Build Habits That Build Wealth

26:10Rachel Cruze:Because financially you're doing better than he is on paper, right? So, yeah, I am curious your thoughts towards his financial. Actually, we actually talked about that over the weekend and he said he's on board. Like I said, he doesn't have any credit cards. On board with what? With the financial plan. So I told him about living debt-free and building wealth and what my idea is and what I would like to do as far as us building together and no more stupid purchases, of course. And he said we wouldn't make any decisions without talking to each other about it first. Okay. That's a good start, I think.

26:46But I think keep having the lines of communication open because it's very different to say, do you want to build wealth? Yes, I want to build wealth, too. Do you want to have financial peace? Yes, I do, too. But it's the how of how it's done that, you know, because the truth is a big part of this is, well, one one thing that we have to do if we want to build wealth is we can't have toys that are going down in value that are this big of a piece of our world. And so getting, I think you're at the point where you can start specifying the conversations even more and saying, here's what I mean by that.

27:22It could mean us not driving$50 ,000 cars unless they're paid for, like that sort of thing. Absolutely. And I've gone through and I've taught, I'm FPU. And so before we get married, like I'm looking at in September, let's go through FPU together so that he really understands and have a clear picture of where I want to go with my life. You've done an incredible job. Yeah, we'll gift you the FPU, by the way.

27:46Rachel Cruze:Yes, that'll be our wedding gift to you. Yeah, and I think continuing to have this conversation, because Jade's exactly right. It's the high level picture of things that is so, so important that you're like, we agree on that. And then when you start to actually get into the details of life and you actually have to go through with the actions. to meet those high values. It's like, well, if it means that, then I don't want this. And so that can be tough. So thanks for the call, though, Keisha, and congratulations. Yes. All right, let's go to Mandy in St. Louis. Hi, Mandy. Welcome to the show. Mandy, are you there?

28:27Rachel Cruze:Yes, I am. How are you guys doing, Rachel? We're doing great. Thanks for calling in. How can we help? first of all i just have to say that when you two host and i'm listening on my earbuds i have to see what you guys are dressed and look like because you guys are like classic and simple and it's like it's like inspiring so it's um i'm a long-time listener and uh super excited to talk to you ladies love that um i'm 44 my husband and i are on baby step six we have a 12 year old and a nine year old and we make about a little over$200 ,000 a year and I had wonderful parents but I was raised with no like financial knowledge and they're wonderful people but they're living off of social security and like a small pension they have no nest egg so we are missing our 15 and we're doing well but what when I started to clean up our finances, I started looking at their stuff and they had savings account and money and piggy banks and stuff like that.

29:33So we, I, we took their money and we, and put it in some index funds with our financial planner. And every year our financial planner, they go with us to our financial planning meeting and he turns the computer around and he shows them, this is how much money you guys made this year. This is what you're invested in. And I just want to know, am I doing right by my kids? Is it too much for their age? It's a very age appropriate conversation to answer their silly little questions and things like that. But I just want to know, are we doing stuff too early for them?

30:06Rachel Cruze:It's a great question. I'm not mad about that. I don't want that to be the only isolated conversation and interaction they have with their own money. I want them to also have some money that they can cash, right? or that's on like a green light card or something that they can spend and use and save and give. Like I would want real life interaction with money for them even more than the index funds. But if you do both, I think that's great. My parents did that. We had mutual funds and I want to say we were probably 13-ish, maybe a little older than yours. And we would look at it and they would pull it.

30:44Rachel Cruze:Now that was when it was mailed to you in like a big packet. so I think you're doing a great job Mandy I would keep doing that I wouldn't change that part I would just add in more interaction getting their hands on their own money yes so that they're giving some of their money that they work for they're saving some of it they're spending some I want them to feel the day-to-day interaction with money not just the investment side but no I think we're both I agree yeah well done Mandy great job

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32:48Rachel Cruze:Next up, we have Terry in Orlando, Florida. Hi, Terry. Welcome to the show. Terry, are you there? Terry, maybe she'll come back. Yes, yes. Sorry, sorry, sorry. He'll come back. Oh, there he is. Hey, Terry. How are you? Doing good. How are you guys doing? It's an honor to be on the show. Oh, thank you. Thanks for calling in. How can we help? Long story short, my wife is having serious talks about the war. to me because of my bad financial habits oh no okay gosh yeah how long have you been married two years two two years two years two years yeah two years so tell us about your bad financial habits long um well i don't really initiate when it comes to financial meetings with each other we don't really i don't really talk about our finances too much that's really on her side of things like I'll make the money or you know my half or my share and I'll just like share account and I'll just like leave it there and whatever the gist of it I'll kind of you know do here and there like if there's something that needs to be paid I'll do it but I don't really know too much about our finances and then the our most recent situation that caused the divorce talks is that there was like again like she'll process most of the payments and three months ago I did that.

34:14What is she asking for from you? What is it that she wants you to do that you have been unable to do in her eyes? Like I was going to initiate a process of certain payments, stay on top of certain payments. I just got my car repoed, and there are three months of late fees, and I just paid off all those to get released. And it got repoed? Did it get repoed because you simply were not? Payment? payment yeah you just didn't pay the payment or you didn't have the money to pay the payment which one i didn't pay the payment that's it we had the money i just didn't pay it

34:49Rachel Cruze:why and can i ask why just you forgot or you thought she was gonna do like what what was the reasoning behind that um it was more just not to get too nitty-gritty i just I just avoided it. Okay. How old are you, Terry? 29. 29. And how old's your wife? She's 27. 27, okay. Before you guys got married, did you pay your own bills? Or how did things get done before you got married? Or was it just a state of mess? I was a teenager. Not before you got married. You're 29. You've only been married two years. We've been together for almost eight years, 10. So she's always, what you're saying is she's always taking care of that?

35:44Is that what you're saying? Not always. I'll do it here and there, but for the most part, yes. Okay. And I screwed up and I avoided it, and that's the part what I'm trying to change.

35:54Rachel Cruze:Uh-huh. Okay. And do you know yourself well enough to know why? What fear comes up in you that you're like, I have to push this thought aside to even pay a car payment. I don't even want to engage that at all. Where does that come from? I would just say, I don't think it's fear. Well, maybe fear is something I don't understand, but I would just say laziness. Is it just pure lazy? Yeah, just lazy. I think there's something else there, Terry. I do too. because you go to work. If you were a lazy person, you wouldn't get up and go to work. If you were all that lazy, you probably wouldn't be calling the show.

36:34I feel like there's clearly in certain areas a level of intentionality that you have the ability to have. And so that's why I have a hard time just with, no, you're just a lazy guy.

36:44Rachel Cruze:You can't do it. How did you grow up with money, Terry? What was your home situation like with money? I came from a Caribbean family and that's already a story in itself. You came from what? A Caribbean family. Oh, okay. Yeah. And like, I didn't really, like, think of it like this. You have support, but you don't at the same time. Yeah. And it really is like, if you mess up, it's strictly on you. And that's kind of how I've been. And I say lazy to chalk it up because I just, I mean, I only have the capability to take. And like, hey, I did miss those three monthly car payments and it did mess us up.

37:24Rachel Cruze:Do y 'all have a baby, Terry? Not really, really much. Yes, I do. You do? Okay. He has a baby. How old is the baby? He is officially two months. Two months. Okay, sweet thing. Okay. Can you tell me, because I'm trying to get a sense, because don't get me wrong, this is a big deal, and it's a frustrating thing. I want to know if there's some other things that are pushing harder on the divorce conversation than just who pays the car payment. um are you working regularly does the laziness show itself in other areas of life like are you not working regularly are you not helping out around the house are there other things that are going on that's not money related that this is really just one of the many things or is this the only thing and you're like okay i gotta get this one thing right just be honest i mean to keep it spade on i would say yeah we have like you know what women should have have multiple things but i would say it it shows itself up in other ways of factors like sure she said it's accumulation of these five bad financial habits and i have been trying to change but it just it it just keeps every time there's a mistake like the repo she'll bring up divorce like the last time my car got repoed she brought divorce so i don't think this is i'm going to be honest with you.

38:46I don't think this is a money issue. I think this is, I think you have some marriage issues and I think you have some personal issues.

38:53Rachel Cruze:I think she wants you to step up, Terry. I'm going to be honest. I think I'd be pissed if I just had a baby and my husband can't even pay his own car payment. Like, I mean, a little bit of me, Terry is like, got to be able to do the minimum basics. Yes, you have to step up. And so there's, and I know you know that, or you wouldn't have called. So you know what you have to do, but something is blocking you to go and do it. And I think that that's work you've got to do, Terry. You've got to figure out what is going on. And in the meantime, you just have to have action. And you're going to have to rebuild some trust with her because I think she's just pissed.

39:28Rachel Cruze:I think she's been doing this on her own. And she's been taking care of the money because you even said, I made the money and I put in the account and that's her thing. She's tired. She wants a partner. She wants a teammate with her. and to be a husband that loves her, serves her. And what Jade is pointing out is exactly right. When you actually start fixing some of these issues, and we'll use money as the main one because that's why you called, and you actually start being so selfless and you're like literally saying, this is what I wanna do, but I know that's probably not the right thing. So I'm gonna engage in this process that makes me so uncomfortable, but I'm gonna choose to do it for the betterment of my marriage.

40:08Rachel Cruze:And you do that, it's going to trickle through all the other areas of your marriage when you start to change in one area because it changes you, Terry. And I think part of it is you figuring out what is that mental block for you. And if I were you, I would spend a couple hundred bucks a month and go find a counselor or a therapist. And I would. I do think money can be such an embarrassment, shameful, guilt-ridden topic. And you're not feeling much relief at home because your wife's threatening to leave, but to, to, you got to, yeah, you got to work some of this stuff out of what is holding you back because there's something there.

40:47Rachel Cruze:And in the meantime, I do want to be clear in my opinion, you still have to make some steps moving forward to, to take care of this baby. And as that baby cried in the phone, I was like, Oh my gosh, they got a new baby in the home. Like, like you have a lot of responsibility and you, and you're, it's doable, Terry, because the money's sitting there. It's not like you can't hold a job and you don't have the money. It's just following through with a couple of things. If you have to make a checklist or have reminders on your phone, it's due today, pay it. Whatever it is to put into place some actions.

41:18That's why I think it's got to be deeper than that because those things, the logistics of it is quite easy. I set the alarm, it rings, or I put it on auto draft. What about that? Then you're not even thinking about it at all, Terry. So, you know, actually, the thing is, like, when it came to the car payment, I really and this I have to emphasize, I thought I did put on auto pay. OK, but what stops you? Let me stop. What stops you from right now? The moment you get off this phone, I realized it wasn't on auto pay. Therefore, I'm going to put it on auto pay this second. Then I'm going to show it to my wife and say, hey, I realize I messed up the last one, but I put it on auto pay.

41:59I just want to show you that I did that. It's going to come out every month on the 15th.

42:01Rachel Cruze:And I would ask her, what do you need from me in this? Ask your wife that. What do you need to see from me to help start making some steps towards rebuilding this trust? Yeah. Because fight for this marriage, Terry. You've been with her all this time. And I don't want you to lose this. Like, to me, this can be solved. And for the sake of that baby and everyone, like, do not let this tear your marriage apart. Fight for it. And do what you have to do to rebuild that trust.

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43:45Rachel Cruze:Welcome back to The Ramsey Show and the Fairwinds Credit Union Studio. I am Rachel Cruz with Jade Warshaw, and we're answering your questions about life and money. So give us a call at 888-825-5225. We have Cambria in Virginia Beach up next. Hi, welcome to the show. Hey, how are you? Hi, we're doing great. How can we help? I'm wanting to know if I'm being selfish, wanting to go on a family, really expensive and once-in-a-lifetime family vacation? Oh. It depends. I like this question. Me too. Okay, what's the situation?

44:34Rachel Cruze:So we've been debt-free. We've been doing Dave Ramsey for about 15 years. We used to teach it. We actually came out to the studio about 10 years ago and met Dave. And we are in a really good financial situation, but my husband is retiring from the military in March. And next June, my dad wants to go to Sweden. That's our heritage. And he's always wanted to take this trip. He's turning 80, and he wants to do a 12-day cruise that's about five grand. not including you know anything off the ship um excursions or anything and flights for my husband and i and our two kids about four thousand and then um he wants to stay a week uh afterwards um and he's gonna take care of the airbnb or whatever we stay in after but it's still gonna be you know a good like twelve thousand dollar trip yeah i would say 15 i would say i would yeah i'd aim high 15 000 i would say yes so where's the problem and my um well with my husband retiring not knowing what job he's gonna get what how much money you know he'll be making how much time off He's going to be able to have, you know, four months after starting a new job.

46:10And, you know, I really want to take this cruise. He's willing to do the week after. And so I guess my question is, do I, like he said, we can try and, you know, make it work to the best of our ability. Well, you've been debt free 10 years. So tell us about the other money that you have. I mean, when somebody tells me that, I'm waiting to hear of several hundred grands laying around in different places. So we've actually been debt-free 15 years, and we have over half a million in our Roth IRA. Good. We have several different investments on the side. We have about$20 ,000 that we've gained in, like we have, we keep our car funds in, oh my gosh, I can't remember the app.

47:09That's okay. Just tell me how much liquid cash do you have?

47:15Probably$50 ,000 to$60 ,000. Okay, so$60 ,000 of liquid cash, and we'll just say that includes sinking funds, emergency funds. Is that fair enough? Yes. Okay, and then you've got, you said the$500 in your Roth IRAs. Any other money laying around?

47:35I don't think so.

47:37Rachel Cruze:There might be some here and there in, like, crypto and whatnot. Where are you guys at with your house? uh we owe about 175 okay and how much do you guys bring in a year um now 150 maybe 150 and is he the only one working yes i'm a singer so i gig here and there but it's not you know it's it's just so he'll so he's making 150 will he get anything with retirement when he when he retires um he'll have about 5 ,000 a month to wake up. Okay. Okay. Okay. So I mean, this is, I think I heard you say this is next year, like June of 2027, right? Yes. Is there the ability to save up the way you've done for your other sinking funds and have this off to the side?

48:28I mean, you've got a year to do it. A little less. Yes. It's kind of harder because in April we started, we decided to, We didn't know about this trip.

48:41Rachel Cruze:And in April, we started remodeling part of our house because we decided we're going to stay here. We're going to, you know, we're getting out of the military. We're staying here. We love our house. We've been here 10 years. You know, how much does a remodel cost? We've spent almost$20 ,000 so far, and we're trying to cash flow as much of it as possible. How much to go? And probably another$40 ,000. Okay. So the good news is we know you guys can stack up money to, you know, to spend$60 ,000 on something at will. Like, so every month we put stuff in different funds every month. And if we stopped doing that, there's probably, you know, there's probably about$2 ,000 to$2 ,500 that we could.

49:32There isn't$1 ,000 of discretionary money that we choose every month where we want it to go. I would seek to do this without touching. If you're going to do this, my goal would be let's cash flow it. Let's do the remodel and we have to put a bow on that first. But let's look ahead and see what our money is looking like. When will we be done cash flowing the remodel? From then on, will we have enough money to put the$15 ,000 aside for this? part of that conversation also is what what's he going to do after he retires and yeah that's a big

50:07Rachel Cruze:part of this and part of his onboarding package for his new job could be slotted hey i do have a three-week vacation that's been planned and it's paid for yeah um so as i start my job part of my contract of starting this new employment can be that this can't take away from any pto you know what i mean like you can negotiate some of that as that with a new employer um so that's We did talk about that. Yeah. So, no. Yes. I think you go. You have the ability to go. You kind of. Listen to me. I'm such a spender. I'm like, come on. You have to go. I mean, your dad's 80. Yes. Yes. I mean, seriously.

50:43Rachel Cruze:These are the things you cannot miss out on in life. You know what's crazy is Winston's family, my husband's family, his grandmother came from Sweden, from Stockholm. And we did a. It's weird. As you're talking, I was like, is this me? We did a cruise with my family around the state, probably the same Baltic Sea type cruise. And we went to like the cemetery where all of his, yes, where his great grandparents are. I mean, it was amazing and beautiful and like such a, it does. It feels like kind of a once in a lifetime type thing. And with your dad who's 80, like you won't regret going. So yes, figure out a way to do it.

51:18Rachel Cruze:And this sounds terrible. Maybe I've been married too long, but I'm like, if he doesn't want to do the cruise. He doesn't have to go. He doesn't have to go meet us over there. Honestly, yes. That's not, that's not bad. I mean, seriously, like if his work can't hold, he'll be OK. He's not crazy about going to Sweden, it sounds like. So I don't know. I would take kids and go with your parents. I would be going without him. But when you've done what you have to do and you've been debt free for 10, 15 years, this is precisely the thing that you should be doing. Yes, absolutely. Exactly. Money is a tool to use to create a life that you love.

51:53Rachel Cruze:And part of that is with your family, creating memories. And you're not out of control. You guys have half a million in retirement. Your debt for, I mean, like, it all checks off in my book. So I'm a green light. But I'm with Jade. You've got to cash flow it. You guys need to be disciplined and start saving. But you've got a year, which is great. Yeah, plenty of time. You're going to be fine.

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53:47Rachel Cruze:Today's question of the day is brought to you by Why Refi? When private student loan payments start getting away from you, it can feel like you're paying for decisions you made years ago. Why Refi helps borrowers explore low fixed rate refinancing options and payments designed around your current situation. So go visit whyrefi.com slash Ramsey may not be available in all states. Okay. Today's question comes from Camilla in Illinois. She says, I often hear the advice that you need 1 million in your retirement fund or some other arbitrary number. Does that amount apply to a married couple or does each individual need to have that amount invested?

54:27I assume it's combined because as a married couple, you're combining other finances, but what happens when spouses are different ages and retire at different stages? So I like this question, Camilla. So first let me start out by saying the number that you need to retire comfortably is different for everybody. There is not one number that is a one size fits all. Now you do hear the number 1 million because obviously that's the first layer of the millions. And it's like, if you can hit a million dollars, yeah, that's an amazing milestone. So I think that's why people park there a lot. And you hear a lot on social media or even in the media that it is a million dollars enough to retire.

55:06Does a million dollars get you as far as it used to? I just think those are buzz. It's just a buzzy number. So that being said, what you're really looking for when you retire, just big picture, is you want enough in your nest egg that you can live off the interest without really having to touch the nest egg. That's kind of what you're shooting for. Obviously, you want to be able to account for inflation in that equation. And that allows you to leave money to your children's children, right? That's the whole point of being able to build that sort of wealth. And some people are able to do that and some people aren't.

55:41They learn this later on and they have a nest egg and they draw on the nest egg and they draw it down, right? So what I would suggest is working with the SmartFestor Pro and figuring out what that number is for you. Around here, we've kind of figured out that 15%, if you invest that annually or monthly out of your gross income, that's kind of the magic number that should help you hit the number that you need for retirement. That's why we teach that. But the number truly is, Rachel, different for everybody. It is.

56:10Rachel Cruze:Yeah. And depending on your lifestyle and what you want in retirement age, you know, some people want to go more simplistic and they're like, I want to just, I want to downsize, you know, they want to go, some people go the opposite way and you're like, I want to travel more, you know, so you kind of want to picture as much as you can, you know, what you want to do. But that 15 % is the rule of thumb. And having no debt. That's right. Oh yeah. And if you have a paid for house and everything like it, that is, that's the way to go. So yeah, the million dollars in retirement. Yep, that will depend on your lifestyle and how much you're planning on taking out of that fund.

56:45Rachel Cruze:I guess we can talk about, she also mentioned it being together or separate. Oh, yes. So you do want separate retirement accounts because you want to get that tax advantage as much as possible. So individually, you both should have Roth IRAs individually, you know, 401ks if your company has it or 403bs or a SEP, you know, but if both of you have those going, yes, one of you will be able to draw out of theirs tax free, you know, at 59 and a half, if it's a Roth before the other. And then maybe you guys live on that and the other one decides to keep working or maybe they stop working because you got enough there for the 59 and a half year old to take enough out to sustain the lifestyle you want.

57:28Rachel Cruze:So yeah, definitely different accounts, but from the mindset that we're still working out of one, we're seeing it still as ours. Yes, it's ours together. But you can, to your point, you can take advantage of more money going into those accounts,$7 ,500 each in the Roth or whatever your limit is for your 401ks, that sort of thing. All right, let's go to James in Iowa City, Iowa. Hi, James. Welcome to the show. Hello, how are you? Hi, we're doing great. How can we help? so i have a question on behalf of my great grandma she is debt-free lives on a farm has a home has a cell tower on the farm that pays her monthly um i think it's like 1800 a month that she gets for having the cell tower on her farm they came to her with three different offers a one-time lump sum payment of$355 ,000 for 20 years, or a second option of$390 ,000 over installments over five years, or the third option,$428 ,000 over 10-year installments.

58:44What happens to the deal if for some reason over that period of time, whether it's the 5, 10, or 20, and she moves, what happens to the deal?

58:59She will not be moving. But I'm just saying, we need to know. I think it would go to the person who...

59:06Rachel Cruze:It would have to be part of the land lease, part of the contract of the new sale of the home. Yeah. Or even if she passes away, James, and you guys sell the property to someone else, I guess is that part of the language, that if there's a new owner... They automatically. They have to assume this tower for X amount of years. Yes. Okay, gotcha. Okay. How much money does she have? She has right now, I think like$50 ,000 in cash, but she also gets Social Security and she has a retirement. And I think her husband had something that she gets. He's passed away and she still gets something. I don't know if it was a military benefit.

59:50Okay. Do you know what the retirement nest egg is? Like meaning what she has in retirement? Mm-hmm. I think it's just the$50 ,000. Okay. Actually, no. I don't know what's in her retirement account, actually, because she does have something saved that is in addition to social security. But I know it's not very much.

1:00:15Rachel Cruze:Okay. I mean, my knee jerk, James, I'll be curious what Jade has to say, is I always like a lump sum because she can turn around and invest that and make a great return. I think she'll get probably the most bang for her buck doing it that way, even though it's a lesser amount. I think she will make from a return perspective more getting it within five years versus 20 years. Yeah. I mean, that's basically what we would say with even a pension or something like that. If you can have the lump sum and reinvest it. Or the lottery. If someone with the lottery gets, like, go ahead and take it all. So that's...

1:00:53She's 82.

1:00:54Rachel Cruze:Okay. So she has been living her whole life off of what she gets at monthly. So this is something completely foreign to her. She's never heard of anything like this. Sure. The tower, my grandpa handled it all. Okay. And they were, he just wanted them out of his face basically. And they were paying him$500 a month. Now her son, my uncle who has passed away, got them up to$1 ,800. And now it goes up, I think, 5 % every five years. So if we did not take a lump sum, it would go up 5 % every five years. After the 20 years, it would have gone up. Yeah, I think she could still make more in the market having a lump sum.

1:01:47Rachel Cruze:Because if it's every five years, would you say every five years it goes up 5 % or every year? Yes. Yeah. Every five years. Yeah, I think I lean towards taking the lump sum in five years. I lean towards that too. yeah I think it's a no-brainer yeah honestly and have her sit down with and you probably will help her James because you're kind of an advocate you know for her even in this call sit down with a smart investor pro you can find one on Ramsey solutions.com and figure out the best way from even a tax perspective of if she invests this money because it sounds like she's pretty low maintenance she's probably not going to use if any of it but from a generational perspective um what a beautiful thing right to be passed down one or two generations uh to be able to help out family right with what this money could be and so i would sit down with an investment professional and just figure out from a a trust stamp the trust a trust standpoint or even a will the tax the taxes um i don't know i would i would want someone looking at this amount of money and just seeing how can we make this go the furthest yeah the best way the best way possible for her and if she needs any of it.

1:03:02Rachel Cruze:It is hers. I'm not just like, yeah, I'm not chagging that it's like not for her. She doesn't hardly. She doesn't. It doesn't sound like she cares for. I mean, she's like, I'm good. I'm good, which is amazing. But man, what a what a crazy thing. That's pretty cool. Pretty wild. Yeah. So great. Well, thanks for the call, James.

1:03:32Thank you.

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1:04:53Rachel Cruze:Up next, we have Michelle in Spokane, Washington. Hi, Michelle. Welcome to the show. Hi. Thank you for taking my call. You're welcome. How can we help? Well, I'm a 56-year-old divorced woman with no retirement saved and a mountain of debt. Baby step two. And my question is, once I finally get to baby step four, because I have no retirement, should I stick with the 15 % of my take-home to invest, or should I maybe consider increasing that while I'm working on paying off my home? Well, let's tackle one thing at a time, because you've got a mountain in front of you, So let's just one step at a time.

1:05:33So tell us about the debt that you have, the consumer debt. Well, the consumer debt is I owe my mom$1 ,500. I owe the IRS$5 ,600. I have about$14 ,624 in credit cards. Okay. Did you say that number again? Credit$14 ,624 in credit cards. Okay. A$23 ,976 car loan. Okay. And this is the scary one,$50 ,603 in personal loans. Got it. Okay.

1:06:12Rachel Cruze:Michelle, what's been going on? Did all this kind of escalate after the divorce? It's just been years. I spent a lot of almost 30 years paying off student loans. Okay. Sorry. No, you're okay. It's a lot. How fresh is the divorce? Oh, it's many years. I've been by myself with kids for many years now. Okay. Okay. How many kids do you have? I have three. The youngest just graduated. Nobody has student loan debt if I've done anything right. Good. That's great. That's excellent. How much do you make a year, Michelle? About$84 ,000. Okay. Okay. Okay, perfect. How much do you see every month in your month-to-month?

1:06:55Take home? Mm-hmm. Yeah. I take home about$7 ,000. I pay myself a, I'm self-employed, so I pay myself a wage that nets down to about$5 ,000. And I try to take another$2 ,000 from the business each month. Okay. And you're not investing right now, right? I'm not investing at all. I've been seven months into baby step two, so I am making progress. Good for you.

1:07:21Rachel Cruze:Very good. Good. How much debt do you have being thrown at? I'm sorry, how much cash per month is going towards paying off debt? 2 ,000? 3? I just got to the point where I can put 2 ,500 towards the debt. Good. Okay. Fabulous. I have freed up$500 to move. Yes. I started with about 2 ,800. That's perfect. I am moving forward. Okay. So within three months, the IRS and the$1 ,500 loan should be close to paid off. That's my plan. That's my plan. Okay, great. What kind of work do you do? Are you able to do extra work, side hustle, add more to this? I hate to say what I do for a living. I'm a bookkeeper and accountant.

1:08:06That's okay. Listen. Don't be ashamed of that. You're fine. Yeah.

1:08:10Rachel Cruze:Yeah. I know, but I always tell the accountants are the ones that make it. Right. No, you're fine. You are fine. So, yes, I haven't been saying I haven't been saying no to work. I've been working myself quite a bit. I don't see the need at this point to get a side hustle because I have the potential to to bring in more. OK, so I would I would quantify that because sometimes you can take on more work, but you may not see the dollar side of it as soon as you want to. So I would really put a goal around how much do I need to earn per month to hit this goal? and how many clients does that amount to so that you are very intentional about going after that money.

1:08:48And then like Rachel said, just keep going smallest to largest by balance. And that's how you do the debt snowball. Like she said, in three months, once you've paid off your mom and the IRS, now whatever those minimum payments were, if you were making those, that's now gonna go onto these credit cards. Is it one credit card or several smaller ones? It's two. I've paid off all the little ones. Everything's closed. Okay, good.

1:09:11Rachel Cruze:So I think if my math is right, Michelle, and again, if you throw on some extra money, I think in two and a half years, this could all be gone. And my hope is, too, with this car, and that includes possibly selling this car, do you know how much you could get for it?

1:09:32Rachel Cruze:Maybe$27 ,000. Oh, that's great. That's great. You owe$23 ,000, right? Almost$24 ,000. Okay, I would get a couple of thousand bucks, Michelle, sell it, put that together and go get an$6 ,000,$8 ,000 car. Because that's going to speed up this process so fast for you. Because I think the urgency of retirement savings is on your heels. It was a wake-up call, ladies. Yes, for sure. But if you can be out of debt, let's say by 59, okay, for the sake of our discussion, and you start throwing, I'm using our retirement calculator right here. And I'm going to say, do you have anything in retirement right now?

1:10:22Nothing. Okay. Absolutely nothing. Okay.

1:10:24Rachel Cruze:Let's just, I'm going to go big here just for the sake of all of it. Okay. So let's say you start investing at 59. retirement age is 67 let's say you put three grand in a month like you you are you're you're you are just throwing money in this account okay you're saying the number that i've been thinking in my head and at least my time is matching what the two of you are proposing well you're just you're just taking what you were putting on debt and now you're turning around and investing it and what you're going to have um you're gonna you're gonna have 458 000 okay at that point By 67. Yep. That's pretty wild that you go from negative to positive to almost half a million dollars, Michelle.

1:11:13So stay with the 15 % then and just continue to work on the house and investing. Okay. Yep. Tell us about your mortgage. I'm just curious. Oh, I owe$217 ,000. my house payment is $1 ,610 a month

1:11:34Rachel Cruze:I probably was a little aggressive on the$3 ,000 a month because you do want to throw some of that at the house so maybe a little less than that with a paid off house I got too excited for you Michelle I needed to hear that I just need to know that there's and you know and you get to make the decision what you want we find the fastest way is to get the house paid off but with your age if you said you know what, I am going to throw more at retirement and keep my low house payments, you know, that could be your decision. I'm not saying to do that. But I'm just thinking if you're aggressively throwing some money and investments, I think that that I think there is hope.

1:12:12Rachel Cruze:Let's just say that. However, you kind of slice the pie. I think you're going to be good. Thank you. Yes. Thank you. I've been really overwhelmed and fearful. So thank you, ladies, both. Yes. And you're a good mom, Michelle. I mean, even the fact that you were like fighting hard for these kids not to have student loans because you said you took so long to pay yours off. And you're like, I don't I can't do that. And there is a wake up call. And everyone has that moment, Michelle, we kind of call it the I've had it moment, where you look up and you're like, I'm 56. I've worked so hard. I've started my own business.

1:12:46Rachel Cruze:I'm putting my kids through college. But like, what about me? You know, you get to this point and it makes you mad. but that anger kind of creates that grit to get out of this. But this is doable, right? I don't see you in consumer debt for six years, right? I mean, like you could really make a lot of progress. And I think you're feeling that. So thanks for the call, Michelle. We appreciate it. It's going to take a lot of intentionality, but I think with what we teach, there's always a measure of hope and there's always a measure of increase that can be gained, right? She may not have a million dollars, but it's better to have 458 ,000 than zero dollars.

1:13:30So there's always a better measure of hope that can come from doing this.

1:13:34Rachel Cruze:Yes, and that is a pro to owning your own business. I mean, that is one thing because you can kind of, you can set your schedule and even, you know, I mean, I know plenty of people in their 70s and they're still killing it. You know what I mean? Yeah, you can work longer if you choose to. Yes. And you can kind of create this environment that you need in order to create, you know, have income on the side. And you're not just dependent upon those investments at 67, too. Right. That could be an option. So it is tough. I think it's a it's probably a wake up call for a lot of people to Michelle to realize, like, yes, the day is coming.

1:14:07Rachel Cruze:Like it's happening. And the sooner you start, the better off you're going to be.

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1:16:01Rachel Cruze:Well, we wish we could get to every call and question on the show. But if you have a money question and you want an answer for your situation, head over to our website and use Ask Ramsey. Ask Ramsey is our free AI tool that's built and trained on Ramsey principles. So you're going to get an answer the same way that we would answer on the show. And I used this the other day, Jade, for something I was looking at. And they continue to update it. They are really iterating this to make it as good as possible. And they'll ask you some questions to get a better insight into your situation. And I was like, that's what I want to ask.

1:16:35Rachel Cruze:As the question comes up for me, I was like, that's probably what I would ask on the show. So it really is. It is amazing. So go and ask your question today at RamseySolutions.com or click the link in the description if you're listening on podcast or watching on YouTube. All right. So let's go to Luke in Billings, Montana. Hi, Luke. Welcome to the show. Hi. How's it going? Thanks for taking my call. Absolutely. How can we help today? So my wife and I are in baby step six. And I'm having a hard time convincing her to cut up all the credit cards and let the FICO score go to zero because she's nervous when and if we go to refire our house for a lower interest rate because we used our FICO score basically, you know, to get our house original.

1:17:28so it sounds like she's missing a piece of information i think because in her mind she's thinking if we have a zero credit score we won't be able to get as good of a interest rate

1:17:43Rachel Cruze:yep yeah and determined it's like yeah they just can't pull up the information because you've been out of debt and closed all the accounts and that only takes about nine to twelve months it's not that long that and that's what i've told her and the whole uh manual underwriting or whatever it's called why doesn't she believe it what has she said this is the reason why i don't believe that that you're telling me the truth or that that fact is real she just says we use it to get our house originally and it took so long to get it to a good score and i just don't want to close it and I've tried to explain it to her a few times and um you guys are on baby steps how much further do you guys have to pay off your house um we just bought it like six months ago so we owe like 520 on it she thinks that you guys are going to refinance does she have a belief that it's going to go back down to two percent interest rate because it's not yeah right now we're at six yeah and that's pretty no i mean from what everything that you know the fed is doing and all that like for the foreseeable future nobody is saying that it's going to go down significantly it's probably going to stay pretty steady for for a long time because remember gotcha luke's that that the two percent that we were living at was an unheard like that was it was a result of yes all this other borrowing that was happening and so it's corrected itself and so six percent actually in the grand scheme of of mortgages is not pretty good that bad right it's bad for us because we've been used to two percent but it's probably probably i mean most most real estate experts are saying there's probably never going to go back to two percent uh-huh gotcha but i i do want to challenge you and i don't i think it's intellectually fair to do this in a marriage that when you're talking about something, if one person is talking about it from a perspective of facts and the other person kind of refuses to do their side of the work of the argument, which is if you're doing your side, which is here's the information I found, she needs to do her side, which is I need to read the information or I need to see it can't just be on a vibe.

1:19:57It needs to be on, have a fair intellectual conversation. And I would challenge her on that. I'd say, honey, I've looked into both sides of this. I understand the credit score side of it. And I understand the manual underwriting side. I think you're only looking at one side. And I would really love for you to just read up on this and see that I'm not making this up. This is really here. There's two options to inform your ability to borrow money. And you're stuck on one. And there's a whole other option here that's actually better for our lifestyle. And I think that's OK to do. And just challenge her.

1:20:34that was a good idea yeah so that yeah i got pretty much i mean i've been listening to your guys's show for a little while now and the more i dig the more i see the more i'm ready to cut them up yeah but she's not she's not ready does she use it on a on a monthly basis and pays it off because they're all ours are all paid off they're all at zero we have our emergency fund and everything. Okay, so she needs to know, though,

1:21:02Rachel Cruze:that score will go down if you are not actively using debt. Yeah, it will. They will penalize you for that. So if she's going her plan, it's going to die a slow death versus just, you know, taking care of it now and then it's all fine in about nine to 12 months. Yeah, that's another really good point, Rachel, because if she wants to do the credit route, she's got to know, hey, it's not just having one line of credit open. right it's they're looking at the different types of credit you have how long you've had the credit what utilization of the credit you've right there's all these different markers that they're measuring so that's a really good point Rachel just made yeah and she's more of like the use it for use it for a tank of fuel pay it off you know what I think I think it's a comfort mechanism I think it's just a comfort thing it's not based on any facts it's not based on math or you know It's just this is what she feels comfortable with, and I would challenge that.

1:22:00Yeah, and she has even said before, you know, what if we need it or something like that? It's like we got 40K in the bank. I think we're probably fine.

1:22:12Rachel Cruze:Yeah, when you're used to this like false safety net, which is what debt is, right? I mean, this is what banks and credit card companies pray for. They love being in someone's wallets for the just in case because the just in case happens. And so this is what they're wanting. And I think, you know, when you said you've been listening for a while, part of my frustration with that whole industry is they take advantage of people. They sit there and market themselves like they're helping you. And they're not because the people that actually cannot pay their credit card bills and that now it's gotten up to$1.4 trillion in credit card debt.

1:22:50Rachel Cruze:and Americans that are really struggling and really are living paycheck to paycheck. Everyone else gets to take advantage of that with the points and whatever. And then we've been brainwashed with this whole idea of the FICO score and the credit score. And yeah, do you have to jump through a few more hoops to do something different? Yeah, because you're not playing their game, but it still can be done. Like we both have great, incredible lives. I know. And it's fine. Like you really can live without this, you guys. You really can and have complete autonomy. And MasterCard isn't the thing that catches your emergencies.

1:23:25Rachel Cruze:It's you that you have built up a system within your family that no one has a say in. And it's beautiful. Yeah, I always say it's, I mean, to your point, you're brainwashed hearing this, seeing the commercials. And so, you know, that's the grace that I have for her is we all grew up that way. you know, never leave home without it. Right. And the truth about that is there's so much money and revenue and profit tied to that style of borrowing money for a mortgage is usually what people are thinking of. But you don't have commercials about manual underwriting. Like nobody's talking about it except us.

1:24:01And so for her, she's thinking, I've never heard what you're saying, but I hear, you know, the majority of the world, the majority of the noise is talking about it in this way. And I think sometimes you do, you have to be willing to go against the grain, do your research, not let it be, oh, cause so-and-so said it, but actually look into it and look into the facts and dig in and know what the heck it is that you're talking about and not just make stuff up. Yeah.

1:24:27Rachel Cruze:Yeah. So if you, if you do get out of debt, which is our baby step two, where you get out of all consumer debts, uh, and then baby step three is you save up a fully funded emergency fund and then you want to go buy a home you guys for you first time home buyers that's maybe step 3b and we say to save at least a five to 20 down payment and if you have been out of debt and you've closed your accounts okay you've closed all your accounts now if you have a mortgage it's a different story because it's going to be there it's going to be there but if you don't have any debt within nine to twelve months you guys your credit score goes to what's called undetermined.

1:25:03Rachel Cruze:They cannot determine your credit score because they don't have any debt information on you because there is no history to that point for them of how far they go back. And so they do a process called manual underwriting and you have to be current on a job for two years. You have to show proof of paying bills on time, like your cell phone insurance for two years. Yes. And so there's some, there's elements of this that you get some paperwork, but you can still get a mortgage even without a FICO score.

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1:27:06Rachel Cruze:Welcome back to The Ramsey Show in the Fairwinds Credit Union Studio. I am Rachel Cruz with Jade Warshaw, and we are answering your questions about life and money. So give us a call at 888-825-5225. All right, let's go to Macon, Georgia, and we have Poncho on the line. Hi, Poncho. Welcome to the show. Hey, how you doing, man? Thank you all for taking my call. Yeah, absolutely. How can we help today? Yes, ma 'am. So long story short, and I keep it brief, I've got to, I'm basically retired from two careers. I'm 41, so I feel like I've won in life, but I'm going to go back to school. I figure out something I want to do when I grow up.

1:27:48And I've got really no debt. I've been working on the baby steps. I got my emergency fund fully funded in a high-yield savings. But I have some chunks of money from some pensions and a 457. It was a public safety 457. So I don't have any penalties. So my question for y 'all is the only real debt I have is my mortgage. and I just want to know, should I invest? Should I pay it off? What do y 'all think? Well, I want to know. I mean, you said you've retired from this job. What will be your income moving forward? Will you be receiving some sort of retirement income from these jobs? Or tell me more about what your income is going to be and that'll help us know.

1:28:35Okay, absolutely. So I am retired military, so I do have a pension I'll get for the rest of my life. Okay, how much is that? uh it's just under 50 grand a year okay and i i do some part-time stuff now actually i just just retired a couple months ago um i want to go back to school um you know through the va either i'm gonna learn a trade so trying to just reinvent myself but i the advice i got was i'll take all this money and then put it put it in an annuity and i'm like i don't think mr ramsey's a big fan of annuities. No, I wouldn't do that. But I would be interested in investing on my own. And really, you're to that point, if you've got three to six months in an emergency fund, which you did say you had some money, I would double check and try to get it, you know, six months is a great place to start.

1:29:26And then from there, yeah, I'd be investing 15 % off of the gross. So off the 50 ,000 a year, that's around$625. And I would start with a Roth IRA, I, you know, max one of those out. And then from there, you know, go on to the next thing. If by that point you do have a job that is offering a 401k, that's a great place to go. If they have a match, I'd even go there first and do your best to spread this investment around until you get to the 15%, the$625. But that's not an annuity. That's invested, you know, through mutual funds in the market. Yes, ma 'am. So I have some money from a pension. I have some money parked in an IRA now, but I've just got different chunks of money in different spots.

1:30:15And, you know, I listened to this whole spiel about annuities. And I said, wait a minute. I said, I'm a follower of Dave Ramsey. And, you know.

1:30:23Rachel Cruze:They didn't like that, probably. No, no. And they're like, oh, well, you know, the annuities, the old ones had a stigma. And I'm just like, I just ain't passing the smell test. Yeah, well, the problem with it is you get, especially like a fixed annuity, you get stuck in a situation that has low interest. It's low risk, but it's just your money could be doing so much more. There's usually a lot of fees attached to annuities. You know, in some cases, some good commission for the guy selling it. Of course. And so, yeah, there's just probably more. Okay, so I am curious. You said you got money in different places.

1:30:58Rachel Cruze:So you have your pension coming in. You have your emergency fund and a high-yield savings account. How much is in there? Just under$12 ,000. $12 ,000, perfect. Okay, and then what else do you have? What's in your IRA? Well, so it's being moved from the county side. I want to say it's just under either$48 ,000 or$50 ,000. Okay, and what's that invested in right now? Do you know? No, ma 'am. I just put it in a Roth, kind of like a holding pattern. Okay. Okay. And then what else do you have? I have a 457. I've got, geez, I got about 95 grand in there, which I have access to. I mean, it's all pre-tax.

1:31:41There's tax deferred, but there's not going to be a penalty.

1:31:44Rachel Cruze:What's that invested in? Do you know? Do you know how much you're making on those, on that? I want to say my ROI last year was about 19%. Okay, that's great. Yeah, so I almost would just park it. I mean, it's doing great. If it's invested in something long term that you're not happy with, like, you know, mutual funds or an index fund, you could always cash it out and move it. But then you may, because you said there's no penalties or taxes with that? well there is taxes unfortunately so that you know if i were to just cash that out and like yeah you're gonna be paying yeah yeah okay so yeah i would probably leave that because that feels like it's doing well okay what else um let's see and i have a couple smaller that i'll uh that i'll get but not till i'm you know 55 okay so so those are your four big buckets It's really the retirement coming from the military, your IRA, the$95 ,000 sitting.

1:32:44Rachel Cruze:And the emergency fund. Okay. Well, I think you're doing good, Pancho. I mean, I think if you can cash flow school, if you can go work. Or no, no, it's going to be paid for because of the military. So, yeah, go get a degree. You just have to be able to live. I mean, my goal would be not for you to touch these investments because you are 41 and able to hopefully live off maybe this whatever 47 ,000, 4700 that comes to you monthly or maybe get a job while you're in school. Right. And find a trade and kind of create the next season of your life, the next chapter of your life. Yes, ma 'am. I talk about a true, true blessing because I was, you know, I was pretty freaking poor.

1:33:28most of my whole life. And I'm like, man, I've been given this golden opportunity. I worked my tail off, but I'm not the sit at home and do nothing type of guy, but I also, all these chunks of money, I don't want to squander it. No, you're doing better than you think you are. And the truth is you should have a couple of chunks of money. Like the way you have this divided is just right. Everyone should have an emergency fund and a high yield savings. You've got that. Everyone should have some sort of retirement nest egg, whether it's an IRA or Roth IRA. Most people have some sort of a 401k or a 403b in your case of 457.

1:34:02And then it's just a blessing, you know, that you're receiving some retirement off of it, you know, early too much. So you're exactly, you're exactly right.

1:34:12Rachel Cruze:Where you should be. Yes, ma 'am. Yep. Great job. Well, you know, we're going to send you, um, King Coleman's book, find the work you're wired to do because there's a great assessment in the back and it may just help narrow down some ideas for this next chapter poncho um but i think the next step for you is college um or the degree or trade school you know whatever you choose that next step in education to get the next job and then when you have that next job like jade's saying invest 15 of that active income coming in and be paying off the house if you have your house and and yeah and then that's what that's it so it's not that much complicated i know it probably feels like a lot simple and well done thank you for your service and everything you did for this country, Poncho.

1:34:55Rachel Cruze:We so appreciate it. And it's amazing that you can go from, what do you say? I was just so poor. Just broke. Broke. Broke is a joke. To what you've got now. It's very, very impressive. So keep doing what you've been doing. Yeah, nothing's wrong. I would stay away from the annuities. So I'm glad you called in.

1:35:24Thank you.

1:35:54Rachel Cruze:Hey guys, Rachel Cruz here, and I love summer. There is more fun on the calendar, more time with your people, and way more chances to make memories. But you know what else there's more of? Spending. Oh, between the extra groceries and gas and camp fees and family trips, it all starts to add up so fast. And before you know it, money stress starts to steal the fun out of everything. And that is why I love the EveryDollar Budget app, because it helps you plan your money, track your spending, and find more margin in your budget so that you can put extra cash towards the goals that matter most. Enjoy your summer without the money stress.

1:36:34Rachel Cruze:Download the EveryDollar app in the App Store or Google Play and start for free today.

1:36:55Rachel Cruze:Are you sick and tired of working so hard and having nothing to show for it? Well, that is normal. And normal is broke. But you don't have to live that way. Our Every Dollar Budget app helps you find extra money every month and builds you a personalized plan to beat debt and build wealth. And in just 15 minutes, you'll find thousands of dollars of hidden margin. And it's going to feel like you've got a raise. So don't live normal when you can live like no one else. So start EveryDollar for free in the App Store or Google Play. All right, let's go to Tony in Cincinnati. Hi, Tony. Welcome to the show.

1:37:33Hey, guys. Thanks for taking the time to take my call.

1:37:35Rachel Cruze:Absolutely. How can we help? I have a question for you. I'm 55. My wife is 52. And right now, we pay extra on our house every month. and we're on track to have it paid off in about eight years. The mortgage is a 2.75 interest rate. And I'm wondering if I should not be paying the extra and instead using a portion of it to invest. Oh, yeah. It's the common question that we get. Yes, the classic question when it comes to paying your house off early. I mean, the truth is paying off your house early is more than just a math question, right? you do want to go into retirement without a mortgage and that's a big piece of this.

1:38:19And I will say this, there are worse things that you could do, right? You could say, yeah, I just want to do this and invest money. But you also want to have a paid for mortgage in eight years. And so I do believe that a major part of wealth building is not just money in retirement, but also having the peace and security of having a paid off house. and so I would stay the course and I would put the extra pay off the house in eight years and then after that you can you know go hog wild on investing if you want to well I've been just I just had my head down I continued to plow forward and then I recently started thinking am I actually doing the right thing sure by paying this low mortgage rate off early right yeah and if you

1:39:02Rachel Cruze:look at it from just a math perspective Tony sure you're gonna make the spread of 10 percent in the market, if you have a 2%, you know, on your home on interest that you're paying versus 12%, you could be making right and just like round numbers. So from a math perspective, that is true. But what what is not calculated in the Excel sheets that you create is peace of mind. It really is that it's that it is this idea of having complete autonomy over your life and your money, that if whatever happens, they can't take your house, a bank doesn't own you anymore. There is something about that freedom that I promise almost everyone we talk to that pays off their house does not regret it.

1:39:51Rachel Cruze:They don't want to go back in. And we used to make the joke all the time, you know, if you hate having a paid for house, you can go get a second, you know, go get another mortgage if you wanted to. I know that would be at now 6%. So I know that that argument doesn't last as much anymore. But there's just, yeah, there's an emotional, spiritual side of money and debt that we talk about that a lot of people don't. And again, you can't factor that into your calculations because it's not there. But yeah, I would say stay the course. I think having that paid off home and then you could go back and reinvest your mortgage payment every month for the rest of, you know, retirement if you want to do that.

1:40:32Rachel Cruze:but having that paid off house is a game changer. Just having something that's truly yours. It's yours. No one can take it from you. Yes. All right, let's go to Cody in Wichita, Kansas. Hi, Cody. Welcome to the show. Thank you for taking time to answer my call. I appreciate it. Absolutely. How can we help today? Yeah, so I'm 23. I own a fencing business and I'm getting married in about three months from now and I need a house to live in. Thank you. I need somewhere to live and I can't run my pension business just out of any place to rent. I can't find really anything. And I'm just wondering, would it be stupid to go borrow about 200 to 250 ,000 to build a house?

1:41:21Rachel Cruze:I would not. I would pause. Just from a couple of things you said kind of gave me like a head tilt. when you say there's no rentals that I can have to run my business out of. When you make big statements like that, it shows to me that you may not have done all your research. And when you start to limit your options because of a belief system, then you pin yourself in a corner where you're like, the only thing I can do is build a home to make my life what I need it to be. So I would push against that philosophy, okay? I would implore you to be a little more creative in it. That's thing one. Thing two, I would not build a house my first year of marriage.

1:42:08Rachel Cruze:There are so many decisions, so many things that change in life. You guys just need to enjoy. Enjoy life as a newlywed at 23 years old. You're running your own business. You have enough stress on you, Cody, already. I would get creative, find a rental. I don't know if you even have to rent somewhere else to run the company out of. I don't know what that looks like for you, but I would do that for a year. And then if you guys look up in a year and say, hey, we want to make a move, then that's when I would start talking about doing something. And then, Cody, let's even talk about since I agree 100 % with Rachel, but there is going to come a time when you do want to buy a house and you want to be ready and prepared to do that the right way.

1:42:50and there is a good, better and best way to do that. And we'll tell you the best way, which is honestly to be out of debt, to have three to six months of expenses.

1:43:00Rachel Cruze:Do you guys have that right now? Are you guys at that step by chance? No, I am not out of debt. So right now I'm actually in debt quite a ways. Oh yeah? With fairly good assets. I own a piece of property. I owe about$430 ,000 on it. It's worth about$700 ,000. What kind of property? It's just pasture land. I live on a farm. Okay, okay. It's 160 acres. So I have cows that I obviously run on that that help me make my payment. But I also would like to pay it off. And then I have one vehicle note for, I think,$30 ,000 or something like that. What about your wife-to-be? uh she doesn't have any vehicle loans at all she is no debt at all okay so yeah i mean i'll be honest with you if i were looking at this i mean the first order of business i'd pay off the credit or the car debt um and then this land could be the difference between you guys having a house sooner than later unless you're thinking you were going to build something on that land what was the plan?

1:44:14Yes. So actually my dad has a bunch of land as well and he deeded me over just 10 acres to my name. Um, if we were wanting to build a house, he would deed that over to me. Um, and that'd be separate. That'd be separate than the pasture that you told us about. Yes. That's how I would have 170 then. Yeah. Uh, I love the idea because you've got this business that you're building that apparently needs a special space for it. I might love the idea of at the right time offloading this pasture land because that might be the money that you need to build something.

1:44:50Rachel Cruze:I mean, yeah, how many acres is it, Cody? 160 acres. Okay, so I mean, yeah, going forward, it's a great asset that you have. So I would make it a goal to pay off the car because how much will you guys be making a year together? A year together, I think I'm about, the business is only about two years old. And this year I'm projected to make about$150 ,000 to$200 ,000. Good job. And then she works at a bank, but getting ready for the wedding and stuff like that. I don't know. Yeah, she's not, she's quitting her job, but I'm sure she'll start. So I would guess we'd be making around$200 ,000 or something like that.

1:45:34Rachel Cruze:$200 ,000. Okay, amazing. So yeah, I would make it a goal, Cody, to pay off the truck. You guys get a fully funded emergency fund of three to six months of expenses. And I would start saving after that a chunk of money. Because I do think building on that land, I think that's great. If your dad deeds over, I mean, that's a gift for sure. But I would do this in maybe two years. And then part of if you need more money past the savings, which you will, I might consider selling some of the acreage of the property to help build this. And then you guys are going to have a massive loan of$430 ,000 that you're going to have to work to pay off.

1:46:19Rachel Cruze:I mean, that's a lot of risk, Cody. I'll just throw it out there. I know it's working out right now, but I'm just telling you, that's a lot of money to pay off.

1:46:44All right, let's cut to the chase. It's easy to get discouraged about crazy house prices and interest rates. But when you have the right real estate agent to help you buy and sell the right way, you'll have confidence to make smart decisions. Ramsey Trusted Agents aren't just experts who guide you through buying or selling. They're people you can trust to have your back from the first call to closing day. Find a Ramsey trusted agent near you at RamseySolutions.com slash agent. That's RamseySolutions.com slash agent.

1:47:28Rachel Cruze:If this show has helped you think differently about money, Will you share it with somebody in your life? One of the best ways to spread the word about the show is honestly you guys. It's the word of mouth of how it's helped you because we do. We want to get as many people as possible to a place where they have financial peace. So make sure to share the show with your friends and family. We would greatly appreciate it. All right, let's go to Ann in Colorado Springs. Hi, Ann. Hi. Thanks so much for taking my question. Yes, absolutely. What's up? Well, mine's a little bit different. I'm not calling from a personal standpoint.

1:48:07I'm calling on behalf of my job. I am an executive director of a small nonprofit in rural Colorado. Just a little bit of a backstory that will maybe help understand things. We had to purchase a new facility five years ago so we could open a free medical clinic. And prior to that, we did not have a mortgage. whatsoever. And we only bought the new building with a promise from a grant funder that after a year, they would pay off the remainder of the mortgage. So we went into it not thinking we were going to have a mortgage for very long. And within that year, when I approached him again, my previous position as I was a fundraiser, it was when Roe v.

1:48:58Wade had fell and they no longer supported pregnancy resource centers, which is what we were. So now we got stuck with a mortgage.

1:49:05Rachel Cruze:Oh no, the grant didn't go through. It didn't. Yeah. And the original mortgage was only for five years and it was a great interest rate. It's for 10 years total, but the first five years was like 3 % interest. Okay. We did not realize that at five years that it was a variable interest mortgage and it jumped to 6.7%. Shoot. Yes. So that leads to where we are now. I took over as director two years ago and inherited$50 ,000 of debt for the center, for the nonprofit. And by the grace of God, we have eliminated all of that debt. And for the first time in 40 years, we actually reached our first goal of having a six month operating buffer.

1:49:55Rachel Cruze:Oh my gosh. and well done. You balanced that budget. I like your style. Oh, I balanced it. She's like, I'm getting there. This is a new problem for the board and myself to have because we've never had anything over. Like we were nervous to pay the electric every month and now we have a full six months operating cost, which to me, I hate debt, but I also hate living in fear that we're not going to be able to provide our services and pay bills. So with all that done, does it make the mortgage manageable or where, tell us where the problem is. Well, the mortgage is manageable because I've, I've shifted some things and I've actually rented out space in our building that pays for the mortgage, but it has a balloon payment due in five years.

1:50:47Can it be refinanced? Well, and that's the step that we are right now. So that's, that's my big question is we are, We looked into refinancing. We found an amazing Christian company that's going to help us refinance. It will drop our mortgage rate by$200 a month. Great. And there's no more variable rate, which is the biggest part. There's no more variable rate. And in fact, we can revisit it every, I think we have it for every three years, that if the rate is lower, we can re-amortize the scale. Okay, that's fabulous. So where's the problem? The problem is, is we have kind of a split opinion on my board of directors.

1:51:28And that split is, is to not, because we owe 220 ,000 on our building. And they think the part that is disagreeing with the plan right now thinks that we should put every penny that we have directly to the mortgage. Including the six months of buffer? Yes. and not keep that six months of buffer. And how much is in there? We have 157 ,000 right now in our buffer. Okay. Which is technically about seven and a half months. I have no problem throwing anything over the six months at the mortgage and try to get it paid off as quickly as possible, but I'm really nervous not to have that buffer. So what, you have to win votes?

1:52:11Is that the situation you need to be lobbying for votes? We want to make sure that we're doing the right thing. I mean, I agree with you. This is the first problem for us that we've ever had. We want to make sure that we are honoring God and being good stewards because we depend on our donors. And one of the points of view is it's not honoring to our donors to have anything in savings. But I'm like, to me, that's being a good steward to make sure that we can keep going, you know, beyond today. So should we keep our six-month buffer and throw anything over that at the mortgage so we can try to remove that debt as quick as possible?

1:52:51Or should we throw every penny at it to try to erase the debt?

1:52:55Rachel Cruze:No, I could even see a split, Ann, personally. If you went down to three months, I wonder if you guys could get some agreements because there's a nonprofit that we support. And I remember we looked over the books at one point and they did have a ton of savings. And even even me, you know, Ramsey Solutions, I even kind of was like, OK, well, they can be using some of this money elsewhere. Right. So I do wonder. I think that it's a great goal to have eventually again. But I do wonder if there's a little bit of a compromise and that if you guys are like, hey, let's go down to four months or three months.

1:53:35Rachel Cruze:And this is kind of even just using the rule of thumb of just even the baby steps from a consumer side, not running a business, you know, of that three to six month. But even Ramsey, I mean, yeah, retained earnings for six months. That's pretty conservative. You know what I mean? I think you could take it down a little bit to throw some cash at this mortgage. And again, part of it is to get everybody on board. And part of it is I think that that's an OK move. I would not take it down to zero. That does feel unwise to do that. Yes. To be at zero, no savings, no retained earnings. There's no. Yeah.

1:54:09Rachel Cruze:And you don't get taxed on retained earnings for nonprofit, correct? Correct. Yeah. Okay. So that's great. That's great. We have our six month buffer in four separate investment accounts that we can access at any time in case there's an emergency. And we have those maturing every six months. We have two six month ones and one and two one year ones. So there's always one maturing every six months. Okay. Okay. To kind of keep it liquid. Besides not getting that grant, because I would consider that an emergency. That's like a wow change of plans. Have you guys run into any big emergencies that you've had to use that fund for in the last 24 months?

1:54:49Well, we've also been very blessed in the last 24 months that we've been able to do all of our major maintenance and improvements and upgrades. We repaired our roof. We replaced our HVAC system. Okay.

1:55:01Rachel Cruze:So there's nothing really looming out there that you would need. There's nothing looming, yeah. I mean, I would be okay taking it down to three, Anne. To three? I would, because I think you guys can, because again, when this balloon is due, did you say in five years? Yeah, and so we're in the process of refinancing it now. Oh, that's right. You are going to refinance. Okay. And if you've been able to cash flow all of those major projects, if you take this down to three months, like Rachel is suggesting, and I agree with her, and then you commit to cash flowing the rest with the same margin that you were using to do those projects, this mortgage is going to be gone in no time.

1:55:41Yep. Yeah, I would hope so. I hate that. I know, I know. How quickly did you pay off the$50 ,000? It took 18 months. Okay. So if you threw 80 at this. And then another additional six months to get everything else taken care of. So we've done a ton of work in two years. Yeah, it's amazing. It's a great problem to have. For sure.

1:56:03Rachel Cruze:Yeah, because if you look at it, if you took 80, right, and maybe threw it, you know, you'd be down to 160. And you said it took about 18 months to do 50 ,000, right? Like you pan it out. And I'm like, yeah, in probably four years, you guys could get this building paid off. It's pretty amazing. Yeah, that would be the best thing. So because I want to throw everything. My my personal goal is to have every penny that we possibly can to go to helping our clients. Yes, I know. Absolutely. If we have a mortgage, that's that's money that we're not being able to. Totally. Yes. Well, you're you're incredible.

1:56:38Rachel Cruze:I mean, you you took you took that organization by the reins and you just said, here's what we're doing and looking at all of it. because to have someone like you in that nonprofit world with that business mind to even look to refinance so you're not stuck with this horrible adjustable rate mortgage, even those moves are so wise. So, so wise. So well done, Anne.

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1:58:02Rachel Cruze:Our scripture of the day is Psalm 104, 24. How many are your works, Lord? In wisdom, you made them all. The earth is full of your creatures. Vera Wang said, oh, I like that. I like that. Vera Wang quotes. When you have a passion for something, then you tend not only to be better at it, but you work harder at it too. Indeed. I would agree with that. Vera Wang. All right, let's go to Linnea in Minneapolis. Hi, welcome to the show. We're taking my call today. Yes, absolutely. How can we help? So I got a couple of issues or things going on in a complicated situation. Okay. So first one is me and my husband, we're about$120 ,000 in debt.

1:58:54We're 28 and about to be 29. I'm finishing college. So that's a lot of it is student loans, some in collections, a car. and right now we make enough money on paper but we're stuck in this daily pay cycle that our job offers where we're able to cash out our earnings every day and so it's really detracting from our paychecks and we're just stuck in this vicious cycle every day you can take part of every day

1:59:29Rachel Cruze:oh wow yes do you get charged a fee or interest i mean anything or is it just that's how you're getting paid? It's like$1.99 or$2.99 every time you can cash out. You can cash out up to twice a day. What do you guys do for a living? So we work for the same company. My husband works from home in a different department. And then I basically customer service. And then I work in the back office in office. What do you guys work? I'm sorry. What do you guys earn collectively? 85 to 95 ,000. He's on 32 to 40 hour flex weeks. So it can range between the 85 to 95 altogether. Okay. What do you, do you guys have kids?

2:00:17Rachel Cruze:I'm making 40. We have one two-year-old daughter. A two-year-old. Okay. And what are you going back to school for? I'm in school for psychology and I plan on getting my master's degree. Okay. Do you know how you're going to pay for that? As of right now, no. We might stop and pause school to cash flow once we get into a better spot, but right now we've been taking out loans. How much longer do you have until you graduate? I have one semester left until I'm done with my bachelor's degree. And how much of the$120 ,000 is student loans? About$50 ,000. It'll be$60 ,000 after everything. Okay. How much do you guys own the car?

2:01:02Rachel Cruze:$24 ,000. Okay. And what's in collections right now? Is it credit cards? A couple personal loans and some credit cards. What does that add up to? About$50 ,000. $50 ,000. And those are all in collections? Yeah, about$40 ,000 in collections. Most of it's on my husband's side because he had some larger credit cards. Okay. And he had the larger personal loan. and then we have about$8 ,000 of active credit cards. We just decided that we were going to stop using them altogether. Good. How long have those bills been in collections? How long has it been sitting there? A couple of years now. Okay. So the good news on that is we should be able to settle that and make some deals on that for significantly cheaper than the$50 ,000.

2:01:49And that would be something that I would make it probably my full-time job. I'd start with the smallest one, kind of snowball it. and whenever you guys can pile up some money, I try to settle it for maybe a quarter on the dollar and do it that way. I just want to go back. I want to make sure I understood you. I thought I heard you say you make$90 ,000 and then I thought you said I heard you say plus$40 ,000. Did I hear that or it's$90 ,000 total? It's about$40 ,000 to each of us. $40 ,000 to each of you. Got it. Okay. He makes a little bit more than me, but he makes less hours. and not have the ability for overtime.

2:02:26Once you get the degree, you have one semester left, what's your income going to go up to? Hopefully for me alone, somewhere in the$90 ,000 to$100 ,000 range once I have my master's. Yeah, no, no, no.

2:02:42Rachel Cruze:Just with this degree, nothing because it doesn't, I don't think it adds value to your current job, right? No, not really. I can become like a case manager, something like that, for about what I'm making now. Yep. Okay. All right. So the degree is a little bit of a wash and we're not going to go deeper in debt to get the master's to hopefully make then 100. Yeah, got you. We are, okay. So, I mean, the number one goal would be to get you guys your head above water just in your current day-to-day bills so you're not having to have this daily pay Yes. Yeah. I want you on a rhythm. And so what this usually means is you kind of have to like shock the system, which is going to mean working weekends, working nights somewhere.

2:03:35Rachel Cruze:and it's going to probably take, I would think, a good 60 days of another job when I had to get some cash flow in so that you guys have enough in your account that you don't have to be waiting on that next paycheck, if that makes sense, that there's enough in there to pay what you guys need for the next one. I did something stupid too. I cashed out my 401k. There wasn't much in it. It was$1 ,600 before taxes. So I have that on the way to just give us a buffer of something so that we can get out of this cycle. And that was the only reason why I did it. Do you know, let's pretend today that you were current and you weren't behind on anything.

2:04:17Do you know with the amount of money that you bring in every month and your minimum payments, are you in the red or are you in the green? No, we make enough money on paper. yeah okay so when you do your every dollar budget and you plug in you know the 90 ,000 how much is that per month for you guys um so it's about i think after everything that gives us a surplus

2:04:42Rachel Cruze:of like no no just the amount of your paychecks like 6 ,000 ish probably hits your account would you say um should be 20 or 1200 per check i get paid bi-weekly and then he gets paid around 900 Okay. And nobody's investing, right? No. Okay. So here's what I would say. Do the budget and do it with, I want to know exactly what that margin is going to be. And then the other number I want to know is exactly how much you are behind on today. Like what's the deficit for this month? Right now we're in August. So, and we're not even midway through yet. So are you already operating at a deficit or tell me how this current month looks?

2:05:29Well, when I did the every dollar budget, it said that we have about$400 extra at the end of the month, but I think it's more of a timing issue. We have heavier bills in the second half of the month. Okay, good to know. So let's do this. On every dollar, there's a paycheck planning feature because what you're highlighting, Linnea, is really important. It's the first step to budgeting is deciding how much we're going to spend, right, and assigning the line items. But the second part of budgeting that a lot of people miss is now we have to decide when we can spend it. And sometimes it's as simple, Linnea, as calling in and saying, my mortgage is due on the 1st.

2:06:03It might be easier if it's due on the 15th. And you can call in and make those changes. A lot of times there's flexibility as long as you're paying it that month, right? And moving things around so that you know when I get the first check on the 30th, that's when I pay bills one through three. And then on the 15th check, that's when I pay the majority of the other bills, right? I pay the three biggest ones with the first check, and then I pay all the little ankle biters with the second check. And so it's a little bit of a puzzle sometimes to figure out what bills you can pay with what check, but let that be your homework tonight, because I actually think that that's the solution here, is knowing, okay, when I get paid that first check on the 30th, even though my entire grocery budget might be$600, but I can only spend$250 of that grocery budget on the first check.

2:06:52And then when the second check comes, now I can spend the other 600. You see what I'm saying? And so that's the puzzle that you guys need to sit down and figure out. Cause I think you're right. There is enough money there at least to hit the minimums. And then when you get on that rhythm, like Rachel said, now we can feel really confident about taking the$400 in margin and chucking it away at, you know, whatever credit card or the smallest debt is.

2:07:14Rachel Cruze:Um, Lenia, do you know what you could sell your car for? Um, Carvana says 19 ,000. That was my second part of my question is I'm having a hard time convincing my husband to let go of it. We just got it in January. It's 2024 and he's really attached to it. Yeah, well, I think if you guys can sell this, if you guys can do if you guys can sell that, maybe get 12 ,000 for the collections and you start doing it. I think in three and a half years, your life looks different. Yes. All right. There's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.

2:07:50you