Get a Healthy Level of Disgust With Your Bad Money Habits

that they love, and create actual amazing relationships.

I'm your host, Jade Warshaw, joined by George Camel, both bestselling authors.

Look at that, George.

We're hosting the show for you guys for the next couple of hours.

We'll be taking calls about your life and your money, so chime in.

Give us a call.

The number is 888-825-5225, and we'll get you on the line.

Who's on the line now?

We got John from Long Island, New York.

What's going on, John?

What's going on, John?

We're having an issue here.

There we go.

Hey, John.

How are you?

Hi.

Hi.

Can you hear me okay now?

It was on us, not on you, dude.

How can we help?

My question is, I made a mistake, and I wanted to not make another mistake, so I wanted to

make sure ... I want to use my Roth 401k in order to pay off a very high-interest HELOC,

and the situation is, I'm not going to be able to afford both my primary mortgage and

my HELOC, so that's going to put me in a position, and basically, I ended up using

my HELOC, unfortunately, in an investment scam.

It was a pump-and-dump type thing, and I basically lost $150,000.

So let me get this straight.

You took out a HELOC of $150,000 to invest in some online scam?

What happened was, it was an online investment club that I found, and they were teaching

me things and giving me different advice, and I was making money along the way, and

I used what investment money I had.

Then I was lured into using my emergency fund, and I was still making some money.

I mean, from about 5% to 8% a week, and then there was supposed to be this big VIP tip

before they wanted me to become a paid subscriber.

So I was encouraged, and I got greedy, and I said, this could solve a lot of my problems,

and yeah, then I invested that.

So all in all, I had $250,000 invested in them.

Wow.

Did they take your money, or did you lose it on a risky investment?

But they advised you to do this?

They're gone.

Can't find them.

Can't contact them.

They're not a brick and mortar place.

They were an online...

I'm so sorry, John.

Yeah.

Well, let this be a lesson to everyone listening.

If it has the word investment and club after it, just run far, far away.

100%.

How much is in the 401k that you're talking about tapping into?

Which I can now remove tax-free, penalty-free.

And I just want to be able to...

I...

Well, I'm 63 years old.

The account's been open for 30 years.

This 400k?

But I do have an 800k.

That's going to be paid off in three years.

Can you use your future income?

Because you're saying you can't afford the HELOC payment and your mortgage payment.

What does that add up to?

My current mortgage with taxes and insurance is 3,400.

And the HELOC alone is going to be $1,200 in interest payments alone.

And then in two years, it's going to convert to a payback.

Okay.

So your payment all in, what does that add up to, interest and the principal?

Yes.

Interest only?

It would end up being, well, like $4,600 a month.

$8,000 a month?

So why are you only netting $6,000 a month, but you make $125,000?

That's $72,000.

Well, I'm only putting $50 a week in there.

That's what I'm confused about.

So let's, we need to pause investing, number one.

Every single cent you've been investing, stop it.

We got to get rid of this debt and get to some foundation.

Do you have any money in savings that's liquid?

What's left on the mortgage?

It'll be done in three and a half years.

And are you single?

I agree with that.

And the way I was looking at it was as like a three-pail system,

where one would be the 401k, the other would be my home,

which I'm going to sell and downsize when I retire.

And the other would be Social Security.

Social Security, I've got about $3,600 a month expected coming in.

The home is $800,000, which will be paid off when I retire.

can you do that now and use the proceeds?

If you sold today, you'd probably walk away with $680,000, $700,000,

something like that.

I have an elderly mom who's living with me,

and I take care of her too.

And to just say, turn around and move.

The downside on Long Island is you sell high to buy high.

I need to go to a lower cost area of living.

And that I can't do until I retire.

And the way I was looking at it was, well, you know,

and then the alternative then is after I pay the $120,000,

there's still $30,000 left over,

which I wanted to then take a 401k loan.

And most of the solutions you've been laying out sound like another mistake.

Because the interest I would be paying back

would be paying back to myself rather than me paying it to the bank.

But you're still robbing all of the future growth of that money,

which you're already robbing because you're trying to pay off the HELOC with it.

your first mortgage is $3,400 a month.

And then the HELOC portion of it right now is $1,200 per month, right?

Correct.

What would happen if you paid off the $80,000 in a lump sum

and then all you're paying is basically the second mortgage?

It's gone.

month to month and continue to make some progress.

without murdering your nest egg.

So work with a mortgage advisor you trust, not just some random website.

Churchill Mortgage is Ramsey trusted because they help you avoid hidden traps

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Learn more at churchillmortgage.com.

This is a paid advertisement.

I'm Jade Warshaw, joined by George Campbell.

And we're going to be your host today.

Taking your calls about your life and money.

Give us a call. The number is 888-825-5225.

And George, my favorite announcement that we've been doing,

the Ramsey Live Like No One Else cruise. It's here.

I'm working on my ship horn. It's not as good as Jade's.

Yours was an actual cruise ship.

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Even if we weren't there, I want to go.

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And here's the thing.

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what do we have to do, Jade?

How do we get signed up?

The good news is, all you need to do is a $600 deposit.

$600. You got that.

You do this in installments.

Yeah.

If it's in the budget...

That's right.

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That's right.

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There we go.

Oh, I can't wait.

Remember that?

That's before my time, but I appreciate the reference.

Yeah.

You're not that much older than me.

Let's take a call.

All right.

We got Andrew in Jackson, Mississippi.

What's going on, Andrew?

So I'm just trying to call.

So I don't really consider myself a business person,

so this is probably why I'm asking the question.

But my full-time job is an automation engineer,

controls engineer.

So I do like manufacturing automation for a DoD contractor.

Okay.

And so that's my full-time gig.

I make about $100K a year on that.

And so I started doing some side work as doing the same thing,

but literally just drove down the street and knocked on the door

of another manufacturer and said,

hey, you don't need any help like this.

So kind of started doing controls work on the side,

netted like $8K last year.

And then this year, I'm expecting to net somewhere around $30K.

So it's kind of growing a little faster than I thought.

So kind of the main question is,

when do I know like when to take that full time?

Because mainly my concern is, you know,

I have a new baby, she's seven months old.

Got another kid who's about two.

My wife is a physical trainer,

so she does that kind of just very part-time,

but is mostly a mom, which is great.

And she sacrifices a lot for me to do this.

But my main concern is just like,

how long, how can I keep it going?

I guess I'm really worried that if I did take it full-time,

it wouldn't be as secure as my full-time.

Right now, I mean,

I don't expect to do it like full-time very soon,

just because, you know, $30K is all at one client.

Yeah, it's still at $30,000.

It's still on one client, but, you know,

I've got a lot of, you know,

interest in leads out there and quotes out there.

I'm expecting to hear good things about and expand that.

Yeah, so I've got a car loan that's about $10K,

but the contract I'm actually working with a side

for that one customer should just pay that off completely.

So that should probably be next month.

which would probably be paid off either by the end of the year or next year.

is allowing you to move faster on the debt.

And if I were you, I think you're on the right track

as far as trying to diversify the clients that you have

because you don't want all of your eggs in one basket,

especially when you're out there on your own.

It is nice to say, I work with this client, this client,

and, you know, have a long list of wells to draw from.

But in your case, I'd be looking to replace my current income.

If you're at $100,000 now, that would be the goal.

And I mean, you went from $8,000 to $30,000.

Maybe next year you hit $70,000.

So maybe this is like a two, two, three year play.

And by then you're kind of able to jump ship

and go over, you know, into your own ship there.

And so that's, that's what I'd be looking for

to replace that $100,000 and know that it's steady.

on the side hustle?

but to try and get the work done,

uh, it's probably more like 20 hours a week.

And then plus the, uh, it's kind of a manufacturing environment,

so you kind of never know with my full-time job.

But it's anywhere from like 40 to 60 hours a week

with a full-time job, so.

to scale the business,

because you can't just go,

well, I'm going to have nine clients

and work 90 hours a week.

So you've got to figure out how to scale it

to where it's not taking more of your time

to take on many more clients.

But once you can kind of do the math and go,

all right, I'm putting in 20 hours a week,

and I'm making 50 a year.

Well, if I did 40 hours a week,

I can make a hundred if I got two more clients.

So start doing some math.

While you're doing that,

aggressively pay down the debt,

get six months saved in an emergency fund,

and probably a few months of just cushion saved

to launch the business.

Yeah.

So once you get the boat that close to the dock...

is like the emergency fund.

If it's six months is enough,

or do you think it needs to be more just to cushion?

but then have a separate savings account

where you stock up maybe three months of expenses

to float to kind of get this thing launched,

to get your feet under you.

Like, are you putting out a lot of money

in order to make this 30,000?

and really just running out of my garage right now.

So taking advantage of all the free software licenses I can,

but I'm probably, I'm probably under,

I mean, 2K overhead because of software,

but most of the time the customer pays for it.

So it's, you know, cashflow pretty well.

If, you know, there's the three to six months

of expenses on your personal side,

but if you can kind of create that same thing

in retained earnings on your business side,

that just gives you that feeling of,

okay, I know I've got the money to do the things I need to do.

And if you have a slower month,

like you've just got that cushion there on both ends,

which I like, very good question.

I would say in another year, maybe two years,

there's the financial part, which is get debt free,

get the emergency fund, get the retained earnings.

Then there's the business side of,

can I scale this up to where I'm not relying on one client?

Because I had a friend do that and it's scary

because they lost that one client

and there went their business.

And so you want to have some diversification,

just like we talk about with investing,

smart to do that with business too.

When Sam and I first started working in the cruise industry,

our only client was Carnival Cruise Line.

They're a big, big fish,

but it's just like this feeling of, okay,

I'm dependent on them.

If they, for some reason decide

we don't want to work with you anymore.

there goes our entertainment.

That happened anyway, even though we,

at that time we were working with all the cruise lines,

but cruising in general,

I mean, we don't have to say what happened then.

It wasn't personal, but it did come back.

So that's good.

small business, should I go full time?

You want to make sure it's earning money, number one.

And you want to make sure it'll scale to where

if you were doing this at a normal 40 hour rate,

you could actually create the same full-time income

and replace that.

And once your side hustle, small business revenue

exceeds your monthly expenses,

well, that's a ding, ding, let's go.

So the lower you get your expenses,

the faster you can launch,

which is why we tell you don't launch a business

while you're struggling with debt

and you're trying to jump ship.

Don't do that.

It's way too much risk.

about the fact that

because he is working so many hours now,

he's probably in the current state

not going to realize the full potential

of his side hustle income

because there's only so many hours in the day.

So there is a moment where you have to kind of

sit down and do the math.

And there's that kind of leap moment

where you're like, okay, I got to make a leap.

It's a calculated leap.

It's not you just, all right,

I'm jumping off a cliff.

Let's hope I land on my feet.

I got to get the boat close to the docks

where I can just step in.

That's right.

That's the goal.

A calculated risk is what we're talking about here.

And I think that our guy is very close to taking that.

So if you have a business venture,

you can check out our Entree Leadership Podcast.

It's a very, very good one to listen to.

Dave Ramsey's the host.

This is The Ramsey Show.

One of the smartest

and most impactful changes you can make

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