Debt Robs Your Life of Margin

22:15Well, guys, buying or selling your home is a very big deal. And you want an expert in your corner, someone who's fighting for you to find the best deal for the right price. The Ramsey Trusted Program is the only way to find a top agent you can trust who will help make your home a blessing and not a burden. Trust me, it's easy. Just compare agent profiles, interview them, and choose the right one to work with. Find a local Ramsey trusted real estate pro faux free at ramseysolutions.com slash agent, or you can click the link in the description if you're listening on YouTube or podcast. Shannon is in Denver, Colorado.

22:48Shannon, how can George and I help you out today? Hi. My daughter recently got out of a relationship that she was in for about three years. While she was in that relationship, they acquired an enormous amount of debt together, although they were not married. We have about$70 ,000,$80 ,000 in vehicle loans,$15 ,000 in credit card, and about$20 ,000 in a business loan. Her boyfriend had quit his job when the owner sold the business so he could branch out and open his own. And the majority of the vehicles are upside down on their loans because he took additional equity to start his new business. Now that they are no longer together, she is a co-signer on all of this stuff.

23:44He is a single mom of two, and he has no verifiable income because the business is so new and he is in with a partner. She is the only one that has verifiable income, and it's not that much. So we're not sure. She's contacted a couple attorneys. Nobody wants to really work with her to get it to where her name is off these loans. I know it can be very difficult, but we're wondering if she should probably file bankruptcy to get her out of all of this debt that she actually has no benefit of. Oh, boy. And you've already run this by attorneys to see if there's anything there to maybe legally split this or do something and nobody will touch it.

24:36they really don't want to because where he is the primary loan holder and she is the co-signer even if they get a judgment the banks don't necessarily want to take her off as the co-signer

24:52George Kamel:well they know how risky this is they like her on there they want someone else on the hook um absolutely um tell us about the cars you said they're both upside down how how badly and how many are there? There currently are three vehicles. I believe it's a 22 Chevy Silverado that has about$50 ,000 that's owed on it. In addition to the vehicle loan, there was also a trailer for a motorcycle as well as motorcycle. I do not believe that has extra equity. I believe that is just straight for those three pieces of property. They have a Hyundai, a 24 Hyundai that is only valued at$33 ,000, but they got an additional$7 ,000 to put into his business.

25:41She had a Toyota Corolla that was paid off. It's an older Corolla. They went in and got a$9 ,000 loan on it. The car's not worth, but maybe about$4 ,000. So they owe$9 ,000 and it's worth$4 ,000? Correct. And let's go back to the Hyundai. She owes$33. What's the Hyundai worth? It's worth$33. They owe$40. Okay. And then let's go back to the first one, the$50 ,000 one. They owe$50. And what's that one worth? It's probably worth around$45 to$50. It is a very nice Chevy Silverado Clubcap pickup. And you're telling me the trailer and the motorcycle are worth nothing? Um, it's a dirt bike trailer for racing dirt bikes.

26:36It's, it would maybe be worth$3 ,000 in our area in the market. We need that. And what about the motorcycle or the dirt bike? That's, that's probably the, the motorcycle and the trailer might bring four or five out of them. To combine them together. Okay. So what I'd want to know, what I'd be seeking out next is if she can sell these items, being the co-signer. And that's what I'd want a judge to approve. Hey, we can't find this guy. We can't track him down. He has no income. This is destroying her credit. Can we have the ability to order to sell? We know exactly where he's at. He will not cooperate.

27:19Right. And that's why I'm saying, can we get a judge to order it? Okay. That's what I'd check on. I don't know if they will, because what's taken place is totally legal. She co-signed on debt, which is honestly, and I mean, you already know, this is just one of the worst things that you can do because you're on the line. That's the whole point. If this guy doesn't pay, I'm saying I will. That's what you're saying when you co-sign. So there's nothing, except him being a scumbag, there's nothing illegal going on here. There's nothing, quote, wrong going on here. So it's going to be hard. But I would at least try to say, I'd try to go before a judge and say, this person's not paying.

28:03Here's what it's doing to me. Can we sell these assets so that we can clear that? That is an issue we're running up against is he is making monthly payments. But at the rate that he's making these monthly payments, if he ever stops, she doesn't know until it's too late. If he, her name's on the vehicles as well. So she can't go get something independently of him. And she has come and taken her vehicle while she was at work. Well, how can he do that?

28:36George Kamel:Is she driving one of these? He has an extra key. Oh, she's driving one of these. She's driving the Corolla? She's driving the Hyundai at this time. Okay. Are they both on the insurance for all these vehicles? From what we understand, yes. But at any time, he could take her off the insurance and she would have no knowledge. Why is that? If she's also on it as well? Because they are not currently together. It's his insurance agent. Is he trying to actively destroy her life at this point? Like, where's his head at? Basically, they have—he left her one month after they had a child together. He is not ordered to pay—he pays$100 a month for child support.

29:26That's what was ordered by the courts? Yes. If she can test it because he does not have verifiable income, she may end up having to pay him.

29:36George Kamel:This is a nightmare. I'm so sorry. 100 percent which is why we're wondering if she files bankruptcy would that get her out from under his cosigner from all of this so at least she doesn't end up with all this on her lap well the bankruptcy is not going to help much because they're going to liquidate all the cars and if they get repoed she's going to be on the hook for the difference they're going to sell it at auction for nothing and then she's going to owe even more while her financial life gets destroyed for seven to 10 years from the bankruptcy. So I don't love that option. I would try to see how we can get her out of these individual situations one by one and get her income up enough to where she could pay them if she had to.

30:22Okay.

30:22George Kamel:And I would try to get up, you're about 15 grand underwater on all these vehicles. Obviously she needs something reliable to drive and obviously we need the ability to find this car and be able to sell it, which that's going to be the difficult part because he's got most of these toys, doesn't he? um he has everything he has she has access to the hyundai and the toyota um but you know she would love to sell the toyota she can't because of this loan that's on it yeah um she has told him come get the hyundai i will go out and buy something that you know i can afford so i can make my own payment but she can't with her credit wrapped up and all of that yeah well she could drive the Corolla, right?

31:03George Kamel:If she sold the Hyundai, she could do that? Absolutely. Okay. So if we at least get out of those two, it solves some problems here because that's, that at least alleviates some of this pain when you owe 33 on one and nine on the other, which means you need to come up with 12 grand to get out from underwater on this and then you can keep the Corolla. Yeah. And what about the credit cards? Are those still actively going? Because I'd want to make sure that those are shut down and that more money is not able to be rung up on those. I would freeze her credit. Yes. So that no accounts can be opened under her name and social security number as well.

31:36And the same thing with this business loan. Her biggest job right now is to work hard to save. I mean, she is on the hook for this money. So let's let's earn twenty thousand dollars and start knocking out debt and make sure it can't come back to haunt us later on by freezing the credit.

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32:41George Kamel:They step in when collectors are trying to push you around, and they handle it. So instead of panicking, you've got a plan for peace of mind. So if you're backed into a corner and facing imminent legal action, don't stick your head in the sand. Ignoring it will make it worse. And Guardian Litigation is who you contact when it gets worse. So go to guardianlit.com slash Ramsey. That's guardianlit.com slash Ramsey. Attorney advertising. Results may vary and no specific outcome is guaranteed.

33:17Right back to the phone lines where Harrison is in Augusta, Georgia. Hi, Harrison. What's up in your world? Yes, thank you all so much for taking my call. So my wife and I are in our late 30s with two kids under three. I make about$80 ,000 a year, and my wife makes about$30 ,000. And together we've got about$100 ,000 in non-mortgage debt, mostly vehicles and credit cards. And after doing our budget, realizing we're running about a$2 ,200 a month deficit. And I feel completely trapped. I have no idea what to do. I've realized we've built our life outside of our financial reality, and it just kind of snuck up on us, and I just could use some help.

34:04Yeah. Listen, I'm going to tell you right now, I've got to believe that a lot of that red is in the cars. Am I wrong or am I right? Yes, you're right. So tell us about the cars. How many are there? And tell us what the payments are. Tell us what you owe on them. Yeah, so I have two vehicles. I have a truck that I owe about$14 ,000 on. That payment's about$325 a month. Okay. And then I have an SUV that I owe about$30 ,000 on. And that monthly payment is$560 a month. Okay. Honestly, I'm going to tell you that's not as bad as I thought it was going to be, although I still don't like the car payment.

34:43What else is sending you guys, you know, over$1 ,000 over? When you look at the budget, what do you find are the key contributors? So it's mostly, I mean, I'm paying$1 ,950 a month for daycare. And that's killing me. And then my mortgage is a little over$2 ,100 a month. So I really put myself in a house that we probably should not have bought.

35:10George Kamel:Yeah. What's your actual take-home pay every month? $6 ,500. Oh, wow. That feels low. Is investing coming out? So I was putting about 5 % into my 401. I just actually paused that this week. I'm trying to do whatever I can to come up with some cash. Downloaded the EveryDollar app and then kind of going through that and just trying to figure out, find some solutions here. So you said you have$100 ,000 of non-mortgage debt. I'm counting$44 ,000 in car loans. Does that mean you have$56 ,000 in credit cards? So I have about$25 ,000 in credit cards. I have about$10 ,000 in a personal loan and about$5 ,000 in medical debt.

36:02Okay.

36:03George Kamel:Have you and your wife sat down and made an every-dollar budget and just kind of put this all on paper to get the reality of it? so i have and you know i've tried to talk with her multiple times and she kind of shuts down um and it's hard for her to kind of see the reality and you know is she overwhelmed i'm trying to absolutely she's overwhelmed well the the truth is if she's making 30 000 after taxes after everything that's not covering daycare hard it's i mean it's it's breaking even 30 000 yeah that 30 000 is from a photography business that's all under the table um but you're right it's it's barely covering daycare but is that what's keeping her i guess what i'm saying is regardless of how it's being paid or who she's working for she's out making money and is that the thing that's keeping her from obviously i'm not saying everybody has to be a stay-at-home wife just hear that I'm just saying I'm trying to solve a mouth problem here if she were to stay home um that's something that might pull this back a little bit and maybe she can stay home and do photography and just shift those hours to where do you see I'm saying there's more of a benefit to it absolutely absolutely because if she could do that nights and weekends and watch the kids during the day well now we have a problem solved because we've kept some income in the door while getting back our daycare money,$19.50 a month, which gets you to more like a$300 deficit.

37:33George Kamel:And that's without paying off any of your debts. Have you guys talked about that? We have talked about it. And honestly, we've tried it a couple times and it just did not go very well. She struggled with keeping both kids at home and trying to work. And so we kind of came up with a plan that, hey, this is a new business. let's get the kids in daycare and give you a real shot to really grow this business and see where it can go. How long has it been? So she's only been doing this about six months. Okay. So here's where I'm at with this. There's three things. There's three options on the table here.

38:13And a couple of them are a must. Number one, we have to sell the vehicles. At least one of them, at least a$30 ,000 SUV has to go out the door. The other thing is she either needs to choose between I'm going to do this part time and stay home with the kids and try to bring in as much as I can in part time hours or I'm going to find a job or make this job grow in a hurry to be to where I'm making more than$30 ,000. because you guys are, and the same goes for you too. Like you've got to find ways to get your income up, even if it's side hustling, if it's overtime, you guys are up against some very scary numbers here.

38:53And you cannot, and mind you, we're not even talking about paying off debt yet. We're just talking about getting you out of the red. We haven't even found them. These are just things to get you out of the red. This is not extra margin.

39:07George Kamel:Just baseline where you can cover all the bills. Because right now, are you using the credit cards to fund that gap? Yes, yeah, that's what we've been doing. But see, it's coming to a head because my limits are about up. And at some point, it's all going to come crashing down. And that's why I say, speaking with her, it's not personal. It's not having to do with anything with her photography business. This is math, and this is numbers, and this is us adulting and saying, this is what must be done in this season. We need to go from I'm scared to I'm angry because that tells me now we can solve the problem.

39:43George Kamel:And so if you can get her there, you know her better than anyone and just level with her and say, hey, listen, I know I'm overwhelmed too. But we're going to get through this together. We're going to get on a plan. We have the every dollar budget. And if you don't have the premium version, we'll gift it to you, Harrison. If you hang on the line, that'll connect to your bank account. That'll give you all the personalized recommendations. And I think once you see the reality and you can look past the fear and the overwhelm, you guys will go, okay, we can see a path out. And you just got to focus on one thing at a time.

40:10George Kamel:That's the baby steps. $1 ,000 cash. Do you have that in the bank right now? I do. Good. Then it's going to be attacking all of our debts, smallest to largest. So what's your smallest debt? What's the next smallest balance you have? It's about$420. Great. Now, can we knock that out if we worked extra and cut our lifestyle down to nothing? Yeah, yeah, absolutely. So then at least you freed up that one payment. And so now you see some light at the end of this tunnel, and it's going to be a slog. I mean, this might be three to four years for you guys on this journey based on your income to debt ratio.

40:46Yeah. Harrison, what do you owe on this SUV? You said you owe$30, but what's it worth? It's only worth about$21, so I'm underwater. water okay um dadgummit the truck the truck uh only owe 14 and it's worth probably 16. okay so there there's some money there um i would probably sell that one then and take the 2 ,000 and uh cheap truck uh-huh put a little money with it see if you can cash flow a couple more thousand dollars so maybe you can get a four or five thousand dollar deal um that might mean kind

41:20George Kamel:kind of pausing the baby steps for a second to stack up that cash to get a used car to replace that truck to get you from A to B. Right. And what about your work? Let's find ways to make quick money for you. What do you do for a living? So I work for a building supply company running inventory and warehousing. And then I also teach pottery classes on the side. Okay. Does your, does the main job offer overtime? No, so I'm on salary. Okay. And what about the pottery? Is that, a great side hustle for you or did you just pick it because you like it? Because if it doesn't pay a whole lot, we need to shift to doing something that really pays.

41:59It could be. I mean, I've been doing it 20 years. I'm really good at it. I just haven't spent much time doing it because it's with the two kids at home.

42:08George Kamel:So what do you make a month on average doing that? Doing pottery? Yeah. About 600. And how many hours is that? I'm working two hours once a week, four weeks. Okay. So that's about eight hours a month? Yeah. Yeah. I think we can pour gasoline on that. I think we could pump it up into high gear. Pretty good hourly rate on that if you can do more of that. Uh-huh. And if you can't do more of that, then tack on something else. And you might be having three or four different side hustles that bring in money here and there. Same thing with her. But the point is, you guys have got to get the heck out of Dodge.

42:46I got to hear some urgency. This is not even my situation. And I'm feeling like I got to move. We got to make changes. We got to shift. So guys, you can do this, but you're going to have to get uncomfortable. There's no way this is happening without you guys getting extremely uncomfortable to do it.

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44:24Welcome back to the Ramsey Show here in the Fairwinds Credit Union studio. Again, I'm here with George Camel. I'm Jade Warshaw. And we're headed back to the phone lines where we have Dan, who is joining us from Fort Myers, Florida. Dan, how can George and I help you out today? yeah so my wife and i are starting on the process of buying our first house and um our lender is suggesting we cash out our 401ks for the down payment oh i'm trying hard not to laugh dan

44:53George Kamel:because it's just so funny that a lender of course is like hey just cash out your retirement to make this happen yes so i can get paid because i haven't in a while right right i mean you do know that This is a horrible idea. I mean, your red flags went up, didn't they? Yeah, yeah. That was my thought. I mean, yeah, yeah. Let's play this out just for kicks and giggles, Dan. How old are you? I'm 30. Okay. You're 30, and how much are they telling you to cash out? So I've got about 22 in my Roth, and my wife's got about 14 or 16 in her employer match. Okay. So$22 ,000 and$16 ,000 is what you would have cashed out if you listened to your lender.

45:38George Kamel:Yeah, about$36 ,000. Okay. So$36 ,000. And I'm just going to play that out. If you left the$36 ,000 in, what it would turn into, which is how much you're losing if you did this move. Okay? And that's if you never added anything to it. Just$36 ,000, letting it ride from$30 ,000 to$65 ,000. That would turn into$1.2 million. So this is not a$36 ,000 decision. It's a$1.2 million decision. Absolutely. So that's the scary part. So that tells me, though, another thing. You may not be ready to buy this house. Yeah. What took place that you guys even got to the point of discussing such madness? So, yeah.

46:19So we just moved to Florida about three years ago. We make about$140. We've got virtually no cash savings. Got it. So that's the thing. So you got 30 ,000 in credit cards and 20 ,000 on her car. Okay. I'm glad you told us that because around here, we really do. We love home ownership. We do. We love when people are ready to make that purchase. We love when people want to invest in 401ks. We love being able to say yes to these things, but there is a time that it creates a much better timeline for this to be a blessing for you versus a burden. And so the way we teach it here is there's certain things that just have to be in line first.

47:03And one of those things is we're never going to recommend you buy a house while you're still in consumer debt. That is just, you're just adding insult to injury because home ownership is expensive. Number one, you're going into debt. Yes, it's different than normal consumer debt, but it's still debt and it's still a financial responsibility for you. So we're always going to say, hey, you got to have your consumer debt paid off. That's numero uno. And then after that, we want you to have an emergency fund because we all know that once you buy that house, something's going to happen.

47:31George Kamel:Everything's on you. Yes. The roof is going to happen. The AC is going to happen. You're going to have pigeons that like to nest up in your gutters. That happens to us all the time. And it's like you got to have the guy come out there and remove them. All that kind of crazy stuff. And that's outside of any family emergencies. Yeah. There's an ice storm and you got to have the arborist come up. Right. And when you have debt, you can't cash flow that stuff. And then if you don't have savings, you can't pull from the savings for that stuff. And then the next thing you know, Dave, what do you, or George?

48:00George Kamel:I appreciate that. She called me Dave. Oh my Lord. I looked at you and I just said, Dave, the next thing you know, what are you doing? You're going into debt. Further into credit card debt. Credit card debt. So this, we don't want that domino effect to take place. That's why there's actually reason to why we teach what we teach, George. So is it too late to back out of this whole thing and just keep renting for a while as you kind of create a better financial foundation? No, no, no. It's not too late. So, I mean, the whole story, right? So we've got about$10 ,000 in savings, in cash savings. So it's not a whole lot, but there's a little bit there.

48:32The issue is, you know, we live about an hour and a half outside of where we work, where we're currently renting for$2 ,500 a month. so i mean it's pretty we're already paying a high rental you know even being out in the boonies and then you know so with we just had a kid last year so we're trying to move closer into town rentals in town or about rentals in town you know closer into town by daycare is about three and a half a month and that's about what the mortgage would be um to play the devil's advocate on the on the cash on the 401k side of things my wife's 401k match grew that in under three years and like two, two and a half years.

49:11So if we replayed that scenario, ideally, we'd be back at that same number within two and a half years. That's true. That could be true. You'll be there even if you didn't touch the retirement.

49:24George Kamel:You'll add that if you kept where you're at. And so it's still, you're still losing that 1.2 million that you unplugged. And even though you're adding to it with the new 36 grand over time, it's still unplugging that growth for the rest of your life versus adding to it. So I still think it's a, and you're making a, you're also going to pay penalties and fees as well. Yeah. We didn't talk about that. That's, that's aside from that. And so I, I think you guys are tired of the commute. You want to be homeowners. And the truth is we made decisions that just has kind of put us two steps back with the car loan and the credit cards.

50:01George Kamel:Like you guys are making 140 grand and you still had to turn to the credit card. So it tells me we need to get our current income under control before we step into this new chapter. Yeah, yeah. I mean, so, I mean, the income is under control. That's been there for a few years now. That's even scarier. That's at 25 % APR. Yeah, so, you know, paying that. So we've actually been living on a cash, you know, a cash budget for a few years now. I also want to call out another part of this. And again, I don't want to sound like I'm here to bust your bubble. That's not what I'm trying to do. I want to give you fair numbers so that whenever this all goes down, it feels good and you can actually keep it.

50:43But if you're bringing home$9 ,000 a month, doing a$3 ,500 mortgage is not good for you. That's way too high for you. It's$1 ,000 over where it should be.

50:55George Kamel:Ideally, you're sitting at about$2 ,200, which means you need to have more saved up for the down payment to then lower the mortgage or choose a different home that's at a lower price point. So there's going to have to be compromises. Otherwise, you're going to be calling us back when maybe you lose one income or income goes down and all of a sudden you're going, hey, we can't afford to stay here anymore. We need to move or we can't invest 15 percent to retirement because this mortgage is killing us. And hear it from this angle. You know, you called in saying your lender gave you some bad advice.

51:24They have money tacked onto that. And so they're kind of driven by, you know, making a commission. George and I have nothing. We're completely unbiased for you. And so we're just looking at this as the numbers are. We get no commission. We get nothing. And we can just look at this and go, the bottom line, Dan, is you're just not ready to buy a house. You just don't have the money yet. and you can get there. And I think that you can get there pretty quickly relative to the span of your life. But the day is not today. And maybe next year you could be ready. But the truth is you guys have$50 ,000 of debt that needs to be paid off.

52:01You need to stack up at least three to six months of expenses. And then...

52:05George Kamel:So that's probably like an$80 ,000 swing before we even start saving up a down payment, which is probably another hundred grand. And I guarantee that's not what you wanted to hear when you called in. Yeah. Right. But I think you knew in your heart that this was a bad decision, hence why you called our show. Yeah, yeah. I was thinking, you know, I probably got to go find 80 grand or so. I mean, the cool thing is I'm self-employed. I own a construction business. Oh, sky's the limit for you. Sky's the limit for you. I've been able to add, you know,$30 ,000 to$40 ,000 a year. Just, yeah. Go bust it, man.

52:41George Kamel:Your income is your greatest wealth-building tool, so let's use it to pay off the debt, get the emergency fund, get the down payment. If you really want that home, prove it. Pay off the debt and get yourself to a good financial spot.

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54:30Headed back to the phone lines where we find Samantha, who's in Miami, Florida. What's going on, Samantha? How you doing? Hi, I'm doing great. How about you guys? Excellent. How can we help? I am calling because my husband and I love the Dave Ramsey show. We watch it all the time on YouTube. And I am trying to convince my husband to let us buy a new iPhone for me. My iPhone does kind of work, but it's not fully functioning. Apple Pay doesn't work. It doesn't connect to my watch. But I do tend to kind of break things. I don't think super fast to the average. But compared to my husband, he is like he takes care of all his technology.

55:12His iPhone's like five years old. You know, mine's about about to turn three. OK. And I want a new one. OK. So it doesn't connect to Apple Pay and it doesn't connect to your iWatch.

55:24George Kamel:And it's only three years old? Yes. Yeah, it's three years old. It's fallen a few times. I work in an industry where I move around a lot. I travel a lot. So by fallen, you mean you've dropped it? Yeah. Okay. It didn't trip on its own. That's what we're asking. Okay. Samantha, let me frequently falls out of my hand though. Let me tell you, Samantha, if you could have been in the commercial break, George was making fun of me because my iPhone is so destroyed. It is just, it's been, it's fallen many times. It's completely cracked. and I am on your side on doing our best and it's still not being enough with these iPhones.

56:08George Kamel:Let's talk through that. You're talking to a former Apple Store employee and it hurts my heart when I see an iPhone fall. It's like dropping a baby to me, almost as bad. I drop babies pretty frequently. Oh gosh, Samantha. You're dropping babies? Your own babies or other folks' babies? Just the iPhone, just the iPhone. Okay, good. I was like, don't give Samantha a baby. All right, so I understand your husband's frustration And he's going, why would we get you a new one for you to then make it an old broken one very quickly? Exactly. What's a new iPhone run these days? I haven't bought a brand new one.

56:41The Pro Max one or the Pro I was looking at was$1 ,100.

56:46George Kamel:Why are you looking at the Pro Max? It's like knowing you get into car wrecks a lot going, I'll take the Porsche, please. Oh, boy. $1 ,100? Even the least expensive one, I think, was around$700. But can't you get an older model? I'm looking right now on Swappa, which is a—I've sold my old phones on Swappa. So you can buy an iPhone 16 in great condition for$350. Oh, love that. And what would be the problem with that, Samantha? I just wanted the new ones. Because I just wanted the new ones. There we go. Thank you for your honesty, Samantha. So it went from my phone doesn't work to, no, I just want the fanciest, latest, and greatest.

57:28If I'm going to get the new phone, I just want the new phone. Well, let's see. Can you even afford it? So tell us, is this something that you could do and it's just not a thing or if it's something that would really set you back? Do you guys have any debt? We have no debt for Baby Steps. We're on Baby Step 6.

57:46George Kamel:Oh, just a mortgage? Just our house. Okay. How much is in the emergency fund? A year. A year's worth? Almost a year. How much does that equate to? that's like well if you include like some of our investments i guess if it's just purely cash on the emergency fund then six months okay so it's about 60k and then we also have some investments because liquidators there was a bigger emergency and in a brokerage account invest brokerage accounts and when we do invest almost 30 percent of our income and when it gets either what's your net worth? All the things. What's your net worth? About a million dollars.

58:26A million. Way to go. Okay, so it sounds like oh boy is being a little stingy.

58:31George Kamel:I have an idea, Samantha. What iPhone does your husband have? So his work pays for his and he just got the newest one after having his for five years. Okay, what happened to his old phone? He cracked the screen. Oh, look at that. Here's where, this is what we really need to discuss. He had it for five years. He had it for five years. But what we really need to set is a baseline. And we need to know what is a norm of keeping your phone? Like, what is the normal amount of time that a person should keep their phone before they upgrade? We were just out in the lobby and it was an iPhone with a single lens.

59:07George Kamel:It must have been an iPhone 4 and it was working great because they took care of it. Okay. George, we need to hear because we don't know unless the people speak. So if you're watching this, in the comments put, what is a normal amount of time to have your phone before you upgrade? Is it three years? Is it five years? Is it every year? I would like to know. Is it as long until it just literally doesn't work anymore? So for the audience, is three years a fair time? I see. One person said 10 years. One said five. I'm seeing another five. Two. Three. Okay. So I think that we're in, it seems like we're in the threshold.

59:42Two to five. For between two to five years, you should be able to upgrade your phone. I agree, Samantha.

59:47George Kamel:So you can't upgrade it. Here's my condition if I'm your husband. Day one, we are getting a screen protector on there and an OtterBox case that is indestructible. The ugliest cases. The ugliest, biggest case you can find to protect it. Because the truth is, I doubt you've had screen protectors and good cases on your phones this whole time. Yeah. And even if she has, just double down on it because you need it. Put it inside of a baggie. I'm a mister. Like, I'm proudly, my phone is like perfect at all times. Really? I take care of it. Screen protector at all times, always in a case. People who, you know how I know someone's rich?

1:00:22George Kamel:Their iPhone is nude. Oh. No case, no screen protector. I go, you can't hide money. Because you just, it doesn't matter. If they shatter it tomorrow, they'll just. I can spot a trust fund kid a mile away if they've got an iPhone with no case on it. But it's slick. You can't even get a good grip on it to hold it. You're living on the edge and there's total confidence. Total confidence? I can just go and ride through and get another one tomorrow. Be a little more chalant with your phones, guys. You're carrying a$1 ,000 device. Yeah. You wouldn't do that with your laptop. I've never had the brand new phone.

1:00:53I've never had the most brand new phone ever.

1:00:55George Kamel:I'm proud of you. I don't even know which one this one is, but it's got two holes. Well, you know what's nice? I buy old ones off like coworkers as they upgrade, and they'll sell them on our little forums or whatever. So ask around. I mean, Facebook Marketplace, don't get scammed there, but Swappa is another one. There's a bunch of cell phone sites to sell old phones, buy used phones. Okay. So all of that really helps because I don't want to overpay. So if I go to the Apple store, I feel like I get them at the Apple store. I get an older one. You can get refurbished. They'll have them refurbished.

1:01:26George Kamel:But it's cheaper on Swappa. 100%. Refurbished is just a little bit cheaper than new. Interesting. And there's more that you can choose from on there? Yeah. Interesting. And it's all, you know, legit. Not a sponsor, but, you know, it's just a site I've used. Maybe they ought to be. Hit us up, Swappa. Okay. So do you think it's fair that, you know, obviously some people like Samantha and myself, we drop them more often, even if you hadn't dropped it, even if you just had the phone for three years and you were like, you know what, I'd like to see what the newer model looks like. If you budget for it, you pay cash.

1:01:55George Kamel:I mean, you might need a sinking fund these days because of how expensive these things are. If it's a thousand bucks and you need one every two or three years, you know, that's 50 bucks a month you got to set aside. This is a loophole that a lot of people do. Do you want to know what they do? They, you know, when they're AT &T or Verizon. What do they do? They just do the payments for it. Oh, yikes. That's my least favorite option. They just add it into the, it's just in my phone bill. Which, by the way, locks you into their contracts. Yeah. Yes. So there's some golden handcuffs there. So never think, well, it's super cheap.

1:02:24George Kamel:I just pay it every month. That's what they want you to do. Can I tell you, I got, I kind of got tricked because I didn't know. So this was several, several years back. I was going, I got a notice on my phone that was like time to upgrade. and to me when it's like it's time to upgrade I'm thinking okay I'm just upgrading my phone it's time to just swap them swap them there you go and uh I didn't even realize because they just did one phone for another and then I realized it was in my bill oh it was just automatically and so all of a sudden one day our phone bill went down and I was like why did our phone bill go down and I realized I'd been paying payments on the phone and I didn't even know it wow that is brutal oh the other thing i need to mention is that a lot of people think when my phone is broken it doesn't work anymore no it's just user error because you put so much crap on that phone it can't function anymore too much not enough memory some space and so resetting your phone and cleaning it you'll feel like you got a new phone just like with a car get your car detailed and that car fever will go away pretty quickly you know what though some people that's just their thing like if it weren't for sam warshaw in our house i would have no dealings with the technology.

1:03:34Like he does all that stuff. I get frustrated. One thing doesn't work. I'm like, that's a stupid phone. And he just walks by and pushes one button and it's all fixed.

1:03:41George Kamel:See me and Sam, we're tech support. Tech support. Every household needs a tech support. I could tell it was you in your house. I can't use a screwdriver, but I can fix your Wi-Fi. No problems. Tech support. We need it.

1:04:02Thank you.

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1:05:42Ask Ramsey is our free AI tool that's built and trained on proven Ramsey principles. And so today we're going to talk about some of the most asked questions that you guys ask Ramsey. We get questions all the time around budgeting, paying off debt, but this time the top question was around retirement savings, George. As a matter of fact, the most asked question was this, how do I know if I have enough saved to retire?

1:06:06George Kamel:Well, the simple answer that you will hate is you know you have enough saved to retire when your retirement income can cover your retirement lifestyle without depending on Social Security. So figure out how much you'll need to live on each month in retirement, which easier said than done because we don't know what inflation is going to be. Will Social Security be there? How much will it be? Health care costs, all of that. But to the best of your ability, go, okay, here's what I'm living on now. Here's what I think it'll be, you know, 10, 20, 30 years from now. Then list all of your expected income streams.

1:06:36George Kamel:Hopefully, if you follow our plan, you've got the 401ks, IRAs, maybe even a pension. And if your monthly income is close to or above that expected monthly spending, you are probably on track. And if there's a gap that tells me you need to lower the lifestyle, you need to increase how much you're saving now or plan to work part time in retirement, not a bad idea. So important call outs, though, be debt free before retirement. So work to pay off the house. Make sure you have everything paid off before you head into retirement. Plan for those health care costs. Be on a written retirement budget, not just vibes.

1:07:07Yeah, not just a guess. That's so good. And Ask Ramsey, it can really help you walk through a retirement planning checklist to make sure that you have your retirement savings that can actually float you and your lifestyle in retirement. So, again, ask your question today at ask at RamseySolutions.com or you can just click the link in the description if you're listening on podcast or YouTube. Again, if you want to ask Ramsey your question, go to RamseySolutions.com. All right. We got Jeff who's in Nashville, Tennessee. Hey, Jeff. How can we help out today? Hey, guys. Well, I have a question about my career, and I was wondering if you guys could help.

1:07:45So I've been with the same company for almost 13 years, and we're in kind of the restoration cleaning industry. The plan for my future was that I'm to take over the company. We have no written contract. There's no written agreement. It's just something that somebody's told me. But lately I've found a lot of moral and ethical disparity between my owner and I. And my question for you is, do I hang on and wait until I can take over? Or is it time to just go ahead and move on? Oh, I would love to know the moral and ethical, because that sounds very serious.

1:08:24George Kamel:Is it like crimes are being committed or they're just doing things in a way you wouldn't? Not as far as the world is concerned. biblically a little bit. Essentially, in this industry, I'm not about giving people money to give me work or people that give me work, me give them money back. And that has started to happen after 16 years of this company never spending a dollar on marketing at all. We're now paying off a person to quote unquote, give us work that is just not profitable. So you're paying a marketer? Oh, no. This is paying essentially a maintenance guy to approve contracts or approve bids that we offer up to them.

1:09:16George Kamel:Okay. What is that doing for the company? What's the upside? I will quote, we have to do what we have to do to get work. And that's what I was told this is all about. Am I missing something on the moral part of this or the ethical? Help me understand. I feel like I'm missing something. So there's a person who's helping you get contracts and they're approving whether the bids are good enough? No. Essentially, this is a maintenance guy that works for somebody who has the ability to approve or deny estimates for this property. and my company paid that man$7 ,000 in an attempt to get him to approve more of our estimates.

1:10:04George Kamel:So it's basically a bribe. A bribe. That's a perfect way to put it, yeah. Okay. Okay. That makes more sense. I needed that clarity. Okay, so they're bribing this guy. If we pay you a little money on the side, you'll approve more of ours. To feed us more clientele and more projects. Okay. You don't like the way that's being done? That makes sense. The part that I'm really wondering about is you said people are talking about me taking over the company, but there's neither contracts nor paper trail for this. I would need more. I would need like a date in writing versus just a vibe of like, well, maybe when the time comes, you could take it over.

1:10:44Can you have that conversation? We've had the conversation several times. It's loose-handed. There's no definition. There's no timeline. There's no payment. None of that stuff is discussed, and we're talking a company that may value somewhere around$350 ,000.

1:11:06George Kamel:If this was a significant other in your life, and we're talking about commitment and marriage, you would go, hey, clearly she's not that into you. If she's kicking the tires going, yeah, maybe we'll get married. We'll see about that. It might just be a way to keep you warm, like keep you on their side and keep you as an employee because maybe they know that you don't like the way things are going. And you've addressed it, it sounds like, because they gave you the answer of, hey, we got to do what we got to do. That's it. And this has been addressed many times. I feel exactly like that they're trying to keep me on a hook for a while until the day comes and then we just cut the line.

1:11:46So that question is, I've already kind of formed up an LLC, and before I just start really moving forward with it, my question is, do I maintain what I'm doing now and try to cold start my LLC, or do I just jump right into this thing? Well, yeah, that's a whole different question because there's income on the line here, right? So how much are you earning now? It's minimal. I make$60 a year. $60 a year. And how quickly do you think you could generate that same profit from you starting up your own business? I would need about six, maybe seven months. Is there any part of this business that you can do ethically while you're still working for your boss?

1:12:36Absolutely. Nights and weekends.

1:12:38George Kamel:Oh, okay. It's on conflict with any contract you signed to like a non-compete? Absolutely. I don't have a non-compete. Okay. Okay, that's good. Then there's nothing wrong with you going, hey, it's my time when the time is right. I'm going to go launch this thing on the side. But I don't think in good faith you can continue working for this person because of the soul tax that you're paying right now, the resentment building up. I mean, it's going to eat you alive. It's a poison that you're drinking every day you stay here knowing this business is not being run ethically. Sure. You're not excited to go to work for a guy who does that?

1:13:12George Kamel:Absolutely. You're not aligned in the values. And so for that reason, I would get out as soon as possible, even if you go work for someone else in the meantime while you get this thing off the ground. Do you think you could find someone else to go work for quickly? Well, unfortunately for this company, about 80 percent of our book of business comes through my phone. It's my contacts, my people, friends, et cetera, family. So the work for me won't stop. It just it will just get through. What happens when you divert those leads to your new business versus them and their business hurts even more?

1:13:47Unfortunately, they're the ones calling me. I'm not in control of who – whether they choose the old company or the new company.

1:13:56George Kamel:But you're going to tell them, hey, I actually started my own thing if you're interested. So realistically, how many leads do you think would come with you and how much money is that? Like how much could you have on the table within your first 30 to 60 days? first 30 to 60 days with a cold start, not necessarily having everything together, I could probably pull together$25 ,000 to$40 ,000 in project work pretty quickly. And that turns into how much in profits? Does that replace your current monthly income? It would absolutely blow my current income out of the water. I think this is going to happen faster than you think.

1:14:34George Kamel:I think you try this for a month or two and realize, oh, okay, I can do this repeatedly. Yeah, absolutely. And because here's the thing, you might just flip it. Usually it's the opposite. We say, okay, do this other job while you build the business, but I think you can build the business. And if you have extra time, yeah, sure, you could work a side hustle and fill in gaps, but I don't even think you'd need to do that. It sounds like you've got it right there. There's no non-compete, so there's nothing ethically here. You just want to run a business differently. I'm all for it and you want to do it the right way.

1:15:04I think that's really, really good, and we're rooting for you.

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1:16:52Well, it's my favorite time of the show, George, where we get to talk about my favorite budgeting app, which is EveryDollar. and one of our favorite things is when people share their stories about how every dollar is helping them win. As a matter of fact, we have this from a fan. They said, it's just being able to use every dollar and see all the extra we have every single month. It was super motivating. We'd have thousands of dollars just, we'd have thousands of dollars extra and just throw it on the mortgage. And hey, I think that's amazing and you can do the same thing too. You can take control of your money, you can change your family tree and you can live like no one else.

1:17:26So start every dollar for free today in the App Store or Google Play. Matt is in Phoenix, Arizona. Matt, you are on the line, my friend. Hey, guys. How are you doing? Doing good. What's up? I am at a weird crossing point. We are in baby step two, and we have no consumer debt left. We just have our mortgage, which is up for$416 ,000. and we have 75 ,000 in student loans left at 8%. Okay. We are trying to figure out, we have 50 ,000 in the bank too. How much? Is it 52? What's that?

1:18:10George Kamel:How much do you have in the bank? 50 ,000. 50, okay. We're trying to figure out if we should pay the student loans right now. And the only reason I would be second questioning it in the process of all this is because in our mortgage is the PMI mortgage insurance, which is$250 a month. Our student loan payment is$117 a month. So in order to get our PMI insurance off, we would have to pay$70 ,000 right around there on our mortgage to drop that off. so my thought process was do I pay the 70 on the mortgage to drop that down so I can roll that extra 250 towards the student loan since it's more than double the student loan payment and then tackle that or do I just keep keep trucking along and knock out the student loans and then keep going from there it's a fair question I mean you're looking at you're looking at what you'll receive back.

1:19:19So you're looking at the payment in essence, more so than the balance itself of the consumer debt. And I understand that. If I were in your shoes, because really when we're talking about the mortgage, that really is a baby six activity, baby step six activity. And so I would continue on with the student loans because there's$75 ,000 of these bad boys. You got to knock this out. The good news is you have 49 ,000 that you can put towards that cause. and I would totally do that. I would totally do that.

1:19:50George Kamel:My guess is you're knocking out a bunch of student loans in the process, right? Yeah. Because they're broken up. So you're going to free up a whole lot of payments too. Yeah. Have you done the calculation? How much is that? As far as interest? If you pay off the$50 ,000 of the smallest loans right now, how many payments would that free up? What does that amount to each month? That I have not calculated. You should do that. That's a better calculation, I think, than the minimum payment on the student loans. So I would definitely tackle the student loans. I know the PMI sucks, but you're going to get there real fast if you knock out these student loans.

1:20:26George Kamel:What's your household income? $318 ,000. Goodness gracious. Oh, yeah. We'll knock out the student loans and the mortgage if you get control of this. Yeah. Over the course of this year, why wouldn't that be the goal to be out of baby step two, so$75 ,000 down, and then we're act like aggressively saving up three months of expenses where and then from then we can aggressively uh put extra towards this pmi 100 yeah we can definitely do it we take home about anywhere from i'm on commission but we take home about 14 to 17 000 after taxes every month um so we we've been aggressive we paid off 120 000 in the last like 15 months excellent so So we've been, we got everything, all the consumer stuff out of the way.

1:21:12The only monkey wrench here is in about 12 months, my wife is going to, we're going to have her stay at home and just raise the kids. Okay. And so we're going to lose about$68 ,000 in income. And we would, our take home after taxes would just be around$13 ,000 to$14 ,000. Okay. But then after we put on health insurance and 401k and all that stuff, we would only be saving about, after bills and utilities and mortgage, we would only be saving about$2 ,000 to$3 ,000 a month. That would be the extra play after all the bills is what we would have left to play with rather than right now we have about$10 ,000 to$11 ,000 in play every month.

1:22:03So you're saying that that feels like a huge swing, bigger than I thought. So she stays home. Obviously, your income goes down from$17 ,000 to$13 ,000. And then you figure how much for insurance? Well, from what I was getting quotes from the home family, so it would be me, my wife, and two kids. Health insurance, full plan, it was like$1 ,800 or$1 ,900 a month. Is that marketplace insurance? So we'll call that$2 ,000. Through my work.

1:22:30George Kamel:Through your work. Okay. Yeah, that's real high for an employer-sponsored health care plan. It feels high. But for now, we'll take your word for it. I would look at the high deductible plans too, which will have lower premiums. Have you looked at those options? No, I just kind of got some rough numbers from the representative. Okay. I would make sure to look at those high deductible HDHP plans because the premiums will be way lower. Okay. Hopefully. So you're down$6 ,000 for the month. So I see what you're saying there. It sounds like the point is just, let's try to kick out as much of this debt while we have this high monthly income.

1:23:10And I think that's a great play. You can obviously afford for her to stay home. You can afford those things. But it really just frames what George and I said beautifully, which is, yeah, while you have this money for the next 12 months, let's kick it into high gear.

1:23:23George Kamel:Knock out consumer debt, get the emergency fund, and get that PMI knocked off. Now we have a whole lot of extra margin. Yeah. Love it. Thank you for the call. Next up, we have Daniel, who's in Salt Lake City, Utah. Daniel, how can George and I help today? Yes, my question is that my business has debt still, but my wife and I personally do not carry any. And so it's kind of a weird spot where we're on baby step four, but the business is still, I guess, technically on baby step two. Who runs the business? Trying to figure out. Are you solo-preneurs? Boom, looks like you're in debt, Daniel. Right, exactly.

1:24:04Yeah, exactly. We're in debt. So that's what I thought you were going to say. We're on baby step number two until the business is paid off then, right? Uh-huh.

1:24:11George Kamel:How much is left on that? Yeah,$80 ,000. Okay. How quickly could you knock that out if you guys got in tents? It'll be done this year. Oh, okay. Before 2026 is over, this debt is gone, and then you need to build up an emergency fund? Yeah, I mean, a business emergency fund. My wife and I have about$70 ,000 ourselves. Okay, I would use your personal money to pay off your debts. Are you the only two owners? Is it just you and your wife? No, I'm a 50 % partner, so I have a partner. I would love to do that, but he doesn't have the same amount of money stored up, so we wouldn't be able to evenly split paying off the debt personally.

1:24:55George Kamel:Could you knock out your part and have an assigned agreement saying, hey, your part of this debt is done? Yeah, I guess in theory. I mean, your name is still in the debt, which is the risky part. Well, that's the whole thing is like businesses have the debt. Technically, the debt that's left is under his credit. I kind of... Why wouldn't you... He's not interested in using profit to pay off the debt over time? Oh, yeah. No, we're doing that. Like I said, we're going to have it done probably by the end of the summer. but yeah I mean yeah and how much was it again was it 70 or was it more it's 80 ,000 left in business debts on a credit card and a line of credit and it will be done at the end of the summer if you use the profits from the business yes that's correct I would aim for that I would get on the same page with them and go hey listen I don't want this debt hanging around any longer it's adding risk to our business if we get real intense we can knock this thing out do you guys have any reserves in the business as well yeah i mean well technically we've got customer deposits you know those are technically not our money yet either until the jobs are produced we're a residential painting company so okay you know the deposits you know you do need to have some reserves i think because if you had told me that you were 100 percent owner of this business i'd say yeah pay it off reach over do whatever you need to do but because you're not full owner and there's another guy that's associated with this yeah as long as you guys can have this using those profits by the end of the summer i I love that.

1:26:26And stack up some reserves. Six to 12 months is what I would do immediately.

1:26:50Welcome back to the Ramsey Show here in the Fair Ones Credit Union studio here with George Camel, myself, Jade Warshaw. we got Ryan who's in Chattanooga, Tennessee just down the road. Ryan, you're up next, buddy. How can we help?

1:27:05George Kamel:Hey, guys. Thanks for taking the call. My question for you as a 26-year-old man married to my wife that's 24, I'm curious. We put a large portion of our monthly income away into savings and retirement. We have little to no debt. And I'm just curious how much money is saving too much for retirement versus being able to enjoy your 20s and 30s. That's a very good question. Can you clarify for us a little bit two things, what it means when you say little to no debt, and just how much are you putting towards retirement and savings? Yeah, so our debt, my wife has about $4 ,000 with the student loans.

1:27:49George Kamel:We across the board do not have any credit card debt. I do not have any student loans and we just have our mortgage. Both cars are paid off. And we put roughly$3 ,000 a month into investing for our retirement. Why haven't you paid off the student loan? We had it set up on an automation. That was kind of her, I guess, spectrum. And that's what we're planning on tackling within the next month or so. Well, how much do you have saved? If you've been putting away$3 ,000, how much do you have in non-retirement savings right now? In non-retirement savings? So as of our, I guess, emergency fund. So if the$3 ,000 a month correlates with, I guess, the 401K and our Roth IRAs.

1:28:37George Kamel:Understood. How much do you have that's not retirement? Savings, higher savings. So we have roughly about$25 ,000 in our taxable, I guess, liquid brokerage outside of our initial retirement. Do you have any high-yield savings money, like just any money in savings? Well, that is, I guess, drawing from the high-yields right now. It's uninvested cash in my brokerage account. Oh, got it. Okay, so it's just sitting there. Like a money market situation. Okay, cool, cool. Correct, correct, sorry. All right, so you're wondering, are you saving too much by putting$3 ,000 away a month into investments? Correct.

1:29:15When I did my calculation, 11 % over the next 32 years or so until I've hit 60 for retirement, it's like$15 million, which is a great number to have with contributing that much each month.

1:29:28George Kamel:So the 3K is 11 % of your money?

1:29:34What do you mean by that?

1:29:35George Kamel:You're saying 11 % as the rate of return when you calculate? Correct. Oh, gotcha. What's your household income, gross household income? Yeah, we make roughly$130 ,000 a year. Okay. So our baby steps go as follows. Baby step one,$1 ,000. You have that. Baby step two, pay off all consumer debt, which means the student loans are paid off today, which brings your brokerage down to$21 ,000. Tracking? Correct. Now we need three to six months of expenses. What does six months of expenses look like for you guys? Is it more than$21 ,000? I would say between$20 ,000 and$25 ,000. Great. So we'll call that good.

1:30:13George Kamel:Now we're at baby step four, 15 % of household income, which for you guys, 15 % is going to be$19 ,500. $1 ,600 a month,$1 ,625. So that's the amount you should be putting away. And any extra money then gets diverted to the mortgage and to enjoying your life. So you asked, how much can we use some of this to enjoy our 20s and 30s? Yes, you should be using it. And I think investing three grand and putting every dime away into retirement is a bad idea because you have a flat tire. And honestly, I think this is just a mental shift more than anything, because after you do the$1 ,600 every single month, if you did another$1 ,500 extra on the mortgage, it's the same$3 ,000.

1:30:54You're just splitting it up and doing it in the right ways. So do you see what I'm saying? So in many ways, you're still investing because a mortgage in many ways, it's an investment. It's definitely a forced savings account at best. And so you are investing, you're just doing it in different ways. So it's just a mentality shift there. Sure. The dollars themselves don't really change. Yeah, I guess it's harder mentally from a, I guess, liquid versus illiquid standpoint. Let's talk through that. Let's talk through that because it is worth talking through that. We have found that it sounds like your goal is to build wealth, right?

1:31:38Correct. Yes. We've done the largest study of millionaires. And one of the things that we found is there's two key portions of this. Number one is these people, they invest in their 401k. That's where they build the majority of their worth. It's not they've got all this real estate. They don't have these crazy. No, they invest in their employee-sponsored accounts. That's what they do. And then the other thing that they do is they pay off their home mortgage, and they do it relatively quickly. And so if you can do those two things combined effort, that is the ticket. That's what we have found works time and time and time again for millions of people.

1:32:11And you're right there. Like I said, the amount that you're putting towards savings doesn't change. You're just not investing at all. So we're creating diversification in many ways.

1:32:21George Kamel:You have a forced savings plan by putting it into that mortgage, paying it off, having all that equity. And that's exactly what my wife and I did, Ryan. We are very much, I mean, you guys are earlier than we even got started. We had a paid off home in our early 30s, became Baby Steps Millionaires in our early 30s. you guys are going to get there even faster at the rate you're going. But I would caution you to slow down a bit, move from intensity to intentionality once you're out of baby step three and you begin to invest. Because I don't want you to look back and go, oh my gosh, we have kids now.

1:32:49George Kamel:We didn't get to do all those trips we wanted to do. Life got crazy and chaotic and complicated. So I would allocate in your budget money for vacations and trips and some little luxuries. You guys have earned it. You've worked your tails off at 26 and 24 to be soon to be debt-free as soon as you're off this call. Yeah, I appreciate it. It is nice to know that percentage threshold of how can I still be secured for the future, but also enjoy today. So I appreciate it. If you just do 15 % until the mortgage is paid off, you're going to have so much in retirement. And by the way, once the mortgage is paid off, you can ratchet that up to 20, 30, 40, 50%.

1:33:26George Kamel:But make sure that you're also giving and spending. You got to have all three in check, investing, saving, giving, spending. So all of those in check, 15 % investing, 10 % giving, especially if you're a person of faith, and then you can enjoy it after all the bills are paid. And that's where the every dollar budget comes in. It forces me to go, oh yeah, I need to put money away for that vacation. So we don't go, wait, this savings account is just for life. No, no, no. You earmarked it for vacation. So use it. One of the things that kind of makes me sad is we can really get into the baby step two mode, that just gazelle intensity mode, because it feels good.

1:34:03We're making accomplishments. We're paying off debt. We're saving really quickly. And it's like, if that mentality continues to follow you, you never really enjoy the fruit of the baby steps. The whole point is to really rush it so you can get out of those painful periods, get out of baby step two, get out of baby step three. But man, once you're in four, five, and six, and the house is starting to come down and everything is really starting to take shape, you're investing your 15%, you've got to live a little. Live like no one else. You've got to. So later.

1:34:31George Kamel:So that you can live like no one else and give like no one else. And I got a DM the other day. They went, hey, can I buy this fancy coffee machine? I know you like coffee. And I was like, well, where are you guys at financially? They go, well, we're millionaires. We have a great income, no debt. Get the coffee machine. Yes. It feels like you're doing a bad thing because you're spending$2 ,000, which feels insane. You're right. It is insane if you're broke. Yeah. But if you have the money, it's a small part of your world and it increases your quality of life. Do it. And what else makes you feel better is when you know you're generous.

1:35:00You know that you're also giving a generous portion of your money. You feel great when you then go and spend some on yourself and on your family and on the things that you value. It is a very delicate balance. Give, save, spend. You got to do all three.

1:35:38Hey, guys. Dave Ramsey here. Every day on this show, we help people work through real money problems and figure out what to do next. Now, you can get that same kind of help anytime with Ask Ramsey. Ask your money question and get answers built on Ramsey principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to RamseySolutions.com and try Ask Ramsey today. That's RamseySolutions.com.

1:36:28The Ramsey Show question of the day is brought to you by YRefi. If your private student loans are in default and you're not sure what to do next, YRefi can help you explore refinancing with a low fixed rate and a payment plan that's based on what you can actually afford. Go to YRefi.com slash Ramsey. Remember, that's the letter Y-R-E-F-Y dot com slash Ramsey, and it may not be available in all states.

1:36:52George Kamel:Today's question comes from Evan in Iowa. I'm a husband and father of two young children currently in baby step two. I do not have term life insurance and neither does my wife. While we were looking at our monthly budget, the subject came up of when is the right time to get life insurance? Is this a financial priority while we are paying off debt or should we hold off until we are debt free and have our emergency fund in place? Great question. Controversial. And the beautiful answer is that you need term life insurance regardless of what baby step you are on. As soon as anybody relies on your income, young children, a wife, even when you're just young and healthy, it's a good time to lock it in.

1:37:33George Kamel:It's great because it's cheaper, number one. It's so cheap. And so absolutely, both of you need to get term life. You need 10 to 12 times your annual incomes on a 20, 25-year term. And you will find that it is quite affordable. And if you're a stay-at-home spouse, you definitely need term life insurance to the tune of at least half a million. I like three quarters of a million. Well, we had a call about that earlier. I think it was maybe our first call today. And it really is that 10 to 12 times number is so important because ideally what you want for anybody who's dependent on your income, if you should go, because we're all going to get beamed up at some point.

1:38:10But if you should go earlier than expected, you want that person who's left behind to not have to worry about. because many stay-at-home moms, they've never worked in the workforce.

1:38:20George Kamel:Yeah, and that was her situation. She had some teens at home. She would stay at home, hadn't worked in a long, long, long time, and she had$500 ,000 payout, which is you're going, wow, that's life-changing money. Sure, but it's not, I never need to work again. Right. And so if he had had 10 to 12 times his income in term life, he would have had$1.4 to$1.6 million. And she could have then drawn the exact amount of paycheck. She could have invested that amount. The market would have spit off enough income for her to cover all of her expenses without having to worry about when is this money going to run out.

1:38:52George Kamel:And they were renting. Yes, that's right. Think about that. 10 to 12 times her income invested, your family's covered. And so while they're grieving your loss, at least they're not struggling financially, figuring out what's next. So get term life in place. Xander is the place we've been recommending for decades now. I just got an extra term life policy. You do 15? Well, now that I got young kids and dogs that are too expensive, I just felt better. It was like, I'll sleep better at night. I might sleep with one eye open now because I'm worth more dead than alive. Because it's high, it's up there, yeah.

1:39:25George Kamel:But I know my family's going to be taken care of and Whitney's not going to be yelling at me. Hopefully looking up, hopefully looking up, yelling at me. If she's looking down, there's a problem. She hates when I talk about it. She is the person who's like, I don't even want to think about it. I'm like, me either. And you bring up a good point because I think a lot of people avoid these types of discussions, life insurance, wills, because it is a mortality issue. And it's like, ew, I don't want to think about the worst happening. But it really is a way to love your family well. I hope you never have to use it and it was just money well spent to transfer the risk to the insurance company.

1:39:57George Kamel:Yeah, sure. That's the goal is the policy runs out after 20 or 25 years. You've been following the baby steps. You got a paid for house at the end of that. You've been investing for a couple of decades. so your nest egg has caused you to be self-insured. Yeah, that's the goal. That's what we want to get to. Exactly. So go check it out. Xander.com is the place to go. Get this done. Do not wait. Don't wait. Eric is in Kansas City, Missouri. Hi, Eric. How can George and I help out today? How's it going? Good. I am recently retired at 57, first out of age by my job. I have a 401k that I am unsure what to do with it because we can no longer contribute to it, but I don't want to draw from it either.

1:40:40So I'm trying to figure out how to maximize my gain with it. Yeah. Well, you could do a direct transfer rollover and roll it into an IRA. And I would suggest maybe getting with a SmartVestor Pro to help you do that. And you can find those at RamseySolutions.com. But that's easy to do. My question is, What do you plan to do with your time? It sounds like you weren't ready to retire yet. Well, part of it's medical. Part of it was my age. So, I mean, I make enough money right now through my retirement and disability through the VA that I don't need to draw off of my...

1:41:18George Kamel:When you say retirement, what is your current income coming from now? um i have um i get about seven thousand a month right now i get three thousand from my job that i retired from like a pension i get money yes okay another four grand from disability from the va yes okay and so you're saying i don't need to touch the 401k money but i want it to grow so absolutely i would do what jade said do a direct rollover so you don't want to see that money. It should not pass through your bank account. They will just transfer it directly over to an IRA, which is a non-employer sponsored retirement account.

1:42:00George Kamel:And that way you have all of the options in the world, way more than you even had in that 401k. But the key is if it's traditional, you want to make sure it's rolled over to a traditional IRA. And if it's Roth, you want to make that portion transfer to a Roth IRA. That way you're not having any tax implications. How much is in that 401k, Eric? It's only$400 ,000. Only$400 ,000? That's a lot of money. That's a lot of money, my guy. But in Eric's case. I feel like it's not enough. Well, you know, you're not using it, which is good. And I love George's point. It sounds like it's traditional money, so it is going into a traditional IRA.

1:42:37But depending on what baby step you're in, I would be interested in, over time, moving that to Roth funds if possible. And that's something else that the SmartVestor Pro could help you with because if you're not touching this money and it truly is for posterity, then you want that to be tax-free growth. You want them to not have to pay taxes on that money when it's transferred to them and when they have the ability to access that.

1:43:01George Kamel:Can I give you some mind-blowing math, Eric? Yes, sir. So based on what the stock market has actually done over the last several, several decades, since 1950, we've seen a 10 % to 12 % average annual return. And so there's something called the rule of 72. And it's simple. You divide 72 by the annual rate of return. It tells you how quickly your money will double. So at a 10 % rate of return, your money would double every 7.2 years. So if you're doing the math at your age, at 64, if you just leave that alone, invested, that 400K, turns into$800 at 64,$1.6 million by 71,$3.2 million by the age of 77.

1:43:42George Kamel:That's what I want to hear. Yeah. There you go. And that's if you never add to it. Like you mentioned, you are fine on your own with your disability income and your pension income. So if you continue to live on less than you make and let that grow, that is generational wealth. And that's where the transfer of Roth really, really matters for you. Plus, you don't want to have retired minimum distributions if you don't need it. Right. So that SmartVestor Pro can help you also. What was that? I said, yeah, because currently, you know, I would like to also contribute more into, you know, my investment instead of letting just ride because I've got money and savings that's not making any money.

1:44:22You know what I mean?

1:44:23George Kamel:Yeah, you can invest that too. So that's Marvester Pro walk you through it. And I would also ask them about Roth conversions. because like Jade's saying, if you can convert those strategically, so you could do a portion each year, moving from traditional to Roth, you pay some taxes. Doing it all at once is going to bump you way up in the tax brackets and cause you to have a big tax bill. And so that SmartVestor Pro can walk you through it strategically so that that money is then growing tax-free the rest of your life and passed on to your heirs tax-free, which is going to be pretty cool for somebody in your life one day.

1:45:00thank you does that make does that make a lot of sense for you eric yes okay good good good great question and is it just you eric or do you have a wife kids is there anybody else it's just you so what what do you plan on doing with that 3.2 million i mean what what do you think you'll who's the beneficiary of that i try to take care of my my sisters and my mom okay i You're a good man. Yeah, you are. That's a it's a really good point, George. You know, he's in such a great position. And there's many people who even if even if you are drawing off your retirement, there's still going to be a large portion there.

1:45:38And you do want to make sure that you're setting it up as a legacy piece so that whoever is inheriting that is not inheriting a major tax burden.

1:45:46George Kamel:Yeah, that's where a good financial advisor is worth every penny. And so if you want a smart investor pro to help you think strategically about whatever it is wealth, estate planning, tax planning. You can go to ramsysolutions.com and click on SmartVestor.

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1:47:45No purchase is necessary in order to win. All right. Amy, in the city I was born, Spokane, Washington. What's going on, Amy? How can George can I help? Hi, thank you for taking my call. I'm calling because my husband said that if I could get the Ramsey show to approve of our house build, we could move forward with it. So no pressure or anything. My entire future is just riding on this. No, we're in a pretty good dream killer.

1:48:16George Kamel:I've been known to be a dream killer, to be fair. Is he is he anywhere listening? Is he with a glass on the door somewhere listening? You know what? He rides bikes, and he is currently listening to the show in his ear pods on a bike ride. Okay, okay. Okay, shout out wherever you are on your bike. We're going to do our best to be fair. I want to get you there. I want this to be a yes. So walk us through the predicament. I do too. And we're both, I just want to start with, we're both very much on the same page. We're just like, we want to be strategic and make sure this is the right choice for our family.

1:48:54And so I'll give you just a little bit of an idea of who we are. So we're 36 years old. We've been married for 12 years. Spokane is the closest town to us, but we're in a very desired ski town nearby. And we own a house. We have no debt. We've paid off our house. we took Financial Peace University right when we got married. And really, it's been fantastic for our life. That's incredible at 36 years old. It feels really good. It really does. And we just built an apartment above a garage on the same property that we live in, in this house right now. And so we're going to like our desire is to build a house because we have a pretty big piece of property on this same property so it's paid for um and we would then have our house and the rental as income or and the apartment rental as income got it and so um we're just trying to figure out like my husband's pretty hesitant to go back into any kind of debt, which I understand.

1:50:16It's been so great. I think we paid off our house about four years ago. And so we're just going, do we, do we wait until we have the cash on hand or being that I'm pregnant with our third and I don't want our baby sleeping in a closet? Do we build the house that will function for our family better than the one that we currently live in. And we don't want to sell our house because it will make really good income. Okay. Well, how much is it going to cost to build this house? It's probably about a million. Okay. And what does that get you? What does a million get you? Is this like a four bedroom house?

1:50:57Like what does it get? Yep. Four bedroom. Like I said, But G-Town, it costs quite a bit to build here. And I think a million might be being, you know, between one and 1.2 for the plan that we have. But yeah, it's a four bedroom, three bath. Okay, four, three. And what do you have saved so far towards this? Not including emergency fund, not retirement. You know the deal. So, well, I'll just give you kind of like cash on hand. is 500. Um, and that's, um, that's kind of just in the bank right now because we were needing to pull out a lot to build this current apartment that is, that I was talking about.

1:51:47Okay. And then in our Roth 401k, we have, um, about 450 and then our joint account that, that, so the Roth, you know that's our retirement we can't write that's off the table uh-huh yeah so um 275 right now and our current property is valued we don't really know because we just built this but i would say probably 1.5 how much do you guys make what do you take home every month

1:52:19um well because that's really what this that's really what this is all riding on because i can tell you right now, if you tell me, hey, I'm looking to do a house for 1.2 million, and I just plug this in the Ramsey Solutions mortgage calculator. If you put the$500 ,000 cash down on a 15-year fixed at, I'll put in 5.6 for now. I don't have it on my screen what the current rates are, but that's going to put the payment around 7 ,000 bucks a month. So as long as this is no more than 25 percent you're on the right track in my unless you say something crazy in the next few minutes yeah well what is your average take-home pay we own a business and we um i would say about it changes year to year but i'd say about 250 okay is your annual income yeah okay got it because yeah i need you to be taken home

1:53:22George Kamel:that puts you at my guess is you're probably taking home around 12 to 14 a month

1:53:31well we pay ourselves once a year because it's a seasonal business uh-huh so what do you pay yourselves um 250k um we're just trying to find out your after tax monthly income to figure out

1:53:51George Kamel:if this mortgage is going to make sense because i'm not for sure if you you know i understand wanting to pay cash it's not a sin if you go back to baby step six for a season with the intentionality of we're going to pay this off pretty aggressively quickly to get back to baby step seven. Like our plan would be five years. Well, if you say, hey, we pay ourselves$250 ,000 cash in our pocket and we split it over 12 months. So it's around 21 ,000 a month. It's getting you close. It's getting you close, but that mortgage is still creeping up, right? But then what would you guys say if our house, you know, our house would rent for about $4 ,500 a month and the apartment for about$2 ,500.

1:54:35$4 ,500 and$2 ,500? So you can rent out both

1:54:37George Kamel:separately? Both separately, yes. Right. Then I think that gets you there because that's now considered income. Now, there's still some, you know, variables with that. So you don't want to count it 100 % because you've got vacancies, maintenance, repairs, you know, tenant issues, all of that is going to play a part. Yeah. But I feel like you guys are thinking about this pretty clearly. The only concern is you'd have the majority of your net worth would be in real estate. So that's the only thing to think about if you have, you know, 450K in retirement. But I think long-term, you guys are 36. So over time, your retirement is going to surpass your home.

1:55:17George Kamel:And the other thing to think about is, is this the same property? If you were to sell one day, could you sell them separately? Is the land big enough? Yeah. Okay, great. Oh, yeah. Okay, so I just— We definitely could, and— Go ahead. Go ahead. Oh, no, I was just saying, like, that's definitely been a huge—and there's more land that we could—I mean, if we wanted to divide off some, we could just sell it as property, too. You could, like, parcel it out and just sell pieces of it. Okay. So if you tell me, if I hear these numbers right, which I think I did, one rental is$4 ,500, the other one is$2 ,500?

1:55:56Yeah. So that's another eighty four thousand dollars a year. And that gets you there. If you keep that and it's consistent, that gets you to just about twenty eight hundred dollars or twenty eight thousand dollars a month, which is right where you'd want to be for this mortgage. But what George said is very critical. Usually we would not tell somebody it's the same as somebody said, I can buy a house. But as long as I have somebody living in the rooms right to make the mortgage for you guys, that's the critical part on this. that$84 ,000 is really dependent on, is this person going to be dependable month after month, year after year?

1:56:29And will this business income be dependable?

1:56:32George Kamel:You got to think about that too, but you got a green light from us if you check all those boxes. Congratulations.

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1:57:55Our Ramsey show scripture and quote of the day is Proverbs 22, 26 through 27. It says, do not be one who shakes hands and pledge or puts up security for debts. If you have nothing with which to pay, why should your bed be taken from under you? Shots fired. Shots fired for sure. Doug Larson said, people are living longer than ever before, a phenomenon undoubtedly made necessary by the 30-year mortgage. That's hilarious. Dang, 30 years, though. That's a short lifespan, Doug. Come on, Doug. Come on, Doug.

1:58:28George Kamel:I mean, he lived a good long life there based on the timeline. Yeah, that's for sure. We got Damon in Arkansas. Damon, how can we help today? Yes, hello. Thank you for taking my call. I recently got done paying off my student loans. I didn't graduate. I didn't know what I wanted to do with my life. But I'm at a point now where I'm the sole provider for me, my wife, and our four kids. We have two children who have been diagnosed with autism. She has to stay at home with them. So, again, I'm the sole provider. But I have a car note for$15 ,000. Then I have my mortgage for, I think I have$150 ,000 left on there.

1:59:22Should I go back to school? What are you doing now? I work in a factory.

1:59:30George Kamel:What do you make? $17 an hour. Okay, so that's about$35 ,000 a year. Is that full-time, 40 hours a week? Yes. And what did you go to school for originally that you didn't finish? I was a physics major. Okay. So what would you go back to school for today if you were to choose a different career path?

1:59:56I don't know. I see a lot of people in this factory have degrees that I would have not even considered would have gotten them their positions, but it almost feels like I just need a degree in anything.

2:00:13George Kamel:Well, I don't want you to get a degree for the sake of getting a degree and then you're back where you are going, okay, now what? Nobody handed me a job all of a sudden. So I want you to have some aim and purpose with this, and we can help with that. We'll send you our friend Ken Coleman's book, Find the Work You're Wired to Do. It has the Get Clear Career Assessment inside, and I think it'll help point you in the right direction. But in the meantime, I mean,$17 an hour, you can make doing just about anything. And if you're handy and you can go into the trades, there's a lot of money to be made there.

2:00:41George Kamel:You could triple your income within a couple of years. Yeah, because that does bring up the bigger question, which is whether you went in trades, whether you needed certificates, whether you needed a degree, what would be the plan in your mind to pay for this? Because George and I definitely don't want you to go further into debt for education. We value education. We just don't want you to go into debt for it. So what do you think a plan could look like? I would like to not have any debt at all at some point with having my car paid off and getting my mortgage paid off. Ultimately, I want to have no debt.

2:01:20How are you getting by right now?

2:01:22George Kamel:I'm curious, Damon. You're making$35K a year. You got the car payment. You got the mortgage. You got four kids, a stay-at-home spouse. How have you been surviving? It is a struggle every month, man. Every month. I mean, we have a nothing on paper budget, but essentially we just have our bills that we have to pay and then whatever is left over, you know, is our food, our gas. I make not enough to have anything left over at the end of the month. But you're able to cover all the bills, just nothing more. You're not going into debt to cover any bills. Yes. Wow, that's impressive. I just want to applaud you for making all this work, even without a budget, which I encourage you to make one, and I'm going to hook you up with every dollar, which will give you that plan as well as the Get Clear Career Assessment.

2:02:14Now, how were you able to pay off the student loans on this? I had a different job. I was getting different hours, and we moved to this town where I'm at now, and I lost that job. And now this is—we had some residual income left over that we decided, like, okay, you know, I may be able to go back to college and get a better income. Let's just toss it towards what's left of my student loans. Understood. I've been paying on them for a decade. What were you making before, and what type of work were you doing? I was in a tipped position, so it's tough to say. I made$55 ,000 in 2025. Yes, 2024, excuse me.

2:03:06And I was a cage cashier. I paid people jackpots. Usually people are pretty happy to see me. Oh, okay. Well, the good news is you've seen a higher earning potential. Like you've seen, okay, I know I can go out in the world and make$55 ,000. I would just apply that. Honestly, if I were you, I might just get curious and start looking online and just start applying for things. You can do that for free, right? and start, Ken Coleman would say to use your proximity and see who you know, ask around, ask your friends. I'd make a list, my goal tonight would be, I'd make a list of 10 to 15 people that I could reach out to and say, you know, what are you doing?

2:03:44Have you heard anything? Is there anybody hiring in what you're doing? And just start making some phone calls and start trying to make some connections and just see what's going on. In your group, in your friend group, in your church group, are people working places where they need employees. and that would be a great way just to get started just to see what what can i pull from and who knows you could end up landing something where you're making a little bit more and that could lead to the next step while you're figuring out the work that you're actually wired to do here

2:04:14George Kamel:very very good question on the line we'll send you that assessment and every dollar damon all right let's go to caleb who's in fort bragg north carolina hey caleb how can george and i help real quick. Hi, how are you guys doing? We're doing good. We're right up against the clock. How can we help you? Hi, so I am currently on baby step two, but I'm going to be out of baby step two in about two and a half months. When I get out of it, I did some budgeting. I realized I'm going to have about$2 ,700 every single month just for free. Nice. And my expenses are going to be like my six month emergency fund is literally going to be less than baby step one.

2:04:54And so I do need to buy a car. I'm looking to buy a car. And obviously my emergency fund is going to change when I have to buy insurance. So my question is one, should I buy a brand new car or a piece of crap? And then two, how much should my emergency fund be since my expenses are so low? A very good question. First one is, I love that you're going to free up that much margin. What is so urgent that you need a new car right away? Because if I could hold off on the new car and save the emergency fund first, I would do the emergency fund first. And you want to build your emergency fund based on your current or very quickly foreseeable monthly expenses.

2:05:37It's a bare bones budget. So this is if I took out all the bells and whistles of my budget that aren't necessity and I said, okay, it's rent, it's transportation, it's insurances, it's daycare, all those things that if you hit an emergency situation, maybe you lost your job, maybe there is a diagnosis. Obviously there'd be certain niceties you'd probably cut away and you'd keep things down to bare bones. So three to six months is what I'd aim from. If you know you need a car, I'd save up the three months, do the car and then come back and do the six months. But if the car is really just something that's a nice to have, George, I would go ham on the six months since it's just you.

2:06:15And then I would start to save up for the car that you want.

2:06:19George Kamel:And I would not go, hey, it's either going to be the worst car I've ever seen or the nicest car I've ever seen. Get something reasonable. What is your income? My income right now is about$4 ,500 a year. $45 ,000? Yeah,$45 ,000. I was like, goodness gracious, man, what are they paying you over there? Okay, so$45 ,000 a year, you're single? Yes. Is this the only thing with wheels and motors in your life? Is this one car? Yeah, I don't have a car currently. Okay, cool. So you want no more than 20K, and for a guy your age, I think 20K is even the upper, upper limit. I might shoot for something more like in the 15 range that'll just get you from A to B.

2:06:59George Kamel:It's decent. It's used. Do not go buy a new car. Don't go to the dealership because they're going to try to get you into a giant payment and go, man, you can get the brand new one for just a little bit more. What kind of payment are you looking for? You're paying cash. You're buying used. And I would, I like the idea of a$10 ,000 emergency fund for sure. Yeah, absolutely. Absolutely. Well, George, it's been fun, but it's also over. Oh, I'm sorry. Hey, remember, there's ultimately only one way to financial peace, and that is to walk daily with the Prince of Peace, Christ Jesus.

2:07:44you