Debt Will Keep You From Being Wealthy!
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Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I am Jade Warshaw. I am joined by Dr. John Deloney, and we are taking your calls. Yes, our powers combined are taking your calls for the next three hours. The number is 888-825-5225. Hit us up. We will do our best to give you our take on the Ramsey Show.

on advice for your situation. Some say the advice is worth what you pay for it. So give us a call. We're going to go straight to the phone lines where we've got Hannah in Salt Lake City. What's going on, Hannah? Hi there. Thank you so much for taking my call. It's such an honor to be here and talk to you guys. I feel the same. How can we help? Oh, thanks. Okay, so to preface my question with just a little backstory, my dad recently passed away and he left me in my, thank you, he left me and my three siblings his house

We love this house. It's our childhood home and it is in a really great area of the Valley. So ideally we'd love to keep it in a family by having one of me or my siblings move in or by keeping it as a rental. The only caveat is, is there still a $250,000 mortgage on the property? So my question for you guys, is there any way for us siblings to successfully co-own the property?

Or are we just kind of romanticizing this idea of having a rental and keeping our childhood home? Just what would you do if you were in my shoes? I think it is a little romanticized to think that you can all three own this property and

and kind of like be twins on it and everybody's ready to sell it at the same time and everybody's happy with the way it's being managed and who's living there and what they're paying. And ideally it would fall to one sibling and you guys would just say, hey,

This person is going to take this. We're either going to sell it right now and we're going to split it or one person is going to kind of take this on and it's their property. They're paying the mortgage and from here on out, it's theirs. My bigger concern is that you've got a $250,000 mortgage, but there's probably some accrued equity in that house, right? What have you accrued in it?

Yeah, absolutely. So it's probably just because of the area, it's probably worth six, six and a half. So I've never seen this situation and I'm sure it exists. So this is just my experience. I've never seen this situation where there isn't one of the siblings, wife, husband, or girlfriend who's saying, hey, this $200,000 would change our life. Let's sell. And so sometimes the siblings are all lock stock and

It's one of their kids gets in trouble and they suddenly need $50,000 or want that one brother that always left his underwear out. His kids are going to leave their underwear out all over this house. Right. And it just becomes a management way. And so, yeah, you end up, you end up causing more internal family challenge. As Jade said, if one person said, I'll take ownership of this, I'm going to manage it. I'll make, I'll pay the rent.

And if y'all want to rent the house or if you want to Airbnb it, I won't charge you. But your family will just have to say we're going to be there for this week, this particular year. Maybe that would work. But there's still a piece of it that when they sell, people are going to want their cut of what equity was. That's right.

So how many siblings is it? So it's me and my three other siblings. So it's four of you. Yeah, there's four of us. So essentially right now, sorry, I'm just trying to get my head around the numbers. Essentially right now with the equity there after, you know, before fees and stuff, you'd each have $100,000 in equity. Right. Okay. And what were you saying?

Yeah, no, I was just saying, um, I know one of my siblings would just want out. I don't think that they would want to manage it. So it'd be like up to the three of us. But again, we'd have to like buy her out somehow. I know it sounds messy. I was just wondering if I'm, you know, I'm kind of deep in the grief and the emotion. So, and that's the bigger picture. How long ago did your dad pass? It's been about four months. Okay. My rule of thumb is six months to a year. Do nothing.

Okay. So continue to pay this bill. And as you said, y'all are just now slowly starting to come out of the fog, right? Right. And some of y'all will come out in different stages. And so maybe say, hey, brothers and sisters, we're going to put a date on the calendar for seven months after dad passed. And we're either going to get together in person if possible, or we're all going to have a Zoom call. And we're going to talk about A, how everybody's doing, and then B, next steps.

And if there's usually in this situation, there's one sibling that is to the death. We will never sell this house. Right. And then it's like, cool. Then you get to buy it. And there's one or two. They're like, oh, kind of, or wishy-washy. I'll kind of go along. And then there's one that's like, no, I want my money right now. And because that's usually the dynamic in your house.

Dude, that's the exact dynamic. So usually, and it just turns into, Oh, you don't care about dad. You just start throwing away our whole life all the way to, Hey, dad left me this money. I want my money. And so a way to just do away with all of that is that one person who's just diehard can buy it from everybody and we'll sell it and we'll get a mortgage and you can, you can take it over. Um,

or we're going to get a realtor and we're going to split it and we're going to sell it. And it's just going to be, it's going to be painful and we're going to have to vote on it. Is there an executor to the will that gets the final call?

Um, yeah, my brother is the, I don't, I don't know if it's an executor. I'm not a hundred percent, but like, I know my brother, he's the one that's kind of like in charge of like my dad's financial end of things. And so he's the one that will actually make the mortgage payment for the next three months while y'all are waiting. Yeah. Okay. And like, my dad has money in the, we'll have, you know, there's still money in the bank. So luckily the mortgage is still coming out of there. So, but yeah, he's been in charge. Does he want to keep it?

Yep. He's very much like he has a rental and he has a primary residence and then he used, you know, a HELOC to buy his residence now. And so I think that's kind of his plan with this next property is the HELOC. And then obviously I am a fan of the Ramsey Kool-Aid. So I don't I'm not 100 percent with that. But well, he's he's a grown grown up. He gets to make his own financial decisions. What you get to decide is whether you're going to participate or not.

Right. And I think the best thing for your relationship with your family moving forward is to not have a business relationship on top of the sibling relationship. Right. And if he's going to keep it as a rental, I love the idea of, I've got some friends that have properties overseas. They've got properties in like lake houses.

their brothers and sisters just put on the calendar when we're gonna when we want to go and that's awesome that's great um and then it's rented out the other parts of the year um so you still get to hang on to it a little bit here and there i just think that wound is so fresh and then after six months after a year it just becomes more and more just a house right just becomes just a house and right now it feels like i'm hanging on to dad we're really not but but that's just hard to do right now it's so fresh i'm sorry you lost your old man dude

Thank you. Yeah, it sucks. But yeah, that's life. Great question. Thank you so much. You bet. That's tough, man. You know, I think it's hard enough when you try to do business with family members, but then when you add a layer of grief to it, it's just, it's a disaster I feel like waiting to happen. That's why that rule, that six months to a year, if you can avoid doing anything, you

Sometimes somebody passes away on a Friday and you got to go work on Monday. Yeah. Right. Yeah. Pay bills. But if you can avoid selling something, moving away, immediately jumping into a new relationship, if you can avoid and just sit with your grief for six months to a year,

The fog begins to lift. Your new priorities begin to come into clarity. And it just gives you some direction on what's next. Yeah, it's really, really good. Oh, I feel bad for them, but I'm happy that, you know, a good man leaves an inheritance. So I'm glad that he left an inheritance in a way that it's being paid for out of his money until they decide what they want to do with the asset. This is The Ramsey Show.

You're listening to The Ramsey Show. I'm Jade Warshaw. Next to me is Dr. John Deloney. We're taking your calls. It's your life, your money. The show exists honestly solely for you. So give us a call. The number is 888-825-5225. Whatever's going on, we'll help you sort it out. Your neighborly question of the day is brought to you by Neighborly, your hub for home services. No more scrolling through pages of internet results.

Neighborly is the one place you'll find a variety of home service professionals you can rely on to do the job right. Or Neighborly will make it right. That's the Neighborly Done Right Promise. Learn more at Neighborly.com slash Ramsey. Today's question comes from Mason in Washington. Mason writes, When I started college, my parents took out a Parent PLUS loan, which I verbally agreed to help pay back. Now that the loan repayments have started, my parents said they are only going to help for one year.

The loan is now over $71,000 and the payments are $800 a month. My wife and I have another loan for $60,000, which we are starting to pay off, but we do not have money to pay the loan under my parents' name. I'm literally shaking while I'm typing this email. Please help. All right, Jade, I'll go first and then you can tell me if I'm off base here. So mom and dad, Mason wanted to go to a school that the family couldn't afford.

And so they took, Mason took out all of the student loans he could under his own name. And then the government said, hey, that's the most you can take out. If you have to go to this school, if you just are out of your mind and unwilling to stop at any of the breaks we're putting on for you, your parents can also take out money. And then Mason turned around and told his parents, hey, I'm going to help you pay this off. And they said, okay. So they took out this loan. They shook hands.

are verbally agreed and then the repayment started there's no there's no plan there's no map there was no hey we're going to do it at this at this rate over this period of time so mom and dad put down a map and said we're going to we're going to help you for one year then you're going to take over repayments and now they've created a world where they can't live right it's 131 000 and what looks to be undergraduate loans and so my two thoughts on this are number one

Maybe mom and dad put down plan one because there was no plan. And maybe sitting down with your mom and dad and saying, look, I get it. I did say I was going to help pay this back. I don't have 800 extra dollars a month to do this. So it's going to have to go in order of what I'm able to do. Right. That's number one. Number two, Mason, you said you'd pay it back. So you got to pay it back.

This is the agreement you made. Now, I'll help you. When you were 18, probably meant something different to you than it did to your parents. I mean...

The thing with the debt is in this case, he's feeling like, man, my parents, they changed the terms. It was supposed to be them helping like for life. And now they've decided they're only helping for one year. There were no terms. And now you're like, just go to terms on this. Yep. It's a $70,000 transaction. But the bigger discussion here, and I hope what you learn from this Mason is debt always changes the terms.

Like the terms always change, whether you took out a student loan and you had the right job to be able to make the payments. And then the terms change when you lost your job and now you can't make the payment. Like when it comes to debt, there's always something that has the ability to change the terms and make it unaffordable or inconvenient. And that's why I hate debt. I hope that you learned a lesson from this, which is if you can't afford it, don't sign for it and don't let anyone else sign for it either. If I'm you,

And I have been you, by the way. I've been in a situation where there are parent plus loans and we just paid them back. Like we just paid them back because think about your, think about the other option, right? The other option is I don't pay it or I don't try to make inroads to pay it. And I can continue to just erode this relationship with my parents because my guess is if they've tried to bow out of this, it's because also they can't afford it. And so, yeah,

There's really no good scenario that allows you to not pay this bill and still have some form of intact relationship with your parents. I just can't see a road where you just go, okay, fine. Well, I'm not paying it either because it's in their name. And so it's going to erode their credit and their good names. So there's just, you got to pay it. At the end of the day, if you just kind of roll it back to its simplest form, you needed money to do something that you wanted to do

And you let somebody sign for it. But at the end of the day, all the money still went to you. Like it still went for you. And so in that way, I'd be like, man, just pay it. And sometimes we get this call. We get this call parent and parents say, hey, we're going to take this from you. We're doing this. And then they change the terms two years later. I'll tell Mason, hey, man, they can't. They told you this is going to be theirs. But here we are. I think it's also important to note that

I don't know a relationship in the world ever that is not changed by you owe me money. Here's a good example. The other day we were getting together for Ballad Bands. We ordered some pizzas and I told the guy, hey, pick up the pizzas. I'm going to be in a meeting and I'll Venmo you. I haven't Venmoed him the money yet.

He texted me last night for something totally unrelated. And you felt? And I felt it. Yeah. Like, I owe that dude money. Even though it's like 18 bucks. It's pizza, right? And it's not like I'm in debt to him. Yeah, yeah. But whether you were that guy who had a friend who was always like, hey, you owe me $428 for Wendy's, right? Or you owe your parents $70,000. Debt always causes cancer in a relationship, period. End of story. The bank tells you what to do. The car...

Finance companies tell you what to do with your life. Your father tells you what to do with your life, even though you have your own new family because of owing them money because of debt. And let's just put this in terms that anybody will be able to understand because this is what's just really rich about this situation. You took out the student loans so that you could have the dream job or that dream career that you thought for sure would be enough to be able to make the student loan payments.

And now you're and I quote, I'm literally shaking while I'm typing this. And I just want anybody listening who's thinking about taking out student loans because they think, oh, I'm going to land that career. Like, I'm definitely going to pass my the bar and I'm going to pass the LSAT and I'm going to be able to do this job and make so much money. It's going to ROI in no time.

We see it every single day. This guy's like, I don't know what to do. I have a $70,000 student loan. I can't make the payment. My wife has a $60,000 student loan. If we do like, we can't live like this. And so I want you to hear real people saying,

saying real things about how loans and how debt works. It always sounds like a good idea on the front end, and it always comes back to bite you in the butt on the back end. So here you have it. Sorry, Mason. Yeah, I wish I had a better diagnosis, but you're in debt. You got to pay it. That's it. All right, let's go to Trevor, who's in Grand Rapids, Michigan. What's going on, Trevor? Let's make it quick. I only have a couple minutes. I'm sorry about that. No problem. Hello. Hello.

Quickly then, I started a new job early in September of last, of 2023. Okay. I made in about four months from September, from the middle of September to the middle of January, I made including a bonus.

About $42,000. $42,000? Okay. Before taxes, but so about $30,000 afterwards. Okay. My question right now is I have an opportunity in my hometown, which is a couple hours from Grand Rapids, to purchase a house for, the house is $41,000. $41,000? Yes.

Yes. And it's a two bedroom, one half bath with hardwood floors and a partial basement. Okay. My stress here is that I have $6,000 still saved for that I could use towards a down payment and have about another six for safety and payments and everything. Wait, why are you only working a seasonal job? Why aren't you working another job right now?

Um, I am, but it's very, it's a lot less. The payments in my hometown are, it's very rural. So income is very, is a lot less than my seasonal job. What would you make per month on the other months? Um, I'm sorry, what was the question? What would you make on the other months that you get just other work besides the seasonal job? Um, it's about a thousand dollars a month. Okay. Okay.

Hey, I'm going to hold you over. Tell me a little bit more. I'm going to hold you over until the next segment because I want to hear more from this. So the house is $42,000. I'm sorry, the house is $41,000. In the last four months, you've made $42,000. But out of that, you've only saved $6,000 for a down payment? I used a large portion of it to pay off other debts.

Okay. All right. Hang on the line. Hang on the line. I'm going to bring you back for the next segment so we can hear a little bit more about this situation. This is The Ramsey Show.

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This is the Ramsey show. Thanks for listening. I'm Jade Warshaw. Next to me is Dr. John Deloney. So if you want to speak to us about what's going on in your life, your marriage, your finances, your job, your relationships, give us a call. The number is 888-825-5225. And we will chop it up with you. Uh, before this segment, we had a guy on the line. His name was Trevor. He was talking to us about his situation. He's in Grand Rapids, Michigan. And, uh,

He is thinking about buying a house for $41,000. And he's telling us about the fact that he has a seasonal job at this point over the last four months or so. He's brought in $42,000. It sounds like he's used that money to clear some debt. And he wants to know if it's a good idea for him to purchase this property. Trevor, are you still there? Yes, ma'am. Awesome. So did I get that right?

Yes, pretty much. Okay, so tell me a little bit more. You've got the seasonal job. You're bringing in around $10,000 a month for this job. And then on the off-season, you have another job that makes you how much per month?

About a thousand. About a thousand. So that's a big, that's a big difference. And there's no way that you can think of that that number would go up, right? Because of the ruralness of where you live. And to my point, I'm asking, is there something online that you can do that doesn't necessarily limit you to your location where you can make normal money? I don't.

I hadn't thought of that before, but it's definitely something I probably should look into. So thank you for pointing that out. And by the way, maybe I'm wrong. I live in a really rural area. Yes, sir. And whether it's mowing or picking up sticks or my 14-year-old shovels horse cha-cha out of the barn all summer long and then spreads it over the fields for our neighbors, like...

I feel like there's always work to be done out in rural areas. It's not fun work and it can be miserable, but there's always work, right? Yeah, absolutely. So is it a possibility that from just before it gets light outside to just after the sun goes down, you can get out there and find $1,500 worth of work a month?

Yeah, I'm sure I could. And I probably will. Yeah, I think it's... I just got home a little bit ago. I think it's important. I don't think you can... I don't think that you can...

go seven months out of the year and only make $1,000 a month. Yeah, that's pretty tough. So that's thing one. Let's find out more about this house situation. So let me know. And by the way, let me clarify, it's five months out of the year, right, that you're doing this seasonal job. So over the last five months, you've made somewhere around $8,000, $8,500 a month. You told me that you were putting that towards debt. What kind of debt was it? It was car loan and student loans. Did you pay it off completely? No.

There's about $2,000 left on my student loans. Okay. And that's the only debt you have to your name? Yes. Cool. Okay. So here's the framework that I would use to decide if it's time for me to buy a house. And just quick correction, I only worked four months. The season starts in March and ends in January. And there's like a one year, you're supposed to work a one year break sometime in there.

You said it starts in March and ends in January. I thought you told me you worked from September into January. Yeah. That's when I got the job. It was a brand new job. So I started near the middle of the season. So it's about a nine-month work season. You're supposed to take like a month off to...

Relax because you're out doing this. I'm a sailor, so you're out there for about four months at a time, four to five months at a time. And are you going to reliably make about $8,500 a month? Yeah. For those nine months? Yeah. Okay. Got it. Okay. So now I've got it. Okay.

Back to the framework, the framework that I would use for you and honestly, anybody who called in here to decide if it's time to buy a house is number one, I want to be completely debt free. Like that's the number one caveat. You've got to be debt free. And number two, you need to have in your case, I'd have six months of expenses saved.

Because you do seasonal work, because of the nature of where you live, I just want to make sure it's ironclad if there's an emergency. And then from there on, in this case, I mean, were you planning to finance this house or try to find a way to buy it outright? What was your plan?

I was planning on financing. Okay. So at that point, then it's like, okay, I'm going to try to put up to 20% down and do a down payment. So I've got to save up money for that. And then if you're financing it, you know, you're doing a 15 year fixed rate mortgage like everybody else where the payment is no more than 25% of your take home. And that's where it's at. Now, if I can be completely honest in your situation with the money that you're making and with the money that you have the potential to make, if this is what real estate costs, I'm trying to pay for this bad boy in cash.

$41,000? It is very discounted. Why? For my area. Why is it so discounted? Currently, my best bet is it is a foreclosure. So you're paying off the mortgage and then you have the house. And then it needs a bunch of work? No. From what I saw, no. The key there is from what you saw.

Interesting. Just make sure you're doing some research on this property. You can get into a $40,000 house that needs new foundation and floor and walls and roof. And that $40,000 house suddenly cost $200,000 and you're in a mess. I mean, a good way to test. I mean, obviously you can get a foreclosure for a lot less expensive, but I'm still wanting to know what real estate in that area costs. Cause I'm like, is there water damage? Is there mold? Is there, how long has it been sitting empty? Like there's a lot of questions that I would have if I were the buyer of this property. Yeah.

Yes, ma'am. That house should probably go for...

Anywhere between $100,000 to $80,000. Okay. So, yeah, I mean, my thoughts remain the same. Once you pay off this $2,000 of debt that you have remaining, you know, stack up that six months of expenses as quickly as possible, and then you're saving up that down payment as much as you possibly can. I mean, we always say 5% to 20%, but in this case, it's such an inexpensive property. Get as much as you possibly can and do it like that. And honestly...

If it goes off the market, it goes off the market. Like don't get it. If you're, if those areas are not in place, don't skip the steps and try to get this house. I wouldn't. Yeah. Cause it's not a deal then. It's not a deal. Um, and if I know you, you often can't do this or usually can't do this with foreclosures, but if there's any way you can take somebody who knows what they're doing, a construction friend or an inspector and even take a lap around the house and look under the house and look through the windows just to see what you're biting off, uh,

$40,000 in a neighborhood that normally goes for $100,000 to $125,000, that tells me the bank's just not going to concede $60,000. That tells me there may be some work that needs to be done in there. And man, I'd hate for you to have a $40,000 house mortgage, even though it's basically nothing. But now you've got to do a bunch of stuff to even make it livable. And now you've got a problem. Yeah. I always tell people that...

If you're trying to buy a house, there's just a lot of cost that goes into it that we don't always talk about. And you do yourself a big favor, A, by doing your research on the front end before you even make an offer. But then when you do make an offer, yeah, there's this...

money has to be in place. Number one, you do have to have three to six months of expenses because home ownership is expensive. And then I tell people to go in with a stacked deck and it's just an acronym. The D is for down payment because that's a lot of money, you know, five to 20%. And that's a lot of cash to have on hand. And then understand that if you had a contingent to sell, you also have to put down earnest money. And if you're down payment and all that money is contingent on the sale of your other house, that earnest money has to a lot of times go first. So you have to be

even though it becomes part of your down payment, you have to have that money on hand when you make the offer. And then C, of course, you've got closing costs that are in there. And then for the K, you've got to keep in mind costs of appraisal and costs of moving, right? So you got to get a truck and you've got to buy boxes and bubble paper and all these things that really jack up the price more and more and more. So, you know, I feel like it's worth talking about, John, that

buying a house is already expensive because of the way the world is right now, but don't get caught slipping because when Sam and I bought our first house, I was shook. I was like, I didn't know about all this. It's just like, most people just talk about that down payment and you're good to go. And as my husband and I learned the other day, homeownership, you got to have that emergency fund in place. We were sitting in our, in our recliners and, uh,

just watch it. One minute you're watching suits. The next minute you have a leak, right? And we're just sitting there watching suits. And my husband looks up at the ceiling. He goes, Hey, what's that? And I'm like, it's water.

And now there's a giant hole cut in our ceiling. Oh, boy. And you got to call Hiller to come over or, you know, whoever it is. Come fix it up for you. Come fix it up. And you know what? You got to dig into the emergency fund. And so there is a way to do this where owning a home is a blessing and not a burden. And when you do it the way that we teach, it's just that it's a blessing. This is The Ramsey Show.

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you're listening to the ramsey show i'm your host today jade warshaw your other host for the day is dr john deloney if you want to give us a call and talk about your situation you can do just that the number is triple eight eight two five a five two two five man we're just happy you're here we're happy that you're listening and if you love the ramsey show if you didn't know this we have a really cool headquarters here in franklin tennessee

You can come hang out in our lobby. People come almost every day that we host and they fill up the lobby. We have free coffee and cookies and snacks. And Miss Janelle is probably one of the nicest ladies that you're ever going to meet at the door. It's pretty awesome. So if you're in the area, we'd love if you stopped by sometime. That would be amazing. All right. Let's go to the phone lines where we've got Adriana in Philadelphia, PA. What's going on, Adriana?

Hey, thanks so much for taking my call. You're welcome. How can we help? Um...

So I am 40 weeks pregnant tomorrow. I'm due to have my baby anytime now. Wow. Yeah, it's super exciting. It's our first baby. So congrats to that. Thank you. Today was supposed to be my last day of work before maternity leave. However, when I logged on, I had a message in my inbox inviting me to a meeting with H.R.,

In that meeting, we found out that they're shutting down our branch. I work in corporate travel, so the whole Philadelphia office is getting shut down. And we all lost our jobs today. Oh, man.

Yeah, it's, I mean, I'm beyond shocked. I'm devastated. I'm scared. No one saw this coming. I should be worried about pushing a baby out and I'm worried about what the heck I'm going to do for money after this because I don't have a job to go back to. So I just need some help navigating what to do moving forward. I can kind of give you guys the bullet points. I'm going to have Jade walk you through the money part of this, but here's what I want to tell you.

Whenever you get these flash, everything just caught on fire real fast, right? I always want to go down to a phrase that gets me through all the crisis response stuff, talking to families who just lost someone or about to lose somebody. Wild situations. A guiding phrase for me is facts are my friend. And I'm going to be angry tomorrow. I'm going to be outraged next week.

But today I need to know if we have food for the next 30 days. See what I'm saying? Right. And so facts are your friends. Jay's going to walk that through, but I want you and as you and your family, y'all go through this, your whole life's about to be different. You're about to have this amazing moment. You're right. That, that takes all your priority. Unless of course we don't have enough money, right? And we've got to figure this out. And so maybe the next three months we're going to be you staying at home and

Maybe suddenly that's changed. Facts are your friends. It doesn't mean it's great. Doesn't mean it's good. That means we're going to cry. We're going to be angry. We're going to grieve. But what do we have to do moving forward? Right. Right. So let's let's find some things that we can cling to as facts, because I do think that's a great idea. So it's you and your husband. Does your husband work?

outside the home yes he does um he does and he makes um about 50 or he makes 100 000 after taxes uh take home it's about 6 000 a month um between his job and then he does side work as well he's a mechanic so okay and what addition does he bring in live off his income so that's right there that's the fact that you need to cling to that now we're just talking baby that's it yep

That's it. Just knowing that, I mean, of course, it's always nice to have extra money, especially when your family is expanding. But in my mind, like I'm looking at this right now, Adriana, I'm going, oh, God, this could have been so much worse. Like you could have been telling me that you're a single mom and you just got laid off and there's no money. But the fact that you're here, you've got a guy who's working, he's making enough money for you guys to live off of. That is the big exhale. Yeah.

Right. And it's going to take, so we've never lived on a budget before. I actually, I caught your live segment with George a couple of days ago and I just downloaded the EveryDollar app and signed up for the trial for premium. Great. And we just put together our first budget for March. Great. That's so good.

I'm so proud of you. That's exactly what you should be doing. Very, very good. And so this is going to be an experiment for you guys. It's going to be new because what were you earning at the job before you were laid off? About $60,000 a year. Take home was about $3,000 a month. So...

Like, give or take, that's like conservative because a lot of my income was commissioned. So it was like most months we were bringing in between like nine and even ten thousand on really good months. Yeah. So it looks like, you know, that's that was probably if we look at it just in chunks, that was probably a lot of your fund money, like a lot of the money that you guys spent just being able to do.

things here and there and it not being, yeah, it not being a thing. A lot of that money is gone right now, but the good news is like you said, his income is enough to cover, you know, the things that need to get done and the necessary requirements. And when you look at that budget, is there, I mean, is there margin for what you feel needs to take place in your life with a baby coming up? So I, you know, I don't know how to even plan for that because we don't have, neither of us have kids. Um,

I don't know how much diapers are going to cost. A million dollars? $50 a box. A million dollars. And by the way, tell your sweet husband, babies poop more than once or twice a day. They go like a thousand times a day. And I did not know that. They do. In the first...

Six months, you go through a lot of diapers. We're just going to be honest about that. We do have a nice stash. We have a little diaper party, so we have a nice stash. Good. And your friends and family, they're like, hey, what do you guys need? And they're not really being serious. You can just look at them with that look of wild, exhausted desperation and say, diapers, send diapers. Send diapers. Yeah, yeah. Can I give you an experiment? We did also. Oh, go ahead. Go ahead. Do your thing, and I'll tell you at the end.

Well, I was going to tell you, we did also, like, we have been kind of budgeting because I was originally, it's going to be an unpaid maternity leave. So we do have our little stork fund, I think is what you guys call it. Yes, right.

So we have that, and the plan with that, and this is kind of where I need help. The plan with that, we were going to use that to pay whatever the hospital bill ends up being. That's great. Who knows what it's going to be because the insurance company has given me zero help with that. Well, you're almost most likely going to meet your deductible, like almost always, I feel like. And by the way, if you call the hospital administrator and request a...

walk out the door number they'll give it to you i would not rely on the insurance company i would talk to the hospital okay so that's a really good point um i didn't know you could do that but on both of my kids we walked i walked into the hospital to have the kid now barring like you know there's a complication in the pregnancy or something an emergency or something but i walked in with both kids um knowing exactly the check i was going to write walking out mm-hmm

Okay. And we should still plan on just paying that in full with our little stork fund, right? Absolutely. That's what it's for. What is your stork fund? How much is there? We have like a little less than $10,000. It's about $9,500. Now here's the other thing. So I was told since we're being laid off, I do get a small severance of about $5,000. Okay. And they're also going to pay me out for the next 60 days, which is a bonus because I wasn't even going to be making any money. Okay. How much is that?

So another $6,000? Yeah, like when it's all said and done, $6,000 plus the five. So I'll make like an extra like $11,000 in the next three months. Great. And I want to know, because our plan, we wanted to use our savings to pay off some debt. We have about $56,000 in debt. Okay. And I'm wondering if now that I don't have a job, like should we pause that and just

Not necessarily. Not necessarily. If you know that you can live off your husband's income at this point, I wouldn't pause it. It would be one thing if you said, Hey, like my husband's income is not enough to make ends meet. Well then it's like whatever money you have, like we're being, we're counting every bean where, you know, but you said, listen, we can live off my husband's income. We've got, I've got an extra 10 or $11,000 coming. I'm throwing that towards my debt. Now I'm keeping a thousand dollars saved just for that, that,

emergency fund but everything else once the baby's here once the baby's bill is paid for I'm throwing all of this money into debt that's exactly what I would do and here it is facts to your friends you're safe you got enough money to pay for everything you got extra money coming in I'm not giving this company one second of my grief while I'm bringing this beautiful new baby into the world they don't get that vote in your life we're gonna have fun now because we can we're all good we're all good

Ooh, love that. Yeah. When it comes to babies, I'm always saying like save up for your deductible, save up your out-of-pocket max. It just helps you sleep well at night regardless of what takes place. Thanks for listening. This is The Ramsey Show. Live from the headquarters of Ramsey Solutions, it's The Ramsey Show where we help people build wealth

do work that they love and create amazing relationships, the actual kind. And I am here with Dr. John Deloney. I'm Jade Warshaw. We are hosting this hour of the show for you, America. And those of you listening abroad, you can give us a call. The number is 888-

825-5225. And somebody very wonderful will pick up the phone and screen it, and then we will talk to you. We'll chop it up. Whatever's going on with your life, your money, we'll help you sort it out. Let's go straight to the phone lines where we've got Lindsay from Toledo, Ohio. What's going on, Lindsay? Hi, Jane, John. Thank you so much for taking my call. You betcha.

So I was just hoping to get your guys' insight on the fun little debate my husband and I are having. Yeah, me and Jill are fighting. What about? I love it. Actually, so we're a baby of step four, five, and six. And we feel really blessed to have found out that my husband's being included on his bonus, his company's like bonus payout this year. He started halfway through the year, so we weren't really expecting it.

The debate is on what we should do with that money. How much is it? So I got a bonus of two grand and then his is 10 after taxes. Nice. 12 Gs. Yeah. So we have some sinking funds for home improvements and, you know, kids college giving and our mortgage. So, yeah.

I'm leaning a little bit toward putting a little bit larger of a chunk toward the mortgage and he's citing a little bit more toward putting a lot more of a chunk toward home improvements.

Okay. The home improvements, is this just for fun or is it like this needs, like we got to get this done? It's for fun. We want to do siding and garage doors are the big ones. Oh, me too. Can I just say me too? I need some siding in my garage door. I think it was built by a small chipmunk. It's time.

That's funny. Good on you. Good on you. So, okay. Other question is, are you guys currently, I mean, you're in baby steps four or five and six. So it goes without saying that you're investing 15% into retirement without the bonus. Are you still putting away a little bit for kids college every month? Are you still putting a little extra on the mortgage or have you not touched those categories yet? Yeah.

Um, yeah. So with a little bit extra each month that like how we've been going is we're going to pay off our mortgage in 10 years. And, um, we don't really, we put a little bit in the kids college, but we don't have like, that's the one thing we haven't set like an actual number that we're trying to hit. Um, we just kind of throw a little bit in there each month. Um, we have four kids, so we do like 50 with each kid. Um,

okay and then yeah so the quotes we got for our home improvements we're the number we're trying to hit is like 25 between 25 and 30 grand um we have five about five so far okay so my husband's leaning a little bit more toward like let's put a really big chunk and we could just get that out of the way um and i'm my

My husband thinks I, he just jokes as I'm like trying to baby step to the mortgage. Well, let me tell you. Okay. You tell me what you think about this, because this is what me and my husband, Sam do, you know, it sounds like you're taking care of business on the baby steps front with your normal, you know, month to month money. And so whenever extra money comes in, you know, I kind of put it under that framework of, okay, what can you do with money? You can give, save and spend it.

And so whenever there's extra money coming in, it's what is something that we're doing to give some of this money? What's something that we're doing to save some of it? And what's something we're doing to have fun and spend it?

And honestly, all the categories you said fall under one of those categories. So to do home improvements, hey, that's a little spending money. That's fun. Like that's something fun that you can do. Kids college, that's you giving, right? Because you're giving money for your kids education and it's a gift for them. And then the mortgage, that's in a way, that's you saving money because it's a forced savings account that you're building equity with that home. And so-

You could look at this 12,000 and say, let's just split it evenly and let's put, you know, 4,000 to each of these categories and call it a day. And that might be the way you solve it. But if you're one of these people who's like, I have to complete one of them, then it's like, then you just, you just decide, okay, is $12,000 enough to do all of the home improvements that we want to do? And then it's just knocked off the list.

you know, from now until whenever the next thing pops up or I mean, it's not enough to pay off the mortgage and it's not enough to cap off their 529s. So I kind of like the idea of either I would either do the home improvement project and it's done and done or I would just be like, all right, I'm splitting this equally three ways. Can I add one more thing to it? Go ahead. So Lindsay, often I'm like you.

Like whenever we had our mortgage, I kept wanting to baby step to it. And I'll never forget after being married for 20 years, my wife came to me and said, hey, could we get a headboard that's not off Craigslist that you spray painted in our backyard three houses ago? And I was like, you know what? That's so me. Today's going to be your life. I'm a great husband, right? I'm the worst. But here's what I found myself falling into is I just had this idea that I wanted to pay it off faster.

And for my wife, that was a moving target because no matter how much extra we put on the mortgage a particular month, my particular finish line moved because I wasn't chasing a number. I was chasing a feeling. And so I like the idea what Jade said is, okay, we're going to put it all in home improvements. We need to get $5,000 more and we're going to knock all these home improvements out. But here's the trade. The trade is instead of doing this in 10 years, I want to take off one year of the mortgage.

And that means we're going to have to put this much more a month. Are you in on that?

You see what I'm saying? And that way it's not, I just want to pay it off faster. Okay. Versus, and that's going to hold you accountable to not being dragged around by your feelings, but it's also going to give him, your husband, a finish line. Okay, we can do this. And here's a way we can make this thing work mathematically and both of y'all can be at peace. You see what I'm saying? Yes, yes. That actually, that is perfect. The only bad part about that is I...

see the like that's the best way to go my husband's gonna think he's winning this argument you gotta let that go sister that ego's gonna bury you yeah let it go it's all it's all in fun it's all in i know i know but yeah no that that uh that that's actually a really good idea because i i do know he speaks kind of truth where i sometimes do get

little bit fired up and passionate about you know focus on one target but he is like slow down well I don't mind passionate about one target but let's be very clear about that target is not just I want to pay this off faster all right what does that mean and how much is it going to take for us to get there

Yeah, I'm with that. I'm with that. I like it. Because the fact of the matter is for some people like paying off debt, whether it's their actual debt or their mortgage or whatever it is, like they get energy from that. They feel like they're accomplishing something and it feels great. And then there's another spouse that it feels totally draining. And it's like, how much more money are we going to throw down this dark hole? You know, it just feels like you're tossing money away, even though with a mortgage you are getting something in return. For a lot of personality types, it does feel like it's just this

dark hole that you're tossing, you know, $10,000 bills into. You're just melting your joy away. Yeah. So it's so, so important when you get to those upper baby steps four, five, and six to do really what John said and just make sure that you're having those clear conversations and that you're not just bulldozing through. Not to say that she's a bulldozer because she's not, but y'all, y'all understand what I mean. This is The Ramsey Show.

You're listening to The Ramsey Show. I am Jade Warshaw. Next to me is Dr. John Deloney. We'll be taking your calls for the next hour or so, hanging out with you guys. If you want to talk with us, give us a call. The number is 888-825-5225. We'd be so happy to hear from you. Honestly, it's an honor to talk to folks on the phone, John. I think it's really crazy that people call in. Man, they trust us with things going on in their life, their money, their marriage, their relationships. And we're just...

Two people, man. We're just two people sitting here giving our opinions. So thanks for hanging out with us. Thanks for trusting us with that. And no matter where you consume the show, if you like it, if it's helped you, if it's done something for your life, your money, consider sharing it. Number one, like, subscribe it, but consider sharing it with the

people around you not only will it help us hopefully it helps them and uh more good content like this will continue to crop up uh wherever it is that they listen to podcasts wherever it is that they listen and watch videos on youtube so that's really helpful for us hopefully it's really helpful for you and for the folks that you're sharing with as well thank you thank you again all right let's take some phone calls we've got christina who is in omaha nebraska how can we help christina hi guys

Hey. Hi, guys. Thanks for taking my call. Okay, so I have a question. We are extremely new to the Ramsey plan. Just kind of started following it in December. Welcome to the madhouse. Welcome to the jungle. We're glad to have you.

So I have a question on how to line up what we've been doing. Because I think up to this point, we've been doing our best, but it's not really lined up with the plan. So since December, we have established the $1,000 emergency fund. Yeah, yeah. And we have another $4,000 in savings. Great. We only have one credit card in which we owe $5,000 on. And I know I could pay that off, but I have a question about that. Okay. So I do have a son who is going to start college soon.

in August. And, um, I'm trying to figure out how to do one, two and three, and then still be able to pay for college. So he has gotten a lot of scholarships and financial aid. And right now, from what we know of, he's sitting at about 18,000 a year and that's room board tuition, everything is it's not here close by. That's what he's earned. So I,

Well, that's what he'll be paying, what we'll be paying. That's what you'll be paying. His $18,000. How much of that, you said scholarships and financial aid. How much of that is student loans? No, that's what I'm trying to avoid. Okay, so after all the scholarships and everything, it's $18,000 will be the all-in? Out of your pocket. All-in cost, yes. Okay, gotcha. Yes, and so over the nine months, basically, of the year, that would be $2,000 a month.

And that's where the $4,000 in things came from. In January and February, we kind of played it out to see if we could do $2,000 a month. And we actually could a lot easier than we thought we could. And so I know that there's still a chance he could get more scholarships and we're definitely applying for them. But I'm worried that I'm kind of skipping step three. Yeah. You're broke. Yes. Y'all.

Y'all aren't safe. Yeah, well, I mean, yeah. So, like, I mean, like, we have money in our retirement and we have, we don't owe very much on our house and all that. But like I said, we're kind of scattered all over the board. That's right. What type of school is this? Is this a university, state university? It's actually a private university. But yes, it is a four-year degree. So here's my take on this. And, you know, you can take it or leave it or take parts of it. Paying for college is a gift.

That is a privilege for us to be able to give. Right. And it's something that we can do out of the abundance of us handling our money correctly. And there's the way the baby steps are the way that they are is because there are certain things that are going to take place in your life that you can't stop. And you need to be prepared when those things take place. No matter what, God willing, at some point you're going to retire and you're going to stop working and you won't be able to work anymore. And you're going to have to be able to make sure that you're

household is taken care of. And so that's why that is why we go through these baby steps starting at baby step one. And that's why baby step five is way further down the list because it's not the priority that it can seem in the moment. And that's also why we teach all of these ways to go to college less expensive because it is expensive and everybody comes to us at different points in their journey. And so in your case,

I love that you have baby step one done. I love that you're thinking about cash flowing this. I'd also love for you to be thinking about

okay, I've got $5,000 in credit card debt. I need to pay that off. I've got to save up three to six months of expenses. Your family needs you to have three to six months of expenses. So I don't want you putting that off over the course of the next four years because of this $2,000 if there's a way that we can find cheaper education that still gets him where he wants to go. I'm always recommending that people start with community college.

It's so much less expensive. It gets those gen eds out of the way in a way more inexpensive way. And then you've got the private school thing added. That's adding an expense. So I would challenge you guys to look at this and say, is there an option that makes more sense with our financial situation? And then the third piece to that is, is there a way that your son can work to

to add to this because if he can pick up a thousand bucks a month, that's amazing. That's actually like, I love the community college idea. Y'all aren't going to do that. I know you're not. I've worked with colleges for 20 years. Y'all aren't going to do that. He got in, he got the scholarship and that feels good. I do think it's very wise to consider, hey son, here's our financial situation. We can do $1,000 a month over the course of one year.

And you're going to have to come up with the rest. And you can't, if a contingent on us putting money on the table is you can't borrow it, which means you're going to have to earn some money. And what I'm telling you is the data says that he'll do better in school with some skin in the game. That's right.

And maybe you say after your freshman year, if you come home with straight A's or whatever metric y'all want to put on the table and you've paid this thing down, we might be in a place where we can increase and allow you to move into your major courses as you go to an internship or whatever the thing is. And so it might be a moving target, but it's sitting down and saying, hey, we're all going to have some skin in the game. But as Jade said, you can only have skin in the game if you can afford it. And right now you have no cash reserves. Zero. Zero.

Right. And he doesn't start school until August. Great. That's awesome. You've got time. You have time and he's got time. From now until August, how much would it, like this sounds like a stupid question, but I actually don't know this. How much is like a three to six month period?

It's not a stupid question.

doesn't include all that stuff. It's like, all right, it's the mortgage, it's groceries, it's keeping gas in the car, it's keeping the lights and utilities on. It's the basic stuff that if the worst were to happen, like you get laid off, it's what you would cut your budget down to, to make things work. And so three to six months of what you would consider your bare bones budget to make things work and run and tick, that's what you need, three to six months of that.

Does that make sense? Yeah, so there actually is a chance from now until August that I could pay off the credit card and get three months, probably not six. There is. But three months saved up. There is, but I want you to realize that there's another baby step even after that, which is saving 15% of your income.

your income into retirement, which is so, so important for you. And we are actually doing that one. That's what I meant by we're all over the place. And so like we actually do have that one in place. Hey, listen, as somebody who spent my entire career working with college students and their families, please ask your child to participate in some shape, form or fashion in their education, please.

Yes, and I do plan on that. I don't necessarily want him to do it first semester. Why not? Because I'm worried about the transition. Don't be. In fact, one of the things about the transition is kids will go to a residence hall, they will know nobody, and they'll hold their phone and they'll stay connected to their old high school friends now, and they never make the separation.

If they go to school, they get plugged into their academics and then they go have a job. They have a thing that they have to go to, a purpose, a place to be in a built-in human community that they have to interact with.

It's not a bad thing. It's actually a good thing. And he does work now. I know. So that wouldn't be hard. But you need to sit down and say, here's a dollar amount. And by the way, that $18,000, as Jade said, doesn't cover haircuts. He's going to want to go on a date. He's going to need new shoes. He's going to need new clothes. So it's more than just $18,000. There's living expenses on top of all this college charge. Yeah.

Yeah, it's so, so important. I'm glad that you're in a better financial situation than I thought. And you, it sounds like you do have the money to pay for this, but I completely agree with John. Make him pay some piece of this. Skin in the game is absolutely necessary. This is The Ramsey Show.

You are listening to The Ramsey Show. I'm your host for today, Jade Gorshaw. Your other host for today is Dr. John Deloney, author of Building a Non-Anxious Life, host of The Dr. John Deloney Show. Really, really cool. So, John, it is tax season.

and um a lot of you i'm done you did it i already got mine back and filed man they crushed it for me that's awesome wait so it's filed did you already did you get a return or no i did yeah i'm still figuring out all the commission stuff on book sales i'm still figuring out how it works but i did hey right afterwards i went and met with the cfo here and i contacted our tax person to adjust the withholding ratio because my return was it went crazy silly yeah but all i have to say is um

Man, I've got a weird thing. I like to get them done and get like, well, I need to know what I need to know. Same. I send that stuff off lickety split to our mother-in-law, who is an amazing bookkeeper books by need. I'm just saying just a little something, something there. All right. Anyway,

You need to get yourself a Ramsey Trusted Pro, though, not my mother-in-law. All right. So here's the thing. A lot of you do have questions about taxes, and we understand that. I have questions. Taxes are confusing. And so to help you get a better handle on them, we're just going to take some of your questions and answer them out loud. These are questions from you guys, our listeners. One of the questions was this. It said, we normally have someone do our taxes, but our tax accountant retired today.

I think that we have a simple return. Should we try to do the filing ourselves with Ramsey Smart Tax? Okay, so here's the thing. You can definitely use a software like Ramsey Smart Tax if you feel confident in filing your own and that your situation is actually relatively simple. So here's some kind of guidelines to know if it is or not. We would recommend working with a tax pro if you have some sort of major life change like,

I don't know, you retired or you received an inheritance or you adopted a child, something like that. In that case, you probably would want to work with a professional for that year. Number two, if you own a business, a small business, there's a lot of little nuts and bolts in there that it would just superly be,

helpful to work with a tax pro. That's Sam and I situation. We always work with a pro. All right. Number three, if you're just not confident about filing your taxes, if that's you, that's totally fine. Even if it's simple, if you're not confident, you should work with a tax pro. And then finally, number four, if you just want to save yourself some time and stress and

Get yourself a tax pro. It's so worth it. So again, if you are confident about filing on your own, you can head to ramseysolutions.com slash tax. There you will find Ramsey Smart Tax. It's low upfront pricing. There's no hidden fees in it. Or you can connect with a Ramsey Trusted Tax Pro if you're not as confident. Again, both of those resources you can find at ramseysolutions.com slash tax. Okay.

Love it. All right. Got that out of the way. Tax season makes people feel some type of way, John. Well, and I actually did both of those. I actually, you know, as a Ramsey employee, Ramsey Taxes opened to us for free. And so I actually ran my own stuff and sent it to the accountant and said, I think this is where we're going to end up. Were you close? It almost bulls-eyed it.

And so that software is pretty good. Now I've got a super simple return. I'm a pretty lame, boring guy, but it was right on. It was right on. If I think about filing my own taxes, I can feel my eye starting to twitch. It's already starting to twitch. I can't and I won't do it. All right, let's go to Colin who's in San Diego, California. Colin, what's going on in San Diego, man? Hi guys. Thank you so much for taking my call. You bet. How can we help?

Well, first I wanted to say tax season actually makes me very excited as a taxpayer. Oh, okay, okay. This is your Super Bowl. It is, yes. So I'll start with my question, then I'll give some context. Okay.

So I'm curious what you guys would think about filing a Chapter 7 bankruptcy, given my age and current financial situation. I know it's often, I know it's supposed to be the, like, last resort option. But right now I'm 24. I'm technically employed, but due to some mental health issues, I'm kind of like, I'm

I'm kind of waiting to hear back on whether or not I still have that job and then also searching for a new job. And then also just because the weight of some of this debt I have, it also has a toll on my mental health and I just find it impossible to see the end goal. So I'm 24. My credit score is

Below $600,000 is not great. And I know sometimes they say that bankruptcy could help increase. Sometimes it actually increases it rather than decreases it. How much do you owe, brother? Colin, how much do you owe? It's not like an insane amount. It's about $34,000. Okay, $34,000. And tell me about your mental and emotional health challenges that make work hard. So...

At least right now, what I know is I'm pretty open about it, so I don't mind saying it on air. I have a major depressive disorder and social anxiety disorder, and they've played impacts on my jobs over the past couple of years. How are you waking up every day and leaning into getting well? What does your wellness adventure look like right now? What interventions are you taking? Yeah.

So one thing that's really helped is I did go back to school and I started a new career path and that has actually helped. Being in the tax field has actually helped quite a lot. What are you doing right now? Are you under the care of a licensed mental health professional or a doctor? Yes. Okay. Yes, two. Two, okay. So I'm assuming you're taking medication for major depressive disorder at least, right? Yes. Are you taking some sort of cocktail?

Uh, no, just, just a single one. Just single one. Okay. When I see him next, I'm going to be talking about that actually. Okay. So when you see your practitioner next, a couple of things I want you to discuss. Medications, fine. It's going to be a bridge to getting you from here to there. And with major depressive disorder, man, it's a whole tangled web of a mess, right? It's very difficult. And most people in your life have no idea how hard it is to just get out of bed on some days. Fair? Yeah.

Yeah, and that's actually the attendance has kind of been too late and shifts has kind of been the issue. Here's the other side of it. It's the tiny little steps towards showing up, towards going for a walk, towards talking to a friend, even though your body is screaming at you saying that friend's not safe. Knowing that once your body experiences that friend is safe, then suddenly that the lights start to come on a little bit.

And so when you sit down with your provider, I want you to ask, in addition to medication, can we have three or four tasks that I'm going to begin to work on on my own? Because you're stuck in a loop right now. And the loop is, it's hard to get up. It's hard to go do things. My body's always yelling and screaming at me to not move, not move because the world's not safe. And so you don't move. And that reinforces your body's message to you. Your body's getting what it wants. Do you see what I'm saying? Yeah. And so the goal is...

with the right counselor, the right exercise program, the right medication, what are we going to do so that we can head into those challenges? You see what I'm saying? Absolutely. Please look at this as I'm working towards empowerment, not looking towards someone to come save me. Yeah. You see what I'm saying? The difference? Absolutely. Okay. Are you, have you ever been suicidal? Yes. Yes. Okay. Are you safe now?

Yes, yes. It was a while ago. I've discussed with my professionals, so I'm not anymore. Well, hey, I want to applaud you because saying it out loud is hard, right? Yeah. Yeah. Now you're going towards the heart, right? You're choosing heart. You're leaning in towards discomfort. And on the back end is a guy. Now you've got a new friend across the country that's cheering you on. You've got two new friends, me and Jade, plus millions of people. Oh, thank God. Okay? Okay.

Now, Jade can get into the numbers with you. I'm asking you as your new friend, please do not file bankruptcy over $30,000. Okay. Okay. Please don't do that. Yeah.

And I'm asking you as your new friend to please not file. Because here's the thing, you know, you're knee deep in your situation and you can't always see the forest for the trees. And so you need external people to kind of look at your situation and go, oh, I see it for what it actually is. And John and I are looking at this and we're going, oh, no way in the world.

Yeah. Do we file? Don't, don't, don't, don't, don't. And I think for you, the biggest workaround is what John said. You have to get to a situation and get to a level of health where you're able to work and so that you can get this paid off because I'm guessing, I don't know what kind of debt it is, but whatever it is, just a reasonable salary. You're out of this in a year and a half or two years. And so we're working towards empowerment, standing taller, getting that work in, and that's the path to freedom. Hang on the line. I'm going to send you both of my books.

You're listening to The Ramsey Show. I am Jade Warshaw, one of your hosts today. You can call me a co-host because I have another host and his name is Dr. John Deloney. And we're taking your calls all hour long. So give us a call. The number is 888-825-5225. And whatever it is that you're going through in your life, your money, we'd like to talk it through with you. So tell us what's going on and we'll help you out. We're going to go straight to the phone lines where we've got Jason from Orlando, Florida. What's going on, Jason? How can we help today?

Hello, John and Jade. Thank you so much for taking my call today. So my name is Jason. I'm 24 years old and I'm from Orlando, Florida. I want to start off first by giving my question and then I'll wait and then go ahead and give the breakdown on the numbers. My question is, how can I properly budget to pay off all my debt and then save for a future engagement rate? Okay.

Love it. Okay. Yeah. Well, let's hear about the debt and then we can talk about what a budget might look like for this. Okay. Awesome. So I want to just first start off by saying that I already paid off in the last two months $8,000 on my credit card debt. Okay, good. So right now I own, I have a card loan of $13,000. Okay. I have student loans of $15,000. Okay. And I have...

Lift over credit card debt of $9,000. So totaling $37,000. Okay. And I'm a recent graduate. Oh, go ahead. Oh, I was just going to ask a little bit about the lady, the young lady that you want to propose to. How long have you guys been seeing each other?

Oh yeah. So we've been seeing each other for four years now. So I'm planning for next year to move out with her. We're moving together. I'm currently living with my parents. Is that before you propose or after you propose? That's one of the things that I wasn't exactly sure on. If I should propose first before moving out or propose after moving out together.

That's something that I haven't completely decided on. Maybe you guys can help me with that too. It's been four years, man. What are you waiting on? Yeah, I'm not going to tell you to pay off your debt before you buy a ring. Okay. I think it's just a matter of you... To pay for the ring first, right? I think you'll go down to the courthouse this weekend and get married. It's four years, dude. It's half a decade. What are you waiting on? That's fair.

Um, it's just, you know, this, this total debt on credit cards, student loans and car loans is just a lot. So it's nice to have help. That's true. That's true. I was thinking about moving in together, you know, coming in debt free, at least in that sense. Um, but what I don't want is to pay off my credit card and all my, my,

And then going in debt again by buying an engagement ring, not having enough money, and then buying and touching my credit cards again. Yeah, but that's your choice. So I definitely don't want to do that. You have to remember, all of this is on you and it's your choice. Nothing's going to make you go into debt unless you decide, I'm just going to go into debt and buy this. And so...

since you called us, I'll tell you what my chain, what my timeline would be and what I would do. And if it doesn't jive with the way you are or what you believe, then you can take what you want and leave what you want. But if I were you, I'd say, okay, I've got this debt. I've got $37,000 of debt. It's important to me that I pay it off, but I also have a little honey over here that I wanna make sure that I'm proposing to her. So I'd probably see if there's a way

that I can cash flow this ring very quickly while still, you know, paying a little off debt here or there. It's not to say that you have to completely turn the faucet off on paying off your debt, but, you know, make it a reasonable timeline. So I'm proposing to her as quickly as possible to John's point. And then I'm like, I'm just going to marry her. Like after that, I'm going to be like, let's get married as soon as possible. I'm not going to do this year long thing of I'm going to

move out and then I'm going to wait a year and then I'm going to propose and then I'm going to wait five more years and then I'm going to marry her because before you know it, you guys are going to have gray hairs. So I just would make this happen as quickly as possible. It's not a caveat and it's in paying off debt is not a precursor to marriage. It doesn't have to be. Um,

And I don't want you to think that I have to pay off all my debt going into this relationship first. I think it's something that you guys can tackle together. And at the end of the day, in many ways, it kind of brings you closer together when you work on something like this together, I think. Now, Jason, I'm going to go negative for a second. You hang with me? Yep, I'm here. All right. Jade and I would not have jobs if everybody who had a plan, if it all worked out exactly as they lined their plan up.

It's just not how life works. We only have jobs because people have great ideas about stuff and it all goes sideways. So if you get engaged to this person and y'all move in and y'all start paying off debt together, and then God forbid y'all break up, you're trying to play house and do a practice marriage and something goes sideways and it's been five years and then six years and she says, forget this dude, I'm not waiting anymore. And y'all break up.

The process of unwinding, well, who paid off what debt and what was mine and it was part of my salary and what went into the food and who paid that is a nightmare. The reason we tell people to get married besides the moral side of it, right, is because if there is ever a fracture in the relationship, if the relationship ever breaks up, there is a legal path of separation out. Do you get what I'm saying?

Yes. So you think you're saving yourself a bunch of heartache and I don't want to put the apple before the cart. You end up just playing, you end up getting a big old jumbled mess. And so following Jade's advice here is really, if you're my brother, if you were my son, if you were one of my close friends, I would give you the exact advice that Jade just gave you simply because it clarifies and cleans up your life and it makes your path much more simple.

And it doesn't involve you waiting to start your life. Yeah, you're waiting to start your life. This amazing thing called being married, which is which is chaos and incredible. It's so great and messy and fun and scary and all the good stuff. And Jade and I wouldn't trade it for the world. But you're just keeping it all on pause. Right. Right. Does your I'm going to call her your fiance. Does she have debt?

Um, he only has, or actually, yeah, she does have that. Um, she has a thousand dollars in credit card loans and she has an expensive car. She has, um, I think, uh,

$20,000 right now. Okay. In a car. But that's about it. Yeah. So I think that, again, you are downloading EveryDollar if you don't yet have it. If you want the premium version, you can do EveryDollar.com slash Jade and I'll give you a promo code so you can have premium for a couple of months free. And you're setting up your budget in a way that is allowing you to make headway paying off this debt because paying off debt's a great thing. Pay off as much as you can. But it's also setting aside some money so you can spend...

you know, a percentage of your income on a ring, maybe one month's income on a ring, right? And then as soon as you give her that ring, it's like, hey, how quickly can we get married? I love your butt and I want to get married instantly. And then you do that. And that's it. I have $2,200 left over after my monthly expenses. How much would you say, like, from those $2,200 should go into paying debt and then the other saving into...

into the engagement ring. So you have $2,200. That's your income or is that margin? No, no. So my monthly take home pay is $4,000. Yeah. But my monthly expenses are $1,800. So leftover is $2,200. Okay. So that's the margin. And you're saying how much of that should go towards the debt and how much should go towards the ring?

Correct. I mean, if you wanted to do, if you're trying to buy a $4,000 ring, then split it in half and say, I'm going to use half of this to pay for the debt. I'm going to use half of this to go towards the ring. And in four months you're proposing and four months also buys you time to get your head around the fact that like, man, I'm about to be a married man. And I got to move out from my mommy's house and get my own place. Right. Well, yeah, we're toggling up, man. We're where this is grow up time.

How old are you? You said 24? 24.

Game on, dude. Game on. We're going to be all growed up. And we're going to follow the great Beyonce's advice. If you like her, then you better put a ring on it. That's right. That's good. John, I'm proud of you. Thank you. Queen B. That's good. I never thought I'd see the day. Here we are. Guys, we're always going to tell you to get married, by the way. If you're in a situation where you have been dating someone for like 5, 6, 7, 8, 9, 10 years, we're almost always going to tell you to...

piss or get off the pot either get married or call it that's right call it that's right and don't let debt keep you from pushing start on very valuable and meaningful relationships in your life hey thanks for hanging out with us this hour I'm Jade Warshaw he's John Deloney and this is The Ramsey Show

Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. I am your co-host today, Jade Warshaw, joined by your other co-host, who would be George Camel. We're talking about your life, your money, all hour long, so give us a call. The number is 888-825-5225. Dr. John Deloney has mysteriously been replaced by...

With George Campbell. How'd that happen, George? Well, we wanted a strong end to the show, Jay. We need someone to really land the plane. Someone who could land the plane. Yeah, that's who they call in. I love it. Well, I'm glad you're here. It's fun to host together. Let's go to the phone lines. We've got Yvette in Los Angeles, California. What's going on, Yvette? Hi, thanks for taking my call. No problem. So I'll start off with a question, give you some numbers, and then some reasoning. Okay. So we have a mortgage on two homes.

One is a primary residence in California and the other is an investment property in Arizona. Okay. So we're wondering if we should sell our primary home in California and rent here in order to pay off our California real estate debt. And then we would keep our Arizona home and pay that off. And we estimate to pay that off in five years. So the Arizona debt is $219,000 with an $1,800 mortgage. Okay.

And our California real estate debt consists of our mortgage, the 389. That's the balance. Then we have a HELOC of 95K. We have a solar loan of 52K, a pool loan of 58K, and a personal loan of 16K. My goodness. Yeah. So we kind of feel like selling our California home would allow us to pay off all the California real estate debt. Can you tell me what the total of that all is so I don't have to add it up?

The $389,000 plus all that? $610,000? Yeah. Okay, thanks. So selling that would allow us to pay all that off. And then what we would do with the profits from the home is we would put $60,000 toward the Arizona principal, which would lower our mortgage.

Okay. And then we'd be able to put away our six months of living expenses, which we currently don't have any of that. We don't have any. We have $1,000 of savings. That's it. So this would allow us to put away six months of living expenses. And then it'll also allow us to invest 15% of our income. And then the last bit of info is renting here in California would be about $2,800 a month.

Plus, we'll still have the Arizona mortgage, which we anticipate to be around $1,200 once we make that $60K payment toward the principal. Oh, so you wouldn't move. Are you going to refinance the mortgage in Arizona or recast it? What was your plan there? Recast. Yeah, it would be a recast. I already spoke to the lender, and so she said that it would recast and probably come down quite a bit. Why keep the Arizona rental? Why not just sell that?

Why not sell the Arizona rental? Yeah, if you guys had the money sitting there, you're not going to go out in California and go buy a property in Arizona to rent out. Right. So why not just sell this and be done with it and use that profit to pay down the debt? Well, the profit on that Arizona house would only be about $5,000. We've only had it like 10 months. Okay. You've only had it 10 months. Yeah. And what would your home sell for in California? We're hoping to get $750,000. Okay, but you owe $6,000. Yeah.

Right. So you're saying the money you'd get out of that, that would get your emergency fund going, that clears all of your debt and it gets you a clean slate. Yeah. What's the cash flow on this Arizona property? Not much at all. I think we made like $3,000. I think you're about to lose money on this deal. If you're not making much with real estate investment, you're losing money because it takes one emergency for you to be underwater on this thing. And then you said the plan was for you to turn around and be renters in California? Yeah.

Yes, we can't move to Arizona right now. So eventually we plan to move out of California. When can you move? Maybe in about 12 years. Oh, 12 years. What's keeping you? Our jobs. Okay. Here's where I'm at with this. You've only had the Arizona property for eight months. It's not cash flowing. It's not making you any money. If you were to sell it, you'd maybe clear $5,000 for it. And honestly...

that might be what happens because you're losing money on it. You're not there. You don't plan to move there. If you were telling me, hey, we're going to sell this California situation. It's just debt. We're going to clear it. And then we're going to be able to move to Arizona. We'll pay off $60,000 on that mortgage. We'll have six months of emergency funds saved and we're starting our new life in Arizona. That'd be a different conversation. But if the plan is not to move there for 12 more years and to keep this property and you be

renters in California. I don't like that plan, George. Yeah, well, I'm thinking the money you would have put toward the Arizona mortgage, why don't you put that away in savings and use that as your future down payment? I don't want you guys renting for 10 years. I agree. So that's what I would do. I would sell both properties. Any money that's left over beyond your emergency fund becomes the new down payment fund. And we work to stock that up to buy a house the more peaceful way.

That's my vote. But the bigger question here, and I mean, this is the elephant in the room, $95,000, $52,000, $58,000, $16,000, and then we're going to buy a second property in another state. There's a pattern of behavior here that's just like atomic. How can you assure us that you're not going to go into debt again? Yeah. Because this feels like a great little shortcut to become debt-free, but it didn't actually change much of the behavior that got us here.

Yeah. Because you guys make great money. What's your household income? Take home is $162,000. Wow. And there's not much to show for it after all these debt payments, leaving your bank account. We're just sick and tired of being sick and tired. Yeah. And let's be honest, $162,000 in Los Angeles, it's not like you're Scrooge McDuck. It's a decent income, right? It is. But it's not outlandish. It's not like if you made $162,000 living in Kansas. So I just think that there's...

Help me understand what you were trying to accomplish by taking out all of this debt. Was it because there's got to be a learning from this?

Yeah, so originally what we had bought this house here, we wanted this to be like our forever home. And so we added the pool, you know, thinking about our grandkids and just the family gathering here. And the solar loan really helped our electricity bill, which was like $400 average. And so we're barely paying $200 a month fixed on that. Add up your debt payments and tell me this solar was such a great deal.

I mean, that's I'm sorry. People justify solar because of their savings. But here you are rocking this solar debt with interest on it. That probably won't ROI for a long time.

Well, it won't ROI because she's selling the house and going to rent for 12 years. So what George and I are getting at is we want to make sure that you can look at every single one of these decisions and go, oh, I see exactly why that was a bad move. I see exactly how that cost me. Right? You built your dream forever home that you now have to sell. That's what's sad to me. Yeah.

Yeah, it is a little sad. We're just the California... If we could move out of California... Come on, Yvette. Don't blame California politics for your money decisions. It's the easy scapegoat instead of looking in the mirror and going, we took the freaking HELOC out. We took the pool loan out. No governor made you do that. No state made you do that. We just got to own the decision. And it's sad that you guys have to give up the dream home, but this house turned from a blessing into a burden real quick.

because of your money decisions. So this is a great way to clean it up, but you got to change the behavior to go with it. I'm selling both properties and let's start fresh. And in many ways, you have to look at it. They got lucky that there's even some equity to get out of this, that they can have it. To get out of jail free card. Take it while you can get it and change that behavior. This is The Ramsey Show.

Hey, you guys are listening to The Ramsey Show. I'm Jade Warshaw. Next to me is George Camel. I almost said Dr. George Camel. You know what? It's not too late for an honorary degree if anyone wants to give one to me. I bestow it upon you. Hey, we're taking your calls all hour. You can call us in. The number is 888-825-5225 and we'll take your call. George, I am happy to yet again announce Total Money

makeover weekend coming up. I'm getting excited. Yeah, I'm so excited. Are you planning your talk? Because we're coming up with all new content for this weekend event. I am not only planning a talk, George. I have pitched a whole new stage design. Wow. Listen, I'm going in. You've got some pull around here. I'm trying. I'm trying. The point is this event is going to be unlike any Ramsey event that you've been to. All new content. We're delivering, you know, we're

playing the hits, but we're delivering them in a, it's like a remix, right? Oh, I like that. I like that. We're delivering the hits in a completely new way. And by hits, I mean, we're talking about the baby steps, baby steps one through seven, you know, you love them. And so the event is really cool because no matter where you are in the baby steps, there's going to be content there for you. So it's just a really fun experience.

event. All the personalities are going to be there. There's going to be live Q&As all throughout the weekend. So you can bring your questions. You get that really cool access to what's going on. And something different about our events, I don't know what events you're used to, but our events are actually fun. Like they're bangers. We have a good time. So yeah, people have been to like a seminar and I'm like, no, you need to come to a Ramsey event. It's a whole experience. We have a world-class live events team and it's a weekend experience. So Nashville is a great destination. Start putting into the budget.

for the travel, the lodging, the transportation, and of course your tickets, which are super low right now. $99 are early bird tickets. I keep telling you to charge more. I'm like, this is wild. I feel like this should be like $200, $300, $400, but what do I know? The point is early bird tickets start at $99, but to be true, that's only for a limited time. So that price is going to go away at some point. So make sure you get your tickets now. And the first 500 tickets sold, you will get a copy of Total Money Makeover signed today.

by Dave himself. I might buy one just to get that signed copy. I know, right? He won't sign one for me. He won't do it. So don't wait. These will go fast. If you want to get your tickets, you can go to ramseysolutions.com slash events to get your tickets. Awesome. Let's go straight to the phone lines. We got Chris in Kansas City, Missouri. What's going on, Chris?

Hey there. Thanks for taking my call. I'm looking for some guidance. So I am making okay money right now. We're in baby step two. We still have some student loans, credit card and a car and then our house.

And I'm starting to do some real estate part-time. And I'm trying to figure out what the number or what I should aim for so I can start doing that full-time. I'm not ready to quit my...

full-time job and I'm just trying to see what the what your guidance is so you're trying to get out of the job you're trying to move out of the job that you're doing it into real estate but we need to understand like that point at which the connection the eagle has landed you can make that connection especially with getting out of debt right yes what do you make right now um about 64 take home

And is it just you or your wife is working also? No, she doesn't work. We have four little kids. Okay, so she's working in the house. So you've got $64,000. She does harder work than I do. I think this is a really great opportunity to replace exactly what you're making right now and beyond it. So that would kind of be my...

My signal, once you get to the point in real estate where you're closing enough deals to where you're meeting this same standard that your 64,000 was meeting on a monthly basis, that's a really great indication that it's time to move on. Have you sold any houses so far?

No, I'm still finishing school and in talks with the brokerage and getting things started. I'm nervous about where the line is. Should I have six months of expenses in case the market dumps? What do we do to protect ourselves? What's the urgency to jump into real estate? Could you work the plan, get out of debt, get the emergency fund in place, and then make the transition?

Um, right now I'm... Because right now it's not like the gangbuster time to get into real estate. True that. I don't know if you've seen the real estate market, Chris. Pros are having a hard time. And that's why I want to start doing it part-time to really see if it's going to pan out. I just don't make, you know, I don't have an upward slope right now. I'm just kind of stuck and I don't really love what I do. So I'm just trying to

So why real estate? What made you go real estate's the thing? I love being able to work for people and help people and be that resource for them and, you know, be able to affect my own income and do what I want to do for people. And right now, you know, I work in IT. I don't really...

have any control over my future as far as... Sure, but what you're really looking for is a commission sales job. And there's a lot of those out there. It doesn't have to be real estate. It could be traditional sales. You could be a mortgage loan officer. And there's a lot of fields. So I'm just trying to dig to go, what is it about real estate that lights you up? If there's something specific about that.

I think it's just, I mean, I've had the experience of like walking into a house and knowing that that's my house, right? Like I know this is where we're supposed to be. And I like working hard for people to do that and see that and, you know, help them get their goal. And so I don't, you know, yeah, you can go into car sales and those things. I just don't know if that's the, I don't, I don't love the idea of just commission. I want to have some purpose in what I do.

Well, let me ask questions on the other side of this. So we're talking about the work side of it. You want to have purpose in what you do. Everyone does. Like there's a big part of that. You mentioned earlier in the conversation that you had student loan debt, credit card debt, car debt and mortgage debt. Can you tell me a little bit about that? Because that's also going to be

a major player in this equation. Like George said, housing market, like now it's not like you're just raking in the dough becoming a real estate agent at this point. And right now you do have the luxury of a stable $64,000 income. I say stable with quotes around it because no job is stable, but you understand my point. And so looking at the debt that you have, I feel like

debt has the ability to cloud our mind and cloud our judgment whether we realize it or not because debt makes every paycheck feel like oh I'm just getting this paycheck and I'm having to put it over here and it especially makes it feel like that if you are in a job that doesn't give you the juice right and so I do think that looking at this debt and getting more numbers around that will also help us make a better decision so what how much how much student loan debt do you have kind of just walk

that line for me. So between, between my wife and I, we have 40 K left our student loans. Okay. Um, we have 10,000 on a credit card, um, 6,000 on a car and then, uh, the rest is house. Okay. So $56,000 of debt making 64,000 a year. Okay. So already I'm looking at this and I'm going, there's not a whole lot of margin to pay this off super quickly. So, um,

I'm almost correct. We've been working for years. We started with 80,000 in student loans. And so for that reason, starting a new job in sales, especially real estate, it doesn't feel like the right move at this time. Just listening to you talk, it feels like at this time what the better move is, what can we do? What can we lock in on that's going to bring in

Extra income, a lot of extra income. What is it that my wife can do? She's at home with four kiddos, which I'm going to get their ages here in a minute. But what is it that you guys can do that can allow you to tackle this debt in two years or less? That's the equation that I want to solve for first. And then when you solve that conversation and that problem, it's going to open up your mind to really see and be able to focus on what you want to do with your career long term. That's my take on it.

Yeah, no, that makes sense. I would probably try to increase my income in the field I'm in as I get this mess cleaned up. And then later on down the road, we can explore the part-time work when you have the margin. Because right now, you can't even breathe. It's hard to think about a whole new career path and have the time to do that. I'd rather you flipping burgers for a guaranteed $10, $15 an hour than hoping that you can make a sale in the next year.

Yeah. And so, and the other thing to think about here is there's cost to just being an agent. I mean, you've got the classes, the testing, MLS fees, the NAR fees, continuing education. You know, it's hard to be a successful part-time real estate agent.

There's a reason people go with the full-time pros. And so my dad did this as a hobby because he loved helping people. And he still does it on the side as a real estate agent. But he was an engineer by trade. And so that's something that's great to pursue, but I wouldn't bank on it to be the breadwinner right now. You need six months with a regular income in real estate and a stay-at-home spouse.

You better have that emergency fund locked and loaded. Oh, yeah. I think the conversation you have with your wife tonight is what can we do to double our income? And how can we do that very quickly? And that's going to take both you and me making a lot of sacrifice with our time. This is The Ramsey Show.

You are listening to The Ramsey Show. Hey, thanks for hanging out with us. I'm Jade Warshaw. George Camel is to my right. We're going to take your calls for the rest of this hour. So if you have something that's just burning, it's sticking in your craw and you got to ask that question. Or see a doctor, depending. Yeah, if it's really stuck in your craw, you might need to see a doctor. If that burning sensation lasts for more than a day,

more than an hour don't call don't call us not the burn george hey give us a call the number is 888-825-5225 and we will try to diagnose your issue only as it can relates to your life and your money though i've been called dr george that was an that was a mistake all right let's go to the phone lines we've got rylan in phoenix arizona hey rylan what's going on hey hey guys how are you doing good how can we help

Good, good. I have a question. I don't know if you've been keeping up lately, but cryptocurrency has been kind of jumping up in the last month. Yeah, about time, man. Yeah, I've been holding it for a while, and I've been waiting for this for a little bit. So it finally happened. What do you have? What coin do you have and how much you got?

I have Ethereum, and it's gone up to, I think it's gone up to $20,000 now. Okay. All right. So what's your question? So you have $20,000 worth of Ethereum? Yeah, $20,000 worth of Ethereum. Got it, because it's at $3,300. Yes, right. So I bought Ethereum a few, like two years ago, I want to say. You have six Ethereum, in case you're doing the math at home.

Oh, okay. Yeah. Right. So I lost my place. I apologize. It's all good. So you have 20 grand worth of crypto.

Yes. I was going to ask, uh, I bought a new car in 2021 and, uh, I put down 23, 24,000 on it and I still owe 17 now. So I'm at a point where I could pay it off completely and still have a few thousand left over. Um, but my son and I are discussing, uh, moving into a house and, uh, growing our family and whatnot. We already have a two year old. I know what you're going to say to that. We're not married yet, but we are going to get married. When? Uh, like, uh,

Tomorrow? Yeah, it's on me. It's on me. I'm so bad at planning. I can barely plan a vacation. The really cool thing about when you go to the courthouse is you don't even have to have that much of a plan. I'm picking on you a little bit, but please get married.

Yeah, I know. You know what? I deserve that. Yes, I know. I'm good with the courthouse. She wants a wedding. I'm going to give her a wedding. You definitely should have a party. I'm not saying that you should not have a party. But if it's just if you're talking about moving in and all this, you've already got a kid, man, just get that certificate. No one even has to know that you have the certificate. Like, just get it for legal purposes. You're all protected. And then tell all your friends we're having a wedding. Yeah.

when the time comes. But to your point, to answer your question, yeah, man, I'm clearing out this crypto immediately. I'm paying off your smallest debt if it happens to be your car in this case. Yeah, more power to you. You'll have a paid for car. And I would not buy a house until you're married and until you have the money to afford the house, which would include not only paying off your debt, but saving up three to six months of expenses and having the property on payment.

Okay, thank you for that. What was making me nervous was that $17,000 kind of going away. It makes me nervous that you bought a $40,000 car. How much do you make? Oh, Jay hung up in mid-sentence. We'll get you back. You're back. There you are. Sorry about that. Sorry. I make $50,000. My fiance makes $40,000. Holy crap. You make $50,000 a year and you bought a $40,000 car?

I bought a $51,000 car. Oh my gosh. Oh my word. Rylan, you may not do a lot of planning, but you plan to be broke. Let me tell you guys. It's a 2.49% HDR low. Oh, well in that case, Rylan, you got me. We'll never be impressed by that, Rylan. Did you get a free t-shirt to go along with it from the dealership after they screwed you?

Well, it's a Tesla, so there's no dealership involved. Oh, no, not on a Tesla. Well, in that case. As a Tesla driver, I'm telling you, that was a terrible decision. Oh, man. Because I know how Teslas have gone down in value, because Elon's like, you know what? Cut the price down 10 grand. I don't care. Yikes. I agree. What is the car worth? Well, right now, I haven't checked, but I want to keep it for the next 10 years. You know what I mean?

No, I don't know what you mean. You've committed to this car more than your relationship, dude. How so? You're more committed to this car than your hopefully soon-to-be spouse. Because if you were committed to her for the next 10 years, you'd put a freaking ring on it and go to the courthouse today. But you're willing to drive a depreciating asset while telling us that you have a great interest rate on it while buying a car that's worth more than your annual income. Do you have any other debt?

I used to have $6,000 in credit card, but I picked that off. Okay. Are the cards still around? Have you cut them up yet? Yeah, I practically cut them up. Not practically. What does that mean? Come on, man. They're either cut up, never to be seen again, or they're sitting in your freezer in a block of ice. Which one is it?

They're in my wallet. I want to say collecting debts, but that's not exactly true. Rylan, you're making it so easy to fire shots right now. So what's going to happen? Is your girlfriend, fiance, is she going to say, no, no, no, no, don't sell. We need to buy a house. What are you doing? Don't pay off the car. Is that what's going to happen when you tell her? Well, I already did talk to her about it, and we've been discussing it. And it's, you know, we were thinking that maybe we'd use...

The money is emergency slash a couple grand for furnishings. And, you know, because the APR percentage on the car is so low to... You're talking about the wrong numbers. We're talking about... Oh, my gosh. Broke people. Let me... Let's just...

talk about this the way it is. Ryland, broke people talk about interest rates on their debt. They care more about the interest rate on their debt. They care more about the monthly payment on their debt. They care about what the debt is doing for their credit score. That's how broke people talk. That's how poor people talk who don't think that they can- It's about payments and interest rates. Yeah. They don't think they can get ahead without borrowing money and without borrowing at whatever interest rate they talk about. What we're talking about over here on this show and what we want to teach people is that

life is more than that. You can actually take your income. It's your biggest wealth building tool and you can do amazing things with it. You can actually pay for your life in real time. And that's what we want to get you to. And I think right now, you know, I'm not going to lie, like shifting a mindset that takes some time. I don't expect it to happen right here in a four minute call, but. I've got just the book for you before we leave, right? I will send to you in the mail. It's called Breaking Free from Broke. And I'm going to send it to you in the mail.

And I wrote it for people like you to help them make this very difficult paradigm shift. Yeah. Because I used to think like you, Rylan. That's why I have a love for you. I want to change your mind so badly because I believe in you and your ability to build wealth. But it takes doing some different things.

And one of those things is not buying a $51,000 Tesla when we don't even make $51,000. Yeah. Did we tell you the rule of thumb? Like going forward, one of the ways we want to shift your mindset is going forward. We don't want whatever you earn per year, your vehicles, the things going down in value should not equal more than half of that.

That's kind of a rule of thumb. That's what's fair. We also say that if you're going to purchase a brand new vehicle, you should not do that until you have a net worth of $1 million or more because you're able to take the hit. You're able to basically take that money that you would depreciate within those first four to five, six years and just put it in a pile and burn it. And you wouldn't even break a sweat. Like your temperature, your heart rate wouldn't raise one bit. And

And so that's the way we teach that. And then at the end of the day, we want people to buy vehicles and cash because we know that the car payment is what separates the middle class from the wealthy class. We know that the car payment is what makes most Americans, most people in general broke because they're giving away such a high percentage of their biggest wealth building tool every single month in payments. It's like it goes like housing and mortgage, student loans, car payment.

You can flip student loans and car payment depending on who you are, but those are the top, those two debts, student loans and car payments are the things that keep people in debt and keep them from building wealth. And so hopefully you got that from this conversation.

A lot going on here. But, Rylan, I'll tell you, you know what beats a 2.49% APR? The APR on my Tesla, which is zero. And not because I got a 0% financing deal. It's because I bought a 10-year-old Tesla in cash. Not because it's a flex, but because I don't care what other people think, and I know this is a toy going down in value. So hang on the line. I'm going to send you a copy of my book, Breaking Free from Broke. Read it. Give me a one-page report, and I'll send you a gift in the mail.

This is The Ramsey Show. You are listening to The Ramsey Show, calls about your life and your money. If you want us to take your call, you can call us at 888-825-5225 and we'll hook you up with our advice.

Scripture and quote of the day, Romans 1 16 says, for I'm not ashamed of the gospel because it is the power of God that brings salvation to everyone who believes. True that. All right. Alice Cooper said this. Drinking beer is easy. Trashing your hotel room is easy. But being a Christian, that's a tough call. That's rebellion. Then call me America's bad boy. Come on. That's what's up. That's good. I love that. That's that's that's very interesting. That's some food for thought there. All right.

Let's go to Kyle, who is in Lakehurst, New Jersey. What's going on, Kyle? How can we help? Hey, how's it going? Good. How can we help? So I got a pretty controversial opinion on credit cards for you guys. Let's go. And just a little backstory. After listening to you guys, I realized I've been on Baby Step 3 ever since high school.

never going into debt, living below my means. Now at the age of 26 and serving in the military, I've managed to accumulate a net worth of $140,000. Here's the thing though. I know this goes against your guys' teaching,

But I actually use my credit cards for all my expenses. However, I always pay the full statement balance every month, never carry a balance. It's always on auto pay. Okay. I've never paid anything in interest or fees. By doing this, I take advantage of the signup bonuses, the cash back rewards without going out of my way to buy things I wasn't already planning on buying.

So do you want us to change your mind? It's also giving me a huge boost. What's that? Are you telling us this because you want us to change your mind or because you... What? Well, I want to hear your guys' thoughts on it because it's also giving me a huge boost on my credit score. And I feel like I might be beating the system. I think you did it, bro. Have you written a book about this yet? Start a podcast? Have you started an online course? I mean, you've cracked the code, dude. I mean, if you're implying I should, then...

I mean, the points guy did it, made a huge brand out of it. Now he gets paid by Capital One. I mean, here's the thing. If your plan's working for you, you keep going. But usually people call the show because their plan is not working. And you told me you've been on Baby Step 3 since high school. You're like a toddler with stunted growth, man. What happened? If your plan was working so well, why are you not a net worth millionaire with a paid for house?

Well, I'm working on it. I'm definitely trying, but... But you're telling me that your use of credit cards will accelerate that process, right? Yes, but I've heard a lot of, you know...

bad opinions about it on this show. And I was wondering if you guys know something I don't or maybe... Here's the difference. We're not financial prodigies. We're fallible humans who realize that psychology plays a huge part in how we spend our money. Here's the difference. Number one, we probably disagree on philosophy.

around money which is fine but the difference is if i go into a gym and i talk to a trainer where most people go to a gym and talk to a trainer when they need help and i walk in and go look dude i'm swole look at me i'm ripped like i can already bench press this much i can already do then i'm looking at i'm going great keep doing it like keep doing your thing why are you talking to me and so part of me is wondering do you want help or do you want to just tell us how awesome your thing is if you if you truly want us to change your mind we can talk about that but at the at

at the end of the day, our philosophies are totally different. You're living in a world where you're caring about credit, your credit score. You love utilizing and leveraging debt and you're a grown man. You can do that all day. But we live in a world where we say exactly the opposite.

And if you really do want to sit in kind of like tit for tat it and kind of say, you think this, here's what we think and kind of like play the fence on it. Like we can do that, but I, I don't think that's what you want. I kind of, and I don't, unless that is what you, I mean, do you want to be swayed in the other direction or do you want to convince us why you're right? Let's do this.

I mean, absolutely. Like, I'm completely open to constructive criticism. Okay. If there is an argument against it, absolutely. Well, let's play it out with your own situation, Kyle. Yeah, let's just play it out. I truly want to help you, as fun as it is to have a friendly debate. Yeah. What do you make a year? I make, I don't know how much it adds up to in a year, but I make, I bring home $5,300 a month. That's your take-home pay after taxes? Yes.

Yes. $5,300 a month. Okay, good. All right. And so you bring home $63,000 a year. How much of that have you put away for investing in savings?

Every year. My living expenses, including like, well, just anything I need, all the essentials, I only pay like $1,500 a month. Everything else just goes into investments. What kind of investments? More than half my paycheck into investments. So you're investing like 60% of your check into investments every month. So $3,800 goes to investments. What investment is that and what account?

So I have ETFs. I'm like Charles Schwab. I also have like a 401k. Okay, good. I do the matching 5%, no more than that. Do you own a home? Yeah, the rest of it just goes into my ETFs. Okay, but you told us you don't have an emergency fund. Oh, yeah. Well, I do keep like an extra 10k in my savings account. Okay. And that just sits there. I don't touch it. Do you own a home?

I do not. That was going to be another question, but I didn't want to take up too much time. Do you have any debt? I do not. Well, aside from the credit cards, but I don't carry a balance. Okay. So here's the truth. The wealth that you've accumulated has nothing to do with credit cards, Kyle. It has everything to do with your ability to flex your savings muscle and put away 60% of your income on live on less than you make. Yeah. So you're much more aligned to us than you think.

And I walk through, you're the character in the book, Breaking Free from Broke, that I wrote on the credit cards chapter. I walk through the eight character archetypes. You are what I consider the perfect spender. And you said the quote. I said the reason, I pay off my card on time and in full every month. I never pay a dime in interest. I treat it just like a debit card. And here's the thing. Even if you pay it off perfectly, every study shows that you spend more when you use a credit card.

So you're in the majority, you know, 48% of people statistically pay off their card every month. So you're in the 48%. But here's the deal. Researchers from MIT did a study in 2021. They used MRI technology and they looked at brain activity when people were swiping that card. And so this is what's wild.

We've already proven that credit cards reduce the pain of payment, but this study added another layer. Not only do credit cards release the brakes on spending, they also cause our brain to step on the gas, accelerating the spending. And so when it hurts less, it costs more. And I'm telling you, when you spend your own money, even though you tell me you treat it just like cash or a debit card, I'm telling you it causes more pain than using someone else's money and paying it back later. Mm-hmm.

and so i think you'd be doing even better i think so too i think you're too i think you're giving too much credit to credit cards and i think you need to give yourself more credit that you're really in many ways you're really great at handling your money and like to george's point credit cards are really just holding you back you've proven that you have the restraint and you have the foresight to go you know i i could save 50 60 of my income like that's a muscle a lot of people in a discipline that a lot of people don't have

And so I think that credit cards are really a dead weight in your plan. And when you look at the rewards, I mean, most of these are 2% cash back. Of course, yeah. And then you've got the airline miles. But they add up. Sure, but it adds up. If you're making $60K take home, you might be getting $1,000 in rewards.

Yeah. That doesn't add up to much when it comes to wealth building. I mainly, you know, I'll farm the sign-up bonuses. So, like, if I plan on buying a computer, if it's, like, a purchase I'm already planning on making...

I'll like find a credit card that will give me a signup bonus. You know, I'll utilize that like a thousand dollars it wants me to spend and earn a hundred dollars back. And you can play that game. And I'm telling you, you can do that and you'll be successful at it. And you will be the rat in the maze for these credit card companies. And I interviewed someone from Capital One and X...

manager who said they run 10,000 experiments on consumers like you to get you to chase the cheese in the maze and think you won. And they zoom out and you go, oh my gosh, I'm a rat in their maze playing their game. And think about how many brain calories you've spent. That's my thing, George. You are spending a lot of brain calories for a smart, successful man serving our country. Too much time and energy putting into maximizing rewards. Just to get a computer.

You'd be better off starting a business, a side hustle, and putting your time and energy into that instead of helping Capital One sponsor the next Taylor Swift tour. I'm with that. So I'm going to send you a copy of Breaking Free from Broke. Read the credit cards chapter, and I hope it helps you see our side of the picture. So hang on the line. Taylor will get you a copy of that in the mail. Thank you for your service, truly. It was fun sparring with you. That was fun.

I just like, I value simplicity in life, George. I like being able to sleep easily at night. I love what you said about brain calories. I got one card in my wallet, Jade, and it's got money on it. I love that. It's amazing how that works. This is The Ramsey Show.

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