
It’s Never Too Late to Clean Up a Financial Mess
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- 10 Jan 2025
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From the Ramsey Network, this is The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Kamel, joined by my good, good friend Dr. John Deloney. Taking your calls at 888-825-5225. You jump in, we'll help you take the right next step with your life, your money, your mental health, your relationships, whatever is going on.
And hey, before we get going- Speaking of what's going on. Yeah, before we get going, I think it's important just to let our friends and colleagues and family members in Los Angeles just know we see it. It's a disaster, man. I'm rarely speechless and just watching some of that footage. I've got friends in Pepperdine. It's just devastating to see. It's one of those things you feel helpless sitting this far away and you're watching on your TV or watching on your phone. But what we can offer right now is to let people know they're not alone. We see it and our thoughts, and we're praying for you guys big time.
Yeah, our hearts are with you all. Speaking of which, John, our first call is from California out here. Nitesh is with us. What's going on, Nitesh?
Hey, folks, thanks for taking the call.
Sure.
And I appreciate your sentiments on LA Fire. Right now, I have a question that my wife and I bought a house worth around 2.5 million. And We have another house which is worth around 1.3 million, and it has 500K remaining. We have rented it out. It's around $4,000 per month. So Our salary is around $900,000. We were just concerned whether to keep the rental property or sell it off. The rental is coming pretty nicely. It's around 4,500, which is covering all the mod cages, and any other insurance and stuff like that. I was just wondering what your thought is on that.
What is the mortgage on your current home?
It's around 2 million.
Okay, so you got two and a half million. Do you have any other debt outside of these two mortgages?
Just a car loan, maybe 40K.
Okay. Well, you're calling us because your plan isn't working as you wanted it to. There's some stress here, and I would feel it. If I was over two and a half million in debt, regardless of my income and how great things were right now, in the back of my mind, I would be knowing this is a house of cards. It could all come crashing down any minute.
Yeah.
And so you want to reduce risk in your life. You're using language like, well, it's just a 40K car loan. That's what gets us here, right? You guys have just undeniably insane income. And yet what happens is you just go, well, we can acquire more and handle more payments. It leads us to this place where I have to decide, do we want to keep going down this road or do we want a more peaceful path? If I was in your shoes, I'm going to try to reduce that risk. You have an amazing income. How much extra margin do you have at the end of each month?
So we have around cash coming in around 25K. After all the 401K savings and everything, we have around 1 million in stock, and around 401K is around another million.
Okay, and the stock is non-retirement, right? It's fully vested?
Yes, that's correct. Okay.
So you could sell a whole bunch of that and knock out a lot of this debt. You could knock out the car loan instantly and knock out the rental loan instantly and make about, what, a quarter of progress on your own mortgage.
That's absolutely correct. My wife So my wife feels that the rental is self-paying, so why should we worry about it? Let's just like the lenders pay for our mortgage, pretty much. And I'm trying to convince, like lowering the risk. So I don't know.
Do you remember I don't know if you remember, it was a while ago, there was this thing called COVID, and people quit working, and then the local government said they don't have to pay rent, and you can't evict them.
Yeah.
Remember that? Yeah. Yeah, I I would assume the mortgage on your rental property is not very safe because you don't ever know. Oh, wow. And especially in California, with the squatting laws, it wasn't... I mean, You all have good tenants, and God bless you, because those tenants can go south in a hurry. It might be 30 days, 60 days, 90 days, six months, two years. You guys get tied up in court, but the bank doesn't care. They want to get paid every month.
The other risk is having all this money tied up in a single stock in a single company. I like the idea of offloading it for other reasons other than just getting debt-free.
My mom worked at this company called Enron that used to do that, gave everybody a lot of stock. I had friends who went to bed millionaires who woke up one morning with zero dollars because all their retirement was in stock in that company. So yeah, man, if you're talking to me and George, our families, our houses, we'd sell that stock and start paying off everything we own, man. I'd much rather have two tangible assets, two homes I can go see than a company saying, No, I promise. We're worth it. I'd much rather that, man.
Okay.
And especially, you're too rich to be holding a loan on a depreciating asset like a vehicle, man.
Okay, sounds It's good. I have some extra $5,000 per month that I can contribute towards my mortgage. Do you recommend me putting that into the mortgage, too?
Yeah. Once the car is paid off, then your next step, if you're filtering this through our Ramsey baby steps, you should be completely consumer debt-free with a fully-funded emergency fund, then begin investing 15%, then any money beyond that can go to kids' college and paying off the mortgage early. Okay. With your income, I think sit down with your wife, show her, Okay, here's where we're at, here's where we could be. If we go down this path, we sell the stock, we become debt-free, we free up that rental mortgage payment, we free up a car payment, we have all this extra money, we could tackle our own mortgage and probably be done with that with your income in under five years.
Yeah.
That's pretty amazing. How old are you two?
We are 39 and 40.
Think about that. You're in your mid-forties, and you will have, I'm not even saying sell the rental property. You could keep it if you're going to knock it out and reduce some of the stress and increase the cash flow, you'd be sitting with about a $4 million net worth of paid-for property in your mid-forties.
And a million dollars in your retirement fund.
Yeah.
So you're worth $5 million, free clear, and here's the thing you have then that you don't have right now. Absolute freedom. Peace.
And guess what? Your buddies are going to think this advice is stupid. They're going to be like, You should buy nine more properties and leverage all the debt and do a heelock on the first one. That's what's going on out there in the culture, but they don't live your life. They don't pay your bills. They don't know what happens inside your home, what's happening inside your body, how you're feeling about it. That's where John and I go, We're solving for freedom all day long. And you're in an amazing position where you have a million dollars sitting there in stock. You have about a million dollar income. This problem is pretty easy to solve, but the hard part is the choice and getting your wife aligned on this.
I think the new wealth moving forward in the 21st century George, is, can you fall asleep on your pillow at night? I think the new status of wealth, like Dave used to say, it's not the BMW. I think the new status of wealth is nobody owns me and my family. Me and my family have freedom. We've got peace. Man, I don't care how little or how big your salary is, solve for that, man. You change everything in your home.
Well said. Thanks for the call, Nitesh. Good conversation. This is the Ramsey Show. Remember the good old days of the internet before it was a privacy nightmare filled with spammers, scammers, hackers, and fraudsters? Simpler times. Now, I don't have a time machine, but I do have the next best thing, delete me. Think of delete me as your online bodyguard, helping to protect you from the risks of online scams and data breaches. Here's how they do it. They scour the web to find and remove your data from these sketchy data broker websites. And this includes your name, your phone number, your email, your address, and more. And delete me will send you a detailed report of what they did and how much time they've saved you, and they've saved me 66 hours so far, which is more time I can spend trying to nail the wortel of the day on the first try. Deleteme has been around for over a decade, and they now have over 100 million data removals, which explains why they have a mountain of rave reviews and an A+ rating from the Better Business Bureau. It's been great for my family, and I love getting fewer targeted ads, fewer spam text, and fewer creepy robo calls.
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Hey, guys. Thanks so much for taking my call. Can you hear me? Yes.
How are you doing?
Good, man. Good. So my question is, I just got married about two weeks ago to my wife who was lucky enough to inherit a Roth from when she was young. Right now it has about 75,000 in it, and all of it is an Apple stock. So I know, I think, how you guys are going to feel about that. And then I also have 30,000 in a bond from my grandpa. And I guess my question was just how to best go about just investing that and what using it for, whether it put it towards the mortgage or if we're saving up for a car or just how to best utilize those funds.
Yeah. So what you said is it a Roth IRA, the Apple stock?
It is, yeah.
Okay. And then you got 30K in a bond. And what is your next financial goal? As you guys look at this new marriage, do you guys have any debt you're looking to clear?
Yeah, we have about 8,000 right now on a credit card that was originally hers, and we're looking to knock that out real soon. We just got a bunch of money from the wedding, so that's what we plan on doing. So it should be debt free, and honestly, the next week or so.
Awesome. And then how much do you guys have in savings for an emergency fund?
Right now, about 19,000.
Well, just knock out the credit card today. What are we doing?
Yeah, no, you're 100% right. And after hearing that, I definitely think we will.
Make a declaration in front of America, Dan. You're going to do it today. Yeah.
That leaves 11K in your savings plus this 30,000 bond. That's plenty. That should be more than six months of expenses for you guys, right?
Of course. Oh, yeah, definitely.
Then you have a house together?
We do, yeah. I think there's about 165 left on the mortgage. I think the next big goal would honestly just be to get that knocked out as soon as possible.
Yeah, so you could use that. I mean, I know there's some required distributions from that IRA, I believe, with the new Secure 2.0 Act law. I would look into that and see when you need to deplete that account by.
Okay.
But you could use part of that money to knock out the mortgage. You could use future income and just let that money ride and continue growing for you. But I would use any money beyond your emergency fund to start knocking out that mortgage.
Okay.
George, can you take the distribution, a mandatory distribution and turn on and buy a new Roth with it?
Yeah, you couldn't do your own investing.
Just flip it around and do it again.
I would sell the Apple stock and be in a more diversified investment fund. Like you were saying, Hey, Apple is a great company. I used to work there. I had some Apple stock. There's worst companies you could have invested in over the last several decades. But I still would sleep better at night knowing that was in a broad-based index fund that had a lot of Apple in it, but it wasn't 100% Apple.
Right.
I would do that either way, and it's up to you what you want to use those funds for.
Okay. All right. Perfect. How old are you two? So I just turned 26, and she is going to turn 30 next month.
Amazing. You guys are going to knock this mortgage out fast. What's your combined income now?
Right now, combined, and obviously this is super recent, but combined right now is about, give or take, 90.
Okay. Great. Well, debt-free, making 90 grand with a 165,000 mortgage, you guys are going to be completely debt-free within, my guess, is three to four years if you do this the right way.
Wow. Yeah, that'd be amazing.
What about by your 30th It's his birthday. You guys have no mortgage?
Yeah, that would be something, man. That would be awesome.
It's not something. It's just a choice you make today. You get what I'm saying?
It sounds cool, but then you're like, Crap, I got to put extra on the mortgage every single month without fail, consistently.
Can I do that? Then here's what you all do. You all will figure out the romance, the sex and intimacy, the dates, the fun. You all will figure out your life over the next four years and how to have fun and laugh and joy and friends over and potlucks and whatever. Then you're going to suddenly find yourself with no mortgage four years in. Then the whole world opens up. You get what I'm saying? I think a lot of times people go crazy the first two years. They put everything on their credit card, they go bananas, they buy all the fancy stuff, and then they realize, Oh, we spend a lot of time on external stuff, and we didn't take the time to have to do the hard work internally. You guys, if you all flip that around and you're just intentional, we're not going to have any money because we're going to put all on the mortgage and we're going to make a run at this thing, dude, that would rule. Dude, no mortgage at 30. I can't even wrap my head around that, man.
Yeah, and this inherited money, that's just leap-rogging you. So I'm going to use that to create a legacy for my own family.
Yeah, no, it's definitely lucky. But yeah, no, that'll be the goal. I like that by 30. So that'll be the goal.
That's it, man. That goal and that intentionality, you start to get your new wife excited about that. You guys are aligned with money. Like John said, you can stop talking about money. You can do more fun things with your life than have money fights. We're rooting for you, dude. Awesome. Congrats.
You could do things instead of money fights. No way.
That's what it's all about. Luis. Let's talk to Luis in Medford, Oregon, up next. What's going on, Luis?
Hey, guys. Nice to meet How are you guys? How are you?
We're doing great. How can we help today?
Yeah. I'm 24 years old, married. My wife is also 24. Our household income is about 90 to 100K a year. About eight months ago, I started hearing about your show. Immediately, we went debt-free. It was no brainer. Now, we have an emergency fund, and we are currently renting and in the process of getting money for a down payment for a house. So the question is, what advice would you guys give us as a first-time home buyer? Should we save 20 % down, 20 % down payment, or should we do an FHA loan, conventional? What would you guys recommend?
Great question. I'll give you the Ramsey parameters, and we can dive into your situation after that. We recommend at least 5 to 10 % down for a first-time homeowner, and only choose a 15-year fixed rate conventional loan, where the payment is no more than a quarter of your take home pay. I know once you crunch these numbers, Louise, you're going to go, Oh, my gosh, these guys are out of touch. How could anyone do that? We can't change the laws of math. So a lot of people go, Well, I guess it'll just be 60 % of my take home pay going toward this mortgage, and I'll be stressed forever. That might mean you need to choose a different house, choose a different location, choose a townhome instead of a single family home, save up a bigger down payment. So knowing all that, where do you guys stand financially? What's your goal?
We would want to get a single house, family, three bedroom, two bath, something like that. We always have family over.
And what is a reasonable home in the area you want for those parameters? What's that going to cost?
We're looking around $400,000.
Okay. And how much do you guys plan to have down?
That's the goal that I'm trying to set. I'm fine with waiting until we get 20%, but if you guys recommend 15, 10 or something before, we can pull the trigger as well.
Well, I think based on the mortgage payment with the current market and rates where they're at, I think that's going to be a hefty mortgage payment that you guys won't be able to stomach. That might be 70% of your take home pay. It's not as much of how much down five or 10. It's we might need to save up 30% down in order to make this mortgage work for us, which means we need to get our income up and we need to rent for another two years. Okay. That's the sacrifices you'll need to start looking at. Are we willing to compromise? Are we willing to do a three-bedroom townhome? That's 300,000 because we have urgency to get into a house?
Yeah, because talking about sacrifices, I own a business. And when I was a little younger, I think I made a rookie mistake of buying an $85,000 work truck. It paid off, but my If you don't mind asking the second question, should I sell that truck and buy a $34,000 truck? And then that would speed up the process of the down payment.
Yes, absolutely. If you can do your job with a $30,000 truck, sell it today. Got it. Today. Yes, get rid of that thing, dude. $80,000.
It's not like if you get double the truck, you're going to make double the money. That's not how business works. You know that. So I would definitely make the sacrifices needed. If that means downsizing in truck, I'm doing it. If that means working overtime for the next six months to get this down payment going, I'm going to do that. So you guys decide. You can pull all the levers you want, but don't take any shortcuts doing these first-time home buyer, zero % down type loans. They're not in your favor, my friend. This is The Ramsey Show. For free tools and resources to help you reach your home goals, go to ramseysolutions. Com/realestate or click the link in the show notes.
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Welcome back to The Ramsey Show. I'm George Campbell, joined by Dr. John Deloney. The phone number to call is 888-825. 5225. Well, there's a lot that goes into buying and selling your home, and all of those decisions can feel overwhelming, and you shouldn't have to do it alone. And that's why we created Ramsey's Real Estate Homebase. It's a place with all the tools and resources you need to get prepared to buy or sell your home with confidence. You're going to find calculators, start to finish guides, how-to articles, a podcast, a book, and even a video course, all packed with actionable steps to help you navigate this process. If you're ready to take those steps toward your home goals with peace of mind, go to ramseysolutions. Com/realestate, or click the link in the show notes and description if you're listening on YouTube or podcast. Cindy's up next in Fortworth, Texas. How can we help Cindy?
Yes, hi. Me and my husband are reading your Total Money Makeover book, and we are trying to get serious about getting out of debt. But we currently have about $300,000 worth of debt, and we're just really struggling to make minimum payments on credit card let alone save up the $1,000 emergency fund.
Wow. Does that include your house?
Yes.
Okay. How much do you owe not including the house?
It's Okay.
Can you break that down for me?
Sure. We've got about $50,000 credit credit, $50,000 car loan. That was $75,000. I just sold my car to get out from under that, and about $40,000 home equity loan.
You got it all. You collected them all.
Hold on, you sold your car, but you still owe 50 on it, or does he have a car?
Yeah, we're financing three cars, and now just two.
Tell me about the other two you're financing.
My husband's car is 2022. We owe about 33,000 on it. Then my daughter's car is a 2022 to Carola, and we owe about 17,000 for that.
We're going to sell both of those in the next 15 days, right?
Are we?
Yes, I think we are. You can't break. You all are scary, scary If you can't come up with a thousand bucks, then these cars have to go.
I mean, these cars are robbing you from a different future. You can get nice cars later. We're not saying you can never have these cars again, but this is part of the issue. You get rid of these car payments, you can breathe again, right?
How much do you and your husband make?
I think it's about $130,000 a year before taxes, bringing home probably right around $100,000. Okay.
Are you guys doing any investing right now?
No. Okay. In our 401(k).
What's that?
Just in our 401(k).
Well, that counts as investing.
That's investing, yeah.
If you took that down to zero, that would put some money back in your paycheck every month, right? Yes. Okay, so that's a start. You can reshop all of your insurance. You can go to ramseysolutions. Com/checkup and do a coverage checkup. Reshop it all because you might be able to save some big money every single month just by reshopping insurance. On top of that, can you guys work extra, either of you?
Yes, I actually just picked up a Saturday job.
Good. Do you feel the compounding effect of what a few of these things stacked on top of each other would do for you?
Yes. Just getting rid of my car this past Monday, we are going to be saving 1,031 a month. Boom.
Wow. There's your 1,000 bucks right there, right?
Yeah.
Yep, absolutely. You'll have 1,000. Then what are these car payments that are left? What do they add up to each month?
Let's see. It's $1,259 a month.
Think about that. If you sold the cars and downsized to just something you can get you to A to B, you'd be saving an extra 1,200 bucks. You freed up 2,200 bucks just by getting rid of some cars.
After taxes and take them, you just added a $40,000 your income to your house.
Yeah.
Let me ask you this. You guys have $160,000 left on your mortgage. You got 140 grand in debt. You all make $130,000. That tells me that Because you all don't have, I know it feels like it, you don't have a ton of debt. You got car notes, you got credit card debt. You'll have a lot of debt, but you also make good money. This tells me you guys go out to eat all the time. Your daughter's a princess. Do you all spend recklessly? Do you all not have a budget?
We definitely have a budget. There was some time that we got a little bit out of control. We have two teenagers, but we have reeled all that in.
Okay. I think one of the greatest gifts you could give your teenagers is to sit down with them and say, Here's how mom and dad have lived, and here's how things are going to be different. We're going to take your precious Carola, and I know you love it, but we're going to sell it because it's the right thing to do. You're the worst. I can't believe you. But I'm telling you right now, the 27-year-old her, the 40-year-old her, will remember this moment as my mom and dad did whatever it took to become free. I think it will be a watershed moment for you and your family.
Okay.
It will really, really not be fun. Not be fun at all, right?
But when you explain to them, you guys won't have to take care of us in retirement because we made these sacrifices now.
The 16-year-old doesn't care. She wants her cool Corolla right now. She didn't care, especially with the crummy car you're going to have to buy her or that she's going to have to go to work for.
Right. Yes.
There's a lot of sacrifice to be made here, but this is a very hopeful situation because these cars, we can undo a little bit. I don't know what they're worth. Do not just go trade them into some dealership that gives you bottom dollar. Sell them private party, clean them up, take some good pics, put it on Facebook marketplace and Craigslist, and get top dollar for these cars so that you're not their water on them.
Okay.
I'm hoping because they're pretty new, you can still... Most of the equity is still inside of them versus being underwater.
Especially the Carola.
Mine was an even trade. They paid it off, and My daughter's is. My husband's is not. He would be upside down. That's fine.
Go to a local credit union and take out the difference because I'd rather you be $5,000 in debt, and then he gets a $2,000 car. I'd rather you all owe seven grand than owe the five that you owe now.
True. Okay.
Remember, this isn't forever. This might be a two-year journey as you guys clean up all this debt, get to some financial foundation, then we can save up and pay cash for a car, no problem.
I'm going to ask you a very It's a stereotypical generalized question that's not fair, but I'm just a lifelong Texan. Is your husband in enough that he's going to sell his truck and get a $7,000 car?
Yeah, he would. He's all on board.
That's an amazing good man. Good for you. Yeah. Good for you. That's fantastic. Now you just have hard work ahead of you. That's going to clear up way, way faster. On this $50,000 a credit card debt, is it one big credit card or is it 30?
No, it's two big credit cards.
Okay.
Did you do some consolidation loan or balance transfer, or did you actually max out each card?
We maxed out. We were really frivolous on one, and the other one, we had everything go wrong in one year and had to put ACs and cars and taxes all on one.
Well, from now on, here's what you're going to promise me. We're not going to swipe that credit card one more time. We're going to be our own bank.
Yes.
We can make do without it. If something really goes down where you need more than a thousand to cover it, you'd push pause on all the steps and save up really quickly because you guys have a great income. That's where freeing up those payments will give you a little bit of breathing room. Right now, you shouldn't get your head above water. So make all the minimum payments on the debts, focus on the smallest one, get the thousand in place, reshop the insurance, pause the investing. As you start to get more margin, it's going to become addictive. You're going to go, Where else can we save? What else can we do? We can cut that subscription. I'm going to send you my book, Breaking Free from Broke, and There's a chapter called Margin as breathing Room, where I lay out at least 10 ideas to make more, 10 ideas to spend less. My goal for you, just choose a few on each list, and you will feel so free just days from now if you do what John and I tell you to do.
I'm going to talk to everybody here, but I'm also talking to you, too. Okay, Cindy, I think when you're having to toggle a lifestyle shift with kids, especially teenagers, I want everybody to keep in mind this one word ownership. How can I invite my teenager, my middle schooler, especially, and even my elementary school kid, how can I invite them into the lifestyle changes we're making? That can be, I'm going to teach them about how much money we make, and they're going to start doing the budget with us. I'm going to help. They're going to get to sit in my lap when they're younger and punch the button in. This is what our electric bill is. So when I tell you to turn the electric like your lights off, this is why.
They're going to put the marbles in the jar for every thousand we pay off.
But when they feel a part of it, then less, Oh, my gosh, and more, Okay, we're all doing this together. And then you get a whole family united in the same direction.
Beautifully said. Hang on the line, Cindy. We'll send you a copy of Breaking Free from Broke. Wishing you guys the best. You're going to make it through. This is The Ramsey Show. Self defense can be a complicated It's not an issue, but there's one solution that makes it a lot easier. A Berna Launcher.
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Welcome back to The Ramsey Show. I'm George Campbell joined by Dr. John Deloney. As a listener of the Ramsey Show, let me ask you a question. Are you staying on track with the Baby Steps to reach your financial goals? If you're not sure or you want some clarity, take a quick quiz that we created to check your progress, and you'll get a personalized plan in minutes just for you. Simply head to the show notes, click on the link titled, Are You On Track with the Baby Steps? And complete the free quiz. Kyle's up next in Portland, Oregon. What's going on, Kyle?
Hey, crew. I Thanks for taking my call. Sure. My main question is regarding my student loan. I have a pretty substantial student loan amount. It's $250,000. I work for a nonprofit. My main question is, should I pursue that 10-year public service loan forgiveness, or should I just tackle it and go head-on and just try and pay it off?
Are you a doctor or an attorney?
I'm a doctor or a pharmacian. I'm a pharmacist. My gross annual is about 170. My take home is about 120,000 after taxes. Oregon has some pretty insane income taxes.
Yeah, that's why we live in Tennessee. That was a dig. I love Oregon. I think Oregon is a stunning place. Let me ask you this, what's the market rate for a pharmacist? If you quit there and went over to Walgreens or quit there and went over to a local hospital, what would that do to your salary?
I would make definitely a lot less. I work for a health care giant. I'm sure if I said the name, you guys would recognize it I make probably the best hourly, and the benefits are phenomenal in terms of how much I pay a year in health care and how much I pay for... Their match is pretty good as well.
You're working at a hospital, but technically, it's nonprofit.
Exactly. It's a not-for-profit hospital system.
Okay. All right.
You're saying you wouldn't make more going into the private sector?
No, I would not. I'd run primary class.
Okay.
Dude, here's what I just saw firsthand. After Biden's going to forgive it all, and then it didn't, then with Supreme Court, after all that, I'm going to be honest with you, I've stopped watching the news ticker on it every day. But what I witnessed was some of the most brilliant, extraordinary law students of mine decide to go into public service because of this 10-year repayment program, and they got hosed. It just got denied. They went all the way through it, and then a thing happened, or they went from working as a public defender to working on a nonprofit, and they reset the clock. Just crazy stuff that makes no sense. It really soured me on it. So what I would tell you is, 10 years from now is two and a half presidential elections. If you think you can predict what's going to happen in 10 years from now, best of luck to you. What I would tell you is for your soul, you make 175 grand. I know you get beat up on taxes, but you make 175,000 bucks, and you could probably pick up Saturday and Sunday work. I would hit the gas in an insane way over the next 18 months and just pay I suck her down as fast as I possibly could.
That's what I would do. I just watched some of the brightest minds like you just get burned alive by a governmental promise that didn't come through. Shocker.
I appreciate it, guys. I'll give you some stats, too. My wife and I, we own a home. We've been there for about a couple of years now. We have a four-year-old son, and we actually have a baby girl due in May, so we're really excited.
Awesome.
Congratulations.
We're on the debt snowball as step number two. We actually paid off our first medical bill today, which is 1,300 bucks, which has been nagging. We're making some huge changes in terms of how we spend. It's actually showing. But should we keep snowballing? Because we are still able to continue snowballing while working to save for our baby. How much do you have in savings? So we just have about 1,500 bucks in our starter emergency fund right now. We have about 150,000 in retirement accounts.
Are you guys still investing right now?
We're still investing right now, yes.
Okay. I would recommend pausing that down to zero for a short time to knock out these debts faster. And I would also recommend pausing to stack up cash. I know you can snowball while saving, but May is not that far away. Four or five months of stacking cash. I hope everything goes perfectly. Mom and baby are home safe. Great. Let's hit play, and we have a bunch of money to throw into the snowball, and we'll continue on.
Okay.
We call that stork mode in the baby steps. When you're in that baby step one through three world, it's okay to pause and just stack up cash.
By the way, everyone you work with is going to tell you that's the stupidest thing they've ever heard. They're going to tell you, Dude, you're missing out on the 2% or 4% match. Are you an idiot? Those guys are morons. Here's what you're going to have that they don't. You're going to have $25,000 in cash in the bank as your wife heads into labor or $30,000 in cash, and you're going to be able to sleep at night.
Yeah.
None of your colleagues have that. They've got a bunch of cool things on a 10 key and a cool things like... I don't know what they have. I'm just being a jerk. But But you're going to be able to sleep at night. Then the day after the birth, when the mom's doing awesome, baby's doing great, not day after, but the week or two afterwards, you're going to take that money and you're just going to roll it back where it needs to go.
Okay.
Suddenly, that loan is going to be $25,000 because you're going to have just dropped 25 grand on it, knock it down.
I'm not anti the PSLF program, but again, the stats are- I absolutely love the idea.
As a taxpayer?
Yeah.
I'm I'm happy to support that. You get some of the brightest minds in the world to go actually solve some of these governmental nonsensical issues. Dude, I love the idea. Taxpayer, I love the idea of taking some of the brightest minds and saying, You work for the government for half or a quarter of your market rate. I'm happily pay back your student loans. But those kids just get screwed. Here's the stat.
It's a half a % is what was actually approved from September 2020 through June 2023, 4 million were processed, 19,000 resulted in forgiveness. It was a half a %. So I think the program itself has a lot of flaws. I'm not mad at it. I also think devoting 10 years of your life to this and putting yourself in some golden handcuffs here because now there's a sunk cost. You're three years in, you have a terrible boss, the workplace changes, and you go, I got to get out, but, man, it's going to ruin my chances.
Or some AI thing comes out and somebody calls you and they're like, Hey, we'd like you to come work with our new pharmaceutical thing. It's going to be amazing. You're like, I can't do that because I have seven years into this 10-year repaint. Just get it out of your life, man. That's tough. Get out of your Get out of your life.
All right, let's go out to Crystal in Dallas, Texas, up next. How can we help Crystal?
Hey there. My question for you is, I'm a single mom of three. I do have a mortgage, and then I have $25,000 cash in the bank. I have $6,000 of zero % interest debt, and I have a car loan that I owe $25,000 on. My annual income is $90,000. I'm just trying to figure out… I feel safer having that cash sitting in the bank because I'm a single mom of three kids. If I were to lose my job or something happened, that's my safety net. I'm just trying to figure out, should I put some or all of those funds towards paying off the debt that I have or leave it sit in the bank.
This is a tough one. You do have a lot on your plate. I would argue that there's also risk. It's unsafe to owe that lender. They could repo your car if you don't make the payment. There's a piece of me that goes, if you knocked out the 6,000 debt, leaves you with 21. If you took 15 or 20 of that and threw it at the car loan, you're done with this car loan within a few months, making 90K, right? You freed up a payment from your other debt. So this is not a, you're going to go a year with a thousand bucks in the bank. We're talking about maybe three months, and then you're going to restack it with no payments in the world and get there really fast. Okay. But that's the fire. When you feel that thousand bucks in the bank and you feel unsafe, that's when you go, I'm going to kick it into high gear. I'm going to do whatever it takes to get rid of this debt fast, to get to that financial foundation.
If you flip it around, if you were to lose your job and you have this pile of cash, all those lenders are still calling you the next day. Right. It's six and a half dozen another. You could spread it out, right? You could pay some a little bit, but you're still going to have to pay that money. I would rather... I mean, just sitting here, this is me. I'm not a single mom with three kids, and so it's much easier for me to say this when I look at my own risk profile. But I would rather owe nobody and get laid off and figure out what's next, then have a I have a small pocket of money, but I have a whole bunch of creditors that are going to come knocking on the door when I got no job. That's just me a person.
I test the waters, pay off that first debt, see how it feels. I think you're going to go, All right, we can do this. You're going to feel the progress. This is the Ramsey Show.
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From the Ramsey Network, this is The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, joined by Dr. John Baloney. We're taking your calls at 888-825-5225. You jump into the conversation and let us know what's going on in your world, and we'll try to give you the right next step. Henry is going to kick us off in Raleigh, North Carolina. What's going on, Henry?
Hey, how are you?
Good. How can we help?
I'm lost financially. I'm not really too sure what to do. I'm in a good spot, but I'd like to see if you all were in my shoes, what would you do in the future you're coming up.
All right, lay it out.
Me and my wife previously had a home. Then we actually just moved back in with my dad. He's not far as anything. He just wants us to save money. I currently have 14,000 in my bank account. We got a little surprise when we moved in, and my wife is now six months pregnant. So, yeah, I don't really know if I should just keep saving and then buy a home or Because some people were telling me to buy a trailer, some people were telling me to buy a home. I'm not really too sure. All I'm doing is just putting money in my checking account, and I don't really know what direction to go.
How much debt do you have?
I don't have any. I actually just paid all mine Awesome.
You're at Baby Sip 3. You're saving up a fully-funded emergency fund. What does 3-6 months of expenses look like for you guys? Obviously, it's tough now because you're basing it off of zero rent living with dad. But what would it be?
Well, right now, the only thing we really have is my wife got a new car about six months ago.
Is there a payment on it?
Yeah, it's about- Henry.
That's debt, homie.
We got to start off this relationship with honesty. I asked if you were dead free.
Well, I'm thinking of me. She put it in her name. She did all of it herself.
No, you all are you all. Any money she owe, you owe.
Was this against your will or were you an accomplice in the crime?
Well, See, I work a lot. I get work on call. I was one of those on call working. She said she was going to go look at cars and then …
Snuck away to the dealership and showed up with what? How much was this car?
32,000.
How do you guys make a year?
I make 2150. She makes 19 an hour.
Okay. You guys are making… I'm going to just ballpark it and say you guys are making about 80K a year?
Yeah, It's out there. Okay.
In our world, just...
John's at a loss for words.
Yeah, it's rare. My wife and I, I I just can't wrap my head around any successful marriage I know. The partner would not go make a $30,000. Dave and Sharon Ramsey, they're worth $700 million, would not make a $30,000 purchase without telling the other person.
She told me she was looking at them, and then, I mean, yeah.
I know, but here's the deal. In our world, we call that financial infidelity. I want you to consider it being that serious of a thing because you have cash in the bank. You're worried enough about your future finances that you moved home with your wife to live with your dad, right? Back to your high school house. You have the burden that most men don't fully understand until their wife tells them, Hey, I'm pregnant, right? Now, suddenly, it's like you're under a squat rack and someone just put two more 45s on each side. You're like, Whoa, this is heavy.
That's the thing I'm worried about. Every week, I've been doing a lot of overtime, so I've been slowly building We're not buying diapers, buying things to be prepared. It's just- Don't do any of that.
I really don't know what to do. Don't do any of that. Again, that's you anxiously spinning out. Okay. You and your wife have to get united on how much do we owe? We're going to share a bank account. There's not your money and my money. It's our money. We're creating a home, a family. We made a human together, for God's sakes. We're going to share everything from this point forward, including our dreams, including our value And that's where the hard conversation like, Hey, we can't have a marriage where one person just rolls off and buys a... I texted my wife when she knew I was at Guitarsan her buying guitar. I let her know, Hey, I'm going to get one. Then she sends me a rolly-eye face. But it's in the budget. You know what I mean? It's just she's annoyed by it, but it is... But I wouldn't even do that with a small purchase like that. But it speaks to a larger unity. You've got one of you buying cars, doing whatever, and then you're up there hoarding diapers, right? Yeah. That just gets to this unity. Let's be on the same page and let's work together towards a common thing.
That may be the first time either of you all have ever seen that in your lives. It's new, and we can help you with that, man. But do you get what I'm saying, how peaceful that would be? Yeah.
Let this new baby be a reset and say, Hey, I've done a bad job leading our family when it comes to finances. Don't make it about her and her mistakes. Like John would say, use I language.
I want us to be on the same page moving forward because I want us to create an amazing home that maybe neither of us had growing up because I don't want our kid to ever have to move back in with us.
Got you. Yeah, I can definitely do that. Be amazing. My next question would be, how would we get out of it? Because it's 15% APR, 740 a month.
Holy shit, folks, bro.
What's left on the loan?
I came… I'm sorry.
What's left on the loan?
The principal is 32,936.
Did she put nothing down?
We put four grand down.
Oh, so this car actually cost 36, 37 grand?
Yeah. What's it worth? Twenty-six?
Yeah. When we were looking at it just to sell it, I mean, I'm probably paying about four or five grand just to get rid of it now. Do it.
Pay it right now. Pay it right now, bro.
What's your car worth?
So I have a spare vehicle, but it actually broke down, but I don't have another vehicle.
So you guys are a one car family?
Yeah. I don't have to drive. I don't have to drive. I have a company vehicle, so I don't have to drive a personal vehicle to get to work.
Got it.
So that helps us out a lot.
I would look at what the private party value is and try to get top dollar for this and be as little upside down as possible and then use whatever in your savings to cover the difference, to clear the title, and then go get you a $4,000 used car right now to get out of this mess. Because then you can start stacking up. I imagine the payment on this thing is massive. What are you paying monthly?
With insurance, it's almost $1,000 a month.
Golly, dude.
That is a lie, man.
I almost had a stroke when I saw it. Yeah.
Yeah, no wonder she didn't tell you. Goodness gracious.
I want to be compassionate. Has she seen... That was dumb.
Yeah. Now, she's trying to figure out what we can do. Because now she's on the same page because before I wanted to just buy a cheap beater.
Yes, absolutely.
That's all I've ever done. I've never owned a brand new vehicle myself.
That's why you have no debt and $14,000 in a bank account. You know what I mean? You haven't made some car dealership wealthy by paying the depreciation on their vehicle for them.
So your job is not to convince her that she needs to sell her car because she made a giant mistake. Your job to give her a vision for what the future is going to look like. A byproduct of that is we got to sell the car. It's a different conversation.
We're going to go take out a loan for the difference, or we're going to save up five grand real fast. Or you got 14 grand. They haven't saved. You're going to go sell that thing, private party, and you're going to be upside down on it. You're going to write the other 4,000 bucks, and you're going to be done.
But then this baby is going to come into the world debt-free with a fully-funded emergency fund, building for the future instead of paying for the past.
Don't buy a trailer. Go get an apartment that you all can rent, and you all can save up for a down payment on your own small starter I'm going to say, Thanks, dad.
I got to go get my own place, and we'll figure it out. This is the Ramsey Show. Hey, George Campbell here with a not-so-fun fact. Every American Social Security number, including our children's, has been hacked and is now on the dark web. And this is not a scare tactic. This fear mongering. It's a reality that could turn into a nightmare for a lot of people. And believe me, I've been a victim of identity theft, and I would prefer it never happened again. Because once the bad guys have your social, it's the lifeblood for all of their activity. Think of all the places you use your social. Your banking, your employer, government offices, utilities, cell phone companies, everywhere. And once they've got it, thief can open new accounts, drain existing ones, steal payroll, and wreak havoc all in your name. Not cool. And to be real, it's not a matter of if, but when. So you've got to protect yourself with Xander's ID theft protection. Xander has all the cyber tools to help, including home title monitoring, full recovery services if you do become a victim, and stolen funds protection. Not to mention, it's the best value on the market.
They've been protecting my family for over a decade, and I trust them to protect yours, too. So get enrolled today by calling 800-356-4282, or just visit zander. Com. That's Z-A-N-D-E-R. Com. Hey, George Campbell here. So you're thinking about buying selling your home. It's exciting, but there's a lot to think about, and all those decisions can feel overwhelming. Well, here's the good news. You don't have to tackle the process alone. Ramsey's Real Estate Homebase is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start to finish guides, a podcast, and even an in-depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps toward your home goals, go to ramsey solutions. Com/realestate. That's Ramsey Cribsolutions. Com/realestate. Welcome back to The Ramsey Show. I'm George Campbell, joined by Dr. John Deloney. Hey, if you're ready to get your finances in order once and for all in 2025, join us January 23rd for a free livestream, Take Control of Your Money. It's hosted by Dave Ramsey and Jade Warshaw. That's how you know it's going to be good.
You're going to learn how to stop living paycheck to paycheck, learn how to free up more breathing rooms, so you can pay off debt fast, and finally get ahead with money. Plus, Rachel Cruz and I will join at the end for a Q&A where you ask your money questions live. And here's the real reason to join. When you sign up, you'll be entered to win our cash giveaway. Five people will win $4,000 each. Not a bad way to kick off the year. So go sign up for the free livestream by going to ramseysolutions. Com/livestream. Or click the link in the description if you're listening on YouTube or watching wherever, podcast, all that good stuff. Check out the show notes. All right, Lucas is in my home state, Worsta. What's going on, Lucas?
Not too bad, How much is that? Enjoying some of the cold weather because I'm a skier, but not too excited that there's not too much snow here yet.
Oh, wow. Nashville might be beating you for us.
We got plenty of snow today. We got five or six inches today.
Probably, But yeah, no, it's a good day, and honestly, it's a good year. We've got some good resolutions, and hopefully, being on the call today, hopefully, you can give me some advice because I'm trying to find some peace of mind over here.
Yeah, what's the question?
Yeah. So the question really is, I'm getting married this year to a beautiful woman, and God willing, we're in a great position to get married, buy a house, build a house, part of our goals. But we're faced with some challenges at the moment. And the challenges are really we're not able to find land that's in our price range. Homes are just very expensive in general if we wanted to go down the route of building a home. Then we're also faced with the challenge of becoming further from our family, our friends, our church family, our communities, to find that nice price that fits into our budget. So really, the question is, should we keep continuously saving? Because we're not in debt. We have a budget. We've spoken to some of the financial advisors and whatnot. We're in a good spot. But the thing is, should we keep saving and wait for affordable land that's in our budget? We're looking somewhere in the central mass area, or should we buckle up and consider buying one of these homes on the market when it seems like those really expensive ones and the ones that are like fixer uppers all at the same price.
Let me free you from two things. Number one, let's assume there will not be magic affordable land anytime soon. Number two, let's assume there's no such thing as our dream home. And so instead, if you go, All right, I'm a newlywed looking to get my very first home, it doesn't need to be the 30-year dream, but I need to get my foot in the door. That can free you to go, All right, we're not going to go buy land and do this dream home right now. We're going go buy a single family in an established neighborhood with some good schools at a reasonable price. That still is too expensive. It's because I'm angry at how expensive the housing market is. I know. I wish we could all go back in time, but we can't. Instead, we go, All right, how much do you guys have saved right now for the down payment. How much do you guys have saved?
We have right now saved a little bit over 200K. Wow.
That's amazing.
First off, I want to, if my parents are listening, I I just want to say thank you to them because without them, they really helped me save some of the money and also my fiancé.
Well, what really they did is they modeled it for you. They modeled what it looks like to live on less than you make. So That's awesome.
Thank God they did. Yeah. We're ready to put a down payment. In details of a down payment, I have no idea, to be honest.
Okay. What does a reasonable home cost in the area that you would like to live right now? Not the dream land, but just, Hey, this is in your family. It's in a good area. Is it half a million?
Yeah, I would probably say around there, or even 400, 400,000.
Okay. You could put 50 % down today and have a $200,000 mortgage, and your household income is what?
Household income a month is around $10,000.
Great. So you guys are taking home about 120 a year?
Correct. Okay.
So now your next step is jump on the Ramsey Solutions' Mortgage calculator and go, all right, our 15 year with 200 down on a $400,000 house, the payment is going to be $2,500. Great. That's a quarter of our take home pay. Let's go ahead. This is a great home. Let's do it. I wouldn't overthink it to the point where you wait seven years to buy perfect land.
Yeah, I think that's the issue, though. That's the thing. I mean, we're very much like, we've got this money, we've got this vision. We want to just build something that we want first off the bat. But we're battling that idea of buying something or just Are there existing neighborhoods with new builds where you could have it somewhat custom for you? Not necessarily. We're looking, I think we're very unique. We're looking for something very specific. We're looking for a nice little overlook of an area of land and some good acreage of land, probably good five acres of land.
You come from the Deloney lineage. Exactly. John loves nothing, but he just, Give me all the acres you got.
Okay, so, Lucas, here's the thing you need to make peace with, okay?
Yeah.
You have a dream, and you've worked towards that dream. Here's what you've done. You've made choices.
Yeah.
What you're not doing is choosing to have peace with your choices.
Yeah, I agree with that.
You're the guy that got married and continues to talk to all his old ex-girlfriends. It doesn't own the gravity of the reality of I made a choice. I picked her. You guys, right now, as a family, as a couple, you all have picked a house on five acres. That means you all aren't there yet financially. Great. Make peace with it. Be frustrated and be annoyed. But what you're doing is you're making yourself crazy. What I want you to see is that you're making a choice to be miserable. Now, if you all want to go back to the well one Saturday morning over pancakes, and the sun's out, and it's cold, and you all are like, Hey, let's Let's swipe the table clean with this five acre dream. If we had to go right now, is that still our dream? Great. It's awesome. Maybe all are like, You know what? We don't need five acres. We can go play at the public parks, dude. We want to get a house. Let's get a house right now. Okay. But right now, you're working really hard towards a dream. You're way ahead of the curve. Most Americans don't have $250,000 in an account somewhere.
I want you to focus not on the scarcity, on what we're doing at. Bro, you are on your way.
You're in the 0.0001%.
Of people. Yeah, be frustrated that it's so expensive to buy land.
That's annoying. You still can't afford a million dollar piece of property.
Yeah, it's annoying. I'm not going to choose misery. Now, with $200,000 in the bank.
Yeah.
You know what I mean?
Yeah, go ahead.
I was going to say, if you want to change your values, change your values. But right now, your value is we want five acres, and I love that. That's me and my family, Then I'll tell you, after three or four years, my wife wanted something crazy, like sell signal, and she wanted- To live in a society. Yeah, like water to always come out of the faucets when we turned it on, right? Who knows what's going to happen in four or five years? Or land is really a fun idea until you have two or three kids and going to the grocery store takes an hour and a half round trip.
Or dropping them off at school is a two-hour round trip. Right.
Yeah. All I have to say is, Dude, I'll be in pursuit of acres until I don't live anymore. I love that dream and vision. If that's for you all, awesome. Just don't choose misery today because you all are doing great, man.
How old are you guys?
We're in our late 20s.
Awesome.
You run out of time, man. Come on.
Dude, you're so far out of the game, really.
I know. But think about it. If you guys got a normal house now in a normal neighborhood and you get it paid off in your early 30s, probably by the time you guys are 30, you'll have this thing paid off, knowing how you how intense you guys are. Then we start stacking up cash on top of that. We can sell it. We can get the land on top of that. Who knows? Your income is only going to go up from here. Obviously, you two are sharp. You're going to be newlyweds combining income. You're going to start off your marriage debt free with $200,000 in the bank. I'd be grateful, and I would take my chips home from the gambling table and go, We did real well.
Or you can rent a house. Once a year, you and your wife can go stay at a farm somewhere for an obnoxious week and then keep the dream alive. Then when you got the money, you got the money and you go get your place, man. But let's don't choose misery today by just sitting there fretting and googling and checking Zillow every five minutes. Don't make yourself bananas.
Maybe there's a secret listing I haven't found yet.
Yeah, get a dollar amount and work your butt off to get that. I'd rather see you working instead of googling, right? Don't choose misery.
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What's up, guys? It's Jade. So picture this. It's the end of 2025, and you're looking back totally amazed. You're looking at just how much your money situation has changed. Bills paid, savings on point, and money stress, not having it. You're breathing easy now. Can you see Listen, I don't know about you, but I know that you can have this. All you need is a plan. And that's where the EveryDollars budget app comes in. Everydollar will help you create a customized plan for every single dollar that you've got coming in and going out. The app is super simple to use. And guess what? It's free. Come on, somebody. Imagining things being better is one thing, but putting in the work, that's how real transformation happens. So go download the Every Dollar app today and let's do this. Welcome back to The Ramsey Show. I'm George Campbell, joined by Dr. John Deloney. Open phones at 888-825-5225. Our question of the day is brought to you by YreFi. Yrefi refinances defaulted private student loans and builds a custom loan based on your ability to pay. You'll have a payment you can afford with a low fixed interest rate you couldn't get anywhere else to help you stick to your budget and work that debt snowball.
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Today's question comes from Wanda in South Dakota. Wanda writes, My 71-year-old husband had to retire last year due to a stroke. He's okay now but not able to work. He was self-employed and did not have a 401 or a pension. We have to live what we were able to save, which is about $320,000. I'm 67 and got out of the stock market a few years ago because I couldn't sleep at night worrying about whether the market was going to tank. Our house has paid off, but our property taxes are high, and we pay a lot in medical insurance. My husband's Social Security is around $2,000 a month, and mine is $1,600. Can you please tell us where we can invest our cash so we can live on our savings at least another 20 years?
All right. So they have a- Can I just say this?
Wanda is scared.
Yeah.
Also, it's not as bad as... They're in better shape than many of the calls that we get.
Yeah, they have a fixed income of 3,600, and they have $320,000. $320,000. That I think is just sitting in cash right now in the bank.
That's what it looks like. But they have no liabilities. They paid off their house. All of that at least lets me go, Okay.
This is where I do a budget with husband and go, Okay, we have 3,600 coming in. Here's all of our bills. Do we have money left over or are we in the red every month?
We take property taxes. We're going to divide by 12. That's a monthly bill we're going to put aside.
Put it in a sinking fund line item in the budget so that you have that money ready come 12 months from now. That's right. Now, as far as the money goes, where to invest it, you said, Where can I invest this money? Well, you just told me you got spooked by the stock market tanking. Can I give you some piece here? If the stock market goes to zero, we have much bigger problems. Every All being in America goes bankrupt and it's worth $0. That's what would have to happen. I'm not worried about the stock market tanking. You're going to have to ride some ups and downs, sure. But if you look at the stock market last year, 2024, it was up 24% over your money that got 0% sitting in a bank. I'm actually more scared for that money to sit not being in the stock market than I am about the market tanking.
George, this makes me think stock market that she had a bunch of stocks. Maybe I'm I'm just looking at it when I see the word stock. It could be. Stock markets versus some- A mutual fund. Mutual funds.
That has hundreds of stocks. That's what you want to focus on is an index fund, a broad-based low-cost index fund. If this money is not in a retirement account, I don't know where it is. I have no clue. But if it's non-retirement, you can just invest it in a taxable brokerage account. As you need, pull money out of it. Obviously, when the market's down, that's the worst time to pull it out because it's worth the least. But when the market's great, you can pull a little more out and pocket that away in a savings account to cover you for the future months. But it really depends on what your bills are. If your bills are three grand a month and you're taking in 3,600, breathe easy. You don't need to touch the money. Let it grow. Let it ride.
In fact, I would strongly challenge somebody to create a life that is below that $3,600 a month threshold. You got no bills other than you got your utilities, you have your insurance, and then you've got your health insurance, your homeowners insurance, and your health insurance.
And your property taxes. Property taxes, yeah.
I would try to build a world where we did that.
If you need downsize in house and get lower property taxes, that might be an option, too.
Or leave South Dakota. There's all kinds of options there. But you would suggest just put it in a- Back in the stock market in an index fund or mutual fund.
That's it, yeah. Keep it simple. Let it ride. Don't touch it unless you need it.
Let's say the last 100 years, historical average is stay, right? Yeah, it's 10 to 12%.
It'll double every seven years at that point.
When he's 78, you'll have 640, depending on what you pull. In 20 years- At 85, it'll be 1.3 million?
Yeah. I could live with that. Yeah. It could be all right. Thanks for the question.
Great question, Wanda.
All right. Sue is in Detroit up next. How can we help Sue?
Hey, guys. Nice to talk to you. You as well. I was hoping I could do this a little bit better, but got a question for you. I've been with someone and recently married three years and found out last year that my spouse has not filed taxes for over 20 plus years.
Oh, jeez.
How bad is it? I'm very firm on this. I don't know. Things have been hidden from me. I gave them an ultimatum last year. I said, Listen, you've got one year to clear this up, to get started, to reach out, get a payment system going. I was like, If you talk to them, they're not going to come after you. They'll work with you because I've had it happen before. A year went by and I found out that the person he was supposedly taking his taxes to and followed an extension with had passed away. I had no idea this person had passed away. Come to find out, he then admitted he had never taken any information to this person whatsoever.
If behavior is a language, what's he been telling you for the last year?
That he's too scared, and he's putting that fear over our relationship.
That's one way to think of it. I was thinking more him looking at you saying, I would rather be scared and hide than to make my new wife feel safe.
Yeah.
Is there kids in this mix?
Well, there are five kids. Thankfully, they're from a previous marriage. I'm not really sure how to proceed with this other than I've been researching and trying to protect myself. Luckily, I've always done married filing singly because it just seemed odd to me that I'd say, Hey, let's get our taxes going. He goes, Well, I'm going to be a little bit late. You go ahead and just do it this way. I said, Okay. Then it finally really just started on at me last year, and when I found out about that- Is he ready to deal with this?
Or is this just you wanting him to? No, he's not.
I want him to, and it's been over a year, and now I'm going to have to make good my word, which is- Is he ready for his kids to visit him in prison?
What's his game plan here?
I have no idea. Just put your head in the sand, I guess, and hope that you've dodged the bullet for 20 plus years. Maybe you'll get lucky a little bit longer, but I can't.
What else He got you. What else is he not honest with you about? This stuff doesn't happen in a vacuum.
Probably other debts, his spending. I'm guessing no shared financial life.
No, I found out that he had just gotten a job a couple of years back with the company I work with, and the salary that he was telling me what it was, was actually like 20,000 less annually than what he is actually being paid.
He's actually making more, and he's using that money for God knows what.
Exactly. I don't know what.
Have you been through an ugly divorce before?
Yes, I have.
It's really common to find in this situation. When you go through an ugly divorce before, especially one that you thought was going to be forever, it's common to look in the mirror and lose trust in you. What did I not see? Why did I not do this sooner? All that stuff that comes with it.
Right. Blaming myself for not seeing red flags sooner.
That's right. I guarantee you that's happening again tenfold this time.
Yeah. Here I go again. Very Dave Ramsey approach Actually, he introduced it to me back after my last failed marriage, and I've been working really hard to be financially sound.
Yeah, but he's a scam artist. He's a scam artist and a liar and doesn't tell the truth.
Yes. I've done the morning of my marriage. I've moved on with that. I've been moving finances to a totally separate institution. We've never had a bank account together, anything like that. I don't want my children to be affected by this. I want to buy my house. I rent a house for my mother. Okay. I want to buy it. I want to have that stability so that I can have my grandbabies come here someday. Yeah. Have you pulled your credit to see if he's pulled anything in your name? No, he has not.
I did check that. Okay. I would freeze that, too.
Okay. And then you or him, maybe both, need to get in touch with a tax attorney ASAP and figure out what's the next step, because this is not going to just go away. They don't just go, Well, I guess he doesn't exist anymore. He hasn't paid his taxes. He fled town. They're going to find him.
And they He may hold you responsible for some of the joint taxes while you all were together. So, yeah, I would get a tax attorney, and if he won't, then you need to go on your own. I'm sorry that this has happened to you yet again. What a mess.
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Who knows what could happen The side of the app? It's our world. You're just living in it. All right, Rick is in Madison up next. What's going on, Rick?
Hey, guys. How are you?
Doing well. What's up, brother?
Good. Say a question for you. My wife and I are restarting the baby steps, and we currently have about five grand in our savings account and about 111-ish in debt. 58 of that is mortgage. 18 of that is credit card, 8,600 is a car, and 27 and a half of that would be a home equity loan. My question for you is, should I take that savings down to a thousand, use that four to put towards debt, or how do I go about tackling this?
Yeah, the debt snowball. You're going to attack the smallest debt first. So what is the smallest balance right now out of all those debts?
Smallest balance is the car at 8,600 at 1.99 %.
Are the credit cards, did you do consolidation on those?
It's just one credit card. Long story short, half of that is from some medical bills that insurance didn't want to cover, yada, yada, yada. You know how that goes. Okay.
But you have an $18,000 balance on one card?
Correct.
Just one So if you threw that at your smallest debt, that's the car loan, that would leave you with 3,600 to go. How quickly could you tackle that while making minimum payments on the rest?
I think we could probably do that pretty good. My wife and I make a 160 combined and probably bring home like one, 110.
Awesome. You guys have a great income to tackle this, but you're still staring down a mountain. I would separate the mortgage, so take that out. When you're looking at this debt snowball, it makes it overwhelming. And that's a baby step six item, so that's going to come later. That really, it frees you when you just look at that and you go, All right, we've got some debt, but we make 160, and we got to clean up 45. All right, we can do this. Now your new mission is to figure out how much margin you can throw every month at the next smallest debt. Again, it's going to pick up more snow because of that debt snowball working for you as you free up each payment.
How much do you pay a month for that car?
325, I believe it is.
Let's pretend you get paid on the 15th. If you took the $4,000 from your savings and you all had four grand because you all bring home, what, 10 or 11 grand a month, you had four grand left, and you're done with a car in one month. Now, you've just dumped $25 back in the system.
Okay. On top of the money you were already throwing. That's where it happens faster than you think because of that snowball method working in your favor. But again, this is some intentionality. If you're throwing, if you've got 50 to pay off and you're on track to do four grand a month, this is going to be a year of sacrifice.
Can you all do four grand a month?
Well, that's part of it. We'd have to get back to a budget. Honestly, I'm not going to say yes. I'm not going to... Well, I'm going to say yes because I want to, right? But we haven't been on a budget. I'll admit that to you guys. We just fell off. Yeah, but you're bringing home- I've been there.
It's fine. You're bringing home like 10K a month thereabouts.
Are you doing any investing at all in a 401k or anywhere else?
So Yeah. Through mine, about eight and a half % gets taken. That's not voluntary. That's through the Wisconsin Retirement System, the WRS. And then I have a 401k and I have a 457b that I have, and my wife has two Roths as well through her work.
Okay. You guys are doing a lot at once right now, and you're not really seeing a whole lot of progress. What if just for one year, we said we're going to pause retirement and we're going to come back swinging investing 15 % after that Okay.
I'm going to write this all down here. So pause retirement.
So pause retirement. You can reshop your insurance. That can save you big sometimes because you've been overpaying with the same carrier. So reshop it. You can go to ramseysolutions. Com/checkup and do a little coverage checkup there to make sure that you're checking off all the boxes. Then on top of that, now it's okay, what are the other levers we can pull? Are there any subscriptions we can cut? We're going out to eat. We need to stop that and start meal prepping and being really intentional about our grocery runs. Once you start doing six or seven things at making more spending less, all of a sudden, it's easy to find five grand sitting around in that budget that you were just lazy with.
Okay. All right. Yeah, I appreciate it, gentlemen. That was my question. Like everybody, we're always paranoid about money and finances, so that's why we weren't sure what to do with that additional savings we had.
You got it. It's scary. I'm not going to lie, Rick. When you take that down to a thousand, your breath is taken away, and you realize just how risky of a position you've put yourself in by being in all this debt. But the good news is you get out faster.
He was saying it there, and I think it's important. I always tell people, you got to choose your heart, right? Being 100 pounds overweight is a hard way to live. It's hard. Losing 100 pounds is incredibly hard. It's not a matter of one's easier or not. It's just choosing your heart. Similar here, it is terrifying to go to $1,000 in your savings account. That's terrifying. It's also terrifying to wake up every single and know we are 50, 60, 70, $150,000 from multiple different angles. These guys will take our house, those guys will take our car, they'll take our insurance. You're just choosing your fear. Which one do you want to have? You want to have an acute fear of, Oh my gosh, we only have a thousand bucks, we got to hustle and get this thing done? Or do you want that grinding, low-level hum, that fear that never goes away, that you don't even get a say in your own life? Man, No, but you're just using your fear.
Yeah. What's interesting as you were talking, I was thinking about how people tend to go into debt when they're desperate or when times are really good. They go, Well, we'll just take out a heelock. We'll take out the home equity loan. Yeah, sure. Get the car payment. We can stomach it with our income. Then they don't make that income anymore. There's a job loss. They need to move for whatever, for family. All of a sudden, it gets scary because you realize just how exposed you were. That's right. What's the old Warren Buffet quote? When the tide goes out, you can tell who is skinny divin.
Yeah, who doesn't have any clothes on.
The tide's You've been submerged in the water with this beautiful income, surviving, making all your payments. All of a sudden, the tide goes out and you go, Oh, my gosh. This is a scary way to live. That's right. We actually had a house of card situation. I'm really proud of Rick because this is the hardest part to get to when you're willing to just burn the chips and go, All right, we got to do it. We're willing to do whatever it takes. Show me the way. Yes. Those are my favorite calls to take because they're not trying to argue that their plan is working.
Yeah. No, I love it when someone's like, Okay, what I'm doing is not working. Help. That's one of my My favorite phone calls to make when I call buddies about workout programs or nutrition or something. Okay, what I'm doing is not working. I need some help. I love that, man, because that's usually when people can say, All right, I got you.
Instead of arguing with John going, Well, my workout plan, this is what I'm doing. Here's why I think it could actually work. They're just watching you going, All right, that's cute. Whenever you're done, come back in. Whenever you're ready, we'll be here with a better plan for you. That's right. But that's big. If this is the year, you're going, Hey, I'm going to get out of debt. I'm going to do things differently. We're here for you. We've got a free livestream coming up on January the 23rd called Take Control of your Money. It's completely free, hosted by Dave Ramsey and Jade Warshaw. Maybe you need some new information. You didn't grow up with financial literacy. Maybe you need a little pep in your step. Well, Dave and Jade, I think they're 90 % pep, DNA-wise. If you need that, go sign up for our free livestream, ramseysolutions. Com/livestream. You'll also be entered to win our cash giveaway. Five people win four grand each. Go check it out. Link is in the description. And again, this is it. If you're listening on YouTube or podcast, to continue listening to more of The Ramsey Show, go download the Ramsey Network app.
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