. Correct. Right. Like if that's a choice you want to make, that's awesome, good for you and good for her. I may call me untraditional, I don't know that that's a decision. I think you should unilaterally make. If she's asking you, do you need me to go to work? Do we need to go to work versus have kind of burnt out on staying here all day? I would like to get back out with other adults in the world. Like that's something I would hope you all would make together. I'm struggling brother by in the $700 margin thing. That's not passing my smell test. I'm not as good at math as George is, but that doesn't feel right for in what means. I mean, you bring home $5,400 a month and let's say you put $1,000 away every month for taxes and insurance. Is that too low? Well, I'm predicting that I put away about $500 a month for property taxes and insurance, so that leaves us the $700. But that leaves you $4,800 a month. We're talking food, utilities, transportation, fuel, other insurances. And beyond that, that's where I want you guys to dig into an actual every dollar budget and sit down together and say, can we find more margin here? Because I think what you're going to find is you're going to be able to squeeze out $1,700 a month once you pay off the mortgage if you do it right, which is 20 grand a year, which should be enough to cover home repairs, upgrading the car over time and living your best lives. Let's say this, if this is the bigger question you're asking, which is, or the bigger pressure you're feeling, which is, I thought when I didn't know anybody anything, I wouldn't have to worry about money anymore. Like I thought if I sacrificed for 15 years, I wouldn't have to think about it anymore. And that feeling, brother, is real and that's the worst and it's frustrating. And for whatever it's worth, like, Dave is our boss, but Dave is also a friend of George and I. And I hear Dave say all the time, I was thinking about buying this, but I don't want to spend that much, that kind of money on this. And so there is always going to be an intentionality with your money, regardless of how much you have. 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Getting term life insurance is a way of saying I love you when you can no longer say it yourself. go to zander.com or call 1-800-356-4282 to find the coverage that fits your family. Brandon is in Nashville, Tennessee, down the road. What's going on, Brandon? I'm a first-hand caller. I just want to tell you how much I appreciate you guys. Thank you. I just think I'm finally reached the point where I'm sick and tired of being sick and tired and walking examples of why not to do everything you'll see not to do. I am so trying to pay off all my debt first, which is what my original plan was. I bought a house last year at H.A. 3.5% down and racked up more debt after I bought the house and so now I'm a little upside down on the house. I'm upside down on a car that I didn't even have before by in the house and I have so much debt. I'm just trying to break it down and figure out if even keeping the house as an option and if it is, what do I pay off first? Where do I get told where I need to be? Yeah. Man. That's heavy. Well, let's walk through this in a very tactical way because I think when it feels emotional and overwhelming, it helps to just look at the numbers and kind of get the boogie band out from under the bed. So what is your income? My income is sustained around 115,000, but I am a flight attendant. It's variable. I can pretty much work as much or as little as I want. Let's get it way above that if I need to. That's amazing to my ear as well. Okay. That's a great lever we can pull to get out of this faster. And do you have family or dependence or anybody sharing this rent with you or are you all on your own? My mom is with me right now. She gives me money. I've just been putting it to the side for her because she's on disability and I just want her to be able to sustain herself down the road and so you're teaming together. She watches my dog while I'm flying so I can work as much as I need to and so I don't have any income coming in, but she lives with me. Okay. And how much debt do you have outside of the mortgage? Outside of the mortgage, $80,868. And what kind of debt is that? Break it down. The car is $33,878. I have a consolidation moment I should have never gotten, which was $31,099. I owe the IRS $13,041. I owe $19101 on appliances and $947 on a phone and it all comes out to about 1664 a month in payments. Okay. What do you take home every month? When I'm working like I'm supposed to and it's $8,000 usually. I've just been struggling to go to work with my depression and everything so I'm trying to get my hours back up right now. What's your what's your mortgage every month? With the A2A, it's 30, 46. And so that's eating your lunch right now out of your $8,000 take home pay. Right. We recommend 25%. So if it was at $2,000, we'd call this a win. And so right now a big part of it is your consumer debt. A big part of it is the mortgage. And the part that we can control today is getting rid of the consumer debt payments. So can you afford the mortgage payment every month? You're not on, you're not at risk of being behind, right? No, I haven't missed a payment and I, I mean, my next year I'll have a 9% raise and then I get 5% every year after that for four years. So I feel like I'm going to keep getting better. I just want to get rid of something. Yeah. Well, the house isn't on fire right now. So can we compartmentalize and put this house on the back burner and say, we're going to be okay. You didn't lose money. It's like a stock. Until you sell it, you're not going to realize a loss or a gain. And Nashville is a solid market. Let's just hope in the next couple of years market bounces back up. You're out of the water and you've also been adding equity with every payment. Right. So now if we focus all of our energy toward your smallest debt, which one is that? Is that appliances or the phone? It's the phone. Okay. Then we have the IRS debt. I'm going to put an asterisk on that because that one's going to go to the top of the list because they can destroy your life, garnish your wages, all of that. So let's, you have a payment plan with them. Have you talked to them? I do. I pay $170 a month. Okay. So let's knock that one out first. And then this car loan, what's the car worth? You owe $33.8 on it. It's 26. So I was, I just need to pay it down by 8,000 to get rid of it. And I just didn't know if I should prioritize that or what to do first, but I feel like you have me say 40% and no, I have 147 in my checking, but I also, I get paid tomorrow. And so I try to budget all the way down to zero. Okay. How much do you have in the secret account for your mom that she thinks she's paying you rent, but not really? She does know I'm doing it for her, but it's it's 4,000 in there. Okay. Because I'm thinking instead of you trying to pay down the car to get it there, because what's going to happen is the car is going to continue to depreciate. So you might be better off just setting money aside to cover the amount you're under water on or going to your your local credit union down the road and getting a person alone for the difference plus enough to get something to get from A to B. Is this the only car at the house? No, my, I have another car. It's a 2005 file on it. My mom drives when I'm calling because we have 35 miles away from the airport. Oh, man, that's a hike. Okay. So I'm trying to think of you, obviously, any transportation, but getting rid of this car, what's the payment on that? 7, 14 goodness gracious. You could really make a dent in those other debts if you freed up that payment. I know. That's why I just I realized that was one of my biggest mistakes. Yeah. And is that 26 is that private party value or trade in? That's pervana, but I I feel like pervana usually gives one of the private party would probably be a little higher. I'm sure. That's what I'm wondering if you can get private party for 30. You have enough today to clear it with with mom's savings. So I would look into what you could get private party because man, you just got to raise and you got some breathing room. You can live to fight another day and start attacking these debts with the debt snowball. But that's the game plan. There's no shortcuts, no more consolidation, no more credit cards. We're just doing nothing but knocking out the next smallest debt. Can you focus on that instead of the whole big picture, the entire mountain? Let's just focus on the next little crest. We're trying to hit. Yes. And I can believe that as long as I can get back to working as hard as I was at the beginning of the year that I can create $2,500 to $3,000 extra margin per month to put towards it. Hello. I love that. Brandon is depression something you've struggled with forever. Or is this just a ever a heavier shadow that's that's just forecasting over your life as you've taken on more debt payments, gotten to more situations your mom moved in? What's the nature of this? I think I've always, I've always, I mean, I've definitely always had it. I was a clinical depression with a diagnosis of a kid. I just think that all of the stuff recently has heightened it. And I just fell into a deep depression around the same time left here and then every time I end up being out of work. Okay. I just, I, yeah. I'm going to the doctor on Monday and I try to make sure you go to the doctor on Monday. I'm proud of you for that. And hang on the line. We'll hook you up with three months for free with our friends at better health that you can just do that whenever and wherever. Okay. But I want you to talk to somebody. Okay. But one of the things I want you to do is exactly what George said, but I want to take it one step further. I want you to not type it. I want you to get a piece of paper old school style and write down your debt smallest to largest. And then I wrote it down to talk with you guys about it. No, but I just want to pull it out of my head. That's a dude. And getting this stuff out of your body onto paper and then mapping the plan. All right. Here's, this isn't pretend like I think I can get three or four of that. I'm going to actually write this stuff down and get a map. So that at the end of this month, I've paid this off and at the end of this month, I've paid this off. And over time, the single greatest gift you could give your mom is you being sturdy and well. Okay. And that might mean taking the four thousand bucks. It's in this little account over here and clearing your debts so that you can put a thousand dollars a month away of your own money or fifteen hundred dollars or two thousand dollars away, creating your own emergency fund from the floor up. And you'll have that money back in way, way, way more when it's not all flowing out of the house to pay debt pay. Yeah. Here's the math on our brand. And you get rid of that car payment that we talked about and you free up that seven hundred bucks. You start throwing at the debts. You'll have forty eight nine left in debt. And if you chunk twenty eight hundred bucks a month at this thing, you're done in eighteen months. Imagine who you're going to be eighteen months from now completely debt free with the financial strength to actually help your mom out. You're a good man. (upbeat music) - Hey guys, it's Rachel Cruz. If you're working the baby steps, every major expense deserves a second look. 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(upbeat music) (upbeat music) - Kathy is in Richmond, Virginia. Up next, Kathy, welcome to the Ramsey show. - Hello. - Hey, how can we help? - I'm 56, I'm 56 years old and I'm currently separated after my husband left of 24 years, the rest of January. And I'm looking for some help or advice because I was a stay at home mom for four kids and supported my husband and his career. I took care of other family members, my grandparents, my dad, my mom. I have no so security points. I have no job history to speak of. I do have some health issues. And I'm kind of in a window right now. He left in January and there's been no separation agreement or anything done yet. And I feel like he's kind of trying to, for months. He kind of, I felt like he kind of played me that he was gonna come back. And then a couple weeks ago, he told me he wasn't coming back and that he'd been seeing somebody. And that he wanted us to do the separation agreement written up and the cheapest way for us to do that was to sit down and agree to everything ourselves and just have a lawyer write it up. - Hey Kathy. - Hey Kathy. - Yeah. - I'm not doing, so when somebody leaves another person, whether in a business arrangement or in a marriage, when somebody says this marriage is over, this business is over, we now partnerships now enter into a business transaction. And that's what you are in. And I don't do business with dishonest liars. And so the most unwise thing you could do is have a man who has no character, who lied to your face over months and years. Who then says, I wanna sit down at a table with you and we'll come up with an agreement and somebody will stamp it for us 'cause it's gonna be cheaper for me. No chance, no way, no how. - Yeah, I agree. - So you need your own attorney that's fighting for you, go get an attorney. - Well, I went to an attorney. I borrowed $300 from my son to go to an attorney. And I went to him and it was before I found a lot of stuff out, but he sat down and did the basics and didn't look great for me, but he said what it was and I went on about my business. And recently I got in touch with Legal Aid here and they told me they couldn't really help me. - Okay. - So why did you say it didn't look good for you? - Well, I'm currently in our home and we have about $400,000 in equity in this home. - Okay. - Out of that 400 in equity, about 225 of it was from my parent's home that was sold and put into this house for a down payment because my mom also moved in with us at that time. - Okay. - So I could help take care of her. She's here, I'm here, key left to home. He's been paying the bills somewhat because obviously maintaining two homes when you haven't been financially honest and whatnot, there's been issues. And a couple times there's. - But let me interrupt here 'cause we have limited time and I wanna make sure I am pretty clear here. - Part of you metabolizing the divorce is coming to grips with, I'm probably going to have to sell this house. - Yeah. - With me and my mom are gonna have to move possibly to a two bedroom apartment for a season. - Okay. - I'm gonna demand via my attorney half of the retirement accounts, my ex has any other secret accounts he has. And by the way, you can tell him all of that stuff is in discovery. All the secret accounts, all of the, all that stuff gets put out on paper. How long you been having affairs with who, all of that stuff gets laid out. And if he comes back and says, I'll give you a 70% and you can have the house and you can have all this great. He might give you the house and you still have to sell it because you can't make the mortgage payments. - Yeah. - But it's recognizing most folks, especially once you get blindsided to a divorce like you're in, they recognize the marriage is over and all the grief and all the heartbreak and all of the relational mess that is. But they want to keep everything else the same. I want to keep it in the same house, the same car and the same life and the same cell phone plan and the same everything. And it's those who can exhale and say everything is different now. That's one that can then look at a clean slate and say, okay, here's how much money I actually have. I'm 56 and I gotta go get a job today and it shouldn't be that way, but that's where I'm at. - So what are the health issues that are keeping you from working? - So I have some immune deficiency issues and I get sick very often and I have chronic diarrhea. There's lots of things. My doctor suggested that I go ahead try to get on disability and when I talked with him, the pimping and the build here and even after once I'm getting an alimony, the only thing I'd qualify for is SSI and they said that I would qualify for the disability part but not the financial part. - Okay. - So I wouldn't be able to get that. And I pride the work and I got sick a lot, which pairs me with a problem. Obviously, stress doesn't help it. And I'm hoping that that'll get better, but I'm worried about my health insurance. I'm worried about just surviving. He makes about 115 K a year, maybe 120 with his bonuses and raises, but before 1K, he pretty much wiped out during the pandemic to take care of some other things and when he lost his job, he started rebuilding it and it's not much there. I mean, I had no idea how bad we were financially. - Sure. - And that was my stupidity. I'd take full responsibility for that. I trusted him. - Yeah, do you guys have any debt? - We have debt. There's credit cards that I didn't know about. There's three parent plus ones. There's a car payment. He actually owes about $6,000 on a utility bill that I didn't know about. - On your house. - At some point on my house. And at one point, he had that bill sent somewhere else because it was late and didn't want me to see it, I guess. And forgot about it. And this is a small water company where we live, privately owned for our neighborhood. And so he worked something out with the guy at some point. When I did find out about it, I just lost it. - Let's do this, Kathy, let's do this. Let's give those type of what happened to a lawyer and let them dig through that stuff. Because it's distracting you from this one terrifying question. What am I going to do now? And I want all of your energy focused on what can you do, what are you going to do? It might be, I have to make some hard phone calls to my kids because I can't work. And it's gonna take four months for me to go through the SSI process. And like, but it's you saying this stuff all happened. He should have been doing this. He's been doing this for years. Yadda, yadda, cool. Attorney, go to war on my behalf and get whatever you can. And here I am now, what am I going to do now? Is there an online? job I can get just in my house for for a year is what I'm trying to do. Yeah. Right. So I've networked. I have a lot of huge network and I've reached out to everybody and I'm working on that now. Good. I've been putting applications in for months. Good. I'm trying to find a work for my job because that I could I could do some of that, you know. Excellent. Excellent. And and I want to, but I'm also, you know, I'm worried about my mom. She lives with me. I can't, you know, I've got to make sure she's okay. And all the kids are out of the house. All the kids are out there. Does she have the she is eligible for Medicaid? She is getting her retirement and my dad with and with his benefits from my dad's job. Okay. Until we know what's next and how this does settles, it's going to be hard to make a financial plan. So your goals should just be to sock away as much money as possible, get by for now, and try to clear the decks and have the best financial outcome for you so that you're not carrying a load. Sit down with the lawyer. Sit down with the lawyer, SAP, and say it's time to buckle up because we're going to war. Hey, what's up guys? It's Jade Warshot. Now, I know a little something about saving money. While my husband and I were paying off over $460,000 in debt, we went over every expense in our budget to find ways to cut back. Nothing got a free pass, including our phones, and you need to be doing the same thing. And now with Boost Mobile, one of the easiest places for you to save money is your phone bill. Their unlimited plan is just $25 a month forever. With a price that nice, why would you ever go back to your old carrier? And with Boost Mobile, there's no contracts, no hidden fees, and no surprises, which makes this a no-brainer when it comes to saving money. The best part, you can keep your phone and your number when you switch. So it's not like you're making some huge lifestyle change. Listen, you need a phone, but you don't need to be overpaying every month. So whether you're paying off debt or building wealth, or you just want to keep more of your money in your pocket, this is a win. Go to boostmobile.com/ramsie and make the switch today. That's boostmobile.com/ramsie. $25 forever requires customers to remain active on Boost Mobile and Unlimited Plan. If you're new around here, welcome. We answer every question through this lens, the seven baby steps. So if you haven't seen them yet, we're going to drop a link to learn about them below in the description of this episode so you can better understand the best plan to get out of debt and build wealth. Thomas is in Boise up next. What's going on, Thomas? Hello, George and John, good to talk to you guys. You two brother, what's up? I just want to know how I can save money from medical school. I know it's a really big expense, and I really do not want to go into debt to do it. Love this mentality. How old are you? I'm 18 years old. 18. Nice. So the good news is Med School is a little bit of a ways away. Do you guys have any money saved right now? Yeah, so I have $20,000, but I will not need to use, I will not need to use those $20,000 to pay for undergrad. Great. How is undergrad getting paid? So I have a scholarship that covers about maybe 70 or 80% of the total tuition, and then my parents have enough money to pay for the rest most of the rest, and then whatever I can work during college will pay for that. Cash flow. So you'll leave that $20,000 alone for now? Yep, I'm borrowing unusual circumstances that should be able to work. Fantastic. So I think there's a couple of things, by the way, I'm super excited for you to go to med school. I want a world full, like there's a shortage. I want there to be good primary care doctors out there. Like I'm excited for you to do this. John because it's psychiatry. Oh nice, nice. I want to do psychiatry. So I knew you'd like that. There you go. So like, so hear me say everything I'm about to tell you is, I want this to be part of your life. You're a young man, you're driven, and I love it, and you've got a plan already. I love that. Here's the things, like a couple of frameworks. I want you to wrap your head around. Okay. First is, there will be an immense amount of pressure to sold to you that there is only one path, and that is, you better be super grateful. Whatever school offers you a thing, you better take it, and you have to take it. And if you don't take it, you're a terrible person, you'll never get into med school, and it's all over for you. And whatever you get, you just pay that price. And if you don't have that money, then you borrow that money, but that's the path. I want you to, I want to free you from that. Okay, you're going to feel a ton of pressure that way. The second pressure, and this is the one that you might not like, is you do not have to go to med school the year after you graduate undergrad. You can graduate undergrad, go work for two or three years, save a whole bunch of money, and then go to med school. And yes, you will not be, however many years old, you still got to do your residency, you still got to do your psychiatric rotations, all that stuff is true. But I'm thinking, you at 18, I'm thinking of you as a 33 year old doctor, not as a 21 year old med student. And when I come, come into your office, bringing one of my kids, or I'm struggling, or my wife is struggling, I want you not owing anybody anything so that you can look at me and be super honest and direct and give me the clearest path. You get what I'm saying? So I'm thinking of you way further down the road than what, what about 21, what about 21, what about 22, what about 22, man, if you have to wait till you're 25, go to med school, that's awesome. It's great. Yeah, you'd be happy to know that I've already kind of actually like fought through those things. So, like, for example, I would love if I could go to university of New Mexico because they're the cheapest medical school in the nation. Great. Great. And Mexico's a red state. I spend a lot of time there. I love New Mexico. So it, but again, it's, it's looking at the price, looking at the total picture, seeing what kind of scholarships, you can get all that same stuff that's still going to apply. It's going to be different in med school. And it's going to be more competitive and yada yada, you know all that stuff. But it is saying, okay, if you, if you look at it from, I have to go to med school in this year, at this time, you, you put yourself on the only train in town, which that is, except whatever offer you get and take out loans up to your eyeballs to pay for it. If you unhook yourself from that and say, I will buy the Alexis, which is an amazing car, win and only win. I have the cash to hand over to buy that Lexus. Then, dude, you on, you free yourself from the traditional path, which means you also free yourself from the chaos that millions of borrowers have found themselves in across the country. Myself included. Does that make sense? I appreciate that. Yeah, I have one follow-up question regarding the money I do have saved. So currently it's in a high yield savings account, but considering I won't need to access that most of it for at least four years, bear bare minimum, probably five or six. What would be like, how would you recommend I manage? Now, that's all in the money to your name. Pretty much, I have $2,000 in a general savings account, and then I have about $500 in the checking account that I budget out of. Okay, here's what I would do. I would definitely keep liquid money, because you're going to need it. I know you may not need it for school, but life's going to happen along the way. So it's good to just keep $20,000 in a high yield savings account, and let's not think about it as an investment. Let's think about it as insurance. This is our never going to debt insurance plan. So here's what you can do. You can set up a different fund called the Med School Fund that can be high yield savings. You could even invest it. If this is a six to eight to 10-year plan, and you can sock away every paycheck, every scholarship grant, whatever comes your way, you put it in that Med School Fund, and that can grow for you over the next six to 10 years. And if you do that, you're going to walk out of undergrad with no debt, a big pile of money and ready to face the world. And like John said, you might work a gap year for two years and sock away even more money, and get accepted to an in-state public Med School, or a university in New Mexico, and know the numbers, know the facts, and go and clear I'd go, and I can cancel this. And Thomas, what Georgia said is really, really important, okay? And here's why. I in no way want to cast anything out on you, okay? I hope it's a smooth ride. But for almost 20 years, my job was sitting with young people who came in and said, "My dad's got cancer. My mom just got laid off. My mom and dad are getting divorced. My dad just died." Or my transmission just fell out of my car and my dad lost his job. What do I do? And so I want you to, what Georgia said is right. At 18, you have a plan and you have followed up plan, but as you enter into higher stakes and more responsibility and you're making more decisions and you just get older, the world happens still. And so having that 20 grand in an account that's going to grow as high as it can, which is much interest as it can, but also you can get it if you need it, that's really important, okay? So remember this, the person with the most patience, information, and options always wins. And so that's what we're trying to set you up for. The patience being, it doesn't have to happen this year on your timeline. The options being, You don't need to just go go to the one med school that accepted you, and then the information. What are all of the variables at play, so that I know, I know, I know, what all the scholarships and grants are, who's charging what for tuition, what kind of aid I can get that's not student loans, all of that is gonna put you in the best position, and it's gonna feel like you're moving backwards 'cause all of your friends are gonna be leapfrogging you. But what you're doing is you're moving backwards in a sling shot so that when you finally get at a med school, you are going to be catapulted so far ahead of everybody because you don't have debt. And so it's a temporary setback for a long-term win. And that's the goal here. - I know that. - And that's what you're wanting. - We do be one thing, Thomas. - I know you guys for a while, so yeah. - Thomas, you do me one thing? - Yes, I know. - Do you know, do you have any friends or family members or neighbors who are psychiatrists? - I do not, so I will have to meet some people that are more psychiatric. - Well, I think it's instructive, it won't matter. - Well, you would need to know this before next year. I'm hearing more and more folks deciding to go the psychiatric nurse practitioner route or going to be a nurse practitioner or going ahead and getting their nursing degree working for a couple years, the hospital pays for their master's degree, and then they have saved up enough money to go get their doctorate nurse practitioner. Like, there's so many paths now that get you very, very close to what you wanna do, which is sit with hurting people and be a resource for folks that may not take 14 years of your life, may not take 10 years of your life and may get you out into the field earning money faster while also doing the thing you really love to do. Now, I've got friends in a work in medical schools. I mean, I love that whole process, but also be open to, there may be alternative paths to what I really wanna do, which is to sit with hurting people. And in your case, psychiatric places man, maybe a psychiatric nurse practitioner's the way to go. And you can stress that over time, get a nursing degree instead of a pre-med degree, get into the hospital, get to work, and then start earning your way up that way. So that's another option, but sit and talk with people in the field and see where the field's going and anticipate it that way. Man, I'm so proud of you. The fact that you've already said this is your goal, that you're taking that off the table tells me, you're gonna take that off the table 'cause it's not an option. You're gonna find a way. (upbeat music) Most people spend years changing their money habits, but never think twice about how their bank probably works against their values with nuisance fees and endless debt products. If you're being weird by sticking to the baby steps, you deserve a bank that helps with that. That's why Ramsey partnered with Fair Wins Credit Union. They built the smart bundle specifically for Ramsey listeners, not for everybody else. And it includes up to 10 high yield savings accounts so you can set up different funds for different needs and goals. And now they've introduced the live like no one else, debit card. The original debt is normal. Be weird, debit card is still available too. And every time you reach into your wallet, your card is a daily reminder that you follow a different path. Listen, if you're living like no one else, your bank should back you up. Check out the Fair Wins smart bundle, including the all new live like no one else debit card at fairwins.org/ramsey. That's fairwins.org/ramsey. Ensured by the NCEUA. (upbeat music) Welcome back to the Ramsey show in the Fair Wins Credit Union studio. I'm George Campbell here with Dr. John Deloney, taking your calls at AAA8255225. Xavier is in Orlando up next. What's going on? - Are you doing? I'm interested in, thanks. I'm interested in how I can pay off my debt and save. Those are two opposing goals. (laughing) - Yeah, that's tough. - How are you gonna do this? - What's the purpose of saving while paying off debt? What are you trying to do here? - I just feel like that I should have more than a couple thousand dollars available at all times, just in case anything happens. But I don't know what the right number to have is for emergencies and I don't like seeing, you know, the numbers that I have. - If that makes sense. - I totally get that. - How long have you been listening to the show? - Not very regularly. My mom's an avid listener, so growing up, driving at school and whatnot. I hear it every morning. And I just thought it may be a good idea 'cause I knew it's out there and I have those questions right now. - How much do you owe? - I graduated college a year ago and I owe about $70,000. - 20,000 of that is on my car. About $8,000 is on a high interest personal loan. I took out in college to get by and then the rest of it is student debt, which is about I think 35,000. - How much are you making in your full-time work? - I make 75K a year. - Okay, so I want you to, George is gonna give you like a path that will work 100% of the time if you'll just do it. But I love the fact that you're looking at your risk profile and seeing, I don't have enough savings. I love that, that's awesome. But if you try to save and you try to pay off debt at the same time, saving while you owe other people money is like trying to turn the bathtub water on faster, but you haven't dealt with the fact there's a huge hole in the bottom of the bathtub. As you keep adding water, it's just going out the bottom. And what we would need to do first is fix the bottom of the bathtub so it can hold water. And then when you turn that faucet on, dude, it will fill up so freaking fast. It'll go and go and go and go, but you've got a $70,000 hole in the bottom of your bathtub right now that we gotta get patched up because your bathtub can't hold water anymore. You know what I'm saying? So prepare yourself to feel really uncomfortable for probably two years of really grind and hustle and moving and dude, then that sucker will fill up real, real, real fast. - So I'm gonna quote Aladdin here on his magic carpet outside the balcony. Do you trust me? - Sure. (laughing) - All right. - I like it. - Let's go on a magic carpet, right? - I also pause when George asks me, do I trust him? - I try to quote Aladdin once a day. So how much do you have in savings now? - I would say about $3,000. I wouldn't necessarily call that savings, such as kind of lives in my checking account for expenses. - Okay, so if push comes to shove, could you keep a $1,000 aside and not spend it? - Oh yeah, for sure. - Great, let's call that your starter emergency fund, and we're gonna use that to hit all the little things that might come our way as we tackle the rest of the debts. Now, what you're saying, that day is coming when we fully fund the emergency fund to three to six months of expenses. So are you living at home right now or renting? - I'm renting, my rent is about $1,000 a month. - Great, you got roommates or is that you, Solo? - No, I have a roommate, so I'd be paying 2000 if it was my own place, we split. - Okay, now you have a great income, but we also have a pretty sizeable amount of debt. It's pretty much, you know, you got 70K in debt, you got $75,000 coming in. So this might take a beat unless we make some drastic sacrifices. So how badly do you wanna get out of debt? - Pretty badly, I've always told myself after college I wanted it to be three years and I'm getting close to one year in and I haven't made the progress I'd like to make. - So we wanna knock this out in two years. - I don't know how feasible that is, but yeah, that would be. - We got you. - Let's find out. That's the 25th and the magic carpet ride, too. We got you. - That means $2,900 a month or so would need to go toward the debt. So looking at your current take home pay, how much are you bringing in every month? It's about, let me look here, sorry. It's about $2,800, a paycheck, pre-tax, post-tax. It's about, and it's about $2,000. And I have 8% of that going to 401K for my-- - I'm so glad you said that. I was going to ask. So you make 75K, right? So if we take that 8% that you're putting in, that's six grand a year. So we both agree that paying off debt is the A1 so that we can then get an emergency fund so that we can build wealth. - Yes, sir. - So what if we reallocated that 8%, that's $6,000 toward debt payoff instead? So now that money's back in your paycheck instead of sitting in retirement, and we're going to come back swinging. 'Cause right now you're investing 8%, we're about to double it once we are out of debt with an emergency fund up to 50%. - What would you say to my company's matching? 'Cause I feel like I'm losing money if I'm not putting in that minimum 8% to get that benefit. - Well, we can't talk about losing money when we're $70,000 in debt with interest. - If we really cared about losing money, we would have not gone into any of this debt. And so, yes, you're going to miss out on the match but what that does is it makes you angry, doesn't it? You're like, "Tangin', I'm missing out on free money 'cause it might pass decisions." So if we, here's what the whole purpose of these baby steps are, is to get you to be angry at the debt. The debt is the villain. Now, you had a part to play, you weren't accomplished to the crime, but if we can be angry that we only have a thousand bucks and that's kind of scary for our emergency fund, If we're missing out on the match and that makes us angry 'cause we'd rather get free money and build wealth, good 'cause that's gonna speed up the process. What happens is too many people get comfortable because they got three grand in savings, they get their company match, and they're in no rush to pay off the debt. They're like, "I'll get there when I get there." I want you to have a goal where you're saying, "Man, are you 23 right now?" - Yes sir. - Okay, you're 25th birthday. Let's celebrate with a debt-free screen. That's how visceral and clear you need to make it. 'Cause I'm paying off $70,000 in debt by my 25th birthday. That means this much needs to go to debt per month. That might mean you need to go get a side hustler too. - Or it might mean, "Hey mom, can I move in for one year to pay all this stuff off?" - Right. - Or it might mean, "Hey, I'm gonna sell this car and I'm gonna drive a $2,500 camera with 250,000 miles on it." And all the paints come off on the hood, but I don't care because at 25, I'm not gonna own anybody any money. - Right, and if you suddenly overnight you sold this car and you took the $12,000 that George has found for you six this year and six next year, now you're down to 58,000 against your 70, now suddenly you're 22 down, right? So you're down in the 30s of how much you owe? You get what I'm saying, how fast you can go if you start saying, "I'm done with this?" - Yeah, I never even considered the car option 'cause I would save me about $500 a year on the payment and knock down my debt and other $20,000 on top of that, or $500 a month. - What's the car worth? - About 20, or I don't know what it's worth, I paid about $23,000 for it and I had a little less than $20,000 on that loan. - Okay, I would see what you can get private party for it. And if you can get a decent amount and go get your different car, that might mean you save up for a little bit, it might mean you get a personal loan from the credit union for five grand, but at least we're going from 20K and debt to 5K. Just to get from A to B, this is not the car you drive for the next five years. This is your two year baby step two car, so that the next 20, 30, 40 years of your life is just freedom. And I'm telling you, man, you make a great income for your age or a sharp guy. If you just trust us and do this process, you will be debt free by your 25th birthday. (upbeat music) (upbeat music) - When you take your car to the shop, you're probably thinking two things. How much is this going to cost me and is it going to get done right? What you need is a mechanic who will give you transparent information so you can make the best decision for your car and your wallet. Christian Brothers Automotive is the official auto repair shop of the Ramsey show because you can trust them to take care of your vehicle the right way. Their digital vehicle inspections let you see exactly what their technicians see, giving you confidence on which repairs are urgent and which ones can wait. Plus every repair is backed by their nice difference warranty. Three years or 36,000 miles with a guarantee like that, you can walk away knowing that your car and your wallet are taking care of. Schedule your service today and get 10% off your visit at cbac.com/ramsey or click the link in the description. That's cbac.com/ramsey. 10% off up to a $250 value. See store for details. (upbeat music) (upbeat music) We love hearing from you guys. So we'd appreciate if you leave a comment on YouTube or Spotify, let us know what you think of the show, a particular call. And if this episode helped you share with a friend, hit that share button and send it on and keep the hope going. Eric is in Lynchburg, Virginia up next. What's going on, Eric? Hey guys, though George, Dr. John, I just wanted to tell you guys are in the top five favorite brands of your personalities for me. Wow, nice. I'm going to make the top five. You made the list. Yeah. How can we help? I'm going to quickly give you the bullet points. My wife and I, we bought a house at the end of July. We got a mortgage for the house, but then in August, we received a sum of money. We are mortgage was sold to another mortgage company. And we wanted to go ahead and pay it off, but we lost. Sorry, you broke up on us. You wanted to go ahead and pay it off, but. We wanted to pay it off, but we lost the paperwork in the move. And we called the mortgage advisor to find out who we need to pay our mortgage to. And she urged us not to pay the mortgage because it would hurt her professionally. In what way would that hurt her professionally? So she didn't specify and I didn't reach back out and ask her. I don't know if it would just be, you know, that you lose her commission. Or if there would be something with the investors that she works with, if it would, you know, put a black mark next to her name. This makes no sense to me. I've never, I mean, I've heard this in the car loan world where they get a kickback. And if you pay off the car loan in the first month, then they lose the kickback. But in the mortgage world, they make money on origination fees. And that's a one time thing. And then they sell the loan off. As you just saw, it went to a different lender. So I don't know how this would hurt your original loan officer. - Right, and I don't know, but it's been bothering me 'cause I don't want to hurt anyone professionally. - No, Eric, let me, let me say this, man. I'm going back in my mind right now. And I'm thinking of my friend Larisa. I'm thinking of my friend David. I'm thinking of my friend Todd. These are all folks that I have used over the years for various, like for a mortgage, for multiple mortgages, for banking back when I would borrow money from a local bank, all the way to the bank I work with now that is, I don't know any of the bankers particularly. It's an impersonal relationship. Like we do business together, that's about it. - Every single one of them, I've paid off something early and they have celebrated me. I don't like to do business with somebody that is not happy when I, as their customer and winning. Do you know what I'm saying? - Yeah. And so I, on its face, I don't like this interaction. I don't like you, 'cause basically what this person is saying is hey, I need your family to keep staying into debt, going against your own principles, paying extra money every month, because I think this might, it's not passing my smell test, but more than that, I don't, I don't want to do business with folks who aren't in the business of helping me as their customer win in whatever way I need to win. - Yeah, I do. So, she specifically asked us to wait until March to pay it off. - Very strange. Well, here's the deal. She may be talking about servicing. - $6600 in interest. - Yeah, the whole thing is gross, man. Doesn't make any sense to me. - Think about it this way. If your freedom is bad for someone else's commission check, that's their compensation plans problem. Not your mortgage pay-offs problem. So, I would pay it off today and she can be upset. I mean, she's not even explaining what's going on here, or even if she did, even if she's like, well, I get a portfolio bonus because we service the loan, and if that goes away, then I'll lose that. That's not your problem. She can go make money off someone else who's gonna hang on to their mortgage for the next 15 or 30 years. But Eric wants to be debt-free. She'll be just fine. You're not taking food off of her table. So, are you gonna pay it off today? - I'm going to, yes. - That's what I need her to hear. - Eric, Eric, man, you've, this is a rare feat, brother, but you almost got me speechless. - I can tell you're a very kind-hearted person, and when someone says, hey, this is gonna hurt me, you go, well, I wanna pause for a second. - And your loan officer didn't give you any further, in any further explanation as to why she needs your $5,600 or something bad's gonna happen to her? - She said it would be detrimental to her professionally. - Okay, if she gets fired over this, then she works for a terrible organization. That's not how it works. And if, if she's gonna pay the interest payments that you're making to keep this loan afloat, where's her generosity here? - Right. - So, let's think through this clearly. This was a business transaction. - This feels like a scam, brother. That's the best I can think of it. - I would pay it off and be done, and that way you don't have to talk to a loan officer ever again. That's how I would trade it, man. But it's very sweet. I mean, the motive behind it, the heart behind it is sweet, but the actual logistics of this are pretty wild. I would not do it. - Yeah, you're a good man, Eric. - Better than us, apparently. - No, I mean, no, here's the thing. If somebody says, "Hey, I'm gonna ask you something bananas." And it might cost you this much money. Here's how you can help me out. I'll hear you out. But if I come to you and say, "Hey, I'm excited." This just happened. I'm about to do a thing and you're like, "Hey, please don't do this. It'll hurt me professionally. I can't tell you anymore." I'm busy profiting off of your debt. Please don't ruin that for me. That's crazy behavior. Hope that happens. Especially to the tune of $5,600 more dollars. No, thank you. Conor's in the walkie up next. What's going on, Conor? Hey guys, thanks for taking the call today. How you doing? We're doing great. How can we help? Yeah, a couple of questions. First, my wife and I got married last August, August 16th of 2025. And since being married, we went from 70K and student loan debt down to $39,000. Nice. Here's some of our good work brothers. And that is on one income. She was finishing up a grad school for speech therapy. So that was just on my income. And I bring home roughly about 100K before the X's. Awesome. So the question at hand is, we still have one loan on there with a nasty interest rate. It's about 7.8% at $20,000. That single loan, it is. It's a grad plus loan. And we are. We found out two weeks ago. Expected. Hey guys. So yes, yay men, amen. So the plan was to get that free. And that's sort of family, but our good god had better plans. So we're ready. We're ready to rock. The question is, the $31,000 in debt does that put on hold? If it's not put on hold, we're thinking about moving. I'm sorry if I'm rambling. The question here is, do we move? Because we currently live in a dirt sheet apartment paying $10, 45 a month in rent. And we're thinking about moving to a three bed apartment for a nursery, because I work remote to be at 1950 a month. So that's a big jump. The question is, does the debt stay-- do we keep paying the debt? Or do we move and put the debt on hold? You're asking two guys this question. So I'm going to answer this way. And my wife might answer differently. I know the picture of a big fancy nursery is fun for Pinterest and stuff. But you're really 18 months away from a-- I would stay where you are and try to get this debt paid. I would stack cash, actually. And as much cash as I possibly could to make sure everybody gets through the pregnancy, safe, and sound, and everything's good, and all that. And after that, I would dump all that cash. We'd stashed away towards this debt, get this thing knocked out, and then start looking at what's another apartment going to look like. I mean, that's what I would do. And it does take away the Pinterest photo or the Instagram photo of the new nursery. I mean, you're talking about a 6 to 7 to 8 pound little person. That's going to live in your bedroom for the first three to six months. In a bassinet. That's about what you need. I don't think we would make this move yet. I would treat it as a, hey, we are out of debt. The baby's growing. We need a little bit more room, and we have the income to do it. Because 1950 is a big chunk of your take-home pay right now. So that's the other piece to look at is, can we even afford this apartment, regardless of what happens next? If you're waiting for rates to drop before you buy a home, here's what nobody tells you. When rates fall, every buyer who's been sitting on the sidelines makes their move at the same time you do. That means more competition, higher prices, bidding wars, all that. That's why I tell people to talk to Churchill mortgage before they do anything else. Churchill gives you a strategy, so you're not at the mercy of the market. They can show you what you can afford, not just what the bank will approve. And with their certified home buyer program, your financing is completely secured before you shop, which means when rates drop and everyone rushes in, you're already ahead of the crowd. You're not scrambling for pre-approval while the house goes to someone else. My husband and I bought both of our homes with Churchill, and having a real strategy, not just a rate we were waiting for, made us ready when it really mattered. So start your search with Churchill. Click the link in the description or go to ChurchillMorgge.com/RamseyOffer for an exclusive Ramsey audience offer. ChurchillMorgge.com/RamseyOffer. Ramsey is taking over an entire cruise ship March 14 through the 21st, 2027. It's the live like no one else cruise, seven nights in the Western Caribbean, and we're taking this to a whole new level. You're going to cruise with Dave and all of us Ramsey personalities. We got new wealth building teachings, the world's largest debt-free scream, live tapings of your favorite Ramsey shows, and more. So if you were in baby steps four, five, six, seven, meaning you were debt-free, you've got the emergency fund, you're building wealth in the future, this is for you. If you're still in those earlier baby steps, get excited, but don't come on the strip. Wait, wait, hopefully we'll do another one one day, you can join us, but this is really to help people mark the moment, the milestones in the journey that we often just breeze by and move on with 'cause life gets crazy, and we had such a good time last year doing this that we're bringing it back. All inclusive pricing starts at $2,100 per passenger, that's your cabin food, entertainment, taxes, and tips. All included in that, so check it out. You can book a cabin at RamseySolutions.com/events. Craig is in Roanoke, Virginia, up next. What's going on, Craig? - Hey guys, thanks a bunch for taking my call. Sounds like all kinds of people from Virginia on here today. - It's the Virginia theme hour. - Yeah, there you go. - What's up? - All right, so guys, I'm 61 years old, and for years, I've been following you guys. My wife and I were doing the baby steps. We were on baby steps six, saving 20% of our income. We were sitting pretty and paying down the mortgage. On my 61st birthday last February, she decided she didn't want to be a part of the team anymore. - Oh no. - I'm so sorry. - We went, yeah, that's okay, brother. I'm gonna rebound it, and it's no worries. So I had to, unfortunately, I wanted to keep the house. So I had to refinance the mortgage and take cash out to pay her some money. So I ended up with a, instead of the two of us going in with a small mortgage, now it's me going in with a pretty big mortgage. So my dilemma is, can I still retire early, despite the fact that I lost her income and have a mortgage. The last thing I thought I'd be doing right now, but I am where I am. I still think I can do it. I just want to see if you guys think I'm nuts. - Wow, I'm so sorry, man. That's not the picture you had heading into retirement. That totally flips the table for you and restarts this next chapter. What's your mortgage payment? - It does indeed. It's only, it's $2,800. - Okay, and what's your income? - $2,000 mortgage. - Okay. - $1,180, base, 20,000 bonus. - Okay, it's about $200,000, can you say? - Yes. - And what's your take home generally from that? Your after-tax monthly income, but before investing in healthcare and all that. - $8,400, I stopped contributing 'cause I'm ready to pull the pin. - Okay, how much do you have in your nest egg? - I've got $475 between a Roth and a Rollover. - Okay. - I've got some unconventional stuff that I've done guys. You keep me honest on this. So I've also got 260,000 in precious metals. It's secured safely. And I took in that Roth and Rollover IRA account, I invest heavily in gold and silver mining stocks. So I know it's risky. - What do you know that we don't know, Craig? You're going all in on this. - Brother, I've been studying it for a long time and I have some people that I subscribe to that help guide us. And it has worked out just spectacularly for us. - So what's your net worth today? - What I, 1.3. - Okay. - But that counts what I was just gonna tell you. I took $334,000 out of the Rollover and bought an annuity. And I locked in, I wanted to de-risk it essentially. So I took the gains from some of these miners in January during the big run up and took that $330,000 out, bought an annuity and I locked in $2,200 a month for the rest of my life. When added to my Social Security, if I take it in February, that'll be $5,000 a month between the annuity and the Social Security. Then I've got the Rollover, the Roth, and the metals to carry the balance. - And what are your monthly expenses? - Seven grand, and that's building in a little bit of slosh. I think that's safe for me to do. So I've got the $5,000 locked in, $7,000 a month heading in. So essentially when I start, if I start pulling out in January, I'll start pulling out about $2,200 a month. - So are you gonna dip in that Social Security early? To make this happen I if you guys don't think I'm not something to file in November and start taking it In February I think you're I think you're insane, but like you knew that before you called I Wouldn't do any of the things you're doing zero of them and so like this is like fun for me to hear It's awesome, but like yeah, this is madness, but you like you have a plan. Okay, then you know I can't tell you when I on a three-minute call without seeing all the variables like yeah Just pull the plug man. You just retire early you got this and then you're gonna call back four years from now saying I'm broke and I can't cover my bills and George told me to retire early, so it's it's hard to say How long you can make this last, but so far it feels like everything is sort of feeling like impulsive now Like you just want I just want to do it and see what happens and so I would have you sit down with an actual investment pro who Can slow you down look at all the numbers all the variables and see is there a better strategy because right now You're talking about de-risking, but then you have all these single stocks and you got money over here And then there's these precious metals which you're gonna have to liquidate to turn into actual money to use to live Because you can't pay your bills with bars of gold yet, and so that's the part I want to investigate It is a better strategy overall keep in mind brother There's a strong possibility you've got another 30 plus years of being alive Yeah, I hear you I'm 30 home software 30 years Yeah, you want to me and so I hear you the game you're playing is of such bizarre risk on one side and such collapsed risk on the other George's word is the word that I had in my mind and it's very common and you might be like nah bro No, no, no, no, it's all good But what you're experiencing is something I've heard over and over and over again for years after something Life-changing happens to somebody a loved one dies a spouse gets Alzheimer's a spouse just up and leaves you a child passes away Where there's this rush for a sense of feeling aliveness which is really an avoidance of grief and reality and I'm gonna Just run roughshod because I only got one life to live I've already seen what happens when plans don't go the way I want them to go and I'm just gonna go bananas and That's my fear for you. I hear it in your voice. I've got this panic almost. I'm gonna do this I do it my way I've been following this guy on the internet and that's and bro if that's you go go that way No, I'm just nervous. I'm just you should be I think that's your body saying I don't know, man You know what I mean? I've been you know, I honestly I've been planning this for six or eight months So if this honestly doesn't feel impulsive to me I've bought the boldness off to our club dollar numbers in and verify things and by the way the mortgage is It's only a 15 year and I'm paying extra on it. So it's gonna be paid off in 10 years So because I'm paying 3,400 a month on that and let's even if you unplug your $200,000 income Yeah, so in 10 years the mortgage will be gone So I'll have that 5,000 a month coming in and my expenses will only be 4,000 But why wouldn't you why wouldn't you stay for 24 months and pay your house off and cash just now? Like what are you in such a rush to go do I? Travel for a living okay, I've been doing it for 15 years. Okay, and I'm over it. Okay, I'm just I'm just I'm just over I'm over the airports and frankly I think that's what contributed to the To the separation. Okay now now we're getting to the room of it Because it's what's gonna happen but the mortgage will be gone and and then the annuity and the Social Security Covered my bills and I still have a half a million to I Know but let's let's let's say this If every single part of your strategy works out then the mortgage has gone in 15 years You can guarantee it's gone if you still work for two more years Get the difference I want to have so much that I don't have to think about can I retire? I'd rather be like I could have retired five years ago, but I like what I need every parlay to hit for me to get my money It's into this of this plan And then dude and you do you brew boo, but I that's just not a risk I want to put myself through when I've got a potential 30 plus more years to go As your business grows everything becomes more complex There was a time when Ramsey solutions had too many disconnected systems and not enough visibility across the business We wasted too much time chasing information instead of making decisions That's why we got net suite net suite brings your financials inventory CRM and more together in one place more than 44,000 businesses run on net suite including Ramsey and now they're taking the next step With net suite next Making it easier to put AI to work across your entire business net suite next helps you make the most of your time Automating routine work like forecasting demand and following up on overdo accounts with net suite next AI is built into everything you do so you can ask it questions Just like when you're talking to a member of your team and right now you can try net suite next for free If your revenue is at least seven figures go to net suite.ai/ramsey. That's net suite.ai/ramsey Our question of the day is brought to you by YREFI. Sometimes the hardest financial step is the one you've been avoiding. So if your private student loans are past due YREFI can help you explore low fixed rate refinancing options and payment plans tailored to your circumstances Go to YREFI.com/ramsey may not be available in all states All right today's question is from Scott in Idaho Scott writes my wife and I are about to hit baby step four which means we'll start investing 15% of our income And I have a question around the four types of funds that you recommend When you say four types of funds do you literally mean we should invest in four individual mutual funds or should we try to find one or two that covers all the basis Good question Scott. Well, if we meant one or two that cover all the basis we would have said that. So four mutual funds mutual funds spouse answer I would have said it Scott. I want to say Scott's on the line so I feel like I can be a little No, it is a great question. There is a lot of confusion around this We do recommend diversifying across four types of mutual funds and that is growth growth and income aggressive growth and international and oftentimes The best equivalent to this that you might find actually out there in your 401k or an IRA They might be listed as large cap or mid cap or small cap or international and so those Those types of funds have different types of companies in them. So you think about large cap companies or Capitalization is 10 billion or more and then you get to international companies who are established overseas companies But produce a lot of products that we buy stateside So if you're diversified across all of those you have likely Thousands of companies sitting in those accounts there might be some overlap across you know a large cap and mid cap depending on what funds You're in but the key is that you are widely spread. So yes, you're right There are one to two that could cover a lot of those basis like a total market index fund has the entire US stock market Now you're still missing out on the international side But you're largely getting the large cap and mid cap companies inside of those Big funds and you hear like a S&P 500 fund. That's the largest 500 US companies So that's a lot of those large cap companies So it's a great question and we do have a lot of resources around this So we'll link one in the description below of how to actually choose mutual funds We'll have the team drop that for you if you want to read up on that scott But it is a good question all snark aside By the way, that's kind of a question. I would I would have John from Nashville All right Willis is in Charlotte North Carolina up next. What's going on Willis? Hey guys. Thanks for taking my call. Sure So I've got a question about how to tackle my student loan debt And I guess the second part of that question would be you know did I met when we got into the details You know, I want you to kind of tell me if I messed up By the you know the house that I purchased and kind of my mortgage and mal and then what I should be prioritizing Hit us with some numbers here. What's the mortgage and what is your after-tax monthly income So the mortgage is 2298 principle and then kind of all them utilities have somewhere around you know 2550 to 2600 We'll take out utilities. We'll leave it 2298 for your mortgage. That's you that's going to include principal interest taxes and insurance and HOA Actually, that does not include HOA. So HOA would be then like 2398. Okay got it So after tax income is just right around five thousand fifty one hundred. Yeah, and then yeah, so that's those numbers. So it's about half to cover the mortar. It takes about half your tax on paper. Exactly. Okay, that's a lot of house for sure. And how much student loan debt do you have? I've got 32,000 and student loan debt. Now the good thing is not not all time good on that behalf, but I have no other debt whatsoever. I've crushed all that in the last three years. Good. Are you married? I'm not. I'm single. Single. Okay. Great. What do you do for work? I'm in the solid waste industry. So we, you know, we build orange facility, we convert methane to natural gas. John knows a lot about that. Keep doing it, brother. It's a good business to be in. So let's talk about this. You're trying to connect the dots here between your student loans and the mortgage. What's the, what's the question in here? I guess the question is, you know, did I, did I do I have too much house should I be looking to get out of the house so that I can then kind of take a step back to to go forward and crush the student loan debt and then from there, you know, then look into the housing market again. I mean, yeah, so we recommend doing this in a certain order. And so what you're describing here is and is what happens when you do it out of order. So we recommend getting out of all consumer debt, getting a fully funded emergency fund and then purchasing a house on a 15 year fixed rate mortgage where the payment is no more than a quarter of your after tax monthly income. So what you're describing here is half of it is your mortgage. And we have these student loans. And do you have savings? Do you have an emergency fund? I do, yes. I'm just around 12,000, 12,500. Okay. Great. So one problem doesn't solve the other here. Even if you were completely debt-free outside of the mortgage, this is still too much house. Now, the too much house is not helping you pay off the student loans because there's not much margin to go at the debt. Is that the main issue here? There's not a lot of margin left over after all of your bills are paid to then throw extra at the student loans. Exactly. And I've tossed around, you know, is it that, you know, the house is obviously one of the issues. Do I do I chase larger salary or do I just kind of take the, I guess you'd say easier out maybe and then get back out of the house. I mean, if you can double your salary, we've solved some problems. I don't know how realistic that is for you. But what I would say is that the house is there's some smoke. It's not quite on fire yet. But if you can't get your income up to, let's say your, your butt, let's say 24 hundreds, you're looking at close to like nine or 10 grand is what you should be taking home just after federal and state taxes in order to make this make sense. So if that's not going to happen in the foreseeable future, you may want to look at selling in the next year. Okay. And part of that means the, the profit, will you get any profits? Do you have enough equity to even come out ahead in January? So I would probably just, no, I would say no. Did you put any money down? I did not. I thought that's another kind of probably internal issues. I find it's 100% of the loan. What kind of loan is it? It is a five year arm at five point. So get out, get out, get out, get out, get out, get out, get out, get out, get out, get out. Like Caramba. Okay. Well, with the fed rates just moving up, that arm just got more expensive. So your mortgage rate, your mortgage payment is not a static payment. It's going to go up. So I would definitely look at getting out of this house. You don't have to do it tomorrow. But I would be looking at getting it listed, seeing how much you can actually net, seeing if you're going to be underwater, because that's a big part of this is there's one thing to make some money or break even. But if after fees, you're not going to have enough to pay off the mortgage, that's a different problem. And Willis, let me just tell you, brother, I've been here. I've done this exact thing. I had a, I had way, way, way, way more student loans than you did. But man, I was in a rush. I bought a house that I couldn't afford. And 11 months later, I took a check to closing to get out. And it was embarrassing. It hurt me and my wife's relationship. It was just, it was, I had a little kid. The whole thing was a mess, dude. But it ended up being the right decision that's that really changed the trajectory for me and my wife in two different areas. One, it got us out of the hemorrhage, which was we're never going to get this debt paid off because our house takes up so much of our monthly income. And the bigger thing that it changed in me is this right here will never happen again. It was, it was just like, I will never be embarrassed. I'm never going to bring a check to closing again as long as I live. So I did, I've been there. It's humbling, it's embarrassing. All those words you want to say. But man, if you're thinking about you in five years and the guy that doesn't owe anybody anything that's back in his own place, a house that he can afford, likes his job, all that kind of stuff, man, you're talking about a free man in three to five years. Got it. I've been there and I hate it for you, brother. So you're going to be okay. I'm not worried about you. You're a young guy. You're going to get out of this debt. You're going to be a homeowner again one day. But for now, to kind of clear the decks and start from place of strength, I think that this house is going to continue to be a problem. And I don't want you just chasing a job you don't like that pays more just to make a mortgage payment on a house that you really don't need right now. And no, no, no, no, 100% downloads. And God help you know adjustable rate mortgages. Please, please, please. That's my note to America. Fixed rate is the one you want. And I wish you the best man. If you want to reach out to a solid real estate agent, you can go to RamseySolutions.com/agent and get connected with one of our Ramsey trusted pros. They can help you get out of this and get the most for that house, which in the best financial position possible. If you're already enrolled in a Medicare plan, you might think there's nothing else to do. You're good to go. Wrong. The fact is Medicare premiums, networks, prescription coverage and benefits can all change, even if your health doesn't. So doing nothing could cost you hundreds or even thousands of dollars a year. With annual enrollment time coming soon, you need to talk to chapter right away. Chapter is the only Ramsey trusted Medicare advisor. And they save Ramsey fans an average of eleven hundred dollars a year. They explain your options simply and help make the smartest decision for your situation. And whether they find you a better plan or confirm you're already in the right one, chapters services don't cost you a thing. Medicare annual enrollment runs October 15th through December 7th. So review your plan with chapter now and avoid expensive mistakes later. To talk to the unbiased Medicare experts at chapter, go to ask chapter dot org slash Ramsey or click the link in the description. That's ask chapter dot org slash Ramsey. Welcome back to the Ramsey show in the Fairwinds Credit Union studio. I'm George Campbell joined by Dr. John Deloney taking your calls at triple eight eight two five five two two five. John, as we kick off this hour, there's something we need to talk about big headline floating around. You've changed hair products. I've not yet. I'm getting close to it. But it has to do with the Fed. Oh, everyone's favorite three-letter word. It sounds like the mafia. They've unlimited power. So let's talk about this headline. We're going to throw it up on the screen for you guys. It's a juicy one. Federal Reserve hikes interest rates for the first time since 2023 amid stubborn inflation. So basically, you know, there's been a little bit of chaos happening in the world and inflation is still pretty rampant. So the Fed, one of the levers they can use is increasing the Fed funds rate. What that does is it trickles down to consumer debts, specifically things that have variable interest rates. So let's talk about what this means, what it means for your money. And I hope it affects very few of you because you follow the Ramsey plan. So what happened? The key rate for the Fed went from three point, it went to three point seven five to four percent. That's up a quarter point. And that happened on September 16th. And it is the first hike since 2023 after two straight years of the Fed cutting. So they were cutting, cutting, cutting. And then inflation's hot. And they went, we got to bring it back up. The vote was unanimous. Nobody blinked. That's the whole headline. Everything's moving up a quarter point. So what does that mean for your debt? Well, if you have a fixed rate mortgage, it means nothing. It's a fixed rate. It's not going to affect that. If you have a variable mortgage, like an arm, like we had in a previous caller, it will affect that. If you have credit card debt, that is a variable APR. So instead of 27%, it might be 27.25% now. Car loan, same thing. If you're looking to go get a new car loan, I hope you're not. I hope you're paying cash. That's going to be a little bit more expensive. So the over under is the Fed is making borrowing more expensive to try to cool inflation. They're trying to limit how much people are borrowing. Make it hurt a little more so that we spend less. Will it work? Well, they've been doing this for a while now. But it is one of the ways historically that has been used to cool inflation. So we talk credit cards. We talk car loans. Here's some good news if you're looking for it. Silver lining. High yield savings accounts. If you've been following the Rams, you plan for a decade and you have an emergency fund in a high yield savings account, that rate suddenly went up too. So you're going to be earning more money. Exactly. So if rates are, let's say, 3% for high yield savings accounts, you might see it go up to 3.2%. Yeah. So that is a win. And it's a good reminder that wealthy people earn interest, broke people pay interest. You want to be on the right side of interest. And the problem is people have been borrowing up to their eyeballs. And rarely do they even look at the APR. They just see the shiny car, that new car smell. They swipe the car because life happened, not thinking about the ramifications of how difficult it is to pay down debt when it's at 27% APR. So if you're a Ramsey follower, you are trying to get out of debt you're currently in, not taking on any new debt. This likely won't affect you that much. And if you don't have a mortgage, this affects you zero. So here's what I want you to walk away with. This is one more reason you don't want your life dependent on debt. The Fed is going to move rates up and down forever. That's their entire job is to find the sweet spot, Goldilocks balance. But if you don't carry this consumer debt, you're not white, knuckling, and adjustable rate mortgage, a rate hike has a lot less power over your monthly budget. So control, which you can control, that's always been the move. I can't control what the Fed does, but I can't control me not going into credit card debt. So this is not for me because obviously clearly I know the answer. I'm asking for a friend here. Could you explain to my friend as though he was a middle schooler, how I'm clearly asking for myself? How does increasing the interest rate cool inflation down? Well, if less people are borrowing money, that's going to limit the amount of spending. And so part of inflation is people are spending so much that it's bringing the inflation rate up. So if we can curb that part, less people taking out buying new cars, less people swiping the credit cards, that will end up cooling the inflation rate overall. Their goal is 2% is the goal. And they are not quite close. Yes, not even close. And so they're just trying to move these levers and it's not an easy task. I don't envy them. I would not want to be sitting in that seat right now, because they're in the hot seat. And nobody's friend when they raise the rates, because especially with the midterms coming up, they're going, "Whoa, whoa, you're making us look bad over here raising the rates." So overall, this is kind of a nothing burger in the grand scheme of life, a quarter percent. And it doesn't have a direct correlation to mortgage rates, because most fixed rate mortgages are not tied to the Fed rate. It's actually tied to the bond market to mortgage-backed securities, the 10-year treasury yield. So you're not going to see this affect mortgage rates directly. There might be a correlation slowly over time that it ticks up, but it's not going to happen overnight. So I hope that helps people understand a little bit what's going on with the Fed funds rate. Again, I don't, this is as much as I thought about it. I don't lose sleep over this. And you shouldn't either. Just keep following the Ramsey Plan control, which you can control. Get out of debt. All right. Let's go to Annie and Richmond, Virginia, up next. What's going on, Annie? Hi, thank you guys so much for having me. Yeah, my question is, when my husband and I are wondering if we should sell our house, it's more than 25% of our income, and it's definitely limiting our ability to pay off our debt, build our mortgage fund. And honestly, even in the long term, it's limiting us to be able to save up for down payment on another home. So, yeah, we're just wondering if we should sell it, and if we'd do, would we buy smaller or would we rent something? Can I ask you a question before, George answers your money question? Yes. Do you hate this house? No, but we don't love it. We only, we're like, in between like and love. Hey, it was a little bit of a deloney being a drama queen, like I usually am. I can hear in your voice, you don't like this house. Well, I think we don't like where it's at, and yeah, there are some aspects of it we don't love. It's hard, we've been here a couple of years, so there's some memories here that we like, and we've made it our own best they can, but we don't love it. Yeah, then, then, numbers who cares, you sell the house. It's okay to decide we don't want to live here anymore. But if it helps you financially, that's a byproduct that we can all get behind. Yes, no, it would definitely help us. I think that we would not be able to buy something else that would be any better financially for us currently, until we obviously pay off our debt and get our money in order there. Which means freedom. Choose freedom every time. That means you're going to rent, right? Yeah. That would be, yeah, I guess so. Did you just realize this for the first time? Like, oh gosh, we're not going to jump into another house we can't afford. We have to rent. So that's going to be the sacrifice. The sacrifice says we're going to rent for a while. It feels like we're moving backwards. It's a smaller space. We got neighbors right next door through the wall. This might not be fun, but what's fun is not being stressed out about money for the next several years and building a foundation where you make this next house purchase from a place of strength instead of impulse or desperation. And somebody else fixes your plumbing for the next few years, that's a way. And this those days. Now it's me. Yeah. I do look more like that out of it. That would be nice, for sure. Walk us through the numbers. What is your mortgage payment every month? So our current mortgage payment is 1850. And what is your aftertax monthly income? About 58 hundred. It gives it to take a little bit. I work, we have a daughter. I work part time. So I just work as many hours as I can, but usually right around there. Okay. So it's about a third of your take home pay. Not unreasonable. Yeah. So that part's not on fire. How much debt do you have? We have 8,000 left to go. So not a time line. Yeah. Andy, I would stay put. Knock out the debt, build an emergency fund. If you got savings, let's knock that out now, sooner the better, build the emergency fund. And then you can continue saving and make the move on your terms, but nothing's on fire here. And just sell this house to go rent somewhere for 1850 instead. Whether you're a small business owner or an individual, doing your taxes is not fun. It's like an algebra test where if you get anything wrong, the IRS can make you pay with actual money. But if you work with a Ramsey trusted tax pro, you don't have to be a tax whiz because they are. They know taxes like the back of their hand, which makes filing super easy. So work with a Ramsey trusted tax pro and get back to doing what you love, which probably isn't taxes. Visit ramseysolutions.com/taxpro and fill out the referral form to get connected to a Ramsey trusted tax pro today. Ask Ramsey is our free AI tool that's built and trained on proven Ramsey principles and we're going to break down one of the questions we got this week. Here it is. If I have extra money coming in this month, should I prioritize putting into my son's $29 for college next year or pay down my car loan? Well I love that you love little Jimmy, but that car loan comes first every time. The baby steps make this very clear. You don't put a penny away for your kids until you got your own mask on first, clearing the decks for your own non mortgage debt. And here's the core reason. The car loan has an interest rate that is working against you right now. Any extra money you put into a $5.29 instead of the car loan is costing you. So even with college coming next year, it doesn't change the order of the baby steps. You got to have a conversation with your son about how he's going to pay for this without debt and that might be scholarships, grants, working part time, community college. There's a lot of ways for him to go about this in a smart way. So kill the car loan now. And if you got more questions, you can ask very specific questions and have a back and forth conversation just like you would on this show at ramseysolutions.com and then click on ask Ramsey. All right. Let's get to hope in Medford, Oregon. What's going on? Hi, I'm 19 and getting married exactly a year from today. We bought a fixer upper about a year ago. I'm in real estate. So my job, my money, my monthly income really varies. I'll be officially on my own by next month or next year until my income will double. My fiance makes a pretty tight income. And we're just trying to figure out what we should prioritize for our house or wedding. We also have a truck payment. And we also have a part time job where we work on a ranch and get paid in cattle. But I have the option instead of getting paid in cattle to hash out the end of each year. So I'm just trying to figure out the best way to go about all of our debt. And also this house, because it was a fixer upper, we did a private loan where we have three to four years to refinance and build the main home and we have to pay them off. What's the interest on that? I kind of figure out the best way. It's a six point step up. Okay. So you've got a mortgage and you have things you need to fix up on the house. We have already fixed up everything versus I was able to save up $25,000 and I bought the house right when I turned 18. Why to go? Instead of doing a down payment through them, thank you. We built a mini house inside the only existing thing inside. So we spent that 25 on building a miniature house that we live in and cleaning up all the pitch. Wow. Well, you guys have a house inside of a house, like a Russian doll. Okay, that one more time, sorry. You have a house, you built a miniature house inside of your, of the fixer upper house? Other shop. So they burnt out, it was a, it was a speaker house. They burnt down some houses and the only thing left was a shop. So we cleaned the shop and we built 500 square foot of a house. Okay. Okay. Got it. So let's make this clearly. let's separate the debts until you guys are actually married. - Yes, I hope you're not gonna like this, okay? But I would only have a job if people's best relational plans didn't work out, that's all of my life, okay? And so I want more than anything, George and I are rooting for you and your fiance to get married and y'all are gonna be married for 70 years, it's gonna be awesome. But we also spend most of our time talking to folks who bought a house together, renovated together, paid off each other's debts, started businesses together, and then they break up. And untangling that type of financial mess is almost impossible when two teenagers are in the eyes of the law, two teenagers are dating and they went into all of these business arrangements together. What usually happens is somebody walks away having paid off their boyfriend or girlfriend or fiance's debts, bought them a car, whatever, paid for their school, and then they are out all of it. And so that's why we always tell folks. - We need to meet everything in our own name so the house is under my name because I bought the month we got together. So he has helped us out, but it is in my name and the truck is in his name fully. - Okay, so your name's not on these, so if he breaks up with you and drives off in this truck, you're not obligated on the loan to make payments for his truck. - No sir. - Okay, perfect. - It's under my name, my husband. - Excellent, excellent. - Only two debts are the truck payment in this private loan on the house? - Yeah, I just, I just need my last school payment this month. And so that's fully paid off, thank you. And then I owe $1,000 on my tires. Like I had to get you tired from my trucks. That is the only. - And you went to debt for that. - And my truck is also paid off. - $1,000, okay, yes. How much do you have in savings right now? - So we, we had our front field, so we get cash for that. So in cash, we have $3,300. And then in the bank, I have 500, he has 500. - So when you say we, who's money is the $3,300? - That is very much so together. He sold a car, so a 1,500 of that was, it is. - So is half of the yours? Could you reach over and pay off the tires? - We could, yes, so my question is, should we pay off the tires with that cash or should we put it towards the wedding so we don't go in debt over a wedding? - Well, you have time to save up for the wedding. I don't want you hanging on to tire debt while saving up for the wedding for the next year. So let's just knock that one out. Now that makes you completely debt free, outside of the private loan on the house, right? - Okay, yes. - Now we have 12 months. Are you guys sharing the cost 50/50 for this wedding? - Yeah. - What's the budget? - Right now, I'm at $3,700 towards it. Like, I've already bought my wedding dress. We've already bought in tables and chairs. - So what's the total budget? Is this gonna cost you guys 10 grand? All in? - It should be under $4,500. - Oh wow, okay. - We're doing everything. We're working for the venue. So we will put in work and work for where we've got. - You guys are hustling. Okay, so you need to save up 22/50 over the next six to 12 months. - Oh yeah. - That's very reasonable. That's less than $200 a month. Or that's one cow. You get paid in cows from you? - You get paid in cows. Cows are at about $3,000 a day. - Yeah, I was gonna say I went to get a burger there today. Cows are about 10 million dollars a piece, man. I would love to get paid in cows. - Yeah, so we get the cows. And then we have the baby and then we sell the baby at the beginning of each year. So this year we're gonna, we have $3,000. We can either cash out or buy another cow from them. - I'll buy you a cow maybe because we can invest into a herd where we could be making some money each year. It'd be about $200, $500 gross. - Dude, forget crypto. We need to get investing in some herds, John. - All day, at least I can, at least I can hug a cow. - It's like settlers of Catan out here, all right. - I can't hug a crypto. - I like this plan, hope. So here's the deal. You pay off the tires today and reach into that fund. Then you're saving up for the wedding. You're gonna do that. And I mean, your next commission check from real estate will do that. - Except as well, I'm in imperial. And so with the preys, I don't get to $10,000. I get about, you know, $800 every time I do a job. Which, great. Some make some super busy and I make that. - Okay. - Because I'm in training for the next year. I only make half of that. So if that's an $800 appraisal, - You get 400. - I know the math. - Well, no, $850 for an appraisal, 35% of the companies that I split up 50, so I really only get $247. But you got like nine side hustles. So I'm just saying all together, you can come up with two grand over the next 12 months. So you're good. Now the question is, can he pay off his truck before the wedding and get an emergency fund? When you, here's the goal. You guys get married a year from now and you both have no debt and a fully funded emergency fund. Then we tackle this private loan together on this house 'cause now it's our house. - The truck now, it's $30,000. - So he's not gonna be able to, how much does he make? - He makes about 1400, 1800 every two weeks. - He can't afford this truck. - Yeah, that's way too much truck. - And his payment is low. - His payment is $30,000. - I don't give a thing to zero dollars. He owes 30 grand on an appreciating asset and he's making 40 grand a year. - Yeah. - That's a problem. He's bought something that's going down in value every day that he owns it. Yet the amount he owes on it is staying the same. The rule of thumb that we use and that we all live by is like everything with wheels and motors in your home should not be more than 50% of your total take-home pay. - Total gross income. So he's way over that. So there's an easy solution here. If he wants to build this life with you, let's sell the truck, get something we can afford in cash. And now by the time we're getting married, we have plenty, does pay for the wedding, to have a nice emergency fund of six months of expenses and then never go into debt again and knock out this private loan. - And if you're making 40 grand, a year, $400 truck payment is still a lot of money. (upbeat music) (upbeat music) - Hey, George Camel here. So you're thinking about buying or selling your home. It's exciting, but there's a lot to think about and all those decisions can feel overwhelming. Well, here's the good news. You don't have to tackle the process alone. Ramsey's real estate home base is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start to finish guides, a podcast, and even an in-depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps towards your home goals, go to ramseysolutions.com/realestate. That's ramseysolutions.com/realestate. (upbeat music) While you're out there playing offense, trying to build wealth, you also have to play defense. And that's where insurance can come into play. But it can be hard trying to find pros who aren't just looking to make a buck and agents who actually know what they're doing and know their stuff. So I got you covered here. Ramsey trusted insurance pros are vetted and coached to make sure they're market experts who have your best interests at heart. So you can go to ramseysolutions.com/coverage to find the type of insurance you're looking for and connect with a Ramsey trusted agent. Alex is in San Diego up next. Alex, welcome to the show. - Thank you, Dr. Lone and Mr. Kamala. Appreciate you taking the call. - Absolutely. What's going on? - My wife and I have completed steps. Baby steps one through three. We're on step four, finishing up step four, we're getting close to that 15%. But we met in your build home about a year ago. It was obviously quite a bit of money. But currently we're doing pretty decent, even though our monthly payment is pretty high. And we're saving quite a bit and we have a lot of savings and I'm just kind of trying to figure out where to go from here. - Cool. Okay, so you are close to investing 15%. What's the hold up there? What's the timeline to get to 15%. - Nothing is just a matter of adjust. And I'm about probably a 14% and my wife's about a 12% and she just got a lot going on the mind 'cause there's some family planning that's going on and we've been keeping that in mind. But yeah, we're close to bumping it up to the full 15. - Okay. So once you're at 15%, you dial that in and you said you don't have kids yet, you're looking to start a family. - We're probably looking to have one here in the next year or two. - Okay, great. So we can pause on baby step five. We can skip that for now, which then puts us at baby step six. So anything beyond the 15% going to investing, any extra margin, we can throw some of that at the principal on that mortgage. - Understood. - What's the left on the mortgage? - Like I said, we just bought it. So it's about 700 and 5,000. - Is the mortgage? - Yes. - Okay. - What's the payment? - The payment or total housing cost that's including the insurance in the HOAC is about 5,800 a month. - 5,800, okay? And then what do you guys take home after taxes? - It's 10,000, 10,000 in three. - Okay, so 10, three? - Yes. - So you're talking over half of your take-home pay is taken up by this mortgage? yes, it's about 56 percent. That's up there. That makes me nervous, really, brother. Yeah. Yeah. Well, I would say we're saving actually about 2100 a month. We're really good with our expenses and our, going, I may have omitted this, but our savings is pretty high. What about $97,000 in savings right now? So we're well above that $6,000. It isn't a high yield savings account, but we're past that six month of expenses. And that's great. And you guys have no consumer debt? No, no. Yeah. I pay off my student loans very quickly. She was fortunate not to have any student loans. So I was pretty aggressive about my paying off in my three years after I graduated. Okay. So the issue I'm seeing here is that that high yield savings account, while it's awesome to have $97,000, doesn't fix the ongoing issue that half of your take-home pay is disappearing into that mortgage. Because you're not going to dip into your high yield savings to try to keep the mortgage afloat. Correct. That's not going to work. So we're going to have to look at the overall picture to see is the income going to go up any time in the future. Because what happens? Let's see you guys have a baby and she wants to stay home, or she keeps working daycares $2,500 in San Diego. Or there's an extended NICU stay, or she's got to be on bed rest for four months. Like that, that's one of those things that's out there that we say that's that's one of the reasons why, and I know it's so frustrating for everybody, especially with how high housing prices are, is keeping that 25% just because you never know what's coming down the road towards you, right? Right, yeah. Both of her works are pretty stable. She's a nurse, and I'm actually working higher education at a four-year university here in San Diego. My pay bumps, my shovels, getting, my shovel getting bigger is not as fast as hers. She's getting pretty substantial increases in pay, but yeah. Okay, so what I'm trying to show you is that you've limited your options by making this home purchase because both of you have to keep working and you have to make way more than you are now. So that's an imperative if you're going to stay in the home long term. Now, if you're going to decide we're willing to sell in a year or two when the baby's here and we got this daycare cost and things are tight, then that's another story. But for now, you're going to try to get to 15% and just suck away money. And if and when you got, you know, you guys are pregnant, then we can pause and save up some money. You already have 97,000, so there's really no need to go to Stork mode as we call it. You guys are in a good spot there. But the bigger glaring issue is what are we going to do with this house payment? Yeah, my only in terms of the immediate nature, not now. I am we are currently doing bi-liquely payments, and I actually have set it up. So we actually put in an additional 300 each payment towards the principal. I'm trying to pay it off close to 20 if not sooner. But I was also thinking about putting something in an opening before 29 and putting a couple thousand dollars away for now at that point, and then just leaving it so it can continue growing. But yeah, the move is definitely to increase our income. Yeah, I wouldn't put anything in the 529. I mean, you got 20 years potentially plus before we have to even think about the kid going to call it. Yeah, I'm more concerned. It will be dead way before that. You guys run out of margin here because of this house payment. It's only going to go up as taxes and insurance go up as well. And so that's where we need to look at our incomes pretty severely and go, if she's not going to go make, you know, 30% more and you're not going to go make 40% more in the next couple of years, you probably have to sell this house eventually because you're just not going to have that much margin once you factor in daycare costs. Yeah, well, well, she's actually going to be seeing an increase of 20% in the next few years, actually, you know, given her union at just a big fight over, obviously, pay increases, but yeah. Okay, I would just keep watching it. It's not like an immediate fire now because you guys do have some stability with no debt and emergency funds. I'm not going to tell you to go sell the house today, but that's the main issue I'm seeing. But I wouldn't let that stop you from trying to start a family or do anything else, but there's no need to get hyper focused on saving for college right now. I'm more concerned about the mortgage. George, is this a situation where like let's say he's got he's basically got $100,000 in an account and he owes $705 on this mortgage. Is this a situation where he could say, okay, six months is, you know, 30,000 bucks for us and then take 70 grand and put it against that mortgage and recast it to where it ultimately gets down below without having to sell the house. I'm trying to think of a solution for him to not have to sell it and if he's able to pay off massive chunks of principal because they are saving and right this moment they're making money and you know, they want to start a family in a year or two. Maybe that happens or like me, we want to start a family took three or four years, right? So who knows what that timeline looks like, but is that a viable option? Well, you can do a recast, which is where you take a big lump sum of money, throw it at the principal and they basically re-amortize your mortgage. So the payment does get lower. It's not magic, but it does take a new balance and just re-doze the math for you. So that is viable, but with a $700,000 mortgage throwing 50 at it is not going to make a dent in your payment. Plus just six months of their mortgage alone is 35 grand, let alone their other expenses. And so that 97 grand is likely, you know, pretty close. A little more than six months, but not much. And so I don't think it's going to make a dent. Now if they had 400 grand, they could chunk at the principal and recast it. That's a great problem. And bring it down to 200 or all the O's two or three hundred thousand. Yeah. But again, he said they had 2100 in margin. And I don't know what daycare costs are in San Diego, but that will disappear real quick with a baby when you're paying for that because she is, she is going to continue working. So that's the part that worries long term. And it's the kind of stuff. It's why we are so conservative. People yell at us because they go, Ramz, he's out of touch with their 25% going, I'm like, I'd rather be out of touch and allow a mom to stay home if she wants to. Because now you have no options. And so I want to have as many options as possible. And part of getting locked into this mortgage, taking up 56% of your take-home pays, you got to keep working. You got to make more. You have to take that job even though you hate it. And so it just limits your options. So my heart breaks for them, but they're sharp. They're young and sharp. They'll figure it out. Maybe he'll switch careers. Incomes can go up. Yeah. And maybe they decide, you know what, we can downsize. But it's San Diego. Yeah. I mean, it's one of the most expensive places. You're not going to find a house for 300 grand. That makes sense for them. So that's part of the issue with real estate, especially high cost living areas. You need a really high income. Yeah. That's part of the math. And they have a great income. They're taking home 10 grand a month. Yeah. But it's just enough for them. Where they're choosing to live and where they're choosing to buy a house in the house, they're choosing to buy like all those things together. It's frustrating. But there is, I always say this and I hate having to say this because I have to say it to myself all the time. If I take the emotions out and what I want out of the picture, I'm just looking at a math problem. And math often doesn't care what I think. It's hurtful. Listen guys, I've heard just about every excuse for why folks think they can't get ahead with money. So let's go ahead and settle this right now. You get the final say on what happens with your money. That's why you have to start telling your money where to go so you can stop wondering where it went. So if you're going to start winning with money, you have to get on a budget. And the easiest way to get started and stick to it is with the every dollar budget app. It'll help you make a plan for every single dollar coming in and every single dollar going out, every single month. And guess what? It's free. So no excuses. Download every dollar in the app store or Google Play today. Our script for the day 1 Corinthians 924. Do you not know that in a race all the runners run but only one gets the prize? Run in such a way as to get the prize. William James said most people never run far enough on their first win to find out they've got a second. Amy is in Dallas up next. Amy, welcome to the show. Hi, thank you. I'm a single mom. I'm 50 years old and I have a rent house and a college town where my daughter goes to school. And I'm wondering if I should keep the rent house when my twin boys get to college, even though I'll be collecting less rent and is it going to make financial sense to keep it? So you want to hang on to the investment property for what reason exactly? Well, I don't really want to. It's kind of it stresses me out having a property that's far away that I have to manage. But right now it's providing like daughter a place to live. And once she's out, can you sell it then? I could. That's where I'm wondering. If I sell it then because it's paid for. Okay. And so if I sell it, then I could. I'm still going to be responsible for boy, I have twin boys, putting them, getting them housing through college. So would it be better to, since the house is paid for, let them live there, still collect rent for two other roommates until they get through to. Oh, so you're going to be losing, on paper, you'll be losing money because you're going to go to down to two renters instead of three, right? - Yes. - Okay. - And you're going to fork over money if you sell it to cover housing for them. - That's correct. - But you'll be saving money, but you'll be saving capital outflow. Cash, you won't be having to write two rent checks for them wherever they're living. - Exactly. - What would you net from this if you sold it today? - Since it's paid off about 320, 30020. - What would you do with the 320 if you had it in your hands right now? - I would add it to my retirement. - Okay. - So I don't have any debt. My home is paid for. The only debt I have is the voice car. - What's left on that? - About 12,000. And I've only reason why I haven't, so I haven't, I have about 25,000 in my emergency fund and about 200,000 in retirement. But after my divorce, I had no credit at all. Nothing was in my name. And so I kept the car payment in order to build up some credit. - So the car is in your name or just the loan? - The car is in my name. - Okay, and he's driving. He's a driver on the insurance and all that. - That's the more. - Yeah. - What's your primary residence right now? - What do you mean? It's a home, a house. - Yeah, is it paid off too? - Yes, sir. - Okay, okay. - Man, it sounds like what you said at the beginning of the call is this house, this rental property, stressing you out and you don't want to be a long distance landlord. - That's true. - But I mean, with my daughter living there, with my daughter living there, I kind of have her to hell and once, yeah, to help and once the boys are there, I won't even have to, you know, they can do the yard and things that I'm paying for now that I can get them to do. - Yeah, but they'll set the house on fire too. - They might. - So what would it cost for them to go live on campus or live off campus on their own? - About 1200 a month. - Okay, and would they be working part time during school? - I would like them to, yeah. - I think that's a good plan to have some skin to the game 'cause right now you're covering all the, you're saying, "Hey, I'm covering all the housing expenses. You guys don't have to worry about anything." - So yeah, with a divorce decree, their dad is paying for school tuition and I'm paying living expenses. - Okay, what if we, I think $1,200 is low, but I'm gonna trust your numbers 'cause you're pretty sharp, you're on top of it. So if we just did, like, "Hey, you said I don't like being a landlord "it stresses me out, it's a long distance thing. "I'm a 100% agreement with you on that." Also, again, I don't wanna overly gender this. I just worked with college students my whole life and I know when I was in college walking into, my girlfriend's house who's now my wife was a much different experience of her walking into my house where I live with four other dudes, right? And so, if you just looked at, so you got that issue, number one. Number two, if you sold this house and got $300,000, and you put 50 grand in a high-yield savings account, then they're gonna live on campus that first year, probably anyway, then you've got three years at $1200 a month that's gonna be about $44,000, $43,000, $44,000, $4,000, then you've got it paid for. And then you could take that $250, drop it in your retirement and call it. - Yeah. - Yeah, I'm looking at this 320 you could net. If you just dropped that in a high-yield savings account, you could make 10 grand a year, and you're not paying property taxes and insurance, yes, you're gonna have to pay for their housing, but I also think they can help out with that too, so it's not all on you. Well, they might get scholarships. We don't know. - And they're not gonna get scholarships. - The way you said that so confidently was worrisome. - No, I mean, I love them, they're great, but. - You're doing such a great job than not to say anything negative about them, but you're like, I don't know I'm living in my house, I don't, they're not gonna go to school. - I only trust them to mow the lawn. - They're gonna go with 17-year-olds. - No, of course, they're feral, and that's awesome. That's why we love them. And also, that's why we're excited for them to go to college. - Let them go destroy someone else's house. You don't have to be the landlord. - Yeah, I'm totally with you on this. - But I personally would sell it based on everything you've told me. I think you're gonna be okay either way, but the mental load is not worth it. The juice ain't worth the squeeze on this one, and I think you can cash flow any housing costs that do come up, what's your income? - I'm a kindergarten teacher. I make about $60,000. - Oh my God, you're a saint, dude. - Wonderful. - Well, you're in a good spot. I mean, I know you wanna make up some time on retirement, and I think eventually we can start dumping some of that money in. Are you talking about using that money in like a non-retirement account? - No, I would put it into my Roth or-- - 'Cause you have a contribution limit on the 401K and the Roth IRA. - Yes, and-- - So you're not gonna be able to dump 300 grand into it? - No, so when we bought the house, we were using it as like long-term income, 'cause that's what my ex has been wanted, and he was in charge of it, and that was great, and I just don't want that stress, like even though it might be potential income, you know, years down the line. - Yeah, well, you sort of become a landlord by default. - Yeah. - Yeah, and I can imagine in your situation, especially given what you've gone through, having 320 grand in a high old savings account just there for a season is gonna give you some breath in room. - Yes, well, and I'm doing okay. I'm like I said, I have my emergency fund. I have a start of retirement, and I'm putting about 10% away a month into retirement savings, and I have the boys first year living in the dorm, living on campus saved for them. That's from my parents. My parents actually set that up for them. - Amazing, that's awesome. - So I would pay off this car, and then you can up your investing to 15% or more, 'cause that puts you in baby step seven. You'll have no debt whatsoever, right? - Yeah, and I'm a little bit worried, because when they turn 18, I'll no longer get child support, but I'll still be paying, even if I pay the car off, I'll still be paying their car insurance on the car. - I know, but Amy, sometimes you sit down and you have a really direct hard conversation with 18-year-olds. - Yeah. - About here's mom situation. And if you wanna keep driving this car, you're gonna have to cover the costs. - Or I can pay $250 of it, and y'all are gonna have to get jobs. - Yeah, they have jobs now. They know, I mean, they were old enough when everything happened, they're dead. But they're very aware. - But I know that you love them, and you want it to be them to get the same experience their sister, all that is awesome. - Yep. - And I'll just tell you, having worked with college students and their parents for most of my adult life, what they really need from mom, from 18 to 21, is mom to be whole and well. - Yeah, and I am, I'm in a good place, I think emotionally, mentally, right now, and so that's why I'm able to start looking at these things critically. The first six months was just survival. - Of course, yeah. - You don't give up because you don't have a choice. - That's exactly what you have to. But now I'm starting to look at, okay, life goes on and I want to make the best of it. - Perfect, perfect, perfect, you're awesome, awesome. - I love it. - Thanks. - You're gonna do just fine. - I feel good. - I would sell this house ASAP. - And again, nothing's on fire here, but the way you hear like this thing is stressing me out. I don't want to deal with it. I don't want to keep it long-term, just because that's a quote, investment. And I see this happen a lot, John, because parents, they see like a social media video about how it's a life hack to go buy your kids a property where they go to school, and they live there, and you can collect the rent and depreciation, and it sounds so good on paper. And the reality of it is this. - As you've got four college kids, live it in your house for, and you're eating the expense? - Eight years. - Yeah, that's a tough road. - All right, that puts this hour of the Ramsey show in the books. Remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. (upbeat music) [BLANK_AUDIO]