Break The Borrowing Cycle

23:42Rachel Cruze:I'm going to celebrate getting possibly a$90 ,000 job with a$90 ,000 car. Can you walk me through, like, Rachel, can you walk Rachel and I through that, Cordell? Because you're sitting here telling me what a struggle it was and what a sacrifice it was for you to sell that truck to pay off all that debt. How in the world did you get to there, from there to, like, yeah, like 80 or 90 on a Denali feels right? so really i think i just gave into her and well i had about 20 grand in cash sitting there and uh i was like this is your dream car she's gonna be making good money i make pretty good money we'll have no problem paying it and then you know we're already paying a thousand extra on our mortgage a month we can afford this okay so you got it what did you end up spending legitimately uh 68 000 and i owe 40 on it right now okay so you owe 40 yes ma 'am what else so the only other thing i have is my mortgage and right now 120 on it my dilemma is we've worked really hard at saving money and right now i have 6 ,400 in my checking.

24:59I put 10 ,000 on my emergency fund. I just put 10 ,000 in a CD. I can pull it out at any time, but just so we don't touch it. And then I've really been wanting to get a truck. And so I went on the road this year from April to August. I saved up about 75 ,000. Okay. And now I'm at the dilemma. Do I buy my truck? Well, where's her money?

25:23Rachel Cruze:Where's her? You just gave me all your numbers. What is she making as a nurse? So she makes about 75 a year as a nurse before taxes, and I make 110 before taxes. So 185 a year combined. And I'm not trying to poke holes in what you're doing. I'm just saying you saved up$75 ,000 for a car, but there's only$10 ,000 in the emergency fund? Yes, ma 'am. So this year, the 75, that was an extra. That's added on to my annual. That's just like a bonus. I did that in five months. I had to travel around the U.S. to do that work. No, and I commend you for saving up the money. I'm just saying, don't you think it's strange that you're earmarking more for this truck versus stacking up a proper emergency fund?

26:13What kind of truck do you want? It's a Denali Ultimate.

26:20Rachel Cruze:I like your cars. Gosh, I mean, Cordell. It's not bad. Like having a nice car is not bad. It's not, but I'm struggling with the mindset. Yes, your priorities are kind of all out of whack a little bit. And see, I guess that's my wife is encouraging me. She's like, I know you haven't had a truck in four years. Oh, poor Cordell. Hasn't had a truck in four years. I'm so sorry. I'm just kidding. If George was here. No, I'm not sorry. I'm not sorry. If George was here, he'd be a lot meaner. Truck guys. But wait a sec. Is the problem, tell us the real problem. Because first off, it was like, man, we owe$40 ,000 on my wife's Denali.

26:59Now we're over here. You're trying to buy a, you're trying to do yours in cash, it sounds like, which is fine. But don't you want to get out of the current debt first? Absolutely. Absolutely. So when I say I was on fire about it to get out of debt, I had to sit it down, put the numbers in front of her to see it. And I was like, hey, if we pay an extra grand on our mortgage every month, we'll save$70 ,000 at the end of interest and this and that. And so I guess I feel she's encouraging me to get my truck. I feel guilt.

27:35Rachel Cruze:Well, hey, can I ask this, Cordell? Is it a brand-new truck? Is it going to cost you$75 ,000? They're about$93 ,000. I knew it. Okay, so listen, y 'all have too much car. You make$185 ,000. These two cars combined are going to be about what you make a year. Yeah. So you guys can't. You have champagne taste and beer pocketbook. And I hate to say beer pocketbook with$168 ,000 a year because it's good income. But y 'all, you can't afford this. This is out of. I'll be honest. This is classic middle class America right here. This is it though. For real. For real. Is that you want the nice truck, the brand new thing, and you make good money, but you would rather have a depreciating asset going down in value because it feels good than actually prioritizing your financial life, which would look like getting out of debt, having cash saved in the bank, investing for your retirement.

28:38Rachel Cruze:And then what we have left, we can figure out what to do and we're going to buy a used car because you guys are not net worth millionaires and so you have to you have to look at these cars that the function is it's not your identity it's not who you are it is to get you to point a to point b and if it's a not if you're making a ton of money and you can afford that that's great we're not mad at it but it has to be in a in a reasonable sense and you guys are just out of out of out of reason well and cordell No, I'm looking at this going, I just want it to be worth your time because you sat and painted a picture that I felt, which is, man, you guys really sacrificed in 2021 to win.

29:18Like you cut deep in order to do that. And if you go forward with this, you're taking all of the air out of that. Like you're taking all of the meaning out of that sacrifice and you're going back to square one. And so all that sacrifice will have been meaningless because now we're just back in debt again. And I said it yesterday on the show, and I'll say it again. When you choose this path, the very first step that you have to take before you even start the baby steps is you have to draw that line in the sand and say, I'm doing this because I'm not a person who borrows money anymore. I'm not a person who does that.

29:51And so you guys stepped over your own line when you did her car. And now you're stepping over another principle of the plan that you say you want to work when you do what Rachel said. And it's like you're buying more car basically than your income can afford. So I'm more in the I'm trying to protect you and your wife because you guys have worked so hard. And I think I don't know. But what I'm sensing is like in our city, in our town, we're like killing it. And we got these cars and there's like a facade that's attached to this. And I think that you guys are starting to play into that. And I think you have to be really careful and you're feeling like I have a good job.

30:32She has a good job. We deserve to have this. And I just want to remind you that I actually think that you deserve a life of peace with no payments. I think that you deserve to have the comfort and security of a fully funded emergency fund. I think you deserve the feeling of actually working hard and it meaning something at the end of the day, not just shiny vehicles.

30:56Rachel Cruze:And not letting your emotions drive you. I mean, you know, children do what feels good. Man. Adults devise a plan and follow it. And so following a smart financial plan is going to help you long term more than a Denali will. Talk that talk.

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32:43All right, well, let's get right back into it. We've got Colin in Boston, Massachusetts. Hey, Colin, how can we help out today? Hey, guys, thank you for taking my call. No problem. What's up? So I'm a 26-year-old from Massachusetts, and I bought a bachelor pad condo two years ago and recently got married. And my wife and I were looking to see if it's feasible to get a house next year without going house broke. and if you guys can provide some financial planning for us. Gosh, I love that question. Congratulations. You're thinking about doing the house. The first thing I want to know about is your financial situation.

33:30Do you guys have debt? Do you have savings? Tell us a little about that. Yeah, so we owe about$228 ,000 on the condo, and there's about$84 ,000 in equity on that. And the only other debt that we have is$8 ,000 on her car, which we're going to pay off in the next month. And then on top of that, I have money in high-yield savings just kind of sitting there. And I guess I'm wondering if it makes sense to just put that money directly towards the mortgage and build up more equity.

34:09Rachel Cruze:How much is in there? There's about 40 in high-yield savings. And I also have three to six months in emergency savings, too. Oh, how much is that? Separate than that? Yeah. Oh, good. Okay. And how much is the three to six months? We'll call it about$15 ,000. $15 ,000. And that's three months or six months? I'd give it, that's about four and a half. Okay, sweet. What price home are you guys looking at? Or in your area, what would it be? Yeah, Massachusetts is pretty expensive. I mean, a house that we would get is probably around$500 ,000. Okay. Yeah, and median listing price, by the way, in Boston, and I don't know if you're in Boston proper or if you're out in the outskirts, but for Boston, it's$1.2 million is the median listing price.

35:03So you're not wrong when you say it's expensive. How far out are you guys? About 20 miles. Okay, so you're not far out. All right.

35:13Rachel Cruze:Um, so if I'm running your numbers on our mortgage calculator and anyone that's interested, you can go to Ramsey solutions.com and do that. Um, okay. It's looking like it's going to be about 4 ,300 for your mortgage payment. And how much do you guys bring home a month? Uh, that's around 5 ,000 take home. Okay. So now this is where we kind of get into the tough part because I mean, you said it right. And I think you have the right idea. You don't want to be house poor. You want to go into this with your home being a blessing and not a burden, which is what we teach. And so it's going to be really important for you to make sure that this payment, when you do buy a house, is no more than 25 % of your take-home pay.

35:56Yeah.

35:57Rachel Cruze:So in the condo, you said you guys have$84 ,000 of equity, but how much is it worth? The Zillow estimate is like$318 ,000. 318 okay okay yeah i mean honestly colin i would stay put where you are keep um paying down you know get this car paid off i would keep you know working to pay down the mortgage so that your equity continues to build up and unless you guys can find something cheaper but i mean honestly i know it's going to be it's going to be difficult you just have to in order to own a home sadly in that area, you just have to make a ton and it may not be feasible in the next couple of years until your income goes up to get something that's worth purchasing, right?

36:45Rachel Cruze:So that you do have to buy a lot of patients in this process. Yeah. Which is, which is not fun. What are your careers? I do marketing for a general contractor here and I don't know if you're going to like to hear this She went down to part-time now once we got married. Because of a child? It's been working for us. Sorry, say that again. Because of a baby or just because? Just for life choices. And we're falling into our biblical roles here. And it was just the job that she's in, she works at a tax firm. And, you know, tax season gets extensive with overtime. And on top of the overtime, she was planning our wedding.

37:38And so that got extensive. And so her job was able to allow her to go down to part-time.

37:43Rachel Cruze:Yeah. So bringing home$50 ,000 a year in Boston, you're probably not going to be a homeowner doing that. So you can't really, you know, have your cake and eat it too. You know, having her work part-time and having a realistic expectation of owning a home. So that's the reality. Now, if she was making 50, you're making 50, then you're up to, you know. Now we can start talking. Then we can, or yeah, like if she brings home 5 ,000, you're bringing home 5 ,000. That's 10 ,000 a month. And I'm like, okay, all right. Let's see if we can get something, you know, in the 3 ,000. I don't know. And then you have some more money saved.

38:19Rachel Cruze:Then it really starts moving, the numbers. What's keeping you in such an expensive area? I mean, it sounds like the nature of your jobs, you could do something like that in a less expensive area where you could have more of what you're looking for, which is a wife working part time, you working full time and a home. You know what I'm saying? Yeah, I guess my job is based out of Massachusetts. And so that's the reason why we're staying here. We don't want to stay here long term, but for the short term, it makes sense for us to stay here. But I'm saying the nature of the type of work you're doing, could you do that elsewhere?

38:59Obviously, you're working in that area now, but could you do that in another area? Yeah, for another employer, I could. That's what I'd be thinking about. And I'm not saying that you have to make that move immediately, but I am saying that what Rachel said, which is we need to sit down and talk, you and your wife, about our values and what we truly want our life to look like, not just for the moment, but even long term. And if we start seeing things long term that we can't do where we are today, then we have to start making a plan for what that will look like as we go through life. If we say, gosh, we really want to be homeowners, that's important to us.

39:37Well, we might not have to do it this year or next year. But eventually, knowing we want that and knowing the kind of trajectory for our income and knowing that we live in Boston, well, gosh, we need to start thinking about a plan for what that means for us. And if we can't do it in this area, what would be the plan for us to do that in another area? Okay. We have to look for different jobs in different areas.

39:56Rachel Cruze:Well, and I'll throw this out, Colin, not to project on you, but because of your earlier comment, I'm going to assume when you have babies, she's not going to work. So that means it will be your income dependent upon when you buy this house. And the house is long-term. So if you guys are wanting a child in the near future, in the next three to four years, you have to do the math then based on your income and what that's going to be too. So remember that because people get that, that is a, that's a hard place that when people buy a home on two incomes and then they start a family and one of them wants to stay home with the kids, which is a wonderful thing.

40:27Rachel Cruze:But when that happens, then suddenly that income leaves and the lifestyle that you've chosen is usually based on two incomes. That's why even doing all of this pretty conservatively gives you, gives you more options. And we see that a lot. That's, That's a very, very good point that you make, Rachel. When you're buying a home, a couple of things to consider. We tend to talk about it from the monetary perspective because it is usually one of the biggest investments you'll make. And we're always saying, hey, 15-year fixed-rate mortgage, that's the best way to buy a house as far as if you're going to take out a loan.

41:00Of course, we want it to be no more than 25 % of your take-home pay. We hit on that. Take-home pay just after tax, not after insurance and investing, just after tax. but a really smart part of that that Rachel mentioned is you have to think about the long term and if you can think ahead of time and go in the future we know we're only going to have one working spouse making sure the house that you buy today meets that parameter of one income yes and

41:25Rachel Cruze:you can run that you can run those numbers and see yeah or be comfortable because we've had friends like this we're actually talking about some friends that lived in Nashville and and it was a nicer you know priced home and one of them ended up staying home she ended up staying home after they had kids and they just knew when that happens, we're going to move homes and we're going to move to a different area, uh, not only for family, but just also, you know, for the environment, but also to probably get a smaller place because we know we'll only have one income. So it wasn't a surprise. Yes. So there, there's like a forethought in this adult like planning that is, yeah, that's very important.

41:59So yeah, you said adult like planning. It's a 100%. It's adulting.

42:04Rachel Cruze:It's adulting It's adulting at its finest And you know what Jade I do I'm going to throw it out there Put it The Proverbs 31 woman She works eagerly And is business minded too So My dog And this is why You know I think it's I think it all It all belongs too So Colin You guys Push hard for the life you want But be wise when it comes Comes to the money

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43:46all right welcome back to the ramsey show here in the fairwinds credit union studio i'm jade this is rachel and we've got jack who's in houston texas hey jack how can we help out today hey hey thanks for taking taking my call um a little bit worried about asking this question after the Denali question. The Denali debacle? Yeah. We're not mad at nice cars. Just remember that. Yes. You have a clean slate. Okay, that's great. Well, I specifically wanted to ask you guys this question because I know how tough you guys are about spending monies on depreciating assets like cars, but that's exactly the kind of feedback I need before I convince myself that, So, you know, buying this car is a good idea.

44:34But so I'm just trying to figure out if I can responsibly purchase an$80 ,000 sports car. It would be a car kind of just for the weekend. And then I would like to keep my current cars as Bailey's. But yeah.

44:56Rachel Cruze:How much are they worth? The other two. Okay, so I drive a 2020 BMW M340i. I purchased it about three years ago for$50 ,000 at the door. And then my wife drives a 2020 Tesla Model Y that we got a family deal on. And we only spent about$18 ,000 on that. Okay, nice. Perfect. And then we have a third card that I kind of drive. It was basically my wife's old card that we ended up keeping because it wasn't really worth that much, but it still worked. So I drive it here and there. Okay. And what's that worth? Anything notable? Maybe like$4 ,000 or$5 ,000. Okay. Okay. And how much do you guys make a year?

45:48um so i make about 175 um a year and my wife makes about 70 000 so around 245 uh combined including 401k matches and um average bonus okay so following our parameters we're kind of of the mind hey if you're making 245 no more than half of that so 122 in cars would be kind of where you'd be sitting is it fair to say you're about 72 now 135 135 with this new car is what i would say probably right well yeah so i mean if you go like what i could sell the cars for today Yeah, yeah, yeah, yeah. It would be less than that, but what I've spent on it, yeah, that's great.

46:41Rachel Cruze:Yeah, I mean, you'll be right at that, depending on what they're all worth now, right at that$122 ,000, I would say. Yeah, a little bit, yeah, give or take, it's not going to be anything that we would split hairs over, I don't think. But the question is, do you have the$80 ,000 saved and ready to go? Yes. So, um, I guess in terms of like cash, no, but I could sell some stock to cover the cost so I could buy it in cash. Um, and half of the dilemma is, you know, obviously I could use this money on probably something a lot better of an investment. Um, we've been considering doing a garage apartment in the back of our property.

47:30But that would be around$150 ,000. And obviously we'd be able to rent that out and they would appreciate over time. Is that what the stocks were for initially? Like when you guys have sat and looked at, oh gosh, we have this much money in stocks, were you thinking, oh, this garage apartment? And then suddenly now here you're like, well, maybe I can get a sports car. No, yeah, not really. I would have enough to do both, but I, you know, it's more so a matter of like.

48:07Rachel Cruze:Can I ask you a question, Jack? Okay. If$80 ,000 disappeared from your accounts, I don't care where they are, stock, anything but retirement. I don't care if that's bank accounts, CDs, stock, high yield, wherever$80 ,000 could be, if that just disappeared tomorrow and you looked in your accounts and$80 ,000 was gone, would you notice? Would you feel it or no? I think, I don't know. Maybe just the way I've been raised. I feel like no matter how much money I had, I would always feel it. Okay. How much do you have in savings non-retirement? non-retirement uh including house equity would be no not house equity cash what do you have just cash in stock about in stock about one point uh 1.2 oh no 1.2 and that does not include retirement that does not include retirement and does not include equity in the home and they're not no Jack you're doing this is a nothing burger well yeah you shouldn't feel 80 ,000 out of 1.2 million Jack yeah gosh I thought you were I should have asked this from the beginning I know both of us I thought buried the lead yeah this is what Ken Coleman would have said is a nothing burger okay there's nothing to discuss other than you getting this car in what color yes you can afford this car Jack I would like a black one yeah I guess it's mainly like the dilemma of I could use that for the garage apartment that would generate more income.

49:55Rachel Cruze:So here's the thing with money, especially when you get to this point where you are, where you, you know, where you are financially for the rest of your life, there's going to be opportunity costs. Okay. When you get above that idea of like, Hey, once you're debt free, you have a fully funded emergency fund, you're funding retirement. and then you actually start putting some money away on the side beyond that 15 % of retirement, even once the house is paid up, right? Like you start actually generating a lot of savings. Your entire life from then on out will be an opportunity cost. And so here's the thing, you cannot live in that mindset at this point.

50:28Rachel Cruze:Now, Denali guy has to live in that mindset. He does. That's where he's at financially. But to the point that you have this amount of money for the rest of your life, it's like, well, we could go on this nice vacation and spend 20 grand, but also we could invest that and it's going to be this. Everything doesn't have to be an investment. That's right. So everything will always have that opportunity cost. So you kind of have to get over that, that yes, you are going to spend things for just pure enjoyments and that it is what it is. So as long as you are giving, you are saving, which you obviously are, and you need to be spending some, you need to be living life and enjoying it with some of this hard-earned money and not just hoard it.

51:07Rachel Cruze:so there there is a release that's actually a healthy thing when it comes to the part of spending so um so yep we are i'm a i'm a green light jade yes and i'm a green light too and jack just know every time you open the conversation start with the 1.2 million when you're calling a financial show say i have 1.2 million saved i'd like to buy an 80 000 car yeah well done really really great are you guys are you guys completely debt-free you said equity on the home is it paid off uh yes so i mean i i fully am aware that the situation i'm in was i'm very blessed that my family was able to kind of help me get on my feet when i first started my professional jobs out of college and uh and i've just been able to very aggressively save yeah that's awesome well done jack you've done a great great job so yeah you enjoy that sports car do some date nights yeah Take your wife out.

52:07Rachel Cruze:Enjoy. Have fun.

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53:53All righty, back to the phone lines. We've got Richard, who's in Columbus, Ohio. Hey, Richard. How can Rachel and I chip in today? Hello, how are you? Good. What's up? I am struggling with the question. I'm a young entrepreneur. I am currently a junior in college, making my way through. However, I kind of found success in my business early. I started it after I graduated high school. I'm currently making$130 ,000 a year. Same with my business partner as well. Good for you, Richard.

54:27Rachel Cruze:What are you doing? Yes, so I do affiliate marketing. Yes. So basically, I just promote products and then promote those on social media. And then people see those products and they buy it and then I get a small commission. Yeah, absolutely. And you're a junior in college doing this. I am, yes. That's amazing. Well done. Well, what are you studying in college? Seems like you got it on lock. Yeah, I'm doing business management. Okay, good for you. Good for you, man. Okay, so sorry, I interrupted you, but I was just curious. What's your question? Yeah. So my question is, I've been finding it harder and harder as I'm going through each semester of college to kind of stay on top of schoolwork and focus.

55:09I don't have any debt with college as my mother works at the university. So I get a discount there of 50 percent. So that's a very big draw to stay in. but I'm also like wanting to focus my efforts on, you know, I have another kind of business I'm wanting to do as well on top of doing this other, this, the one I'm doing now. Um, and I'm just like, would it be worth it to stay like push through school or I guess do school less, maybe just an associate's degree. Um, I only have a car payment that I'm going to have paid off in around nine, nine months. So I'm not really, I don't have any debt. Um, And I am very good at investing.

55:51So in the two years I've done this, I have about$51 ,000 in investment portfolios that are not retirement. In my retirement accounts, I have about$35 ,000. Good for you. How much do you have in your car?

56:09Rachel Cruze:How much do you owe? Yeah, so I just bought a Toyota 4Runner. That was kind of my dream car. I've always wanted it. and I've saved up for about six months and I put about half down. So currently I owe$16 ,000 on that car. Let's pay that off. Other than that though, gosh, you're really killing it. I'm really, really proud of you. A lot of people, I mean, you're accomplishing so much in just a short period of time. I think the two things that stand out to me was Rachel, what Rachel said was, let's pay off the car. I think you did, you could have gone really crazy on this. And I think you tried to exercise like some reasonable, like reasonability on it.

56:49And I'm glad that you did that. But I'd like to crank that even more and just say, hey, a guy in your position doesn't need to borrow money. And let's just let that be your lifestyle. My guess is that you built your business without debt. And let's just go through life without debt. You make a lot of money. You don't need to be slave to any lender. So that's thing one. And I wondered about the degree. So you get the 50 % off because your mom works at the university. the part that I see is how much are you what's the other 50 % that you're paying like how much do you have to pay in tuition and I'd be weighing that out with the idea of okay like realistically what do I see myself doing do I feel like I need this degree because you're very entrepreneurial and college is not necessary necessarily a necessity for everyone um and that level of education and that type of education is not necessarily a necessity for everyone.

57:44Yes.

57:44Rachel Cruze:Are you, do you have two more years left, Richard? I do. So I'm in my junior year just started. I kind of took less credit hours this semester to work a little more. But like I said, I just find it really hard to focus on school when I'm like, when I plan, when I graduate and get my degree just to go back and work full time for myself, which is, you know, it puts getting a degree hard to do. I'm paying probably about$4 ,000 a semester for school. That's with the discount included. Do you feel like you're learning anything or do you feel like you're like, I already know that, like I already am doing this.

58:25There's some things I've learned, but I just, not really. Okay. I'm kind of sitting in classes falling asleep. Yeah. Okay.

58:35Rachel Cruze:I may have a different take. Tell me. I would finish. I think you are because you're how old you're 19 I'm 21 21 oh sorry 21 you're 21 you have your entire life your entire life to build businesses make money get in there you're already halfway done if this was your first semester I might change my mind you're halfway done and and I'll be honest too there's a little bit of me because I mean we play in that world just a little bit and it's ever changing right? So what the world looks like with affiliate marketing today, we don't know. Maybe it gets bigger. Maybe AI takes everyone out. I mean, we like genuinely, we don't know.

59:18Rachel Cruze:We don't know. And there's something to me, especially when it comes to business management, to have something that it's not that you fall back on your degree by any means. I know a lot of people don't even use their degree, but it's like that extra step that you took. You finished what you started. It's not costing you a ton. It's another year and a half, basically. You're halfway through this semester. So what is that? $12 ,000? If you were my kid, and that feels weird saying because we're only like 15 years difference, but I would encourage, like if you were my brother, I think I would tell you, finish out college, get your degree, you're halfway done.

59:56Rachel Cruze:And again, you have your whole life ahead. And the truth is too, there may not be a ton to learn, but I don't know. There's a value in - There's more to it than that. Yes. You're right. You're right. I don't know. So I just think you have your whole life ahead of you to do what you want to do. And there's something about just investing in yourself. And a little bit of this just finish what you start to mentality. Did you want to go to college or did you feel like people were pushing you to go because you had the discount? I initially did want to go to college. I was originally going to go into the military and then that fell through.

1:00:33So then I just decided to go full on to this business, which was very successful. And then college was kind of just a, you know, it was there to just be doing it as, you know, cause the 50 % discount is really nice, especially with tuition rates these days. And then my whole family all has college degrees and they're,

1:00:51Rachel Cruze:they're all pushing me to, you know, I wonder if you would regret being a business owner later on and not having your degree if you're halfway through. Do you know what I mean? Yeah, I think 100 % Rachel would ride with you on this. If you had said to me, I never wanted to go to college, I feel like I'm just going because I have the discount and I feel like this or that. But the fact that you set out to do this, and I think I'm with Rachel on the principle of, let's finish what you started because you did say this is something you wanted to do. I do see the 50 % discount and go, hey, it's here today.

1:01:19It might not be here later on if you ever want to finish. And I think in your world, fairly, the 12 ,000 that I think it's going to cost you to finish the last semester and the last two, you know, the other semester of your junior year and the last two of your senior year. I think that's well within a small percentage of what you're doing, that it's not like this big sacrifice for you to pay it. And so for those, for those reasons, I'm out.

1:01:46What do you think? I mean, does that sit right with you or are you like, dadgummit, I was really hoping.

1:01:51Rachel Cruze:It's going to be frustrating if you take our advice. I think you will be sitting in classes and being like oh my gosh what am I doing but I think it is like that I think you'll look back though when you're 40 years old and having having your degree well you made a good point like it's not just the education I mean it's relationships it's dealing it's learning to do things that we don't always want to do but we do it because it's our responsibility like yes there are so many things that you take away from college that is not the grades that's right that's right and not you just sitting in a classroom yeah and learning I know And that's like the biggest, you know, debate right now.

1:02:25Rachel Cruze:And it continues to be, which is good. I think we need to push on this notion that like everyone just has to go to college. I agree. So I am for pushing that notion because it is the conversation these days, figuring out when people start at 18, because some people get into real estate. Yeah. They get their license takeoff. Some people go to trade school. Yep. I mean, it just it looks different for everyone. And to your point with AI, I do think that it's an unknown because it's like, gosh, if I invest this money, will this career field even exist the way I thought it was? And I just don't ever want to bank on something at 21, even though he's making such good money.

1:03:02Rachel Cruze:So it's easy to be like, oh, this will be my life forever. And it may not be. Like, it's just the Internet world is the ever-changing world. And so we know that well in our jobs.

1:03:28So

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1:05:20Rachel Cruze:Today's question comes from Courtney in Georgia. Up until the last few years I would get paper statements from my bank and use them to balance our checkbook each month. Now with everything online I just check our balances daily but don't really balance my checking account. Do any of the Ramsey personalities double check their bank's math or do you just trust that the online numbers are accurate oh my gosh i had like a 15 year old rachel like twitch because dad made us do that yeah and quicken do you have quicken books yes i do put that cd in your computer and we had our little checkbooks and we we had to balance our checkbooks every month as teenagers and i'm like oh it's like trauma to this free spirit it was the worst it's a great question though i mean this is very deep courtney had quick quicken she probably did um gosh i don't know why that made me laugh so much i think because i had the exact same experience and so it was exactly that um i'll tell you what i do just honestly i mean i do every dollar i track our transactions in it so i know i honestly probably know more of what's happening in our budgets.

1:06:35Rachel Cruze:I check that more. And then in every dollar, our account is linked. So if our account starts to get low, like towards the end, or like, because we get most of our commission stuff on the 15th, really low on like the 30th. So we have a full month from 15th to 15th for us. So when it gets to be like the 10th of the month, if you will, start to look. Yeah. Then I will be like, okay, did we have a big purchase that it's not been accounted for yet because sometimes it won't update till like Tuesday. And if it's been over, but usually it will show up in our bank's app and it's like gray. It's a different color.

1:07:08Rachel Cruze:So I'll double check that if I feel like our balance is getting too low to be like, okay, I want to make sure that we're, you know, on track with this. But that's what I do personally. But honestly, the budget for me is kind of my quote unquote balancing the checkbook. I know it's not against my bank statement, but it's against what we've planned and what we planned. We know we have the money for. Does that make sense? Yes. I'm with you. I can say I do not check my bank statement. I have not downloaded a bank statement in quite a while. I do trust that when I see the transaction come in through every dollar, usually I'm like, yeah, I went to Publix for$13.81.

1:07:47That is true. And then I just track it. And I'm with you. Since I track my transactions, not every single day, let me be honest, but very often I can start to see if it seems like we're about to go over a budget in an area. And then it's like, if, or if we did, I, you know, it'll tell you like, if you've already gone over, then, then I'm starting to pay a lot more attention to go, okay, I need to like shift this around or we need to pull back. So I kind of do it like that. And then at the end of when you close out your budget, um, everything's already tracked because you've been tracking throughout the month.

1:08:20And then the closeout is just, Hey, did you stick to your amounts or didn't you? And I think that's kind of, I care mostly about tracking the transactions and the closeout and kind of seeing how we did and are there trends there? Like, are we constantly going over grocery budget? Are we constantly, and I pay attention to those types of trends, but other than that, um, I'm not as, I'm not locked into the statement and making sure the balance is perfectly to the decimal point. I have a friend who's like that though. And I, But that's too much for me. All more power to you. You got the energy. Yeah, I mean, do what you got to do.

1:08:54Rachel Cruze:Yeah, but for real, EveryDollar really is great, you guys, in that sense. Because I think we have shifted because of everything online. And this kind of gives you more of a real-time, more budget mindset than like a bank statement. Yeah. Check, check, check. It should make it easier that you don't have to do all that. Exactly, yeah. So if you guys do want to check it out, you can download it for free in the App Store or Google Play. We'll put a link down below. But check out EveryDollar if you haven't done a budget because it really will help sync all of that. And you sync all your accounts. That's the other great thing.

1:09:22Rachel Cruze:If I need to look at the balance of our accounts, I click on accounts on EveryDollar. And it has our money. It has our high-yield savings, our checking. All of that is just right there in EveryDollar. That's very helpful. And, you know, I do want to hit on this because I think about how my budgeting practices were when we were in$460 ,000 of debt. and like going through that. And then I think about how our budgeting practices are now that we are not in any debt and life is a lot easier financially. And I do think there's little things that change. Like the principle of budgeting doesn't change.

1:09:59The principle of living on less than you make. The principle of tracking your transactions. It doesn't change. But I do feel like you're not down to the nitty gritty. The tactical can change a little bit. Scent like you were. And I actually, I think this is a great post from LinkedIn because it just goes to show like, No matter how well you're doing, no matter if you're making hundreds, hundreds of thousands or hundreds of millions, it's really important. So Logan Ryan, you guys might know that name. He's an NFL player, played on lots of NFL teams, but more notably the two Super Bowls with the Patriots.

1:10:29He says he made, this was a LinkedIn post, he says he made close to$80 million in the NFL. And he says never spent a dollar of his salary. He retired at 33 and lived off of what the market pays him. So he just invested the money and basically lived off of the interest. It sounds like he says, most guys who hit that number are broke a few years after their last paycheck. And I know Dave talks about that all the time, like the amount of pro athletes who make so much money and then they truly end up bankrupt and broke a hundred percent. It's just sad. He logo Logan Ryan goes on to say, he says, I've watched it happen up close growing up in New Jersey, two loving parents that worked super hard.

1:11:10But then when he got drafted in 2013, it's like that feeling never left him and so he just was like I was suspicious of every dollar I spent and I lived on a strict budget lived off what my portfolio paid me and he still like works with a financial advisor and just asking questions and learning so it really just goes to show a lot of people think Rachel that if you earn more money that's the solution to your money problems but this just goes to show and I can even say from my own experience if you learn to manage your money when you don't have any that's how you really know that's right and then when you earn more then you're like okay I know how to manage this it's not gonna come later it comes

1:11:50Rachel Cruze:at whatever point you're at today that's exactly right yep yeah the money just magnifies your financial habits and your mindset around money so if his is a very conservative mindset around money and he's like I'm gonna live I'm gonna live over here and then he starts making 10 million 20 Right? Yeah. That conservative mindset just continues to expand. It just makes you more of what you are. And that is why it is so crucial, so crucial that we, yes, we talk about the dollars and cents on the show, but also it's the character of who you are during whatever baby step you are. And that's a little bit of that beauty of baby step too.

1:12:23Rachel Cruze:The sacrificial season is so difficult and all of it. But man, when you learn to live without, when you learn to be content, like all of these things are so helpful. Yeah. It's a helpful setup for when you actually start being, you know, start building wealth as your income increases. So I know I do always love this. Logan, Ryan, well done. Very good. Because the story of this, professional athletes to lottery winners and all the above, it's not great because if you don't have great habits, again, it's going to be, so if you're not good with money and you win a lotto ticket. Just blow more of it.

1:13:02Rachel Cruze:It's just got to, yeah, you're going to be not good money with a lot of money. Yeah. And I got to believe there's two, and I know you talk a lot about this. I got to believe there's a contentment play to this as well. Just knowing, knowing how to be content, whether you have a lot or a little and knowing what that boundary is of, I actually like, this is not going to, more of this is not going to make me happier. That's right. It's just, yes, it's available to me, but it's not going to make me happier. or if anything, it can start to become a headache. The more and more stuff you have and you have to maintain.

1:13:33Rachel Cruze:More money, more problems, you know? Mo' money, mo' problems. I did my version. More. More money, more problems. I'm such a hip-hop girl, Jade. You feel it? You feel it? I do feel it. One of my favorite things is when these sides of Rachel come. They're my favorites. Like, let Rachel get spicy. We were talking about this at the break, and we think it's so fascinating. I came in, I grabbed a tee on the last break and I walked in. I was like, change. You know what I was thinking about? It's just the last two callers we had with cars, right? You got one guy and cannot afford the nice new truck. No.

1:14:06Rachel Cruze:$90 ,000 truck. $90 ,000. Other guy wants to buy an$80 ,000 new sports car. The people that actually have the money and can do it are like, should I? It's people that can't that are like, I got it. I got it. And I'm like, it's such a fascinating mindset. It is. The emotional part of money, you guys, is as important as the numbers. Absolutely. Well said.

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1:15:58All right, let's go back to the phone lines. We have Micah, who's in Philadelphia, Pennsylvania. Hey, Micah, how can Rachel and I contribute today? Hey, thank you guys so much for taking my call. No worries. What's up? I have a question. I'm a stay-at-home mom. I worked for five years, and then I have a two-year-old and a one-year-old, and we want to have more kids someday. And I have a 401k from when I was working. It's kind of pathetic. It's like$15 ,000. But it was with the company I worked for got bought out a few times. So I consolidated all of that into one account. But now I just have this account that's in a Raymond James.

1:16:39And so my husband, he has a TSP account and he is going to change jobs next year. So he'll be getting, I think his new company that he's going to work for has a JP Morgan account. And so we are going through baby steps. We're trying to just consolidate and like simplify our life. and I'm just kind of asking, what am I supposed to do with this 401k that's kind of like off in like la-la land and with he's going to grow his, but is mine just going to sit there until I'm 65? Like, what am I supposed to do? Didn't you say you already moved it into, did you already move it into an IRA with Raymond James?

1:17:22Well, it's like half of it is a Roth IRA and the other half is a 401k. Okay. So I would take the 401k and I would roll that into, I would do a direct rollover into an IRA. And you can do that by kind. So if it's a Roth, you can do it into Roth IRA. If it's a traditional, into a traditional IRA. And then with his TSP, when the time comes, I'm not sure if he can roll that over, but if he can, you can do that. but they're all going to be separate. They're not going to go, they're not all going to go into one IRA together. They're going to be individual ones and that's okay. How much would, how much is in the 401k?

1:18:01Rachel Cruze:Um, I think it's like 7 ,000. Okay. Okay. Cause I'm, what I'm thinking is cause it is such a small amount, um, rolling it over into maybe a, the putting everything into one Roth, which means you will pay taxes on that 7 ,000, but it's not a lot. Um, So I almost would just roll it over to that Roth IRA and have one Roth IRA that's sitting there with all$15 ,000. And again, you will pay some out-of-pocket taxes to make sure you don't have the cash for that. But for the long term for it to grow, I think I would probably focus on that. Because eventually for a lot of people, making that transfer from traditional to Roth is a good idea if there's time because you're going to have so much growth.

1:18:44Rachel Cruze:How old are you, Micah? I'm 30. You're 30. Okay. So what's crazy is if you did just leave it in and you didn't touch it, that$15 ,000, and you didn't add to it at all in 35 years when you're 65, it'll be almost$700 ,000.

1:19:06Rachel Cruze:So you say it's like, oh, what a little thing. And it does. It kind of just feels like, eh, it's just$15 ,000. The potential. But the potential. So honestly, I think I would pay taxes on the seven, roll it over to the Roth. Roth IRA and just let that thing grow. I'm not mad at that. And yeah, and God, let it turn into$700 ,000 for retirement. Perfect. Okay. Yeah. And because that's what I was wondering. It's like, well, if I'm not working and contributing, like what's the point even? Yeah. If it's going to be like that. It's going to be stacking up. Yep. Compound interest. It's your friend. So yep.

1:19:41Rachel Cruze:It'll just keep growing and growing. And what you said, Rachel, is so important. And, you know, we talk about Roth conversions and a lot of times, especially with larger amounts, it's a baby step seven activity because you're right. There is taxes that they're going to be on the hook for when when tax time comes. But with the 15 ,000, they'll probably cover it. But it is so important to if you're able to make that transition to Roth. It's so important because when you think about how this money is going to grow over time and that's such a good example of it, that 692, let's just say 692 ,000. And let's just say it was even more than that, or it's money that they'll never need to touch in retirement.

1:20:19With it being traditional, there is going to be a required minimum distribution. And so when you look ahead at your own retirement planning and you go, gosh, this is not even money. There might be money that you don't even need, but you're required to take a distribution. And then if it's money that you're going to pass on to your heirs and you go, gosh, they're going to be required to take that distribution and they're going to have to then pay the taxes on it. but if you turn around and you're able to convert the majority of your wealth to Roth money, then that money is growing. It's growing tax-free and you're able to pull it out as needed.

1:20:50You don't have the required minimum distribution and you're not paying taxes on the money when you pull it out because it's already been covered. And so that to me is just a huge, it's a huge wealth planning thing that I think people sleep on. They're not really thinking about it. So just

1:21:06Rachel Cruze:something to yeah to noodle yes because i mean for her um yeah it would be about 1500 in taxes today versus it's let's just say that 700 let's say 300 ,000 of it if it was left in traditional as she's going to be pulling it out yeah i mean it would be probably around 100 ,000 at that point yeah or 70 ,000 about 70 ,000 so 1500 70 ,000 huge yeah and when you think about it okay yeah and then when you roll it back to it, let's just say it's an inherited IRA, that same person, they've got, I think it's 10 years to pull out. And can you imagine having to, like, if you have a substantial amount, you're having to pull out that money at such a high rate to drain it.

1:21:49Oh, none of that. None of that. Let's be thoughtful people. We love a Roth. Yes. You can do the Roth. Do it. Yes. All right. Let's go to Jordan, who's in Seattle, Washington. Hey, Jordan, how can we help today? Hi. Well, actually this question is concerning my mother-in-law. She's on her way to 85 years old, blindsided us with a request from her financial advisor who's advised her to get a reverse mortgage.

1:22:19Rachel Cruze:Oh, boo. It gets better. To buy stock. No. Yeah, it is. It's insane. What is he high on? Man. I know. That's wild. It even got better. Now we find out, so this is about two weeks ago, we find out that she set up and sent over a mortgage broker to her house who laid out a reverse mortgage, second mortgage. The house is free and clear, but he called it that, or an equity line of credit. To borrow, for her to put that money into the market to try to make money. Does she need money month to month? What's her reason for doing this? well yeah that's when we can't pin down she's probably uh it's close to 2700 a month in her social security she literally she has a tiny car payment um owns the house yeah there's yeah has been taking out a thousand dollars a month out of her investment account and tells us she has roughly 35 000 left in that but tells us that she's losing money in that so we're not sure where all that money is going on a monthly basis um but she's scared and you know of course we think if she's if this is her any other elderly people oh yeah who live by themselves and are trying to find out or you know balance their their finances are having this happened to him.

1:23:56Rachel Cruze:It's horrible. Uh, Jordan, is she asking for help from you? Is she saying, will you help me? And, and she's telling you all of this. Yeah, she's telling us. So she's asking for help, but at the same time, uh, so my wife, uh, it's her mom and her other daughter, everybody's telling her, no, don't do anything. Just stop. Um, we'll figure this out. Of course, offering to, you know, if she really feels like it, shall the house come live with one of us, it's open to you. But it sounds like now she's leaning towards a$150 ,000 line of credit. Oh, man. Is she a sound mind, would you say, from her age?

1:24:42Rachel Cruze:Okay, so she's good. She's sharp at 85. She's sharp at 85. Knows what she's doing. Okay. It's just that doesn't strike you as strange that all the people who love her are saying, please don't do this. And this one guy is like, do it. She's saying, OK. I'm wondering if you guys can lay out a plan, Jordan, to show her, hey, mom, here is what would happen when this goes down the road this way. Here's what you need to do. Fire your financial advisor. Let's figure out how we can make$3 ,500 a month work for now. and if you all I don't know where you guys are from a financial standpoint Jordan, your wife and her sister but even if you guys have to supplement a couple hundred bucks for a little bit just to kind of get her feeling secure again I think that's the key to make her feel good again in confidence but she needs some more information on the right way to do it not just the wrong way

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1:26:51Welcome back to The Ramsey Show here in the Fair Ones Credit Union studio. I'm Jade. This is Rachel. Let's get back to the phone lines. We've got Austin in Raleigh, North Carolina. Hey, Austin, how can we help today? Hey, thank you for taking my call. I really appreciate it. Absolutely. So I do, my question today is whether or not my wife and I can afford for her to get a new job. That's going to obviously take a pay cut. Yeah. Okay. Lay it out for us. Why are you thinking about this? Well, there's a couple of reasons. One being the drive. She currently works about an hour away. Oh, gosh. The main reason, yes, we're two hours.

1:27:33And we have a 19-month-old, so he has to ride in the car, you know.

1:27:37Rachel Cruze:Wow. two hours a day, which, you know, not ideal. But, yeah, so the other reason which is, you know, kind of drove me to call you guys is my wife, she has a bit of like a hostile work environment, I would say. There's a bit of, quote-unquote, like, clicks going on within the office, and she's never been one of those girls. Got you. And they pretty much, you know, kind of like, you know, bully, quote-unquote, bully her. and I just, I can't, I can't. What kind of job is this? What does she do for work? She's a nurse navigator. So she works at a hospital and so she works with all other nurses and like, you know, and that kind of thing.

1:28:20Rachel Cruze:Okay. Okay. Is there a, is there a hospital near you guys that's not an hour away that she would go get a different job or what is she thinking yes but the problem is or she works at now she makes um i mean she she would have to take about a twenty thousand dollar pay cut to move closer to where we live okay um what's the full salary so she'd go from what to what so she makes right out of a hundred right now and so she would probably go anywhere from 75 to 85 range okay um depending on the job where are you guys that financially? Do you have a lot of debt? Do you have savings? Kind of. We have about $75 ,000 in consumer debt, which is primarily my fault.

1:29:12Actually, it's all my fault. What was it?

1:29:16Rachel Cruze:Gambling? Student loans? What'd you do? Well, student loans, I have about$19 ,000 student loans and about 56 on my truck. Okay. Wait a second. Well, this might be an easily solved predicament if we really want to start talking about the debt. I do think it's okay. I think for the commute alone, honestly, the two hours every day and with the two-month old, when you said she has to drive that with the two-month old, are you saying that the daycare is near her job or like what is... Oh, wow. So she drives. Okay. Yeah, that is. It's a lot. For that alone, I would definitely consider finding a job closer.

1:30:00My bigger question is, are we assuming that it has to be a long-term pay cut, or is there a way for her to work back up to that same salary living closer, working closer? I mean, maybe in the future. It's just difficult. because she found her job. She actually loves her actual job. And her boss loves her. The doctors love her. But it's just the other employees that's making it miserable. And she called me crying today. And I'm like, it's not worth the$4 ,000. Yeah, it's no way to live your life.

1:30:32Rachel Cruze:Totally. No way to live your life. So you guys will be short probably, what,$1 ,500 a month-ish with this new change? Yeah, I think that's about what it comes up to. Okay. I mean, we have the$1 ,500 in margin. Okay. I mean, together we bring in about $210 salary and then I have like a side hustle I do. I make about$30 ,000. That's only like two months out of the year. Nice. Okay. So you can handle the hit to your budget. Does this affect, but I mean. It's going to decrease how quickly we can pay off, you know, all the other things. Yeah, yeah, yeah. But also you're not factoring in if she gets a raise, if you get a raise, if you guys make some big moves, like, you know, maybe selling the truck, getting something cheaper.

1:31:14Rachel Cruze:You know what I mean? I'm just saying. You can finagle this and kind of be like, okay, if we're making this decision over here, that means we're going to have to make these decisions over here. It's kind of that trade-off, but it's worth it. It's worth the trade-off. Yeah. For my truck, do you all think I should sell my truck? How much did you get for it? Okay. I'm about$10 ,000 upside down in it. And I also drive an hour each day to my job. So I think I'd be— I think I'd be looking at how quickly you can pay it off. Like if you can get this done, if you guys can buckle down and be like, man, we're knocking this truck out.

1:31:55And technically the student loans should be first. But if you looked at the$56 ,000 alone and you're like, man, we can knock this out in the next 18 months. And if we add the student loans to it, like two years or less, I might say you could keep it. It's not more than half of you guys' income together, I'm guessing, with your wife's vehicle. So on that parameter, and if you can do it two years or less, I feel like you have the ability to keep it. It just has to do with you guys' values and how quickly you want to be debt-free.

1:32:24Rachel Cruze:Could y 'all pay off? I mean, how much money could you put with her new salary towards debt? Like$3 ,000,$4 ,000,$2 ,000 a month? A month. Right now we put about$3 ,000 or$4 ,000. So we got our emergency fund, and it'll probably knock it down, like you said, or like$1 ,500, so we probably have a$2 ,500 range. Are you investing? Yes. I mean, I put, so I work for the government. I put my TST match. I put 5%. She does 5%. Okay. But into our 401ks. But besides that, I mean, I've got my$7 ,000 in a savings account just because I don't know. So let's roll this back. Let's roll this back, Austin, because I think that if we can lay this out for you in a way that makes sense, it'll help you kind of change some of the things that you guys are doing, how you handle your money.

1:33:27Because investing usually is a very good thing, but there's a good, better, best way to do it. And there's a time to do it that makes more sense. having the$7 ,000 savings. I love savings, but again, good, better, best. And so I think the best way for you guys to tackle your financial goals here is to work our baby steps in order. It's the same plan that I use to pay off debt with my husband. We've all done it. It works wonders. All right. So what I would do in your situation is I would temporarily pause investing. You guys are putting aside 10 % of your$210 ,000 income. That's a lot of money.

1:34:05And if you can imagine that money back in your monthly checks, well, now all of a sudden you have the full power of your income to pay off this debt really, really quickly. Because the debt itself is not an overtaking amount of what you guys bring home. So if you have all your income, you can tackle that super fast. So I would temporarily pause investing. I would knock that savings down to$1 ,000. you just need a little buffer there because once you throw that$6 ,000 debt at the$19 ,000 student loan gosh now there's only$12 ,000 left with your income that$12 ,000 student loan should be gone in three months just gone and if you tighten the straps it should be gone in like two months like really get after it and then after that it's like alright now we can think about this truck get the truck paid off in 14-18 months and you might decide maybe you do want to sell it that's totally up to you either way but that intensity is going to be what drives you guys' decisions.

1:34:58And then from there on, Austin, we're saving up three to six months of expenses so you have a cushion under you and you're never in this type of situation again where it's like, can we do these things? Do we feel secure? And then from there on, yeah, turn investing back on and go be wealthy.

1:35:13Rachel Cruze:Yes, and I would have her change jobs. Yes, 100%. And then also the toxic environment. Yep, I would take$1 ,200 out of my paycheck for that. peace of mind.

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1:36:22All right, we've got Mary who's in Houston, Texas up next. Hey, Mary, how can Rachel and I help today?

1:36:29Rachel Cruze:Hi, guys. I'm 54. I'm retired Navy with 100 % disability. And my husband is 57 and he's on SSDI. We are debt-free. We own our own home. But it needs major repairs, which we plan to cash flow. So we have$300 ,000 in the bank, and we have two investment properties, one that we actually live in because that's how bad our primary home is, and one that my parents live in. My real question, though, is do we, since we have a steady income for the rest of our lives, do we need an IRA? Because I don't have any kind of investments currently other than our investment properties. what is the three hundred thousand dollars in uh it's in high yield okay um you know honestly what i would probably do mary is sit down with a smart fester pro and just run the numbers because that three hundred thousand because you guys still are relatively young um and if you just put that three hundred do you guys contribute to that every month no so really this all just happened in the last three months for us.

1:37:47Rachel Cruze:Okay. We actually sold another piece of property and we got debt free, got the money in the bank. And now we're okay. What do we do now? We have this steady income for the rest of our lives. What is the income? What is between the disability and the SSDI? What is it equal to every month? A little over 11 ,000. Oh, wow. That's great. Right. So what I would probably do, Mary, again, if you want to sit down with an investment professional and like really look at this in detail, I probably would encourage you to at least get a meeting and talk about it. But if you just stick that$300 ,000 in the market and you just did, you know, a mutual fund, an index fund, anything similar to that in 10 years, that's going to end up being almost$900 ,000 in just 10 years.

1:38:36Rachel Cruze:Without adding. And that's not a high savings. Remember that is actually putting money in. Um, so I, I would probably throw that in an index fund. Um, and you can just, you know, you can do that Vanguard. I mean, anything I would maybe keep some of it in a high yield for an emergency funds, but it sounds like what you guys are bringing in income wise is what you're living off of, which is great. Have some, some more cash available still for an emergency. Um, but then also I, now I'm remembering, sorry, you said that the house needs major repairs. Are you guys wanting to just sell that house and live where you guys are in the rental or what are you wanting to do?

1:39:13No, we want to fix it. My father-in-law built our primary home. So we want to fix it. What's it cost to do the repairs? It will probably cost us a little over a hundred thousand, but it's worth twice that at least. Okay. And we plan to cashflow it, you know, and stay in this house. I mean, if it takes me five years to fix my other house, then it takes me five years to fix my other house. And all three houses are paid off? No. The one I live in actually has a 15-year mortgage. How much? How much is my mortgage payment? It's$3 ,000. No, how much is the total amount of the loan? Oh, the total amount of the loan is$350, and it's worth$475.

1:40:07What about the one that your parents live in? The one my parents live in also has a mortgage on it that they pay. It's literally just finance. But it's in your name. So how much is the total loan there? The total loan there is$72, and it's worth$129. Okay. And then finally, you guys' personal residence. We own it outright. Okay. So that one's paid off. Yes. And it's worth$250. Yeah. I think even more reason to invest that money, like Rachel said, because you guys are carrying some risk with these properties, specifically the rental one, and obviously the parents one too. So I would just like having that money there.

1:40:52I would like it growing because if you want to reach over at some point and pay them off because of the growth, you would have the ability to do that. So for that would be my number one reason of like, yes, we have to make sure that there's money that's growing for us because we are carrying a level of risk in our life. So I think that's a really good question. Okay. How do you plan on doing so that the repairs, it's all going to be cash flowed from your$11 ,000 income, or are you planning on taking out something out of that 300 ,000? If I needed to take out of the 300, I would, but currently I don't plan to, I plan to cash flow it out of our monthly income.

1:41:26Yeah, I like that idea. Well, thank you so much for the question. That's a good one. Next up, we have Olivia in New York City. Hey, Olivia, how can Rachel and I help today? Why? So I'm engaged and we're currently negotiating our prenup and there's a very large financial disparity between us. So his disclosed net worth is over a hundred million and it's primarily from a business that he built before we met. I absolutely want him to protect what he built before me and I'm not asking for ownership of any of those assets, but basically in the prenup, it's stating that everything that all of his current income and after we get married, everything's going to remain separate.

1:42:15So yeah, so I'm trying to figure out like if let's say we're married for 10, 20, 30 years, like the vast majority of his wealth accumulated during that time is going to continue to remain entirely in his name. Have you asked about making it to where it's the stop is when you guys get married? So everything he had before the marriage remains his, and then what you build together, it has a fair 50-50 split or whatever is.

1:42:41Rachel Cruze:So that you're protecting yourself in case something happens. Have you said that to him? Yeah, he does not want to do that because he makes, yeah, he's making around 12 million a year. So he feels like, you know, I'm coming into this marriage. Like he already built all this before me. So yeah, he doesn't want to do a 50-50. Does he want to do any percentage of what you guys, what happens once you say I do, whether he earns more or earns less. Even 20%. Yeah. Because what happens, Olivia, and I think you feel this, because we've gotten this call where, you know, dude leaves, there was a prenup in place, and now she has no assets.

1:43:28Rachel Cruze:Nope. No savings because she didn't work because he provided a great life. And now she has nothing to her name. And so that's where the prenup ends up hurting women, right, in that position. Right. So, yeah, exactly. That's what I'm scared of. How long have y 'all been dating? We've been dating a year. Okay. And we're engaged. Yeah, we're getting married in two months. How much of a deal breaker, if you can't get this locked in in a way that you feel protected as well, have you decided where your go no-go line is on this wedding yeah I think like you know I want him to kind of like meet me not even like halfway but like kind of like say like okay like I'll give you this or that just to feel like you're financially secure if we you know end up not working out down the line yeah even 10 I mean even 10 percent right is 1.2 a year right like from his income.

1:44:34Rachel Cruze:He has a lawyer. Do you have one? Yes. Yes, I have a lawyer. She told me not to sign it. She said that he needs to come up with something that, like, we need to come up with basically something that would resonate with him. Right now, like, he's basically saying he would give$30 ,000 a year to, like, he would put$30 ,000 a year into a brokerage account for me. um and then the other thing that he was offering was 10 percent of the future of of the appreciation of the future family residence which the lawyer felt was unfair as well i think that's unfair too just the appreciation of that he's yeah uh yeah i'm sorry that's happening yeah and i wish we could give you a thing yeah i'll tell you what he basically where he's coming from is that he said But if we divorce, like the child support will be so much that you won't need any more money.

1:45:31Like he's he basically said it would be a half a million. I just think that he's setting a lot of the terms and it sounds like he's doing the majority of the talking. And I understand that it's his money. Go ahead.

1:45:45Rachel Cruze:I was going to say, ultimately, it feels like you're not taking we're not even married yet. And I feel like you're not taking care of me. Yeah. if something bad were to happen and if that's how he's feeling before the marriage. I would go slow, Olivia. Push on it, Olivia. Go slow.

1:46:11Rachel Cruze:Hey guys, Rachel Cruz here. And I'm so excited to tell you that the brand new 2027 Ramsey Goal Planner is available now. Guys, this is the only planner with exclusive monthly content from John Deloney, Jade Warshaw, and me to help you set clear goals and actually stick to them all year. But here's the thing, these sell out every single year. So don't wait. Order your new 2027 Ramsey Goal Planner for$49.97 at ramseysolutions.com slash store. That's ramseysolutions.com slash store.

1:46:56hey if you love the ramsey show make sure you're letting us know what you think in the comments and by the way if you watch the show regularly on youtube and you've never subscribed or you've never followed us or you've never you know click the little plus button on the podcast please do all that that helps all of us and if there's an episode that you particularly like make sure that you're sending it to someone who you think could need it or could use it or could benefit from it. That is something that benefits not only us, but it benefits the people around you as well. And it costs you nothing.

1:47:26By the way, I don't know if you guys knew this, but Ramsey solutions is taking over an entire cruise ship here coming up in a little while, March 14th through 21st, 2027. Join us for the live like no one else cruise. Rachel is going to be seven nights in the Western Caribbean. Do you say Caribbean or Caribbean? Caribbean. Okay. What are you? Caribbean? I got to go with Billy Ocean. He said Caribbean Queen. Caribbean Queen? Well, you know what? I don't know. You were a cruiser back in your day. Back in the day. A long time ago.

1:47:57Rachel Cruze:Singer on cruise lines, Miss Jade Warshaw. Yes, ma 'am. Beautiful voice. A little Whitney Houston action. That's right. So good. You never know what could happen. I mean, we're all going to be on this cruise doing our thing. I said karaoke with Jade. Get ready, y 'all. It's going to be good. When I do karaoke, it's fun to do like songs, like the worst songs ever. I get knocked down. Right? It's like stupid songs. But anyway, we're going to have a good time. We do have a good time on this career show. It's more than a vacation though. I feel like it is like an immersive Ramsey experience. I mean, obviously all the personalities are going to be there.

1:48:26Dave's going to be there. But we've got new teachings this year. So come for those. The world's largest debt-free scream. We're going to have live tapings of your favorite show. Smart Money Happy Hour. The Ramsey Show. All of that and so much more. So here's the thing. You need to have paid off your debt. If you've paid off your debt, everything but the house, if you're on baby step four, this is your deal. This is for you, okay? All-inclusive pricing starts at$2 ,105 per passenger. I got to say, that's not too shabby. That's pretty good. It means all your cabin, your food, entertainment, taxes, tips, everything included.

1:48:59Yes. Not bad.

1:49:00Rachel Cruze:Well, and let me just say this. The ship is really nice. It really is. Because I genuinely, I'm like, I going on a nice vacation. Y 'all know me. I love a bougie hotel. I like, but I'm like, they have a, they have a good sushi restaurant. Holland America. Yes. Steak restaurant. Great bars. We're sipping martinis, having happy hour people, going to getting good food. Like that's my, that is my favorite type of vacation. So fun. I agree. And it is. It's, it's classy. It's beautiful. Like it is a great, it's a great spot and great memories. We grew up cruising. Mom and dad love a cruise. They may or may not be on one right now.

1:49:37Rachel Cruze:Are they? Over another, on the other side of the world. Yes, mom and dad, they do love a cruise. Yeah. And we grew up doing them. And the memories that you have, even as a family, bring your kids. There is. There's such a great experience. It is. It's very special. Please join us. Be our guest. Actually, don't be our guest. Pay your own money and come with us on the cruise. Click the link in the show notes or go to RamseySolutions.com slash events to book your cabin today. Come celebrate. Yes. All right. George is in Tulsa, Oklahoma. Hey, George. What's going on in your world? Hello, Jade. Hello, Rachel.

1:50:13Hope you guys are having a great day. Thanks for taking my call. So we're completely debt-free, including the house, and have a fully funded emergency fund, and currently have$500 ,000 in a brokerage account invested in index fund. Good for you. yes and 650 in retirement uh we are thinking about building our dream home and using the 500k towards it but i'm not sure this is a wide financial decision or just a large luxury

1:50:43Rachel Cruze:purchase one get your thoughts okay so the 500 ,000 do you guys have you have a separate fund for like an emergency fund right yes okay it's under the 50 ,000 would you have to use the equity in your current home to help with that process? Or would you just take this$500 ,000? What would you do? That's a great question. We would probably need to most likely sell this house because the house that we're thinking of building is around$650 ,000. Okay, that's great. How much equity do you have in your current home? About$350 ,000. About$350 ,000. Okay, awesome. Love it. Yeah. So, I mean, you could do this a couple of ways, George.

1:51:26I mean, you could, because we're okay.

1:51:29Rachel Cruze:The mortgage is the one thing that we say, you know, we're not going to yell at you for. Now, being on Baby Step 7, if Dave was sitting here today, he'd be like, no, you got to figure out where to cash flow. It's hard to go back. So, you could, I can tell you what Dad would say. He would say, sell your home now. Go rent for a year. Take that equity. Take your cash. Don't even take out a construction loan. You just literally cash flow the build and move in. And that's probably where I would lean, honestly, just so you don't have to worry about it. But if you did decide, hey, we are going to take out a small loan to cover that difference, get into the house, maybe with, again, move that construction loan over to just a conventional loan after you move in, sell your house then, and then pay off that loan with the equity of the home, you could do it in that order too so you're not having to move twice.

1:52:16Yeah. Yeah. That's the other part. And I love that. And because we don't want a mortgage. My wife doesn't want a mortgage.

1:52:24Rachel Cruze:Okay. Yeah. So we're leaning more towards that. The other idea we had was maybe just wait. So we own our business and we've been doing really good. And that's where the 500 has been coming from. It's just we just put away our profits. So maybe in another year and a half, we should have the six to 650. Oh, good. Yeah. That's great. Then maybe just take a beat and, and so you don't have to rush. Cause I'll tell you, George, we were in this position a few years ago, my husband and I prices are going up. Yeah, they are. That's true. But, but just in a year, it'll be like, yeah, it'll be, yeah, maybe one, 2 % you'll see.

1:53:05Uh, but that's, uh, I think it may

1:53:07Rachel Cruze:be worth it just to wait. Cause my husband and I did this exact same thing and we waited, we had, we had saved for a long time and we did our build with cash. And I'll tell you, when you have that mindset going into these meetings, because it is fun. Like if you're able to build what you want, like it's, that's a dream for a lot of people. Right. And, and it is so fun because you get to pick everything you get to, you know, do the architecture and figure it out. But it forced us, forced us to stay in a budget. And there's things still, there's one thing we did not do because we literally didn't have the money for it and we look back.

1:53:41Rachel Cruze:Does it bother you to this day? Yes, one thing. Well, you got to tell us what it is. We could have had like a half basement and dug it out and it could have been unfinished. Oh. And it was like an extra like, I don't know. Yeah. I feel that for you. A couple hundred, or a couple hundred, listen to me, couple ten, yeah. It would have been a little bit more. It was and we just literally did not have the money for it and we were like, that's the one thing we kick ourselves for. We're like, man. But I'm saying of us to say, George, it is, it's a great exercise and you go in on move day and you're, it's, that would be an insane thing to do for you guys to move in and not have a mortgage on a beautiful home that you guys have built for your family.

1:54:18Rachel Cruze:And it's awesome. So whether you wait a year or if your wife is like, nope, we're not taking on a mortgage, which I applaud her for. That is kind of our MO here. Um, yeah. And you guys want to do it faster. Just move for a year, put some stuff in storage and a year flies it goes so fast so either way either way i think you're going to be fine thank you so much for your call appreciate everything you guys do yep absolutely george that's great so much because after all of that they're still going to have about around 200 left after the sell of the of their other home they've done really really really well but i i think that is worth noting uh baby seven baby step seven to be there have a paid off mortgage and then go back to a mortgage, that's got to feel like the sting.

1:55:04It's within the bounds, I guess, of what we teach, but I think that it would probably be a painful feeling. Yeah, and we've known some people that

1:55:11Rachel Cruze:have done that, and they pay it off quick. They're really aggressive with it to pay it off. But yeah, you're back in it and not always fun. But for the home, a home is the one caveat to this whole no debt thing because it is such a large part of people's world. Yeah. But in their, especially in their situation, it's like if they did what you said, which like, hey, let's take a little of this. That way we're not moving twice. Yep. And then we can quickly pay off that loan once we sell the house. Yes. I mean. Yeah. Totally. We're splitting hairs here. And I'll say this, George, this is what we experienced too.

1:55:49Rachel Cruze:I remember for a few years that we were real estate heavy because we took all the muscle. You know what I mean? And you feel that where I like having money in the market. Liquidity. So that even forced us for a couple years after. There was probably about three or four years that we had aggressive goals to get money back into investments. Just balance it out. Yes, yes. Because I don't like being super heavy one or the other. Yeah. So there's something about that, too, to remember when you make this move. But you'll be okay. You guys are – you show a lot of diligence, George. That's exciting, though.

1:56:19Rachel Cruze:It is. That's a fun thing to do. Well done.

1:56:46you've heard from me and the Ramsey personalities for years, but nothing beats actually getting together in person. That's why we created the Live Like No One Else Cruise. For seven days, we're vacationing with you and 2 ,500 Ramsey people in the Western Caribbean with live shows, us, new content, us, and more. If you're on Baby Step 4 or beyond, come spend the week with us next March. Choose your cabin at ramseysolutions.com slash events or click the link in the show notes.

1:57:36All right, our Ramsey show scripture and quote of the day. Isaiah 45, 2 says, I'll go before you and will level the mountains. I will break down gates of bronze and cut through bars of iron. James Clear said your success depends on the risks you take. Your survival depends on the risks you avoid. Oh, that's good. Balance that wisely. Yeah. That's good. All right. Kathy's in Montgomery, Alabama. Hey, Kathy, what's up in your world? Hi, how are you today? Doing good. How can we help? I received a, well, to give you a little bit of background, I'm 66 and started working full time the past year due to a crappy situation financially.

1:58:20Rachel Cruze:Sorry. Anyway, yeah, it happens. But anyway, with that being said, I received a nice, nasty letter from Social Security stating they overpaid me. Yeah. And they're going to take half of my payment until starting in October till April of 27, which is seven months. And with that being said, I was advised through my church to ask for an SSA 632 because this is less right now, less than 2000. And my fear is I can't get anyone security wise to send me a letter because I can't get on the website because I changed my phone number due to my ex and I can't get into the website. Right. So requesting the letter, I've requested it for two weeks now and or twice in two weeks and have yet to receive that letter to make the accommodations for me not to pay this back is getting a waiver.

1:59:27My fear is next year I'm going to get the same letter, but it's going to be more as me paying back. Why are you fearful of that? Well, retirement age, I was told, would be officially 67. And I'm receiving my Social Security to help pay. I bought a house to help pay that. That's what I'm using for my house payment. And my other is basically surviving with moving into this new home. I had to unfortunately use a credit card that I'm now just snowballing. which is recent that I started snowballing this. And I, of course, put it away, don't spend it, and snowball the heck out of it. In other words, I get paid weekly and they get a weekly amount for me to snowball this.

2:00:25So going back to the overpayment of the Social Security, you're saying you can't log in to fill out the waiver or to fill out the form to say, hey, give me this money back or don't take this money because you can't log in? I'm confused about that part. Is there a way that you can just print it off and send it in? No. Unfortunately, I don't have access to a printer unless, well, I guess I can go to. Well, I didn't even think of that. Thank you. Yes, ma 'am. Yeah, I'd find anything to get this waiver. Yeah, you need it. The problem is I can't get into the website itself. It's stating that my old phone number.

2:01:04Correct. Correct. It's stating that it has my old phone number. They need to send me, you know, a text or something. I can't remember.

2:01:12Rachel Cruze:Oh, for verification is probably what they're asking for. Yes. Thank you. Yes. Yes. Well, you know what? I would call. Is there a number to call? I did call and I stated that I needed the waiver. What is it? A document sent to me. And I did this on October. the, oh gosh, excuse me, I'm sorry, September this past Monday and then the Monday prior to that. So I would go down to the office and just have them create a new account for you, Kathy, with a new login. That's all you need. But you can also, you can just download the form I just did and you can fill it out and you can either upload it on the site or you can mail it in.

2:02:00okay okay well they they stated that i could i could print it out and but it's just getting in there to verify you know i i don't know where to go to do that other than they're telling me oh you know you've got you already have an account and it's associated with this phone number and

2:02:17Rachel Cruze:the phone number shouldn't be the thing that's holding you back i mean you have your social security number and all your information for your identity yeah so fill out this form online jade As long as you have your social security number and the claim number that's attached to all this, I would go ahead. I would at least start. I would go ahead, fill it out, mail it in and then see what they say after that. Because if you have all the correct and maybe go the extra mile, if you need to like have some form of identity that proves that that's your your name and number. I don't know. Maybe sometimes people want to see like a government ID or a government ID or just like some some trade lines that prove that this is you.

2:02:54You could do that. but um don't let that one thing stop you from doing this because it's a big deal for you yeah yeah it is yeah because financially it would devastate me yeah i just i can't afford it yeah

2:03:07Rachel Cruze:so if yeah so um and are you able to qualify for this is that what someone was telling you i i'm thinking that i can because it would create a financial hardship on me right um taking that much money out of my account for Social Security, it would devastate me not being able to pay my house payment. Okay. So, yeah. And it generally applies if you agree that there was an overpayment, but if it wasn't your fault, and if you can prove that it would create a financial hardship, that's usually what they're looking for. They're going to want to know why it wasn't your fault. They're going to want to know your household income, your monthly expenses, your assets, and why it would be financially difficult for you.

2:03:47So I think that you have a pretty clear case on that and so 100 % move forward. Okay. Well, I, I, my next thing was I'm looking on this paperwork and it gave me a local number, um, to make an appointment with them. Um, and, and hopefully I can do that on my off day or my delayed day going in. Yeah, for sure. Yeah. Yeah. I'm, I'm, I think I'm on the right track financially. It's just this kind of put up. Yeah. Yeah.

2:04:16Rachel Cruze:I mean, it's just frustrating. It's a bump in the road. Yeah. And you're having to deal with the government, which is always a trip. It's like going to DMV sometimes. Yeah, absolutely. Oh, my gosh. So, yeah, it'll take some effort, Kathy, on your end. But that effort is very much worth it for your situation. So don't give up. Yeah. And with the government, you have to be careful because in many ways, it's hard. Like, if you call them on the line, you're never getting through. Yes. And they don't ever call you. that it's like they only contact you through the mail. So it can be like really, really frustrating, especially when you're dealing with like your livelihood, which is your social security in her case, a major, it sounds like the major only part of her income.

2:04:56So it's a really big deal, but keep fighting, keep doing it. Let's go to some social questions, Rachel, because these are some of my favorites. All right, where are they? Right in front of me. All right, so Dave from the Ramsey Baby Steps community, which by the way, if you follow us and you just love the teaching and you want to stay motivated. We have an amazing Baby Steps community on Facebook. There's so many folks in there and they're just motivating each other. It's a great place to be. But anyway, Dave from the Ramsey Baby Steps community says, I'm doing DoorDash to pay down debt and I'm wondering if I should be setting aside money now to pay the taxes next year or should I concentrate on paying down debt first and then worry about the tax implications?

2:05:37Rachel Cruze:No, you need to be putting money aside. Yep. Because I think you're a contractor, right? Yep. With something like that, with a situation like that. So no, yeah, you will be paying taxes. So for sure be putting money aside. That's actually one of the biggest problems we find with people when they are doing a side hustle. Then they're like a 1099 and they don't put taxes aside and the IRS bill comes. And they're like shook. And then you got to move that to the front because that's basically adding to the debt. So yes, be putting some of that money aside. I love that. Okay, that's a good one. Jeff says from Facebook, he says, we're just starting the baby steps.

2:06:11And I have a question about baby step one. Do we save$2 ,000 since the emergency fund has to cover both me and my wife? That's a new one for me. Or is it$1 ,000 total for both of us?

2:06:24Rachel Cruze:Yes. Well, we get a lot of, yes, people that are not always happy with this one baby step. But listen, the point of the$1 ,000 baby step is to get something really quickly in the bank. And for a lot of people, they don't even have$1 ,000. So for some people, listening, getting that is a big deal. And then that's just supposed to cover the ankle biters, like the things that just come up and you're like, oh crap, I forgot about that, that. But if something really big does come up, and let's say you're throwing two,$3 ,000 a month of debt, if something big comes up, pause the debt snowball, that money that was going to debt, pile that up, fix the big emergency for a month or two, and then get back on it.

2:07:00Rachel Cruze:So it's supposed to only be there for a short amount of time. But yes, that$1 ,000 is key. Well, thank you so much for hanging out with us today. Thank you for everybody in the booth for making this show happen. And remember, there's ultimately only one way to financial peace and that's to walk daily with the Prince of Peace, Christ Jesus.