We Make $200K and We’re Still Broke

11:36George Kamel:And what about her? I mean, her husband's working, right?

11:41Rachel Cruze:On and off.

11:43George Kamel:Oh, boy. Well, here's my fear, Pat. Let me play this out for you. You drain every penny of retirement to pay off these Parent PLUS loans. Now you're left with nothing. Now we're down to Social Security and you working until you can't work anymore. That's it. That's the only future available to you at that point. Not that the$37 ,000 is your saving grace for retirement, but that's really draining everything down to nothing all to pay off this Parent PLUS loan for your daughter. and so I'm just trying to figure out what the other options are. What is your current income?

12:20Rachel Cruze:$78 ,000 a year.

12:23George Kamel:Great. And what are your expenses?

12:27Rachel Cruze:So around$3 ,000 a month. Okay.

12:30George Kamel:So you should have, if we were doing a budget, you should have a few thousand dollars left over each month?

12:37Rachel Cruze:Oh, I have a few hundred left. I figured like around$400 left. I do budget, and I do have$400.

12:45George Kamel:Do you have other debt?

12:46Rachel Cruze:$400. No, that's all. But it's, you know, my take-home pay is like$3 ,400 because of me contributing to my IRA. I've been putting 25 % in. I've been really trying to build it up. Oh, okay.

13:06George Kamel:You're trying to make up for lost time.

13:08Rachel Cruze:Mm-hmm.

13:10George Kamel:Man. Well, I'm trying to think through a plan where you could knock out these loans, get them out of your life, and still try to build a decent nest egg.

13:20Rachel Cruze:That's what I've been trying to do. I've been putting$600 a month against this loan. Well, the interest is probably$600 a month at this point.

13:29George Kamel:Those Parent Plus loans are brutal.

13:31Rachel Cruze:Oh, they are brutal. Yeah, I was looking at the daily interest is almost$7 a day. Okay. And that was the other thing. At 7.9%, is there a way to negotiate that interest?

13:47George Kamel:I don't know that they'll negotiate. The only way to get out of that would be to refinance it, which you'd lose the federal protections. It'd become a private student loan. And I don't know if you'd get a much better rate. It's something you can look into. But again, I don't think this is going to be the solution. I'm wondering if we pause all retirement investing and just got real intense about this, and you pay it off in two years. Because right now you're trying to do two things at once, and you're not making great progress on either.

14:18Rachel Cruze:Right. Pat, what will you be getting at? Are you getting Social Security right now? I am. I'm getting$2 ,000 a month in Social Security. Okay.

14:27George Kamel:Are your benefits hurt by the fact that you're working right now?

14:32Rachel Cruze:That I don't know because I just started. collecting social security.

14:38George Kamel:Okay. You are full retirement age, so I think you should be getting the full amount, even if you're working at this point, but that's something to look into. At least you have a great income. I mean, there's some saving grace here. Usually people that are 68 either retired and are just trying to live off social security, or they're not making 80 grand a year. They're making 30, 40, 50. And so this is at least something you have to your advantage of knocking this out. And maybe eventually, I don't know their situation financially, but if they're able to even chip in and help, because I just don't want them to, you to be a burden to them when you're in your seventies because you have nothing saved and now mom's got to move in with them and they have to cover her financial life.

15:18George Kamel:Yeah, that won't, that won't happen. The, uh, the husband. He wouldn't even let you move in. No. Sounds like a peach. All right. Well, Pat, um, these Parent PLUS loans really are becoming like a cancer on society. It's destroyed relationships and parents took it out thinking they were doing the right thing for their kids. The kids go, hey, it's in your name. You took it out. I was a kid. I was 18. I didn't know what I was doing. This is on you. But I would at least be very blunt about your financial reality with your daughter and so that she knows what's on the line. And if they can at all help you get rid of this, that at least gives you a chance at a decent retirement.

15:59Rachel Cruze:Okay. So I'm pausing my contributions in my IRA. Yeah, put that 25 % back in your paycheck.

16:07George Kamel:Remember, you're not pausing it for the rest of your life. You're pausing it for a short period of time. 24 months, we're going to pause it all, and we're going to start throwing, you know, this kind of loan. You're talking about$3 ,000 a month going toward the loan to knock it out in two years. A little more than that. Because the interest is adding up. You're right. And so the more we throw at the principal, the faster this thing's gone. Because right now you throw 600 at it, but 100 or 200 is interest. Well, only 400 is now knocked out. And so if we can start throwing 3 ,000 at it, you'll actually see that balance start to go down instead of just keeping it at bay.

16:41Rachel Cruze:Okay.

16:42George Kamel:But there's no other magic wand I can throw at you. I mean, these loans are not even bankruptable in most cases. And so really the only way to get rid of student loans is to pass away, which is the darkest part of it all. Oh, my goodness. I'm wishing you the best, Pat. So sorry. Riley is up next in Memphis, Tennessee. Riley, welcome to the show.

17:05Rachel Cruze:Hey, how are y 'all?

17:06George Kamel:Doing great. What's going on with you?

17:08Rachel Cruze:Hey, about two years ago, I bought a$60 ,000 truck. I currently owe$39 ,000 on it, and it's worth about$29 ,000,$32 ,000.

17:20George Kamel:Okay.

17:25Rachel Cruze:I say I can afford the payment, but once I get done paying the payment, Well, after I get paid and, you know, insurance and buying diesel for it, I'm left with about$100 for two weeks.

17:36George Kamel:Yeah, that's right.

17:37Rachel Cruze:After your truck payment? Yeah, after my truck payment. How much do you make a month? How much do you bring home a month? It fluctuates depending upon if they're letting us work overtime. But it could be anywhere from$1 ,400 bring home to$2 ,000 bring home.

17:56George Kamel:In a week?

17:56Rachel Cruze:So it, you know, I mean, every two weeks. Okay. Okay. And how much is your truck payment?

18:06Rachel Cruze:$758.64. Woo.

18:09George Kamel:That's a lot, my friend. That's a quarter of your take-home pay. It is. Just going to the truck payment. It is. So you're underwater by seven to nine grand. So that's the magic number we need to come up with, either in cash through savings, future income, or by going down to your local credit union and seeing if they'll give you that loan for the difference plus some to get you something to get around in. Yeah.

18:29Rachel Cruze:An ideal situation is like a$12 ,000 loan,$13 ,000 loan. So you have an extra three to 4 ,000 to go get a crappy truck.

18:38George Kamel:Facebook marketplace and get an inspection and just go, all right, this thing's not, it's not fancy, but it runs.

18:44Rachel Cruze:And then you save almost$1 ,000 a month,$750.

18:47George Kamel:Yeah, between the diesel, the insurance and the payment, you're going to feel like you got a giant raise because you did.

18:53Rachel Cruze:yeah well i talked to the bank this morning and they told me that uh i have another car that's paid for and it's fine it's in the driveway they told me to get the vn and put it up for collateral

19:07George Kamel:no and they just don't do that like a title loan no yeah like a like oh they just said for

19:14Rachel Cruze:collateral because i've never had a title loan it means they own the car if you miss the payments

19:19George Kamel:I don't like that at all

19:20Rachel Cruze:yeah no just see if they will if you can do just yeah just a personal loan for nine grand at that point or if you have a thousand bucks saved Riley then an $8 ,000 loan whatever it is for that difference yeah and pay this truck off ASAP

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21:08George Kamel:We wish that we could get to every call and question here on The Ramsey Show, and we can. But if you have a money question, you want an answer, there is hope for you. You can head over to our website and use Ask Ramsey. It's our free AI tool that is built and trained on proven Ramsey principles. This is stuff that you're not going to get from your other search engines because they just don't know us like that. Yes. This thing has the brain power of all the Ramsey show calls. Of all Ramsey.

21:33Rachel Cruze:It's kind of scary. All of the articles. Just like a robot of Ramsey. It's like us, George. It's a superpower.

21:38George Kamel:It's way smarter than us because it knows everything.

21:41Rachel Cruze:That's so true. Can do.

21:43George Kamel:I actually used it today, Rachel. You know what I asked it. What'd you ask? You know, I know our car parameter that no more than half your income in things with wheels and motors. But I was like, what about net worth as a ratio? And it told me. It said, hey, make sure that the cars in your life aren't more than 5 % of your total net worth. Of your total net worth. I was like, thanks, Ask Ramsey.

22:02Rachel Cruze:Gosh, Ramsey.

22:03George Kamel:I was like, I think it's 5%. I think I've heard Dave say this. And Ask Ramsey knows all. So it settled the debate for me. And you can get the answer the same way we'd answer it right here on the show. So ask your question today at RamseySolutions.com. Go take it for a test drive. I think you'll really enjoy it. Or click the link in the description if you're listening on podcast or YouTube. Tyler joins us in Canada. Tyler, welcome to the show.

22:27Rachel Cruze:Oh, thank you for having me. It's my first time calling, so I'm excited to hear your feedback.

22:30George Kamel:Hey, about time. We're glad to have you. What's your question?

22:34Rachel Cruze:Thank you very much. Yeah, so my wife and I are moving to a different province in Canada.

22:41George Kamel:She's just about to be done graduating seven years worth of school. She's going to be a veterinarian when she's done. Nice. And because of the, she has a job guaranteed contract.

22:51Rachel Cruze:She's already signed it. And I have worked lined up back home as well that we both know what we're going to be making. So we went ahead and made a decision.

23:00George Kamel:We put an offer on a house in part because of the money we had saved for school. Plus, unfortunately, her father passed away recently.

23:08Rachel Cruze:But that meant she got, you know, the life insurance payment made it so that it was more than possible for us to do either a 10 or 20 percent down payment on all the housing that we were looking at in rural New Brunswick in this case. Which maybe that's maybe that's fine advice. Maybe it's not. But the problem became then, you know, they're good people and they had, you know, their worries and concerns. But her mother and grandmother and my in-laws have sort of been telling us that it's too much too soon and it's a bad decision. And I was just wondering if there's if I'm making a mistake or if if what I'm doing is fine.

23:48Rachel Cruze:Are they saying it's a bad decision because of where you guys are financially or because it's just too soon because you just graduated, you're newlyweds? Was it more of a life or money reason? I think it's definitely more money reasons. Like we've been married for almost five years, so it's not like you're keeping up too much onto a new relationship or anything. And they know your incomes? Yeah, they know what we're going to be making. Do y 'all have a lot of debt from her vet school? We have some hangover.

24:18George Kamel:The only caveat here is because it's Canada, there's no interest on the student loans.

24:23Rachel Cruze:So we are paying them, but it's a little... How much student loan debt is there? It's around$30 ,000. Okay.

24:31George Kamel:What other debts do you guys have? Nothing.

24:34Rachel Cruze:It's just those. Do y 'all have any money? There's no loan loans. There's no credit cards. Okay. And how much money do you guys have saved total, including when her father passed away? So all between what I've saved and between what we have, we've probably got around 80. 80 ,000. Okay. Saved. Yeah. It'd be a little over$80 ,000. That's like liquid right now. Okay. It's non-retirement.

24:56George Kamel:Gotcha. So if you take away the loans, that brings you down to 50. Take away an emergency fund of six months. That takes it another 30 down. So you're left with 20 grand essentially, right? Let's go three months.

25:05Rachel Cruze:They're young. They don't have kids.

25:07George Kamel:Okay. Rachel's being very kind. Let's live on the edge.

25:09Rachel Cruze:We'll go 20.

25:11George Kamel:20K. So 20K for emergency fund, 30K for... $30 ,000. Leaves you with$30 ,000 left for a down payment.

25:17Rachel Cruze:Yeah,$30 ,000 for a down payment is where we would say you guys are parameter-wise versus$80 ,000.

25:22George Kamel:How much is the house that you guys put an offer on?

25:25Rachel Cruze:So what we ended up settling for was$345 ,000. So 10 % would be the$34 ,500. Okay, yeah. I was hoping to – so maybe this is the philosophy difference. I was going to leave the student loans and go for$20 ,000 on the house and then use the excess because it would be an extra$500 ,000. bucks a month that I'm saving on the mortgage. And I wanted to use that to go in and pay the student loans. How much a month extra would you get? You'd say$500 a month if you put 20 % down. Because it would avoid PMI. So that would be going, instead of paying the student loan immediately, just because there's no interest on it, my incentive to pay it isn't quite the same.

26:07Rachel Cruze:And I would rather, I think I'm net saving more money by reducing the insurance load or the interest on the house rather than, you know, the student loans that I'm less incentivized to pay. Yes. Well, yeah. And in that case, if it was just 500, you're putting towards those loans, it'd be like three and a half years till they're paid off. So our philosophy is to be debt free before you buy a home and to have an emergency fund in place. And then what is left is, yeah, what you would put down for a house. How much do you guys make a year together? What will the new So she's, it'll be the, so the, about the floor, the most conservative estimate will be 125.

26:45Rachel Cruze:Okay. Her job, she's expected obviously like within three years to be making a lot more than the 85 starting. And there's a commission component to like, depending on what drug she does or doesn't sell. So one, I'm not like planning that into a budget or anything, but it's another consideration. So 125 for both of you. Right. What are you making? Oh no, no. That's combined. 125 is combined. Combined. Okay. It should be around$85 ,000. Gotcha. Okay, yeah. So if you guys lived on$90 ,000, well, I guess that's before taxes.

27:14George Kamel:Yeah, my guess is your take-home pay will be somewhere in the$7 ,000 range. Yeah, that seems about right. Okay.

27:23Rachel Cruze:Maybe I would say a little bit more than that, but yeah. Around there. Okay.

27:27George Kamel:My fear is that, I mean, if you do it the Ramsey way, you're talking about, I know you guys have a different mortgage structure. you guys have like adjustable rate mortgages that change every five years. Is that right?

27:39Rachel Cruze:And our interest or the rate is like three and a half percent here where it's more, I think, for you guys as well.

27:45George Kamel:Okay. Not sure. But the rate could change, you know, every couple of years. Yeah. So my fear is that you pick up this home and if you do it our way, you know, that mortgage could be$3 ,000 out of your seven, right? It's possible. That feels like a big load to carry going into this new phase of life. We know we recommend 25 % going towards your housing. And so you'd be closer to 40 edging up to 50, depending on the situation, insurance, property taxes, all of that, HOA. I don't know how that works in Canada, but that's my fear right now.

28:20Rachel Cruze:It's world, so there's no HOA and the property taxes is a little, it's about$100 a month. Okay.

28:27George Kamel:So there's a piece of me that says you guys might be able to make this work, but it's going to be more stressful than you think it is. But if you waited another, let's say, six months, you signed a short lease agreement to rent in this new province, kind of get used to the area.

28:42Rachel Cruze:Even just a year. You know what I mean? It just. It's the province where we were from. I guess the only other thing, piece of information that might be relevant here, her job requires her, like, week on week off to be in one of two different places. So where we were getting is kind of in the middle to reduce her driving between each one. And it's closer to where I would end up working as well. So the options to rent that are actually close are, like, close to nonexistent because of how rural it is. Well, how far is the difference? What's the difference of the two places? We're talking about like a 20-minute drive versus over an hour.

29:21Rachel Cruze:Yeah. Okay. Well, for a year, here's the thing, Tyler. The reason that everything is laid out the way it is with the baby steps and all of it, which hasn't changed in 30 plus years, is because this is the most peaceful, most efficient way to build wealth long term. Okay. And so, and I say peaceful, people getting out of debt. It's not really peaceful. It's crazy. You're like trying to get out. But the point is, is that especially with a house, you know, your house is supposed to be a blessing. It's supposed to be a place of peace and rest. And the thing is, people quickly move into that purchase thinking, OK, if I could just get that house, it's going to be OK.

29:58Rachel Cruze:And we'll figure out the finances. Well, it's OK. We're right on that edge. But what George was saying earlier is you're just you're right on that edge. And what it could cause is a level of stress that's unnecessary for today. that if you guys just waited one year, had an inconvenience of an extra 25, 30, 40 minute drive for one year, saved like crazy, knocked out the debt, had, you know, looked at it and said, okay, we can go full force, 20 % down. Like it's just a more peaceful way. And there's no one telling you you have to buy a house right now, you know? There's no one, so.

30:30George Kamel:And you can, you know, it gives you more options down the line. Let's say you have kids. One of you wants to stay home. Well, you can't. And guess what? There's no daycare out in the woods. And so now we're left in alert. So we're trying to think about future Tyler as well. Wishing you the best.

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32:21George Kamel:Haley's in Seattle up next. Haley, welcome to the show.

32:24Rachel Cruze:Hi, thanks. Super excited to be here.

32:27George Kamel:What's going on with you today?

32:29Rachel Cruze:I am trying to decide if my family, just made the biggest financial mistake of our lives. Oh, no. What is it? Say more. So we just sold our Ramsey Model Perfect house in Boise, Idaho to move to a high-cost living in Seattle, Washington. Why'd you move? We have two young kids, and I became permanently disabled from my job.

32:59George Kamel:I'm so sorry.

33:01Rachel Cruze:Oh, thank you. I'm dealing with it, but I wanted to be close to family to help with the raising of our children. Yeah, that's a very noble decision and a great why. So what is causing you to feel like that was a big mistake? Is it all financial related because it's just more expensive? Yes. So, well, I mean, it's hard to justify leaving a$1 ,200 mortgage. well it is when you're permanently disabled and you have young kids you want to be near family i mean that's and it depends on how much of your world this new mortgage is yes so it might just

33:39George Kamel:be like well we're paying this much now we're paying this much the sticker shock sometimes hurts more than the actual reality ratios so like our rent we moved into an apartment and our rent

33:50Rachel Cruze:is three thousand two hundred and eighty five dollars oh yeah that can hurt and what's the

33:54George Kamel:household income now? Like every month?

33:58Rachel Cruze:About $7 ,500.

34:00George Kamel:So that's where you're feeling the pinch. Is half of the income is now going to rent instead of building equity at$1 ,200 a month.

34:11Rachel Cruze:Exactly. And it was I mean, it was just such an affordable place to live, too. Okay, well, it's done, right? The decision's made. The house has been sold, correct? Yes. Yep. Okay. So what can we do moving forward to help you? So we, my husband and I feel like we are never going to be able to reenter the economy as like homeowners and like take that next step again. We feel like we took this huge step back. And I guess my husband is in the mindset currently that we made the biggest financial decision that could ruin our future going forward. And it's going to take us years to recoup. It's very dramatic.

34:52George Kamel:Wow.

34:53Rachel Cruze:Very dramatic.

34:56George Kamel:The clouds are just hovering over you. Well, what happened to the proceeds from the house?

35:00Rachel Cruze:You sound like me. Like the world's coming to an end. I mean, it's scary. Like I get where he's coming from. I feel like he has such a solid financial base that I don't think that's not true. How much did you get from the house when you sold the house? $230 ,000. Where did that go? Where's that? That one is in a high-yield savings account right now because we don't know when we could buy again. Okay. What are the houses going in the area that you guys are in? Oh, gosh. Like, for a decent three-bedroom house, we're looking at$700 ,000 to$800 ,000.

35:37George Kamel:Okay.

35:38Rachel Cruze:Yeah.

35:39George Kamel:So this is a solvable problem. I mean, yes, it's more expensive than living in Boise. So we need to get that out of our head. And y 'all knew that though, Haley.

35:47Rachel Cruze:Like, right? Like you, you guys didn't just like show up in Seattle and be like, oh my gosh, this is more expensive. Like you knew that. So living in it's a different reality. I understand that. But it wasn't, it wasn't, it wasn't like it surprised you. Well, I think it surprised my husband a little bit just because he wasn't really for the movie. He loved our home and the situation we were in, and we felt like we were really financially stable, and he kind of believed that we could make it worse even about family. So I wonder if that's part of his drama. I wonder if that's part of the big statements, Haley, is that, yes, it is more expensive, which can feel overwhelming, but you guys have$280 ,000 sitting in a high-yield savings account, which is more than enough for a down payment on a new home.

36:33Rachel Cruze:You're not destitute. And I think part of it is I just don't want any level of bitterness or resentment in him to grow because it doesn't sound like you both were felt really, really solid and really excited and really on the same page about this move.

36:48George Kamel:It's not something you chose. You didn't do it out of a place of strength.

36:52Rachel Cruze:No. Well, it just seems so. It feels like we just went against everything that Dave Ramsey teaches. Forget Dave Ramsey.

36:59George Kamel:This is your life, Haley. I mean, you have this health condition that has caused you to have to move and it wasn't your choice. And I have Dr. John Deloney in my head going, you need to grieve the life that you had. That one's over. And now there's a new chapter. And so we can either look backwards and go, oh, my gosh, if we just could live in Boise again. Or we can go, hey, this is a fun adventure. We got young kids living in this really cool city. Yes, it's more expensive. But my husband has a great job. Maybe he can make even more money in the long run being in Seattle, especially with all the tech stuff around it.

37:31George Kamel:There's a great economy there. Yeah. And you guys will be homeowners again one day. You have hundreds of thousands of dollars saved.

37:39Rachel Cruze:Right. And I was going to say, would we put all of that money down on a new home?

37:44George Kamel:Yes. It was stuck in the last home, wasn't it?

37:47Rachel Cruze:Okay.

37:48George Kamel:What else would you do with it?

37:49Rachel Cruze:I just wasn't sure. I don't know. I just feel like it's, I don't know. Yeah. I guess. It just feels like we're getting a lot of. Was this move, Haley, a quick decision? When from the moment you guys started talking about it to it actually happening? Was it a couple, like, was it a year? Was it? Oh, gosh, like months. Okay, so I do wonder if you guys rushed into it. And George, I love you, but I will correct. He said you needed to move. You didn't have to move.

38:15George Kamel:Yes. You chose to. For the help. For the help.

38:18Rachel Cruze:Yeah, exactly. For the overall quality of your life because of what happened. How long ago was the accident that caused you to be permanently disabled? It's kind of hard. I'm blind, so it was a slow progression. Oh, okay. Oh, I'm so sorry. Haley, y 'all were just dealing with a lot. Can I just say that? You're just dealing with a lot. That is one of the most horrific, life-changing, yes. I mean, you're grieving your sight, which I can't even imagine. Oh, I didn't want to give up work. Your husband, no, sure. Yes, and giving up that part of you that was contributing and that you loved, your work.

38:59Rachel Cruze:Like, you know, your husband who's, you know what I mean? Like there's a lot.

39:03George Kamel:And I'm sure it's a lot on him to figure all this out. Yeah.

39:06Rachel Cruze:I think the stress is less about it being more expensive in Seattle. And I think it's that your life has completely changed, completely changed. And what George said, quoting John, of kind of grieving what was supposed to be, what our life, what we thought would look like for the next 10, 15 years of our life. it does it looks so different on so many levels right and that's uh it does that's a really sad reality you know that's hard not that you guys can't get through it and create something beautiful in this next season but um to acknowledge that that that's that's difficult yeah yeah it has been hard but I again like you guys said I feel like we're in like a safe space I mean we're around family and and there is the financial backing to purchase a home we've just kind of hesitant.

39:56It just feels like putting all that money into a new home in this area,

40:00Rachel Cruze:like just with the current economy and climate, like we don't know if that's like smart or if renting is the better way to go. What do you mean? Yeah. What do you mean by the current economy? When you say that, what does that mean to you? It just, to me, it feels like with the interest rates of where they're at and the type of houses, they're like, they're not like, a lot of them are fixed for uppers at the 700 to 800 ,000 range. You know, we're going to have to, we'll get into a home and we'll probably have to replace through for the HVAC system is going to be ancient. And so it's like this fear factor of like, if we buy into another home, like, is that really going to be wise?

40:38Rachel Cruze:Are we going to get equity on that? Long term, long term, it will. Paying$3 ,000 in rent forever and ever. Amen. Is not the wisest move. It would be, you know what I mean? Yeah. More wise to, to get in and, and you guys need to, I would say, slow down before you buy and actually look, to see, yes, does the HVAC unit need to be replaced? You'll see all of that in the inspection of the home. None of that will be a surprise. You guys will have some factor. But yes, being a homeowner is more expensive. You're exactly right. But also, I do think there's some semantics that are thrown around when it comes to the economy and the housing market.

41:15Rachel Cruze:And it is true. Houses are more expensive than they were five years ago. Yes, interest rates are around 5%, and they're not at the 2 % to 3%. Like there are some realities, but just this like vague idea that, oh, gosh, the economy is just not good. We shouldn't buy a home. I would want some more facts around those thoughts.

41:34George Kamel:My fear is you look back 10 years from now and you go, wow, the economy was great back then and we had no idea. And so I'm a glass half full kind of guy when it comes to that. So the goal is let's let's grieve what was and let's make a plan for the future. And that might mean we're going to save$25 ,000 a year or$50 ,000 a year for this next home three years from now. And that's it. It's slowed down your wealth building, but you have the right setup in place for your life. And that's far more important.

42:08George Kamel:Well, Dave, you know, on the show all the time we get calls about cars, used cars. What's one thing you want folks to know?

42:14Rachel Cruze:Well, really a couple things. Number one is always buy used unless you've got a million dollars. We don't buy new cars. And if you're going to buy used, number two, you want it to last. And that means regular, proper maintenance. Yeah, that's a big deal. I know when Sam and I moved from South Florida up to Tennessee, that's the first thing you're looking for. You need somebody who can take care of your car. So when we found Christian Brothers Automotive, it was a no-brainer, and they've been absolutely great. We're excited to recognize Christian Brothers as the official auto repair partner of The Ramsey Show.

42:42Rachel Cruze:Christian Brothers keeps things simple, honest, and transparent. Every repair is backed by their nationwide nice difference warranty. Three years or 36 ,000 miles, whichever helps you more. Listen, Dave, I'm first to admit I'm not into cars like you are.

42:56George Kamel:But the thing about Christian Brothers is I feel just as confident going in there. They're not trying to upsell me. I feel 100 % confident that I'm going to get the service that I need.

43:04Rachel Cruze:Hey, if you want your car to last and stay on track with the baby steps, trust Christian Brothers. Go to CBAC.com slash Ramsey to find your local shop, schedule service, and get an exclusive Ramsey discount, 10 % off your visit, up to$250.

43:20George Kamel:Yeah, that's CBAC.com slash Ramsey. See store for details.

43:36George Kamel:Welcome back to The Ramsey Show in the Fairwinds Credit Union studio. I'm George Camel, joined by bestselling author Rachel Cruz, and we're taking your calls at 888-825-5225. Lynn is in Maine up next. Lynn, welcome to the show. Are you with us? So close. Yes, I am. Oh, good.

43:59Rachel Cruze:Yes, I am. You scared me half to death. Thank you so much for taking my call. I'm sorry. What's going on? Hi. So my husband and I got married last year. We started the baby steps right after getting married. We paid off our debt aside from our mortgage. and six months into marriage, I found out that my husband owed$80 ,000 in back taxes. And also at this time, we found out we were pregnant with our first child. Oh my gosh. That's finding out a lot going on. We paid the$80 ,000 out of our emergency funds and house funds, so we had the money to pay that. But we are unsure where to go from here emotionally and financially because tax season for 2025 is quickly approaching and we are expecting to owe about$40 ,000.

44:54Rachel Cruze:Oh, my gosh. Lynn, why has the accounting not changed after everything? The accounting? Are you doing quarterly payments? No, we hadn't. Okay. Okay. So you didn't learn -

45:13George Kamel:You didn't make any payments in 2025.

45:15Rachel Cruze:But didn't learn from owing$80 ,000. Do you know what I mean? Like, I'm just wondering, did it not occur to your husband? We found out in December. So we were trying to catch up before we paid 2025.

45:29George Kamel:Oh, so you found out about the 80 in December. Yeah. Oh, like two months ago. That was for 2024?

45:38Rachel Cruze:That was for 2022, 2023, and 2024.

45:42George Kamel:Got it. So by the time you found out about all of this, it was too late because 2025 was over at that point. So now we're just sort of cleaning up. This is still part of the mess. Let's call it$120 ,000, and you've cleaned up$80 ,000 of it.

45:55Rachel Cruze:Yes, exactly.

45:56George Kamel:Well, it's fairly simple. It's a$40 ,000 debt that you owe the government, and so we've got to pay that as aggressively as possible. Do you have other debts as well?

46:07Rachel Cruze:We don't. We paid off all of our other debts. Good. Thankfully, we have a business. It's a restaurant. So we have$40 ,000. Well, total, we have$60 ,000 in the bank account for our restaurant, and we have$20 ,000 in our personal account. And I know you talk about pausing paying debt when you find out you are pregnant. So we're just wondering if we should take money from the business account or if we should get on a payment plan with the IRS or what our best way forward is. Yeah, I think for stork mode is what we call it. I think IRS debt is not included. I think you've got to pay it.

46:57George Kamel:Especially if you have the money. So the question is, what was that$60 ,000 earmarked for in the business account? Is that needed for upcoming purchases, investments, anything like that? Or was it just kind of an emergency fund for the business?

47:10Rachel Cruze:Yeah, an emergency fund for the business. It takes about$15 ,000 a week to operate. While we do bring in more than$15 ,000 a week, we just wanted to kind of... Yeah, how much do you guys bring home? a total a month we bring home about 15 000 oh amazing okay so you could easily restock the business account yeah i would pay 40k today out of the business because truthfully this is kind

47:39George Kamel:of an emergency for your business is you didn't withhold enough taxes or at all and so i would take that out now you got 20k in there plus 20k in checking so you're not in a lurch if you did need to cover, you know, an emergency. And so I would just work on restocking that and you guys should still be good for your stork mode. I mean, you have 20 grand. This is the stork mode is more for like, we are broke, we have$1 ,000 starter emergency fund, and we need to make sure that we're covered in case there's, you know, health bills.

48:08Rachel Cruze:Right, right. Okay.

48:09George Kamel:So I have full confidence. I would clean it up because truthfully, while you're pregnant, you don't want to be dealing with the stress of IRS debt.

48:15Rachel Cruze:Yes, yeah. I want this to be exciting and fun and not this looming

48:19George Kamel:in the back of your mind that we owe the IRS all this money.

48:21Rachel Cruze:Do you have someone that's helping you with your taxes for the business? We do now, yes. Okay, now. And how in that we had before wasn't great, but we have somebody trustworthy now, which so we feel like we're in a good path forward. Obviously, this was very hard emotionally, which I'm still trying to get over. I think that's the biggest thing for me right now. Emotionally because you didn't know about it? Because trust or? Yes. Yeah. And was it, do you feel like, was there any level of secrecy out of, out of not malice? That sounds bad, but of like, oh gosh, I don't want her to know. Or was it complete just ignorance of genuinely not knowing that he owed this?

49:06Rachel Cruze:I think it's hard to say for sure. I think part of him maybe knew that he owed something. I don't think that he knew that he owed 80 ,000. And he was filing taxes for the business but wasn't filing personal, the money that he was taking from the business. Yep, yep. And he wasn't fully realizing but also should have definitely checked. So it's just been hard to find that out. Yeah, for sure, Lynn. That's very stressful.

49:36George Kamel:Yeah, absolutely. Well, the good news is you guys can cover this with the cash on hand, and it's fixed for the future. So I would just get rid of it now. I wouldn't get on a payment plan. Just cut them the check for$40 ,000 and fix it for the future. I mean, you got your next quarter is coming up here to pay your quarterly estimated payments. So let's prepare for that and finally get ahead of it instead of kind of being reactive.

50:00Rachel Cruze:Right. And use some kind of cash flow for the next month or try to cash flow for the next month that quarterly because we're kind of still playing catch up right now.

50:10George Kamel:Exactly. So you might owe$10 ,000 or$15 ,000 in a quarterly payment coming up. And so we've got to make sure we have that. And so the next week we're going to be living on a pretty tight budget now. So I don't know how you guys are living now. If I was making$15 ,000 a week, I'd be living La Vida Loca. And so it might be time to batten down the hatches and live a little bit more conservatively until we get through this phase. The taxes are solved. The baby's here.

50:33Rachel Cruze:Yeah, he may not bring home as much because he's putting more in the business to make sure those taxes are paid. Okay. Okay, awesome. Thank you so much. Yes, best of luck with that sweet baby. I know.

50:46George Kamel:Such an exciting time. You don't want it clouded by this mountain of debt.

50:50Rachel Cruze:Oh, so much. And it's scary, like what she said. I mean, and thank God, I mean, they're somewhat responsible. They got 60 grand in an emergency fund in the business, 20 grand. I mean, like there's elements of it that are a saving grace because some people...

51:02George Kamel:Usually if you're making that kind of money, you're comfortable with all these payments around you and you're just sort of keeping up.

51:07Rachel Cruze:Yes.

51:08George Kamel:And luckily they lived fiscally responsibly in other ways. Yes. To be able to have some of that savings. And a good reminder for anybody who is self-employed, even if you do like side gigs, I mean, you got to pay self-employment tax. You got to pay your quarterly estimated payments. And it's not that hard. You can sort of calculate using calculators on the IRS website, how much you'll owe in taxes. And you go, all right, I'm going to owe 40 grand this year, or I made this much this quarter. I need to write a check to the IRS and log in, connect your bank and pay the IRS what they're owed. It's not fun, but we can't pretend like, ooh, free money.

51:42George Kamel:I don't have to pay taxes because I'm self-employed. You got to pay them and then some, bud. You got the business taxes and your personal taxes. The government wants their cut. And so make sure you take care of that so it doesn't add stress to your life because the IRS can really screw it up. They can garnish your wages, come after your stuff. They're not your traditional lender. So take care of the stuff.

52:26Rachel Cruze:Hey, what's up? This is Dr. John Deloney from my friends at Mama Bear Legal Forms. I spend a lot of time talking with people about anxiety, relationship challenges, and all kinds of other things that keep people up at night. One thing I'm always telling everybody is that peace does not come from avoiding hard things. Peace comes from facing hard things and directly walking through them. One of the hard things we all face is our own mortality. And if you've got kids or people you love, creating a will is one of the most important things you can give them. I'm such a big fan of Mama Bear. When I moved from Texas to Tennessee, one of the first things I did was set up my will through Mama Bear so that my family was protected in my new state.

53:10Rachel Cruze:Mama Bear will help you make a clear, legally valid will in about 20 minutes. They provide step-by-step guidance that makes getting a will simple. Believe me, if you're ready to love your family in a real, impractical, and lasting way, Go to MamaBearLegalForums.com and use the promo code RAMSEY to save 20%. That's MamaBearLegalForums.com. Use code RAMSEY.

53:50George Kamel:We're headed to Providence, Rhode Island. James joins us there. What's going on, James? Hey, how you guys doing? Great. What's your question today?

53:59Rachel Cruze:My question is about communication. I'm 30 years old and I just got engaged. And I found you guys maybe a year ago and I'm on baby step two. I got$10 ,000 left on a car loan and I budgeted$12 ,000 and maybe a little more for a wedding that we have coming up in 2028. That's a long ways away. Yeah. Well, we could have done it next year, but we wanted to fund it ourselves without going into debt.

54:33George Kamel:Okay. So that's why we chose 2028.

54:38Rachel Cruze:Right now I make around$50 ,000 a year, but I'm transitioning careers to become a firefighter, and I'll be making$80K. Nice. So I'm upping my income for our future. But I wanted to try and start a conversation with her. But as I tried to talk about debt and all that, I just found myself not knowing how to approach it well. I've become really passionate about living debt free and trying to become debt free. So how do I communicate with her without coming off as controlling or judgmental about her having debt and all that?

55:18George Kamel:What do you know about her finances?

55:21Rachel Cruze:Um, from what I know, she has credit card debt. She has card, card and student loan. Um, the amount is not, I don't have full knowledge on the amounts. I know it's north of 25 ,000 total or more.

55:40George Kamel:Well, you guys are engaged. So you have the right to start talking about this stuff. It's not like it's been two dates and you're like, Hey, I really want to lay it all out. And so now is the time. Consider this your premarital counseling to make sure. And you go into it saying, hey, as we head towards marriage, I want to make sure that we're aligned because I know money is a huge part of marriage. And I don't want us to be having money fights. I want us to hit our financial goals. And my values around money is that I believe being debt free is our best path to building wealth and having a marriage with less fights.

56:11George Kamel:And see how that hits her. And it's not a judgment. You're not saying, I can't believe you're in debt. You better get out before we're married or else. That's not the spirit of this conversation.

56:19Rachel Cruze:Yeah, it's almost like not even shaming the past decisions, but it's more like, hey, going forward, how are we going to build a life together where we're unified and we have the same value system, right? And that would be true with how you want to handle in-laws, how you want to parent, your spiritual life. I mean, this is all part of uniting two lives together when you get married. and you don't have to be the same person, right? She may still be a spender. You may still be a saver. It's not like you're trying to morph her into who you are, but the value systems on which you make decisions doesn't have to be consistent, but the more consistent they are, I would say probably, I don't want to say the easier the marriage is going to be, but definitely it's a less mountain to climb.

57:07George Kamel:Yep. Less tension in that area for sure.

57:10Rachel Cruze:So yeah, so if you, go ahead. I know she's the one, and I really want my future to be with her, and I just want our future together to be as stress-free as possible. Yeah.

57:26George Kamel:What if you guys did something together to sort of get on the same page, like reading The Total Money Makeover or going through Financial Peace University and going, hey, as part of our sort of premarital counseling, I'd love for us to go through this money course or read this book together so that we're kind of speaking the same language.

57:42Rachel Cruze:Well, her language, she's a teacher. She's an English teacher. So her language, she has a bunch of books. So, I mean, that would probably be the good first step through books.

57:53George Kamel:I love it. And even an audio book, too. If you guys are on a road trip or something, it can be casual. It's not like it's an intense, we're going to do a book report here. Yeah, no.

58:01Rachel Cruze:And you're not wrong to ask this stuff, James. I do want to just affirm that when you're engaged to someone, everything's out on the table. Like you're about to combine your lives. You know what I mean? So bringing up big conversations and hard conversations, that's the grounds of marriage. Like that is what you're going to do. And so you're right. Practicing that now is very important for you guys to, you know, I mean, by the time you guys walked down the aisle, James, you didn't know how much she makes, what's in retirement, what she has set up, you know, as a teacher, what debt she has. She needs I mean, you guys are going to know everything because you're going to combine it all and be one after that marriage.

58:44Rachel Cruze:I just don't want to come off as someone like I'm trying to dominate or anything. I just want to know what I have to deal with and what we will have to deal with together once we become married.

59:01George Kamel:And nothing about you sounds controlling and dominating at this point in the conversation. So I don't know that you could really screw it up unless you're just super way too passionate and overbearing. And she's like, who is this guy? He came out of nowhere. But if she knows you well enough, this is going to feel like another conversation and just say, hey, I've been thinking a lot about this. And I was thinking, man, it would be really cool to be heading into marriage debt free. Can we like just – I want to map it out on paper and just see like what's possible because you've got to pay for the wedding.

59:28George Kamel:You're both covering that.

59:28Rachel Cruze:And you're still getting out of debt, James. So it's not like you – you know what I mean? There's no better than thou attitude. Yeah, yeah. I mean that's what you can say. I mean I've messed up with money. I've been so in debt and it's stressed me out. And I've started to actually find freedom and peace by getting out of debt. And it's really important to me that as we build a future together that we see and are aligned on this. And it doesn't have to be like this my way or the highway, but at least approaching the conversation.

59:55George Kamel:And then whatever she says next, that's your cue to dig in and ask more clarifying questions and really get to the heart of whatever her fears or dreams are.

1:00:04Rachel Cruze:Definitely.

1:00:04George Kamel:And then you can sort of couch that to go, okay, now I can see how debt freedom is a part of that. And I think even going into it saying, I have these goals, how cool would it be if we had options when we got married? Instead of having to clean up a bunch of debt, how awesome would it be to have the wedding paid for and no debt and money in the bank so that we're closer to buying a house or we can go on this amazing vacation or honeymoon? And so now we're dreaming. This is an exciting conversation versus a woe is me.

1:00:30Rachel Cruze:And you get to know a person through the lens of money, right? Of how she grew up. What was her household growing up with money? You know, was it stressful? Was money talked about? Was there tension? Was it scarcity mindset? You know, you kind of learn of how she is, what her personalities are, what her tendency is around money, the things that she loves to do with it, the things that she's scared of and that she's fearful for in the future. I mean, you know, you get to, you really get to know someone as well on a great level, on a deep level when it comes to these conversations too. Okay. Thank you so much.

1:01:04Rachel Cruze:Sorry, probably overwhelmed you, James. You know what? Hold on the line. And Kelly's going to pick up and we'll give you a copy of my book, Know Yourself, Know Your Money, because it does talk about those money classrooms of how you grew up, your tendencies, and total money makeover. We'll give you two copies. The OG. We'll give you two copies of Total Money Makeover so you each can read one.

1:01:20George Kamel:She's an English teacher. She wants her own.

1:01:22Rachel Cruze:Yeah, yeah.

1:01:23George Kamel:Mark it up, highlight it.

1:01:24Rachel Cruze:Yeah, and this is exciting. We probably overwhelmed him. Sorry, James.

1:01:27George Kamel:No, he's excited. I get it. In engagement, you're nervous. You're like, I don't want to screw this up. You know, you're on the precipice. So you're like, now's not the time to throw a wrench into things, but it's the right wrench.

1:01:39Rachel Cruze:It's the right wrench.

1:01:39George Kamel:You don't want to throw it.

1:01:41Rachel Cruze:I know. But money fights and money problems are one of the leading causes of divorce. It's in the top three list always of reasons why people get divorced. And it's a big, big conversation to have and an urgent one to have.

1:01:58George Kamel:Yeah, I don't know what woman is like, if you came up to her and said, hey, money fights and money problems are one of the leading causes of divorce. I don't want that to be us. I want to just -

1:02:05Rachel Cruze:Yeah, you almost feel loved and cared for.

1:02:07George Kamel:What a fiscally responsible man I'm about to marry. This is awesome.

1:02:11Rachel Cruze:James is so responsible. He loves me so much.

1:02:14George Kamel:And if she gets frazzled or upset, then you're the calm one going, hey, what's going on here?

1:02:18Rachel Cruze:Well, then that's saying more about her. What's going on there? And then you can dig in. Yes.

1:02:22George Kamel:So there's really no like - Lose, lose.

1:02:24Rachel Cruze:Yes.

1:02:25George Kamel:This is going to be so great. I wish I was there to watch it. You know, we should do like a show where we were like, we're in their ear with a little microphone.

1:02:31Rachel Cruze:Oh my gosh. That'd be so fun. And we're like, say this, say this. Hold her hand. Grab her hand. Okay.

1:02:36George Kamel:All right.

1:02:36Rachel Cruze:If you guys want that show, we'll workshop it.

1:02:39George Kamel:We'll pitch it to the network.

1:02:41Rachel Cruze:Because people know we can talk. I think we just talked James and Zorro.

1:02:43George Kamel:I would love it. But like you have her, I've got him. And we're like sort of battling. Oh, that's good.

1:02:48Rachel Cruze:I think that's great.

1:02:49George Kamel:I'd watch that show.

1:02:50Rachel Cruze:I think that sounds fantastic. It's like Impractical Jokers. That's what I was going to say. There's a show that, yes, where they make them do something, but we would actually be helpful.

1:02:57George Kamel:But it's not a prank show. No, no, we're really trying to help. Nail the conversation.

1:03:01Rachel Cruze:Ooh, the money fight show. That's what it should be.

1:03:04George Kamel:All right, guys. I think we just nailed it. We just pitched it. I think Dave Ramsey just signed off. We're good. Can't wait.

1:03:24Thank you.

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1:04:16Rachel Cruze:And many members save hundreds of dollars a month compared to traditional health insurance. And that margin gives you breathing room when you're working the baby steps and trying to steward your money well. And right now, CHM is offering new members a 50 % credit towards their first month of membership. Get started at chministries.org slash budget and use promo code Ramsey. That's chministries.org slash budget and promo code Ramsey.

1:05:01George Kamel:The Ramsey Show Question of the Day is brought to you by Why Refi. When your private student loans are in default, your progress stalls out. Why Refi can help you restart by refinancing defaulted private student loans into a low fixed rate payment that fits your budget so you can stop spinning your wheels. Visit yrefi.com slash Ramsey. That's the letter Y, R-E-F-Y.com slash Ramsey. May not be available in all states.

1:05:23Rachel Cruze:Today's question comes from Brooklyn in Ohio. I'm 27 and married to a great guy who also lives by your principles. We're on baby steps four, five, and six, and our home will be paid off in five years. We have a six-month-old baby. I'm a free spirit, but with my husband's help, I have become a saver. Wow.

1:05:41George Kamel:I didn't know you could change.

1:05:43Rachel Cruze:Our wedding budget a couple of years ago was almost$50 ,000. And with inflation, our daughter's wedding is going to cost around$70 ,000. I want to start a wedding savings account for her, but my husband thinks we should pay off the house first. Can we do both at the same time or pay off the house first and then save for the wedding?

1:06:01George Kamel:That is hilarious and fantastic. I mean, from a free spirit to I'm planning the wedding for the six-month-old, that's pretty impressive. Because she wants a great wedding in 20 plus years or whatever. Yeah, in the year 2050.

1:06:15Rachel Cruze:Yes, so no, Brooklyn, I would not be saving right now for a wedding. I would be paying off the house on your husband's team. You don't know. You don't know what it's going to cost. You don't know what your daughter is going to want. We don't know that far in the future, right? So that's a very far off purchase to make. Now, one thing you could be thinking about, though, is college. you know, and saving for that. But yep, for the wedding, I would wait a little bit. I would get the house paid off and get some college funding happening on the side. And then as she gets older and you guys are in a great financial position to be saving.

1:06:55Rachel Cruze:And yep.

1:06:55George Kamel:Yep. I just crunched the numbers for you while Rachel was talking. I got so deathly bored. I was like, I'm just going to go to the investment calculator. Well, I want to just show her that this is a solvable problem, right? You focus on paying down the house. Yes. Five years from now, they're debt free with a five and a half year old daughter. Okay. Right? So that gives them, let's say 20 years. Let's say at 25, she's getting married. Okay. Wedding's happening. Yeah. So it's 20 years. If you invest a hundred bucks a month, starting from nothing in an investment account, non-retirement, so just like a taxable brokerage account in index funds, you will have$86 ,000 likely.

1:07:26George Kamel:Let me go 10 % to be conservative. That's at 11. 10%, you'd have 75.

1:07:30Rachel Cruze:And that's a hundred bucks a month.

1:07:32George Kamel:So 75 to 85%, 75 to 85 grand you'd have when she's 25. So that's$100 a month. That's very doable. Again, when you have no mortgage payment. Yeah, absolutely. And that's what I'm actually doing right now is not just for wedding, but you got to think about a car, a wedding, a down payment as a gift. What are houses going to cost? How can I help my kid get a leg up while they're young adults?

1:07:55Rachel Cruze:So I think it's more that. I think it's just the savings for future purchases in life, right? College, yes. If you want to help them in some other way, down payment you mentioned or wedding, all of that.

1:08:10George Kamel:And there's no obligation. You're not a bad parent if you can't help with these things. No, no. But if you can, and you definitely can when you have a paid for house following the steps, it just gives you more options and flexibility and more room to be generous. Yes. I love this question, Brooklyn. You are nailing it. You and your husband are doing the exact thing we would tell you to do. So keep it up. Pay off the house first. AJ is in Nashville. Up next. AJ, welcome to the show. Hey, guys. How you doing? Great. How are you?

1:08:39Rachel Cruze:I'm doing pretty good. I wanted to call in. So my fiance and I got engaged last March, and the wedding is in July this year. Woo-hoo! I already had a house and everything, so she just moved in with me about a year and a half ago. So I paid a mortgage and kind of feel house broke, I reckon. She makes a little more than twice what I make. and I know she'd help if I asked her to, but with her student loans, credit cards, and just, I guess, miscellaneous things like her wedding dress and stuff like that, money's tied for it too. So my question is, and I know Dave's generally pretty traditionally against it, but would it be easier for us to combine finances early since the wedding's in five months or just hold off on it and then, you know, hit the ground on it from there.

1:09:30Rachel Cruze:Yeah, no, I would not combine finances till you're married. I would have her be working on her debt and you working on your financial situation. Then when you guys get married, combine. And then if you are out of debt and she still has debt, then your income will be going to help her pay off her debt. And, you know, you guys are focused as a household on that. So, AJ, how did you afford the house before she moved in? Because you said you had a house and then she ended up moving in. But it's still stressful for you. Is it too much house? I'd argue it is. But when I bought the house, it was in 21.

1:10:06Rachel Cruze:I was in a sales role, so I was doing really well. And then some things happened with the customers I was working with, so I kind of just took a hit. Oh, gotcha. Okay. Okay.

1:10:20George Kamel:Are you still in a sales role? No.

1:10:23Rachel Cruze:I still make commissions, but it's more of a support. Okay. When you guys combine in July after you get married, because that's soon. I mean, you guys will be, you know, it's a couple months. Will the mortgage then between both of your incomes be about a fourth of your take-home pay?

1:10:43George Kamel:Monthly take-home pay? Yeah.

1:10:44Rachel Cruze:Yeah. Okay, perfect. Okay. So you guys can afford the house once you guys get married. But yeah, but to answer your question, no, I would keep everything separate until you get married.

1:10:54George Kamel:The scary part is that she doesn't have housing expenses and she makes double what you do and she's still paycheck to paycheck.

1:11:01Rachel Cruze:Yeah. So she's got her loan debt. She just paid her car off. She, I think the way we grew up is really different. She's been pretty much on her own since she was like 15. So I think it's just a matter of how we look at it. Yeah. Is she paycheck to paycheck, AJ, because she's paying off debt or is she just paying minimum payments on everything? I think it's minimum payment. I think lately she's kind of kicked into another gear where she wants to try to get everything paid off before we get married or at minimum before we have kids, which was ideally two years as a timeline for that.

1:11:36George Kamel:Okay. I would just dig into this and get aligned on what the goals are going to be. It sounds like she is aggressively paying off the debt. I don't think she's just sitting around comfy going, well, we'll just deal with it when we're married. I like the attitude of how cool would it be to have this debt paid off by the time we're married. So, I mean, it's going to be tight until then. I don't think it's an, if you were like, hey, listen, it's tight for me to cover all of the housing expenses on my own right now. I don't think it's terrible to ask her to pitch in. And if you did it, you know, I'm old school.

1:12:06George Kamel:I would have just said, let's not move in together before we're married. But, you know, you guys have made those choices already. We're not going to evict her at this point. I don't think that probably wouldn't go over well for you. But I would get on a game plan of here's what's going to happen from, you know, March through July. Here's how we're going to handle the finances. Once July comes, we're married, we'll combine and whatever debt is left, we'll attack together.

1:12:27Rachel Cruze:Yeah. I think my fear was on asking her initially when she moved in was I didn't want her paying towards like a house. She's not getting anything out of it. I think that was a big thing. Yeah. I mean, unless it's quote unquote rent at that point, right? If you had a roommate, they would be paying rent. But yes, no, I hear what you're saying because her name is not on the house. But when you guys get married, yeah, combining assets and everything is a big.

1:12:50George Kamel:I mean, it will end up being half hers in a sense once you guys are married. So. Yeah. I mean, you did the front end work. So either way, I believe all marital assets should be combined. One account, not keeping your separate accounts for fund money. Just do it all out of one joint checking account. Do a budget. Keep a high yield savings. That's, again, joint that you both have access to. That is the key to a great marriage as it relates to money.

1:13:14Rachel Cruze:okay good luck my man great job aj i'm gonna send you a financial peace university is our

1:13:19George Kamel:premarital uh counseling gift it's one of the best courses to get on the same page and to light a fire under you guys to start dreaming about what life is going to be like as a couple as you build wealth thanks for the call oh it's it's wild how relationships and money get so intertwined and it can get heated quick and he's trying to avoid the uh i don't know want to ask her because she's working on her thing and do we combine?

1:13:42Rachel Cruze:Yeah. And I think the most important conversation is when July happens and we are a married couple, what does life look like? And painting that picture is really important.

1:13:50George Kamel:Because you probably both have very different pictures right now.

1:13:53Rachel Cruze:Yeah. If you haven't talked about it, you do. Yeah, absolutely.

1:13:55George Kamel:It's rare that you're like, I was thinking the same thing.

1:13:58Rachel Cruze:This is what I want to do. That's rare. Yeah. So the more aligned you guys can be before the wedding day on, again, every topic in life, This happens to be we're talking about money here, but on everything that, yeah, I mean, there's just more clarity, more direction and a little bit more enjoyment because you're walking the same path together through life versus competing. Right. Or butting heads in it. So, yep. AJ, great question. And good luck to you guys. It's exciting. It'll be here before you know it.

1:14:47Rachel Cruze:You know, one of the first things I discovered working in the financial world is how absolutely devastating it is when the breadwinner of a family dies. And there's too little life insurance or none at all. Grieving families are suddenly left behind, scrambling to pay bills and trying to make ends meet. I also discovered that there are a lot of ripoffs in the life insurance world, like that whole life crap posing as an investment opportunity. What you need is level term life insurance, usually 10 to 12 times your income, which is the smartest, most affordable way to protect your family. The key is finding an independent broker who represents a ton of companies and works for you, not for the insurance company.

1:15:30Rachel Cruze:This is exactly what my friend Jeff Zander and his team at Zander Insurance are all about. They shop the term life companies to find you the best options, and they've been around for over 95 years. So you know they'll be there when you need them. Zander is the real deal, and that's why they've handled all my personal insurance for over 25 years. I trust them, and you can too. Visit Zander.com for instant online quotes, or for a more personal touch, Give them a call at 800-356-4282.

1:16:22George Kamel:Welcome back to The Ramsey Show. Tax season is upon us. If you want free checklists and guides that will help you file, Go to ramsaysolutions.com slash taxes. We've got you covered for all the resources you need. Elaine is in North Carolina. Up next, Elaine, welcome to the show.

1:16:39Rachel Cruze:Hi, thanks for taking my call.

1:16:41George Kamel:Yeah, what's going on?

1:16:44Rachel Cruze:Well, I am recently widowed. My husband took care of all the finances. I am 64. I'm in good shape in regards to finance. I just don't know exactly what I'm doing. So I have about$3.5 million in a high-yield savings right now. I have two homes probably worth right under another million. I know I will eventually, hopefully this year, be selling one of the houses. And I do have an appointment next week with a certified financial planner, someone that I trust. trust and that. So my question to you is, do I just deal with one financial planner or do you, should you split up your money and do it with different people?

1:18:00Rachel Cruze:I'm comfortable with one, having someone in your corner that you trust and you look at. I mean, I think having a team of people is wise, like having someone, you know, a tax pro in your corner for taxes and different things. So there's different elements of money that I would probably bring some people in just to make sure you have expertise in these areas. but when it comes to specifically investing and looking over your entire financial picture, yeah, if you had one person, again, that you trust and that you know, that you at least know the history of even other people they've worked with, you know what I mean?

1:18:40Rachel Cruze:Like that they are reputable. I would be comfortable with just one. And I say that because my husband and I, we just, we have one that we use and that we've used for 10 years. So they'll be able to look at this 3.5 million and say, hey, how much of this do we want to leave liquid? How much of this do we want to maybe put in into the market so that it grows? And, you know, maybe you can live off that and even have some, you know, when you pass away to pass on to your kids, right? And so whatever that legacy looks like for you guys, because what a wonderful position that you're in, Elaine. I'm so, so thankful for that.

1:19:19Rachel Cruze:I know that's such a heartbreaking thing to lose your husband, and I'm so sorry. But I'm glad the financial piece isn't a stress factor in this. Yes, I'm very thankful to my husband. Yes. God. Yes. I have one more question for you. Yeah. So being 64, I don't yet have Social Security. My husband would have been, well, he passed away he would have been 65 this year. So I was told, and I'm just wondering because I've heard from different people, I was told though that I should not take Social Security right now or claim his because I really don't need it right now. And I never worked really outside of our home.

1:20:10Rachel Cruze:I did the whole wife and mom and, you know, all of that stuff. So what I would get in Social Security would be minuscule. And I've been told that if I wait till, what, later 60, 70, that I would get all of his, what he would have had.

1:20:31George Kamel:Yeah, at 67, they'll be full retirement age. So you'll get 100 % of the benefit. If you take it now, it's reduced. And so because you don't need it, I mean, You're three years away. You got three and a half million. I would just wait. And you said you're healthy?

1:20:44Rachel Cruze:Yes, I am healthy.

1:20:46George Kamel:So the longer you live, the better of a deal it becomes to take Social Security later. And obviously, you know, God only knows how long we get to live. But in your case, I would be waiting till 67.

1:20:58Rachel Cruze:Okay. And that's actually what my financial planner said. But like I was talking to some friends and they were like, well, you don't know if you're going to live that long. And you can, you know, take it now and then if you don't need it, invest that.

1:21:13George Kamel:So, but. Well, the truth is you're going to be fine either way, Elaine. I mean, Social Security is a drop in the bucket compared to the legacy that you guys have built on your own without the help of the government. Okay.

1:21:24Rachel Cruze:All right. Well, that really helps me. That gives me a lot of confidence. Yes. Can I ask the$3.5 million, was that part of that life insurance? Was that you guys over decades saving? How did you guys, how did you accumulate that much? It was both. Okay. It was both. I just got a, my husband always had life insurance, praise God. Yeah. And then he was a very hard worker and we did, in fact, we employed the RANV program years ago. And before our children married, we took them to Atlanta to see your father and go to, you know, before they got married and we were like, you need to do this. Just a prerequisite.

1:22:09Rachel Cruze:So great, Elaine. Oh, my goodness. And I would wait too. Elaine, we do say usually if there's some type of tragedy or death that it's okay to wait a year, right? Just to, I don't know how, when he passed away, but you can have some time. There's no rush to do anything. So if you feel a little stressed or questioning or not understanding, you have time on your side. So don't feel any urgency from this financial planner to do something today. You know, you can wait a little bit and that's okay. It's whenever you feel comfortable. And any questions you have for this financial planner, ask and fully understand before you put your money into whatever you're putting in.

1:22:53Rachel Cruze:So I would say those two things. Okay. Thank you so much. I really appreciate it. It helped me a lot.

1:23:00George Kamel:Well, thanks for trusting us with the call, and I'm so sorry for your loss. Lucy is in Lewisburg, West Virginia, up next. Lucy, welcome to the show.

1:23:10Rachel Cruze:Hi, how are you guys?

1:23:11George Kamel:Great. What's your question?

1:23:13Rachel Cruze:So I just turned 30. I've got a four-month-old, married last year as well. And my grandparents, when they were still alive, they had built a cabin that could comfortably hold at least 12 to 18 people overnight. So they made it as a vacation for us because of what we do. We're farmers. We don't get to go on vacation very often. This is kind of close to us. But my grandparents left the entire cabin in my four, well, myself and my four siblings' names. So they left money to maintain that cabin, and it's drying up. In other words, you know, we're running out to the bottom of it. And right now our farm is currently bankrolling it.

1:23:58Rachel Cruze:So we estimate about$8 ,000 to$10 ,000 a year is what it costs to maintain the cabin. That's everything. And maybe a little bit extra if we have stuff happen, you know, quick fix and stuff like that. But I know for, so I'm 30. I have another sibling that's 27. One that's 25 and 20, gosh, 24 and then 18. So my question is, is that the farm is not in a position to bankroll this for a long time. You know, the farm will take care of it for, you know, what it needs. But when does it ultimately become the responsibility of my siblings and I to pay for this? Because we own it. But we have guests and friends that stay in it too at no charge.

1:24:45Rachel Cruze:Yeah, you guys are going to have to just create some kind of document, honestly, and rules and boundaries around this property. Because five people owning a property is pretty difficult. It is. And the biggest thing is that I know, at least for my brother, the only boy, he will probably, we've talked about it and I've said it before, he will not financially be able to contribute to this camp year after year. So we estimated, you know, between$15 ,000 to$2 ,000 a year each of us give into the camp to kind of, you know, help pay more.

1:25:23George Kamel:You might need to just buy his portion out and he doesn't own it anymore if he can't.

1:25:27Rachel Cruze:But that's the thing, though. My parents are alive. Like, you shouldn't do that. Just pay for his part. You know, he can't do it. So someone needs to help him. Shared ownership means shared responsibility.

1:25:35George Kamel:And so it doesn't really matter what your parents feel like you should do. He owns a fourth of this. So a fourth of it is his responsibility. And if he can't pay it, you guys can be generous for a little while and ship in. But long term, you're going to have to figure out if he should be a part of this or not. And that's going to be the harder conversation. Wishing you the best as you have those conversations. But I like Rachel's plan. Make a document. Make it very clear so that nobody goes, but I thought that's not what you want. bardzo długo replied.

1:26:30George Kamel:5-2-2-5. Hannah is in New York City up next. Hannah, welcome to The Ramsey Show.

1:26:37Rachel Cruze:Hi, how are you guys?

1:26:38George Kamel:Doing great. How can we help? So basically my question is, my husband and I own a gym here in New York City,

1:26:49Rachel Cruze:and about a year ago, right before I had our baby, we decided to move into the basement of the gym to save money on rent and then kind of make it so that I could be a stay-at-home mom and run the business at the same time. And in that year, because we were able to save so much money, we paid off$70 ,000 of our business loans, but we still have about$120 ,000 in debt. And we're trying to decide when to move out because we're not technically supposed to live here and it's not the most comfortable living situation, but we do want to pay off the rest of our debt. Oh boy.

1:27:32George Kamel:So when you say technically, do you mean it's not legal? It is not zoned for it. Oh boy. Well, that poses a problem. Yeah. I mean, one is the actual legal implications. Another one's just the integrity of the situation on top of the risk that you're putting yourself in, especially with a baby. Yeah. I mean, is it even safe to have a baby there?

1:27:57Rachel Cruze:It is safe. It

1:27:58George Kamel:meets all the requirements of the windows being above ground and the ceilings being high enough,

1:28:06Rachel Cruze:all of that.

1:28:07George Kamel:It's just the zoning. Got it. Well, the real question is, why can't you guys afford rent and start to knock out this debt?

1:28:16Rachel Cruze:um we i mean in new york city rent is so expensive um we were paying three thousand dollars a month for an apartment um that was basically you know a closet yeah um so can y 'all afford to live there hannah i mean you're you're not paying rent right now but in order to you know what i mean have the four walls we call them food shelter utilities transportation in order to survive you have to be able to afford it. Will you guys be able to? I think so. We went from last year when we moved here, we were only bringing in a gross$40 ,000 a month for the gym. And we've improved that by $25 ,000 a month.

1:28:59Rachel Cruze:So now we're bringing in about$65 ,000 a month. Nice. How much of that do you take home? So last year we were taking home basically nothing. But now we're probably taking about$10 ,000 to$15 ,000 a month.

1:29:15George Kamel:Great. Okay. So let's play this out. Even if you're spending four grand a month and you make, you know, 15, that's still reasonable. And of course, everything's just going to be more New York City, but it's not like you guys are making five grand a month and you're paying four grand in rent.

1:29:31Rachel Cruze:Right. Yeah. And we could probably pay the same amount of debt off that we were paying last year.

1:29:37George Kamel:Yeah, I would make that a goal of let's still attack the debt aggressively and have a place that we can legally live in and rent, even if it slows you down.

1:29:45Rachel Cruze:Yeah, because eventually you're going to have to move. You know what I mean? So I think I would rather be on the proactive end of you all choosing than versus, I don't know, getting fined or something found out. You know what I mean? It's like a forced situation.

1:29:58George Kamel:Or get sued by the city. I don't know. That sounds like I wouldn't put it past New York City.

1:30:03Rachel Cruze:I know, right. I mean, for real, yeah, I would be making this move soon. And just to set up a home and set up a place that you guys are going to be for a while, where did you guys move from? Just a couple blocks away. Oh, okay. Gotcha. Okay. Because when you said we moved here last year, I didn't know what that meant. So, okay. Yeah, no, we just moved here last year. We actually did, the inspectors did come and look at it because someone reported us. Oh, boy. So, yeah, you already found out. You're fine. Yeah, but they said that we were okay. Wow.

1:30:36George Kamel:New York City is just a wild place.

1:30:39Rachel Cruze:It is a wild place. So that's why we're not too worried about it. But it would be nice to have more of a real house.

1:30:47George Kamel:Yeah, I would make it a very urgent goal to get out of there and get your own place. Now, what makes up the$120 ,000 in debt? debt?

1:30:55Rachel Cruze:What's left now is credit cards is about$40 ,000, and then I have$80 ,000 in student loans.

1:31:01George Kamel:Okay. And are those broken up into smaller debts and multiple credit cards? Yeah, it is multiple. So I would just debt snowball this, and you're going to just try to live as frugally as you can, which I know is saying a lot in New York City, paying four grand in rent, but anything that isn't your four walls and insurance, we're going to try to chunk at this debt. And that gives me some urgency to also go, hey, how can this business make even more? How do we really continue to scale this thing? Because then if you can keep that up and you're debt free, you guys are going to be living beautifully in New York City.

1:31:35George Kamel:Yeah. Yeah. That's very exciting to think about. So I think this is a very doable plan. As long as that 65K a month is sustainable and it's not going to go down to 40 or 30 in the next few months, then spending four grand a month on rent, you know, if you need a slightly nicer place, you don't need to go crazy. But I think four grand a month will get you something a whole lot better than the three, right? Yeah, absolutely. Okay. The goal is to keep it around 25 % of your take home pay, which I understand a very high cost of living area like New York City. It might be a little over the parameter.

1:32:07George Kamel:But the goal is to not have 50 % of your take home pay going to rent. And you guys are on the path to that. So thank you so much for the call. Stephen is in Lynchburg, Virginia up next. What's going on, Stephen? Hey, how are y 'all doing? Great. How can Rachel and I help?

1:32:23Rachel Cruze:All right. Well, I'm 21. I'm a senior in college and I'm planning on graduating debt-free and my grandfather passed away in October and I just turned 21 and I found out that I've inherited about$50 ,000 and I like to know what to do with it. Y 'all were recommended by a friend.

1:32:45George Kamel:We came highly recommended, Rachel.

1:32:47Rachel Cruze:Wow, call a friend. Stephen called us, George. That's great.

1:32:50George Kamel:So you said you're graduating debt-free. Do you have any other debt? Car loan, credit cards, anything like that?

1:32:56Rachel Cruze:No, sir.

1:32:57George Kamel:Okay. How much do you have saved right now, aside from the 50K?

1:33:01Rachel Cruze:Not a whole lot, to be honest with you.

1:33:04George Kamel:Okay.

1:33:05Rachel Cruze:And you say you're graduating in May? Yes, ma 'am. Yes. What are you going to do after graduation? Do you know? That is one thing I'm trying to figure out currently. Okay. Okay. You know what, Stephen? You know what I would do? You're probably going to hate my advice. But I would put it in a high-yield savings account, and I wouldn't touch it. And I would just let it sit there. Okay? And I would force yourself. Not force. That sounds terrible. I would make myself when I graduate college to find a job, start living a lifestyle on the salary that I'm making and create a life for myself. And then when you're somewhere that is settled and that you know, okay, I'm probably going to be here for a bit, then I would probably use part of that$50 ,000 and other money that you're going to be saving from your first job as an emergency fund and then possibly a down payment for a home.

1:34:08Rachel Cruze:Do you know what high-yield savings account you would recommend?

1:34:12George Kamel:Oh, yeah. I got the one for you, my friend. We're in the Fairwinds Credit Union studio, and they have an awesome smart bundle that they created just for people like you. And it's got a high-yield savings account with a great rate, also has a no-fee checking. And I like that the no-fee checking is connected to high-yield savings. So if you did have an emergency where you needed this money, you could get it easily.

1:34:31Rachel Cruze:So, Stephen, my caution to you is$50 ,000 is going to feel like $5 million when you're 21. That can go so fast. So don't feel like you hit the lotto, okay? Because if that's your mindset, you're going to end up spending it and thinking it's going to last you years and years and years, and it won't.

1:34:45George Kamel:This is not a post-graduation vacation and a new car. Yes. This is future Stephen down payment money.

1:34:50Rachel Cruze:Yes, future Stephen.

1:34:51George Kamel:You will be so thankful you did it.

1:34:53Rachel Cruze:You will be so thankful. Great job.

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1:36:17George Kamel:Scott is in Sacramento up next. Scott, how can we help today?

1:36:23Rachel Cruze:Hey, thanks for taking my call. I appreciate everything you guys do. Thank you.

1:36:27George Kamel:What's going on today?

1:36:29Rachel Cruze:Yeah, I have a question regarding when it would be prudent to take on new expenses during the baby step journey. So a little bit of background for me.

1:36:42Rachel Cruze:Starting sometime last year, I just got sick and tired of being sick and tired. I started really looking at my finances a lot closer, and I'm in some debt, and I decided to do everything I can to get out of it. And I started listening to The Ramsey Show about two months ago or so. I'm picking up a lot of tidbits of knowledge, and I think I'm really enjoying a lot of what you guys are discussing. Good for you. That's awesome. Yeah, I appreciate it. But my question, though, is some of the stuff that I've heard Dave and you all talk about is are some certain types of expenses that would be probably good expenses, such as certain types of insurance, long term disability, identity theft insurance, things like that.

1:37:32Rachel Cruze:My life insurance policy is like one times my salary right now. And I'm kind of in the I'm in the baby step two phase right now. I would like to know when during the baby step journey would be a good time to start paying towards these other expenses that I'm not currently paying towards. And another one would be like a will. I heard him talk about how, you know, at age 18 you should be getting a will or even financial peace university. You know, any kind of expenses that I feel like would really help me in my financial journey. journey? Yep. No, they're great questions. Yeah. So some of these insurances, yeah, I would say are probably a requirement that I would do.

1:38:16Rachel Cruze:So some that you would definitely want are renters or homeowners, obviously, in car insurance. But yeah, long term disability is definitely one I would pay for. I mean, ID theft protection is a great one. You know, Xander Insurance is who we recommend for that. And then for life insurance, are you married, Scott? it? That's a complicated question. Yes. But I am actually in the beginning stages of a divorce. Oh, shoot. I'm sorry. Do you have kids? No, no. Okay. Okay. But it is amicable. So yeah, so because the life insurance, that's what I was going to say to have just term life is if someone's dependent upon your income.

1:38:56Rachel Cruze:And so yeah, in this situation, I guess, depending on if you have to pay alimony. I don't know what that would look like. But if it all comes out that you guys are not, if there's nothing financial that you're tied to her in any means, because you guys, especially because you don't have kids, you may not need a ton of life insurance. It's really if someone's dependent upon your income. So that would be the one that you may could get away with for a little bit, unless again, by court proceedings or something that you have to pay her a certain amount and you, you know, or something like that.

1:39:31George Kamel:And then what other – do you have health insurance right now through your employer?

1:39:35Rachel Cruze:Yeah, I have health insurance. I have auto insurance.

1:39:38George Kamel:I have homeowner's insurance. So it's really life and long-term disability that you were kind of unsure about? Yeah, identity theft as well. Think about it this way. The baby steps are kind of offense to build wealth, and then you've got all these insurances in place for defense because those can derail all the wealth you're building. When you think about how many people go into bankruptcy for medical costs or a car wreck and you were underinsured and now they're suing you for hundreds of thousands of dollars. That's the kind of stuff that you need to transfer the risk to the insurance company and it's well worth the cost.

1:40:13George Kamel:The insurances we're talking about here are not expensive.

1:40:17Rachel Cruze:Yeah, correct. How old are you? But is it something – I'm 41. Okay. What was that? Is it something I should be looking into getting right now, even though I've really – I've just started getting gazelle intents, as you guys put it. Yeah, the insurances are not a baby step. Yeah, I would go ahead and put those in.

1:40:38George Kamel:It's a prerequisite to doing the baby steps. And so I would get a will in place. And if you want help with that, we've got a great partner with Mama Bear Legal Forms. You can create that online, and they're created by attorneys, but you can just fill it out all online. So it's super easy. And these are pieces of the puzzle, especially at 41. I don't know what the rest of your life looks like. Will you get remarried? Maybe. I hope so. And so, again, life insurance, you might want to get it now while you're young and healthy. Yeah, that's a good point. Because it's only going to get more expensive.

1:41:08George Kamel:And you can lock in, you know, a 25-year term so that you know you could get married and have kids and you're covered until you're, you know, in your 60s. And so there's things that you want to sort of think about future Scott and what he would be thankful to have. and I would just get it all priced out and you don't need like millions of dollars of life insurance. How much do you make a year?

1:41:29Rachel Cruze:About 120 right now.

1:41:31George Kamel:Okay. So you'd be looking at like a, you know,$1.2 million policy, maybe even a little more if you want to go 12 times your income. And you might find that it's pretty affordable. And yes, it slows down your debt a tiny bit because it's going to cost you, I don't know, 80 bucks a month or whatever it ends up being. But the peace of mind that you get knowing that you're covered and knowing you're not going to pay$120 four years from now when you're older and it's more risky, it wouldn't be a bad idea. Okay.

1:41:58Rachel Cruze:Yeah. And stay on the line, Scott, because Kelly will pick up and we'll give you Financial Peace University and a year of every dollar, our budgeting app. Just as a thank you as a new listener.

1:42:08George Kamel:There's an insurance lesson in Financial Peace University. That's right. Juicy stuff. Dave really crushes it on the insurance lesson. Rachel made sure he did that one. Cannot wait to binge it.

1:42:16Rachel Cruze:They asked Rachel, hey, do you want to do this lesson in Financial Peace University?

1:42:19George Kamel:And I said, it's too good.

1:42:20Rachel Cruze:I'm going to give it to Dave. I'll let Dave do it.

1:42:22George Kamel:He loves it. He loves the deductible.

1:42:24Rachel Cruze:We love a deductible. But you're asking the right questions.

1:42:26George Kamel:I appreciate the call.

1:42:27Rachel Cruze:Scott, we're excited for you. Yep. Sorry about the -

1:42:30George Kamel:Yeah, not a fun situation.

1:42:31Rachel Cruze:The divorce stuff, but excited about the money piece of your -

1:42:33George Kamel:Well, usually it's when the life changes happen is when you sort of take stock and go,

1:42:37Rachel Cruze:Am I doing all the right things? That's a great point. People, when they have babies, they do the same thing. They look up, they're like, oh my gosh, what have we been doing? You know, kind of, yeah.

1:42:45George Kamel:Yeah. And a good way to make sure you're covered in all the bases for anyone listening is jump solutions.com slash checkup. We have an awesome coverage checkup tool with just a few clicks. You'll kind of know where the blind spots are when it comes to insurance and we'll connect you with the people that we trust for all of that. Yeah.

1:43:00Rachel Cruze:But in high level, Xander insurance for ID theft protection and term life insurance is great. Mom and Bear legal forms for will. So just some resources for you guys out there that are wanting to, uh, wanting to get your insurances in place as well.

1:43:12George Kamel:You want to get a little nerdy and sleep better at night. That's it. All right, let's get out to Julia in Pittsburgh. How can we help Julia?

1:43:20Rachel Cruze:Hey guys. Um, so I just recently got my work bonus. Um, it was about$14 ,000 after taxes. Yeah. And I have about$32 ,000 in debt and I'm trying to figure out what is the best way to pay down some of it with my bonus. I have about 15 ,000 in savings for a long-term emergency fund and$1 ,000 for a short term. So I don't really feel like I need to use it to amp up my savings. I want to try to tackle the debt. However, half of it is no interest, and some of it is very low interest. So following the debt snowball, I could pay down the lower balances, but they're 0 % interest. So I'm trying to figure out, does it make more sense to knock out the ones that have a little bit higher interest and pay it down that way?

1:44:11George Kamel:Well, the truth is you could be close to debt free as soon as this bonus hits because you'll have$30 ,000 in cash spread out, right, between the bonus and all this emergency fund? Yeah. And so it really won't matter much if you do it the Ramsey way, which is leave the$1 ,000 emergency fund, but take the bonus plus the full emergency fund. That's going to be$29 ,000 out of the$32 ,000, and you can knock out almost all of it. And so at that point, just knock out the lowest balances and free up those payments faster, and then you'll have$3 ,000 left. And so the interest is really not going to matter.

1:44:44Rachel Cruze:Okay. My only worry, and I feel like this is probably a worry a lot of people have when they have an emergency fund, is like, it took me a while to get there. Yeah, but you also have a ton of payments right now. So if you were debt-free today, how much money is going out the door in payments? So payments are$900 a month I pay. Okay. So let's say you were gazelle intense, and that's baby step three is to bump up your emergency fund to three to six months of expenses. So what if you threw an extra$1 ,000 a month at that emergency fund plus what you were paying, your payments, in 10 months you could be back up to where you are and completely debt free.

1:45:29Rachel Cruze:Okay. You just got to be intense about it.

1:45:31George Kamel:It takes a mental shift to go, oh, I'm actually not safe having this money over here because I owe$32. The risk is still there. Yeah. So getting rid of the risk, you will stock up that money really fast. And I highly doubt you're going to have a$20 ,000 emergency while you're trying to build this up. So we're rooting for you. Follow the plan. It works.

1:46:08George Kamel:Hey guys, George Camel here. Do you ever feel like insurance companies only care about your money and not what you actually need? Well, there's a better way. When you go to Ramsey's Insurance Resource Hub, you'll start feeling confident that you're getting the right coverage that's truly best for you. You'll find helpful info on everything from life insurance, health insurance, identity theft protection, and more. And when you're ready to get the coverage you need, you can connect with a Ramsey-trusted insurance pro who will only get you what you need at the best price. Go to RamseySolutions.com slash insurance, RamseySolutions.com slash insurance.

1:46:52George Kamel:Sarah is in New York up next. Sarah, welcome to The Ramsey Show.

1:46:56Rachel Cruze:Yes, hi. How are you?

1:46:58George Kamel:Good. How can Rachel and I help today?

1:47:01Rachel Cruze:I'm just a little confused. One, I have some money like that I don't need right now, and I was thinking I'm not seeing it. I just don't know who to trust and what to do. I'm not very savvy. That's one of the things I have. Another one I had is that I wanted to buy a car. Do you suggest buying or leasing? I don't want to.

1:47:24George Kamel:Okay, so I think you broke up on us a little bit. But you have cash you want to invest. You don't feel super confident, not super savvy on that. And you want to know about buying a car and what the best way to do that is.

1:47:35Rachel Cruze:Yes, correct. Okay.

1:47:36George Kamel:How much money do you have right now?

1:47:39Rachel Cruze:So right now I have about, I have close to$100 ,000.

1:47:43George Kamel:Wow.

1:47:44Rachel Cruze:Nice. Where is it right now? No, I'm sorry. I'm sorry. Yeah. Right. So I have about like close to 80 just like sitting. And one I can't like, like that was on the CD, but I'm like, I want to just stop with CD. I want to do more. And then I have about the rest I have in just like my checking account, which I live out of every month. But I make sure every month I leave over some for savings, even though I don't have too much. for sure so you kind of have an emergency fund that's there I know it's not an official emergency fund I never set up one I just set up a 401k plan when my company over 2 % match and I did that do you have any debt?

1:48:24Rachel Cruze:I have zero debt no I'm still young I'm learning all this

1:48:27George Kamel:you're crushing it you said you're looking to buy a car do you have one right now?

1:48:31Rachel Cruze:no I don't

1:48:32George Kamel:Okay, and you need one for transportation to work or what?

1:48:36Rachel Cruze:No, so that's the thing. I take a bus to work. I work in the city. It's not worth, like Manhattan, it's not worth driving. Yeah. But personally, I think it would be nice to have a car. I don't know if I could sure afford one. I know I could, but I just don't know if it's worth it.

1:48:53George Kamel:Let's focus on the definition of a Ford because most people go, well, if I can afford the payment, I can afford this car. And the problem is these dealerships.

1:49:00Rachel Cruze:No, but I'm the only term with insurance.

1:49:01George Kamel:What's that?

1:49:03Rachel Cruze:No, I know I could afford one now. I don't know if I can upkeep one with insurance with a mountaintop.

1:49:07George Kamel:Yeah, that's something to think about. And so the key is we're going to pay cash for this car, and we know the long-term maintenance and insurance costs on top of that. And having it in the city is like 10x the cost of having it anywhere else.

1:49:19Rachel Cruze:Yeah, and a lot of people sell their car when they go to Manhattan. So do you feel like you really do need one, Sarah? For my freedom, yeah, at night and just to get out places. It would be nice to have one. Okay. I haven't got one until now because I wasn't sure. I don't know. I just opened a 401k, and I now pay for my own. I pay for insurance. I was on Medicaid, but now I have K-12, so I'm not sure. Okay. Taxes just eats up so much.

1:49:42George Kamel:Yeah. How old are you?

1:49:44Rachel Cruze:I'm 23.

1:49:45George Kamel:Okay, awesome. How much do you make?

1:49:48Rachel Cruze:I make about$49 a year.

1:49:50George Kamel:$49 ,000?

1:49:52Rachel Cruze:Yeah.

1:49:52George Kamel:And how much are you currently investing into that 401k through your employer?

1:49:58Rachel Cruze:I'm investing 6 % because I get like three, so I'm investing six.

1:50:03George Kamel:Okay, so you're investing six, they're adding three on top of that. So a total of 9 %? Okay, so that's$4 ,410 is what's happening per year out of your$49 ,000 income. Okay. So the difference between investing in that CD is a CD has a fixed rate, and it will mature, and you'll make that 3.5 % or 4%, right?

1:50:27Rachel Cruze:Yes.

1:50:28George Kamel:But with investing, you're putting this money into the stock market. And if you do it right, you're going to have a tiny piece of a whole bunch of companies that are doing really well that we're all rooting for.

1:50:39Rachel Cruze:So how do I know who to trust and where to go? I'm ready to invest close to 80. Like I don't need it now. I can invest like for the next five years.

1:50:47George Kamel:Sure. Well, you have this 80, and that might be for a different purpose. And so right now we're investing – I would recommend investing 15 % of your income regardless of the employer match. So you put in 15. They put in three on top of that. That would double your investment rate right now. How cool would that be?

1:51:04Rachel Cruze:They're giving me 3 % though only for a 401k plan. That means I can't pull it out, correct?

1:51:10George Kamel:Correct. You have to wait until you're a retirement age. So if you want money outside of that that you want to invest, you could use a portion of that cash to do so.

1:51:19Rachel Cruze:Yes. I'm confused. Yeah. So what I would do, Sarah, is I would I would get an emergency fund. So I would I would open up I just go to Fairwinds. That's a credit union, one that we recommend and open up a high yield savings account. OK, and put some money in probably three months of of what your expenses would be for three months and that we can consider that your fully funded emergency fund. So if we were to do that, how much does it take you to live a month? What are your expenses per month? So it takes me probably a little over a thousand. Just a thousand bucks? How is that possible? Is that rent?

1:51:57Rachel Cruze:I live with nothing. No, I live with my parents. Oh, okay. So for now, we'll say your starter emergency fund is, you know, 5 ,000 bucks for right now, okay? So I would just keep that on the side, and that's there just in case something happens. Now, when you move out of your parents and you start paying rents, you're going to bump that up, okay, as your lifestyle goes up. Then I would look at my retirement, like what George was saying. We want to fund 15 % of your income into retirement. So that means 6 % already is going into this 401k. That means you have 9 % left of what you can invest with your income.

1:52:39And so what I would do is open up a Roth IRA, and you can put up to$7 ,500.

1:52:46Rachel Cruze:Is that right? Is that$7 ,500 this year?

1:52:48George Kamel:Yes,$7 ,500 for the year.

1:52:49Rachel Cruze:per year is the limit. And so I would do and figure out, okay, how much of that 9 % of my income needs to go into that Roth IRA. So that's retirement. Okay. So when you do that, oh my gosh, I bet you could run numbers. Yeah, George, did you run some numbers?

1:53:07George Kamel:What I was calculating here, Sarah, and you can do this at home and we'll put it up on the screen here for anyone watching. I'm using our investment calculator and I'm going, okay, Sarah's 23. she makes$49 ,000 a year. And if she invests 15 % plus you have a 3 % match, that's$8 ,820 a year. Are you tracking? Yes. So monthly, that's$735 a month is going into that 401k into what we call mutual funds. And that has a collection of hundreds of companies. And you own a little piece of those. And what we've seen is about a 10 % to 12 % rate of return over the last several decades versus that 3 % or 4 % you're getting in the CD.

1:53:45George Kamel:You tracking?

1:53:48Rachel Cruze:Yes, but I never put that into the CD. I mean to say is I put the 80 ,000 into the CD.

1:53:54George Kamel:Got it. That's where I got the 80.

1:53:56Rachel Cruze:I put less than 80.

1:53:57George Kamel:But as far as the return, like you said, you're like, I want to do more with it. And that's what investing will do for you. It's going to have compound growth. So if you have$1 ,000 in there.

1:54:05Rachel Cruze:How do I know who to trust?

1:54:06George Kamel:So number one, you have funds within your 401k, and there's going to be some great funds in there, as well as investing outside of retirement, which is where you can reach out to a financial advisor. And you can jump onto RamseySolutions.com and click on SmartVestor. And you can reach out to someone called a SmartVestor Pro. These are financial advisors that will teach you and help you understand what you're investing into before you make any decisions. So it's not, hey, here's my money, take it, invest it. You want someone who's going to help you understand this. And what they'll do is invest you in very similar funds.

1:54:36George Kamel:I spoke to three people. I'm like, I'm not sure who to trust. I'm like, I don't know. You're right to be skeptical because there's a lot of bad actors out there who are really just insurance salesmen in cheap clothing and wolf's clothing. And they're going, Hey, I got you. How about this whole life policy? And they make it real complicated. You want this to be as simple as possible. And so what you'll end up having is a retirement account, your 401k, maybe this IRA, which again, is not connected to your employer, but another great place to invest with compound growth. And then outside of that, you've got the, just a, it's called a taxable brokerage account.

1:55:06George Kamel:And this is a non-retirement account where you might be able to, you'll be able to access that money before you're of retirement age. And so think about it like buckets. You want to have a few different buckets for flexibility and options. But can I give you the numbers here before we run out of time? Yes. If you keep this up, you remain debt free and you never get a raise, which we all agree Sarah will get a raise. She's going to make more than$49 ,000 in her career, right? But even if you didn't, from 23 to 63, if you invest$735 and we assume you're going assume a 10 % rate of return over those 40 years, if we smooth it all out, you would have$4.6 million sitting in that 401k.

1:55:45Rachel Cruze:At 63.

1:55:46George Kamel:Here's the crazy part. You didn't contribute$4.6 million. You contributed$352 ,000 of that$4.6 million. $4.3 million, Sarah, was just compound growth doing the heavy lifting over a long period of time. So you want to start now.

1:56:01Rachel Cruze:Yep. So go and find a smart investor pro in your area, interview two or three of them, get a feel for them, see if you like them. But these are people that we have vetted and that we trust.

1:56:11George Kamel:And if you guys want to check out that investment calculator, I will drop a link in the show notes or description of this episode. So go click there, play with the numbers for yourself and see just how many millions you could have to build wealth and leave a legacy.

1:56:43Rachel Cruze:If you've been working the plan, paying off debt, saving, and changing your family tree, I'm proud of you. And if you're in Baby Step 4 or beyond, it's time to celebrate. The Live Like No One Else Cruise is back March 14-21, 2027. Join the Ramsey personalities and me as we sail to Half Moon Cay, Cozumel, Jamaica, and Grand Cayman on the ultimate debt-free vacation. Cabins will sell out just like last time. Lock in yours with a$600 deposit at RamseySolutions.com slash events.

1:57:36George Kamel:Our scripture of the day, Proverbs 28, 19. Whoever works his land will have plenty of bread, but he who follows worthless pursuits will have plenty of poverty. Justin Timberlake once said, if you put out 150%, then you can always expect 100 % back. That's what I was always told as a kid, and it's worked for me so far. Interesting math. So you got to put 150 in to get 100 back out. Put that in your investment calculator. Not a great investment if I popped it into a calculator.

1:58:07Rachel Cruze:I don't know if I would do that investment, Justin. I don't know. Okay, but I guess you're saying you really got to overdo it to succeed.

1:58:13George Kamel:You got to go over index on how much you try.

1:58:16Rachel Cruze:Yeah, I guess so.

1:58:18George Kamel:Oh, yeah, yay. So if I put 50 % in, I get zero out, apparently, based on this math.

1:58:23Rachel Cruze:That's right. Yep, you got to go above and beyond.

1:58:25George Kamel:You got to go all in, baby.

1:58:26Rachel Cruze:Above and beyond.

1:58:26George Kamel:Thanks, JT. All right, Rachel joins us in Utah up next. Rachel, meet Rachel.

1:58:33Rachel Cruze:Hi. Hey. Hi, Rachel. Hi. Hi, Rachel. I just have a quick question. So my husband and I just read the Total Money Makeover last week. We like binged it and we're so excited. We're all fired up about getting started, but we just want to make sure that we make the right first steps because we just got a tax return about$8 ,000 and we have about$4 ,500 of credit card debt, but we also want to sell our cars to downsize. So we don't have car payments and we don't think we're going to be able to sell my husband's truck for more than what we owe on it. So we're wondering if we should use the cash that we have from our tax return to help pay off what we owe on the truck after we sell it, or if we should use the cash to pay off the credit cards and then sell the truck later on.

1:59:23Rachel Cruze:Oh, great question. Okay, how much do you guys owe on the truck? About$14 ,000. $14 ,000. And what's it worth now if you were to sell it to an individual?

1:59:35Rachel Cruze:I don't know but it my husband's thinking it's going to be less because it's it doesn't have like it's been in a wreck and so it's it doesn't have like a clean title so I don't think that we're going to be able to sell it for but you don't you don't know 100 % though right so I would look at Kelly Blue Book and put in all that information because you'll have yeah history with the vehicle you'll you'll put input all that data and I would be curious what Kelly Blue Book size. You might be right. Yeah, you might be some underwater. Or you never know, depending on when he bought it, you know, sometimes you could sell it for 15 grand, you're actually 1000 ahead.

2:00:08Rachel Cruze:I mean, we're not sure yet.

2:00:10George Kamel:What's your household income?

2:00:13Rachel Cruze:About 80 ,000.

2:00:14George Kamel:Okay, because the other option is just keeping the truck and just paying it off aggressively.

2:00:19Rachel Cruze:Right? Yeah, it's hard, because we, yeah, we're just not sure if we should like do the credit card debt first or the or the truck loan because I feel like with this cash, we could for sure pay it off. You know, after we sell it, we could make up for what we owe still. But if we don't do that and we use the cash to pay off credit cards, I feel like we will have that truck payment for a lot longer in order to save up.

2:00:45George Kamel:Well, if you knock out all the credit cards, that still leaves you with, what,$3 ,500 to throw at the car loan? Yeah, that's true. Then you're down to$10 ,000.

2:00:54Rachel Cruze:Yeah, and how much does go in to credit card payments every month? How much are you guys paying? We've actually, we have been able to pay off our credit cards without, like, the total statement balance, without paying any interest up until this point. But we, that's, the$8 ,000 is basically all the cash that we have. Yes, well, I was just thinking, yeah, if you paid off the credit card debt, that does free up some more money per month that's not going to pay minimum payments on credit cards. You know, that's cash back to you guys. But you're saying you've never had credit card payments?

2:01:32George Kamel:You've just paid it in full each month until now?

2:01:34Rachel Cruze:No, we've only paid off the statement. Yeah, we've never, yeah.

2:01:37George Kamel:But now there's a balance that you're carrying.

2:01:40Rachel Cruze:Now there's a balance. It's not due until like the middle of next month. So we'd have, you know, a couple more paychecks before then, but it would probably, we might not be able to make it. I'm not sure.

2:01:52George Kamel:Okay. I wouldn't just knock out the credit card debt, just debt snowball everything. So you'll knock out all the credit cards. You'll knock out a chunk of the car loan. You'll have 10K left on that. You're making 80K. So now it's how much of that 80K or take home pay can we throw at this car, at this truck? And my guess is if you can throw, I mean, two grand a month, you're done in five months.

2:02:12Rachel Cruze:Right. Okay. So three grand a month, you're done in a little over three months. We'll use that cash to do the credit card. Yeah, is that all your debt you got is just the credit cards and the truck? And my car. But we'll be able to sell my car for more than what we owe on it.

2:02:26George Kamel:Okay. And still have enough to get something different? Because you're going to need something to get around, right?

2:02:31Rachel Cruze:We actually have a car, another car. Oh, my goodness. Oh, well, perfect. Perfect. That's great. It's like a Russian doll.

2:02:40George Kamel:Underneath that is another car. Okay.

2:02:42Rachel Cruze:Right? That's good news.

2:02:43George Kamel:So you can sell it and be just fine and be completely debt-free. Yeah. And then just keep that intensity up and build the emergency fund, and then you'll never have to go into debt again. You've got sort of a debt insurance plan at that point.

2:02:56Rachel Cruze:Yeah, we were kind of shocked when we read the book because we're like, oh my gosh, we could be debt-free in like a few months. Yes, that's awesome. Well done, you guys. That's exciting.

2:03:05George Kamel:The hardest part is just realizing we don't want to live like this anymore, and we don't need to. Most people would just assume, well, you've got to have a car payment. What are you going to do? You can't save up and pay cash for a car. That's crazy. so you guys are doing it the right way we're happy that the total money makeover helped you guys out it's a great book for anybody out there who's like what is this ramsey stuff i just want to get on the plane and get fired up it is the book you can go check it out ramsey solutions.com doug is in sacramento doug what's going on hey how's it going good how are you

2:03:36Rachel Cruze:good hey so just my question is is real brief um i feel like my wife and i are doing well we both have good jobs, but I feel like we're not doing more with our money because we don't know what to do. Um, we have, um, an emergency fund that's 15 K we have, um, like 165 and a high yield savings. What's that for? But it's that's what, that's the thing is like, my wife is this, she wants to save all our money. She's like worried about not having any, and she wants to save save save but i feel like we should be doing something with that okay are you guys renting or do you own a home we own a home what's left on the mortgage 340 okay so that's one thing we could do with the money and it's it's at 3.4 okay and you guys have no debt i have outside of the mortgage

2:04:33George Kamel:um i have a truck payment we owe like it's 460 a month and we owe 20 on it that's another thing you could do with that money. I'm finding all kinds of things to spend that money on.

2:04:44Rachel Cruze:We could do a lot of stuff, Doug.

2:04:46George Kamel:We have a couple grand on credit cards,

2:04:50Rachel Cruze:but we always pay them off. We never pay interest on it.

2:04:53George Kamel:Okay, you're not carrying a balance, you're saying?

2:04:56Rachel Cruze:No, never.

2:04:58George Kamel:Okay. Well, I would, if I'm in your shoes, you're saying, what do we do next? I would get rid of any and all debt in my life and then start to tackle the house and also be investing 15 % after that. So are you guys investing a certain percentage right now of your household income?

2:05:16Rachel Cruze:I don't think a percentage. So we both have like Robinhood accounts that like a friend from work turned me on to. And I think I have like 10 grand on mine and she has like five or six grand on hers.

2:05:27George Kamel:Do you guys not have like a retirement plan through your employers?

2:05:32Rachel Cruze:She has a 401k that's got 360 in it. And I have a deferred comp that's got 78 in it. Okay.

2:05:38George Kamel:I would focus on those tax-advantaged accounts long before I ever opened up the Robinhood app. I hate that thing with a burning passion. It's basically the lottery for finance pros. I know nothing about investing, so that's the only thing that I knew how to do. A friend showed me how to do it. I would say investing in your retirement plan is easier than navigating Robinhood because they always got something new they're trying to throw at you and get into. So I would put away 15 % of your household income, which is how much? What's the total between the two of you, gross household income?

2:06:12Rachel Cruze:270.

2:06:13George Kamel:That's a fantastic income. I think you guys should be doing a whole lot better. That means you should be investing$40 ,000 across retirement plans. And I would start with anything that has a match on it, then move to any Roth type accounts or Roth 401k or whatever you have available, and then move back to traditional accounts. And if you still haven't hit that 15 % mark and you maxed everything out, then you can go to things outside of retirement, you know, like a taxable brokerage account. But I would stick to mutual funds. I would never play with individual stocks. I wouldn't touch crypto. You guys can build some serious wealth if you just start to attack these things in order with some focus.

2:06:51Rachel Cruze:Yeah, so getting out of that consumer debt, getting a 401k in place and a Roth IRA and you guys funding 15 % of your incomes into those. Yep, it's a great place to start and then start attacking the house. You guys have some movement you can be making for sure with this money.

2:07:03George Kamel:The baby steps will tell you everything you need to know, my friend. All right. That puts this hour of The Ramsey Show in the books. We'll be back before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.