You Breathe Easier Without Payments Choking You

0:25We'll see you next time. It's 888-825-5225. We'll get you on the line. I'm Jade Warshaw. Next to me, George Camel in the place to be. I can't wait. This is going to be fun. Do the people know? They know. Yeah, my wife and I, we just had our second baby, a beautiful little boy named Henry. So I'm coming into the show because I just needed to get out of the house, Jade. Listen, I wondered about that. Okay. We got a lot of help at home. So she's doing great. Mom's doing great. Baby's doing great. We got applause in the lobby here. Thank you guys so much. Yeah, yeah. So, so great. I'm glad you're here with me in the co-pilot seat, George.

1:04Let's take off to Pittsburgh, Pennsylvania, where we've got James on the line. What's up, James? Well, congratulations on the new baby. Oh, thank you. You're very welcome. So I just inherited$750 ,000 in a Roth IRA. Wow. From who? I'm going I'm going to buy a new home mainly because of the neighborhood I'm currently in. It's time to find a new one. And the spouse would like to be farther out in rural central Pennsylvania. What I'm trying to figure out is what is a good amount to pay for a home. We've got a little disagreement of about 50 to 75 ,000 on what we should spend. Wow. So, you know that, you know, bar none.

1:49Hey, I want to spend this money on a house. And you're just like, how much should we spend? Have you kind of looked at, you know, real estate in your area to find out, OK, we're looking for a three bedroom. We're looking for this and this is what it costs. Yeah. Oh, yeah. I've been on the MLS probably three hours a night for the last two weeks. And what are you finding? I'm finding a lot of prices coming down on on homes that I didn't think I could afford a month ago or I wanted that I wanted to pay for a month ago. in a lot of areas, and I've pretty much tossed away homes that definitely need a lot of work, or we don't have good pictures.

2:30I was a realtor 20 years ago, and I'm astonished at some of the pictures they put on the MLS. I'm like, my God, buy a camera. Come on. So you're finding. What's your current house worth? Yeah. $160. It's worth$160, and is it paid for outright, or do you owe on it? No, I owe$80 ,000 on it. I've got a 2.5 % mortgage. I had the stupid thought of renting it after I buy another one, but the more I listen to the sale, the more I'm thinking, nope, I'm just going to sell the thing when I'm done and be done with it. So what's the plan? Is the plan that we're taking the proceeds of the current home sale and we're adding it to the$750 and we're spending that and buying the house in cash?

3:12or tell me what you're... No, we're going to buy the house in cash and we'll put the current home up for sale six months from now or whenever. That's not that big of a rush. So tell us the problem. Well, I'm trying to figure out out of that$750, because the rest of the money, I'm going to work for five more years before I hit$67 to retire. My spouse is 30 years younger than I am. I want to make sure the house is paid for. They've got no debt. When I die and pass on to the great heavens, The only thing they're going to have is the spousal social security to live off of and whatever they're making.

3:45They're a stay-at-home artist. Okay, so that's where I want to camp out. That's where I want to camp out. So your spouse is 30 years younger. You've got the$750 ,000. Is this the only money to your name, or do you have other 401k retirement money elsewhere? No, I have not had any type of work benefit in 15 years. I make$120 ,000 a year consistently. I work, you know, 65, 70 hours a week. So this is the part where I'm not so sure I agree that you should spend the majority of this on buying a house. Because, A. We're not thinking that either. The issue is my spouse wants to spend maybe$225 ,000.

4:31I'm thinking, no, let's go$325 ,000. And that's where we're at. I mean, because it makes a huge difference in central PA on what type of house we're going to get. Sure. So what would you do with the rest of the money? Let's say you did$325. It's sitting in a Vanguard EFTs, and it's going to sit there. Okay, and that becomes your retirement account, essentially? Your nest egg? Correct, yes. Sir, you plug in those numbers in. So George has got— Yeah, how old are you now? I'm sorry? How old are you now? Current age? 62. Okay. So let's say you let this ride to 80. Okay. And you have zero in it now.

5:12How much will be in there once you, let's say, how much are you going to dump into that account? I'll probably put 10 ,000 a year, 15 ,000 a year. I can put anything, whatever, because I have no debt now. I thought you were going to do like hundreds of thousands. I have no debt. Why not dump like 400 ,000 in there and let compound growth do its thing for the next 18 years? Mm-hmm. Right. Because that would give you, let's say you did$400 ,000 in there. That's$2.4 million when you're 80. Nice. That's not a bad legacy to pass on to your loved ones. Yeah, because you're still going to have the money from the home sale, too.

5:47So you're going to have plenty. True. You sell the house. You're going to pay off the mortgage as part of the sale and have some equity left over. Do you have anything in savings? Do you have a fully funded emergency fund right now? My emergency fund will come out of this$750 ,000 because I've never had one and I know I need one. But you said you've been making six figures for a while now? Right. And I was paying down. I was$142 ,000 in debt up until a month ago. Oh, wow. And I wiped it all out. So you spent the last decade just cleaning up a mess. Exactly. Okay. I just wanted to make sure that we don't have a spending problem here to where you just spend this money within the next decade.

6:25Right, right. Understood. And what about your spouse? Do they work? You said they're an artist. No. Yes, but they don't spend any money. at all. It's almost impossible to get them to spend even$20. Yeah, but do they make money? Not a lot. $20 ,000,$25 ,000 a year. Listen, I want to find out how you can live on$20 and be that frugal. That's wild. That takes starving artists to a whole new level. Yeah, that does take it to a whole new level. Let me just tell you this. With the situation that you're telling me, I'm going to just tell you what I think, and you can take it or leave it. I think the spouse needs to find some way to bring in some money.

7:03I don't think you can just not do anything. And I don't think it's a fair argument to say, well, they don't spend any money. Therefore, they don't need to make any money because they do spend money. And even if you don't view it that way, you're the one who called in and said, hey, I want to make sure they have something more, not just Social Security. Right. So that person can help contribute to that. They've got 30 years on you to start putting towards that. So I think that's a conversation that you need to have, because the truth is this money was a windfall. Right. It wasn't something that you worked to get and you guys got lucky to get this money.

7:37So I don't want you to have to rely on luck anymore. I want you to rely on, okay, we can have the wherewithal to do what we need to do to make sure we're set up very, very well. So that's my two cents. And I do think there's some frugality, scarcity mentality with your spouse here that I think needs to be dealt with. And I don't know if that's therapy. I don't know what happened in her past. But it sounds like there's something here where she goes, I'm scared of having too much. I don't know if I can handle it. So get to the root of that and figure out what's actually going on there. Because I think what you're saying is reasonable.

8:08A$300 ,000 home in 2025, everyone's going, well, sure. Yeah, that's nothing. Yeah, you can do that. And matter of fact, I want you to check out our Ramsey Trusted site. You can look at the housing market in your area. It's going to keep you up to date on the U.S. housing trends, up to the date information. And also you can go on there to help you find a real estate agent in your area when you are ready to buy. So check that out. Yeah. Be smart with this money. $750 ,000. It's a lot of money, but if you're not smart with it, especially when you're talking about something like a house, real estate purchases, it can be gone in two seconds.

8:45Gone with the wind. Gone with the wind and you need that.

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10:44To the phone lines we go where we have Jessie in Maui, Hawaii. What's up, Jessie? Hi. Congratulations on the new baby. Oh, thank you, Jessie. So kind. This is a fun day for me. It is a fun day. Everyone's so nice. I know. How can we help, Jessie? So I have started following you guys, like literally eating, breathing, sleeping, Ramsey. Aw, yeah. Drink the Kool-Aid. Yeah, I'm deep. But I want to just confirm if I indeed have to downsize my home in order to survive this situation. Yeah, tell us more. Tell us what you make every month. Yeah. Well, currently I'm making$6 ,000 with my part-time. I'm a nurse, but about three years ago I got a divorce plus an injury.

11:37and so I went I was at 135 and um I was able to do everything but I assumed the debt for the divorce and I was unemployed with the injury with no income for several months oh shoot so now I'm working um so yeah so I'm at the low end of a nurse's spectrum but I am applying and you know trying to find something that I can do are you able to work full-time now yeah I'm full-time but I'm not able to work like a floor, you know, like hospital kind walking. Yeah. So that limits your income to a different role. Yeah. Okay. How long till you feel like you would be at kind of an optimal nurse's salary?

12:22And what would that be amount wise? If I got the position that I'm trying to apply for, I'd make probably 10 to 11 starting, maybe 10 ,000 a month starting um and what's your mortgage payment every month supplement uh 39 i'm sorry 29 no i'm sorry 29 and change even still but so right now it's about half of your income every month yeah but i have a i have a 1100 hoa which is starting in january It's going up and I have the debt. You must have a nice view. I have car cross loans. I do. I, you know, I like my house and I, I was like yesterday I was okay. I'm like, no, I can downsize. I can sell and go get a condo, one bedroom condo.

13:13But then this morning I'm like, I like my house. What's the total payment with the 1100 HOA? So it, it comes out. Oh, I'm sorry. You said 2900. You said 2900. Which includes the HOA? No, the HOA is separate, and they're raising it to$1 ,100. So it's going to be$4 ,000 a month here shortly. Yeah. Okay. That's the part that scares me. I think 69 % of my income, according to the dollar. Yeah, I mean, you can't live like that. So the question is, in reality, the grandest scheme of reality, how quickly can you get to this$10 ,000 payday? And when I say get to it, I mean you're taking the check home.

13:58Well, it's with the state. I applied for a job with the state. So I don't have control even if I put out some feelers with somebody who works in the department to try to feel out, you know, to keep my application. And they said they'd try to contact somebody. And that's the only line you have in the water? um yeah because okay and how long has it been there how long how long since you applied i just applied last week okay so yeah we've got a what what i'm why i'm asking these questions and why i'm being so direct is we've got to kind of have a breaking case of emergency button here to where you can't go on with this being 69 of your income for much longer so if you said to me Jade, I applied for this thing a week ago, and I'm giving myself three weeks.

14:53If I don't, if I'm not pretty much 100 that this job is happening, I'm moving. And I feel like that because, hey, this is your only line in the water. It's not like you're telling me, hey, I've got a lot to choose from. One of these is going to pan out. You've got one line in the water, and it's been a week you haven't heard anything. And you're not really sure what lever you can pull and make it happen is what I'm gathering. To go back to my original salary, I have to go back to basically middle management or higher. And that's kind of what killed me in the first place and why I was going to take a break from it and go back to the hospital.

15:28Yeah, I don't want you to take a job that kills you just to keep a house you like. That's not worth it. Your quality of life will go down. And not to mention, let's just be honest, even with the$10 ,000 a month, a$4 ,000 payment is still higher than what it should be. And it's not going down. Yeah. With insurance and property taxes and HOA, that payment's only going to increase until you pay off the mortgage. So I think as my friend, Dr. John Deloney would say, we need to grieve the picture you had of your life where you were 100 % healthy, married. Here's what our life's going to look like. We have this beautiful home that we can afford.

16:01And now there's a different picture. And so I think we have to kind of choose reality and go, okay, what can I afford right now? Maybe one day we'll get back to this beautiful home or something like it, but right now you got to do what's best for you, especially with a pile of debt to clean up. How much is the debt? Yeah. With the parent pluses that aren't in my name, but legally I think I'm responsible for them. No. Well, did you co-sign for that parent plus loan? Someone did. Yeah. It's in my ex-husband's name. Oh. You said you assumed all the debt? I agreed that I would pay it so that he wouldn't touch the house.

16:39Okay, so it's part of the divorce agreement. Yeah, that's when I was still working. I left him debt-free. And if you sold the house, could you pay off all of your debt? What's the total debt, excluding the mortgage? $99 ,000. Okay, so you owe$99 ,000. And what's the house worth, and what do you owe? I owe$3.23 and I'm crossing my fingers to put it on the market for$1.2. Okay, good. So you would clear the debt and probably have enough money to purchase something in cash. Yeah, I was hoping to downsize to go to like a one-bedroom condo. Condo prices are dropping in Maui because of the fires and just there's new legislation about Airbnbs and such.

17:34So I was thinking if I sold, I could get a one bedroom condo maybe for like 500 or something like that. Could clear some of this debt too? Yeah. You'd be in a very different place. Because here's the thing, even if you were able to pay the debt off, you still have the same problem in front of you. The mortgage is just simply too high for your income. And unless you see it going up to 15, $16 ,000 in the near future, it's still going to be a lot of your take-home pay, taking away from your goals to pay off debt, get the emergency fund, invest for the future. Yeah, not as a single person. Exactly.

18:06And if you're married again, we'll reassess the picture. Sure. So the$99 ,000, that's it for you? Yeah, that's including the parent pluses that I agreed to assume. Yeah, listen, I think that's the move. I mean, they're not in my name, but, you know, I think. I think I think that's the move. You've got an opportunity here. You clear this mortgage. It's a headache for you anyway. You take some of the money that you're going to gain here. You pay off the$99 ,000. You find something that you can afford in cash. And if it takes a while, if you say, hey, I'm going to rent for a bit until I maybe save up a little bit more if you need to, then so be it.

18:43I think right now, to George's point, you're starting a brand new life. And the good news is you've got some equity to build that life off of. But you also have time. Like there's nothing that says I have to. Now you do need to get out of this current house, but there's nothing that says that you need to hurry up and buy the next one. You can take some time and really decide what a new property looks like in this phase of life. And I like that for you. I'm breathing the freedom of having$800 ,000 to take$500 ,000, throw it at a home,$300 ,000 left over, take$50 ,000 of that for an emergency fund.

19:17And you still have a quarter million down payment for your future home. And so I love that. I breathe easier just thinking about that for her versus I make$6 ,000 and I owe$4 ,000 every single month. Am I going to be able to eat and pay down my debt? You know what you're saying, George? Some of the hardest advice that I feel like we have to give is to tell somebody to sell their home. but it's kind of like, what are you trading? Because when you call in, you know, you're full of anxiety, you're full of stress. The payment is about to, you know, knock your block off. And so it's like, you're so focused on wanting to keep your Kung Fu grip on that house.

19:50But if you would just let it go, like you said, you can finally breathe, the stress is gone. You don't have that crazy payment again. And you've given yourself the opportunity to get something that actually is sized right for your lifestyle, for your budget. Listen, that's a win-win. Make that view a screensaver for now and put it on your vision board. We'll get back to it in no time. But right now we've got to clean this mess up. We're wishing you the best.