You Can Stay Broke Or Start Changing

28:13Once we save up for that three to six months of emergency fund, would you recommend saving even more just in case anything happens? Like with our roof, I know that's technically what the emergency fund is for, or even putting stuff aside for travel fun items. Okay. So yeah, we're talking about two different things. I love the question. Yeah. After baby step three. So the purpose of Baby Step 3, let's just reiterate, is for emergencies. It is a fully funded emergency fund, and we suggest three to six months. Now, whether you do three or six months is largely dependent on personal factors. So if you're a single person with one income and maybe you have a health issue that flares up every couple years, you want six months, right?

28:57You want more. You want to make sure you can cover your deductible, all of that. If you're a family, maybe you're a family and you're dinks and you both have a high income, you have stable jobs, you're healthy people, maybe you opt for three months, right? So it's up to you depending on those sorts of factors. In today's world, I'm not going to lie, for most people, I'm like, just go on ahead and do six months. I just feel like we like that security the way the world is now. I don't know. So once you get that six months, Lucy, that's really all you need. Now, from there, if you're going to continue to save up for other areas that are kind of like sinking fund areas, whether it be like you said, we know we need a new roof.

29:38We know that's coming. If you know something's coming, it's not an emergency. So yeah, you need to save up. If you know you want to purchase, you know, upgrade your car or you know that you're putting a down payment on a house, right? So those are sinking funds. And just a reiteration, maintenance and known maintenance, John, is not an emergency right you know your car is gonna need new tires save up for it you know if you have a leak and you see it starting to form and you know like hey i'm not gonna run this through insurance we're just gonna pay for it save up for it that's not an emergency you knew you see it coming you know it's coming uh so that's just a little sidebar there but yeah the the thing the thing that happened to me and my wife is we had to replace the roof without thinking we're going to have to.

30:25And then of course that's when the air conditioner went out. Right. Right. So we were able to save up for the roof issue and we had an emergency fund for the air conditioner. And if we had just tried to play it out, be like, just pretend it's an, we'll wait till it's an emergency. Yeah. You'll, you'll, they'll double and triple up on you. And now my screen said, you never mentioned this. My screen said, when can we open fun accounts while working the baby steps? You didn't mention anything about that. So let me just hit that right quick. Uh, yeah. After baby step three is when it's time to start having some fun again.

30:52So that's when you add back in those. Go to dinner, go to movies. You'll go on a trip. Go have fun.

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32:48All right. The all new EveryDollar is here. And now it's way more than just our world-class budgeting app. There's a ton of advanced features to help you make faster progress with your money. As a matter of fact, the average person finds thousands of dollars in margin in just the first 15 minutes. Matter of fact, we've gotten some calls through here, John, already of people saying, hey guys, I'm in the all new EveryDollar and I've already found X amount of margin and I'm putting it towards my debt. And so I think that's really exciting to hear. But you can start your EveryDollar today for free.

33:26You can get in the App Store or at Google Play. But guys, I'm telling you, you get in there, you do a quick onboarding and don't try to skip the onboarding because that's where they find out everything they need to know so that you can have a personalized plan. So it just takes a few minutes, give them the information, then it's gonna spit back, hey, based on what you told us, here's the amount of money that we can find you. And I'm telling you, there is money hiding in plain sight in your budget and in your finances. You just needed somebody else to look at it. And so it'll look at it, spit back and say, hey, we found you X amount of thousands of dollars.

33:58Here's what you, and then it'll tell you, here's what you need to do to get it. And so then you can say, do I wanna do what it's telling me to do or do I not want to do what it's telling me to do? And so you go through the recommendations it gives you and then you can say, hey, I agree. Maybe I agree to these, but I don't agree to those. And you check the boxes and then it'll say, okay, based on the ones you agreed to, now here's how much money you'll have. And it'll keep walking with you as you do what it's teaching you to do. It really is, John, as though you had myself or you in your pocket.

34:25You don't want me there, but it's like having you or Dave or George, that's what they're talking about. But yes, it's pretty amazing. It's pretty awesome. So if you don't know, now you know. All right, we got Eric who's in Knoxville, Tennessee, right down the road. What's up, Eric? Hey, guys. Thank you for taking my call. You got it, brother. What's up? My question is, well, I'm 19 years old, and I'm getting married next year. Congratulations, man. Thank you. And I feel like I've always been generally pretty smart with my money. I've never had to take out money for anything. I pay for my car in cash.

35:00and I grew up on 21 acres with my parents and I've saved up enough money that I was able to build my own mini home at the bottom of the property. Dude, way to go, man. I paid cash for that and everything. What? But I'm still in school. Hold on, hold on, hold on. You're just blown by this. You are in a better shape than most people in the country. It's incredible, dude. And I know that sounds silly. Like you got to pay for a car. You got to pay for a place to live. Right? That's amazing. Yes, sir. Who taught you this? My parents. I've been watching Dave Ramsey since I was 12, 13. Lots of people watch, but very few people live it like you are, man.

35:41Well done, brother. That's cool. So how can we help? Well, my question is, I know later down the road, it's just 500 square feet, really small. I know later down the road, probably four or five years, I'm going to want to be able to buy a house. But me and my fiance, we have no form of credit coming in at all. Good. We've never had loans on anything. Fantastic. The only loans we'll even be taking into the marriage is she's about to graduate nursing school. So we'll have about 15K in student loans. Okay. And I'm hoping to have that paid off in the first year. I'm still in school, so I'm just working part-time.

36:22So I'm working as a pest control technician part-time. Okay, good. So I'm only making about$30K. Okay. And she has a job lined up making about$75K when she graduates. So our first year of marriage take home should be about$100K. Right. But my question is just when I want to, you know, take that next step and actually build a house and build a family, is there something we should be doing to build credit? No, but I do want to address that. So there's a couple areas of this I do want to address. I agree with John. I think that you're doing a fabulous job. but I also want to say there's no rush. So that is the, if you can embrace that, then you're going to be home free.

37:05There's a lot of times, John, this rush is like, I get married, then I got to get the house, then I got to do this. It's like, you're trying to like check boxes really fast and you've got so much time, Eric, and you're in such a good position. I don't want you in such a rush that you start going back on all of the things that got you where you are today, which is you, I don't borrow money and I'm not interested in building this credit score, right? Those are all these things that you've done and you've gotten great results, right? You've, the fruit of that is amazing. So just remind yourself, the fruit is the proof, right?

37:34The fruit of what you've been doing is the proof that it's been working for you. So don't go back on it. Now, here's the thing. Let's talk about the no credit score thing, because you're right. When you guys get married, you're not going to have a zero credit score because you've got the student loan open here. And so until you guys get that paid off, get that account closed, and then it's going to take another six to eight months for your score to drop away or for your wife's score to drop away. Yeah, it'll be tough for you to buy a house with a low credit score. Does that make sense? So having a low credit score is not going to help you out.

38:08But once you pay it off and you have a no credit score, you will be able to do that. And we're always going to suggest john churchill mortgage that's who i have my mortgage with john i'm pretty sure when you had a mortgage that's when you had who you had it my credit score um was zero it was non-existent none and they just do a process called manual underwriting and that's the way they've done it for a jillion years before they started turning us all into algorithms and that just means i had to send them a letter from my employer i had to send them a tax return i had to send them proof of employment and they an actual human looked at an actual file and they're like, oh, this guy's got a great job.

38:43He has always paid his bills on time. No brainer. Here you go. Gotcha. Does that make sense? Here's, here's, I'm glad you're asking this question. Here's what a credit score is. It is not, or let me say what it's not. It is not an indicator of your wealth, how much wealth you have. It's not an indicator of how well you're doing financially. It simply is a dating score for how well you've dated in the past, except it's not asking about girls you've dated. It's asking about banks you've dated. So if I gave you$5 million right now, your credit score would still be zero. That's a shame. It has nothing to do with your wealth.

39:21It has everything to do with, have you borrowed money from a car dealership once and you paid them back? Okay, we'll give you some points for that. Did you one time borrow from somebody else? It's just a report card for how well you've managed debt in the past. And so far, You've been a dude that just doesn't play that game. And the system can't get its hooks in you. And so it says, well, you've got to have this number, otherwise you're not a wealthy person. It's not true. It's just not true. And so you, Jade, I love what you said, brother. Listen, y 'all come on with$110 ,000. Yep. $110 ,000.

39:57So let's say after taxes, y 'all are holding$60 ,000 next year. In the first three months, you should pay off this entire student loan and be done with it. Then y 'all can have$45 ,000. If y 'all can eat light, y 'all have no bills, right? Or very, very minimal bills, other than like a cell phone bill and a small light bill or whatever. If y 'all could stay in this house for two years, y 'all could literally have, I don't know,$75 ,000 to$85 ,000 in cash. That's right. When y 'all decide to move out. Would that be fun to live in 500 square feet with two people? No. But dude, if y 'all wait, it's like, we're going to wait until we can drink legally.

40:31Sure. The day we can buy a beer in a restaurant, we are going to go buy a house. y 'all be able to put 80 grand down or more 100 grand down and let's not forget i mean there's always the option to rent let's say you do start hating each other's face and that could happen like that could happen and you're like man we got to get out of here just know again pump the brakes you don't have to buy a house tomorrow you can always go rent a two-bedroom apartment right and then you can still save up money like uh like john is saying so you have options and no way are these people like painted into a corner.

41:04They've got so much time, so many options, so little debt. People always ask me, what would you go tell your 18, 21 year old self? And I often say nothing because that guy was an idiot. Wouldn't listen to anybody. But if I could get one message through to him, it would be slow down. Yeah. Slow down. Relax. I hear that. And I was so amped about having a car and having a place and having, slow down, man. Instead of saying in like in this, in this guy's case, just put a date on the calendar. When we are 22, we're going to buy a house let's see how much cash we could have in the bank by 22 let's see if we can live in a way that we have this much money by 22 it will change everything in your life moving forward yeah all of things 100 oh so true all right hail mary if you could go back and change one thing you did when you were 19 what is it 19 well he's 19 that's why i picked 19 like if you could go i'll say 21 i left and i drove an 88 tricelle easy hatchback that was the size of a small wheelbarrow through college so I graduated with my student loan debt and the first thing I did was went and bought the biggest truck I could find and so I my first year out of college I almost doubled or tripled my debt holy smokes all right yeah that's a big one what about you um I straightened my hair instead of leaving it really my wasn't as big of a deal as yours I ruined my financial future I ruined a photo I gotta relax her

42:25keep hanging out with us there's more show to come

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44:03All right. Welcome back to The Ramsey Show here in the Fair Ones Credit Union studio, continuing to take calls about your life and your money. Again, if you were wondering, how can I call that show, Jade or John? The number is 888-825-5225. No worries. If you don't get on the line, you can leave a message and we'll still schedule your call for another time. All right. Hattie is in St. Louis, Missouri. Hattie, how can we help today? Hi, Jane and John. My question is, my husband and I are just getting ready to purchase our first home, and I keep hearing about doing a line of credit, a$10 ,000 line of credit to make a bulk payment and then putting your paychecks into that and paying all your bills out of that to build$10 ,000 up again.

44:57You've got to do me a favor. Do me a huge favor. My mind just exploded. Please delete Instagram off your phone for 60 days. Okay. Just get off. Just get off. Okay. For real. Just get off. I can do that. It's Facebook actually, but I can do that. Whichever one it is for 60 days. And then I want you to solve for one thing and one thing only. Okay. Okay. Peace. Okay. Peace. I was just talking to my, one of my oldest best friends on the planet yesterday. This is an honest conversation. And I was asking him a question about, Hey, if I move this here and I move this over here and I pay this here. And he said, Hey, you're doing a whole bunch of work for like 1.8%.

45:44And he said, you're the guy who tells me you solve for peace, not for arbitrage. And I was like, I'm getting off the phone now. You're right. Okay. I was going to move it to this account. Cause this one's got 3.4. And since interest rates just dropped, what if I moved it over to this one? And he's like, bro, relax. And then he did a quick calculation. It's like, you're doing all this for like$70. Like, go enjoy your life. And he was right. Yeah, I have accounting background. So I was like, well, does this number actually crash? And I'm like, okay, this perks kind of, but does it really? And I just wanted to hear somebody else say, it's okay.

46:18Just make double payments. You'll be just fine. Make triple, quadruple payments. Make stupid amounts of payments. But like Jade and I will both tell you the best. Like we can tell you what we do in our house. Yeah. Like we borrowed a mortgage and we put on a 15-year note. and we just paid as aggressively as we could. Just make extra payments. And make extra payments. Ta-da! How long have you been married? I wanted to make sure. 23 years. And y 'all are buying your first house? Yeah, we had some health conditions. Amazing. I just had a brain tumor in 2020, so that set us back a little bit. Wow.

46:53How are you now? I'm great. Well, I have MS, so I'm disabled from that, so I can't work, but it's only his income, so I get really creative with finances. I love that. Okay, so you know this as well as I do, that stress is a multiplier of MS symptoms, right? Yes. What if you just solve for peace? Yeah, exactly. If you just took out one mortgage, made one payment, and then you spent the rest of your time focusing on things you love and have fun with. Well, yeah, exactly. We just want to have the house paid for by the time that we're about 60. Done. The shortest distance. Is this still true? The shortest distance between two points is a straight line.

47:35I've heard there was somebody. I need to go look in that. I heard because my track coach always told me that. I know, but sometimes I feel like there is a shortcut. In this case, let's pretend like that still holds because I think it does. Don't do all the loop-de-loop, okay? You're really smart. I can tell. Like you said, you've got the background. Use your powers for simplicity. Use your powers for good. Let me say this. Can I take this call way too deep, way deeper than you're asking it to? Yeah, go for it. I spent my career working with folks who had special needs of some shape, form, or fashion.

48:08Yeah. And one of the biggest metas that I got from working with those people over time was a fear that they were going to be a burden on other people. Or that I needed to contribute in some way on top of what I'm doing for my friend, my family, my community, whatever. And so I don't want to paint a picture, but I don't want you sitting at home thinking I'm a net drain on this house. But if I figure out some way to escalate our mortgage payments, then I've proven that I'm worth being here. Right. I want you to help simplify the chaos in the house and be an agent of peace in your home. And your husband's the luckiest man who's ever walked the earth.

48:52I love that. Thank you. Is that fair? Yeah, he'll tell you that too. Well, I know he will, but you don't believe it unless you come up with a secret plan to pay off the mortgage. You know what I mean? Yeah, just take his word for it. You're pretty amazing. You're pretty amazing. Jade, I've heard this song and dance on the internet. It's like, all right, this is what you do. Yeah. I don't know. I'm not a dumb guy. I'm not the smartest guy in the world, but I think I can figure most stuff out. And usually I'm like, you lost me at step 17. I'm just going to make a double payment and go on with my day.

49:25I mean, let's run this out for the folks who might be listening for the first time, John. So obviously we do like our countercultural take on mortgages is first off, if there's a world where you can just stack up some money and pay cash all day, baby, all day. Like that's, we're going to cheer for you. Yeah, people are like, no, I'm going to take out a mortgage for tax savings. That's literally the dumbest thing. If you have the money or you live in, you know. I'm going to pay$100 ,000 of interest so I can get$10 ,000 in tax savings. Yeah, don't do it. if you can get cash and there's somewhere in, I don't know, Kansas, where you can still find a $200 ,000 house and you can pay, get it, right?

50:00Then the next level is, hey, in a world where everybody's getting 30 year mortgages, we're always going to suggest a 15 year mortgage. And at the base of that is, well, you'll get a better interest rate. But the other base of it is you're going to pay it off 15 years sooner if you just pay the payment, right? Everyone says, I'm gonna get a 30. I'll just, I'll just pay it like it's a 50. But you won't, you won't, There's always going to be something that pops up instead. And so we're like, hey, set it for, set the dial for like, you can't screw this up. So 15 years, what we were going to suggest.

50:28And even if you never make an extra mortgage payment, you're still paying it off 15 years earlier, which is giving you another 15 years that you can invest more to build wealth, right? For your legacy, for retirement, you know, to buy that restaurant you want to buy, whatever that thing is. So 15 years, what we're talking about now, we're always saying, hey, this, the payoff of the mortgage lies in baby step six. So it's after you've paid off your debt. It's after you've saved up an emergency fund. It's you've been, you've been investing 15 % of your income all the while you've put a little bit aside for your kids college.

51:02And now after all that's kind of rolling, now we're saying, hey, you know, maybe I have a little extra change I can throw over to this mortgage. I make the payment and maybe I pay another half payment or maybe twice a year, I double the payment. Whatever that rhythm looks like, it's just about you being intentional. You don't have to get intense about it, but just being intentional about saying, I'm going to put extra money on my mortgage. And there's some really crazy arithmetic out there that if you just make one extra payment a year, like the quickness that - Takes seven years off or something off a 30 year mortgage or something.

51:34Yes. It doesn't take a whole lot in order to really shave that 15 years down. And John, on this show we find that if people follow the baby steps no matter what point you lock in if you actually lock into the baby steps most people have their mortgage paid off and like 10 to 12 like it's like quicker than 15 yeah so and by the way people always ask hey is it okay if we get hyper intentional about we've had the mortgage for a while yeah if you got two or three years left on it and you say we're gonna go to baby step one that's your choice and you and your and your spouse lock arms, go knock it out.

52:08Go do it. Get it done. Yeah. And then on the flip side of that, if you're like, and you're like, hey, you know, all my life I had to fight and I finally just got out of debt and I'm not ready to put double payments on, that's also your prerogative and nobody's going to be mad at you. The point is you started in the best possible spot, which is a 15-year mortgage that was no more than 25 % of your take-home pay. And I understand that that is a tall order in today's world and today's day and time, but it's still possible.

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53:57All right, we're going to go back to the phone lines. But before we do, I didn't say who was hosting today. I probably should. It's you and it's me. John and Jade. John and Jade. So now you know, just in case you were wondering, John, you're kind of like on the mental wellness tip for anybody who doesn't know. You're everywhere, so everybody knows. No, they don't. I believe that they do. And then I am your money expert for today. So that's how this thing works. Two people, two chairs. All right, let's go to Nicole in Denver, Colorado. What's up, Nicole? Hi, thanks for taking my call. My husband and I just got married, and we both want to have children, but now we have to adopt or preferably get a surrogate.

54:41We have some debt, we have some savings, and my husband is about to start a business. so we we really want to prioritize this because of our ages i'm factoring us in like us needing some extended time to have kids and both of these options are expensive my question is how do we fit a baby into the baby steps oh i love this question how old are you by the way i'm 30 he's 34 okay um so if you were calling in and you were like hey we're thinking we're going to get pregnant the old-fashioned way, I would have just said, yeah, tomorrow, whenever you're ready, right? I'm never going to tell somebody they have to, you know, wait till they're out of debt to have a baby.

55:24I'm never going to say you have to have this financial echelon accomplished before you can start a family. I would never tell you that. Now, it is your own personal choice. I can tell you, my husband and I, we were like, ah, we're going to pay off our debt, then we're going to start a family. That was a personal choice. I don't think anybody else has to make that choice. But in your case, it doesn't change my answer, but there are some considerations because in your case, yeah, it's going to cost a pretty penny. How much does it cost to do surrogacy in the 2025 world? There's a huge range. I was going to say$50 ,000 to$100 ,000, huh?

55:59More than double it,$90 ,000 to$200 ,000. Agency fees, surrogacy compensation, medical expenses might need multiple rounds of IVF. and then for adoption if you're working with an agency somewhere between 30 and 60 000 so i mean the pragmatic answer is adopt instead of do a surrogate but i just i don't know how to even start saving up for this okay um what's your income we go what's your income right now i'm in school um i'm a student for another six months i have a part-time job i earn about twenty five hundred dollars a month my husband gets about seven thousand dollars a month okay good and a third of that is an untaxed disability for being a veteran so it's helpful i i i guess and jade push back on me here um adopted kids with the most amazing things by the way that 30 to 50 of the private private adoption there's tax rebates there's there's local support sometimes there's business support so i would check into all those different things the last buddy of mine that did this.

57:05I sat down with him. He said at the end of the day, they were out of pocket like 11 ,000 bucks. Oh, wow. And you can do, but that was after tax breaks. And dude, who knows what tax cuts and breaks look like now, whether they're bigger or smaller, who knows, but it's worth to find all that out. And there was some upfront costs that he got reimbursed for, et cetera. But that's just a one buddy of mine. So I'm a huge fan of it. I think the challenge for me is if you get pregnant and had a kid and you had health insurance or you didn't have health insurance, there's almost a fixed cost because there's medical conditions, there's NICU, there's all kinds of other things that can happen.

57:43But inside of a bell curve, often, there's a$5 ,000 deductible or a$10 ,000 deductible or a, hey, we want to cash pay this thing and this is what it's going to cost. when you get into 90 to 200 thousand dollars that to me feels like we have to do some significant planning because that is that's i mean that is a that's a that's a graduate degree or that's a home in certain places right that's a huge chunk of money and i would feel irresponsible to say yep it doesn't matter you're starting a family just go let it rip um because that's a ton of debt to carry into on top of your student loans, etc.

58:27The reason I'm calling you guys is to, if we're doing, you know, highest cost scenario, if we do do surrogacy, just help me out. How do I even start this process? It might not be that expensive, but worst case. I mean, it's a math problem, right? Yeah, I mean, it's a math problem, and I'm going to make it super clear. I would never recommend any kind of debt for this. I mean, you know, you're going to do what you're going to do, but Jay didn't tell you to go into debt for a family because there's a risk of here, right? There's no guarantee on any end of the spectrum. And to John's point, when you get into numbers like 200 ,000, 100 ,000, that is insult on top of injury if this doesn't go the way that we want, right?

59:14And sometimes in life things don't go the way we want, although I'm praying that it does for you. So you see what I'm saying, right? I just want you to, I don't have to explain the risk to you. Well, and there's the other side of it is, again, I've got a close friend who had a really traumatic pregnancy and there was NICU stays and ICU stays and God knows what those bills are going to end up being. And you deal with those as they come. This is one where we are planing out the door. We know this is going to be a hundred grand or 150 grand. So real steps, like let's pretend, Hey, 50 ,000 is what we need.

59:47That's kind of somewhere in the middle of the adoption realm there. And so, yeah, I would treat it like, in many ways, I would treat it like the debt snowball, right? You're paying minimum payments on all your normal debt, but all the extra is going to your smallest debt. In this case, it's this adoption bill. So after all your minimums are met, now we're using our margin to stack up$50 ,000 as quickly as possible. And what I would do is I would say, okay, I'm starting up my every dollar budget. I've got everything in here and I'm seeing here's the margin that we have every single month. So let's pretend it's$3 ,000.

1:00:19I got$3 ,000 margin. That's going and I'm going to keep stacking that up until I hit 50K, right? Run those numbers out, see how long it's going to take. And at any point you go, hey, that's longer than I want. What can we do to make that go faster? Income is the issue. So we say, OK, can we get extra jobs? Can somebody drive Uber? Can somebody pick up extra shifts, that sort of thing? So in that way, you can kind of control it. But at the same time, you'll probably hit a point where it's like this is as fast as we can go. And you just kind of have to ride that train until it's done. I love it.

1:00:55All right. Thank you so much. Yeah, really great call. Thanks for the call. That's, you know, John, that's, I actually got that call a couple of days ago. And it's true. You know, when Sam and I were in debt, we had almost half a million dollars of debt. We were young, 23 years old. And I, I, I remember thinking, I'd rather wait. And plus, I wasn't sure if I want a family yet. Anyway. So I was like, let's just wait. He wanted to wait, because it was just eating our lunch literally like chaos and anxious install in your house yeah and so for us there was we had just made the decision and said hey we're going to clean up this mess and then we'll feel great about you know having a family plus you know and i again this is i'm not saying anybody else has to make this choice but i kind of had this clear picture of this is the life i want to be able to provide um and so that was kind of like a guiding light for us i was like i don't want to feel like i have to work i want to feel like i'm working because i want to work if i'm not going to stay home with these kids.

1:01:51Like I wanted as many options, not just for us, but for the kids too. So that was our choice. And yeah, I ended up having kids later in life. That was a choice we made. But I remember the years that my wife and I were trying to have kids and it wasn't happening. And then I sat down with somebody, we went to the meeting about adoption and private versus public and all those things. And I remember my, my mind shifting to I'm owed this. I deserve this. and it was giving me a pass. I'm just going to go borrow on whatever this costs because I want a family. And it was this, I remember thinking, do I want to add, because this is when I still owed a jillion dollars, do I want to add that burden to a guy that's already pretty spun out because of all this money I'm carrying or that I owe people.

1:02:40And I remember very much feeling though that like math doesn't apply to me here. this hurts and I can I want to have a family and I want to be able to like give a kid a family like all that stuff was so good and right and yet math doesn't care it's still it's it's gonna be you're gonna have two hundred thousand dollar mortgage on a on an adoption right or on a surrogacy or whatever and so there is something about I would never tell somebody don't have kids if you owe money right sure especially if you got a traditional um health insurance yeah yeah yeah But if you're going to go make a$30 ,000,$40 ,000,$50 ,000, you can put that much money on the table.

1:03:18I want you holding that check because otherwise you are setting yourself up for all kind of additional chaos. In addition to having the kid and all the heartbreak and joy and all that comes with that. Absolutely.

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1:05:18All right, you're listening to The Ramsey Show. Hey, don't just set goals in 2026. I want you to actually learn how to reach them for once in your life. And we're going to help you do that. The 2026 Ramsey Goal Planner is here, guys. And it's packed with monthly content from myself, from Rachel Cruz, from Dr. John Deloney sitting right next to me. And it's all there to help you stay on track with your money, with your faith, with your relationships, all of it. and finally for the first time you can actually follow through on your goals it's so helpful now i'm going to tell you the real deal every single year we sell out of these all right so they're already gone listen there can't be that many left there can't be so the point is this is not a sales pitch this is like them sending being like hey we have like almost like they cut off product benefit nobody in the building can buy them yeah we can't even buy them there's only a few left and it's just for just for just for our fans the only way i'll get one is if one of you send me yours, because I didn't even get one.

1:06:13But the point is, they might be already gone. So if you were thinking of getting one, go on there now and make sure you can get one. They're$49.97 at ramsaysolutions.com slash store. Or if you're watching on YouTube or the podcast, you can just click the link in the description. Now I'm gonna tell you straight up, I was making a joke before. I always get a couple of these and I send them as gifts. It's on my gift list every year to send to other people. and everybody loves it because it's so helpful. And so, yeah, get involved. All right, next we have Sue from Chicago, Illinois, Chi-Town. What's up?

1:06:47What's going on, Sue? Hi, thank you guys so much for taking my call. I'm blessed to be able to speak to you guys and to listen to you guys every single day. Thank you so much. What's up? I'm stuck. I'm 54 years old and married with a child. And I just found out that my husband no longer has savings and no longer has the college account for our child because he's gambling and there's more infidelity I just found out about. So there's that. I just started a job, thank goodness, because I kind of had a feeling like something was up. and my job will be able to pay in the future for the success that I want with our family, but I'm kind of at a T-section.

1:07:44The big question here is, do you want to stay in this marriage?

1:07:52No, and I hate saying that. We had an issue before where things were questionable, and he said he wanted to reconcile and this was years ago and I had a huge cancer scare. I'm cancer free. It's great. It's wonderful. He hid it really well since then. I don't feel for my peace and my daughter's peace moving on in her life that it's safe to stay in this marriage. So I think answering, well, there's two things. One is you are right to be fearful about if there's sexual infidelity, you're right to be worried about the betrayal, worried about your health, worried about like the values of your marriage being swiped out from underneath you.

1:08:41Right. The financial infidelity, you waking up one day and realizing y 'all have no safety net. That's a real harrowing fear also. And so whether you choose to stay in this marriage and heal it or – and y 'all have to rebuild this thing from the ground up because it doesn't exist anymore as it was. You still have to take the steps to go open your checking account and deposit money in your account and begin to have some sort of financial safety because this person is very unsafe and very reckless. Yeah, I did that with my new job. Good, good. Yeah. But that now has been paying for groceries and school fees.

1:09:24And I don't, I, I, pennies, pennies, putting it aside could possibly, you know, eventually get a down payment. Hold on, hold on, hold on. You're doing a very natural thing, but I want to slow you down. You're solving for seven steps down the road. I need you to solve for step one, which is I need to get me and my daughter into a safe place. Yeah. Exhale. next step. I want us to make sure we have the apartment that we've moved into or that he's moved into. Can we afford this house and we have to sell it? Do I have an attorney's fees? We rent. We rent. We don't even have a house. Okay. So am I on that lease?

1:10:02So if I go get an apartment, a one bedroom apartment for me and my daughter for the next 18 months, because that's what I can afford right now. Am I on that lease? And is he going to quit paying and then it's going going to blow up my world, right? So it's getting those very basic things, four walls. Do I have a place to live? Do I got food? Do I have utilities? Do I have water and heat? And do I have transportation to get to and from my job? Okay. That's what we're solving for right now. You'll solve for what's my retirement going to be? What's a pension? All of that is a problem for future you.

1:10:33Okay. Okay. Thank you. And anxiety is taking future stuff and dragging it into the present and trying to solve it in the present, don't do that. You've got enough trouble right now. As you experience and as the Bible says, you've got enough trouble today, let's deal with today. If you are done with this marriage, I want you to push pause and call an attorney. Okay. Okay. And they will guide you. They'll have, not thousands, but a list of questions, thoughts, ideas, and they will walk you through step by step and you won't feel so alone. If you want to try to save this marriage and reconcile, you've got to call a therapist today, a licensed therapist who will walk with you.

1:11:14It's just too much. Your whole world exploded, right? Yeah. It did. It really did. And I'm more worried about my daughter. Yep. How old is your daughter? She's a junior in high school. Yeah. But she's now been, unfortunately, it's blown up in her face and she's very aware of everything that has happened. All right, let me tell you the greatest gift you can give her. Take her out to a diner. In fact, tell her we're skipping school this morning. Take her out to a diner so she'll know it's a special moment. And I want you to look her in the eye and say, I'm not going to talk bad about your dad. I'm not going to run him down.

1:11:57You're not going to talk crap. You're not going to swear at him about him. Because that's her dad too. And she knows in her body half of her is him. So if he sucks, then half of her, right? But I'm going to tell you the truth. I'm going to tell you I'm scared. I'm going to tell you I'm heartbroken and I, your mom, am working to keep you and me safe. And so you're going to give her this gift. You're going to A, give her the gift that she's not crazy because a lot of parents try to just say, I don't want the kids to know. I don't want them to, I want to hide my tears. I want to hide everything. And what it does is it makes your kids feel nuts because their insides are melting.

1:12:32So it's important for her to see, oh, mom's a person too. If she's sad, I have permission to be sad. Yeah. I've never hidden anything for her, even when I got the cancer. Good, good, good. I painted pink polka dots on my head when it was growing back, because that's what she said would happen when my hair grew back. And the next plan, the next important thing for her is to know my mom has a plan. I have a job. I have my own checking account. I'm going to, we're going to, your college plans may have completely changed, but I'm going to be right next to you, walking with you. Right. And it's letting her know you're not on your own and her job isn't to take care of you.

1:13:06Okay. Okay, 100%. That will be a blessing to her for you to say, I'm hurting, and here's my plan. Thank you. Okay. I would also recommend this, and this is like, I don't feel like I want you to give you another thing to worry about. I want you to go pull your credit report from all three credit bureaus today. Yes. And I want you to freeze your credit. It is. Okay, good, good, good, good. I did that as soon as I found out. Excellent, excellent. He's very smart. Excellent. What's your husband doing right now? Is he running, hiding? Is he saying here? How'd you find out? I just, well, I started, I got the, I don't know how long has he become a millionaire.

1:13:51I just started going, hey, can we go over the bills because I want to put all this together and make a budget. I want to make a plan. And he started listing off these bills. I'm like, well, what bill is this? What bill is this? He goes, oh, it's a loan. It's a loan. I go, it's a loan for what? it's a loan for what and he goes well I have a lifestyle to keep up with and I'm like I don't understand like he should be getting he's retired and has now a part time job because it just exploded it just exploded well thank you for trusting us for the call stay on the line we're going to hook you up with EveryDollar it's the best budgeting app in the world we're also going to hook you up with Financial Peace University so you and your daughter if y 'all want y 'all can watch these lessons together and I want you to begin using this app for you.

1:14:38Make a budget for you so you know where every dollar is going because right now every dollar is precious. And if it's time to call an attorney, go call one. If it's time to call a therapist, go call one.

1:15:17All right. Our question of the day is sponsored by Y-Refi. If other lenders won't help with defaulted private student loans, then Y-Refi might be right for you. They offer fixed rate solutions that fit real life. Find out more at yrefy.com slash Ramsey. That's the letter Y-R-E-F-Y dot com slash Ramsey. Remember, it's not available in all states. All right, this question is a good one. I'm going to have to process this out loud. All right, read it. And it's funny because I've been wrestling with something about this. Oh, really? Okay, I'm excited then. Today's question comes from Gabriel from California.

1:15:52Gabriel writes, I need advice on whether to take on commission work for a very popular video game. I would get paid to make 3D digital models for game servers who have the aesthetic that I'm trained in. I developed these skills over the past two years. However, here's my dilemma. I stopped playing video games several months ago due to a conviction to stop playing them and just grow up. I've been benefiting from the time away from them to connect with friends, read my Bible, and attend church activities. I've actually lost a desire to play video games but I can make a ton of money with this side hustle should I take the opportunity or walk away because I'm afraid I'll be pulled back into that world so here's where this question is with me I watch social media like melting us culturally and yet every day I post on it twice a day right you're in my brain right now i live in it and so i've had this weird tension with it and the piece i've come to is if it's a cesspool if if it's constantly sending people negative negativity things that way to divide people up and whatever i will i can tell myself i'm going to be someone who puts good out into that world yeah and so that's that's where i've landed right now, but I do wrestle with it, right?

1:17:20If they came in and said, hey, social media is over. It doesn't exist anymore. That part of our business is over. We're going to do something else. I would exhale. It would cost me a lot, right? Understood. Yeah. But I would exhale. And so there's a tension there. So this is a little bit different because he's not able to put positivity out into a negative environment. He's going to literally to be participating in it, right? Yes. So part of me, I don't know. What do you think? What do you think? I think we can look at this from two arguments. I don't think he's created like a good versus bad argument.

1:17:55Like video games are bad, therefore I'm not playing them anymore. He's like, I found relief being out of that world. Yeah. I think he found it more of there's better things I could be doing with my time. This is kind of a drain on me, so I'm not going to do it. So for him, I think it was like productive versus not productive. not necessarily good versus bad like if he had said hey oh i think they're evil so i quit them right like i got out of video games because the chat's crazy and it's not good for kids and people it's dangerous and like sex trade all these things like if he had said that argument i would have been like dude it's a moral thing for you you have to walk away um but since it's more of a personal productivity thing i would say any i would i will hold it more loosely but at the end of the day i would still say anything that feels like a violation of personal integrity for you you do have to walk away from.

1:18:43However, I would say this doesn't really feel like a personal integrity thing. It feels more like you're getting older and you're like, I can't spend time on video games, so I'm not gonna. And he's got his lived experience where he spent too much time for too many years on them. But also, and I've run my mouth about video games for a long time, but I've got buddies who play with their kids. I got buddies who play with kids in college and it keeps them connected and they have fun and they talk trash and those little things. So it's fun for them. But then they set it down and they go back to their regular lives.

1:19:13And so, yeah, it comes down to a personal conviction at the end of the day. It almost feels like, I don't know if this is a good analogy either. Somebody who has struggled with alcohol gets an amazing opportunity to make a bunch of money to be in a bartender. That's a bad idea. It could be, right? But if someone says, dude, I don't have any, for six months it could pay off everything. I wouldn't go back in the bar. Well, no, because he struggled with it. It was an addiction. I don't think that's a good analogy because one's like an addiction. But he's saying, I don't want to be pulled back into that world.

1:19:46Uh-huh. I think that I don't know much about making video games. So I think it has more to do, I think, and correct me if I'm wrong because I'm not a gamer. I think it has more to do with him than the outsider because I don't know if if you're making if you're making models for this if you actually have to like be in the game and kind of like play the game and talk about the game yeah so if he has to be in that world in order to create for it I think that's where more where his struggle is versus I don't want other people playing these games I don't want other people there you go because it's a moral conviction yeah so Gabriel I would tell Gabriel if he was sitting here and um thanks to everybody letting us think that out loud.

1:20:28I would tell Gabriel, no amount of money is worth your personal peace and your personal integrity. And so if this is a matter of, I feel like this is an integrity issue for me, but I could make some good money in the short term, I'd say walk away. Yeah. There's other ways you can make money. And the other side of it is if you have just found peace, like, man, I love doing other things with my time and good on anyone who wants to play games. It's not for me anymore. And you can go back into that world and make some quick money over six months knock your lights out right yeah yeah i'm with you on that it's uh yeah i was just reading back over the question i'm with you if you feel like it's it's pulling you back don't do it there's other ways to make money and there's always going to be uh temptations well and we get this call from folks who listen to the ramsie show they they buy into the message they live it their own life but they sell whole life insurance policies or they work at a at a at one of the big, the giant banks who take advantage of people.

1:21:27So, and they are faced with this moral dilemma. But again, I think that's more of like the good versus bad argument because we're saying, hey, debt, it is truly like out to get you. Like it truly is out there to try to scam you, try to trap you, all those things. This didn't feel like, he didn't mention anything. Now, don't get me wrong. I have my own views of video games. I don't want to project that onto him. but if you're a person who if if gabriel if you're listening to this if you do feel like hey i just think video games inherently they're trying to track people the the algorithm is there to keep you stuck keep you locked in i just don't agree with that like if you do have a moral stake in it i 100 wouldn't do it yeah because then you're compromising your own personal integrity man And that's a good question.

1:22:15It is a good question. And I challenge everybody in their life, if your day job at some level conflicts with what you know to be true or what you feel is to be right or true, it's easy to bomb the job. But there's something about taking personal ownership and saying, I can't be a part of this anymore. or I'm going to, the building's not on fire, I'm being asked to steal money, but I'm going to start looking for a way to transition out of this job into something else. I'm going to turn down this opportunity. And both of us have gotten opportunities to go speak at a place and we're just like, you know, I'm going to sit this one out.

1:22:52Like everyone has to make those kinds of choices. Right. But the fact, Gabriel, that you're even asking this question is pretty noble. Good for you. I think so too. Because I think it's so easy to just run for the money. Yeah. Whatever the hell it looks like. Yes. You have to have your personal moral compass. And that sometimes can look different from other people. It's kind of like going back to the drinking thing that you said. Some people go to a party. They're like, hey, alcohol is just not for me. I don't like who I am when I have a drink, right? And then the other person could sit right next to you and there's no moral dilemma.

1:23:21They're not going to act a fool. They're just going to have one or two drinks, go about their business, and it's fine, right? So different things affect different people in different ways. If I drink, I don't feel good the next day. That's fine. Sure, that's fine. Or I think this is wrong. I think nobody should be doing this, right? But whatever you bring to it, live it out everywhere. Live it out everywhere. And that's the good word. Oh, I like that one. That was a good one. All right. Since we just took a question that was verbal, me reading it. Somebody wrote it in. Let's do another one from social.

1:23:52All the questions are verbal, by the way. I know. That was not the right way to say it. Okay. Let's do this one. This is Sue from TikTok. She says, why does canceling a rarely used card affect someone's credit rating? OK, so we tell John, we tell people, John, it's time for you to not only pay off your debt, but you need to cancel it. You need to close the account and be done with it, not just paid off. And so she's saying, yeah, if you cancel this card, your credit score initially is going to go down. That's true. And that's OK. It's one of the factors that they use to measure your credit score.

1:24:29right? It's how many lines of credit do you have open? How many, how long have you had it open? What percentage of it are you using? All of that affects your credit score. And so when you do something that affects one of those, you know, ticks in the algorithm, yeah, it's going to ding you. But in the long run, if you just close them all and pay them all off, your score is going to roll to zero and you're going to be a person who has a zero credit score. And that's ultimately what we want. Stick around. There's more of the Ramsey show coming up.

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1:26:08Hey, welcome back to the Ramsey show. We're here in the Fairwinds Credit Union studio taking calls about your life and your money, like we always do at this time. We got Tom in Minneapolis, Minnesota. What's going on, Tom? Hi, John and Jade. Thanks for taking my call. I got a question around term life insurance. I'm 65 and over the years when we had four children, over the years I would buy life insurance, but term life insurance. And then it would, at one time I probably had a million dollars. I'm down to one last policy of$250 ,000. There's seven years left and the annual payments are only$711 a year.

1:26:55and just questioning whether or not I should keep it because I really don't need it and it's just my wife and I today. I mean, yeah, you're right. The point is that we get to the point where we can kind of self-insure where that nest egg is big enough to where if something happened to you, your wife would be okay and it sounds like you have that. Yeah, I mean, yeah, no debt and multiple millions of dollars put away probably a$7 or$8 million. You're saying that the policy runs out in seven years? It does. In 32, it's done it. But it's only$7 a year. I get$250 ,000. I'll$250 ,000 and I got to change our lives.

1:27:35No. No, but neither is$70 a month either or$70 a year. Right. There's no right or wrong answer on this. If you want to keep it, you can keep it. Because like you said, the$711 a year is not changing your life. The$250 ,000 is not saving your life. I would ask your wife, how does she feel about it? hey, do you want this extra$250 ,000 coverage? Does it give you any extra level of peace? For me, I could maybe let it go and just have that conversation. If it were me, I'd probably be like, just keep it around, let it play out. But like I said, there's no right or wrong. Yeah, yeah, okay. So that's it.

1:28:13I just, I know she'd say, you know, she's always had her trust in my management, and obviously pay off, and she can't believe we're in a place that we're in today. So she'd just say, hey, I don't really care. Yeah, well, dude, let me be the first to tell you today. Well done, brother. That's awesome. Really good. Like the thought that you can pass away tomorrow and your wife's going to be okay, that to me is the greatest, I don't know, just as a husband, that's the greatest feeling I could have that if I cashed out tomorrow, my wife and my kids would be okay. That gives me a lot of peace. Hey, do me a favor.

1:28:44Call our friends at Xander. What I know about those dudes is they will tell you the truth, and they won't take money from you, that they won't try to bilk you for money, they'll be honest with you. And they'd be a great person to run this policy by and just run through the numbers for you. And whether it would save you if you just quit paying on it, if you can't, they're gonna answer all those specific insurance questions. So call them. They're the ones who did my life insurance policy. Yeah, me too. Me too. Yeah, so let's talk a little bit about life insurance for new listeners who are like, what the heck are they talking about?

1:29:16So here we're always going to suggest term life insurance. That's what I carry. That's what John carries. And you can get it on a 15-year level term, a 20-year level term. And basically the term is just what it says. You are covered during that term of years. And the level term means the price is not changing. But the point of life insurance is for anybody who depends on your income. So for instance, I work in my home and my husband works. But if I were to pass away, that's a big chunk of income that's gone. And so my family has a dependency on that, right? And same thing with Sam. If Sam were to pass away, we have a dependency on his income.

1:29:53So we suggest you get 10 to 12 times your income, which a lot of people think, oh my gosh, that's a lot of money. Like that could be in the millions. That's a lot of money. And it is, but it's about survivorship. It's about the people who are, like I said, dependent on your income long term. They don't just need, you know, 30 ,000 bucks. They need to be able to continue living until their life situation changes. Or maybe you're a stay at home mom, right? And you've been staying at home. If you're the spouse in that situation, you want to make sure this mom can continue to stay home. So you need a nice nest egg there.

1:30:24That's what it's there for. I won't get into the whole life thing. I feel like that's a different call, a different time for a different day. But I do want to say term life insurance is a way that you love your family well. Now, I know I hear it now, John. People are like, oh, I have insurance through my job. No, you get$10 ,000 too. You have barely enough to cover the cost of a coffin these days. That's right. That's it. If that anymore. That's right. That could barely cover your funeral and that's it. So you need more. And trust me, it's not expensive. Like this guy said, he's paying$711 a year.

1:30:56That's nothing. Like Dave would say, that's a biscuit. Yeah. Yeah. So get it done. It's so easy. They'll come to your house and do the medical. They'll draw your blood at your house. It's easy. And then they'll set your term and you'll be set. So that's how this works. If you're wondering this too, my wife has a part-time job, but the vast majority of the income is mine. I have a policy on her. It's not near as big as mine. Three to four times. But if she was to pass away tomorrow, if you've listened to this show for five minutes, you know that my life would be in shambles. Yes. Right? I would have to hire some support and help.

1:31:32That's right. There'd be plane tickets. There would be parents coming and going. there would be, I need help with, my whole life would fall apart. So I'd need to hire folks to come backfill that. And that money would add up and add up, especially when I'm in a season of grief and my income would drop because I'm on commission. Right. So all that say is I got a policy on her. It's not, again, not near the size of mine is, but I do have one out on her because there's going to be real costs associated to me trying to figure out how to manage my life and my kid's life with her gone. That's such a good point.

1:32:01Yeah. When you have a stay at home spouse or a spouse that maybe works part-time or whatever the case, there's still a huge monetary value on what it takes to, if you're the home CEO, right? So you're doing all the shopping and you're planning all the meals and you're taking the kids to school and you're picking the kids up. Well, who would do that if that person left? Do you have to hire a nanny? Would you have to have a babysitter there at the house, you know, six hours a day? That is all cost. So please, please, please. Term life insurance is what we're looking for. And what we were talking about earlier with Tom is the idea is that you don't have to pay a premium forever.

1:32:34So he's got millions of dollars. That's right. He's now insured. He's insured. His wife's insured. And that means that whatever pops up, he's got the money that he can carry that risk now. The point of insurance is to transfer risk when we can't afford it, right? And so when you're walking through the baby steps, you can't carry that risk. So let the insurance company carry it. But the hope is that you get to a point, you keep walking through the baby steps where you've got a couple of million dollars stacked up or whatever your nest egg is stacked up to where when you hit a certain point, hey, if somebody passes away, there's enough money on that nest egg that they can draw from.

1:33:06They can cut or, you know, if something happens, my medical expenses will be covered as well. Like all that stuff is there. So that's how this works. It's just a really good thing to think about from time to time. We get calls all the time, John, of, and it's sad when someone passes away, there was no life insurance, no will, and everything is just in a tailspin. I've mentioned this several times over the years on the show, but a couple of times when I was doing crisis work, I responded to calls where a husband had passed away. And there's just, I don't know how to describe it, other than there's a very particular look when a spouse just lost her husband and she looks.

1:33:47And I remember one person in particular said, I have to go to work on Monday. We don't have anything. And it was the most harrowing. It's like, what do you mean? Like, they don't have any money. We don't have any insurance. We have nothing. You got to figure out. And I got to figure, I got to go, I have to get a job now on Monday. We don't have no, we had no, I mean, it was just such a harrowing conversation. And then the other, the other, I remember one other person in particular said, I don't, I don't know what to do. I don't know where anything is. I don't know if there's a will, where it is, the accounts.

1:34:16I don't know if we have life insurance policy. It was just a zoo. And I remember being like, man, like me and my wife, that's a big deal for us is where's the forms, where's the passwords, where's everything. because it's not a matter of if, it's a matter of when. Yes. And I want that to be the last thing she worries about is what do we have and where. Term life insurance, a will, making sure your spouse knows where all the documents are.

1:34:56Many of you listen to The Ramsey Show because you're sick and tired of getting nowhere with your money. You work too hard to live paycheck to paycheck with no money in the bank. But here's the deal. Just listening to the show won't change that. If you want different results, you have to do something different. We've helped millions of people save money, ditch debt, and build wealth. And you can too. But you got to have a game plan. And that begins with our Get Started Assessment. Go to RamseySolutions.com slash start now, take the free quiz, and get your free step-by-step action plan. If you've had it with money stress and are ready to take control of your money for good, go to RamseySolutions.com slash start now.

1:35:51You know, last segment, we were just talking about the importance of term life insurance. We were saying wills, making sure your family knows where all the important documents are. And we actually have an online wills quiz because you might have been listening to that saying, hey, Jade, I don't know. Do I I'm 18. Do I need a will or I'm 21 and single? Do I need a will or, you know, I've been married 50 years. My wife already knows what we're doing. Do I need a will? You need to take the wills quiz is what I'm telling you. OK, so here are the top questions people have about online wills. Let's talk about number one.

1:36:23they ask, how do I know if I need a trust or if my estate is too complicated for an online will? Okay, so that's a great question. So the answer there is, if your estate is worth less than 1 million, then getting a will online is probably a really great option for you. So if you're worth less than a million, yeah, probably online will is good. Next one is number two. Jade, what do I need to start my will online? All right, making a will online or not involves a couple of big decisions. Number one, you need to know like who's going to get my stuff. You need to know who do you want to take care of your minor children if you have children, because that's going to be all part of the will.

1:37:03And you need to decide who do you want to make decisions if you are in some way incapacitated. Now I'm going to tell you right now, John, when Sam and I made our will, you kind of have to make an event out of this because it's not the most fun conversations to have. And the truth is after a long day of work to come home and talk about what will happen if you're incapacitated. It's not necessarily fun, but hey, pizza and wine helps a lot of things. I remember I gave my wife like this big, long, like, here's how I want my funeral to go. And she was like, hey, I'm not doing chores for you. Your funeral will be as I plan it.

1:37:40But I wrote it down and it's in the will. And she's like, I don't, I just sue me. Come get me then because I don't care. But you do, you need to sit down and you need to decide these things. And it's OK if it takes more than one evening or if you get kind of like mentally exhausted and have to come back to it later, just as long as you come back to it later. Now, number three, is an online will legally valid? Great question. Yes, an online will is legally valid, but not just any online will you find on the Internet is going to legally validate your state. OK, you want to make sure your online will needs to be made to match the laws of your state, the state that you live in.

1:38:17OK, so that's the important part. Number four, why would I want an online will versus a traditional one made with a lawyer? Very good question. The truth is, yeah, they're just less expensive and they're more convenient and they take less time to set up. So you could just pop online, do your thug fizzle and move on versus trying to set up something with an attorney. So if you have more questions, you can go to RamseySolutions.com slash will's quiz to find out if an online will is right for you. All right. Enough of that business. Let's go to Sarah, who's in Georgia. Sarah, how can we help today?

1:38:51Hey there, thanks for taking my call. I have a question about whether or not I should take out a home loan or a HELOC. I bought my grandmother's house two and a half years ago. And when I bought it, I knew it would need to be renovated, like down to the studs. So that's probably going to cost about$250 ,000. Gosh. Yeah, it's going to be expensive. I'm in a pretty good financial situation, and I've saved up$75 ,000 toward that. And I've got savings, I've got an emergency fund, I've got retirement, all of that squared away.

1:39:41but do I take out HELOC or a loan go ahead and reno the house and then after it's done it will be income producing because I can rent out the basement and bring in about two thousand dollars a month or do I wait and continue to save for the next probably four or five years until I have enough to just pay cash for all the renovations. See, here's what I think about in these situations. And I'm going to just play this back to you and John cut in. So when I hear somebody run out the two sides of like what I could do on the one side, when they're talking about the debt, they're like, I could just get a HELOC.

1:40:23I could get it all done. I could have this income producing property. I could, you know, and it's all these positive, positive things. But then when they talk about the cash way, it's like, well, I could wait five years. And then I would just, but they're not listing all the pros on that side. So Sarah, we want to remind you of all the pros of paying cash because there are pros. And yeah, it could take longer. But the truth is, we didn't mention there would be no risk on your home, which was your grandmother's home, which is clearly a source of great pride and joy for you because you bought it.

1:40:56So we would eliminate the risk from that. We would allow you to sleep better at night. We would ensure that an asset that's been in your family remains in your family. Like there's a lot of pros on there that you didn't list that are benefits to doing this thing in cash. Where did you come up with the 200 number? So I've gotten some estimates from a general contractor and everything that needs to be done. And it is more expensive because essentially the basement, it'll be two full kitchens, one for my living space, one for other living space. And that was actually my question. Is there a path where you phase this in, where you completely gut and renovate your kitchen with your$75 ,000 and you have an amazing, beautiful living space?

1:41:46And then you exhale for a year or two and then you make a choice down the road. do I want to go through and completely gut and do this? Because here's what I promise will happen. If you have a HELOC, and what you're going to do is you're going to say, I want a$200 ,000 HELOC against my home. They're going to say, well, there's always an overage or whatever. I'm just going to give you 275, and whatever you don't use, that's fine. I promise it will balloon up because they'll be like, well, what about these fixtures? These are nice, and it just gets out of control. And if you have 75 grand, you say, this is all I have.

1:42:20it just changes how you spend your money but is there a way you can phase it in yeah why does it have to be an income property why can't it just be a the place you live property later when i have the money to make an income property but can you get this awesome kitchen i'm trying to think of a new of a third way or a fourth way or a fifth way other than i've got to borrow a couple hundred thousand dollars against an old property which by the way i think that's probably when they get in the walls they're going to find all kind of wild stuff um and they get into the basement they're going to find all kinds of structural, like that's just what happens on those old homes.

1:42:53Or I can't do anything for five years and I just got to sit here. Is there a middle ground there? Well, so it needs new electrical and some plumbing updates. And so the thought was in the long run, it would save money by just doing all that at once versus going in and doing plumbing in one area or fixing electrical in one area or just doing the upstairs and fixing that and then doing the downstairs. How much would it actually save?

1:43:28I don't know. It's the exact number. I would want to get that because I think that's one of those things that we just think, hey, if we just do this all at once, it'll be cheaper. Well, that's a luxury. Let's be honest. That's a luxury for when you have money. So let's break this down to a smaller, we're talking about a big house there. Let's break it down to a smaller denominator that we can talk about and it'll make more sense. If you had a flat tire and you didn't have any money and you're like, oh man, I have a flat tire. I'm going to go buy a tire. And they said, well, you should get all four.

1:44:00You'll get a better deal. You'd say, well, I can't afford all four. I've got enough for one tire per new tire. I'm just going to get the new tire that I need. And suddenly it makes a lot of sense because it's like, why would I buy four tires? I can't afford. I don't even really need the four times, the third, you know, the other three, I just need the one. And so when we put it like that, you can, it's the same thing with this house. You can't afford, it doesn't matter if it's a better deal to do it all at once. You can't afford it. And Sarah, here's the other side. The show wouldn't exist if people didn't take out a four-year HELOC on their house for a couple hundred grand and they immediately get into a construction project and then they get sick, their in-laws get sick, or COVID shuts everything.

1:44:43This show wouldn't exist if everybody's plans always worked. And so we have the misfortune and the blessing of our whole job consists of people who had this great plan. It's just going to be 36 months. It's just going to be four years and something blows up. And that's why, man, if If you don't owe anybody any money and you put 75 grand on the table, you get a brand new kitchen. They do the wiring and they do just the plumbing in that area. And then something happens. You can take two years off and you don't have this looming. Hey, they're going to take our house from us because we put it on the block.

1:45:17It's just a way to take risk off the table. And I want to do$250 ,000 of work on my house. I do too. And I still got to wait and do it little by little. Okay. So.

1:45:57We'll be right back.

1:46:01a Ramsey trusted agent near you, visit RamseySolutions.com slash agent. RamseySolutions.com slash agent.

1:46:26All right, welcome back to the show. We've got Brian who's in Phoenix, Arizona. Hey, Brian. Hey, Jade. Hey, John. Thanks for taking my call. Yeah, you bet. So I'm in my late 20s. I'm on baby steps four and six. And I have around$40 ,000 that I want to spend on a car. I'm wondering if it makes financial difference whether I choose a new or used car for the same amount. Interesting. Yeah. How much do you make? Around$200 ,000. Oh, so you got some cash. What do you do for a living, dude? I'm actually, funny enough, I'm in sales, financial advice, things like that. Well played, man. Excellent. So you, how old are you?

1:47:1128. 28. And you've got a great income, killing it. What's your, I mean, what do you have in retirement? What's your nest egg? So total nest egg is around$830 ,000. Okay. $310 ,000 is in retirement. I've got$357 ,000 in taxable assets. Okay. $30 ,000 cash. 13 ,000 HSA and 120 ,000 on the home that I purchased last year. Okay. So you're a millionaire. No, it's 830 total. Oh, okay. I thought you were saying 830 was in your retirement. So you're saying the total amount is 830. Okay. Correct. So I do think that in this case, if you want to spend the 40 ,000, it's no big deal. I would spend it on a used vehicle though.

1:47:58I would. Tell me why you don't want to. I don't know. The 26 RAV4 is looking pretty nice. Okay, so if I told you you could get a 25 RAV4 and somebody turned the key in it and backed it off the lot and drove it right back on and burned$10 ,000 of that, because that's the difference. The moment you sign your name on a brand new car, you drive it off the lot, it's worth last year's car. and that's why we tell folks a million dollar net worth is arbitrary like Dave just picked that number but it's basically can you walk into your house and set $10 ,000 on fire in the living room and you're okay with that you've got a million bucks it would be dumb and nobody would want you to do that but it wouldn't change your life and so that's the difference I love Rav4s My wife drives a Highlander.

1:48:55I love them. In fact, she asked me the other day if I could trade that in for a RAV4, an older one, right? I totally love that car. It's just what is driving off the lot and immediately losing that equity worth to you? Got it. And I guess would it make sense if I were to wait another year or two and buy used if I really wanted – sorry, buy new if I was able to bring it up to a million? I did that exact thing recently, like literally that exact thing. Yeah, the million is a, to John's point, it's a rule of thumb. It's something that we kind of feel like, hey, this is the point where, to John's point, you don't care about, you can take the loss, you can take the hit.

1:49:34You're very, very close. I mean. Bro, you're so far ahead of all of humanity. You're doing great, man. You're doing great. if i'm gonna advise you to do a used car if you did a new one lightning wouldn't strike you worse things could happen in your life but we're just telling you the rule of thumb that we think is kind of that safe point where you can really feel good about it like you can feel good about driving off the lot brand new and it's like hey i i if you're a rule follower it's like i follow the rules and i did this do you know what i'm saying like it's that kind of thing do i think it would break you no it wouldn't break you at all you wouldn't feel it at all you wouldn't feel it.

1:50:11So take that very contrasting advice. But you put it out there. So let me ask you, what is waiting six months? Like what's burning a hole in your pocket right now? Right. My car is getting to the point. I drive a used car. It's the first car I had. It's at the point where it's a lot more maintenance, a lot more money is going into it. So I think it's ready to buy something newer. Yeah. I mean, like I say, dude, you're doing so well. And if you think it's going to, like the intellectual exercise or the discipline of, I'm going to put on the calendar four months. I'm just going to, I'm going to make myself wait four months.

1:50:52And then I'm going to go buy this car. Then if you think you need that, and that'd be good for you long-term, because you work in sales, right? So some years are going to be up, some years aren't. That's the lifestyle. So I'm having, I'm in a good season right now. I'm in a season of blessing, that's awesome. I'm going to practice just holding off just because I can. That's a good, that's a very good one. It's like somebody who's such a cold plunge. Like, I just, I'm going to do this because it makes me tougher, right? And I think that'd be an awesome exercise. But also, if you went out today, you're not, again, you're not going to be destitute tomorrow.

1:51:20You're going to be fine. But you are going to have just said, hey, like, Toyota dealership, I want to give y 'all 10 grand of my hard-earned money, really for no reason other than I wanted this right this second. Because here's the truth. The truth is, if you said, hey, Jade, there's a used car I want to buy that's$50 ,000, I would have said, yeah, go do it. Because somebody else has already burned the depreciation for you. But my point is the amount is not any risk to you. It fits your income. It fits your net worth. And so that's kind of the way I'm reverse engineering it in my mind. But, you know, if you want to hit that rule of thumb, that's also great.

1:52:00Here's another game to play. What's your mortgage every month? uh like a three thousand dollars i didn't if a three thousand correct okay so just ask yourself is this how is this car today worth three months of house payments yeah and if that's if that's a good math if that's a good trade for you then cool yeah cars are cars are an interesting thing because if you're a car person you're like i'm in on it all day. But then if you're like me, who's not much of a car person, the question that John just asked, I'd be like, no, it's not worth three months more. I'm that person because I like nice things, but for whatever reason, cars just don't, they just don't do it for me as like, I'm willing to spend this money today.

1:52:47And again, I want to run back what Jay just said. Our rule of thumb here is once you're out of debt, don't own anything of vehicles with wheels on it, toys that are worth more than half of your annual take-home income. You make$200 ,000. So technically, following that line, if you came and said, I want to buy$99 ,000, we'd say knock your lights out. We'd say do it. If you got cash for it. It's not about the dollar amount you're spending. The$40 ,000 is nothing for you. It's simply about, for the one year having it now, do you want to burn$10 ,000 or or 7 ,000. I don't know how much a RAV4 depreciates in one year.

1:53:28I have no idea. But do you want to burn that now? Or do you want to go buy a 2025? Or if the model changed and everything upgraded or whatever, do you want to wait a couple more months until December and they're going to start liquidating those cars at a lower price? Then you can pick one up there, which is what I did last year with the truck. So do whatever you want, man. And you're well within the rule of thumb. You're there. Yeah, this is not a problem for you. But it's a principle as much as you're going to be in trouble of any kind. Yeah. And that's the crazy part of this rule of thumb. If you said, hey, Jade, I want to get this$99 ,000 car in cash, I'd be like, knock your lights out.

1:54:05I would tell you this dumb, but do it. It's not going to hurt you. It'd be stupid, but do it, right? But it goes back to that principle of can you just eat that? Yeah. Man, interesting conversation. I like it. I like it. I like it. All right. I like these social questions that we have on the desk. So if you follow us on social media, you can submit questions. I guess even if you don't follow us, you can submit questions. That's the whole point. But if you don't want to call into the show and this is a way that you want to ask, you can do that. So William from Facebook says, is there an average amount or percentage you should set aside in your budget each year to fund for future maintenance and repairs on a home?

1:54:46So like he's wondering if there's like an actual number that we're saying, hey, in your budget, always budget this amount kind of as a sinking fund. It's like a depreciation. Yeah. My answer would be no. Obviously, you've got your emergency fund, right? Three to six months. That is for the stuff that pops up that you didn't see was coming. And then beyond that, I would treat it as a sinking fund. Anything that you feel like you couldn't cash flow in a month's time. Like some people, their income is enough that if they blew their tire out, they could cash flow it. Other people, if they blow their tire out, that's setting them back.

1:55:19So, yeah, you probably need to have some sort of a car maintenance sinking fund that you're putting$50 a month in or$25, whatever suits your budget that you're putting aside every month for that. What else does he ask for? Home repairs. Yeah. Again, if you know your roof is 25 years old. And you're going to need one in two years. Yeah. Start putting aside for it. So, yeah, that's a really good question. It's not a certain amount. There's not an amount that we say this is the amount. It's based on your situation and your budget. And by the way, if you don't have an every dollar budget, I'm going to suggest you get one.

1:55:51It's the best budget out there. It's the one that I use. It's the one that John uses, and it'll help you create those sinking funds that you need.

1:56:26All right, today's scripture and quote of the day. 1 Thessalonians 5.1.1, 5.11. Therefore, encourage one another and build each other up, just as in fact you are doing. All right. Vince Lombardi said confidence is contagious. So is a lack of confidence. That's so good. Gosh, that's what everybody needs right now. Confidence. Is a unified. We got this. I like that. Yeah. That'd be cool. It makes me think of, gosh, I always go to remember the Titans. And you've never seen it, which is... Me? Right? I've seen it a thousand times. Okay, but the last time I feel like I quoted it, you didn't know what I was talking about.

1:57:07What'd you quote? It was about mounting up on wings like eagles. That was the quote of the day. Yeah, and I said, like eagles, y 'all, like eagles, y 'all. Yeah, yeah, yeah, I totally forgot it. All right, and then this one... Out of context. I've seen it a thousand times. I was thinking about it again. I was like... Strong side! Yeah, dude. This one I was thinking, attitude reflects leadership, Captain. Right? Anyway, moving on. And the math teacher brings in that film strip. He's like, I've been breaking down the other tendencies. I was like, bro, you're running algorithms with a protractor.

1:57:38So good. It's a classic, classic movie. A film, really. You should really watch it. All right. Kira is in Austin, Texas. Hey, Kira. How can we help today? Hi, Jade. Hi, John. I had a question. My employer allows us to convert our 401k to Roth. And I was wondering if that is a good idea to start doing. Yes. Yes. If you got the cash, do it. Okay. I can't do it all at once because I have quite a large 401k and the company only matches if you contribute to the 401k, not the Roth. So over time, would that be a good investment to do? I think so. They only match it if it's the traditional 401k. They don't match it if you put it into the Roth 401k?

1:58:29Correct. So I'm still contributing to the 401k, but I can convert it to the Roth, which is weird. But then you can't touch that for five years. So I'm going to go with the traditional first because the equation is match beats traditional beats Roth. Match beats Roth beats traditional. There we go. So free money, nothing's going to beat out free money. So we want the free money first. And then we love Roth over traditional, right? Because when you're older and down the line, you don't want to have to pay taxes on that money. You don't want your family to have to pay taxes on that money. So if you can convert it, that's also a great thing.

1:59:05And yeah, I would do that. okay and I could only do a little bit over time because I don't want to get out of my tax bracket when I like because and you can correct me if I'm wrong but it counts as income right when you convert it and then you have to pay like I don't want to move out of the tax bracket so if I make a large amount I don't want to like you're over my skis on that one you'll have to ask a tax pro on that one yeah okay what baby supper you want uh i'm on four i think whatever whatever contribute uh uh paying down the house okay four or five so you might want to get with the tax pro but you should be paying you're paying money because you're you're basically essentially when you do a roth you've already paid the taxes on it yeah no i meant when i convert when I convert it, so let's say I convert$50 ,000, don't I have to pay my tax bracket percentage for that$50 ,000 that I convert?

2:00:15Yes, but that's the conversion. You're paying taxes on that 50 grand as though it was income now, and you're not going to pay taxes on it when it becomes 500 grand 30 years from now. Yeah. So that's what I'm saying is I have$330 ,000 in the 401k that I could convert, but I don't want to convert all of that at once because I don't have the money to pay. Yeah. Okay. So here's the thing. Here's the thing. Technically, this is, this is a baby step seven action, what you're doing here. Um, so I should pay off my house before I do that. Technically. Yes. Because there it's, it's almost like if you were rolling this money over to a traditional Roth or I'm sorry, to a Roth IRA, it's almost like if you were doing that and we would save that for baby step seven because of the tax implication.

2:01:03You're in baby step four. So there's other more important things to do than to do that. Now I wish I'm thinking through this because this is the first time I've had this call because I love a Roth, but at the first, at the same time you're getting this match over. So I'd almost pretend like the other one wasn't there until baby step seven. okay so don't convert it yeah because i don't want to pay off my house yeah i don't want that tax burden on you until until after baby step six yep that's my final answer is that your final answer john i think my final answer would be start converting that other the backlog if you will like maybe start now like this year's income convert it that's what i was thinking is doing like 50 000 a year and what's your take on salary every year what do you make uh for me and my husband both or just me just you at your company that you would roll to to you'd do it back to a thousand two hundred okay so you make a chunk of money okay i don't mind that i don't mind what john said and keeping the past in the past but from this from this point forward whatever your current amount is that you're starting with it as a traditional and then at the end of the year or whatever however you want to do it rolling that over i'm not mad at that and here's my my algorithm on that in my head is is not a dollar for dollar i'm sure somebody could whip out a calculator and make a math case one way or the other well she would have been doing that anyway like on the taxes exactly but but i'm saying like in doing it out of order um is there's a risk to let's say the stock market has a significant troubles down the road, right?

2:02:46So there's a risk. Anytime you're in the stock market, you're always playing a risk game. The one thing that's not going to change is that mortgage is still coming every month. Yeah. And so I want to knock out the thing that's against me all the time. Like I want to take the risk off the table. And that's just a personal thing. And so I would I would probably roll the, the, your, this year's income into the Roth to do it back to a Roth at the end of the year. But I would, yeah, I'm with Jade. I would save that catch up if you will, until I've taken all my risk off the table, but that's just me.

2:03:23And that may be a terrible mathematical calculation. I can't do the math in my head, but that's, that's for me just wanting to solve for peace in my house. Yeah. The only reason I was thinking about converting it since it grows tax free once you pay taxes on it because then anything it grows from it and i still have well that's why i said to work that's why i said your current amount like whatever you're putting in there for this year and the years going forward i'm fine with you getting the match and then rolling it over and then because that was a tax burden you were going to take anyway yeah exactly whereas the big chunk the 330 or 40 or whatever it was that's a bigger tax burden and like i'm with you on john i'd rather not have a house payment save the big chunk as a baby step seven action yeah that's a good question and that will cost you for everyone who's yelling and screaming into their their youtube yeah people aren't going to agree it's going to cost you um and dave may disagree with me but it's going to cost you potential compound growth that that i mean it's going to cost you money to keep it there right if you're going to roll into a roth and it could have grown tax-free or that's there's going to be a penalty there right it's going to cost you something to not make that action.

2:04:35But it's also going to cost you money that could have paid down your house principal. And that house principal never is going to go away. And so I would take that risk off the table first. That's just me. It's a prioritization. We would say that if somebody called in today, and even though this is through her employer, if somebody called in today and said, hey, I've got$500 ,000 sitting in my traditional fund, should I roll it over? but they had a bunch of a pile of debt sitting there and they had payments, we would still walk them through the baby steps. And so in the baby steps, any type of conversion, any type of investing over 15 percent is a baby step seven action.

2:05:13And so that's the way it rolls. And it's just like John said, it's keeping the priorities, the priority, which is getting peace and getting your house paid off would come first in that. But I do love the idea of the people who come after me being able to get all of my retirement with no taxes. Absolutely. Yes, it is important to do that. If you can do it, do it. And if you can only do Roth, only do Roth. But like I said, free money, again, that's going to trump it at this point. So that's the way it works. All right, guys. Enjoyed hanging out with you today. Remember, there's only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.

2:05:55Thanks for watching The Ramsey Show. See you next time.