Short-Term Sacrifice Leads to Long-Term Financial Freedom

20:18Rachel Cruze:Of some confidence, yeah, of what you're doing. But yeah, I would take care of yourself, Holly. Get yourself in a good place. And it sounds like you're doing that.

20:41Hey, George Camel here. Let me pull back the curtain on something you may not know. If you're in debt and collectors are threatening lawsuits, The worst thing you can do is ignore it. That's exactly what they're counting on. Because when you do nothing, they can take you to court. And if you don't respond, they can win by default and even get access to your bank account. And that's why I tell people about Guardian Litigation Group. Guardian Litigation is not another debt relief company with some bait-and-switch tactic and empty promises. They're an actual law firm with real attorneys. And from day one, you get an attorney who represents you.

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22:27Rachel Cruze:So make sure to find a local Ramsey trusted real estate pro for free at Ramsey solutions.com slash agent, or click the link in the description if you are watching on YouTube or podcast. All right, let's go to John in Salt Lake City. Hi, John. Welcome to the show. Hi, Rachel. Hi, George. Thanks for taking my call. Absolutely. How can we help? I have, my wife and I, we have a lot of concerns, but I can narrow this down to one or two at this point. We're 53 and 54 years old. Late bloomers as far as creating a good income, And we've developed, we've collected a lot of debt. My wife graduated from law school not too long ago.

23:15After dropping out of high school, she went back to school and got her law degree. We, you know, accumulated a lot of debt there, about$215 ,000,$220 ,000.

23:27Rachel Cruze:Ooh, okay. That's just the beginning. um uh we have a home that's we owe 365 on and it's worth somewhere in the mid fours uh maybe a little higher than that um we have a lot of other debt that we've accumulated over the years um so other than the school loans and the house probably another um 150 000 are there cars in there looking at uh there's only one car um sitting there right now it's about five grand left and that's the thing that got me calling you guys because i had the urge when i looked at that uh amount that was owed i was like hey it's worth more than that and i can go trade it in and get another car and then i was like what are you stupid um you want to get another payment and uh and so i decided not to do that and start looking back into the ramsey program, and it's brought me here after a couple of weeks.

24:32My wife's not quite on board with me yet because although she's got that attorney job, it's only been a prosecutor's pay, which is less than what I make as a manager at a warehouse club. What's your household income today? After net, we make almost$10 ,000 a month. That's your take-home. That is our take-home, but that is after all the insurance. I mean, I max out everything on my paycheck, really, because of medical insurance. You're talking about investing? Insurance. Up until now, up until recently, I was investing$1 ,200 a month into my 401k, but I stopped that because I'm going to start putting it toward debt.

25:16Good. I've already maxed out for this year, I've already maxed out my 401k match, and my company does a gratuitous 6 % on top of that. So I'm letting them add to my 401k from here on until debt gets cleared up. The questions I have are twofold, really.

25:41Do we need to sell the home? Do we have to do that? We're living in a home that's quite frankly too big for us, but we bought it.

25:49Rachel Cruze:It was our first home we bought three years ago, and we wanted to have enough room for our family, our kids and grandkids to come over. What's your mortgage payment? $2 ,600. That's right in line with our 25 % parameter. So it's not going to— It's real close. You'll have like$70 ,000 in equity maybe if you're lucky, maybe$50 ,000 net after fees to throw at your$370 ,000 in consumer debt. So that's where I'm doing the math here going. You guys bring home 120, you got 370 in debt. How much can you realistically throw at all of your debt right now per month? I'm still trying to collect all the data because we have not done a good job, obviously, of controlling our spending.

26:29We pull out a card and we spend and we don't pay attention. We go, hey, we still got money in our account. And that's how we live. And we've been living, you know, according to payments and not according to debt. what can we spend each month. So the other thing is, you know, my wife's not on track with this yet because with her job, she has got an ethical issue at work. She could be suing her employer and possibly not. Suing a law firm? That feels fun. Yeah, suing the county. Suing the county that she works for because there are questions in there. ADA, you know, Disabilities Act that they're not following through with and also questionable practices that put my wife's law, her law degree or her bar status in question.

27:29Rachel Cruze:My question about her, just real quickly, does she see another path of making a ton more money in the next five years with this degree that she paid$220 ,000 for? Quite possibly. But right now, I try to talk to her about this stuff, and she says, I am 100 % focused on trying to figure this thing out at work. So the conversations just aren't happening. I am ready and rearing to go. I will go live in a trailer and I'll go live in an RV if I have to. Yeah, you're so done with all this. Wherever I need to. My wife's not there yet. And I knew that that was the biggest key. So, you know, I called the LPs to talk to them.

28:14And I was looking specifically for somebody who could be a financial advisor and a financial counselor. And I'm ready to pull the trigger on that. But my wife's not. And I don't want to make decisions without her.

28:25Rachel Cruze:Sure. Do you guys work together, John, about money? like in the past, like I'm not talking about the last six months. We ignore it. Okay. So when one gets fired up, the other one's not. Yep. Yeah. And so we flip flop through that. Yes. Your whole time. Okay. So that's been a pattern for, I mean, how long have you guys been married? 31 years. Okay. So breaking a pattern of financial habits and marital habits with money, it's hard to do in a really quick way, right? You've hit your emotional breaking point, which was why this makes it easy. We call it the I've had it moment here at Ramsey. People do exactly what you do.

29:01Rachel Cruze:They wake up one day and because of one small situation or a crisis, they're like, holy crap, I'm done. Like you just, like you said, you're like, I will go live in a trail. I'll do whatever I have to do to get out of this. And she may not have to hit it to that extreme, but that's, you know, obviously that's why you're wanting to change is because you have hit that moment. And so to expect her to flip a switch automatically with you, obviously probably from a relational standpoint is not realistic, but like you said, it is needed. And so I do want her to feel the weight of what you're carrying because as her husband, you have felt a massive level of now responsibility, a massive level of stress and anxiety around this that you want free from.

29:51Rachel Cruze:And so what can you all do as a partnership, even if she's not to that point? My prayer is that she can come around you as her husband to say, okay, I have a lot of stress at work. John, you got to give me 14 days just to kind of get a plan in place. And then my head will be clear. And then we can move forward. She can't live in the clouds, right, about money for the rest of her life. So I almost would have some kind of like, hey, I'll give you some grace right now. But it's kind of on fire, our situation. So in the next 14 days, we have to sit down and address what we're going to do about this.

30:23What if this drags out for two years as you guys get foreclosed on because you can't keep up with your payments? It's going to become her problem even if it's not right now. And the napkin math, John, to help you, let me just show you this. If you pay$2 ,000 a month toward your debts, it's going to take you 15 years. Yeah. That's$2 ,000 a month. That's probably money you don't have right now to throw at all those debts. And so – I think we actually do. How much can you throw at it? Because if you can do 7K, 8K, now we're talking three to four years.

30:50Rachel Cruze:Well, because you stopped the$1 ,200 of your 401K, so you can add that. And then any level expenses that you can cut, you could probably cut another three, right? I would make it a goal to be out of this thing in less than four years, and that's going to take 8K a month getting thrown at this debt, which means upping the income. And maybe selling the house is just part of that game plan to clear some of it. Working extra and all of it, yeah. Yeah, you guys do have that long road ahead. and getting her on the same page and you guys talking about this is going to be a big part, right? You can't cut$3 ,000 out of a budget you used to spend without your spouse really being on board.

31:26Rachel Cruze:And so her sitting down and you guys creating a plan together is gonna be crucial. And I think that she will have that ability to do it.

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32:59Rachel Cruze:Next up, we have Joe in Indianapolis. Hi, Joe. Welcome to the show. Hey, Rachel. Hey, George. How are you guys doing? Hi, we're doing great. How can we help? Good. Yeah, it's a blessing to talk to you. I'll keep it brief here. So I actually get married in 12 days. Oh, congrats. Thank you. Thank you so much. Yeah, it's been a long engagement, about two years. So we are more than ready. But we're going to be obviously combining finances and kind of tackling debt. So I would just like some wisdom and experience from you guys and how to just set ourselves up the best we can financially heading into this new chapter.

33:37Love it. That's awesome. And you both are on the same page that we're doing this. Yeah, yeah. It's about to be our debt, our income. Absolutely. Yes, absolutely. That's great.

33:46Rachel Cruze:How old are you guys? We're 25. Okay, great. And how much debt will you guys have combined going in? So I just bought a house last year. So consumer debt, I have about$17 ,500. That is a student loan and medical. And then she will be a chiropractor. So she has about$190 of student debt that she'll be bringing in. And that's all that we'll have. Okay. And how much will you be making, do you think? Or is she just graduating school or is she working? She's just graduating. So we think that she'll probably make about$100 ,000. I'm talking to the chiropractors at the office that she's essentially doing her clinicals at right now where she will be working.

34:33And then I'm self-employed, and I've only been working full-time in the workforce for two years now. Last year I made about$181 ,000, and I'm on track to do that this year as well. Good for you guys. Amazing. Thank you very much. Great income is going to help because you're now going to be making$281 trying to pay down$207. And so you've got a big pile here, but you've got a big shovel to clean it. And so the goal is combine the income into one bank account. What my wife and I did is I had a checking and I just made it a joint checking, added her, and then we shut hers down. It was that simple.

35:08So joint checking, a joint savings, and use any money you guys have, any savings, money from the wedding that isn't used for the honeymoon or whatever to get your life started, and start throwing that at the debt. And then stay on a budget and keep living like you're broke. Don't get high on the hog just because she's working making$100 ,000 now. Keep living like broke college students and just throw every cent at this debt until it's gone. Yeah, it's wild. A question I had is I have about$150 ,000 in my just a savings account, personal savings. And I think I know the answer to this, but should I write a check for$17 ,500 today and just pay everything off?

35:42Yes. Yes. And then write another huge check once you guys are back from the honeymoon and clear a bunch of these debts. Okay, that's what I was thinking. What's the money for, the$150? It's not for anything, really. It's just what I've saved up working the last two years, and yeah, it's just accumulating in my account. So are you going to have a hard time letting go of all of that to pay down her debt? You know, I think when I first started making, like, I was a broke college student, at first started making like quote unquote like real money right in the adult life i think at first like probably four years ago three years ago i was a little bit hesitant but i'm more than willing and wanting to just start you know from a clean slate so i am willing yes i love it well if you use that now you're down to 74 000 left to pay off making 281 and now we're done in a year and so you see how that speeds us up and guess what you're going to be able to build some serious wealth making 281 with no payments for the rest of your life.

36:38Right? Yeah. Saving up 150 grand, that's a lot of money, but you'll do it pretty quick with no debt payments. Yeah. I like that. It's much easier to hear that from, you know, from somebody with your experience. It's what I would do if I was in your shoes. So it's not just like, well, it's what the Ramsey plan says. It's what I would do is clean up the debt as fast as possible with all the assets you guys have.

37:00Rachel Cruze:Yes. I mean, that's what's crazy. If you have$150 ,000 saved that, yeah. And 200, I mean, yeah, it's 50 grand. And if you guys made it an aggressive goal to say, Hey, let's pay this off in six months. Right. What's wild to think about Joe is, yeah. I mean, we can talk about the debt payments, but in six months, that's, that's going to be, you know, in your rear view mirror, it's going to be more now going forward for the rest of your lives. And Hey, how do we set this up well between two people who you will learn very quickly that your wife is not you and you guys are going to have opposite tendencies with money.

37:36Rachel Cruze:You both may grow up in different backgrounds when it comes to money. All of that will start to kind of filter in. And so what I would say from a relational side is to see your spouse as a strength and for her to do the same to you, because opposites attract. And sometimes that can actually create friction and tension and conflict. but when you can actually pause and say, hey, actually what they're bringing to the table is the thing I'm probably worse at. And so I'm gonna lean on their strength in this area and vice versa, right? So there's gonna be those relational dynamics, yeah, that you guys will be working through throughout all of marriage, but you're gonna get good at it.

38:13Rachel Cruze:And my prayer is that as you guys follow the baby steps and you get out of this debt, you guys save up in emergency funds, you start investing in retirement, y 'all are 25, you can start all of this in the next year. That is so wild to me. It's going to be crazy what you guys are going to build. So have goals. Have really big goals of saying, hey, let's pay off the house. Let's go on this trip. And maybe it's a generosity play of like, yeah, maybe we have parents that could never afford this type of trip. Let's make it a goal to be able to take them or whatever it looks like. But always have something you're kind of shooting for and aiming for with your money because you guys make a lot of money.

38:51Rachel Cruze:and you're going to be on the other side of this debt in the blink of an eye, if you do it, which I'm going to assume you are, Joe, to pay it off. And I think that moving forward is the big, it's kind of that big glaring thing for me. What are you going to do moving forward? The biggest temptation after you get married and you're making$281 at 25 is to look like you make$281. That's right. Let's get some fancy new cars. Even if you had the money to do it, it's not wise. I know, I know. That's right. And your friend's going, dude, you spent$150 ,000 on debt. You could have invested that, bro. That's going to be your friends on the other side.

39:22And so you have to get blinders on going, no, these are the goals we set for our family. And that is to be completely debt free to give us options and flexibility so that one day, let's say she has a kid and wants to stay home. Well, it's going to be hard to do that. That's right. Losing her income when you've got payments all around you and a mortgage. So instead, build a life that has options and margin. That has margin.

39:43Rachel Cruze:Love it. All right, let's head to Devin in Omaha. Hi, welcome to the show. Hi, I'll try to keep it quick. Currently on Baby Steps 4, 5, and 6, I make about$113 ,000 a year. Life makes between 80 and 90. And then I run a small business on the side that fluctuates quite a bit, maybe between$25 ,000 and$45 ,000 a year. Oh, nice. Okay. Like I said, we're on Baby Steps 4, 5, and 6. We're just wondering if we're to the point where she can stay home. We had plans to pay off the mortgage within the next three or four years, but we have a two and a half year old and another baby. And is it all right to delay that baby step six to cherish these years so she can stay home with them?

40:31Rachel Cruze:Yes, for sure. For sure. I would still keep a semi-aggressive goal, right? Because if you went all the way to what the average person, if they have a 30 year, I was like, I'll pay it off in 30. We still want you to pay it off in a reasonable time to have that. But if it slows it down, by a couple of years because, yeah, if you guys have two babies in the house and you're like, listen, we want, yeah, we don't want to pay them for daycare. Your wife wants to be home. And you guys make$150 ,000 a year with just your income, the side business and all. I mean, I think it's a green light for sure for her to stay home.

41:03Have you done the budget and crunched the numbers just based on your income? Yeah, not factoring, just my income. I don't try to factor my side business in too much to our budget monthly just because that's kind of bonus on the top almost. Right. Just make that the extra mortgage payoff money. How about that? That's fun. Yeah. So we'll have about$1 ,000 to$1 ,500 left a month still. And that's after investing 15%, money in college, paying all the bills? Here's my next part on that. I have a pension. You guys say they only count half of what you put into your pension? Yes. So if it's 6%, you can count 3%.

41:40But they still, yeah. So it's 5%, so it would only be 12.5%. So I could bump it to a half percent. But yeah, we're still contributing to 529s and then retirement as well. That's the key, is if it's going to derail the baby steps, then we've got a problem here. But if you can still do 4, 5, and 6 on your income, then it's green lights. The other thing was this would bump us above the 25 % rule for the mortgage just a little bit. But by the end of the year, we'll have about$100 ,000 outside of our emergency fund saved up. Would it be okay to recast the mortgage? Yeah, throw that lump sum at it and recast.

42:17That'll bring your payment down. I mean, either way, you're going to knock the mortgage out fast anyways. So you guys are in great shape.

42:23Rachel Cruze:Yeah, and congratulations, Devin. I mean, honestly, you guys doing this and paying off your consumer debt, having an emergency fund, that's why you do it. Yes, it's to have options in life so you're not tied down to a job that you hate when you want to be home with your kids. And so, yeah, you and your wife have done a fantastic job. So we're excited for her. It's so fun.

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43:59Rachel Cruze:Welcome back to The Ramsey Show in the Fairwinds Credit Union Studio. I am Rachel Cruz, hosting today with George Camel. I was going to say co-host, best-selling author. Say what you want. All the things, all the things. But we are here to answer your questions. So give us a call at 888-825-5225. We have Lacey on the line in Phoenix, Arizona. Hi, Lacey. Welcome to the show. Hey, thanks for having me. Absolutely. How can we help? Yeah, so my question is, I'm a single mom of three, and I'm trying to determine if I actually should drop my emergency savings down to$1 ,000 to put that$9 ,000 towards my car loan.

44:45Rachel Cruze:Oh, my goodness. Okay, how old are the kids? 17, 10, and 8. Got your hands full. I applaud you, Lacey. Being a single parent, I can't imagine. I mean, you're doing a fantastic job just calling and having a sentence that you're putting together because I know it's probably so much work. Okay, so you have$9 ,000 saved. I have$10 ,000 saved. And how much debt do you have? So I have my mortgage, which is$400 ,000. And then I have my car loan that's$40 ,000. Okay. How much do you make a year? um my my net take home monthly is 7 300 okay so that car so you're what is that probably about 90 000 yes a year um yeah you're right that car is kind of right on the bubble of too much car for what you make we always say you don't want anything with motors and wheels being more than half of your annual income.

45:52Rachel Cruze:And so you're not quite there, but you are kind of close. So I'm just curious, have you looked at if you sold the car, what could you sell it for? I have, and I've actually been going back and forth on this for a month or two. So I'm in an equitable position in the vehicle, whether I were to trade it in or sell it private party. So I owe$40 ,000. If I were to cancel the warranties, I would get that prorated refund applied to the loan and I would be at$37 ,000 to pay that loan off. If I sell it private party, I'm hoping it appears I would get about$43 ,000. And I actually just this weekend went into a dealership and was quoted a$41 ,000 amount for trading it in.

46:42And so the reason I bought this vehicle is because I had been in an accident. My car was totaled. And I purchased the warranties because I basically have no maintenance, no issues for the next six years.

47:05Rachel Cruze:So that's the 150 ,000 mile powertrain warranty. And then it includes oil changes, tire rotations, all of that stuff. So I felt like I was getting a really good deal. However, I still have a$750 car payment. So I was looking at, okay, if I downgrade into something just a wee bit smaller for, you know, 20, 25 ,000, then that'll drop my payment probably$350 a month. But then I'm not. Why not sell it, net your six, and then use five or nine to purchase something used for now and then upgrade later? Because then you're completely debt-free, and with your great income, you'll be able to save that emergency fund up quick.

47:47You'll have 10K back in no time. Yeah, and it just makes me nervous to not have that 10K in my savings account because if they're – for example, I had a dog emergency a few months ago that cost me$3 ,000.

48:04Rachel Cruze:So if something like that were to come up, then I'm back to having to put something on a credit card, which I really don't want to do. Right. My question is, say you did George's plan. Okay. And that means you only have 5 ,000 in the savings. If you didn't have a car payment, could you, could you find another, I don't know, I'm making this up,$6 ,000, do you think, beyond the car payment?

48:37Rachel Cruze:I mean, in the position I'm in today, my monthly margin is about$1 ,100. So getting rid of that car payment, I am, you know,$1 ,800, almost$1 ,900 in monthly margin. Okay. Which means you could cash flow a$3 ,000 emergency between your$1 ,000 emergency fund, and that's just one month in. And if you put that aside, then you could have your emergency fund built back up in three months. So I hope you don't have any emergencies in the meantime. But if you did— But if you did, you could have, yeah, you could cash flow up to$8 ,000 at that point. If you kept 5 ,000 in, use 5 ,000 for the car plus the six, go get an$11 ,000 car.

49:22Rachel Cruze:Yeah. I mean, you could make this work. It's just, it's transferring risk, Lacey, is kind of what we're looking at. Because, you know, people feel safe when they have cash in the bank, understandably. But yet, over here, there's still money owed. So from a net worth perspective, like there's still risk there. So if you did the plan of selling the car, netting out six, putting five with it, buying an$11 ,000 car, now you have no risk, right? You have an$11 ,000 car, but plenty of people drive$11 ,000 cars. And you might drive that for less than a year. Yes. As you save up and then get a better car.

49:58Yep. And then a better car. The problem is when we drive brand new cars, our body says, I need to have a brand new car forever now. And so I kind of like stair-stepping it up because you get used to that nice new leather smell and the fancy, you know, leather heated seats. And so I think there's something about sacrifice where you go, I'm going to drive this beater car and sacrifice for a short season, especially with your situation being a single mom.

50:20Rachel Cruze:Yeah, so I have no debt. You have less risk. I have no risk. No risk financially. Like it is all you. All you. There's no bank tied to you saying, if you don't pay this, we can come and get it, right? There's none of that happening. And so there's something that's very freeing about it. And we've studied, I mean, tens of thousands of people, I mean, hundreds of thousands throughout the years, millions of people that have gotten out of debt and have walked their way through the baby steps. And we have just seen time and time again, it really is the fastest, most reliable way to build wealth when you have no payments and you depend on your income, which is your largest wealth building tool and you yourself with the autonomy of just you are able to stair step you financially.

51:06Rachel Cruze:And so getting a car loan out of your life, a$40 ,000 one, because even if it was$2 ,000, you know, that you're putting aside, it'll be two, two and a half years till you pay this car off. And that's a long time to have a$750 car payment. Right, right. I promise you, you can afford the oil change and the tire rotation should be free with wherever you got your tires. So I think they'll sell you on those warranties all day and make you think this car is about to fall apart. And I go, well, maybe I shouldn't be buying this car if you're so worried that I need a warranty so bad. You talk about this in your book, Breaking Free from Broke, George.

51:39Rachel Cruze:Oh, yeah. I mean, most of the money they make is warranties and financing. It's not from the margin on the car. That's why they hate people like me who walk in with a check ready to pay cash. And so I would get out of that warranty, bringing it down to 37, go get your 43 for it, take that six in profit, plus some from your emergency fund and find the best car you can you know do your research on make model and get a pre-purchase inspection for 100 bucks yes you know you're not getting a lemon that's right and like see if you have a few um friends that are good with cars maybe some of your friends husbands or something i don't know have them look at it too right because it is a big purchase a car and you want it to be reliable you want to you want to make sure all those things are in check and they are though that's i promise you you can find a used car that has all those things and yeah getting out of this payment and freeing it up.

52:27Rachel Cruze:It's pretty amazing what it does. Yeah. But we're cheering you on, Lacey. You're doing a really, really good job.

52:48Rachel 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've got$20 ,000 saved. You might earn around$70 a year.

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54:09Rachel Cruze:Up next, we have Valerie in Chicago. Hi, Valerie. Welcome to the show. Hi. Hello. Thanks for calling in. How can we help? So we are currently in a multi-generational household. We just moved in not too long ago with my in-laws. But there has been some costly updates that probably should have been taken care of a while ago. But my in-laws are expecting us to pay for it, but they haven't fully given us the home yet. Does that make sense? Yeah. I mean, when are they planning on giving you the home? when it's paid off. Okay. That's still a bad idea for tax reasons, but we can couch that for a second and talk about this multi-generational home.

54:59So is it just your in-laws and you guys right now? Yes, there are 10 of us living here. Wow. So it sounds like more than that. Is it kids? Who else is there? We have six kids. Oh, okay. So how does this work? I'm curious because I've heard about these, who pays who? So they own the house, they pay the mortgage, and then you pay them rent? And then we're just paying the utilities. So you don't pay rent? No. Okay, so you're living pretty cheaply, and they're going, well, hey, listen, you guys are living here pretty cheap. The house is going to be yours. We think you should pay for these renovations.

55:37Yes. Repairs. How much is it? Yes. um well just for example we had to order like a new um like a window and that was like 900 so but it had you know been needed to be taken care of before we moved in so they waited until you guys moved in and said hey there's a bunch of repairs to do that's fun oh kind of but not really But my husband, go ahead.

56:07Rachel Cruze:Well, I was going to ask, how did this all come about? Did they offer this as, you know, a great option in life? And you guys were like, let's do it. Yes. Okay. My husband got a job opportunity, and so we moved back to his hometown. Left to your own devices, would you guys want to have your own place? no my we we want the multi-generational to to work we want it to work okay well then i would do a reset if you really want this to work i would do a reset on all things finances because it sounds like you guys never actually came to any agreements as to how it would work other than you guys pay utilities that was pretty much it correct we need a whole lot more than that and the thing about taxes i mentioned if they give you the house while they're still alive then you lose the ability to have the step up in basis.

57:01So if they bought the house for$100 ,000, when they give it to you, and now it's worth$500 ,000, where you're going to owe taxes on all the gains. But if you inherited the house after they pass, well, now there's a step up. And so the IRS says, hey, the house is worth 500.

57:16Rachel Cruze:And you got it at 500. So there's no taxes. So if you went and sold it within a couple months, you'd have no taxes to pay. And so that's one of the issues with giving a home to your kids. It sounds like a really sweet thing to do while you're alive, but it's actually one of the worst things you can do from a financial perspective. So I'd caution you against that. Oh, I didn't. Which then complicates it, right? Well, how do you get the house? Well, you need to like buy it from them outright. Or you all live there until they die. I mean, you know what I mean? Oh, yeah. But is that what you guys want, though?

57:47Rachel Cruze:You want a long-term life like this? Yes. Yeah, that's what we're planning on. How old are the parents? In their 70s. Okay. So, listen, people do life different. And if this is how you choose and what you guys value and want to do, you do what you guys want. I mean, you're all adults. Here's my fear, Valerie, is that down the line, and we've heard crazier than what I'm about to throw out. I'm just making this up. You know, his mom passes away in five years. Dad's 75, meets a woman online at 80. She wants to go and leave and sell the house, whatever, whatever. And you're 10, 15 years into this wonderful plan.

58:29Rachel Cruze:Something gets derailed. And for 10 to 15 years, you and your nuclear family have done nothing from a home perspective of building equity, of having your own, of saving for a home. Quote unquote, you're out of the deal now in this pretend scenario. And here you guys are in your 40s or 50s. and you're starting from nothing from a home perspective, which is one of the, it's the largest purchase you make as a home. It's the thing that if you rent, it continues to go up. So that avenue is not smart long-term. I mean, it just puts you in a scenario that can be very sticky that you don't see right now, but could happen in 10, 15 years.

59:11Rachel Cruze:Someone gets sick, right? Or, and you have to take care of them. There's addiction. Or they run out of money and now they're doing a reverse mortgage and now you can't even inherit the home without paying them. And so there's a lot of issues that could arise in the meantime. This is why doing deals with family can be a little sticky. And what I'm going to propose is going to sound probably a little heartless, but I would. I would almost write some type of legal contract that could hold up in court that literally plays out. It's what we would do if someone did a partnership in business. We don't recommend partnerships, but if we do, we're like, you got to think about it all.

59:46Rachel Cruze:addiction, divorce, you know, you go through all the things that could happen to put you guys in a bad situation. And you guys need to lay out scenarios to protect yourselves for whatever that could look like in the future. So that's my only word of caution. That doesn't always happen. Sometimes there's crazier things that happen. Sometimes nothing happens and everything's fine, but we wouldn't have jobs if everything went according to plan for people. Yeah, and they are willing to write something, you know, get something in written form in case, you know, XYZ happens. Okay. And then I would also come to an agreement on how repairs and renovations are going to work because you're going to have more of this as time goes on.

1:00:27And so are you guys going to cover it forever? Are we going to split it 50-50?

1:00:31Rachel Cruze:Yeah. That's up to you guys to decide. And if you want to foot the bill for this one, but I think if it's$20 ,000 in repairs and they just neglected to do them, I don't think that should fall on you. And then Valerie, you and your husband need to have some really healthy check-ins as well, because sometimes you get locked in a situation where you start to be really unhappy living with his parents. And again, maybe not next year, but five, six, seven years, resentment plays up and unity mean comes in and it starts to erode you guys, right? Like you just need to be thinking through all of this. Or if he gets another job offer, he got a job offer to move home.

1:01:09Rachel Cruze:What if he gets an offer that would triple his salary and it moves you guys somewhere that you like really want to, but then you feel stuck in some situations, right? Yeah. At the house. Or they expect you to take care of them regardless of the finances. Yes. Because they are in their 70s. Yep. So I would just be, I would be looking at every possible thing and saying it out loud and you and your husband be in agreement. And I would meet with an estate planning attorney just to help you navigate this. Not out of like, we're not suing anybody. It's just more, hey, can you help us craft this in a way that makes sense for everybody?

1:01:44Rachel Cruze:Yeah, I think that would be great. And I would feel comfortable probably doing that. Yeah, and they can walk you through those financial aspects as well of what I mentioned of inheriting the house versus them giving it to you while they're alive. Because that's also some pieces to think about. We get too many calls where someone calls in and they go, yeah, they just gave it to me while they were alive. And we go, well, you have a tax bill on that$700 ,000 in gains from when they bought it in 1982. Yes, yes. Okay. How many bedrooms is this? I'm just curious with 10 people there. Three, four, five bedrooms.

1:02:17Wow. So are the kids all bunking up? No, just some of our boys. They're younger. And so they also have a bedroom. But there's essentially two primary suites. And the six kids are splitting three rooms? Yes. Okay. And then we have a baby with us. But also there's potential to make other bedrooms if we need to along the way. But it's a pretty spacious house. It's 7 ,000 square feet. Oh, wow. This is palatial.

1:02:50Rachel Cruze:That's great. Okay. Well, I wish you the best. I really do hope it works. Thank you. It sounds so good on paper. Like grandma and grandpa there. And Dr. Arthur Brooks, he's mentioned this because his kids live with him. Yes, that's right. Grown kids, and it's a great situation, but it's because there's healthy boundaries in place. Yes. Everyone has to be functional. You know, he studies this for a living too, which is a good thing. You need to have some financial footing, have good boundaries, be emotionally, mentally, financially healthy for this to work. Yes, yep. And a lot of people go in blindly, not thinking about what could be or don't address things, and that's when the dysfunction starts to play out.

1:03:26Rachel Cruze:So it can be a beautiful thing if it works. But a lot of times people aren't, you know, aware of all the traps. So just going into it, you know, eyes wide open is important.

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1:05:02See website for full details.

1:05:20Rachel Cruze:We wish we could get to every call here on the show, but if you do have a money question and you want an answer to your specific situation, make sure to head over to our website and use Ask Ramsey. So Ask Ramsey is our free AI tool that's built and trained on Ramsey principles. So we put in the past few years of shows into this, articles, books, everything coming out of Ramsey so that your question, your specific question can be asked the way we would answer it. So again, ask your question at RamseySolutions.com or click the link in the description if you're listening on podcast or YouTube. All right, let's go to Wanda in State College, Pennsylvania.

1:05:59Rachel Cruze:you. Hi, Wanda. Welcome to the show. Hi, Rachel. Hi, George. How are you doing? Hi, we're doing great. How can we help today? So I would like to know how one ages gracefully, financially speaking. I honestly thought the Lord would come back, but while we wait, the cost of long-term care is astronomical and frankly, one cannot afford. I feel like the country is not financially kind to the elderly requiring care and the life that we save for without debt investing smartly is just gone in a poof because the cost involved with any type of elder care. So I'm 56 my husband's 57 and after having witnessed what my parents do have since passed on when they needed care.

1:06:50It makes me nervous for me and my husband and even my in-laws. So how does one plan for that?

1:06:59Rachel Cruze:That's a great question. So there's a couple of things you can do. There is long-term care insurance. Have you looked into that? I've been thinking about it. I honestly have not. And I'm not sure like how old I need to be to even invest in that. We generally say once you turn 60 on your 60th birthday as a gift to yourself, I would look into it and purchase a policy for you and for your husband. Because the earlier the better, the lower the premiums. Got it. Because that's the one thing that could tank you is that long-term care. A nursing home stay, you know, can run over 100 grand a year easily.

1:07:35And the average stay is two and a half years. So you're talking quarter of a million dollars out of your nest egg if you even have it to cover something like that. Correct. And so it's worth it even though you're like, oh, man, it's an expensive insurance. Yes, but you're not going to have it forever. And hopefully, quote, you know, fingers crossed, we can get you self-insured to where your nest egg can cover that easily without, you know, depleting your retirement.

1:07:59Rachel Cruze:Yep. So that was going to be the next option. So you can do long-term care insurance. And then the next option is you, Wanda, you and your husband. So where are you guys at financially? Oh, we've got a couple of retirement accounts. We're still working. I'm just about to pay off our house at the end of the year. So we're doing okay and everything. How much are in those accounts? Oh, goodness. Let me think. He has like 300. I think I might have 400. I don't even know how they're split out. I kind of glaze over when it comes to investments and retirement. We have about almost$100 ,000 in the bank.

1:08:44Rachel Cruze:Okay. So, yeah, you guys are around$800 ,000, and then your house is almost paid off, which is so exciting. What's that worth? Probably the last time we checked, somewhere around$250 ,000 to$300 ,000. Okay, great. So you guys are net worth millionaires. okay maybe that's just the math that's the math wanda i think it's not an opinion i think you are which is very exciting based on accounting standards your assets minus liabilities would put you over the million dollar mark which is awesome that's a great milestone it's not to say you can go retire tomorrow but at least you're heading in the right direction compared to most of america so i would continue to invest once the house is paid off i'd start maxing out those retirement accounts and build up enough of a nest egg where 250 grand, you know, is not going to tank your retirement.

1:09:37You can still retire with dignity and know that you have those costs. And again, at that point, you still might want long-term care and let the nest egg continue to grow in the meantime. And maybe you need it, maybe you don't. But either way, you're covered, not wondering, is a health scare or a nursing home stay going to ruin us?

1:09:55Rachel Cruze:Going to take us out. Yep. All right. Let's head to Catherine in Virginia. Hi, Catherine. Welcome to the show. Hi, how are you? Hi, we're doing great. How can we help? Okay, so I would like to know, should we increase our living expenses while we save up a down payment for our house? Should you increase your living expenses? Yes. So spend more per month while you're saving up a down payment? Yes, because we're welcoming our second baby in September. And right now we're living in a studio apartment so that we could save up quickly for the emergency fund while I was pregnant. And our lease is about to be up.

1:10:37Rachel Cruze:Okay. Yeah. How much do you guys bring home a month? My husband brings home$5 ,320 per month. Okay. Perfect. And are you home with the baby? Yes. We have a toddler. She's one and a half. Okay. So great. So where you guys are in Virginia, what would be an average rent for, I don't know if you guys do like a two-bedroom or a three-bedroom or a small home? What are you looking at rent-wise? It seems to be about like for something decent,$1 ,300 to$1 ,500. Okay, yeah. Yeah, I would say that's pretty doable. I mean, we say 25 % of your income is what should be for living expenses or for, I'm sorry, for rent or mortgage.

1:11:25Rachel Cruze:So that's about right. Yeah. $1 ,350 or so would get you right there. And if it's, you know, 26%, it's not like anything is on fire. It's just a parameter to make sure that you have money left over to do things like save a down payment and invest and save for the kids college and live your life and go on vacation because too many people have their house payment or rent at, you know, 50 % of their take-home pay. Yeah. So if you guys upped it some, Catherine, for sure, I think that you can make that move. Because saving for the down payment, it may take you guys, what, two, three years possibly of you renting somewhere to save that up.

1:11:55Rachel Cruze:And, yeah, I probably would not want to do that in a studio apartment with two little kids. I would like walls and separate rooms for the sanity of everyone. Yeah, because my husband, he actually works remotely. he lost his job like right before I got pregnant with our daughter so we took a big pay cut and so after we used that money from our house that we had bought when we first got married to move down here and pay off all of our debts because we just couldn't afford the mortgage which was about$2 ,000 so we're just trying to figure out how we can save up as quickly as possible resetting with some peace this time for sure yeah do you guys have any more consumer debt that you're working on?

1:12:42No, none.

1:12:43Rachel Cruze:Okay, great. So yeah, so it really is that down payment. Do you guys have kind of a goal that you're shooting for? We're hoping about 40, hopefully in like two and a half years. Just based off of the numbers right now, my husband thinks he'll get a couple of raises, but I just don't want to base it off money we don't have yet. Sure. No, I get that. Don't count the chickens before they hatch, but I'm hopeful. If he's got that mindset, I think he will increase his income because he's going for it. Well, and the fact that he was being paid more in his last job than the job he took. So it makes me think he's marketable, right, at some level to be able to be making more too.

1:13:20Rachel Cruze:So that's exciting. I like that specific goal. 40 grand, two and a half years. That's a little over$1 ,300 a month. So we have to be putting that away in a high-yield savings account. We'll let it grow. And if you don't have a good one, Fairwinds is an awesome partner of ours. You can go to fairwinds.org slash Ramsey and get a great high-yield savings account to help your down payment fund. Awesome. We're so excited for you. And pregnant with number two, you said, right? Yes. Okay. Congratulations. So exciting. Yeah, I think this is the change in lifestyle or in life that happens, life scenarios that does make you say, okay, what do we need to shift to create some piece that's doable?

1:13:58Rachel Cruze:And the beautiful thing is that Catherine and her husband freaking worked their butts off to get out of consumer debt. so that$1 ,200,$1 ,300,$1 ,400 in rent is doable while saving more. If not, they would be paying two car payments. That would equal that. Yeah. You know, and they wouldn't be able to save for a down payment if they still had debt. Those are heartbreaking calls when we get those. So it's nice to see someone doing it right. I know. So that's the power, you guys, of getting out of debt and freeing up your income, is that you can actually put money away and save for things that you want in the future for you and your family.

1:14:29Rachel Cruze:So, Catherine, well done. Uh, yeah, and good luck to you guys with baby number two

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1:16:43Rachel Cruze:Today's question of the day is brought to you by Why Refi? If you've been turned away by other lenders because your private student loans are out of control, Y-Refi may still be able to help. They specialize in refinancing options built specifically for borrowers in that situation. So go to Y-Refi.com slash Ramsey. That's the letter Y-R-E-F-Y.com slash Ramsey. May not be available in all states. Today's question comes from Owen in New York. He says, I make$124 ,000 a year making two jobs more than my parents ever earned. I bought a used car and went to a cheap in-state college. My problem is that I can't afford a home.

1:17:22And my parents who are retired have a$650 ,000 home. I live in upstate New York where property taxes are a thousand bucks a month and houses that aren't falling down sell in three days. How can I possibly afford a home? And how do I stop being this angry about being stolen from by the boomer generation and their generation's government, which is ruining my relationship with my parents. That got dark quick. Oh my gosh. I felt a little anger and then he just said it out loud.

1:17:51Rachel Cruze:I feel like I want to hug Owen. I feel like Owen needs a hug. Wow. And he's mad at his parents? He's mad at the entire boomer generation. How dare you? How dare you own a home? Wow. And the generation's government. Listen, I get kind of being pissed about the housing situation. That's understandable. It is so crazy. It is. It's wild how expensive things are. I can't wait for Owen to have kids for them. They're going to be so mad at Owen's generation. You ruined everything. You ruined everything. Listen. Oh, no, Owen. Why were you a child in 1992 instead of buying up a home? What were you doing, man?

1:18:25Rachel Cruze:What were you doing at three? That's the running joke. Okay, but I do feel his anger. Yeah. And I actually mentioned - Not to that extreme. Not to being mad at your parents. But I understand going, I've done everything right. Sure. Even debt-free, making six figures. it's still hard to afford a home where you want to live no matter what your age is. And so I get where he's coming from. But the real question, how can I possibly afford a home, is set a goal. And if you're debt-free, you should have no payments. And if you have reasonable rent right now, you should have a pretty good amount of margin in that$124 ,000 to set aside in a high-yield savings account to start saving up a down payment.

1:19:03Rachel Cruze:I mean, we just talked to a couple right before the break. And they bring home$5 ,000. And she said they still can probably put away$1 ,300. And that's with her and two kids and a husband. Yeah. And he makes double that single, no kids. That's what I'm saying. So, like, you can make some serious sacrifices to put some serious cash away. And that's the reality of what has to happen. Now, did that have to be true for your parents for as long as what you're going to have to do? Maybe not. Maybe not. But it is the reality. And I think that's what's hard is like it sucks. And I think we can say that.

1:19:37Rachel Cruze:But then what's the next thing we're going to do? Are we going to sit and complain and be mad? Or are we going to say, okay, let's get creative and figure out how can I put money aside to save up for a down payment? And we say for first-time homebuyers, 5 % is a great goal, right? Up to 20 is awesome to avoid PMI. But 5%, are you going to have to drive 20 minutes further one direction than what you want? Maybe. I don't know. But so there's ways to do it and people are buying homes and maybe it's going to take longer and not specifically where you want to be. But that's where we're at. And that's the solution.

1:20:12Rachel Cruze:That's what we try to do on this show is like there's a lot of people that are just – they just complain about it all day, which I get. Venting can be fun for a little bit. Yeah, vent for some. But what are you going to do after that? If you keep venting, you're going to be getting nowhere financially if you don't have a goal. Yeah. Well, there is some actual stats behind this anger. The median home price is now roughly six times the median household income. When you look back at the 1970s, it was like two times. So it is hard. Three times as hard, yes. I don't want to minimize that. It is harder for a young person to save up for that home.

1:20:45And so that's not just the market being the market. Part of it is structural. Part of it is supply and demand. Part of it is the interest rates during COVID were so low, and now everyone's hanging on to their house because of the mortgage.

1:20:56Rachel Cruze:Yeah, 2 % rate or something. So no one's letting go of their homes. And you've got the boomers who have had these homes for a long time. They've appreciated and they're going to have a big tax bill if they sell. So they don't want to get out. But there is something, Rachel, I want to bring up that is actually happening right now in Congress. Oh, yeah. That could actually help a little bit. OK, tell us. So it's not going to be like a silver bullet, but it's a move in the right direction. So you may have heard on the news these large institutional investors, firms that own hundreds of thousands of single family homes.

1:21:24You've heard private equity firms. Yeah. Well, they've been buying up these homes at scale in cash, outbidding regular families, which is really frustrating. People like Owen, who are about to go buy that home, it gets bought up by, you know, Blackstone.

1:21:36Rachel Cruze:Yeah, yeah. And so that makes it more difficult. And we believe homes are for people, not portfolios. And so there's actually a bipartisan bill working through Congress right now. It's called the 21st Century Road to Housing Act. And what's encouraging is the Senate version passed 89 to 10. Oh, wow. That's about as bipartisan as it gets. So everybody is forwarded these protections to keep large institutional investors from buying up more single-family homes. So it's a good bill, and it actually could help some people buy a home, could free up some of the supply. So it would basically stop these private equities of buying up residential homes.

1:22:08It would force them to sell off within seven years. And the ones that own$350 or more, they can't buy anymore. It just blocks them completely. And if you are renting one of those homes, you have the first right of refusal to buy that house. So there's a lot of good things in the bill. here's the catch rachel this is government for you so the senate passed that but it goes to the house now well the house released their own amended version and they quietly stripped out these key provisions that gave the bill its teeth so they kept the name and they removed all the substance and the house vote is happening this wednesday and so if this weakened version passes these protections are gone which sucks so we don't want it now we do not want this house bill to pass and And so, listen, I'm not a person who thinks I can sway government, but if this matters to you, and I think it should, I would let my House representative know.

1:22:56To say no. Yeah, this is one of those times where you go find your rep, 60 seconds, go to House.gov, we'll drop a link in the description to make it easy for you, and tell them to keep the protections in place and to say no to this bill on Wednesday. And, you know, Congress hears from lobbyists every day. They almost never hear from regular people like you and I, and that's the gap you can fill. And we say all the time on the show, Rachel, you know, what happens in your house is more important than what happens in the White House. But there are structural things happening in the White House that can help the American people.

1:23:24I believe the government's job should be to create an environment that helps people win financially. That's right. That's right. Not to solve our problems, but to be a part of that solution. So go to house.gov, find a rep. We'll drop a link in the description. If you want to learn more about what's going on, we'll drop a link to an article.

1:23:38Rachel Cruze:Yeah, that's the bait and switch, though. And to a link to find a rep. Good bill in Congress, now bad bill that went to the House. I mean, as I was reading it, I was like, this is like a movie plot. It's so crazy. The bad guys are trying to swap it last minute to sneak it in. And this is how it all happens. It's like late night. They kind of sneak it through the door. Nobody knows about it. No one has time to read it. And then you're voting on it. This is insane. This is why I'm not in politics, Rachel. It's too much stress for me. I want to actually, we can help someone in seven minutes on this show.

1:24:05Rachel Cruze:I know. Congress has a hard time doing that. But I'm glad we're moving in the right direction. This is a good bill. And everybody should care about it and say yes to that. Love it. But say no. Say no to the house bill. All right. But we are going to say yes to Mike in, what is this, Westchester, New York. Hi, Mike. Welcome to the show. How's it going, guys? Good. How can we help? Good. So today I'm going to be talking about how I graduated in December from college. And then I came out with about$21 ,000 in federal loans. I'm still in my grace until August, but I've already paid off about 11 grand.

1:24:43Rachel Cruze:Wow. Good for you. Yes, thank you. My question today is, do I continue on this path for about another four or five months? Or do I take out from my Roth and kind of just end all right now as far as student loans? Yeah, that's a great question. I would just keep at it. I would just keep cash flowing, paying this off, because if you did take money out of your Roth IRA, that's a retirement account. And you will get penalized by doing that and paying taxes, too, on it because you're not 59 and a half. So that's going to be the key. You want to be able to get that money out without that penalty. And so I would keep that in, let it continue to grow.

1:25:26Rachel Cruze:And, yeah, in four months, Mike, well done. You'll be student loan debt free. Do you have any other debt besides the student loan? That's it. I drive a used car and I kind of just stay frugal. Good for you. How much are you making? I bring home about$4 ,000 a month. Good for you, Mike. Well done. Just keep at it. If you had non-retirement investments, like in a brokerage account, then we would say, yeah, let's sell those off and get rid of this debt even faster. But because it's in those retirement accounts, you can technically take out contributions, but then you're still unplugging all the growth.

1:26:00And at your age, if you actually map out what that is costing you over decades... Way more than 10 grand. You'll be slapping yourself going, what did I do? That could have been 150 grand or 500 grand. Way to go, man. Get debt free and stay debt free.

1:26:39Rachel Cruze:Normal is broke and common sense is weird. So we're here to help you transform your life from the Ramsey Network and the Fairwinds Credit Union Studio. This is The Ramsey Show. And I'm Rachel Cruz, hosting with George Camel. We are answering your questions at 888-825-5225. All right, let's head to Sam in Roanoke, Virginia. Hi, Sam. Welcome to the show. hey how are you guys doing hi we're doing great how can we help so i'm 17 and i'm a business owner and i'm just wondering how i can build credit without using a credit card because i want to buy my first home within the next few years and just don't know where to start on that nice way to go man what are you making with this business uh right now i'm doing around two to three thousand a week a week that fluctuates to the So, yes, sir.

1:27:31So you're talking$100 ,000 to$150 ,000 a year at 17? Yes, sir. Now that is before taxes, but yes, sir.

1:27:39Rachel Cruze:What are you doing, Sam? That's amazing. I'm a mobile mechanic. Wow. Did you go to trade school for that? I graduate in a month. Way to go. Sam, we applaud you. How do we clone Sam? Unbelievable. Okay. That's so great. I love this. Okay, so you're trying to build credit because you want to buy a house one day? In three years. He wants to be a homeowner soon. By 20 years old. Well, here's the good news. You don't need credit to do that. I know that sounds crazy coming out of my mouth. Do you believe me, Sam, first of all? Do you trust me? I feel like Aladdin right now. I believe you. Okay. Yes.

1:28:19So the way to do that is through something called manual underwriting, and it's something I've done personally. And our friends at Churchill Mortgage, they specialize in these. They've done tons of them for Ramsey fans who live life outside of the stupid credit system we live in, which is go into debt to get a score so you can get more debt, so you can hopefully pay that off perfectly to hopefully increase your score to hopefully get a higher score. Does it sound crazy to you? Yeah, it does sound a little twisted. Because it is. And so manual underwriting instead of automated underwriting, which is let the computer decide if you should get the mortgage and let the three-digit number define your financial life.

1:28:56So instead, the lender will look at your situation. Do you have on-time rent payments, Sam?

1:29:03Rachel Cruze:I don't believe so. I don't think I quite know what those are. So do you rent right now or do you live with family? I live with my parents still. Is the goal, are you going to live there for the next three years while you save up? I'd like to rent eventually within the next year or two, but as of now, yes, I plan to stay there. Okay. So you'll be required to show on-time rent payments, whether it's to your family or to a landlord if you decide to go rent elsewhere. But you'll need a year of on-time rent payments. You need some utility bills in your name. So think water, electric, cell phone, internet, things that show that you pay your bills on time, that your insurance premiums are paid consistently, that you have strong employment history, that this business has done$100 ,000 for the last three years, and some solid savings and down payment.

1:29:53I got you. And if you have those things, you don't need to have the credit score in order to buy that home or get the mortgage.

1:30:00Rachel Cruze:Yeah. So, Sam, if you were to live with your parents for the next three years, then I would be keeping track at least two years out of rent. Of documented bank transactions going to mom and dad. So document those if you put deposits in for rent. And maybe they put one bill in your name, like Internet or something. I don't know, and you pay something so that you have a bill or your cell phone, one or two bills that's tied to your name. So making sure, yeah, you have that. And then, of course, the down payment, what he's saying. Or if you go and rent somewhere in the next year or two, then that's great because that rent will show up.

1:30:35Rachel Cruze:And that utility bill that you'll pay at the apartment or house that you rent, you know, all of that will show that history. But the history is big on manual and drawing. You have to have that. Oh, I got you. That makes sense. But yeah, I mean, you're... If you keep doing this, you're going to pay cash for a home and ignore the entire system. That's pretty wild. What's your savings goal right now? Right now, I'd like to have by the end of this year around$40 ,000 saved because I do want to possibly migrate into a shop space to rent at the end of this year. Yeah. Cool. And just grow my business that way.

1:31:12It's amazing. What are your monthly expenses? so i do have three vehicles uh i do have a lot of tools i have to go through to i guess keep my work going and besides that just insurance gas uh basic utilities nice and you're doing this all on your own currently yes ma 'am the solopreneur that's amazing sam that's great all the cars are paid off those three cars uh yes sir nice okay sam i want to implore you because you're doing above and beyond.

1:31:47Rachel Cruze:I mean, you're a one percenter when it comes to the 17 year olds in America. And if you stick to this principle with your business, Sam, it is going to help you not only grow, but create such peace and wisdom is do not go into debt in your business, okay? So when you were 20, 21, and you're like, hey, I need to go and get five more trucks and I need to do this and that. I'm just gonna go get a small business loan, whatever, whatever. Say no. Don't do it. You're going to get mailers, Instagram ads, emails telling you, hey, we'll give you a loan, Sam. Scale your business. You deserve it. Yes. Move at the speed of cash with your business, Sam.

1:32:24Rachel Cruze:Stay debt-free. And I promise you, it's one of the number one things that takes small businesses out is debt and overhead expenses like that. And the debt stays with you even if the business fails. That's right. They don't care. They still want their payment. You are in the green. And so stay there, Sam. Do not go into the red. Do not go into debt for your business. But man, well done. I mean, think about three years. If he lives off, say, 30 or 40 living at home and socks away almost 100 a year for three years, that's 300 grand. $300 ,000. That's mind-blowing. Which would buy, you know, possibly a small home somewhere.

1:33:00I'm sure you can find a home in Roanoke for 300 grand. Yes, yes. Especially as a young single man at 20. That's pretty wild. So there you go, Sam. And I'm going to send you a copy of my book, Breaking Free from Broke. I have a whole chapter on credit scores and how to live without it. And I walk painstakingly through everything of how do you rent an apartment? How do you get a car? How do you buy a home without a credit score? And I hope it's a helpful gift to you because we want to see you win. We believe in you.

1:33:25Rachel Cruze:All right. Sydney from Instagram asks, if I only pay minimums on my higher debts and focus on the smallest debt payoff first, won't that put me further behind because those accounts will be occurring interest? Sure. I mean, they're going to accrue interest no matter what, because that's how debt works, unless it's a 0%. And in that case, the goal is to pay it off so aggressively that the interest doesn't matter all that much. Like, yes, you might be paying 50 bucks or 100 bucks or a couple hundred bucks in interest, but if you're throwing 1 ,000 or 2 ,000 at it, you are faster than the interest.

1:34:00That's right. That's the goal.

1:34:02Rachel Cruze:And that's what I think people, yes, because when people do the math and they're like, well, I shouldn't pay off the highest interest rate first. What you don't understand, number one, is the behavior change, what actually ends up happening with the momentum. When you get a small win, our human spirit, it's how we're wired, is that you get excited and you get more intense and you keep going and going and going versus trying to pay off the highest interest rate. Let's say it's a credit card. It's$30 ,000 or something, right? And you're just like chipping away, but you got a$1 ,200 medical bill over here, things over here.

1:34:32Rachel Cruze:when you just knock out the small ones and you combine all those minimum payments to keep throwing at the highest, the next highest debt, it's incredible what happens. And it's proven. I mean, it's not just a Ramsey thing. Like Harvard Business Review, MIT, they all have come out and said Dave Ramsey was right. The debt snowball method is the best way to pay off your debt. It actually works. And to your point, George, when you're doing it this quickly, the average person is paying off all their debt in 18 to 24 months. The interest at the end of the day, it ends up kind of just being a wash. And so, because you're outpacing it with the amount of money you're throwing at that debt.

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1:36:03Learn more at RamseySolutions.com slash SmartVestor.

1:36:27Rachel Cruze:Let's go to Ben in Cincinnati. Hi, Ben. Welcome to the show. Hi. Thank you for having me. Absolutely. How can we help? um we just paid off all of our um student loans and we took the financial peace class and it was worth it amazing congratulations yeah uh now we're just paying off uh we paid off one other car we have one more we're paying off our minivan and we just we bought a house last year so we're working on those. We do have like about 25K saved up in savings, a little bit for emergency and a little bit for the house emergency. But now as we're working through that, how would you say we should start saving up for her retirement since her job doesn't offer it?

1:37:22Okay.

1:37:23Rachel Cruze:So we got a couple of things going on. You guys, how much is left on the car? on the car we have is about twelve thousand twelve thousand dollars left on the car okay and then you have twenty five thousand dollars in savings and then you're asking about your wife's retirement so before we get there we do want this car cleaned up the debt yep yep so i would throw twelve thousand at it today out of your 25 okay which means you free up a payment What's the payment on that? The payment on that is about$300. Boom. You just got a nice raise right there. Yep. So then I would build that emergency fund back up to what you guys need, three to six months of expenses, and you guys can pick in that range where you feel comfortable.

1:38:13Rachel Cruze:And then you move on to maybe step four, which is retirement. So her company does not offer like a 401K, 403B, no pension plan, nothing. No, it's just a small Christian school, so they didn't have that in their offerings. Okay, as a benefit. Well, one thing she can do is open up a Roth IRA, and so she can do that and fund, is it what,$7 ,000? $7 ,500 this year is the contribution limit. What's your household income altogether, gross income? Altogether, before taxes, we're about$90 ,000 together. Okay. So if we, so our plan, the Ramsey Baby Steps, Baby Step 1,$1 ,000 emergency fund, you have that.

1:38:57Baby Step 2, we'll knock out the consumer debt. You're about to do that today after you get off the call. Baby Step 3, let's fully fund that emergency fund at three to six months of expenses. Then Baby Step 4 is 15 % of your household income going into retirement accounts. So for you guys, that's$13 ,500. That's what we want to see put away in a simple order. If you have a match through your employer, let's take that first. Do you? Yeah, I already do that. And I think altogether with my employer putting in about 8%, I put in about 12%. So you're putting in 12 % of your income. Yeah. But then she's not putting in away anything.

1:39:40Yeah, that was way before we got married. I was already doing that. Okay. And do you have a Roth 401k through your employer or just a traditional? My 403B. Okay. Do you have a Roth version of the 403B you have access to?

1:39:57I don't think so. Okay. Add that to your homework assignment to ask HR if there's a Roth version available, and you might be able to sign in and see on your 403B login there. But if you do have that, I love that option because it's going to be after-tax money, but then it grows tax-free forever. So imagine that's net income. If you have$2 million sitting there in retirement, that's like$2 million of take-home pay that the government doesn't touch again. Okay. And I would bump yours up to 15%. Now, on her side, 15 % of her income now can go into that Roth IRA, and now we're at a collective 15 % household income.

1:40:36Do you see how that works?

1:40:36Rachel Cruze:Which is probably close to a little less than that$7 ,000. She may not fully max it out with her income. But, yeah, so I would put, yes, 15 % of hers into a Roth IRA. and then if your employer match goes up to 8%, you may want to take it down a few percentages to max out a Roth IRA on your end, Ben. If you don't have a Roth 403B option. Yeah, that's true. Because the goal is get the match, move to all the Roth options that you can, fund those, then move back to traditional options if you run out of Roth options. But with your income, you guys won't hit that. You'll be able to do all Roth there and not run out of room.

1:41:11So that's a great problem to have. But right now you're doing like three good things at once, which is making it bad because you don't have much focus. So like we said, if you knock out that car payment today, get the emergency fund stock back up. In a couple of months max, you're investing 15 % with no problem of that household income.

1:41:28Rachel Cruze:Well done. All right, let's go to New York City, one of my favorite places. And we have Sam on the line. Hi, Sam. Hi, how are you guys? Hi, we're doing great. How can we help today? I'm good. Basically, I'm really nervous. You're good. I have a job. Yeah, I'm at a job for now, I'd say, three years. I hate it. But I make$120 ,000, and I have really no other career path that would get me anywhere near that. What do you do? Basically, I do bookkeeping for a big trash company. Okay. Do you hate trash, or do you hate bookkeeping? No, I actually love trash because trash is feeding my family because my base salary is really like$85 ,000.

1:42:16But I get another$25 ,000 annually, but I get another through commissions. And they're not like, you know, one month, one month. These are in contract, you know, every month the same amount. And thank God it only goes up every month. That's cool. I never heard of a bookkeeper making commissions. Is it off trash, like accounts? Right. No, it's like, yeah, trash accounts. So the more accounts created, you get a piece of that. Yeah, exactly. Why do you hate it, Sam?

1:42:44Rachel Cruze:What's going on that you're like, I hate my job? So I'll tell you, coming to work, I love coming here. It's like an awesome, great place to work. But the actual work, like I feel like there's a lot more I have to add to this planet than doing bookkeeping, which I hate. And what is that thing you have to add to this planet? I don't know. You just feel it. You just feel this like gnawing feeling that like this is not it. Yeah, there's something more. And I just need to know how do I find out what that is and how do I get there. Well, that's where I was joking about the trash versus bookkeeping. But sometimes you're doing the right thing in the wrong place.

1:43:23Sometimes you're doing the wrong thing but in a great place. And there might be a different seat on the bus, as we say. And so that's where I'm digging in.

1:43:29Rachel Cruze:Is there any other opportunity within the company? Because you said you love going to work there, which is a positive. Do you look around and see a position that you're like, oh, man, that would be something I think I could really add value and be really good at? No. Like, the positions are really pretty booked up. Like, I think if someone, an outsider came in to run the company, probably half the people would do their job. Do you want more of a challenge? Like, are you kind of bored because you're like, all right, knock that out. What else? Yes, for sure. Okay. Have you brought that up to your leadership?

1:44:00Yes, I have. What do they say? Everything here runs very, not to the word for it, like very mind-popped. Like it's not, like there's no, the company's very successful, but it's not very efficient. I'm trying to think for the right word. Yeah. Well, that's what I'm wondering. Are there opportunities where you go, hey, I noticed this over here. I know in my bookkeeper seat, it feels a little bit out of bounds, but could I try this little challenge over here and see if I can solve that and create some efficiencies in the business? If I'm the business owner, I'm so excited to have Sam on my team. So that's where I'm wondering.

1:44:35And if you run out of those opportunities or they're not giving them to you over a long period of time and there's a sole tax you're paying, then I would look for a different opportunity where there is a bigger challenge for you. Maybe it's a more senior role. Maybe you're in leadership. Maybe you're solving a bigger problem. And so that's where I go. You might be doing the right thing and you're just not in the right seat right now. Right. But the thing is that when you have, you know, three kids, a wife, a mortgage, the whole thing, not that the wife has a tax that helps, but when you have that many things going on, it's hard to just switch jobs.

1:45:08Sure.

1:45:08Rachel Cruze:Yeah, you have a responsibility to put food on the table. So, yeah, you don't want to neglect that. We would never tell you to have a gap in income. No, but I do wonder for you kind of searching yourself and just to say, hey, what else is out there? If you hold on the line, we're going to get you Ken Coleman's book, Find the Work You're Wired to Do. There's a great assessment at the end of that book. And that may just be a good place just to kind of start jogging some ideas in your mind and start thinking through. And it may be at this company, it may be something totally different. And it may take six months.

1:45:41Rachel Cruze:It may take a year and a half. But sometimes these decisions are slow and the awareness can be, you know, take some time. But overall, I think if you keep digging, Sam, you're going to get some answers.

1:46:11Hey, 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.

1:47:10Rachel Cruze:Are you sick and tired of working so hard but feeling like you have nothing to show for it? that so many people we talk to where they work and work, make a paycheck, but then they look up and they're like, I just still feel like I am broke. And it's gone. Yeah, I feel like I'm broke. So if that is you, make sure to check out our EveryDollar app. So EveryDollar, the budgeting app, it helps you find extra money every single month and it builds you a personalized plan to help you beat debt and build wealth. And you can do all of this in 15 minutes, you guys, and find thousands of dollars that is hidden in margin that you don't even know you have.

1:47:41Or your pizza's free. That works.

1:47:44Rachel Cruze:There you go. So you guys don't be normal. Live like no one else and start EveryDollar for free in the App Store or Google Play. That is one app, George. Shameless plug. I plug in. I tap on a couple of apps every single day. Out of habit. Weather Channel app. I still love my Weather Channel app. Wow. I feel like a boomer, but I do. I love a Weather Channel app. Email, Instagram, and EveryDollar. That's it. I do. Those are like a routine for me. I'll go through and look. Yeah. A simple woman. But every dollar it is. I'm like tracking those transactions, feeling good about May, put teacher's gifts in there this weekend.

1:48:21Rachel Cruze:Oh, nice. That's right. So yeah, when you do it all, you're like, okay, I feel organized. I feel in control. You can't keep it all in your head. No. People go, well, I do a budget mentally. I'm like, bet. And can I say, if you have kids, have a higher miscellaneous fund than ever before. Because who knew you had to sign up for fall soccer in May. And you're like, oh my gosh, I'm signing up for soccer in May for fall. I didn't plan that. Put that in the miscellaneous category. But it helps. It does. Even though it takes the stress out of the chaos of life. Yes, it's wonderful. So again, there's a free version, you guys.

1:48:54Rachel Cruze:Make sure to check it out. Build your budget. Actually, be intentional with where your money is going. All right, let's head to Nick in Columbus, Ohio. Hi, Nick. Welcome to the show. Hi, thanks for having me. Yes, absolutely. My wife and I are about to have our first child. Oh, congratulations. Thank you so much. So I have money and an investment account that would cover all of our debts if I were to sell it. And I don't know that I want to do that. We have about, we're just about millionaires in total. That's mostly tied up in retirements. I have been in school for 10 years. My wife has her master's.

1:49:41I have a bachelor's. It's a long story, but I had to restart because the school went under. Luckily, no debt from that. So we managed to pay off all of my school loans. We owe about$180 ,000 total, and that's her student loans, the house, and about$15 ,000 in credit card debt. Okay.

1:50:02Rachel Cruze:How much is just the student loans, Nick? It's about$50 ,000. $50 ,000. How much was the credit card debt, you said? About$15 ,000. $15 ,000. Okay. So that's the consumer debt. $65 ,000. And$130 ,000 left in the mortgage? Yes, that's correct. And how much is in the stocks? It's just under$200 ,000. Okay. So my company pays me RSUs, and I haven't touched it since I started this company. Is all the$200 ,000 in the company stock? That's correct. Okay. Wow. Single stock. And it's single stock and it's up 168%. Well, that's some good return. Good time to sell. That's exciting. Have you factored in what the taxes would be if you sold?

1:50:48I haven't factored that in. I just found your guys' show recently and started listening.

1:50:55Rachel Cruze:Okay. So this was just, with her pregnancy, she had a health scare. Luckily, everything is fine. But now I'm like, they had thought that she had a heart issue and then went to a specialist and ended up she didn't. But they were concerned she would die during labor. Oh, my gosh. Do you guys have liquid cash at all? We have about 18K in liquid cash. Okay, good. Okay, perfect. Perfect. So you could pay off the debt and still have the 18K left over as your emergency fund. Exactly. And have no mortgage payment or any other payment, which frees up how much? if you added up those payments per month? Credit cards, loan loans, mortgage?

1:51:37So my wife and I do things a little differently. We have two accounts. Her income goes into an account that pays for our food, gas, everything that we would need monthly. And my account just pays the bills. And I say my account. We're attached to both accounts. We see what goes in. We see what comes out. It's just how we've divided it since we've been together.

1:51:58Rachel Cruze:Can I just ask, Nick, why don't you just put it all on one account and everything comes out of one account?

1:52:06We had no money when we started dating in 2010. We were high school sweethearts. And we decided that by doing it this way, we worked while we were in college. And we made sure that all of our bills were paid. And we've always just done it that way. Okay.

1:52:22Rachel Cruze:Do you think things can change? Do you think a mindset of an 18-year-old maybe could make some tweaks and some adjustments now that you're going to be parents and you're grownups and you're 30 years old and you both have careers? Yep. That's what I'm going through right now is like we weren't planning to have kids necessarily. Not that it wasn't unplanned either, but it wasn't something that we were like, we're going to have kids. We were like, we're going to live, we're going to travel, we're going to do things that we want to do first. Totally, totally. With my college stuff happening, we ended up not doing as much of that and focusing more on that.

1:53:07So over the time, I've only had like two full years out of college. I graduated.

1:53:12Rachel Cruze:How much do you guys make a year, you and your wife? uh so not counting the rsus we make 260 000 roughly with the rsus about 320 okay is she gonna be working still nick do you think after the baby's here that's her plan she's a social worker she gives like she helps the community locally through her job how much does she make How much out of the$260 is hers? $110. $110, okay. Yeah. Okay, that's great. Yeah, so just, I mean, you called in. Can I just give you a couple of maybe random thoughts I have about your situation? Yep. Okay, so we talk about when you are pregnant, we have a thing called stork mode, meaning if you are trying to get out of debt, we pause the debt snowball, and we just save a bunch of money to the side in case something happens.

1:54:08Rachel Cruze:Okay. Now that is with people doing the true baby steps, which means they've already done baby step one, which is they take everything down to a thousand dollars. If you could imagine, Nick, yes. People didn't take everything down to a thousand while getting out of debt. You guys will not have to do that because you have$18 ,000 saved and$200 ,000 in stock. So I would not count stork mode for you because you guys have that money. You will have enough money even if you paid off all of your debt, if that makes sense. So if I woke up in your shoes, I would, I probably wouldn't pay off the house right now, but I would go ahead and wipe the consumer debt and just be done with the 65 ,000.

1:54:48Rachel Cruze:And then once baby comes, everyone's good, mom's good, baby's good. Then yeah, I mean, I might have a discussion to say, hey, what if we aggressively paid off the house and it just had no debt. We had complete autonomy over our money, which is pretty crazy, the fact that we can even have this discussion, Nick, that this is a possibility for you guys. So that's what I would do in your situation. I'd go ahead and pay everything off. And if you hate not having a mortgage, you can go and get another mortgage if you want. You can borrow against your house. I mean, you're probably going to get like a$3 ,000 or$4 ,000 raise if you paid off all of your debts, including the mortgage, right?

1:55:28Yeah, I mean, this year has not been good for us financially. We had a lot of setbacks this year. We were basically debt-free coming into the year. And then we had house problems, our basement flooded. We had to dig a new sump pump line. Our dog has been sick. He's 16 and entering kidney failure and stuff like that. That's even more reason to be completely debt-free, man. You have that money back in your life. You just sold yourself on becoming debt-free and you're probably going to have, you know, maybe 15 % capital gains on the money that's appreciated, not from what you bought it for, but the gap from what you bought it for to what it's worth today, that might be 20 grand.

1:56:08And look, lo and behold, that's 180 grand you can throw at your debt. Gosh, I would feel good. I like Rachel's, weighed your toes in the water by paying off the consumer debt. Once the baby's here, I think you'll go, you know what? Let's liquidate the rest.

1:56:21Rachel Cruze:Yeah. And then relationally, Nick, you and, you know, I would love to see you guys see yourselves more as one financially. This is our household. This is our family. The money that comes into the household in one account. How do we run our household out of this account versus divvying it up? Who pays what?

1:56:51Rachel Cruze:Hey guys, Rachel Cruze here, and I love summer. There is more fun on the calendar, more time with your people, and way more chances to make memories. But you know what else there's more of? Spending. Oh, between the extra groceries and gas and camp fees and family trips, it all starts to add up so fast. And before you know it, money stress starts to steal the fun out of everything. and that is why I love the EveryDollar budget app because it helps you plan your money, track your spending and find more margin in your budget so that you can put extra cash towards the goals that matter most. Enjoy your summer without the money stress.

1:57:31Rachel Cruze:Download the EveryDollar app in the App Store or Google Play and start for free today.

1:57:51Rachel Cruze:Our scripture of the day comes from 1 Samuel 16, 7. The Lord does not look at the things people look at. People look at the outward appearance, but the Lord looks at the heart. Nathan Morris said, I've found that the stuff, sorry, I have found that the less stuff I own, the less my stuff owns me. Such a minimalist. Look at that. Before his time. It's a little bit like the Dave Ramsey quote of, it's okay to have nice stuff. Just don't let your nice stuff have you. I wonder if that's where Dave got it from. I don't know. Who's Nathan Morris? I couldn't tell you. We'll Google him real quick. Let's find out.

1:58:29Rachel Cruze:He's probably from a different era. Should we know him? Is he an evangelist? He's not a president. He's not. I really hope it's the founding member of Boys to Men. Is it? I mean, that is a Nathan Morris. I don't think it's the same one. but that would be incredible. Oh, let's give him the credit. Yes. Author of The Art of Getting Money, personal finance expert. Boo. Boo. A Boyz II Men lead singer would be so much more cool. In my heart, it will always be Boyz II Men. Kelly, work on our quotes of the day. We need some Boyz II Men. I'm sure they said something, you know, really profound. Who's gonna know?

1:59:01Rachel Cruze:About stuff and money and life. I'd like to say that. Boyz II Men said it. I found that the left stuff I own, the left stuff I own, you should give a little tune, George. No. But that, yeah, it's okay to have nice stuff. Don't let your nice stuff have you. It is a great balance because your stuff having you is you go into debt for it. The borrower is slave to the lender. You don't own it. You owe on it. So it has you. And the identity contentment piece is really big. Where your treasure is, there it will be also. There you go. Look at you quoting another scripture. It's not just about debt, but it's what is the chokehold that material goods have on you?

1:59:40I know. And you can't take it with you.

1:59:41Rachel Cruze:You can't. nope and so it's it's fun to have stuff right i've seen left behind that you can't even take your pants all right they'll be folded neatly on the bed every time i still see clothes folded on a bed i freak out a little bit that's that movie scarred trauma all three yeah there's three they gave me the kids version listen you get left behind the first time years old you get left behind three times that's on you that's on you oh lord okay uh emily god bless you emily sorry Thanks for hanging with us. You're going to have to round us out. But, yeah, in Idaho Falls, we have Emily. Hey, Emily, what's up?

2:00:18Hi. I am just calling in to ask. My husband and I just had our fifth baby. We're almost done with baby step three. But we are growing out of our house. And we have an unfinished basement. We're just trying to figure out if it's financially wise to take out a loan to finish the basement. We're feeling really on top of each other right now.

2:00:40Rachel Cruze:Yeah. Seven people. That's a lot. What's it going to cost to do the basement? So we estimate it'll be about$40 ,000 to do the basement. For context, we are in a three-bedroom as is. So I have two kids in each room and a baby who's going to need a room soon. So we owe$200 ,000 on our mortgage, and it's at a 2.3. So moving just makes no sense. Neither does refinancing. So we're trying to figure out if a loan to do the basement would make sense. Another piece of information, our current mortgage payment is below 5 % of our take-home. Okay. How much do you guys bring home a month? About$10 ,000. $10 ,000, okay.

2:01:30Mortgage excluded. Would you guys just go buy a different home right now if you could? Absolutely not. We love our neighborhood. We love our home. We love the lot our home is on. It's our favorite. Okay, so you want to make this home work no matter what. How much do you have in the emergency fund? About 30. Well, by the time I said we're almost done with baby step three, when we're done, it'll be at about 35. Okay, because I think you can just cash flow this. I mean, that newborn baby is going to sleep next to you for the first couple of months, right? Yeah, it did take us—I mean, we have a lot of kids.

2:02:05It took us about four years to get that fund put together. But you bring home$10K a month, you said? We do, yeah. Our food bill is more than our mortgage. Okay, yeah, because you said the mortgage is 5%. So I went, can you save up a couple grand a month?

2:02:22Rachel Cruze:I was going to say, yeah, could you guys really kind of go crazy and just say, we're going to save$4K a month, and in 10 months we'll have it all. And you can even start planning and doing things even before that. yes yeah so we do have we have been doing that um we're just we're like i said we're really on top of each other i've got the baby my husband also just started a new job where he'll be working from home sometimes and his current i mean he doesn't have an office because that's how many bedrooms yeah yeah so what are you going to do with the basement is it going to be a bedroom an office and you're going to parse it out?

2:03:02So it's got space for four bedrooms. We are hoping to get a quote to do just, you know, two bedrooms initially, kind of leave the plumbing and stuff for later in the bathroom. But I would imagine we're still looking at 20K for that. That feels reasonable.

2:03:19Rachel Cruze:Yeah. I mean, Emily, yeah, we're not going to tell you to take out a loan. So you called the wrong show. I'm so sorry. No, it's okay. I want your guys' advice. Yeah, so what I would do, though, is start meeting with some – because I think if you guys really could buckle down and save three to four grand a month, you could actually start to cash flow this and get it at least starting. You don't have to have all 40 grand at the beginning. You know, you could start some of this in six months. When is the baby due? Oh, he's a couple of years old. Oh, he's here. Okay, I'm so sorry. Yeah. Yeah, so, I mean, honestly, yeah, that's what I would do.

2:03:57Rachel Cruze:I would just make an aggressive goal to save$15 ,000, start the process, and you guys just be putting cash away every single month and be cash flowing it as the project is going so that you can get it done faster versus waiting and having it all saved up. That's what I would do personally just to get the ball rolling because I know the urgency in it. But, yeah, we're not going to – You work too hard to get debt free, so why go back in and restart the whole process? and it just is it's not the move because you're going to build this thing you're going to feel it you're going to be paying for it versus saving up and paying cash you treat it differently you're going to get multiple bids you're going to be very strategic with every move and why you do it when you take out a loan or even worse a heloc you go well let's just take out more let's just really go big with it since we're already here that's what most people do they use their house like a piggy bank and they just keep moving backwards and you guys make so much money you're doing so great.

2:04:52I know it feels chaotic right now. And you got a newborn, which is not helping anything as far as your exhaustion of feeling like everyone's all over you. You've been a great sleeper. So thank goodness for that.

2:05:02Rachel Cruze:Well, and what you could do too, which may scare some people, but you have 30 grand in the emergency fund. You know, you guys could say, well, it only really takes us, you know, 7 ,000 to live off of. So technically 21 ,000 could be a three month. Yeah. It may feel a little risky because you got kids, one income, you know, but$21 ,000, you know, could be okay for a bit. If you want to take some. To get through the project and then refill it. Yep. And then jumpstart it. And if you had an emergency, you pause the work until you're back to some stability. Yep. And I think you can cash flow this and you'll get to the end and be thankful that you don't have a loan to pay.

2:05:38I mean, seriously.

2:05:40Rachel Cruze:Yeah. And, George, you hit on it, but I just do want to reiterate. When you do things with cash, there is something more subconscious that goes into the care at which the planning process is happening, the speed at which people do, the changes. If there's changes, you're thinking about those so much more in a diligent way than when you borrow. It's a little bit like, oh, OK, if that's an extra five grand, tack it on. We'll figure it out later. Add it to my tab. Yeah, there can be a little bit of that feeling. And so it really does force you to stay in a time frame and in a budget. But I mean, that's what Winston and I found when we did our pool project and when we built our house in 2019.

2:06:18Rachel Cruze:Like, it's a different game when you're cash flowing something like that, a big project. So it's... It moves slower, but with that comes a whole lot of peace. Absolutely. It takes more patience on the front end, right, to have the cash to do it. But in the process, you're just... Yeah, I think you're just a little bit more paranoid about it because like, this cannot go over. This just can't go over. So what do we have to figure out? But I mean, if you were running a budget for a company, you're going to go, I got to stay within the budget. and we can't take on any debt. So once you take the debt off the table, it just changes things.

2:06:48And that's really helped me go, well, if I don't feel good about spending that much on it, maybe it's a sign.

2:06:52Rachel Cruze:That's right. So if you're willing to finance it, but not willing to depart with all that cash, that's your body saying, this is a big purchase. Are you sure? Yes. And debt removes all of that. It makes it frictionless to get all of these things that you want now. And you signed a bunch of dotted lines that said, nope, you owe us with interest. Yes, with interest that adds into it. Yep, absolutely. Well, thank you, Emily, and good luck to you guys. George, great show. Always fun hosting with you. Thanks to everyone in the booth. And remember, there's ultimately only one way to financial peace, and that is to walk daily with the Prince of Peace, Christ Jesus.