Normal Is Broke—Don't be Normal!

25:05But only with this caveat, if you take all of the extra money that it saves you and put it on the smallest debt. So do you have any debt besides the student loans? No, that's our only debt. And the student loans, I'm guessing, are broken up into smaller student loans. It's not just one big one for two. Right. Exactly. So if you make it, if you do the plan, that's the 25-year plan, and let's say it drops it down to, what's the payment now? From$3 ,000 down to? About$1 ,900. Okay,$1 ,900. Now you can take that extra$1 ,100 and you can throw it at the smallest student loan at the principal. Do you see what I'm saying?

25:41So it's giving you more firepower to knock that smallest one out first. So it's not getting eaten away with interest. Does that make sense? Yes, absolutely. But should we take a few months first to save up a little bit bigger emergency fund? How much do you have in your emergency fund now? How much is in there now? Well, it was at$1 ,100 this morning, but I had to get a repair on one of our cars and now it's at like 400. Okay. So stack it back up to a thousand. We found over the course of 25 years, 30 years doing this plan that a thousand dollars is the sweet spot. It's just enough that if something breaks down with the car, right, Rachel, you can pop in there and get it fixed.

26:18But it's also, it's not so much that it's taking away from the momentum of you paying off the debt. It might feel like not a lot, but you know, your wife's already had the baby, the baby's healthy. You guys are home. Childcare is paid for it. Like you can take that, that moment and exhale and say, okay, like the the risk or the danger is over thousand dollars is good and then yeah if you clip uh 1900 if you clip that other 1100 at that student loan uh you're going to pay it off a lot sooner and think about how much more you can add to it so this is uh probably you doing some overtime probably now's not the time for your wife to do overtime with a baby but getting that number up as high as you can because ultimately you guys are the going to be the ones that say okay if we do it at a rate of$1 ,100 a month extra.

27:02Here's how long it's going to take. We're not satisfied with that. So let's see if we can get it up to$2 ,200 a month extra. Are we satisfied with that? Do you see what I'm saying? And reverse engineer that number to get it where you want it to be. Yeah. And Joel, I mean, this is, it's a lot. I mean,$300 ,000 of debt, like this is going to be a long game for you guys, right? I mean, this is a, this is a long journey. So your wife, you know she's in a career where the upward trajectory is massive like I feel like I'm like in that medical field I would be depending on her in a sense of like because I mean there you can do extra work a hundred percent and I would I would be I would be taking on extra but I am I freelance that brings like 600 a month yeah that's awesome yes so for her long term and when I say long term I'm saying five to eight years, I'm going to be making as much as I can.

27:55I mean, because to your point, I mean, she went$250 ,000 in debt for this degree. And so, and so the upward trajectory of her having a bigger shovel over time is probably going to be more possible. And that's what's, I mean, and I'll just be frank with you too, Joel. I mean, Jade and I are both moms. So I'm like, that feeling, especially your first, is it your first? Yeah. Yes. It's different. I mean, it's just, I mean, I think I cried every day going in for a little bit. Oh, I know. I cried more in the past six months than the rest of my life. It's so emotional and it's so exhausting. And this is not to like pick on you guys, but it's just another example, a real life example, literally, of you, Joel, in Atlanta with your wife and what debt is freaking doing.

28:37where if, you know, in a perfect world, if there was no student loans and we had an 18 year old girl call in because she wanted to go to a private school in Minneapolis, that was going to cost like$250 ,000 to get an undergrad degree. And we were like, don't do it. Don't do it. Right. Because you want options. Right. And if, and if your wife wants to stay home, it's like, it sucks. Now, could you guys choose that? Absolutely. And then it'll take you maybe a lot longer to get out of debt. But what sucks is that like the debts that she, that, you know, at a school that was very expensive. And again, hopefully she has the opportunity to be making more.

29:12I mean, that's the goal, right? If you're going to be going that much more into debt that you're going to be able to sufficient, that's going to be sufficient with the income you're making. Right, exactly. But it just sucks, you know what I mean? Because there's not, it limits options on what you guys want to do in life. So again, that's not to pick on you. It's just another example of what debt does. It takes your freedom and it takes your options and it sucks. So would you, so even with a baby, 1 ,000, you would say, is a good round number. I think it's just as a father, you know, it's like, I'm a little terrified that something's going to blow up and we're not going to happen.

29:43What you're saying makes sense. Like, logically, I hear what you're saying, but think about it like this. Let's pretend, let's imagine the worst thing that could take place, which would be like the worst emergency. I don't know, something with your roof, maybe? Right. Right. And let's pretend that costs$3 ,000 to fix. Well, you've got your emergency fund, but then you've got your actual income. And remember, you're putting an extra, you're paying extra on your debt every month. So if you said, if I have my emergency fund and I stopped the extra that I'm paying on my debt for that month, just to cover whatever crazy thing could possibly happen.

30:20And if I pulled back, you know, the purse strings a little bit more and tightened up a little more, I could probably find another five,$600. So you see that there's actually money there. You're just not, you're taking it out of the mix in order to pay debt, but it's there if you were to need it. That's a really good point. Wow. Thank you for that. So you're saying stay far away from the IDR and the IDR though, right? The IDR, like I said, the IDR doesn't bother me, especially if you were moving it from the 10 year plan to the 25. That doesn't bother me, but only with the caveat that you're going to use the extra money to pay off the debt.

30:51If you use that money to go out to eat and just inflate your lifestyle, then you are only playing yourself. And I can't stress that enough. No, that's a great point. Yeah. And I think, you know, with a lot of things, too, whether it's medical bills or that kind of thing, you usually have a month or two to be able to, you know what I mean? That's right. So sometimes it's not like an immediate expense. Yes, this moment we have to. Sometimes you have a little bit of time, to your point, that you can get that cash back. But I get it, Joel. I know that, like, mama bear mentality of, like, I just want to be smart, keep everyone safe and all the things is so good, so true.

31:24But that$1 ,000, that emergency fund stays true no matter what.

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33:11Next up, we have Michael in Boston. Hi, Michael. Welcome to the show. Hi, how are you today? We're doing great. How can we help? I'm doing well. So I have a question for you. I was just informed a few weeks ago that I'll be getting laid off at the end of the year. Oh, no. Shoot. Yeah, it's all good. My wife and I have about$100 ,000 in cash right now. I'm just trying to figure out what I should do with that in these uncertain times. Okay. What do you do, Michael? I work for a large corporation in product management. What were you making? I was making$160 ,000 plus a 20 % bonus. Okay. And does your wife work at all?

33:57She does, yes. And what does she make? She makes$110 ,000 a year. Okay. And how quickly do you think you can find a new job? Is this something you can start looking for, like, this week? Yeah, I mean, a job and a good job are different things. Sure. But I will, you know, I did get a decent severance package that can really carry, hold me over almost for a whole year. How much was that? So I have my full salary through the end of October of next year. Oh, good. And that's not including the$100 ,000 you guys have saved? Correct. Okay, that's really good. That is nice. I mean, I want to encourage you that you're in a really good position with the severance and with the cash sitting there and the fact that your wife also works.

34:42I want to caution you, though, because I don't want that to be a reason to not be motivated to really go out there and get a job that was just as good as the other, replace this income and possibly make more money. I mean, what's to stop you from making more going into the next season with all of the experience that you have in that field? Right, right. Yeah, absolutely. And that's one of the goals for sure, opportunities available. So if I were you, I would be looking tonight at your budget. Do you guys have a budget? We have a loose budget, definitely. Okay. You know, inclusive of the mortgage, one small car loan and just other monthly bills.

35:23So what I would do, we'll give you every dollar before you get off the phone tonight, but I want you and your wife to sit down tonight and really plug in all of the numbers. Because if you can, my goal would be to touch as little of your saved money as possible. Do you guys have kids at home or who all is at home? We do. We have three kids, 14, 11, and six years old. Okay. So I would want the goal to be, we're going to touch as little of this$100 ,000 as possible. so in order to figure out what that is you've got to set a budget for 110 and see okay monthly if we set our budget for whatever wife brings home and he'll be getting a severance and you'll be getting your severance too so oh that's true uh so not much true not much should change yeah i would be paying your debt how much how much you guys have left on your car um we have it's a 2025 and we have a little less than ten thousand dollars left on that okay well i would pay that off tonight.

36:21That's true. Yep. What other debt do you guys have? That's a four, four, that's a 4 % interest rate. I don't care. The only other, okay. The only other debt that we have is our, is our mortgage. Perfect. Okay. So all right, great. Yeah. So what you, so the baby steps, Michael is the seven steps that we walk people through. So technically I think you guys are on baby step four because you guys will be debt free by tonight. Correct. Cause you're going to just pay off that car. And then your that that'll be a$90 ,000 sitting in savings. And I would figure out your monthly expenses, what you guys you know, what you have, and I would go ahead and get a six month emergency fund just because you got three kids, the job thing is kind of in the air.

37:03Six months is plenty, because you're still getting paid. I mean, you're still going to get a salary. So I take that whatever that six months is for you. I'm making this up. So just say it's like, I don't know, 10 ,000, so say it's 60 ,000, you'll have 30 ,000 left. And then with that 30 ,000, I mean, honestly, I don't think I would be motivated to feel like I have to keep any more because of a job loss because you're, you're, you're getting paid the same. So it's almost like you haven't lost a job technically, right? Because you're still getting a paycheck. So you guys are still living your life.

37:35Is the severance at all tied to if you get new employment anywhere, like will that stop at all? Or do you get that plus if you get a new job? I would get that positive. I get a new job as long as it's not with the same company, obviously. That's great. That's great. Which is awesome. Yeah. And then I would be funding 15 % of your income into retirement and I would count the severance as income. You know, I mean, I would still say, um, so I honestly would just, I would keep going and then I would put extra on the house. I mean, I would just go through the baby steps. I don't think I would be that alarmed when I, when I first heard you were being laid off, honestly, in my head, I'm like, oh my gosh, if you have no savings, you're down to one income, then there's a lot of shifting that has to take place that's usually people's situation but you're getting a nice severance you guys are going to be debt free you have a fully funded emergency fund so not much really has to change michael you just have to feel that urgency do you jade no i mean the only thing i'm thinking is you've got to find another job that's going to replace your income and you've got to be on it that's it you know got it so would you would you guys take that other 30 000 and put it I would probably put it at the brokerage account, like into an S &P 500 fund or something along those lines.

38:44Or should I just keep the cap? That's where my big decision is right now. So I almost would do option C, Michael, because if you're funding 15 % of your income into retirement, the next step beyond any other investing is to pay off the house. So I almost would be tempted. How much do you guys have left on your mortgage? $260 ,000. Okay. Okay. It's a 2.85 rate. Okay. Yes. Again, the interest rates don't really apply to what we talk about. When we talk about math, it is so behavior change, finding peace. Dr. John Deloney, one of our other hosts, he always says we're solving for peace. And we find when people are completely debt free, that is one of the most peaceful places you can be financially versus high stress, high financial stress with trying to pay bills and keep up with everything.

39:31So you can do what you want with that$30 ,000, Michael. that's left. If you want to open up a brokerage account or something, yes, that's not going to hurt. But the next step technically would be to throw anything extra at the house. But because there is this, you know, again, kind of weird thing with the layoff, if you want to feel extra safe, you can. But I don't feel like you have to have extra padding. Number one, you have a six month emergency fund and you're still getting paid. Yeah, you're still getting paid. Yeah, there's part of me that might wait until it's a storm. It's not the stormiest of storms because Because of the money.

40:04To get a job, yeah. There's part of me that might wait until you land that next job. And then if you do, I mean, what a blessing because you'd be getting the severance plus to pay from your new job. Then you'd have something to do with this$30 ,000. Like you could really do some major damage on your mortgage at that point as far as paying it off. Whether or not you wait until you secure the next job is really up to you and how you and your wife feel about it security-wise. Awesome. All right. Well, you know, I appreciate the advice. Yep. And, you know, hopefully good luck moving forward. here.

40:34Absolutely, Michael. Well, I'm sorry about the job loss, but I'm thankful you guys are in the position you are. You guys have done a great job saving. And yeah. And again, that severance is so helpful. Rachel, let's just take a moment and talk about it because I could tell you're getting frustrated, not frustrated, but like the interest rate. And let's talk about that because people get so hung up on, I've got this debt, but the interest rate is good. So therefore somewhere in their mind, they think they can just string it along because is that 2.2 %? You know, that is not big deal. Debt is risk no matter how you slice it.

41:05If you are tied to debt, that means you have risk associated with your life. And even if the interest rate is lower, it's actually in many ways more dangerous because you're more likely to leave it around and keep it in your life for longer. So just remember, guys. Yes. And that is debt. And that is the hard thing because I think, you know, even the question with paying off the house, you know, people, right, you know, they have$60 ,000 left in the mortgage and they have 70 ,000 in non-retirement investments. And they're like, wait, you want me to just pay off my house, but I'm making up to like 20 % this last year, you know, and my mortgage is the old interest rate of 3%.

41:38Like I could be making a 17 % spread. And so the calculations come into place. And again, we're not dumb. We get that, totally get that. That makes sense mathematically. But what is never calculated again is the emotions around money, which is what, what shades, oh yeah. The emotions around money, the stress around money, the peace that you have around it. And so, um, so we can play the math game all day long, but that's even one reason we talk about you pay off the smallest debt first, not the highest interest rate. Like it's not a math problem. Majority of personal finance is your behavior. It's not the head knowledge.

42:14It's not the Excel sheets. It's not trying to form the interest rate. That's what's best for you. And it's not that bad. Debt is debt. So to your point, the borrower is slave to the lender when it says in Proverbs. So, um, there's something freeing about being depth for you guys. So, yeah, again, Michael, he has a great head start. I'm, yeah, I'm excited for him. I think he changed good season. Yes. And they were wise. So it's not a crisis. This is just an inconvenience.

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44:27Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union Studio, this is The Ramsey Show. And I'm Rachel Cruz, hosting today with Jade Warshaw. And we're taking your calls at 888-825-5225. Up first, we have Jeff in Minneapolis. Hi, Jeff. Welcome to the show. Hey, good afternoon. Thanks for calling in. How can we help? Yeah, so my family and I were in the process of getting ready to purchase a home for ourselves. This will be the third home that we've owned. We sold our previous house back in June when we relocated for a job change.

45:12and I'm feeling that we're sitting pretty good financially with what we have invested and in retirement and trying to identify the right level of home that our budget can support while still letting ourselves be comfortable financially but also feeling that going into our third home we maybe don't need to settle on every single item at this point of our life as well. Good. So what are you thinking about spending? Well, right now we're considering a property that would be around the$550 to$600 range. Okay. And I didn't ever think I would end up in a home of that size, but with real estate being somewhat inflated right now, that's kind of what we're looking at needing to be ended.

45:54Check all the boxes that we're looking for house-wise. And you feel good that if you put whatever down payment you're going to put, but it's not going to be any more than 25 % of your take home when you include taxes, insurance, HOA, all that stuff. Yeah. Depending on what we put down for a down payment, we'd be tracking right about the, right about the 25 % mark. What do you have saved in cash? So we've got a, we're sitting on three 10 in cash right now. And that includes, that includes a bunch of money from the sale of our home in the summer. About 50 of that is what I've considered to be our emergency fund.

46:28And, you know, the rest of that would go into the home purchase. So about$250. Okay. Great. Good for you, Jeff. Well done. Is there anything standing in the way? Do you have any other debt? Well, we're sitting pretty good. Otherwise, we've got a small car loan,$5 ,000 on that. That's the only other debt that we have. We're free of credit card debt, free of education debt. Yeah, none of that. We've got a young family at home. What's the problem, Jeff? Family at home, so we're trying to provide some flexibility to have life change if needed there, whether it's education or... So what do you need from us?

47:07What made you call in? What's your biggest question? Well, as we've been looking at this home purchase, what we think about is, is that really the best way to deploy that money? Should that money go into a home purchase, or should it be further invested or set aside for a child's education? Is it the right move to put that much money into a home right now? Well, you said yourself, you said you're sitting pretty with your investments. You said everything seems to be on track. So if you did, let's just play it out. If you did purchase this house, like you're saying, it would meet the criteria that we say is kind of a safe place to buy a house and still have enough margin to do the things that you've mentioned, which is save up for kids, college, be able to put a little bit extra on the house.

47:48You'd still have that money in order to do that. whereas if you didn't purchase this house let's pretend you didn't purchase this house uh let's pretend that you what would you do take this money and invest it would you drop it in the stock market drop some in the market beef up a 529 okay and then how long would you rent well we yeah we we need to get into a long-term home as soon as we can just for everybody's comfort but um you're saying just maybe a smaller home something not yeah maybe maybe it's a 400 $400 ,000 home and our monthly payment is closer to $1 ,200 instead of $2 ,400. Would it suit your needs if you did that or would you feel like you were sacrificing?

48:31I would feel like we were sacrificing. Yeah. And how old are the kids? Two and a half right now. Okay. And how much do you guys make a year? I'm at 93 and my spouse is at, my wife's at 57. Okay. I mean, And did you both, how did you guys grow up with money, Jeff? Did you, because you said, I wouldn't imagine ever buying a home this expensive. Yeah, so my wife grew up from pretty, you know, pretty limited means, you know, larger family. And they made it work. But, you know, she definitely comes from a, you know, a different background than I do. When I was growing up, we as a family didn't ever have to worry about money.

49:12My parents always made smart decisions with it. Who's more hesitant about the house purchase? you or her right a frugal approach to life um i would say she's a little more hesitant than i am which makes total sense and you know sometimes money's weird because you guys have been really successful jeff i mean you guys make six figures i'm gonna say you have no debt because i think you're gonna pay that car off tonight is what i want you to do with some of this money you know you're debt free you have a fully funded emergency fund you have a massive down payment uh you have little kids you've already started 529s for that i mean like you guys in all terms are very successful.

49:47And I think sometimes if we come from a family where there was a little bit more scarcity, you had to watch things, more caution around it. It's almost like her emotions haven't caught up with the reality of what she's living. And I think that's really normal. I think a lot of people, and we get calls sometimes people know like, oh my gosh, we can spend this on vacation, but is that crazy? Like they can't emotionally digest like where they really are at, you know, realistically and so um so I could I totally see where she's coming from and I get that but also our emotions can't be our driver of decisions always because they sometimes don't make sense like they're not logical always you know and when you look at the numbers yeah you guys are not out of control at all that's a good time when the numbers do help you like looking at the numbers I mean the same thing happened to us uh the other night Jeff my husband had said there was a line item on our budget, he was like, man, I just think that's too expensive.

50:41And I had to look at him and say, and relative to what? Like relative to what? Because sometimes you can have a certain number in your mind about a certain thing that, like you said, I didn't think we'd ever have a house that was five, you know, five or$600 ,000. But that might have been relative to the old situation, but relative to where you are now, like Rachel said, it's totally within means. And sometimes running out those numbers and running out the actual percentage of your income is so helpful because it helps you. It helps your emotions align with where you are now and go, oh my gosh, this is so true.

51:12And then just take some time and marinate in that. High five each other and be like, man, we really did it. Good for us. We can afford things that we once thought were out of reach. And I think it's so important to mark those times, both mentally and emotionally, because they are wins. And it's so easy to go through life and not celebrate your wins. That's so good. So good. That's good advice. Yeah, I appreciate that. Yeah. Do you guys, do you all have a specific house that you, that you guys have looked at and you're thinking about putting, putting a down payment on? Like, is there a specific one that she can like picture and see, or is it just, that's the price range and you guys are going to start looking?

51:49No, yeah, we've been in the market for a while. We've had several offers that have not gone through on different properties, which has kind of caused us to escalate what we're looking to spend. You know, at one point we weren't going to go above$450, and now we're knocking on the door at$550 for a specific property. So that's what gives us some apprehension as well. I got you. We've shifted away from our original conservative plan, and we've always been conservative in all other financial decisions. Totally. I hear you. I hear you. Yeah. That's when those guardrails really help, though. what we said before, the 25 % rule.

52:21That's when that's kind of like your true north of, we may have started out one way, but this is truly the line in the sand. We know no matter what we choose, we're not crossing that. And I think for you guys, like you said, if you do the plan the way you said, you're not going to, you're not going to cross that line. And I think that's good for you to remember.

53:15This show is sponsored by BetterHelp. I have awesome friends, I got a great faith, and I have an amazing wife and family. I've also got two PhDs worth of information about how to be well. And yet, the times that I've spent with great therapists over the years have made all the difference for me. The right therapist can change everything about your mental, emotional, and relational health. And this month, my friends at BetterHelp are shining the spotlight on the therapists, the people who truly make the world a better place. With over 30 ,000 therapists, BetterHelp is the largest online therapy provider in the world.

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54:52our question of the day is brought to you by why refi if you didn't take out private student loans hoping you didn't take private student loans out hoping to default but life happens and why refi will not shame you they'll help you explore a real plan to get you back on track head to Y-R-E-F-Y dot com slash Ramsey to find out more. That's the letter Y-R-E-F-Y dot com slash Ramsey. Not available in all states. Okay. Today's question comes from Jamie in Iowa. They say, I'm struggling to pay off debt, not because I can't afford to, but because it's hard for me to let go of the cash that's in the bank.

55:29I have close to$80 ,000 in car loans and a$450 ,000 mortgage. I have liquid cash of$300 ,000 and a brokerage account with$100 ,000 in it. I know it makes no sense to keep the debt, but I have a hard time not seeing all of the cash available. How do I overcome this mentally? Oh man. So this is crazy because yeah, if you were to clear out the$300 ,000 of liquid cash, or at least, you know, take it down to three to six months and then take the$100 ,000 out of the brokerage, you could almost pay off everything, including the mortgage. Almost. You'd get pretty close. But for sure, you'd clear the$80 ,000 in car loans and get rid of most of the mortgage.

56:11I have a sense, Jamie, that this is some sort of fear of the unknown, I think. Whenever people cling on to savings, it's usually either one of two things. It's kind of like that scarcity mentality that we talked about earlier, which is maybe the way you came up, something caused you to be like, when I have money, I have to keep it. Whether you grew up super duper poor or you were in some sort of a relationship where you couldn't get what you needed or you had a scary time where you lost a job and your family suffered and you had to go on food stamps, whatever that was, something affected you to the point that, yeah, you feel like you have to cling to money.

56:48Or maybe it was none of that. Maybe you just feel like you're doing super duper well and you just love the feeling of looking over in that account and seeing that money and just the idea of what it would feel like when it's gone, you don't know because you've never done it. And I think that that's so much. Rachel, we talked about this earlier today. So much of what we teach is a big question mark to people because people are calling us. Most people have been in debt their entire life. Most people have never felt what it feels like to have paid off mortgage. Most people have never felt what it feels like to have, you know, in her case,$300 ,000 in savings.

57:24And so, so much of this is a question mark that when we ask people to shift into the unknown, they're like clutching their pearls like, well, what's it going to feel like? What's going to happen? What if, what if, what if, what if? And all these what ifs come. And I get it. It can be overwhelming. But in this case, you almost have to ask yourself, well, what if I don't do this? What's the repercussion on the other end? Let's talk about that. Because if you keep this$80 ,000 in car loans around, all you're going to end up doing is, you know, draining, milking yourself with interest. That's ridiculous.

57:57Why do that? Same thing with the mortgage. I mean, an amortization schedule is there for a reason. It's explaining how much the interest is costing you year over year and how much is going to the principal. So you can see on paper that the longer you keep that debt around, the more you're paying an interest. So you kind of have to ask yourself at what cost? and what would it feel like to be free? Yeah, and it is so interesting that people, we always talk about change is so hard. And even if you're doing something that you know is kind of stupid, like what she's even saying, I mean, she's even saying, she's like, but it feels comfortable because I know even though what I'm doing is wrong, at least I know how it feels and I can at least stay in there.

58:37So there is a level of change in life that's hard. If you're changing something relationally, if you're changing your, you know, physically or your health, like it causes something to be stretched within you. But if you're changing to something that is good, and what we have found time and time again is that people that are debt free, they are free. They are free. That's it. And if you want to get back into debt, you can always get back into debt. Like there's a whole industry waiting for you. Like, right. If you hate it, you can get right back in and, you know, take a personal loan and put money back.

59:09Whatever you want to figure out. You can put it back if you want to yes but there's something about owning your life and when you pay things off and you build back up that savings it's all yours that that car is yours um you know that savings that you build back up is yours and so it is it's a it's kind of a different approach and you've even said jade before how it is a it's kind of a myth that you're safer with the cash yeah because you have you have risk like the cash like if something were to happen and you have to drain your cash for some reason, you still have a payment. You still have payments.

59:39Yes. And let's just, if you want to take it completely mathematically, the feeling of, if you tell me, hey, I have$300 ,000 in a brokerage and$100 ,000, or no, I'm sorry,$300 ,000 in cash and$100 ,000 in a brokerage, you're thinking, you think you own$400 ,000. But that is not true. If you own$450 ,000, if you owe$450 ,000 on a mortgage, you owe$50 ,000. Yes. Nothing is yours. That equation does not add up. And then there's the other 80 ,000 in car loans. So technically you are in the red. It's a negative net worth. It's a negative net worth. So all of this is based on a lie that you're telling yourself, this money's mine, this money's mine.

1:00:19And it's really, really not. And so if you approach it from the math, the math is laughing at you. And if you approach it from the emotions, the emotions are going, well, there's more peace over here if you go ahead and pay this off. So it's kind of like what Dr. John Deloney says, you have to choose reality. And what is the reality telling you? And that's what I would tell you to do, Jamie, is take Rachel's advice, pay it off. And if you feel terrible, which no one's ever called in here and said, I paid off all my debt and I feel horrible. Help me get it back. But you could if you wanted to. You could if you want to.

1:00:53Yep. Hope that helps. All right, let's go to Dallas. And we have Chad on the line. Hi, Chad. Hey, how you doing? We're doing great. How can we help? So I've been listening for a while, and pretty much everybody I hear you talk about the baby steps with is on a structured income. My question is my income fluctuates monthly and yearly. Is there a custom plan made for somebody in my situation, or do we just try to make the baby steps work for me? Yeah, everybody. Well, there's a lot of irregular income earners that call in. I was one, Chad, if that makes you feel better. Yeah, I technically am. I mean, yeah, we get, I mean, I haven't heard one and all the.

1:01:39Okay. Yes. Yes. It's very common. There's a lot of people that are irregular, whether they're doing freelance work or commission based positions where they make a lot one season or like photographers, they make a ton one season and then it kind of goes dead. So, you know, that, that is a very normal approach to money or people have that situation all the time. So no, there's not a special way to do the baby steps. But if your job, is it seasonally very different, Chad? Okay. Tell me about that. What's the seasons? Mother Nature controls my work, basically. I fix hail damaged cars. Okay. So if it storms, I have good storm seasons.

1:02:21I make a lot of money. If I have weak storm systems, then I can look. So what I would do is... I usually have about a four to five month slow period throughout the year that I save my money for that slow time. And so the thought of paying that money off onto my debt, then work dies off and now I'm scrounging for money to pay my bills. So the paying extra on your debt doesn't include your monthly expenses. So I would have that fund of what you've set aside for savings, which is so smart. I would consider that amount of money for your expenses, for your four walls, your food, your shelter, utilities, transportation.

1:03:01That's not just extra money that's just hanging out that has no purpose. That's to cover your basic living expenses during low season. So we do say to have an account that we call your peaks and valleys. And if you know, okay, we spend X amount every single month that we need this much. And if we don't bring in any money, I have to pull this amount out of savings in order to cover our expenses. Like if you're down to a T like that and you know that that fund is there for that, no, I would not throw that extra at the debt. That's totally fine. The paying off debt is above anything or anything that you can cut.

1:03:38So I would look at your lifestyle and say, hey, is there anything in our regular expenses that we have regardless of, you know, seasonality of the weather that we can throw extra at the house? But no, that fund, I would consider your Peaks and Valleys fund to be able to literally pay your bills. So we don't tell people to get behind on their bills to pay off debt. Stay current, which is what that fund is for. But anything extra that you can squeeze out of the budget and or any more work you can do in those slow periods. That's the T. That's the T right there is doing work in the slow periods. Yeah, go get another job during that time.

1:04:10And man, you can double up, which is great.

1:04:18Thank you.

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1:05:43Well, if you enjoy the show, one of the best ways that you can help us out is by spreading the word. So putting it on social, sharing it with your friends and family, it's always helpful. So make sure to subscribe and yeah, give us a like, share the videos. And we always love to spread the word about the show because we want to help people get control of their money. Absolutely. All right. Next, let's go to Trey in Houston. Hi, Trey. Welcome to the show. how you doing we're doing good how can we help um so i'm about four thousand dollars in credit card debt right now i don't have any other loans nor any other anything else and um basically me and my girlfriend have been talking about um getting married and i've been thinking about just engaging to her soon and stuff and she's been talking about homes and everything like that And I've been talking to her about the show, but I just want to know how can I tell my girlfriend that I kind of lied about my financial situation?

1:06:45Oh, no, you lied. What happened? So basically, I only told her I was like$2 ,000. Why did you lie, Trey? Why? So at first, that's where I was at. And then I started just, it started racking up over time. when I did get my first, well, my third apartment. And then I just, that always is. So let me make this, let me understand. When you told her you had 2K, did you have 2K? And then you accumulated another two without telling her that you accumulated, while you were accumulating the other two? Yes. Okay, that makes me feel a little bit better. Yeah, for sure. Yeah, so you didn't lie to her like upfront, but you've not been honest with her since.

1:07:28When was that conversation that you told her 2K and now it's 5K? Was it a year ago or like two weeks ago? It was a couple weeks ago. A couple weeks ago. So you accumulated the 2K in two weeks? Yeah. Oh, okay. Doing what again? Did you say your third apartment? What was the 2K for? 2K was used mainly for basically like a lot of the stuff that I have. Like currently I got a lot of new stuff that I really haven't kind of told her about either. Like what? I got a lot of new stuff. Name it. I got a new bed. Okay. I got a new bed. I got some other like pots, pans, stuff like that. Okay, because you just moved.

1:08:11Okay, so you're buying stuff for the apartment. So I moved not too, so basically I moved not too long ago, but I've been at her apartment a lot of my time. Understood. So a lot of this stuff has been, I've been at her apartment. So just tell her. I moved not too long ago and then I'm like, I just gotta move it. What do you think will happen if you say, hey, just so you know. now she's listening now so she's probably hearing me is she there with you or is she like at work listening and you're gonna come home to fury like listening on the yes i'm gonna go all right well hi trey's girlfriend this is doing well this is like maury why did you make it like this trey okay so um what's your girlfriend's name can you say it since she's listening shayla shayla Shayla.

1:08:53I can say it. All right, Shayla. Now you know. And we're trying to tell him he needs to come home tonight and tell you what happened, but he's telling you now. So the key here is you need to start paying this off. What are you making? What do you earn, Trey? So I originally earned about$48, but now I make around$50 because I got a 4 % pay increase. Good. So I make around$50 a year. Good. At this point, I've been talking, me and her have been talking about this. like we've been talking about your show. We've been talking about the baby steps. I sent it to her today and stuff. So we've been really talking and honing in and we've been talking about all this stuff about getting out of debt.

1:09:32She kind of told me where she's in debt on her end. How much does she have? I kind of just like around$8 ,000 or$9 ,000 in the student loans. Okay. Now, can I ask you, Trey, if you've been listening to this show, what caused you to go? I mean, you have a fine income,$50 ,000. What caused you to go into debt to buy pots and pans and a bed. Why didn't you just cash flow that? What was going through your mind? So at first, the problem was, was that I had to get the stuff that's currently in my apartment, the like couch and bed stuff is not mine. It was my sister's. So I had to give that back to her.

1:10:08Got you. So you felt like you were in a time crunch. Yes, I was in a time crunch situation where like I had to, you know, kind of spend it, just kind of do it. You can do it now. I see. So I just want to encourage you going forward. I love that you and Shayla are listening to the show. I love that you guys are starting to hone in on this. I just want to encourage you and also just admonish you going forward. There's always going to be times where you feel like there's a time crunch. There's going to be times where you feel like you have to move fast. Urgency is where the debt industry loves you when you're urgent.

1:10:40When you're on a car lot and you're like, I got to get a new car. Yes. I moved to, oh, God, oh, God. They find you in crisis. That's right. A hundred percent. A hundred percent. But if you can start now to exercise the muscle of just even taking a moment, taking a breather and going, OK, what can I do instead? Can I can I sleep on a friend's couch for a week while I save up some money? Yes. Could I go on Craigslist? Or an air mattress, a hundred dollar air mattress. I slept on an air mattress for a long time. Yeah. So just always know, Trey, that there is always another option. OK, so in a situation, whether it's furniture or a car, there are options out there.

1:11:16So slowing down is a really big part of making wise financial decisions, not feeling like you're backed into a corner. And then I would want to get to, and again, it's only been two weeks, so it's not like you've lived with this for months and lied to her. But I would want to know from you what's caused you to not tell her. Is it because she'll get mad? Is it that you're embarrassed? Is it that you wish you had done better and now you kind of have some guilt and shame around the choices that you've made? what was the main motivation do you know i i would say honestly for me the main thing was just like you know me and her have been talking about marriage um and like we've been talking about how much do we want to spend she's been talking about being getting eloped it says so we can save a lot of that money we don't just go in and just have this big wedding ceremony yeah um and she's not looking for that i think we've been it was a situation where it was like a little bit of embarrassment like dang like you know I didn't really want to tell her that I just did this because she's gonna she's gonna tell me hey why'd you do that you didn't need to do that we couldn't figure something out yeah yeah even even this even this tray is an example of just learning that communication pattern you had a feeling about not telling her you didn't tell her but then even still you came on the show as a strange way of telling her I would just want to encourage you in the future just if this is a person you love you trust go to them and tell them the truth yeah and starting off marriage with hiding the pots and pans tray we don't want to do that we don't want to do that we don't want to get we don't want to get in that habit because genuinely I mean secrets start to they that erodes trust so fast and as honest as you can be tray with her about this and going forward I mean yeah Jada we've been married we've been married over a decade, both of us.

1:13:06And to men, our own husbands. Yeah. Sorry, not to each other, to our own spouses. I think we both could say that, you know, there are things that are going to come up in life that you're embarrassed about and you're, you know, you don't like things. You know what I mean? Like that is going to happen. And the moment you start hiding those things is where that trust erodes. So the more vulnerable and honest you can be trained, And this is a great first step. And let me just say to lighten the lighten the load a little bit that it's$2 ,000. Yeah, it's not. Some people, you know, send that. It can be much worse.

1:13:43It can be much worse. But but that doesn't matter, regardless of the amount. It's the principle behind it. Right. That I want you to get in a healthy pattern of you guys communicating and being on. And and I want you to cut up the credit. Was it credit cards that you that you charged it on, you said? Yes, it was credit cards. Cut it up today. You guys have been talking and listening to the show. You've been talking about the show, listen to the show. I want you to start doing the stuff that we talk about. So cut up the credit cards. You guys cash flow. She sounds amazing. I know she's listening.

1:14:09Girl, we are for you. We are on her team and your team, Trey. But she sounds so level-headed. And be wise about this. You know, if you don't have the money, don't buy it. And let that start to be a pattern in your life. And that includes the engagement ring. That includes the wedding and the honeymoon and all the things. But yeah, I think it's going to be awesome. Do you know when you're going to... Well, no, I don't want to ask for that. How long have you been together? right now i've been with her off and on we were off and on for about a year now but um i have been secured with her for about going on three months now secured with her that's a good i don't know really really like that's a phase i didn't know about yeah secured like it before we stopped talking for a little bit and then we got back together Okay.

1:14:56Okay. I like it. I like it, Trey. Secured. I'm excited for y 'all. Oh, man. Love it. And all the security coming forward. It's great.

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1:17:04the all-new every dollar is here and now it is way more than just a budgeting app there's so much in this and the features are incredible and it's all designed to help you make progress faster when it comes to your money. The average person finds thousands of dollars in margin in just the first 15 minutes of using the new EveryDollar. So start EveryDollar for free today. You can get it in the App Store or Google Play. All right, let's go to Andrew in Chicago. Hi, Andrew. Welcome to the show. Hey, Jake. Hey, Rachel. How are you guys doing today? We're doing great. How can we help? So I am about to propose to my girlfriend of five years coming up in the next month or so.

1:17:48Oh, congratulations. And with us moving forward, obviously that comes wedding and pay for the wedding and looking at buying a house in the next couple of years. My question is, when you're saving up for a down payment and for a wedding, should you still invest your 15 % of your income for like retirement or should you reduce that to a lower percent or kind of guidance on that? Well, so in the baby steps, technically the house would be 3B. So you'd save up baby step three first, so three to six months. Then you do 3B, which is save for a down payment. And then four is the investing, the 15%. Now, if you felt like you could do 3B and four at the same time and make, you know, find progress on that down payment, I would say that's fine.

1:18:43And that's up to you guys if you want to do that. Do you have any other debt or anything like that? So we're both out of debt. She's going to be graduating college here in December. Great. I'm debt-free. I'm currently debt-free. We're keeping our finances separate until marriage. Good. Okay. So kind of just looking for guidance for what we should do. I currently have$20 ,000 in savings. Okay. Does she? My yearly salary. Go ahead. Go ahead. Um, my yearly salary, I'm going to a new job in two weeks. My current salary will be$100 ,000, and her salary as a teacher will be$50 ,000 when she starts in January.

1:19:27What would you be looking to spend? I mean, in the Chicago area, it can be pretty spendy. What do you, what's it going to cost to get what you guys need? Probably somewhere as a first home, probably somewhere between$200 ,000 and$300 ,000. Oh, okay. Okay. Then, yeah. Further out in the West. Yeah, and the wedding, right? How much are you guys wanting to spend on the wedding? We're just getting into those weeds. We haven't really decided on a budget yet. Don't call your wedding a weed. I'm just kidding. Is family helping pay for any of that, or is it all on you guys? Yeah, I believe both her parents and my dad both are going to contribute to the wedding.

1:20:14So the first point of that would be really sitting down with them and finding out, honestly, what they plan to contribute. Because that's going to, I mean, obviously heavily impact what the overall spend of the wedding is. Because you guys are going to have to look at your budget and say, whether they help us or not, here's what we can contribute. So having those numbers ahead of time and also understanding how it will be dispersed is very important to planning a wedding. Because if their thought was like, oh, we're just going to give you 10 grand as a wedding gift, that's very different because deposits and stuff have to be made.

1:20:47So really getting in the details on that, as awkward as it may seem, I think is so important and is so helpful on the beginning part of planning a wedding. Because those timelines and those deposits, they got to go on time. Yes. Yeah. So to make sure you guys know, OK, here's what we're being helped with that amount. And is that amount of money enough for what we're wanting as a wedding? And if not, how much more do we need to add to that? And is that realistic or do we need to pull back some of our expectations? So that and then on top of that, yes, saving for saving for a house. So if I were you guys, you know, I'm OK with people pausing baby step four and not investing for maybe three years.

1:21:30that's not really a hard and fast rule but it's a good one though anything beyond that i would probably want to get in and start investing because that compound interest is so great but if y 'all need to pause for a few years just to build up um a large amount for a down payment um that i would be okay with that but i probably wouldn't go any longer than three years not investing and then uh the three to six month uh emergency fund is that based off of your income or off of expenses? It's really based off of, you could think about it a couple of ways. So I like to think about like job situation.

1:22:06I like to think of relationship status and health. So for instance, if you were a single person, I'd probably automatically go to six months simply because if I lose my income, that's it, right? But if I'm married and there's another person who, if I lose my income, but if they have theirs, there's a little bit more security there. So that's kind of how I consider like the relational side of it. Then I'm thinking about health. If one of you is in, you know, poorer health and there's an opportunity for hospital stays or being out of work, that's another thing that could impact wanting to have six months versus three months.

1:22:39So those are the kind of things that I look at with you guys. I mean, is there anything? Well, and I think I would say, too, from are you asking, should you save three months of income or three months of expenses? Or are you asking time frame? Based off of how much you should save, is that based off of saving up to three months of your income? Yes, so we don't really do by income. It's more of expenses. So when you look at keeping, yes, you know, the rent paid, food on the table. So that's what Winston and I did. We kind of looked at our monthly. And we stayed. Did you go bare bones? We did it bare bones at first and then later on we upped it.

1:23:18Yes, yes. So, yeah. So you guys could just start with, okay, what keeps food lights on the rent paid and get that, you know, not all the extra exciting stuff, you know, no going out to eat. Like if you got the bare bones, how much is that? And then you can multiply that by three, four, five, six. And that can give you kind of that number for that emergency fund. But what Jade's saying too, I think is important that you guys are going to be two people with two incomes, no kids. So you really could go on that three months, especially since you are going to be saving up for a down payment. yeah like getting to that um because you can always come back later yes and do that's right that's right is that helpful Andrew yeah that's perfect that's questions both questions so fun answer definitely uh didn't know perfect so great well congratulations again um yeah that's gonna be fun all right quickly let's go to Jamie in San Diego hi Jamie welcome to the show hi thank you so much yes how can we help today okay my question is we my husband and i seven years ago were gifted financial peace university as a wedding gift we were able to get completely out of debt save six months of expenses in our emergency fund we currently invest 15 percent of our household income and we have about two hundred and fifteen thousand dollars in savings okay um We live in a really expensive area.

1:24:41We cannot afford to pay a mortgage yet. We're in San Diego, so it's just really expensive. But my question is, we just had our second kid. I'm supposed to go back to work in December. The thought of going back to work and paying so much in child care for someone else to raise our kids is just really hard. So is it just a completely stupid move for me to not go back to work and us pull one to two thousand dollars of savings each month so that I can stay home with our kids because we have such a big savings of savings? Yes. Y 'all have two fifty. Y 'all have two fifty liquid, right? Two to fifteen.

1:25:16Two fifteen. OK. You know, I I would be OK with it for like I don't know if it's if it really is one thousand a month. And you need a little. So two thousand a month. And yeah, what's the long term plan? Is there a long term solve here? Or are you just living in an area that's way too expensive for you guys? Do you need to move? No. Well, my husband changed careers about six months ago, and he is on a track where he is going to be getting promotions. And hopefully this would only be a year or two. And he has a lot of growth opportunity, but it's so there's I would say, Jamie. So I would say I would be OK with it.

1:25:55I think you guys have worked hard. You put money aside to be able to make some of these moves. But I would have a threshold because what can happen is you're like, well, we're in San Diego. You know, the promotions haven't really come. It's not really what's happening. You know, if stuff doesn't happen according to plan, you can start justifying your position. That 215 is going to be gone in an instant. So you need a threshold to say we're not going past 100 ,000 in savings. So either I have to go back to work if the promotions aren't coming, but have that threshold. But yes, I am OK with it for a time, for sure.

1:26:24but don't sit there and just drain that 215 without another plan. So have a threshold of what you will not pass. That can be whatever number it is for you guys. Um, but yeah, you've worked hard to make choices and this is a choice you want and you can afford it.

1:27:02welcome back to the ramsey show in the fairwinds credit union studio i'm rachel cruz hosting today with jade warshawn we're answering your questions up next we have nancy in dallas texas hi nancy welcome to the show hi thanks for having me yes absolutely how can we help today um so my husband lost his job about a week ago oh my gosh sorry he was our sole income earner as I'm a high-risk pregnancy right now with our third kiddo and I just want some guidance on how we navigate the next few months until he's able to find work oh my gosh now are you high risk because of your age or are you high risk because of other factors?

1:27:50Because of other factors. And thank God there's a chance that the issue will resolve itself by the time the baby comes to term. Yeah. How far along? Until that, I'm on bed rest. I am 24 weeks right now. Okay. So financially, where are you guys? How much debt do you guys have? um so we actually moved houses earlier this summer um to a house in the country and we've been trying to sell our other house oh gosh you have two mortgage payments no thank god you were able our the house we're in right now we have no debt on oh great yeah uh but we have debt on the old house. Okay. And then we have two car loans.

1:28:42Okay. How much are your car loans? My husband owes five grand on his truck and then we owe 24 grand on my minivan. Okay. And how much is the payment on the 5k, the truck? $770 a month. Okay. And how much is your van payment? $507. Okay. And how much is the mortgage payment on the house that you're not living in? uh one thousand four hundred seventy dollars okay um perfect okay and what was he bringing home per month like what was hitting your account um he got a lot of overtime so it was consistently between seven and eight but his base pay was uh forty dollars an hour 36 hours a week okay Okay.

1:29:29And what was he doing? What kind of work? He worked maintenance, facility maintenance. Okay. Okay. Do you have any money saved? I mean, you were able to buy a second house kind of outright. Where'd that money come from? My husband worked really hard. We both did for a while. And then we came into some family inheritance money. and so it just kind of like sped up this process for this dream we had of moving out of the city and slowing down our lives yeah so between savings and inheritance we were able to get out here and then we thought selling our previous home it would pay off the cars pay off the mortgage what will it bring when you sell it eventually uh it's listed for 260 right now and i owe 160 on it Okay.

1:30:21So it should pay off all of our debt. Yeah. Okay. And so you don't have anything left over saved from? No, we ended up using all of our savings pretty much to build the house. We still have our$1 ,000 emergency fund, though. $1 ,000. Okay. Tell me this, Nancy. How hard will it be for him to be able to replace that income? It just feels like maintenance, I don't know. Again, I don't want to be ignorant, but I feel like that's a very wide spectrum of being able to probably plug in somewhere pretty quickly, right? Would you, does he feel like there's options? He's been applying a lot. I don't know that we'll find anything that's comparable to the last company.

1:31:04Sure. But I think we can find something in the high 20s, low 30s. Sure. Okay. So what I would do, because you guys have$2 ,700 a month going out to debt. Um, and I would, I would figure out maybe you already have a really tight budget to figure out. You don't have a mortgage payment on the house you're currently living in. Um, but I would figure out food, um, utilities, gas for the cars, like the things that you guys have to have, um, and figure out, okay, here is the minimum that we can scrape by. And I don't know what that is going to be for you guys. I don't know if it's 4 ,000, 5 ,000. I have no idea, but you guys need to figure that out with the debt included.

1:31:43and if I were you which I'm so urgent so I can't even imagine how you're feeling that you're on bed rest and like this is happening um did he get any severance at all no no severance okay what's the what's the movement on the house is there anything like I would be on my realtor like we gotta close like we gotta get an offer and close in 30 days we've had the house listed since June and it was originally a solicited at 290 and we've dropped it 30k when did you do the drop five months oh it's been gradual okay it's been gradual yeah well average it down i think the last drop we did like a week and a half yeah average is two months right now sitting um so you guys are over that a little bit so it might be a price thing um yeah so i i am with jade you know, if you, what, what you guys can do to, to be urgent on that, but even urgent on the, on the income side, like if I were him, you know, I wouldn't, I wouldn't care if it's comparable for right now because some things are going to turn right.

1:32:44This, um, after, you know, you have the baby, the house sells, like some things are going to start to like alleviate some stress, right. As life continues on. Um, I mean, it'll be in the next, you know, six, seven months, but until then, in these next, I mean, I would think until like summer, like that would be in my head, I got to go do anything. Yeah. Anything to be able to stay current on this stuff. And my hope is too, Nancy, that he does apply and that what he was doing obviously was bringing a market value of something that was fantastic and that he can find something. I think there's always a natural assumption in our human spirit that if we lose something that the next thing's never going to be as good.

1:33:28And so we're probably going to have to always downgrade, especially if there's like a layoff situation. But that's not always the case. Yeah. I think both of you have got to sit down tonight and decide that come hell or high water, like debt, you're not going to go crazy into debt because of this. Like even if he's picking up Uber tomorrow, like any money coming in is going to be better than no money coming in. Because with$1 ,000, yeah, you guys are up against the wall, which is for the listening audience, why we always say you got to have three to six months of expenses before buying a house.

1:34:02You've just got to have it. Even if you're counting on another house to spend, money's not yours until it's in your hand. Like, this is a cautionary word for the wise for everybody else listening. And yeah, for you guys, Nancy, I mean, we're pulling for you. Whatever he can get immediately. We had a call the other day where a guy lost his job. And I'm going to give you the same homework that I gave him, which is to make a list tonight. you guys sit down, make a list of everybody you know that's in that field or know somebody that's in that field and call them. Make contact. Don't just text them, call them and say, hey, I'm in the market.

1:34:38Do you know anything? Have you heard anything? And really start making those connections person to person as much as you can. He should be going to coffee with people because that's the way you're going to get a job. Just putting in resumes on the internet doesn't work anymore. So make that list tonight and you guys hit the pavement on that. Yeah, absolutely, Nancy. oh, I'm so sorry. I could only imagine how stressful, but I think the stress will lower when money starts coming in and any way that's possible for him in this season. Um, that's what we're looking at. And I know, I'm sure he feels it too.

1:35:10Um, but yeah. So, um, and again, that budget figuring out how much on the minimal side that you guys can spend on food, food utilities, all of that cutting subscriptions, not going out to eat. You guys are bare bones. It's kind of that crisis mode right now and that's okay. And you're going to get through it. You're going to get through it and he's going to find another job. The house is going to sell. Things are going to happen. But for now, we are going to buckle down.

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1:37:12All right, let's go to Mary in Portland, Oregon. Hi, Mary. Welcome to the show. Hi, hello. Hello, hello. How can we help today? Oh, thank you so much for just hearing this story out and giving your thoughts. So basically, my husband and I, we're debt free except for our mortgage. And he is a hardcore do-it-yourselfer, works really hard. He's a diamond in the rough. We bought 10 acres 23 years ago when we got married with a single wide mobile home on it with the intention to build. And, you know, life happens. And there was five of us in 850 square feet. So him being him built an addition onto the mobile home that has failed.

1:37:55We have extreme mold and it needs to be torn down. He wants to rebuild it. And I think that we should either build or bring in a double wide mobile home. We've even looked at moving, but with a brand new grandbaby on the way. And my mom just recently in assisted living. I don't think that that's just an option. So we're kind of curious. What would you do when you're in this situation when you really don't owe much on your mortgage? And you're looking at adding another mortgage. Yeah. Just a question. Why can't you move? You said a baby and your mother. Is it because you don't want to leave the area or the property?

1:38:34Because you could move somewhere else. I'm not saying that's the option. I'm just making sure that I heard you correctly. Basically, it's family that's here. And we live in an area that's extremely expensive. And we could never purchase what we have right now and replace it. My husband has built a shop on the property that he has worked out of. And so that would mean leaving that and leaving our extra income. We just couldn't replace it. We'd have to move really far away. Sure. Okay. And you guys have, is it 25 acres? We have 10 acres. 10 acres. Okay, perfect. And how much is the mobile home worth right now?

1:39:13You mean like the current mortgage? Yeah. We owe$95 ,000. Okay. And how much do you guys make a year? A year, he's at$80 ,000 a year. That doesn't include any of the extras. Okay. On average, what does he make extra? That one, I couldn't say. It kind of comes and goes. And so we don't really rely on it. and it could be a couple thousand every month or so. So can I ask a question about the addition? So you've got, you had the initial mobile home, then you added an addition. The addition is the only place that has mold, right? As far as I know, we haven't dug too far into it other than the addition.

1:39:53So if you were to, how many in your family? Is it just? There's five of us. Five of us. So if you were to remove the addition, could everybody temporarily be in the initial part of the house? Or, like, I don't know how large this is. It's 850 square feet. Yeah, I mean, it would be tight, but, yeah, we could do that. How much would it cost? I'd love to know the numbers of what it would cost to remove the addition and then what it costs to add another addition. My husband is all himself. He won't let anyone else do it. Hey, well, still. He may not have an option. I mean, like, you know what I mean?

1:40:33Like that's where people pin themselves into bad situations is because, well, he won't do it. And I'm talking more to him than you, Mary, that you guys are in a situation that it's like, I don't know. It may have to be an option. You know what I mean? Like just taking it off completely because of his pride and he doesn't want to – he just wants to do everything himself, which obviously didn't work. So we need all the options in the world, right? Do you feel that way? But he won't even entertain the idea? No, he will. He'll entertain any of the ideas. He's phenomenal. We just want to make a financial decision that's correct, you know, because we don't owe much on our property.

1:41:11He is more of the type that once it's paid off, he can breathe and he has room. But yet we have no home to live in. Well, yeah, you can't live in mold. So again, again, with my other question is, regardless who does the work, what's it cost to tear it off and what's it cost to put a new one on? I mean, I guess tearing it down, he would do. So it wouldn't cost anything to tear it down other than taking things to the dump. okay so free free okay and then um and rebuilding it i think it cost us maybe five to seven thousand to build it okay so then that would that's the equation we're solving for how quickly now if you have to that's why i asked can everybody uh stay in the main side because you got to get out of the mold so it's like right getting that done and then doing the math of how quickly can you save five to six thousand dollars um with the margin that you have because there's no other debt, you should have a decent amount of margin laying around.

1:42:01I mean, maybe not a decent amount. You're a family of five on 80 ,000. Do you work, Mary? I homeschool my kids. Yeah. So yes, I do. Yeah. No, fair, fair. I shouldn't. Yes. I didn't really phrase it that way. But I say, I'm still going to ask the same question because you work full time. Your husband works full time. Both of you are going to have to do something on the side to bring in income in order to save up this five to seven thousand dollars as quickly as possible because you guys are going to feel each other's presence in that single part of that mobile home. His side business I mean you said kind of like well it's like around a thousand maybe two thousand um a month but we don't really count on it.

1:42:38I would be counting I mean I would I would make it a goal to say we need to save at least two thousand dollars for the next three months that's six thousand so then we can start the addition and that'll be a couple of months to do that and so you know life looks different come you know, May, June, if you guys actually buckle down and say, hey, no, no, no, we are going to work extra to make this actually happen. Yeah. The one thing that concerns me is the fact that once you get into a mobile home and you take parts out of it and you add new parts in, it's not legal. And also insurance doesn't cover you if your house burns down.

1:43:15So that means so what you're saying is your husband can't do the work you have to hire a professional? I don't think legally you can build an addition onto a mobile home. But he did. And you were living with that and you wouldn't have said it. Don't get me wrong. I'm not saying that you need to do something legal, but where was that logic the first time, I guess is what I'm asking. My husband does things on his own terms. Got you. So Mary, help me with this. When you called in with the question, Rachel's first thing was you need to move somewhere else. And you were like, that's impossible. So now we're, now we try to go into your world and say, okay, well then let's just rebuild and you're like, well, here's the problem.

1:43:51So what do you want to do? I mean, I'm open to anything. That's why I was calling. Well, you're not open to anything because you're not open to moving and you have... No, I'm open. Well, listen, I'm on your side, but I'm just saying what you said back to you. Moving is too expensive and you're concerned with the legality of the addition. So you have some qualms. So you're going to have to choose. Is there an option that we didn't think of? Are you thinking, hey, scrap the mobile home and let's build our own home? You tell us what you're thinking of doing so we can help you get there. That's probably what I would look at anyways, Mary, to make it a goal to build something.

1:44:29It'll obviously be more expensive and it would be adding on a mortgage. So I want you guys to do that. But having something that, you know, because mobile homes, I mean, depending on the markets, yes, sometimes they do go down. And so having something from a financial standpoint that's really steady for your family long term, I think is a great goal. Is there a building plot on that land, on that 10 acres? I mean, I'm sure there is. Yeah, right where we're sitting. Okay. So yeah, so maybe it's you guys moving somewhere part-time. I don't know. I mean, I don't know, Mary. I'm just trying to think of things.

1:45:01That's what I was kind of leaning towards. Okay. But is that financially a good choice when you're almost paid off on your mortgage? Do you want to add another 30-year mortgage? Well, it's not that. What you could consider, and this is just, I'm throwing something out there because I like Rachel's idea of getting in something permanent that can go up in value. But the truth is you don't have the money to do that today. And you're living in a situation that's not healthy because of the mold. What if you kept the land? What if you rented somewhere for a while to save up to be able to build on the land?

1:45:31People do it every day. And renting for a while is not going backwards. No. And it would be, you know, he could still keep his shop, you know, there on the land. And but yeah, you guys are going to have to get creative for a long term plan to get this to work. So it's not. Yeah, it's definitely not one plus one just equals two. And this is like the easy route. There's going to have to be some give and take from you guys from location standpoint, maybe for a little while while you guys save some extra work that you're doing. But again, if you're thinking the long term thinking here for housing is the key, not just in the next six months.

1:46:40We'll see you next time. a Ramsey trusted agent near you, visit RamseySolutions.com slash agent. RamseySolutions.com slash agent.

1:47:08up next we have michael in seattle washington hi michael welcome to the show All right. Thanks for taking my call. Absolutely. How can we help today? My question is, we are expecting our firstborn in March next year. Oh, congratulations. Thank you. And my question is, am I able to afford or is it wise for me to stay home with the baby? Well, let's look at it from obviously a financial perspective. So does your wife work? Yes. What does she do and what does she earn? She's an HR manager and she earns$170 ,000. Okay. And what do you do today and what are you earning today? I'm an engineer and I make$135 ,000.

1:48:00Okay. Do you guys have debt? We have some debt on a rental property and that's it. Oh, and our mortgage. Okay. So you have some debt on the rental and then your mortgage. What's your mortgage worth?

1:48:18The note has$450 left in the house is worth$585. Okay. What about the rental? I'm just curious. Rentals$225, worth$225 left on the note is$150. Okay. Okay. Okay. Okay. You know, if you were to have crunched the numbers and said, okay, like, we can do, do you have three to six months of expenses? We do. We have about 30K. Love it. Yeah. I mean, yeah, if you crunch the numbers and you're like, okay, we'd be going down substantially, but we can live off 170 and we can continue to do, you know, baby step four. And, you know, I don't know how I feel about this rental. Maybe that's not the question for today, but if you can do it budget wise, there's really not a problem.

1:49:12Have you all done a mock budget at 170 just to see like what she brings home every month? Do you guys comfortably live there? Can live on that? We have not done a mock budget, but we can probably live off 170. And I know probably is not a good term. Yeah, you got to do the real numbers. Right. Because usually the home is the problem. Yes, that was my primary question is, can we afford the house? Is this advisable? Should we pay down the mortgage more? How much does she bring? How much is her paycheck a month? How much is her paycheck a month?

1:49:51Right now, it's like maybe$6 ,000, but that's got some investing taking out of it and other things. That's fine because you are in baby step four, so the investing would have to stay taken out of it. But how much is your mortgage? Mortgage is$4 ,600. Ooh. $4 ,600? Impossible. Yeah, that's... Yeah, no, that's almost, I mean, that's, well, yeah, then you guys, you can't live off$1 ,500, can you? A month? because if she brings home 6 000 no you can't i'm gonna answer it for you and your mortgage right michael but for real like that's that's not right right you can't live off that yeah she she must bring home more than that i'm sorry i'm getting my numbers mixed up okay well that's it's important to do that budget and i also want you to consider yeah She makes 170.

1:50:49She's not bringing home 6 ,000. Yeah, no. It's more after, even after. After tax and everything. Yeah, it's more like 10 ,000. Okay. That would make more sense. And then you said that she is, do you know what percentage is going towards investing? Yeah, 30%. Okay, so that could come back down. So you'd have some extra money there. So that's looking better. But I also, you have to consider this rental. And I would probably say if you do this, that you might have to sell the rental because if for some reason you don't have renters and you're on the hook for that mortgage for a time, that's going to put you up a creek.

1:51:26Do you agree? Yeah. Yeah, absolutely. Yeah. And that'll give you a$70 ,000 cushion too with the equity, which is just nice during this time. Yeah, because are you really making anything off the rental or are you just kind of breaking even? Breaking even. Yeah, I'd sell it immediately and keep that cushion. I'm just curious, Michael, what caused you to be the one to stay home and not her? I know she's making, I mean, yeah, she makes 35 more than you do. But I don't know. Was that a career decision? She loves her job. And after the baby, she definitely wants to continue on with her career. Yeah.

1:52:05I like my job, but don't love it, if that makes sense. Okay. Yeah. and yeah I'm just wondering if I can stay home with the kid because I feel like I would be a better dad than I am an employee I love it it's great okay perfect well and if we sell the rental what what should we throw that equity to technically it'd go at this stage it's go towards your mortgage um that's where you're at in the baby steps I mean once you guys are doing 15 % and you're putting a little extra for the kids college, right? 529 once the baby is born, then any extra money would go towards the mortgage. And you really wouldn't do any investing on top of the 15 % until after the mortgage is paid.

1:52:52So yeah, I mean, right now, if you're, let's see, you're at 30 ,000 saved. Yeah. I mean, that's good. If you wanted to, is that a full six months, like full budget, six months? yeah that's just our cash aside not our other assets so if you said she's bringing home 10 grand that feels like three months of savings i'd probably beef that up to six if you wanted like a like a robust three to six months since only one person's working and then yeah the rest of it you could put it towards the house that's what i'd do okay so pay down the mortgage as fast as you can and tighten up the budget. Yeah. And it would be okay.

1:53:32Yeah, I think that's great. Yeah. I mean, the numbers aren't crazy. I mean, the mortgage,$4 ,600 going to$10 ,000 is like a little bit like a, but I mean, if that's what you guys are choosing, then, right? I mean, it's close to 45%. Let's give you some clarity because you said you still have to dig in on the numbers. If you get the numbers and it's over 30%, you got problems. Like 30 is like, and that includes back her 50, her match, like her, her retirement and all of that, right. That's added back into the salary. So don't take that out. Add, add the retirement back in. That gives you a little bit buffer health insurance.

1:54:13You can buffer back in, you know, so some of this is like, this is just after tax. It's not after health insurance and retirement. So add those numbers back into her salary. And if the mortgage is more than 30 % of what she's bringing home, that gives us pause. Yeah, 25 % is the rule, but you can make it work on 30, but just know it's gonna be tighter. That's why we said that, but that's what you're getting to. If you're getting upwards, Michael, of 35, 40%, you have to just say no, at least for a season until you can, I don't know, maybe get this house paid off or maybe it's you working part-time and closing that gap on the mortgage and working it out like that.

1:54:55Yeah, for sure. No, it's a good question. I think that's always a hard dynamic, Jay, that we get a lot of people wanting to go down to one income, usually because of a family, and they've set their lifestyle as a two-income lifestyle. And yeah, you take one away. The mortgage suddenly is a larger part of your percentage and all this stuff. That's one reason the rule of thumb of living below your means in general is a great idea. That's right. Because when you overextend yourself, even beyond two salaries, right? You're going into debt and all of this. Then pulling back is that much harder. And if the bank, if you go to buy a house, you guys, the bank is going to offer you a lot more money than what you need to take.

1:55:36And so you really do want to be more conservative on these numbers so that it gives you options and choices. And if you know you want to be starting a family soon and one of you wants to stay home and you're looking to buy a house, remember this, right? Like don't build your life around two incomes if you know that it's probably not going to be two incomes for the next couple of years. But all that's really it's really hard, though. And then to do a mock budget, because we get this question a lot, if they can be a stay at home parent. Yeah. Run the numbers for real. And live it out. If you have the opportunity and the time to try it.

1:56:07Yeah. Live one month with the budget that would be and see how it all feels, because sometimes people go down to one income thinking it's going to bring peace and it actually brings more stress. And for a season, you know, work to get out of debt and put yourself in a better financial situation. and then come back home and there's more margin and more peace and more enjoyment. So, yeah, a lot of different ways to look at it and a values conversation, too, of what you want for your family, for sure. But also, we got to be adults and make the math work.

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1:58:08Our scripture today comes from Isaiah 5410. Though the mountains be shaken and the hills be removed, yet my unfailing love for you will not be shaken, nor my covenant of peace be removed, says the Lord who has compassion on you. The singer Pink. We got Pink. We got the book of Isaiah and the singer Pink. Love it. Pink said, you can't move mountains by whispering at them. Okay, Pink. All right. I guess that's true. I guess we just be a little more aggressive towards those mountains. Maybe. I don't know. also a mustard seed i thought but is it conflicting with the bible pink you're i don't know we don't know where we get our clothes we just we take them listen we take she's a fabulous singer yeah give her that and a great she dances she does all the like aerial trips yes we'll give her that not quotes all right let's go to tracy in california hi tracy welcome to the show Hi, thank you so much for taking my call.

1:59:14You are welcome. How can we help today? I left teaching. I was an elementary school teacher several years ago. And now it's time for me to go ahead and apply for my pension. And I have a couple of options that are quite different. And I wondered if you could help me decide. All right. What are your options? Well, I can retire now at 60 on my application. And I will go forward with a monthly pension of about$1 ,700 a month. Or I could backdate to age 55, and that would lower my monthly to$1 ,135. But I would get about$73 ,000 to cash out, about$50 ,000 after taxes. 50 grand in addition to the 1100 that you'll get monthly yeah that'll still go forward okay um what other retirement do you have saved and so um my husband and i are debt free thanks to the ramsay plan good for you guys yeah and so i have about 360 in retirement investments okay And his accounts have about$500 ,000 in retirement investments.

2:00:35Good for you guys. And then he will get his pension. That'll be about$7 ,800 a month plus Social Security and Medicare. So, well, medical and then Medicare someday. What's that amount to? Yeah. So$78 total for him. Yeah. That was including his Social Security and everything? No, Social Security will be on top of that. And how much will that be? We're guessing not much. We're guessing probably$3 ,000 at the most. $3 ,000? But maybe closer to... And will you have some Social Security as well? No, I will not. I didn't qualify for that because I was a teacher. That's$10 ,800. What's your monthly budget?

2:01:25What's it take to operate your lifestyle? Yeah. Well, we live in a very expensive part of California. So right now with pets, et cetera, we're probably at about nine. Okay. So if you had, his is$10 ,800. It takes nine to operate the budget, and that's not you ever touching a nest egg. And then if you had the$1 ,700, would that be more than enough? Well. Because I'm almost wondering this 50 ,000 could be helpful for you as a nest egg. And if you can get by on the thousand, then I probably would take the lower payment, but getting the lump sum of the 50, because then you get to invest it, Tracy, right?

2:02:13With a pension, you don't have a lot of control over where they're investing it. So if you get this 50 ,000, you guys could put that in a great index fund or something. You know what I mean? And you don't you may not even have to touch a lot of this retirement just because of his pension and yours. But if you need to, that's why it's all there. But if you got that 50 ,000, you guys are in the upwards of, you know, a little over nine hundred thousand dollars on your own, which is incredible. And with your house and everything. I mean, yeah, you guys are baby steps millionaires, Tracy. You're exactly what we talk about.

2:02:42I mean, you're a teacher. I mean, it's just it's phenomenal. so I almost would want more control over the pension and the amount or sorry I would I want control if so I would want it as soon as possible so that I can turn around and invest it in something that I know you know I'm pretty guaranteed of what I'm putting the money into where the pension you don't really have a lot of control over that so I would I would opt for the latter getting 1100 with the lump sum of of what it'll be 75 but 50 after taxes yeah this the extra 700 is incidental for you i think okay yeah i just i guess we i didn't consider investing because we already had money put away so um you know i i don't i i didn't know that that's what we should do with it.

2:03:36And I was afraid that if it comes to us, it'll be gone, you know, whereas the larger monthly pension would continue for my life. Well, I think it's the opposite. I think that$700, if you add it to your monthly budget, it's going to get piddled away on dog food and other things. But the$50 ,000, I mean, if you turn around in the moment you get it, if you invest it and put it with your other nest egg, That's going to go to work for you in far greater ways than that$700. Because you weren't going to invest that$700 a month. You were going to likely spend it on lifestyle, right? And you said that your lifestyle ticks right now on$9 ,000.

2:04:14So with your husband's pension, his Social Security, plus your$1 ,000, you're already at$11 ,800 a month, which is basically more than what you have now. And that's not touching your retirement. And you guys have other savings, right? Do you have other savings that's just like an emergency fund on the side? Yes. Perfect. Yeah, Tracy, you guys are doing great. Way to go. Either way, you're going to be fine. So just hear me say that. If that just keeps you up tonight, then choose the first one. Either way, totally fine. But if it were Jade and myself, this is what I would choose. That's what we would do.

2:04:49All right, let's go to Olivia in Wisconsin. Hi, Olivia. Welcome to the show. Hi, how are you? We're doing great. How can we help? I was kind of wondering if I should be paying off my student loans while I'm still in college or if I should keep taking them out and wait until afterwards. What would you be paying them off with? Do you have income? Just other side income money. Both my fiance and I work part time. Okay. So if it were me, I would be saving to cash flow as much as you can for the remaining college and not take out any more loans and see, okay, what do we have to cash flow to not go deeper in debt?

2:05:34And then once you graduate, you'll have six months until those payments start hitting. And then you guys can tackle that debt or you tackle it's your fiance, but I know you guys probably will be getting married. How much do you have in student loan debt? I have about$10 ,000 and he has about$20 ,000. Okay, he has 20, you have 10. And how much do you have left in school? How much time? We both have like two and a half years left still. Okay. And what's it cost per semester? Per semester, for me, it's about five with like financial aid and whatnot. And for him, it averages about 10. Okay. Yeah. So I'd be focused, like Rachel said, on how can I cash flow this every single semester so I'm not going further into debt.

2:06:24And cash flowing my portion. You guys don't need to be paying on each other's tuition until you are married. So that's a call we get, Olivia, where they're like, I have$30 ,000, but I helped my fiance get through school and we never ended up marrying. No, no, no, no. So I would be separating these. So whatever work you're doing goes towards your tuition. Whatever work he's doing goes to his. And then once you guys get married, do you all have a date set? Yeah, it'll be May of next year. Beautiful. So after May, then you guys can combine everything. Are you guys making enough to live off of being full-time students?

2:07:02Yeah, we make, yeah, we get, we take our extra loans for that too as well. We make about$3 ,000 a month. Wait a minute. That's not made money if you're taking loans for it. We want to stop that. Do not take loans to be living off of. you guys need to be cash flowing your lives. And if that means pausing school for a little bit, then we may need to do that. But we're not, we don't need to go deeper in debt for lifestyle. So you either need to find and be working more or just, yep, pump the brakes on the tuition because you guys may not be able to afford it right now. Thanks for the call, Olivia.

2:07:35Well, Jade, great show. So fun. Always fun. Thanks to all the guys in the booth. And remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Go to Beadaholique.com for all of your beading supply needs!