If You Want Wealth, Stop Being Dumb With Money

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10:46Dave Ramsey:Mikayla is in San Diego. Hi, Mikayla. How are you?

10:50Rachel Cruze:Hi, Dave and Rachel. Thank you for taking my call. Sure.

10:54Dave Ramsey:What's up?

10:55Rachel Cruze:I'm calling in with kind of a two-part question about business cash flow concerns. My husband had worked at this business for over 20 years and we recently bought it. We took out two personal$50 ,000 loans to pay the previous owner and to start the business. But now after two months, we're feeling a lot of stress in our new marriage. I feel like we're only paying debts, not making any progress and can't breathe anymore. We need guidance on how to manage the cash flow so we can try and get ahead. The monthly business expenses are between$50 ,000 and$60 ,000 a month, but the income varies between$40 ,000 and$70 ,000 depending on the month.

11:33Rachel Cruze:My second question is that I'm...

11:35Dave Ramsey:You paid$100 ,000 for a business that breaks even?

11:39Rachel Cruze:He told us it didn't. He said that it had a significant cash flow, but we are finding that we're only breaking even. He said it's a slow time period right now. Did you look at previous books of the business, like the last 12 months before you bought it, to see seasonality, if that is true? He didn't really offer that, and we kind of went on good faith because my husband had worked for him for so long. But I'm realizing now that maybe we should have. No, not maybe.

12:09Dave Ramsey:Absolutely. Yeah. You stepped up into a bear trap. Yeah. What kind of business?

12:17Rachel Cruze:It's an appliance repair business.

12:20Dave Ramsey:What is the$50 ,000 to$60 ,000 in overhead on appliance repair?

12:25Rachel Cruze:Mostly it's payroll. There's six technicians, but we're also paying for health insurance, rent, software insurance. Let's see what else the auto insurance website Leases on the vehicles, which I don't agree with but so the six

12:50Dave Ramsey:Technicians are not working all the time

12:53Rachel Cruze:Well, there's three office staff and three technicians We did used to have four technicians and one quit during this time frame. So we're trying to hire a new one Why would you want more expense? we're hoping that he can also bring in more income

13:11Dave Ramsey:and why would you have that hope if you're not already overwhelmed with business yeah um

13:18Rachel Cruze:are you guys trying down a lot of business no right right now they're they're pretty busy i think um my husband's schedule he's booked out to next week so not turning down a lot of business but we're at least a day or two busy all the time.

13:35Dave Ramsey:Yeah. Okay. So here's the thing. You have to ask what must be true for this to work. And so revenues have to go up and expenses have to go down for this to work. That's a basic business premise, right? We all know that. And so that's what you've got to start asking yourself. What can I do to get revenues up and get expenses down? and none of these things are going to be easy. They're all going to be painful. Like your husband's going to be working like all the time. Welcome to being self-employed. And the technicians, you're going to get them to where they're so busy they can't breathe. And then you're going to bump your rates and start charging more.

14:17Dave Ramsey:And then you're going to lay off one of the three office staff or two, and you're going to be down there doing the books. and then you're going to look at getting rid of these leased trucks and get some old trucks that show up because nobody gives a crap what you're driving if you fix their dishwasher.

14:34Rachel Cruze:Yeah. The hard part is that I'm active duty military, so I can't move there yet.

14:40Dave Ramsey:Okay. All right.

14:42Rachel Cruze:And I'm debating if I should pause my TSP savings. Yes. Put that money towards the debt. Okay.

14:48Dave Ramsey:Yeah, yeah. You guys got to clear this debt and you got to stop everything and get where you can breathe. But the point is the more you move into increased revenue and decreased expenses and more margin in your personal budgets, the more there's a light at the end of the tunnel that's not a train. And then you can, you know, the problem with where you are is if you feel like you're stuck there forever, that's an untenable place. That creates unbelievable anxiety. But when you're in a hard time but you can see your way out doing some hard things, well, the brain will help you do that. That's unnatural.

15:22Rachel Cruze:Where is your husband right now living? If you're in San Diego, where is he? He lives up in the Fresno area. Okay. And you guys are newly married. How long have you been married? One year. Okay. Were you deployed or something? No, we just met living in two different locations. When are you guys planning on being in one location together? Next year. I retire next year. Okay. I'm just wondering, does he have this level of stress as well? because you're the one calling us and you're not even in the same city with the business. His stress is easily two to three times what mine is. And so you're just hearing it.

16:01Rachel Cruze:You guys are talking through and you're like, I'm just going to call and see what they say. Yes, exactly. Okay.

16:05Dave Ramsey:And you don't owe this former owner any money.

16:08Rachel Cruze:We owe him almost$400 ,000.

16:13Dave Ramsey:Holy moly! You paid$500 ,000 for a business that doesn't make a profit? That's why I'm calling. Fixing dishwashers?

16:27Dave Ramsey:Oh, my gosh, kiddo.

16:30Rachel Cruze:Yeah.

16:31Dave Ramsey:Yeah, you got screwed. Wow.

16:39Dave Ramsey:Unbelievable.

16:40Rachel Cruze:Okay, so what does she do?

16:41Dave Ramsey:I can help you with this real quick. Call the former owner and tell him to come get it. Come pick up the keys, buddy. I'm done.

16:51Rachel Cruze:You just walk away.

16:52Dave Ramsey:And walk away.

16:53Rachel Cruze:With$100 ,000 and just pay it off.

16:55Dave Ramsey:Yeah, pay the$100 ,000 off and call that stupid tax. Call him and tell him to come get the thing. Screw this. You got hammered.

17:06Rachel Cruze:Yeah.

17:07Dave Ramsey:Yeah. For a business to be worth$500 ,000, you need to be making a profit of$150 ,000 to$200 ,000 a year. and you ain't going to see that in your lifetime out of this thing.

17:27Rachel Cruze:And I think that's what he told us that it was worth.

17:30Dave Ramsey:Yeah, well, he's a liar. Okay. And I'll be mean. Can I be mean for a minute? Sure. Y 'all were dumb on how you did this. Yeah. I mean, you believe this guy just because your husband used to work there and he got a paycheck instead of actually checking out the freaking numbers. You signed up for a half a million dollar trip around the sun and didn't look at a stinking number. Just trust some good old boy. Yeah, that's like walking in front of somebody. Oh, my gosh. Bless your heart. Yeah, you got a mess. This is not going to end well. I'm calling that owner and saying, I can't do this. You sold me a pig and a poke.

18:11Dave Ramsey:I'm done with you. And there's no possible way this thing is worth anywhere close to what you sold it to me for. you screwed me and here I'm leaving you can come pick up the pieces and tell your husband to move to San Diego and move to San Diego with his new beautiful wife and get a job and then y 'all scratch through your stupid hundred thousand dollars worth of debt and when you look back on that you'll say that's the dumbest thing we ever did cost me a hundred grand by the way I've done dumber things that cost me more than a hundred grand but I but but man I can look at myself in the mirror and go you are stupid dave when you did that so yeah you this is not recoverable i'm i'm turning this over to this guy i'm serious you're not going to work your way through

18:57Rachel Cruze:five hundred thousand dollars in debt in the seasonality part is of appliances that i'm like

19:03Dave Ramsey:you're just dishwashers don't break in the summer more than the winter or less than is what he's telling them i know that's just absolute bogus now if it was heating and air maybe we'll talk about it. There is some come and go on heating and air. But you said appliance repair. Appliances aren't on a schedule for repair. Refrigerators don't go, oh, I'm going to wait till after Christmas to break. They don't do that. So this guy's full of it and he sold it to you and he's sitting over there grinning going, look at these fools sending me checks. No more checks for Bubba. Nope, I'm done.

19:37Rachel Cruze:How does that really quickly? I'm serious.

19:39Dave Ramsey:You're probably going to get yourself sued.

19:42Rachel Cruze:I was going to say, legally, how do you do that?

19:43Dave Ramsey:But the other thing I would do is when he sues me, then I would countersue him for fraud.

19:47Rachel Cruze:And say you lied. Verbally, this is what was said.

19:50Dave Ramsey:When you lie to do a business transaction, that's called fraud.

19:53Rachel Cruze:Yeah, yeah.

19:53Dave Ramsey:And this guy was fraudulent. He lied about how much money this business makes. I promise you he lied. Way seriously lied. And the dumb part was you believed him. So you're probably going to get sued. You're probably going to have a countersue. and you definitely got to pay the$100 ,000 that you borrowed from real people. Oh, geez.

20:14Rachel Cruze:Sorry, Michaela.

20:15Dave Ramsey:Yeah, this is awful. I'm so sorry. I'm aghast on your behalf.

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22:09Dave Ramsey:Okay, now that I can breathe again, let's give a little bit of recap to talk about how to value and how to buy, how to purchase a small business. A small business is a lot of work. I've run one most of my life, and Ramsey today is a$300 million business. It's not that small anymore, but it's at its heart a small business. And I coach about our Entree Leadership team and I coach about 10 ,000 small businesses. We'll be with 3 ,000 people next week at Disney at the Entree Leadership Summit event, teaching leadership and business acumen to small business people. So this is something that we do. It's not just a random guy who gets people out of debt that this poor lady, Michaela, called and had gotten herself into a mess.

23:04Dave Ramsey:So it's good for us to – part of what we want to get out of this is to help the individual caller that calls in, but we also want you guys to get a lesson and learn and inspiration from and so forth anytime we take a call on here. And so that's how we decide who we're going to talk to on the air on this show. So backing up then. Number one, small business is all-encompassing. It is the hardest. When you own your own business, it's the hardest boss you'll ever work for. Your boss will work you to death when you're your own boss. It's hard. It is not to be taken on by someone who got married 20 minutes ago.

23:50Dave Ramsey:Bad idea. Okay. It's a strain on you physically, mentally, emotionally, spiritually, and it's a strain on your family.

23:58Rachel Cruze:The stress of it all. Yeah.

23:59Dave Ramsey:When I started this business, I worked 16 hours a day, five, six, seven days a week. You talked to my wife, Sharon, when Rachel was a little bitty kid and this business was growing up, that she felt like a single mom a lot of times. And she, for all practical purposes, was. That's what a small business is. You don't do that on a weak marriage. You don't do that on a new marriage. And you don't do that when both spouses are not fully engaged. You don't do that when you live in separate cities. So rule number one, violated two rules right there, okay, before we get started. because it's hard, y 'all.

24:36Dave Ramsey:It's really, really, really hard.

24:38Rachel Cruze:It's a season of grind when you sign up for it.

24:40Dave Ramsey:When you buy a business or you start a business, it's hustle and grind. Hardcore. And that's okay, but know what you're signing up for, and it's not going to make everything better. It's going to make everything worse for a while. But the idea is we're going to make more money and have control of our destiny, and that makes things better over time. But that's not where it starts. Then the second thing is if you're going to buy a business, you investigate and expose every single number in the business, all the accounting, and particularly the tax returns. Because they may lie on their accounting and they may lie to you, but most of the time the tax returns are going to be some semblance of accurate.

25:26Dave Ramsey:And if they say to you and you're looking at a business, oh, don't pay attention to the tax returns. We actually make more money than that. What they're saying is, is we are lying to the federal government on our tax returns, committing fraud, but we're trustworthy. That's what they're saying to you. So run away when someone says something like that. OK, the tax returns are the number. I'd look at least two years, but probably five years. I want to see the trend line of the profits over the last five years. And what are the profits they actually paid taxes on? Now, if you take$100 ,000 and put it into a good mutual fund, you can make 10 % or 12 % pretty much in a year.

26:13Dave Ramsey:So if you were going to take$100 ,000 and buy a high-risk small business where I'm going to have to pour myself out and hustle and grind, you need to make a minimum of a 20 % rate of return on your business. Okay? And you need to make probably a 25 % rate of return. So here's how that translates in valuing a small business. You look at the net profit after everyone is paid, including the guy that works there that hasn't paid himself. If you weren't working there and you had to hire a manager, You take the manager's salary out and you have the net profit of the real business if you're an absentee investor to determine what kind of actual revenue this business is creating.

27:04Dave Ramsey:Because if he's just paying himself and that's all, you're not buying a business. You're just buying a job. You don't need to buy a job. Just go get a job. But don't buy a job. So if it pays$100 ,000 and that's all it pays and you can make$100 ,000 doing something else, then don't pay to buy a business that only pays you what you would have made putting up nothing to work for somebody else. So don't buy a job. Instead, after everybody is paid, if I'm living over here in Tennessee and I'm buying this and the thing will operate over there completely, what is the net profit then? And if you want a 25 % rate of return, you multiply that number times four, and that's the value of the business.

27:46Dave Ramsey:If you want a 20 % rate of return, then you multiply it by five, and that's the number. So if it made, after everyone was paid,$100 ,000, it's worth$400 ,000 or$500 ,000. If it made$10 ,000, it's worth$30 ,000 or$40 ,000, which means don't buy it. And it's worth$10 ,000.

28:10Rachel Cruze:That's right, what they should have paid for that business.

28:13Dave Ramsey:Instead of a half a million dollars. If you'd actually looked at this Goober's tax returns, you would have seen that after he got paid, the thing had no net profit, which is what they have discovered now that they're running it instead of just working there. The skill of being a technician inside of an organization is different than the skill of owning and operating a business. You can be a very smart graphic artist a very smart software engineer a very smart accountant You can be a very smart anything and not know how to run a business They're different skill sets And you have to consider that So if you're a heat and air guy and you've been working there 20 years and the heat and air guy wants to sell you the heat and air company You're not qualified to run it yet You've got some skills you got some metaphorically, tools you need to put in your belt to get ready to run that.

29:08Dave Ramsey:Because you can fix an air conditioner doesn't mean you can run a heat and air company. Because you can sell real estate doesn't mean you can run a real estate company. It means you can sell it. That's different. So you've got to consider those things when you're valuing out and deciding, is this an appropriate purchase for me? And then lastly, if you have to borrow money to start all of this, you've increased your risk 100 times. Don't do it. 80 % of the small businesses fail in the first five years, according to the Small Business Administration, which is really not a trustworthy organization, but it's the only number we've got.

29:45Dave Ramsey:Eight out of ten don't make it. And if you're in a restaurant business, it's 95 out of 100 don't make it. So just because you can cook doesn't mean anybody's going to buy your barbecue. It just means your neighbors liked it when you gave it away. That's all that means. You're not qualified yet to operate a barbecue joint and go$250 ,000 in an SBA loan. And now we've got Dave's barbecue. Not so famous Dave's, right?

30:10Rachel Cruze:I think there is a Dave's barbecue.

30:12Dave Ramsey:Yeah, that just occurred to me as I said that. But see what I'm saying? So that's the thing. You've got to dig into this. And you know why 80 % of those companies fail? Those little businesses fail? Cash flow problems. Cash flow problems are created by two things in small business. Not paying your taxes because you're taking all your money home because you didn't have enough money coming in to eat, and now you're starving to death, and so you don't pay your taxes, you don't pay your quarterlies, or worse than that, you don't turn in the withholding, and if you don't pay your 142s, they're going to come get you forever.

30:52Dave Ramsey:That's not bankruptable. You're going to get it. That's the withholding numbers, okay? on your employees. You have to turn that money in. You can't keep that money. Wow. And guess what the other thing causes cash flow problems is? The debt. When you went and borrowed money to start and run this business. And so one of my friends is sitting out here and he paid off a half million dollars on his business. And that means he's the exception of the rule. He made it out alive. Most people don't make it out alive when they do that. They don't make it. don't sign up for that trip. It's not worth taking.

31:52Rachel Cruze:Okay, guys, let me ask you something. What would it take for you to switch your bank? Because if you're still earning next to nothing on your savings, you need to check out Fairwinds Credit Union. And I know what you're thinking. It might sound like a hassle. Moving your direct deposit, updating bills, getting a new debit card feels like a lot. But here's what most people don't realize. Staying where you are could be costing you hundreds of dollars every year. Y 'all, the average savings account pays less than half a percent. So let's say, for example, you got$20 ,000 saved. You might earn around$70 a year.

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33:14Dave Ramsey:Buying or selling your home is a big deal, and right now things are crazy out there. Interest rates are down. House prices are starting to change again. Things are moving. If you're thinking about buying a home or selling a home in the market like this, you really need somebody that knows what they're doing in your corner, not somebody that got their license three weeks ago and you go to church with them. Sorry, Charlie, at the church, but unless you've been doing a bunch of real estate deals, we don't want people to list their house with you. We want people to list the largest asset they have with somebody that really has a proven track record.

33:48Dave Ramsey:So that's how you become Ramsey Trusted. You have to have an incredible track record of performance in the real estate market. To find a local Ramsey Trusted Real Estate Agent Pro for free, go to RamseySolutions.com slash agent or click the link in the description. Naya is with us in Boston. Hi, Naya. How are you? Or Naya. Naya.

34:09Rachel Cruze:Yes, it's Naya. It is Naya.

34:11Dave Ramsey:I got it right the first time. Okay. How can I help today?

34:15Rachel Cruze:Yes. So I am currently in baby step number two. I have$112 ,000 of that total, and I am just struggling with being in a long-distance relationship and essentially staying in tents while also still investing and prioritizing that as well. How far is the relationship? How far apart are you guys? Four hours. Okay. How long have y 'all been together? So it's a year and a half. How many times have you physically seen each other? Once or twice a month.

34:53Dave Ramsey:Oh, okay. Good. All right, good. Because I asked that question one time, and the lady said never, and I wanted to make sure what I was dealing with, so okay.

35:01Rachel Cruze:Well, that's what I'm struggling with, because I recently just picked up another part-time job. I do have a full-time job.

35:07Dave Ramsey:So what is your career, and what do you make?

35:10Rachel Cruze:So I'm a property manager, and I currently make$65 ,000 a year.

35:14Dave Ramsey:What about him?

35:17Rachel Cruze:That's a great question.

35:18Dave Ramsey:What does he make?

35:21Rachel Cruze:That's kind of a struggle in the relationship, but yeah. It's a struggle because he's not working or he won't tell you?

35:31Dave Ramsey:Both. He won't tell you because he's not working and he's ashamed of it.

35:37Rachel Cruze:Yeah. Has he not worked for a while? Yes. Okay.

35:43Dave Ramsey:So why?

35:44Rachel Cruze:Why is he not coming to see you then?

35:47Dave Ramsey:He ain't got nothing to do.

35:50Rachel Cruze:He does. There's a trade-off. I mean, it's just like that's the struggle. And ideally, it would be to live in the same state. No, no, no, no, no, no. Stop.

35:59Dave Ramsey:You did not answer the question. You completely deflected. This guy's got nothing to do. Why are you driving to him?

36:07Rachel Cruze:Because he says it's more comfortable for me to go there. Yeah, I bet it is.

36:11Dave Ramsey:He does a lot of things that are comfortable for him. It's more comfortable not to work, too.

36:16Rachel Cruze:Oh, no. Yeah. Is it bad? Do you see it's bad?

36:20Dave Ramsey:Do you not hear yourself?

36:22Rachel Cruze:Yeah. Oh, man. But you love him, you know?

36:26Dave Ramsey:Oh, well.

36:27Rachel Cruze:Shoot. Uh-oh. How old are you? I'm 25. Okay. You've been together a year and a half, and you're just way more mature than he is, and he's going to be a husband. Everything about him right now will be magnified. in marriage.

36:44Dave Ramsey:So yeah, all the good and all the bad, mostly the bad.

36:49Rachel Cruze:And not that people can't change and grow, but for the most part, he doesn't sound very proactive right now to come to you or to get a job. Oh no. Okay.

36:59Dave Ramsey:So not talking about the debt snowball, which is actually how you framed the question. Then we got all up in your personal business. But personal business is there because it's personal finance. So you're going to be my 25-year-old little niece for a minute, and I'm going to be ugly Uncle Dave, okay? And I'm going to love you like you're in my family, all right? So if you had a daughter, you need to think about what she would tell you or what you would tell her about this guy, the same stuff Rachel's telling you. Now, having said that, if you want to pursue this guy, that's fine. but he needs to show some initiative in two areas to be worthy of you, my princess.

37:43Dave Ramsey:In order for him to be worthy of you, he needs to be a working man, period. Okay. And he needs to pursue you, not you have to pursue him. He needs to get his little butt in the car and drive over and see my princess, the niece, because you're worth that. Yeah. You're not, he's not worth you chasing him. You're worth him chasing you. And if he can't do that, he's disqualifying himself. Does that sound like good old uncle advice?

38:22Rachel Cruze:It does. Yeah. It's just, I am like annoyingly obsessed with you guys. It's all I listen to. And I'm just so sick and tired of being sick and tired.

38:30Dave Ramsey:Well, you're going to get out of debt because you're not going to be driving over there as much. because he's going to be driving to you and you solved your problem. So now you can keep working your debt snowball. But as long as you're distracted with this character and you're the only one putting out all the effort and the money while he sits on his comfort self. So if someone's wanting to date one of my daughters, comfort does not need to be a word that comes out of his mouth. discomfort while he serves and takes care of the princess that I raised sitting next to me, the good kind of princess, not a bad princess.

39:09Dave Ramsey:And so when Winston, when Winston Cruz came into my house to talk to me about dating my daughter, he, he, there were requirements and being a productive young man is one of them.

39:23Rachel Cruze:Well, and can I be super, probably a little prideful? I I never had to.

39:30Dave Ramsey:That makes it okay for him to be there.

39:33Rachel Cruze:In college. You know what I mean? But I guarantee you I'm gauging that. Yes. Yeah, yeah, yeah.

39:37Dave Ramsey:And if you don't qualify, you don't get invited back. And that's the mean old daddy. Dad, the boys in the youth group are scared of you. Good. Keeps away wusses and jerks. Two things I don't want dating my daughter, right? Yeah. So, and productive is a good thing for a young man, a young woman to be.

39:57Rachel Cruze:Yes. For anyone's soul in society, but again, not to be like overgeneralization with gender, but there is something about a guy of going and doing something productive with his life.

40:07Dave Ramsey:Highly unattractive to not do that. So it's - To the father of the daughter.

40:12Rachel Cruze:Well, that, and then on top of that, I mean, seriously, but it'd be one thing if he's like struggling in the job market, you know what I mean? Like we hear lots of stories and situations.

40:21Dave Ramsey:Yeah.

40:21Rachel Cruze:But the straw of like, he doesn't want to drive to you because it's uncomfortable. I've been in a lot of job markets.

40:28Dave Ramsey:I've never struggled. Yeah. Run down Home Depot, buy you a leaf blower. Rich people are afraid of leaves. You can always find something to do. There's something to do. There's always something you can do for money. I mean, that's just that's I know I'm just trying to give a little grace. Yeah, he's trying to find himself. Yeah, that's good. My princess niece, what I want you to do is I want you to stay in your town and invite him to come see you. And if he does, he might be worthy of pursuing. If he refuses to come see you on his dime and he refuses to become gainfully employed, please move on.

41:04Dave Ramsey:However, while we're doing all of that, of course, we've solved the other problem. You now can work and work on your debt snowball and you're a productive person. You're a property manager, a professional young woman that makes$60 ,000 a year and more. And you're awesome.

41:18Rachel Cruze:Yeah.

41:19Dave Ramsey:Act like it.

41:19Rachel Cruze:Yeah. And if you can work extra, you know,$2 ,000,$3 ,000 a month on top of anything you can squeeze out. And anything that you can sell if there's a car.

41:29Dave Ramsey:You got a$50 ,000 car in that 112? Sell the 12. Start knocking.

41:33Rachel Cruze:Yeah.

41:33Dave Ramsey:Oh, that's what we were driving four hours away. Oh, good. Okay. Got rid of that too. Can't come see you. Got rid of the car. There we go. Oh, there's an excuse.

41:41Rachel Cruze:I'm like, sorry, I sold my car. Can't do it. And my$7 ,000 car probably isn't four-hour worthy of a road trip, so I won't be able to do that.

41:49Dave Ramsey:I'm thinking that Hoopty's not going to make the trip. So, yeah, you've got to be careful when you call this show, boys and girls, because we love you, and we're going to treat you just like you were a member of our family or some of our best friends' kids or something like that, and we're going to put our arm around you and tell you the truth, and sometimes it's a little disconcerting to hear all of that. But we love you, Naya, and we're glad you called in. And I think you've got an incredible future, but I want you to put more value on yourself. This is The Ramsey Show.

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44:12Dave Ramsey:Welcome back to the Ramsey Show in the Fairwinds Credit Union Studio. I'm Dave Ramsey, your host. Thanks for joining us, America. Rochelle is with us in Columbus, Ohio. Hi, Rochelle. How are you?

44:26Rachel Cruze:I'm doing okay, Dave. How are you?

44:28Dave Ramsey:Better than I deserve. What's up?

44:32Rachel Cruze:um i'm trying to get some advice on whether we should sell our house in order to pay off our debt my husband wants to sell the house and move back to his hometown to clear all our debts and start over and i'm just concerned that that's um not not the right move and i'm also just emotionally overwhelmed so i figured i'd call for some advice that's nice thank you do you feel Like the right, you're concerned about moving back to the hometown more or selling the house or both?

45:09Rachel Cruze:I'm so sorry. I was just putting in my car. You okay? Yes. My husband pushed a button on my car that made it beep.

45:22Dave Ramsey:That's okay. You're fine. You're fine.

45:23Rachel Cruze:No, you're good. No worries. I'm walking down the neighborhood now. So my concerns, I'm just a little emotionally overwhelmed because I do like our house and I like our neighborhood. And you don't want to move to his town. Well, there's pros and cons to both. I'm just in a fragile state emotionally, and I also feel like if we just move without changing the behaviors that got us here in the first place, we're just going to have the same problems in a new location.

45:55Dave Ramsey:100%. That's true. But if you change your behaviors with a fresh start, it could be a good move. So what does he do for a living?

46:07Rachel Cruze:So he is a security contractor. He's a professional bodyguard for a celebrity country music star right now. And he's salary$7 ,100 a month, whether he's on tour or whether he's at home.

46:19Dave Ramsey:He will keep doing that regardless of where you live, whether you live in his old town or the current town.

46:25Rachel Cruze:Yes. because he travels a lot from anywhere. Yeah. Okay. But on his off time that he is home, he was an HVAC person with a union job which provided us benefits and an additional 4K per month. He got laid off because of his unpredictable bodyguard job. So now we're only living on the bodyguard salary and he's doing extra side gigs and picking up other security contracting and just kind of making it work. but we're just paycheck to paycheck.

46:56Dave Ramsey:So how much debt do you guys have, not counting your home?

47:01Rachel Cruze:So we have$10 ,000 on his truck and$16 ,000 on our van and about$14 ,000 in credit cards and about$3 ,000 in medical bills. And we owe$8 ,000 to the IRS because we didn't take out taxes properly last year for self-employment with security contracting, and so we've got to get a payment plan set up with the IRS for that.

47:30Dave Ramsey:Okay. Have you been doing your quarterly estimates this year?

47:35Rachel Cruze:No, we have not because his security work this year is he gets the taxes taken out from the salary job. Oh, they changed it.

47:43Dave Ramsey:They made him a W-2. Okay.

47:45Rachel Cruze:Yeah, he got this salary job. So now when he does the job.

47:49Dave Ramsey:But any of the side hustle stuff he does, you've got to set money aside and do your quarterly.

47:52Rachel Cruze:Yes, exactly. Yeah. Okay.

47:55Dave Ramsey:All right. How long have you guys been married?

47:59Rachel Cruze:I think like 19 years.

48:01Dave Ramsey:And how old are your kids?

48:04Rachel Cruze:We have 15-year-old twins, and I have a 5-year-old, a 4-year-old, and a 22-month-old baby, and a 19-year-old. Yeah, that's overwhelming in general. That's a lot.

48:18Dave Ramsey:That would put me in a fragile state. Yeah, that's a lot. That's a lot. Yeah. Okay, so I'm going to tell you this. Unless both of you hate the house, I would not sell the house. I would sell his truck. Okay. He never drives it.

48:38Rachel Cruze:Well, he just recently bought it so that he had something to get himself down to Kentucky. Because his country music star lives in Kentucky. He has to drive down there regularly, leaving me at home with kids.

48:49Dave Ramsey:Oh, I see. Okay.

48:50Rachel Cruze:So he bought it. Yeah, so he does need a vehicle. Okay, and he can use the truck for side hustles as well.

48:56Dave Ramsey:Okay.

48:56Rachel Cruze:Yeah.

48:57Dave Ramsey:All right, then that won't work. But basically you've got, what you're telling me is the debt you've got, you can clean up if you guys lean into this and live on beans and rice, rice and beans for a period of time.

49:12Rachel Cruze:I'm not sure if we can. I don't know.

49:15Dave Ramsey:I don't know why you can't. Why can't you?

49:19Rachel Cruze:Because he said he's working his life away, and he's so miserable, and he's so tired. He's so fired up. That's not changing when you move.

49:31Rachel Cruze:Well, he said that it'll be a lower cost of living, and our debts would be wiped out. No, yeah, but that doesn't change.

49:37Dave Ramsey:He's still on the road all the time.

49:42Dave Ramsey:I'm working so hard. He's talking about his side hustles are killing him?

49:48Rachel Cruze:Um, yeah.

49:50Dave Ramsey:Oh, wow.

49:51Rachel Cruze:He's here with me now. I think he's right there, too.

49:55Dave Ramsey:I don't care. Dude, wow.

49:57Rachel Cruze:And whatever money he does make could go towards something instead of just scraping by.

50:02Dave Ramsey:Yeah, well, something could be like owning a home that your wife wants to live in and the neighborhood she wants to live in, because she's got a freaking house full of kids while you're off on the road with a country music star. Yeah, I think that's part of the gig you signed up for him, son. So, yeah.

50:19Rachel Cruze:Well, I'm not saying I don't ever want to move. I'm just saying I would rather us try to dig our heels in and get our behaviors fixed first before we make a rash decision.

50:29Dave Ramsey:No, you did say that. You're changing your story. You said, I love this house. I love my neighborhood. I don't want to move. That's what you said.

50:37Rachel Cruze:I do, but I mean, I know I could be happy anywhere, you know.

50:41Dave Ramsey:That's different. You did say, I don't want to move. I like my house.

50:46Rachel Cruze:Maybe not right this second, yeah.

50:48Dave Ramsey:And it's not because you want to change your habits. You do need to change your habits. Both of you need to do that for sure, and you need to get on a written budget. So what I would tell you guys to do is get on an every-dollar budget. Don't go out to eat. Don't go on vacation. Pour every dollar on these debts. Cut up every credit card. You take any side income you can do to create from home. He takes any side gigs he can take in addition to his bodyguard gig, and you guys tear into this debt full throttle for six months, 12 months. Next March, revisit this. And if everybody's still miserable and we're all dying and the only way to fix this is sell the house, well, then sell the house.

51:28Dave Ramsey:But I don't think that's the problem.

51:31Rachel Cruze:Because what's wild is if you got two extra thousand dollars a month just to put at this.

51:34Dave Ramsey:You'll be done.

51:35Rachel Cruze:In two years. Do you know what I mean? Which is long, but also not really.

51:38Dave Ramsey:Not only 2 ,000 extra, you already make 7 ,700. plus side gigs.

51:44Rachel Cruze:Plus the side gig, yeah.

51:45Dave Ramsey:So, I mean, you get some extra, he gets some extra, you guys cut, but you're spending, you guys have got to quit spending money like you're in Congress, too. How much is your mortgage payment?

51:56Rachel Cruze:It's$2 ,400.

51:58Dave Ramsey:Okay, that's not killing you. So, you guys, listen, do whatever you want to do, but that's what I would do.

52:06Rachel Cruze:Yeah, and I would look at the van and the truck, and we've gotten more calls than not that actually their vehicles, they actually have, they're upside down, or they're not upside down on it. And so if you guys can do anything to even move those, because to me, I'm like, that's$26 ,000 of this. So if there's any wiggle room there.

52:24Dave Ramsey:You're not dying from working extra to take care of your family and clean up the mess you made for one or two years. It's not going to kill you.

53:01Dave Ramsey:Hey, George Camel here. Let me pull back the curtain on something you may not know.

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54:09Dave Ramsey:There's a thing in psychology called cognitive dissonance, which means that you are stressed and there's a frustration level building up because things are inconsistent in your emotions and in your brain. Frustration, anger, all these types of high-energy emotions start to appear. Fear. Fear. Fear. And when you have that around money and you see a quick way out, like selling your house to pay off all your debt, it tells you I can make all of this psychological pain, cognitive dissonance, go away if I just sold the house. So we're always looking for human nature is to look for the quickest way away from the pain.

55:04It is not always the best methodology for your long-term health.

55:10Dave Ramsey:The quickest way away from the pain after surgery is not doing physical therapy, because physical therapy is painful. But if you don't do physical therapy after a knee or an elbow or a shoulder, it won't work it it'll freeze up you have a problem so you have to lean into the pain to get the best long time term result and that's usually true with money so what's painful in the you pick the uh short-term pain and the long-term gain in any money equation it's almost always the right one versus the short-term gain and the long-term pain. This is always a trade-off. So if you sell your most expensive asset, your home, it's very mathematically expensive to move.

56:02Dave Ramsey:It's emotionally expensive to move. It's relationally expensive to move. It's the biggest disruption you can cause to happen automatically in your life short of some kind of a tragedy. And so it's the last thing we tell you to do. Now, if you've got a house payment that's 60 % of your take-home pay, we're going to tell you to sell it, regardless of the pain, because it's not sustainable. But just looking for a quick way out of your debt and cashing in your retirement and having a huge penalty and tax bill is a short-term release for a long-term stupid move. Selling your home often is a short-term release, becomes long-term stupid.

56:46Dave Ramsey:Because now you don't own a piece of real estate anymore. Real estate starts going up and you box yourself out of the market. Because you're renting in your old hometown in that guy's case. So, when we say suck it up, buttercup, play through, it's for your good. Because it's 10 years from today, it's going to be the best decision. To not go through a home move now again if you have to it's different but but if you want to right if

57:17Rachel Cruze:they were talking about it don't like the house yes yes i hate this area i don't want to live in

57:21Dave Ramsey:this state anymore yeah that's okay yeah that's a good point but but don't do it as the quick fix as the basically the sole motivation because i'm tired and i don't want to work extra no work extra be tired. It's worth it. 10 years from today, you'll be glad you did. The 10 year from now version of you will like the current version of you better. And you will pay a price to win.

57:47Rachel Cruze:Yeah. And I think what he said, or what she said, he said, you know, to a degree is very relatable that he's working his butt off and it's just going to payments. Like, you know, it's different if you work hard and you make all this extra money, you get to do fun stuff with it. But when you're in that season of sacrifice, allowing that to be a driver too, of like, I am pissed. That's why even like selling the cars, it's like, okay, when you do the math, you know, okay, what if I got a$5 ,000 car and 5 ,000, how much extra was I having to work for that$5 ,000 that was sitting in a truck equity that could be to this, right?

58:16Rachel Cruze:Like you got to be thinking about it. And that starts to like really mess with you. And you actually see the hours I'm working, what, you know, if I could sell an asset to save on a day of working, I'll do that all day. Like we're just moving stuff.

58:29Dave Ramsey:Could she drive a$4 ,000 minivan instead of a$16 ,000 minivan? And because she's got more kids than, gee, man, there are kids everywhere. And, you know, that kind of thing. So what we want for you is to hurt in the short term, not the long term, so that you win in the long term. If you're going to choose pain, choose pain today that gives you the long-term result. The Bible says no discipline seems pleasant at the time, but it yields a harvest of righteousness. And so the way I'm going to say that is, wah, or suck it up, buttercup. It's the same thing. Live like no one else so later you can live and give like no one else.

59:10Rachel Cruze:Yeah, the short term, right, if they sold the house, and that's the gain of short term. But long term, you think about it, the dynamic of even moving to his hometown that she wasn't crazy about could be long-term pain in a bitterness in her of like, oh, my gosh, we got stuck in this small town that I didn't want to be at the first place. We made that move four years ago. You're doing it all out of desperation, not out of clearheadedness and desire for both. And that's a red flag for me.

59:37Dave Ramsey:What feels good in the moment is seldom the right financial decision. It feels good to impulse a brand new car and put nothing down and lease it and drive it off the lot. Long term, it's one of the dumbest things you can do. It feels good in the moment to buy something you can't afford, to eat something you don't need to eat. It feels good in the moment, but the long-term consequences to your health and your financial wealth are real. And so that's the tradeoff we human beings make. The ability to delay pleasure for a greater good is the primary sign, psychologists tell us, of emotional and spiritual maturity.

1:00:19Dave Ramsey:Can I look at a great future and pay a painful price to get to the great future? That's maturity. learning to delay pleasure i was looking at a watching a uh a piece of research the other day on um one of the podcasts that i follow i can't think which one it was one of the psychologists that's out there and they were talking about this study they did of uh seven-year-old kids and they put them in a room and they put three marshmallows in the middle of the plate and they said do not eat the marshmallow and they walked out of the room with you know two-sided mirrors and cameras and everything and watch them sit there.

1:00:59Dave Ramsey:100 % of the eight-year-olds ate the marshmallows. However, some of them went, you know, 10 seconds. Some of them went 10 minutes before they ate it. The ones that went 10 minutes, they studied them 15 and 20 years later, and they were inordinately more successful because they delayed. They had the, even at Seven or eight years old, they had the discipline to avoid something that is harmful.

1:01:32Rachel Cruze:Is that nature or nurture? Do they learn that in a household or do you think that's part of your personality?

1:01:36Dave Ramsey:I have no idea. I do know this. Regardless of how you got there, once you're there, it's a choice. Whether DNA got you there or your mom and daddy got you there, once you're sitting in front of the marshmallow, it's still your choice.

1:01:49Rachel Cruze:You still have the ability. It's so true.

1:01:51Dave Ramsey:You still have a choice. I mean, you know, so it's, you know, we do know now, for instance, that some people have a genetic predisposition to being alcoholics more than others. Right. But once you know that, then you still got to take a drink or not take a drink. Right. Right. You got to decide, am I going to do this or not? And so, you know, who falls off the wagon, who doesn't fall off the wagon? All these things are, this is all tied to this emotional maturity thing of delaying pleasure for a greater good. And it really is maturity. Sometimes we see it in a young person. We have a 19-year-old call in here with the numbers are just astronomically amazingly positive, right?

1:02:31Dave Ramsey:We're like, how did you do that at 19? And we're all aghast at how wonderful this 19-year-old is. And we get that call on this show fairly often because we get those kinds of 19-year-olds around here. But the reason we're all kind of so impressed is that he or she matured to that degree at that young age. And it's not a chronological maturity. It's an emotional and a spiritual maturity. And so I think the way that I got propelled forward in that category was when I was the opposite and was impulsive as crap. Did everything. Get rich quick. Get rich quick. Get rich quick. I went broke as a result, lost everything, including my dignity.

1:03:12Dave Ramsey:And I'm humiliated, not just humble. And sitting there with driving a hundred dollar car. You were born that year and I've got babies I can't feed. And so I didn't have a choice. I snapped and went to the other side of the equation. And so I don't want that for you guys as your method of learning. I'd rather just teach you.

1:03:40Thank you.

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1:05:47Dave Ramsey:Our question of the day is sponsored by Why Refi? when you fall behind on paying back your private student loans. It can feel like your life is being held hostage. But Y-Refi helps borrowers explore with a fresh start with low fixed-rate refinancing and a payment plan designed around their ability to pay. Visit YRefi.com slash Ramsey. That's Y-R-E-F-Y dot com slash Ramsey. Might not be in all states.

1:06:15Rachel Cruze:All right, today's question comes from Matthew in Oklahoma. Dave, let's address to you. Ready?

1:06:21Dave Ramsey:Okay.

1:06:21Rachel Cruze:Dave, back in the early days of establishing the seven baby steps, did you ever have to use your emergency fund? If so, what type of emergency happened that you felt warranted using the savings account for? Huh.

1:06:39Dave Ramsey:Well, when I was climbing out of this, there weren't any baby steps because I hadn't started teaching Financial Peace University yet. So there was no starter emergency fund of$1 ,000 and later a fully funded emergency fund of three to six months of expenses. I just had the goal of the three to six months of expenses. So I did use that emergency fund, the big one. The only time that is specific, I think it's the only time. but if not it's almost the only time was uh that um did i cash i'm trying i suddenly thinking i might have cash flowed it i might have cash flowed it but i think out of the budget but i think almost 40 years ago i think i used the emergency fund no it's not that long it's um 30 plus years ago okay So we had just bought the house on Victory Trail.

1:07:39Rachel Cruze:Oh, okay. And I was eight.

1:07:45Dave Ramsey:Yeah. Yeah. You were eight years old. So 30 years. So 30 years ago. So that heat and air went out and it was$7 ,000 at that time, which today would be$17 ,000, right? But yeah, the heat and air went out and I called a guy and he fixed the heat and air and I wrote a check. And it was, the reason I remember it, it was the first time we had a drama, a catastrophe happen that we had the money. And it was just like an, that's when I came up with the phrase that when you have an emergency fund and you have an emergency, it's an inconvenience rather than a crisis. You've heard us say that a hundred times.

1:08:22Dave Ramsey:But that was every time before that, that the heat and air blinked, it was a crisis because I didn't have the stinking money. And the only reason I'm thinking I might have cash floated is I paid cash for the house from a book deal that we had done on financial peace.

1:08:43Dave Ramsey:But it's possible that I was low enough on cash that I used the emergency fund for that. But I have a distinct memory around it, so I must have. Other times I know I cash flowed everything else after that, whatever broke or blew up or whatever. because we've always kept a larger amount of cash than most people because it gives my wife, after what we've been through with bankruptcy and everything, it gives her an extra level of security. We always laughed and said our emergency fund had an emergency fund. And so, and that's been largely true in the last 35 years. So, but in more recent years, I don't think anything about it.

1:09:24Dave Ramsey:It's all cash flow. I wouldn't, it'd be very unusual for me to have an emergency today that actually tapped into a store of cash to fix it, that would be very strange. We did not have to do that during COVID even in our business because the business never became unprofitable. So we never had to touch the, even though we lost huge sums of revenue, we never went into the red. And so we never had to touch our retained earnings. So it didn't happen then. And that would have been another time that it could have happened. But yeah, that's an interesting question. It makes me go back and think. I remember more clearly all the times I didn't have emergency fund, and there was drama and gnashing of teeth and crisis and everything else.

1:10:07Dave Ramsey:Wyatt is in Pennsylvania. Hey, Wyatt, how are you? I'm good. How are you all doing? Better than I deserve. What's up?

1:10:16Rachel Cruze:Well, I had a question here. I'm not exactly at a, I guess, financial trouble crossroads, more at a what-do-I-do-now crossroads. I have a$65 ,000 in total debt over my head, and I'm trying to figure out if it might be a good idea to sell my truck for around$41 ,000 and take like$20 ,000,$25 ,000 in the hole to get myself out of debt faster.

1:10:40Dave Ramsey:So you owe$65 ,000 on the truck?

1:10:43Rachel Cruze:I owe$61 ,000,$62 ,000 roughly, and then I owe about$4 ,000 on credit cards.

1:10:49Dave Ramsey:And what's your household income?

1:10:52Rachel Cruze:My income is$78 ,000 a year.

1:10:55Dave Ramsey:And are you married? No. Okay. Yes, I would sell the truck even if it was paid for. All right. Because here's a good rule of thumb. Things that have motors and wheels go down in value. You cannot build wealth while you own too many things that have motors and wheels. Too many things is defined in our world as more than half of your annual income. Your truck is more than half your annual income in value.

1:11:27Dave Ramsey:And so it's eating your lunch. Every day it goes down in value, and you're trying to pedal uphill, and it's killing you. So are you sure it's only worth$41 or$45?

1:11:40Rachel Cruze:I got bored one night while I was at work, and I checked the Kelly Blue Book value, which in my experience is a little bit heavy-handed with its estimates.

1:11:49Dave Ramsey:but it estimated at around$41 ,000 because I got into— Private sale or trade-in?

1:11:55Rachel Cruze:I believe I put down trade-in. I don't remember exactly. I do remember it will trade-in. I go back and do a little research.

1:12:01Dave Ramsey:Because what kind of truck is it?

1:12:03Rachel Cruze:It's a 2025-2500 HD. It did have an accident like about a year after I bought it. Well, less than a year after I bought it. And it has like some minor paint damage. But other than that, it's mechanically sound. Yeah.

1:12:17Dave Ramsey:It's only a year old. This is a hardcore work truck, and so there's probably a pretty good market for it. Right. You know, versus if you just had some kind of weird truck or something, it might be harder to sell. So you might be able to sell it and get out of it.

1:12:32Rachel Cruze:Did you roll negative equity into it? No. I don't believe so. They quoted$76 ,000. I put$10 ,000 down as the down payment.

1:12:44Dave Ramsey:Yeah. So you bought a truck at the time that you paid for it, what your annual income was about. And so ever since that day, this truck's been hammering you. And so that's what brings you to this question. So yeah, I risk my case. I think I would sell it if I woke up in your shoes. And I like a nice truck. I've got trucks. I love trucks.

1:13:08Rachel Cruze:Yes. You just have to take a small loan from a credit union or something for the difference and enough to pass low.

1:13:14Dave Ramsey:Get you a$5 ,000 truck and then become a rich guy. Because most of the guys that drive trucks like this aren't the rich guys. Most of the guys that drive trucks that are$5 ,000 or$10 ,000 are the rich guys, especially on a construction site. Yeah. All right, Bridget is in Chicago. Hi, Bridget. What's up?

1:13:33Rachel Cruze:Hello there. Thank you so much for taking my call.

1:13:36Dave Ramsey:Sure. How can we help?

1:13:38Rachel Cruze:What I was calling for was that I was a teacher. Now I'm an administrator, and I'm fully funding my pension, and my contribution is 9%.

1:13:48Dave Ramsey:Mandatory.

1:13:49Rachel Cruze:And so my question is—

1:13:52Dave Ramsey:That is a mandatory contribution?

1:13:54Rachel Cruze:It is, yes.

1:13:55Dave Ramsey:Okay, all right.

1:13:57Rachel Cruze:And so my question is, should that 9 % be included as a part of the 15 % that should be towards retirement?

1:14:06Dave Ramsey:Excellent question. Okay. There's two problems with your pension. one is you don't have any control over what it's invested in okay two so the outcome of what you end up with at the end is totally up to someone else okay the second problem is because pensions are heavily regulated what they invest in is more conservative and so your average rate of return that you're going to see is about seven percent So because of those two things, I would take your 9%, I would count about half of it. So if we want to just use round numbers, let's count 5 % of it towards your 15. I'd still put in another 10 in money that you control.

1:14:54Dave Ramsey:But that's giving it some credit, but we're not giving it 100 % credit, so to speak. It'll still be there. I'm not predicting the end of it. But I think you'll do a lot better with a 10 % contribution than you do with this 9 % contribution.

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1:16:42Dave Ramsey:Matthew is in Boston. Hi, Matthew. How are you? Hi, David. How are you? Better than I deserve. How can we help?

1:16:50Rachel Cruze:I'm calling because I'm kind of in a spot where we're not really sure what to do anymore. My wife and I, she lost her job almost two years now. And we're kind of, we've been just kind of racking in credit cards every month to kind of pay for bills and pay for everything going on.

1:17:11Dave Ramsey:Why hasn't she gotten a job in two years?

1:17:14Rachel Cruze:So she got laid off during her maternity leave. She did get like a long severance for that. And just now she's about to have a second baby, so she's been in there during this time. And then she has been working kind of like an administrative role with her cousin, not getting nearly as much about like, you know, she went from probably$5 ,000 a month to about$2 ,000 a month now. And what do you make? I make about$4 ,500 a month.

1:17:47Dave Ramsey:And what do you do?

1:17:49Rachel Cruze:I'm counting. Okay.

1:17:52Dave Ramsey:And so if she got laid off during maternity, she had the baby, and you guys knew you weren't making it, why did you keep doing exactly the same thing for two years?

1:18:06Rachel Cruze:Well, I think we have just kind of our principles of, you know, we didn't want to pay for daycare, especially since it's so expensive up here. And, you know, being at home, I work from home, and then she is also at home. So she's kind of just watching our daughter. And then also, you know. You're still not answering my question.

1:18:30Dave Ramsey:That doesn't, none of that changes the fact that you were going in the hole every month and you kept doing that for two years. Why? Why didn't you change something?

1:18:42Rachel Cruze:Yeah, I mean, I think that's a very good question. I've, you know, I think we were just kind of a little naive. and now we're at the point where, I mean, we're going to look into it regardless because we're trying to get out of Massachusetts. So you have the second child on the way, right? Yes.

1:19:03Dave Ramsey:Okay. All right. And you make$4 ,500, and how much debt do you guys have, not counting your home?

1:19:12Rachel Cruze:So not counting the home, it's about$30K, and that's pretty well. Should I include student loans as well?

1:19:19Dave Ramsey:Yeah.

1:19:21Rachel Cruze:So with student loans, probably about$50K.

1:19:25Dave Ramsey:So about$20K in student loans. $20K in student loans. So what's the$30K?

1:19:32Rachel Cruze:It's pretty much all credit cards now.

1:19:34Dave Ramsey:Okay. No card debt? $30K in credit cards.

1:19:37Rachel Cruze:We do have a car as well. There's about$20 ,000 on the car left to pay.

1:19:48Dave Ramsey:And what is it? What kind of car? What the car is? Yeah, what kind of car?

1:19:53Rachel Cruze:Just a Tesla Model Y.

1:19:56Dave Ramsey:Okay. All right. That car will bring more than$20 ,000, won't it?

1:20:04Rachel Cruze:Possibly. It'll probably just pay off the loan. Good. It's more likely. Good.

1:20:10Dave Ramsey:Sell it this week. You can't afford the payment.

1:20:17Rachel Cruze:It is our only car, though. That's the other thing. That's okay.

1:20:20Dave Ramsey:I don't care. Sell it this week and get you a$5 ,000 car. You can't afford to drive a Tesla. You're broke and going in debt every month. These are the kinds of ways you need to start talking to yourself. I can't afford to do this. We can't afford to go out to eat, which you've been continuing to do. You're broke. You can't afford to go on vacation. We can't afford to buy three airline tickets and take the babies to see her mother. We're broke. But you haven't been telling yourself that. So you got$30 ,000 in credit card debt paying Tesla payments. That's what I'm talking about.

1:21:08Rachel Cruze:Does that feel accurate, Matthew? Do you get that? Yeah. Yeah. I mean, I've been making cuts where I can. We've definitely made the cuts, but just clearly. How much in the whole per month are you guys that you're having to use credit cards for? So pretty much we're probably putting, I, you know, started this dumb thing when we did have both of us working where I said, let's rack up points. So let's put everything on the credit cards and pay everything at the end of the month, which we were doing fine with until she lost her job. and then we're like, well, let's just keep putting it on the credit card so that we can continue to pay everything that we need to pay.

1:21:50Rachel Cruze:So how much?

1:21:51Dave Ramsey:If we were to do a really tight budget, which you have not done and now you've got to do starting today, how much do you really have to have to stay afloat beyond the$6 ,500? $4 ,500 from you,$2 ,000 from her.

1:22:06Rachel Cruze:So is that just to survive and pay credit cards or not?

1:22:10Dave Ramsey:Just to survive and pay credit cards. No eating out, no new shoes, no new purses, no new hobbies, nothing. What does it take to feed your freaking family only?

1:22:27Rachel Cruze:I put everything down. It's probably going to be just like on my own simple budget. I have about negative$300 left to put everything at the end of the month. And that's not how y 'all are living right now, right? Y 'all are a little bit more widespread. So$300.

1:22:52Dave Ramsey:So when I get rid of the Tesla payment, now you're balanced.

1:22:57Rachel Cruze:How much is the Tesla payment a month? Right now it's$700 per month. Perfect. Good.

1:23:04Dave Ramsey:Now we've got$400 in margin. You're driving a$5 ,000 car, not a$20 ,000 car. Do you have any money anywhere saved? We do.

1:23:15Rachel Cruze:I do have just some money in like Robin Hood and simple investments and stuff like that. How much? About like$5 ,000 in there.

1:23:26Dave Ramsey:Perfect. Go buy a car with that and sell the Tesla. And now you're$400 upside,$400 right side. and cut up the credit cards. Say it together.

1:23:38Rachel Cruze:Do you have one with you right now, Matthew?

1:23:40Dave Ramsey:A card?

1:23:42Rachel Cruze:A credit card, yeah.

1:23:43Dave Ramsey:Okay, take it out. Get it out right now.

1:23:45Rachel Cruze:Just cut one. Just do it.

1:23:47Dave Ramsey:I want to hear it in the phone.

1:23:51Rachel Cruze:Will he do it? He's going to be like, oh, I left it in my other wallet. Do it, Matthew. You got it. This is the start of change, Matthew. This is the start of change. You got to do some extreme stuff. you guys have to stop you got to stop the whole thing by the way we're completely aligned with

1:24:07Dave Ramsey:your wife being at home with the babies that's great but we're gonna put your butt to work

1:24:13Rachel Cruze:yeah i mean i've been trying to do uh to make more money i started just like a woodworking

1:24:20Dave Ramsey:side business well i think you make more money doing bookkeeping on the side you got one you got a card yep let's hear it

1:24:28Rachel Cruze:Yep.

1:24:33Rachel Cruze:That was it.

1:24:34Dave Ramsey:You did it? What kind of card was it?

1:24:36Rachel Cruze:Yeah. It was just a discover card. Yes.

1:24:40Dave Ramsey:Oh, you just discovered freedom, Matthew.

1:24:43Rachel Cruze:Matthew, we're so proud of you. Way to do it. Seriously, you've got to start making some action steps. And that's one. That's a proclamation of like, we're done. Next thing is cut the cord on the Tesla. It's hard to go into credit card debt when there are no credit cards. You know what I mean? Like when you don't have an option.

1:25:01Dave Ramsey:Yeah.

1:25:02Rachel Cruze:Literally, when you physically don't have an option, you have to start getting creative. And you're like, okay, what do we have to sell?

1:25:06Dave Ramsey:And then you've got to start whittling away at these cards. Yes. Cut them all up, whittling away at them. They'll start to go away. You don't have the$700 ridiculous car payment. You've got to make adjustments to be able to live the life that you are choosing to live with your wife being with the babies. And again, we're aligned to help you do that. but we're not going to act like it didn't cost something. It does cost something. She has a$3 ,000 less income now than she had.

1:25:33Rachel Cruze:And let me go back to what you said, Matthew. You said now she's working for my sister-in-law or a family member making less, you know, because it sounds like a favor kind of thing. If she can find a side hustle with the hours she's doing and get paid twice as much, because it's not some weird connection of family and you're like being nice all day.

1:25:50Dave Ramsey:All day. All day. Let the family be nice somewhere else.

1:25:53Rachel Cruze:Yes, yes. You guys are in a mode. You guys, you have to, man, get on this. But yeah, it's the 50 grand, those student loans and credit cards. You start chipping away. And in two years, Matthew, you guys could be out. If you guys can get an extra two grand a month by working extra, selling stuff, it's amazing the progress you can make.

1:26:12Dave Ramsey:So we got you to cut one card. If we really get you to sell the Tesla, you can really do this.

1:26:44Dave Ramsey:Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. I'm Dave Ramsey, your host. Thank you for joining us, America. Rachel Cruz, Ramsey Personality, is my co-host today and my daughter. Julie is with us in Boca Raton. Hi, Julie. How are you?

1:27:03Rachel Cruze:Hi, Dave. I'm good. How are you?

1:27:04Dave Ramsey:Better than I deserve. What's up?

1:27:08Rachel Cruze:Kind of a pickle situation. I'm wondering if I should sell my house to pay off a total debt of$575 ,000 and$162 ,000.

1:27:23Dave Ramsey:$575 ,000 on what?

1:27:26Rachel Cruze:$575 ,000,$162 ,000.

1:27:28Dave Ramsey:I know. $575 ,000 is the debt on what?

1:27:32Rachel Cruze:so part of that includes a HELOC of 51 000 credit card debt of 74 175 student loans of 53 000 um a custody battle that i'm currently going through of 7 000 and 176 a new roof i had to pay because my insurance claim was denied of$27 ,700, and an IRS bet for my business of around$18 ,000. Wow.

1:28:07Dave Ramsey:It's been a tough five years, hasn't it?

1:28:11Rachel Cruze:Yeah. It just felt horrible.

1:28:14Dave Ramsey:Yeah. So the$162 ,000 in addition to the$575 ,000 is what?

1:28:21Rachel Cruze:um well i mean all of it is just it's credit cards it's um no so you you broke the two numbers apart did you not give me two different numbers right no i gave you uh the the total is 575 thousand

1:28:37Dave Ramsey:and 162 so so we can round it to 575 not 162 thousand 575 thousand one hundred and sixty $52. I got you. Okay. I misunderstood. Okay. Okay. So, and how much is your first mortgage on the home?

1:28:54Rachel Cruze:So, my first mortgage, I have$338 ,000 left.

1:28:59Dave Ramsey:Is that in the$575? Yes. Okay. So, you've got about$225 ,000 in non-mortgage debt, unless we count the HELOC, right?

1:29:14Rachel Cruze:Unless you count the HELOC and the roof. I did a PACE program, and they included the roof in my escrow.

1:29:22Dave Ramsey:And what is your income today?

1:29:25Rachel Cruze:I own a business. I'm a physical therapist, and I have a group practice. And it's a little foggy to understand the numbers. I have a business coach who's helping me right now. but basically I grossed around$385 ,000, but my take-home, my personal salary was about$65 ,000.

1:29:50Dave Ramsey:Okay, and that's what you paid taxes on, was 65?

1:29:55Rachel Cruze:The taxes actually are backdated.

1:29:59Dave Ramsey:No, no, no, and when you file your income tax, what will be your income showing on your income tax return?

1:30:05Rachel Cruze:Oh, the$65 ,000. Okay.

1:30:08Dave Ramsey:So that's really what you're making. Okay.

1:30:10Rachel Cruze:Yeah, my personal. And I'm trying to fix this with my business coach because there's a lot of expenses I'm trying to get rid of, like my lease.

1:30:18Dave Ramsey:Yeah, I agree.

1:30:19Rachel Cruze:And payroll's high. Yep.

1:30:22Dave Ramsey:Everybody's making money but you in this business. I got you.

1:30:26Rachel Cruze:Basically. I think that's what your coach is telling you. Basically. I'm the one working to pay the bills. If I stop seeing clients, then I don't. How much could you sell the house for, Julie? so my realtor wants me to we've listed the house at 575 it's been in the market for a month um at first i thought i had an assumable mortgage but i found out with the bank that it's only assumable to family members so the highest offer i've received was for 545 000 which is what my neighbors sold his house for. And I don't know if it matters, but my interest rate, I bought it in 2021. I had amazing credit.

1:31:09Rachel Cruze:I have an interest rate of 3.375. Okay.

1:31:12Dave Ramsey:So when you give me the list of things that equal the 575, what I hear are a lot of, that's why I said it's been a tough five years, the numbers all are associated with painful things. Child support or child custody, IRS debt, a roof that went bad.

1:31:36Rachel Cruze:74 ,000 in credit card debts.

1:31:38Dave Ramsey:Yeah, overspending that's out of control. There's a lot of stuff in here that I think is mostly in your rearview mirror and is not representative of your future. Am I wrong?

1:31:52Rachel Cruze:No, that's correct. And one problem I, sorry, is just that it's been very hard.

1:31:59Dave Ramsey:Yeah, it has. I can tell.

1:32:02Rachel Cruze:One thing I realized was that I'm, you know, in therapies, that I've been trying to save everybody but myself.

1:32:08Dave Ramsey:Yep.

1:32:09Rachel Cruze:You know, I bought a three-bedroom house on my own. You know, my husband didn't help me. It was just me. That's a whole other subject.

1:32:16Dave Ramsey:How old are you?

1:32:18Rachel Cruze:I'm 41.

1:32:19Dave Ramsey:Okay.

1:32:20Rachel Cruze:Are you still married, Julie, or you guys are, you're divorced, and that's what the custody was from the child? We were never married. This is just a custody battle, which my lawyers are telling me that because I declare more money, they're thinking that he does some kind of tax evasion. They're thinking that I may end up having to pay him child support. Now, this isn't your husband that you just mentioned, though, right? This is a different guy? No, no. This is my daughter's father. Okay. We weren't ever married. He just, you know. Okay. Same guy.

1:32:53Dave Ramsey:When you bought the house, that's what you were referring to.

1:32:55Rachel Cruze:That's what you were meaning, him, when you said him. That's what I meant. Yeah. Gotcha. I bought the house just myself, my efforts. Okay. You know, he contributed when he lived with me, but it's just all me. Okay. I was going to mention that, you know, I bought the house. I realize now it's, you know, I bought a three bedroom. I wanted to help my parents. They moved in with me. In my culture, you know, we're Brazilian. and, you know, you assault your parents and you take care of them, but I just can't do it anymore. And I had a conversation with them. I mean, it's not their fault, but I just, they're looking for a place now.

1:33:27Rachel Cruze:They're considering returning to Brazil, and I'm just trying to figure out what to do for myself and my daughter.

1:33:32Dave Ramsey:I think you sell the house for$545 ,000. Take the offer.

1:33:37Rachel Cruze:Okay.

1:33:39Dave Ramsey:And give yourself a fresh start with all of the mistakes then in your rearview mirror. Now, the trick from the mistakes that I always want to do, I've done a lot of stupid stuff in my life. I often say I have a Ph.D. in DUMB. And so I want to make sure I never repeat that mistake that caused that. Okay? So I don't want to repeat the mistake that causes me to be$18 ,000 in the hold of the IRS. So I've got to get my business coach and my business running right. I don't want to repeat the mistake that trying to save everybody. I don't want to repeat the mistake of this or that or this or that. And just go down the list of these items that you're paying off, and you're not even going to be able to pay them all off.

1:34:20Dave Ramsey:You're still going to have$30 ,000 in debt, right?

1:34:23Rachel Cruze:That's it. That's it. Yeah. I mean, people have even said that, you know, they've suggested that I do a Chapter 13.

1:34:30Dave Ramsey:You're not bankrupt.

1:34:30Rachel Cruze:One of my bedrooms.

1:34:32Dave Ramsey:You're not bankrupt. They won't let you in at Chapter 13. They'll throw you out because you have this huge asset. debt. So no, you need to sell the house. You need to put all this mess in your rear view mirror and start fresh cleaning up$30 ,000 worth of debt. Start making more than 65 out of this business so that because you cut your expenses there, never get behind on the IRS again. Never get in a situation where you're living with somebody you're not married to again. It sets up these kinds of problems and on and on and on and on. Just make the list down through here. What did I do? I was trying to save everybody.

1:35:10Dave Ramsey:You know, I think you've got a good head on your shoulders. I think you can do it, but you need to put the pain in the past.

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1:36:15Dave Ramsey:One of our favorite things is when people share their stories about how they're winning. I just got this from an awesome review from our EveryDollar budgeting app. Quote, EveryDollar's excellent. It helped me get my personal finances in order. Well, there you go. Now that I'm married, my wife and I use it together out of our joint checking account. It really helps us maintain a common vision and set of goals. Man, that's perfect. That's exactly what we want to hear. Hey, you can work the Ramsey plan the Ramsey way. What you hear here on the air, we will coach you right along the way only on EveryDollar.

1:36:49Dave Ramsey:And you can start EveryDollar for free in the App Store or at Google Play today. Doug is in Fort Worth. Hi, Doug. How are you?

1:36:59Rachel Cruze:I'm doing great, and I'm so excited to hear you, Dave. How are you?

1:37:02Dave Ramsey:Better than I deserve, sir. What's up?

1:37:05Rachel Cruze:I love it. I'm calling today. My wife owns a small business. Well, actually, we both own the small business, but she runs it. And my question is, she stopped paying herself because she's trying to get out of the negative. and every time we discuss it, it ends up in an argument. But we got some supplemental. I worked full-time, and we got some supplemental payment through part-time stuff at the beginning of the year. And she didn't tell me she was going to stop paying herself, and I found out in January, and we got in a big fight about it. And then she'll pay herself a little bit here and there, but still not up to her salary she was doing last year.

1:38:00Rachel Cruze:And every time we talk about it, it just ends up in an argument. And I just wanted to get your advice on how I should approach it or if I should just trust her that, you know, whatever is happening in the business is going to work out or I'm just stuck at what I should do.

1:38:19Dave Ramsey:What kind of business?

1:38:22Rachel Cruze:It's a spa.

1:38:23Dave Ramsey:How long ago did she start it?

1:38:26Rachel Cruze:She's had it about three years now.

1:38:29Dave Ramsey:How much money have you all invested in it?

1:38:33Rachel Cruze:She bought it from the previous owner, and it was like an owner. They did a loan between each other, so she kind of still pays her salary until the loan's paid off.

1:38:53Dave Ramsey:Pays whose salary? The former owner?

1:38:55Rachel Cruze:The former owner.

1:38:57Dave Ramsey:Okay, so she has debt to the former owner, and that's the only debt she has.

1:39:03Rachel Cruze:As far as I know, yes.

1:39:04Dave Ramsey:And do you know how much that debt is?

1:39:10Rachel Cruze:It was only maybe a couple hundred thousand.

1:39:14Dave Ramsey:Yeah, okay. Yeah. So the first mistake you all have made that has caused a lot of this angst between the two of you is you don't handle your money together. She's got her world and you've got your world. And so when you start speaking into her world, you don't have a foothold to do that because you're just a roommate. And the roommate doesn't like it when you tell her what to do. Instead, you guys need to have in-depth, combined finances, full transparency, so you know exactly what she's making because you're having to put it in the monthly budget together every month at your house. And you would never enter into a business transaction that's a couple of hundred thousand dollars without your spouse knowing every stinking detail and being in agreement aligned to it.

1:40:08Dave Ramsey:And you don't even know what's going on down there. Oh, I think it's a couple of hundred thousand. That's a fairly good rounding error. Yeah. So that tells me how disengaged you are until you decide you want to get engaged when she doesn't pay herself. But you don't know what's going on down there. Yeah, how much do you make, Doug? That's why she's insulted.

1:40:29Rachel Cruze:How much do you guys bring in household income? If she doesn't pay herself and you guys are living off your salary, what are you making? I make about$55 ,000. We started at the beginning of the year. We're helping a church do music, and they've been paying us$500 a week. So I think she's looking at that as supplemental to where she doesn't really need to pay herself because it's not like we're struggling. We were in baby step three. We were building our emergency fund because we got out of debt, but now that's stopped.

1:41:05Dave Ramsey:So you went$200 ,000 in debt, yeah. Yeah.

1:41:09Rachel Cruze:But we did our personal finances together, but you're right. No, you don't. I haven't been involved in her. No, you don't.

1:41:16Dave Ramsey:No, no, no, no, no, you don't. That's not true, Doug. Because she quit paying herself a salary, which would have gone into your personal finances, and you discovered it later. You are not doing your personal finances together.

1:41:29Rachel Cruze:No, she paid herself all last year. She stopped in January, and that's when I found out because she didn't pay herself. And I asked her why she hadn't paid herself, and that's when she just told me that she was losing money.

1:41:45Dave Ramsey:Losing money. Yeah. Yeah. So her business is failing, and any time you question her about it, it shames her.

1:41:56Rachel Cruze:Puts salt in the wound. And it puts salt in the wound.

1:41:59Dave Ramsey:And so, honey, the business is not doing well. I want to help, but just know where's your paycheck? that's not a help and so um yeah you need you guys need to get together and look at the business together in a supportive way how can i help what's going on how can what's happening here and we're on the same team and we're making decisions together here not you haven't put your part in and that's still the language you're using tells us all of this um so um I don't know. I mean, you speak into Winston's business, right? Sure.

1:42:44Rachel Cruze:I mean, yeah, some of it. I'm like, I mean, there's a there's a level at which we see money come in and out and we're talking about and we were talking about a deal. Actually, he's going to go do a showing today. And I go, great. This, this and this. Now, I'm probably not the most detailed person in the world, just like I'll probably, you know, it's all to a degree. but high level when we look at our numbers every single month yeah i mean we know what's going on

1:43:06Dave Ramsey:yeah but if something was going on that he was losing money on oh gosh yeah oh yeah well he would

1:43:11Rachel Cruze:he tells me like if there's a deal that yeah that they yeah they bought something and it was like oh we're selling it for less than one and that it's a loss and that sucks it's like okay yeah but it's being talked about yeah hundred percent that's you know that that's the process yes and so yeah and i think it's an attitude at which which i don't which doug i understand why you would be frustrated. I get that. But also the way you approach it and the way you guys have this conversation, it's either that the business is between you all and you're, you know, and it almost splits you apart emotionally or together you lock arms and say, hey, we're taking on this world and this business and everything together.

1:43:47Rachel Cruze:And the problem's out there. That's the problem. It's not us. It's out there. And so pointing it at the right direction and at the right thing, I think is what's important because it's almost like a third party where it actually starts to become her identity instead.

1:44:02Dave Ramsey:Now, he's not been involved until he questions her about it. Right, right. And so she's insulted and shamed.

1:44:08Rachel Cruze:Yeah, yeah, yeah.

1:44:09Dave Ramsey:And so that's very easy. So get involved.

1:44:10Rachel Cruze:And she'll be defensive, which makes sense why she would be defensive because she's not in the numbers, you're not in the numbers throughout the month and you guys aren't talking about it.

1:44:17Dave Ramsey:Yeah. Let's sit down and look at how this business is operating. What are the parts of it what are the details and what can we do together to get this going hey i'll come down there and help i mean what do you need i'll cut the janitorial out i'll come clean the toilets but uh what do we got to do but we got to work this through and um otherwise that couple of hundred thousand that you owe somebody is going to come down around your head at some point and so we need to get this thing back profitable again where it's making money and instead of losing money. And right now it's losing money. So, and yeah, I'm suggesting you become supportive and ask how I can help.

1:44:57Dave Ramsey:And I made a mistake by not being more involved and being more helpful. I am sorry for that. And I'm going to start today though, being very involved and very helpful. And so where's, how should I do that? And what's the place to start? Because we need to get this thing moving because it's scaring me. And I know it's probably scaring you.

1:45:17Rachel Cruze:Yeah. And there's probably a story you've made up in your head, Doug, a story she's made up in her head of what he thinks about her and her business acumen. You know what I mean? That may not all be true.

1:45:25Dave Ramsey:Exactly. So it's saying those things out loud, I think is really, really important.

1:45:29Rachel Cruze:And you guys start getting on that trajectory where, yeah, where you're seen as helpful and not being an accuser of what she is or isn't doing.

1:45:37Dave Ramsey:Yep.

1:45:44Thank you.

1:46:13Rachel Cruze:Hey, George Camel here. So you're thinking about buying or selling your home. It's exciting, but there's a lot to think about, and all those decisions can feel overwhelming. Well, here's the good news. You don't have to tackle the process alone. Ramsey's Real Estate Homebase is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start-to-finish guides, a podcast, and even an in-depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps toward your home goals, go to RamseySolutions.com slash real estate.

1:46:45Rachel Cruze:That's RamseySolutions.com slash real estate.

1:47:03Dave Ramsey:The right insurance acts as a shield around your loved ones and your wallet when bad things happen. Our free insurance coverage checkup helps you figure out if you have the right coverage by giving you a personalized action plan with clear next steps. Go to RamseySolutions.com slash checkup to take the coverage checkup and find out if you have the protection you need. It's free. Brad is in Des Moines, Iowa. Hi, Brad. Welcome to the Ramsey Show.

1:47:35Rachel Cruze:Hey, Dave. Quick question. How much faith should a 32-year-old guy put in his pension fund being still around and still viable when he retires at 55?

1:47:50Dave Ramsey:I would actually study the history and the articles that are written about the particular pension fund. But overall, as a category, I think pension funds are safe.

1:48:03Rachel Cruze:Does that take any responsibility away from me doing this?

1:48:07Dave Ramsey:additional? No. Is that retirement saving? No, it does not. Pension funds will underperform standard investments because of the regulation, they typically are going to yield about a 7 % rate of return. And so if you put the same amount into a good growth stock mutual fund or funds in a Roth IRA, you would make well more than twice as much. Meaning you'd make 11 or 12%, 10, 11, 12 percent, somewhere in there as an average rate of return. But that's a lot more than double the result of dollars then. And so very, very important that you do your own investing and not rely exclusively on a pension fund, regardless of if the pension fund is going to be there or not.

1:48:53Dave Ramsey:I thought you were saying, is it going to collapse and I'm going to lose everything and have nothing? I doubt that's going to happen. But you definitely want to have money that you have control of where it's invested and that you get to decide the disposition of it as you reach the retirement year.

1:49:10Rachel Cruze:What percentage of your income is going into the pension? Well, it's all employer paid. Oh, then you need to be putting 15 % away. And they pay into an annuity fund as well. That's growing also.

1:49:26Dave Ramsey:Both are lame.

1:49:29Rachel Cruze:Both are lame, including the annuity. Yes. Even the annuity last year had a 20 % return.

1:49:34Dave Ramsey:Well, the market had a 25 % return. Okay. Both are lame. So I continue to build my own retirement account. Absolutely. You need to be doing baby step four when you get there, when you're out of debt and have your emergency fund in place, following the baby steps. You need to be putting 15 % of your income aside for retirement. And then all of the employer-funded things are just going to be gravy on a really nice large biscuit that you build. Gotcha. And I think both are going to be there. They're just underperforming products compared to good mutual funds and a Roth.

1:50:12Rachel Cruze:Yeah, but for some people, like we had a caller, 9 % was going in mandatory, and so you cut it in half. So 4.5%, 5 % went to the 15 % rule.

1:50:22Dave Ramsey:Exactly. But in his case, he's not putting anything. So you don't need to. It's just a full 15%.

1:50:26Rachel Cruze:Yep.

1:50:27Dave Ramsey:A quote unquote benefit, which is very weird because in the old days, when I first started this show 30 something years ago, almost 40 years ago, the pensions were everywhere. 70 % of the companies had a pension. Now, I think it's like 4 % of the companies have a pension. It's very unusual to find an actual pension anymore, unless it's government.

1:50:48Rachel Cruze:I was going to say more so government. Yeah.

1:50:49Dave Ramsey:Yeah, you see teacher pensions and union pensions and that kind of stuff. But actual corporate America has just about done away with them because they're difficult to manage. They're highly regulated. It's very hard to make them work in terms of managing them for the benefit of your employees. But many do. And they seldom completely collapse. I mean, you've got some pensions. Some of the state pensions are in trouble. They're being run very poorly. Illinois, your pension sucks because your government sucks. They're horrible at managing money. And as an example, I'd be scared to death if I was dependent on that one.

1:51:29Dave Ramsey:But now there's – and all you've got to do is just Google. You'll see what I'm talking about. I mean there's a lot of states that are so poorly run, the actual state is creating a horrible pension product. Or municipalities, the same thing. your local city government for your police pension or whatever. You've got to look at that kind of stuff and make sure it's solid. But even if it is or isn't solid, I'm still going to go build my own biscuit, and then whatever this stuff is is just the gravy on it. And that's going to put you in a good position where you're never really worried about that. And then you don't say, well, the mine closed and the pension collapsed and Grandpa ain't got no money.

1:52:10Dave Ramsey:You don't want to be that guy. That's the guy we're not going to be. Benjamin is in Los Angeles. Hi, Benjamin. How are you?

1:52:18Rachel Cruze:Doing pretty good. How about you?

1:52:19Dave Ramsey:Better than I deserve. How can I help?

1:52:22Rachel Cruze:I had a question because I am on baby step two, and one of my debts is in collection, and I called the collection agency today and offered them a settlement offer to pay it

1:52:33Dave Ramsey:and be done with it, and they declined my settlement offer. Okay. Tell them to call you back when they feel better.

1:52:44Rachel Cruze:That's what I did. I told them when they're ready to accept my settlement offer to call me back. Yeah, yeah.

1:52:49Dave Ramsey:And next time they call you, just say, hey, there's a settlement offer on the table. We don't even have to have a conversation. If you take that, I'll send you money. How much do you owe them and what did you offer them and who is it?

1:53:01Rachel Cruze:I owe them$300. The company is called... $300? Yes.

1:53:08Dave Ramsey:You're flexing over$300? bucks?

1:53:12Rachel Cruze:In total, I have about$2 ,300 in debt, and I was just trying to settle the collections and get done with it, and I offered them a hundred bucks and didn't want to take it. So I was just curious if I should just...

1:53:23Dave Ramsey:That would not be unusual on$300. I thought we were talking about you had$5 ,000 you owed, and you hadn't paid them in two years, and you offered them$1 ,500. But on$300, they're not going to screw with it. No wonder they laughed at you.

1:53:36Rachel Cruze:Hopefully, you'll be out of debt in a month or two, right?

1:53:38Dave Ramsey:I would just pay them is what I would do is 300 bucks. Get a letter confirming the amount by email and then send them the amount. No, I would not settle a$300 debt.

1:53:48Rachel Cruze:Yeah. And for a lot of people out there that are settling, yeah, we do find obviously talking, you know, giving a little ball offer and depending on how long you've been in the collections process is probably how easily that can happen. But we also I have friends at Guardian Litigation. So if you go to guardianlit.com But don't do that with 300 bucks. No, no, no, no. But for everyone else out there, if you are in Baby Step 2 and you have gotten to this point where collections it's, you know, you have to pay.

1:54:18Dave Ramsey:You got 10 or 20 ,000 bucks in collections. 100%, yeah. Or 50 ,000 or something. They can help you. Guardian Lit can work that through. And they're lawyers is what they are. And so, yeah, you're right, Rachel.

1:54:28Rachel Cruze:But that's a question we get a lot. Not always for 300 bucks. It's usually more. But the collections process is real. And so, yeah, and it can work to your benefit, right, if you are in baby step two. If you're going to settle, get it in writing before you

1:54:43Dave Ramsey:give them any money. Matter of fact, if you're going to pay in full, get it in writing because they'll double the amount and say they added late charges and try to get more out of you later. So even with you, Benjamin, on 300 bucks, have them send you an email exactly what is the balance. Wait a week since you just got off the phone with them. But have them send you an email the exact amount and then cut them a check for that that day. But don't give them electronic access to your checking account. They'll take more out than they're supposed to because they lie. It's a filthy business. And so that's why guardian litigation is a good idea to have the lawyers on your side.

1:55:17Rachel Cruze:Yeah, for sure.

1:55:18Dave Ramsey:But don't do that with$300 either.

1:55:22Rachel Cruze:I'm glad your debt amount, though, is so low, Benjamin, honestly. That's good. Yeah, you'll be out of debt quick and then start building up that emergency fund, maybe step three of three to six months of expenses.

1:55:33Dave Ramsey:Precisely. That's how it works. So typically what happens with credit card debt is as it gets older, the credit card company, the older the debt is, meaning the longer expenses has been paid, it ages out. The credit card company will quote unquote write it off. Now that does not mean that you no longer owe the debt. it means they no longer think they can collect it, and so they take it off of their books and take a tax write-off for bad debt on you. Then they sell that bad debt to a debt buyer at pennies on the dollar, and that debt buyer will try to collect from you. And they will work with you because they only paid two and a half to five and a half cents on the dollar for the debt, but not on$300.

1:56:32Thank you.

1:56:53Dave Ramsey:Hey 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.

1:57:45Dave Ramsey:Romans 5, 4-5 Patience produces character and character, hope and hope does not disappoint Thomas Sowell said Some people who are very dissatisfied with their lives Nevertheless have no intention of changing their own behavior They want to keep on doing what they've always done But just have it turn out differently

1:58:11Rachel Cruze:It's like the definition of insanity

1:58:13Dave Ramsey:Exactly Keep doing the same thing over and over again And expecting a different result There you go Alright, Jasmine is next Jasmine's in St. Louis Hi Jasmine, how are you?

1:58:24Rachel Cruze:I'm doing well, how are you all?

1:58:26Dave Ramsey:Better than we deserve. How can we help?

1:58:28Rachel Cruze:I have a question about paying off an auto loan that I took out in my name for my mom. The balance of the loan is a little over$6 ,000, and I want to just understand if it would be wise to take out a loan against my 401k or take out the money from my 401k to pay off the high-interest loan.

1:58:55Dave Ramsey:Neither would be wise. And I will walk you through why. Do you not have$6 ,000 otherwise?

1:59:03Rachel Cruze:I have$6 ,000. It's in a separate Roth IRA and also my son's college fund and savings. Oh, savings.

1:59:16Dave Ramsey:What's in savings?

1:59:18Rachel Cruze:So I have a little over$5 ,000 in savings.

1:59:20Dave Ramsey:And what is your income?

1:59:23Rachel Cruze:I make$105 ,000 annually before a bonus.

1:59:29Dave Ramsey:Okay. All right. I would scrape together from some non-retirement something and pull the$6 ,000 together and pay it off. It's a high-interest loan. I wouldn't have bought the car in the first place if I didn't pay cash for it as a gift to someone, even your mom. Now, here's why we're not going to cash out your 401k.

1:59:50Rachel Cruze:Or kids' college.

1:59:51Dave Ramsey:Or your kid's college, yeah. Or your Roth or anything. So if you take money out of a retirement account, they charge you a 10 % penalty plus your tax rate, which in your case is 30%. So you're going to get a 30 % hit plus a 10 % hit for a total of a 40 % hit. That's going to make your high interest rate look like a deal. Great. So we don't want to do that. We don't want to borrow money at 40 % interest in order to do that. Now, if you borrow on the 401K, you are unplugging a good mutual fund investing, assuming you've got it invested in good mutual funds, and you will pay yourself back at the rate of 6%.

2:00:34Dave Ramsey:When you leave the job, and you will leave when you die, get fired, or get a better job, one of the three, when you leave the job, That loan is considered due in full, and you're facing the same thing with the penalties and interest if you don't repay it at precisely the wrong time for you to want to come up with money is just when you're doing a job change. So, no, we don't want to borrow against a 401k anytime, and we certainly don't want to cash out a retirement account or something that has a penalty on it in order to pay off the thing. So I'm going to take some of the$5 ,000 and scrape together some money out of my budget, and I'm going to try to get it paid off that way.

2:01:14Rachel Cruze:Yeah, and making what you're making, too.

2:01:16Dave Ramsey:Yeah, you're making up money to knock this out.

2:01:17Rachel Cruze:Yeah, it'll be amazing. That's so good. Yeah, the car thing, it's real. The issue with the car debt, people, I mean, I feel like this whole show so far. Yeah. Today. I think it has been.

2:01:29Dave Ramsey:Yeah, I think we talk car debt all day long. All right. Open phones at 888-825-5225. Jennifer is in Pittsburgh. Hey, Jennifer, what's up?

2:01:41Rachel Cruze:Hi, Dave. Oh, my goodness. I'm sorry. I love you. How can we help? I can't believe. Yeah, so a little bit of a situation here. Like two years ago, I was married, now separated. Our house got hit by a car. We have probably around$170 ,000 settlement. And my husband moved out when his mom got sick to take care of her. And now he doesn't want to talk about where the money went.

2:02:15Dave Ramsey:He doesn't want to talk about what?

2:02:17Rachel Cruze:He doesn't want to talk about where is the money. From the settlement of the accident? Yep, yep, yep. Because basically it's...

2:02:27Dave Ramsey:You said you're separated, so you're getting a divorce?

2:02:34Rachel Cruze:I'm thinking of it if he's not going to come clean, because right now...

2:02:37Dave Ramsey:No, I'm sorry. Are you separated? Your marriage is not good? Separated? Or what's going on?

2:02:45Rachel Cruze:Well, he moved out to his mother's house. Why? So right now... At first, to take care of her, because she had cancer. but after that the conversation of buying the house another house is no longer in you know in the story like he wants us to just get like rent and basically doesn't want to doesn't want to help me pay like he's now saying he's in debt um but honestly we've been married for so long, but his mom is one of the reasons we fight a lot, and now I feel like I'm like, this is too much. It's like, you're not telling me anything about the money, and now you want us to rent.

2:03:33Dave Ramsey:Well, there's not an us. He lives over there. You live over here.

2:03:38Rachel Cruze:Pretty much. So now I feel like I really need to talk to a lawyer.

2:03:45Dave Ramsey:Yeah, that's your next step. I mean, you need to get some legal advice, And then you need to get some marriage counseling advice and decide, you know, if we're going to keep this marriage together, what are going to be the guidelines for the relationship going forward? Because the ones that you have right now don't work.

2:04:02Rachel Cruze:Yeah. And, you know, there could be a good chance that that money is gone. The 170 that happened two years ago from the settlement. That's what she's saying she's trying to get. And he and she doesn't know where it is. So there's. Yeah.

2:04:16Dave Ramsey:You waited precisely two years too long to deal with it.

2:04:19Rachel Cruze:That's right. That's right.

2:04:20Dave Ramsey:If you're wondering about where it's going to go, you should deal with it the instant it comes up.

2:04:25Rachel Cruze:Yeah, that's right.

2:04:26Dave Ramsey:You can't wait two years later and go, oh, I wonder what he did.

2:04:29Rachel Cruze:I wonder what happened there.

2:04:30Dave Ramsey:I wonder what happened there. That's not going to play out very well.

2:04:33Rachel Cruze:All right. I know how much you love social media.

2:04:35Dave Ramsey:All right. I love social media. Not at all.

2:04:37Rachel Cruze:So we got a question from Instagram for you. I'm 26 years old. I just sold my house and will be netting$72 ,000 from the sale. I have no other debt than the mortgage of my new primary residence. What's the smartest way to use or invest that money? So netting 72, but the other home, I guess, is already bought. So, yeah, I mean, if I were you, I'd probably just roll it right into the mortgage, unless you have consumer debts.

2:05:06Dave Ramsey:Make sure your consumer debt is cleared. Work your baby steps. Make sure your consumer debt's cleared. You have an emergency fund in place. You're putting 15 % of your income away in retirement, putting money aside for kids' college. And then you start paying down your mortgage. That's right. So if you suddenly get a$75 ,000 bonus, you apply it to whichever one of those baby steps you're in. There you are. And so if you're all the way up to baby step six, you would put it on the mortgage.

2:05:29Rachel Cruze:Annalise from Facebook asks, it feels weird to be in stork mode and not paying off debt. We're expecting a baby and the hospital bill should only be around$2 ,000 to$3 ,000. Can we just set that money aside and keep working to pay off our debt?

2:05:43Dave Ramsey:I wouldn't. pile up cash. It's just for a short period of time. And that, you know, having 10, 20, $30 ,000 laying around when a baby comes is comforting in case something did happen that was outside the range of your insurance policies. Yeah.

2:06:00Rachel Cruze:That is one event that, I don't know, there's just a level of peace of like, who knows? And it's just for a short period of time. That's right.

2:06:07Dave Ramsey:I mean, so really, let's say you stack up $20 ,000 instead of paying down the debt for$20 ,000. And the day that you and the baby come home from the hospital healthy and there's nothing wrong and everything's okay, you're sitting there with an extra$20 ,000. You pay it on the debt. What did you lose by doing that? You lost the interest rate on$20 ,000 of debt for that three-month period of time, which is nothing. We'll buy you a biscuit.

2:06:32Rachel Cruze:Yeah.

2:06:33Dave Ramsey:When you look over the debt. Just make sure you pile up cash ready for a baby to come. Now, if you are out of debt and you have a fully funded emergency fund and your baby steps four, five, and six, we don't do stork mode. What we call stork mode is while you're in debt, you temporarily stop paying down your debt snowball with a baby on the way to be sure about a baby.

2:07:00Rachel Cruze:Have some cushion there so it's not just your$1 ,000 emergency fund.

2:07:03Dave Ramsey:And not to spend it. We're not spending it on the nursery. Okay? We're building up this cash as an extra pad that is going to go on the debt the instant that we know everybody's okay.

2:07:13Rachel Cruze:Who would do that?

2:07:14Dave Ramsey:I don't know anybody. That would put this hour of the Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.