When You Play the Game of Debt You Lose Every Time
2024-02-23 01:57:10
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Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, joined by Jade Warshaw this hour. The number to call is 888-825-5225..
We've got a great crowd in the lobby of Ramsey Solutions. Look at, they're so happy to be here, Jade, and a good reminder that we're open to the public. You can watch the show on the glass. If that's how you want to enjoy your day, is to watch a radio show through glass, then come join us. We've got baked goods, coffee, all kinds of things.
Fun for the whole family. Love it. So give us a call, 888-825-5225.. And Jade, we're going to kick off this hour with a brand new segment we are calling Change My Mind.
Ooh, Change My Mind. I love it.
It all started with a friendly voicemail from a listener who wanted to have a friendly debate. Okay. And so I thought you'd be the perfect person to have a friendly debate with.
Okay.
And so if you want to join in and you have something you'd like us to change our mind about or change your mind about, you can email, ask at ramseysolutions.com, put changemymind in the subject line. And Brad, welcome to this brand new segment. You invented it, my friend. How you doing?
Great. Change My Mind. New car versus used car. This is a debate. I'm calling for value here.
Hot debate. Hot debate. Okay. Make your case.
My case is a new car, $2,000 a year is my case. And I'm not talking Hoopties. I'm trying to do a nice regular car, not a upscale and not a Hooptie. So we're talking Hondas and Chevys. Okay.
$2,000 a year is my goal to beat. And I did that with a brand new little Honda HRV. I bought it, sold it back to them, traded it in and bought another one. And I beat $2,000 a year. I've bought several.
I've listened to Dave for a couple of years now. And we bought several used cars, two to three years old, low mileage, get you a good deal on it. And I've gone over $2,000 a year on all those.
What do you mean by... Yeah. Is this like maintenance?
No. So if you buy a car for $20,000 and it lasts 10 years and you throw it out, you paid $2,000 a year. Okay. That's the way I'm trying to do this.
Got it.
So I bought the $20,000 used Honda Pilot, drove it for 10 years and it had some engine problems and dah, dah, dah, threw it out for $1,000, I sold it. But that is $2,000 a year. Okay. And I'm driving a 13-year-old car at the end of it. Now, my other scenario here that I did, I bought a brand new little Honda HR-V, drove it for three years, traded it in, and I paid the same $2,000 a year.
What did the HR-V cost you after taxes?
After all the... Around $25,000..
For a brand new HR-V?
Oh, no. This is 18, 2018..
Okay. I did that. Because you're saying the argument here is new car versus used car. Correct. So are you saying, why shouldn't I buy a new car?
This is your first time looking to buy a new car?
Nope. I've bought several new cars and several used cars. Wow. And I seem to win on the new cars. Now, I've only...
Yeah.
Help us understand how you're winning because of buying...
You're saying your yearly cost of ownership, essentially?
Correct.
Is lower on the new car.
Not any maintenance, gas, none of that. Just the initial cost and what it's worth when you get rid of it.
So you're not factoring in... You're paying cash, whether it's new or used, is what you're saying?
Oh, yeah. Always cash. Okay. So you buy it up front, it's a done deal, you sell it at the end, you complete the transaction.
So, then, really what we're talking about is whether or not you have the net worth to care about the depreciation that's taking place on the new car.
The depreciation is what the argument is. Okay. Dave always says the depreciation is in the first three years. I don't agree with that. Okay.
Three to five.
Well, let me give some people the facts, because we're changing my mind and I happen to have it right here. One minute, one minute after you drive the car off the lot. Let's say we're talking about a $35,000 car. One minute after you're losing somewhere between nine and 11%. So that's basically what $3,500 out the window right there in one minute.
And then after one year, you're losing around 20%, maybe even more. And then after five years, you're down to about 60%. And then after that, you're 10% each consecutive year after that. So the idea for the people listening, because some people might not know it, the way we teach is, hey, if your net worth is a million bucks or more, you can buy a brand new car, whatever year you are in. You can buy that car brand new in cash.
And it's fine, because I don't care if you bought a $100,000 car.
As long as everything with motors and wheels doesn't add up to more than half of your annual income.
Because basically the argument is you're happy with burning that money in a pile and just seeing it go up in flames, and it's not going to affect your net worth whatsoever.
So a car is like a vacation property. It's a toy. It's a luxury toy. And it's going to go down in value, which, unlike real estate, it will go down in value. regardless of what people tell me, that cars are an investment.
They also rust. And so, Brad, in this scenario, what is your financial situation? Are you a net worth millionaire? Do the cars add up to more than half of your income?
We're almost a net worth million, plus over 100,000 coming in every year. And we have no bills, no debt.
Wonderful. You have a paid-for house?
Oh, yeah.
Crushing it. OK, so the argument here is over a few hundred bucks a year in cost of ownership. Wait, I'm sorry. Is the argument here over a few hundred bucks a year of cost of ownership? Hey, the used one cost me two grand.
The new one cost me $1,700..
Yes, sort of, yeah, except, yes, that's basically it. I looked around today. I could not find a car that was half its value in five years.
Well, you're also looking at a very specific time in the car market. It's been real weird for the past three years or so. And so it's a weird time to look at this and go, well, this is reality, when this could all change and go back to normal. And so you're right. Cars have held their value more than they have over the last few decades because of this crazy time in the car market, with supply and demand and the chip shortages and COVID and all of this stuff.
And so we're starting to normalize, but everything is still so overpriced that it makes me just want to barf looking at prices of used cars or new cars. They're both terrible investments right now.
I agree. And I am not a car guy. I'm looking at 140 horsepower vehicle here. So, um, I get that, but I am trying to save some money, because I would much rather go on vacation than spend it on a car.
Love it. So give us the example of the car you bought, or you want to buy. that's brand new.
Um, let's do my HRV again. Okay. Still $25,000 several years later.
Okay. And when did you buy this?
Well, I bought a couple of them. I bought the first one, I think it was 2018..
Ah, okay. But you bought it new in 2018..
Correct.
Okay. Well, I would look at the next five years and see how it pans out for you. And again, this is, you know, it's a fun little debate and you are not the problem, Brad. You are an almost net worth millionaire with a paid four house. And if you want to spring the extra 200 bucks, it's not changing your world.
But if you want to check out the blog we have on new cars versus you car use cars, we'll put that in the description. It's called should I buy a newer used car at Ramsey solutions.com more of the Ramsey show coming right up.
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Welcome back to the Ramsey show. I'm George Campbell, joined by Jade Warshaw. The number to call is 888-825-5225.. Don't be scared. You can't DM.
You got to call in. It's the only way, my Gen Z friends. I know it's uncomfortable to call on a phone, but they still do that.
You can't text in.
One day we'll get there. That'll be like our Patreon edition. That'll be fun. All right. Gabrielle is on the line in Detroit.
Gabrielle, welcome to the show.
Hi, thank you. Um, my question is, should I apply for my first credit card so I don't have to continue paying for everything in cash?
No.
Where is this coming from? So, right now, you're paying for everything with actual physical dollars?
Um, cash, I mean, as in, we'll get that in just money in my bank account.
Like your own money. Okay.
And so what is your fear with using your own money from your own bank account with a debit card?
Um, I guess, I mean, I know that a credit card can help me build my credit. I do have other lines of credit open, just not a credit card. And also, I guess sometimes it's going to sound silly, but it's kind of hard to let go of some cash all at once. So the idea of paying it in increments by the due date is somewhat appealing.
What if I told you that that is, that's your body saying, don't make a stupid decision? When you say letting go of a lot of money at once, what would be the purchase here?
Um, I don't have anything in particular, just my day-to-day transactions. So things like groceries, gas, maybe like a leisurely item here and there.
So you'd rather lump it all into one giant mountain and then, 30 days later, have that come out of your account, if you're lucky.
I guess not.
That's even scarier to me. Cause I've been there. I was that guy who opened the credit card to build the credit, who racked up a bunch of debt on there and the balance carried. So I'm telling you, as a guy who did this, you don't want to do this. How old are you?
I'm 24..
Okay. Have you ever had a credit card?
No.
Wow.
And you've survived to tell the tale.
I just think it's interesting. Okay. Our screen says, I don't want to pay for everything in cash, which kind of feels a little bit like, um, it doesn't feel like it's as much of a credit card and building, is it for building credit? or is there something else behind this? Like, are you, I'm just trying to understand, because this might sound simple, but in my mind, I'm thinking, if I want to buy something, I should use my money to buy it.
That's the whole purpose of working is so that you have money to purchase the things that you want and need and you feel purpose in doing that. And so I, there's part of me that kind of feels like credit cards take away that feeling of satisfaction. I've worked my, the money I've earned is good enough for me. And I can use that money to make my purchases.
Where does that bother you? Like, I'm trying to understand kind of your take on this.
Um, I, like I said, I guess just, I, you know, I, people always tell me that you should have a credit card to build your credit. I don't know if I should need that. Just my friends and family.
Are your friends outstandingly wealthy that you look up to them and go, I want to be them when I grow up?
Um, not exactly.
So there's one reason to not listen to them.
There's, there's a fine, there's a foundational difference here. And so where George and I are coming from is we're, I mean, you might be new to the show, but everyone here is kind of of the mind, not kind of, we are of the mind that we don't need or rely on credit at all for our lives. Because, like I said before, we have jobs, our jobs, earn money. And we've learned to live on the money that we earn. And when we do that, we keep ourselves out of debt and we keep ourselves out of risk in general in life, because we're just using and spending the money that we have, we're using that money to pay for our day-to-day needs.
We're using that money to save up emergency funds so that we don't need to rely on credit cards. And so that's where George and I are approaching this. And it sounds like some of the people that you've been talking to have a different, uh, view of life. and their view of life is your money is not enough. And so you have to get credit, because they can give you the money you need to have the lifestyle you want.
And the only way to get credit is if you can have debt. And so it's this, it's this, uh, ping pong between debt and building credit and more debt and building credit. And when you do your life like that, you're just constantly caught in that, that limbo. you're never debt-free and you're never actually living on the money that you earn. and you're in this constant state of risk to play that game when you don't have to.
That's understandable.
I appreciate your sharing, that, you know, and I want to take it a step further, and George can help me with this, because I think, Gabrielle, what happens, it's truly, and I don't say this to be ugly to anybody. I truly think a lot of people don't know and don't have the education to understand. you can buy cars without a credit score and you can get apartments without a credit score and you can buy homes without a credit score. That's not taught in our culture. I mean, we're really the only ones talking about it over here at Ramsey.
solutions become controversial over time, just to pay cash for things.
Because when you pay cash for things, no, one's really making any additional money off of you. So a lot of companies don't like that. They don't like that. We say this. And I kind of want you to hear that.
Like, we're teaching you something that you can live and be self-sustainable and no one's constantly making money off you, right? They're not making money off you on interest and payments and late fees. That's, that's really what this argument is about. You don't have to play that game. So I hope you hear that with a clear, you know, what is it?
Clear minds, clear hearts.
Yes. Right. Clear eyes, clear, clear eyes, full hearts. Can't lose.
Thank you, James. Texas forever.
I'm curious. You said you wanted this to build credit. Why do you feel like you need to build credit?
Um, I guess, in case I ever needed to take like another loan out in the future. Cause right now, like I said, I do have three other lines of credit open.
Um, what are those lines of credit?
I have a mortgage, a car loan in some student loans.
Okay. And so your path is let's get more lines of credit to get more lines of credit, to get more debt, to get more lines of credit. That seems to be the path.
I guess that's what I thought I should be doing.
Well, I'm trying to, what I'm trying to do is unravel this, to show you the, the insanity that America has fallen into. And so when you really look at what credit scores are for, it's a, it's a magic number that was given to us by the credit gods to get us into more debt. And so when you decide I'm done with debt, I don't want a car loan anymore. I don't want the student loan anymore. You no longer have a need for credit.
And even when it comes to buying a house, I bought a house with no credit score. And we teach people, save up and pay for a car you can afford in cash. And then you don't need credit because they don't check your credit score when you pay cash.
Cause, let's just play this out down the line, Gabrielle. What happens if you, what happens if you do what you called in to do, what you just say, you know what? I don't want to use my own money anymore. I'm going to use credit, credit cards. What happens is each month you have a revolving balance.
And if you're lucky, you pay it off. If, if you're not, you, you keep some of it there. And so you end up now with a car note, a student loan, and then credit cards. And I'm, my question for you was, what does that get you? If you do that, what are you getting out of this deal?
Besides debt.
I guess the material item of whatever it was, I purchased,
which was probably not a wise purchase. And here's what I found. When you use someone else's money, you look at it differently. When you use your own money, you start to go, oh crap, that's money leaving my bank account right now.
Well, that's science, George. Like that's actual, there's actual psychological studies on what happens when you use credit card, that's plastic versus credit card, that's your debit card versus cold, hard cash. Your body becomes more and more removed from the process. The more and more it's removed from being actual money in your hand, even something like Apple pay, even though it's your money, their tagline.
is cashless, made effortless. They want to make spending so effortless. And here's what I found, Gabrielle. now, for 10 years living with a debit card. When it hurts less, it costs more.
You spend more, you're hoping you can make the payment. You're lucky to make the payment. I found when I use my debit card, I don't need hope or luck. I can just actually pay attention to my money. And when I run out, I can't spend any more.
And to me, that is a great way to build wealth and it adds really healthy guardrails. So that's why I'm recommending all of this to you. And I unpack all of this in the credit cards chapter of my new book, breaking free from broke. I'm telling you, you will want to take a shower after reading that chapter. I unpack the studies.
I go through, every objection that's in your mind. I'll show you how to live, live life outside of the credit card and credit score system. So hang on the line. Our team's going to pick up and we will gift you. breaking free from broke.
You can choose audio book, ebook, the hardcover copy. However you like to read. We want to make sure we get it into your ears or in your hands. Thank you so much for the call. Great question.
Love your heart around this. And I hope we've convinced you to stay away from these gross companies. Cause listen, Capital One's out here sponsoring the Taylor Swift tour. We can't afford tickets to the Taylor Swift tour. Who is winning here?
It's not us. It's the companies with the big buildings downtown. This is the Ramsey show.
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Welcome back to the Ramsey show. I'm George Campbell, joined by Jade Warshaw. We're going to have some fun here in this next segment. If you've listened to the show for a while, you know, we've done some stupid tax segments. And if you don't know what a stupid tax is, you've probably paid one.
This is a financial mistake with some zeros on the end. It's just one of those things. We, if you're over 12, you've paid a stupid tax at some point in your life. And so we, we don't do these segments to shame people. We do it to kind of have a laugh and go, we're not alone.
We can all grow from this. And it really, it's only stupid if you do it more than once. That's how you know. And so we've got some folks we've scheduled on the show to call in and share theirs. And I have a whole list of stupid tax stories that were submitted from our listeners.
So we're going to kick this off with Erin in Dallas, Texas. Erin, tell us about your stupid tax.
Okay. Well, I was working downtown Dallas and I decided I started making some real money. And so I decided I needed this designer Prada handbag and I'm not a flashy person. So I don't know why I decided I needed this handbag, but I bought it $3,800..
And yes, I, it was a beautiful purse.
It better be for 3,800 bucks.
But I learned quickly that I didn't enjoy carrying it. I was too paranoid to mess it up all the time. I was worried it would get stolen. I wouldn't take it to the restroom. And like, if I was out to eat and I had to go to the bathroom, I didn't like putting it on the floor, on the counter.
And one time it was raining outside at work and I spent about a half hour covering it in those plastic grocery bags so it wouldn't get wet. And I finally realized I didn't like it that so much. So I sold it a year later for $350..
A year later? Yes. That thing depreciated by 90%. Is that, were you just desperate, or is that the running, the going rate for a one-year-old Prada bag?
I, I, it was a buy-sell page, so I guess that was market speaking for you.
Yeah.
Designer bag.
Well, now I know where to get a designer bag for my wife. I'm going to go on one of those pages. Just a year old, honey. It's barely used. It's been covered in a Walmart sack for the last year.
Because Erin was scared.
Well, honestly, it's going for $500, the same bag, going for $500 on the same buy-sell page now, and I kind of like it. So I kind of thought about buying it again.
Oh, my goodness. Now you're like, I feel better buying it for 500..
Yes.
Oh, my goodness. So what purse do you have now? What's your go-to bag?
I don't even carry a purse. I just carry my wallet in my hand.
Wow.
I know, that's right.
Which wallet is it? Is it fancy?
No. You know, Brighton, like the mall store.
Oh, wow.
That is so funny. Do you know what that reminds me of, Erin? That episode of Friends where Monica wants those boots. so, so bad, and she finally gets them and they hurt her feet. Her feet are like bleeding and then she has to return them.
Oh, gosh. Were you, are you married, Erin?
Um, I was at the time. Yes.
What did your spouse think about this?
Um,
Was this a conversation or was this just like, I'm doing this?
Well, he was, he was in the military and he was deployed at the time. So I don't really remember asking.
Oh, would this go on a credit card?
No, I wrote a check for it.
That's good. At least. Good old check.
There's the silver lining.
At least it wasn't 3,800 with 22% APR.
Yes. Added payment.
Oh, my goodness. Well, are you doing well now?
I learned a valuable lesson. I, you know, sometimes it's just not worth it. when you have something, you're worried about messing up all the time.
Yes.
That's a very good point.
When you buy that really nice luxury car and then you're parking it a mile away in the parking lot, cause you're scared someone's going to ding your door. I'm like, was this really worth it for this level of emotional paranoia and stress?
Look, I feel that way with kids. Like sometimes I see people with brand new cars and they have like two and three and four year olds. I'm like, these kids are destroying the inside of this car.
Covered in sauce.
They kick the back of the seat.
Oh yeah. Now you got to get a kick protector. I found out just to protect that. Erin, you know, stuff has a cost. And my friends, the minimalists, they talk about this stuff a lot of like, it's not just a financial cost.
It's the emotional cost, the mental cost, your time cost. And so thank you for being brave and sharing that with us.
Yes. Well, it's good to talk to you guys. I listen every day.
Thank you. Well, hopefully we can steer you away from buying $4,000 bags that will haunt you. And again, let me make it clear. There's nothing wrong that people think we're anti $4,000 bags. If you make a million bucks a year and you're paying cash and that's something you value, you're not trying to disimpress people you don't like.
You think you got to make a million bucks a year to have a $4,000 bag?
No, because I know Jade probably has, you probably have sneakers that are more than my retirement account.
Okay, that could be true, but not bags.
Okay. I've seen, here's the thing. I don't know anything about sneakers. And then I'll see in the YouTube comments like, oh, Jade's got those Travis, Scott, friends and family. I'm like, I don't know what they're saying.
And then they're like, those are thousand dollar sneakers. And I'm like, Jade is walking on, on pavement in those, like, why I couldn't wear those out.
I will say in the live like no one else. So later you can live like no one else. My thing is sneakers. Like everybody, has their things. I don't care about like bags or jewelry.
Like some people like, like diamond jewelry. I like costume jewelry, but I love sneakers and I'll pay cash for them. Um, and yeah, not, no stupid tax on that.
That's fair.
Well, if I was in debt, it would be stupid tax. And I'd be like her, like trying to cover them up and like walk without creasing them, and that whole, although I do still try to walk without creasing them, but still.
Oh, that would stress me out.
Listen, when I, when you sit in a stool and it's like your feet want to like. I have to sit like with my feet straight, so they don't crease.
That's too much stress for me. But you know what? The guys are not, they're not, uh, guilt-free in this category. A lot of guys, you know, if it's not the truck, it's the sports, it's the hobbies, it's the golf.
It's well, what's your thing, George?
For me, it was, it was gear and technology. So, from a music world and from a technology world, I could justify every single camera purchase. I, one time, on a whim, I bought, like every GoPro accessory money could buy, along with the GoPro, the latest Hero 8 or whatever it was. I spent hundreds of dollars on this. I can count on zero fingers how many times I used my GoPro.
I thought I was going to be some kind of like action adventure hero, you know, going mountain biking with my GoPro. Yeah. I don't leave the house, Jade. I don't know what I was thinking.
I could be like that, with like kitchen equipment. Like you're like, Ooh, if I had a, the juicer that has the attachment that does this, I'll become one of those people that makes ginger shots.
That's what it is. I'm an aspirational shopper. I'm like, if I get the Vitamix, I'll start to enjoy smoothies. Yeah. I will like kale more.
Yeah. And if I buy the right equipment, if I bought a Canon 7D, cause I thought I'm going to be this big, you know, videographer, photographer, it has been collecting dust and I have too much shame to sell it. Cause I know for whatever I sell it for, it will be, it would be cents on the dollar for what I paid for it. And so I think there's a lot on the old shelf. Yeah.
And guys can do that all the time. So here are some of the attacks stories submitted from our listeners.
Okay.
Uh, crystal said I financed a Botox treatment with a six month, no interest deal, quote unquote, the Botox wore off before I made my first payment.
Oh.
Oh man. Her face unfroze, just in time for her to go, Oh crap.
That's right.
I gotta pay for this now.
That's nuts.
Amanda, in Australia, I use the equity in my home to up my 30 year mortgage to buy a brand new Jeep Wrangler worth $50,000, while making $40,000 a year. Ooh. That one takes your breath away a little bit. I kind of know about that.
Wait, let me share mine then. Okay. Because we had a paid-for Jeep Cherokee and we're like, yes, we finally paid it off. Most people would be excited and to have their money back in their pocket. We were like, paid off our car, let's go finance a $35,000 Hummer and pay $435 a month.
You were a Hummer family. We were a Hummer.
Wow.
Those were hot for a while. They were. Listen, they're coming out again.
Really? And mama wants one. Are they electric or something? Do they make coffee?
What's so special? They're not electric, but they're less gas guzzly.
That's comforting. I want to come back and do it the right way. Thank you for that. All right. Pamela said, I got scammed out of 300 bucks on Facebook by a friend, quote, unquote.
It wasn't actually my friend. Keep in mind, we are Baby Step 7, both finance majors, and yet we found a deal on a car too good to be true and immediately sent a deposit after a short conversation with said friend on Facebook messenger, oy. I've been scammed before and it hurt. The Nigerian Prince. Well, it wasn't a prince, but it is funny.
And here's what's funny is this went on TikTok and went viral. And everyone from Nigeria was like, I can't believe this guy is dogging Nigeria. And I was like, this is just where he had me send the shoes. So I was on Craigslist posting some Nike dunks I had, and I thought I'm going to be a dunks guy. Could not rock the dunks.
Sold them on Craigslist. This guy says, hey, these are a gift from my cousin in Nigeria. I went, what a kind gift. He said, I'm going to pay you right now for shipping. I'll pay beyond what it costs.
Red flag number four. True, that. And so I thought I got an email from PayPal with the confirmation of payment. And so I just went ahead and shipped them. Turns out that PayPal was not, in fact.
That was fake. It was not a real email from PayPal. The money never actually hit my PayPal account. And I was just an 18 year old knucklehead. And so, good news is, six months later, I got a box back to my house that said return to sender.
Oh. Address not found. So I was only out the cost to ship. So a small stupid tax. No weapon formed.
That's right. Hey, we got more stupid tax stories coming up. Don't go anywhere. This is The Ramsey Show.
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Welcome back to the Ramsey Show. I'm George Campbell, joined by Jade Warshaw. 888-825-5225 is the number to call if you want to jump in and talk about your life and your money. We've been having fun sharing some stupid tax stories. And if you don't know what that is, it's just financial mistakes you've made, with some zeros on the end.
And we call it a stupid tax around here, because it's kind of the price you pay to get an education the hard way. And we've all done it. If you're over 12, you probably have some stupid tax in your life. And so we've got some listeners submitted stories. And we've got Jenny on the line in Fayetteville, North Carolina, who is brave and willing to share her stupid tax story.
What's going on, Jenny?
Hey, there, guys. How are you?
We're doing well. Please share. I'm so excited about this.
So my stupid tax story starts at the beginning of COVID, March 2020.. I'm self-employed, as is my husband. And this was before Dave. So we borrowed money at every chance we got. Our business banker loved us, right?
And 10 days after everything started to happen, he sent us an email and said, hey, we want to offer you this great loan, $50,000, unsecured, low rate, no payment. We were like, yeah, that's awesome. Because we were really worried about the revenue stream over the next couple of months. We didn't really know what was going to happen. So we took out this loan that we didn't need.
But just because we didn't have.
sufficient savings, we thought we should do it. We thought it was a good idea. Like I said, this was before Dave. Well, fast forward a year, and we had taken financial peace by then, and we were deep in the heart of Baby Step 2.. And that's when we really realized, what did we do this for?
It's ridiculous. So that $50,000 debt went in our Baby Step 2.. We put it in the debt snowball. And I figure when it was all said and done, the interest had accrued over the year with no payments. The payments that we did have to make, it probably cost us about $3,000..
So what did you do with the 50?. Looking back now, out of it, we're Baby Step 7.. We don't owe anybody anything. And I can't.
believe I ever thought that was smart. Well, in a moment of panic and fear, you tend to make some pretty stupid decisions. Absolutely. And that's exactly what it was.
I took that loan out of pure fear. And I was using debt as my emergency fund, but I will.
never do that again. Lesson learned. So 50 grand shows up in your bank account.
What do you do with it? Yeah, they made me take the money. They didn't just give me a lot of credit to use it. They wanted me to take it so they could get interest ASAP.
Did you actually use it to cover the business or did it become sort of a lifestyle spending fund?
Well, honestly, George, I didn't even really ever need it. I'm more in real estate, and real estate was booming. That's right. My husband's in a different industry that really relies on large gatherings like festivals and weddings. And we were really worried about his situation, but he's smart.
He was able to pivot and figure it out, though. So we didn't even need it. That's the carry on top. We didn't need the money, but it cost us three grand to have it in our account.
Are you still friends with the business banker? Yeah, we're still friends. Maybe just limit that relationship. He's just not loaning you money anymore. Yeah.
Send him a Christmas card once a year, but maybe don't answer his emails when it comes to loans. Thank you for sharing that story, Jenny. That's a fun one. Hey, you know what that reminds.
me of, George? Kind of during the same time, COVID, remember with student loans? It was like, Biden's going to forgive your student loans. So get a refund on the payments that you made. during COVID.
It was like an advance. Yeah. People were getting those advance refunds on the payments that they made. People who had literally paid off their student loans got refunds on their payments and went back into debt, thinking Biden's going to forgive X amount and I'll get that money back.
If you had paid your balance to zero and you made 20,000 on payments, the student loan company would bring your balance back to 20K, as if you went back into 20,000 of debt. That's right. They went, good luck. The government will take care of you. Oh, that was a scary time.
A lot.
of bad decisions were made. A lot of people spent the money that they got back and then Biden never forgave the student loans and then they were on the hook again to pay off the 20,000 or the 7,000 or whatever it is again. That was a big old, stupid tax. I know a lot of y'all paid that. I feel bad.
for you. All right. I'm going to share a listener's story here from Vincent about his stupid tax. My wife had this quote, amazing idea of starting a hobby farm, so we moved from the city to a rural area. Over five grand later, I'm standing in the rain, getting kicked in the face, trying to milk a goat, and I'm chasing foxes trying to eat the chickens.
Oh man. No milk and very few eggs. and neither of us had the courage to do what had to be done for chicken meat, if you know what I mean. Oh boy. That was like the worst.
Wow. The worst children's story ever right there. Yeah, that's true. A lot of people are like, I'm going to be a homesteader. We're going to move and live off the fat of the land.
And then you realize how difficult it is. Yeah. To become from a city slicker to the farm boy, that's a big jump. To just up and start a farm. Remember.
when eggs were so expensive and people were trying to buy chickens? Oh yeah. Well, John.
famously had some chickens, and I think they started getting attacked by some coyotes, and so he ended the chicken coop situation. Yeah. And eggs aren't that expensive now. That's true. We've.
come back down to reality. Yeah. But what you said about Jenny is true and about so many of us, when we get in the state of fear, eggs are getting expensive. You go to, like these crazy extremes. Buy a chicken coop for $4,000..
Yeah. Take out a $50,000. well, and it's like your brain, just, it's definitely a temporary moment of insanity. Yes. Sometimes.
Well, we always say no one makes.
good decisions when they're panicked or drunk. That's right. And some people were both during the pandemic. Okay. Here's a fun one from Olivia.
Buckle in. My mom is paying stupid tax and has been for about 15 semesters of college. My brother's 26 is a full-time college student working towards a bachelor's. To be clear, he has no degree so far and has been attending college full-time since fall of 2015, after he graduated from high school in May of 2015.. He has been academically dismissed from an out-of-state college and is now attending an in-state university where my mom pays for all of his bills and recently bought him a new truck after he totaled my mom's 20-year-old Corvette.
Every semester, when it's time to pay tuition, she hands him her debit card and has never officially seen his grades. Oh boy. Every semester he has a new, quote, graduation expectation date. that's typically six months to a year out. And when that time comes, he has another excuse about why he's not graduating.
And my mother continues to fund this lifestyle and never hold him accountable, all while financially supporting him 110%. Don't be my mom, people. Set goals and expectations with your kids. Require some aspect of responsibility and accountability and don't blindly pay for things without seeing the bill for yourself. Ouch.
It sounds like mom is happy to pay the stupid tax bill for her little boy. Yikes. Well, what is it? What? Come on now.
Now, Dave has a fun rule. He said, I will pay for college, but the requirement is you finish in four years. If you don't, it's on you. Yeah. You're on the hook.
for the rest. I like that mentality because that encourages you to go, I better finish in four years, because homeboy has been going on many, many years and he's just having a good time out there partying on mom's dime and now driving a brand new truck. All thanks to mom being an enabler and having zero boundaries. That stupid tax remains to be seen, but it'll come out in the wash, trust and believe. That bill must be paid eventually.
And if that means mom can't retire, that's going to be on her. We've seen that story, Jade, where parents are like, I signed up for the parent plus loan because I thought I was being a good parent by taking on the loan for my kid. And, by the way, if you're taking on a parent plus loan, it's because the student loan company, who is scummy as all get out, doesn't even trust your little kid to pay back the money. So they go, we don't trust you. You need to co-sign her.
And the crazy thing is when.
parents who already have their own student loans that they're paying back, then turn around and take out parent plus loans, which have a higher interest rate, their loan plus their kid's loans on their back. And since they're older, they have less time to pay it all off before they retire.
It's just not good. And they go, well, I thought little Johnny was going to pay. And I just took it out in my name. He said he was going to pay. And all of a sudden, Johnny goes, this ain't legally my debt.
Yeah, that's on you, bro. It's on you, mom and dad. You signed up for this because we had a call the other day. This guy went 270 grand into student loan debt for a computer science degree and now is making 50 working cybersecurity. Yikes.
And I'm like, what made you think this was a good idea, that this was even going to ROI? It's a lot of poor decisions being made out there, and colleges are happy to take your money to raise the tuition because they know y'all are going to go out and take as many student.
loans as it takes. That's right. Yeah. In the moment, it always sounds like a good idea because it's getting you what you want in the moment. Whether it's, I want to feel like, I want this anxiety to go away.
I want to feel like I have money. I want to feel like I'm getting the degree. Whatever it is, we want it in the moment. And whatever solution presents us getting fastest, we kind of get fixated on that instead of opening up our mind and going, okay,
what else is possible here? A lot of stupid tax happening out there, but hey, learn from these stories. I don't want you to create a stupid tax story. If it hasn't happened to you yet, there is hope that you can avoid this. Learn from us.
Learn from us. So we're having fun here, sharing these stupid tax stories, and we've all done it. We're not here to judge. We just want to help everyone get better, including ourselves. That's right.
Avoid these financial mistakes. That puts this hour of the Ramsey Show in the books. Thank you to my co-host, Jade Warshaw, all the folks in the booth keeping the show afloat, and you, America, will be back before you know it.
Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, joined by Jade Warshaw. This is your show, America. Give us a call at 888-825-5225.. We'll help you take the right next step with your life and your money.
Paul and Chris, join us up first in Nashua, New Hampshire. What's going on, guys? How are you doing? We're doing well. How are you guys?
Doing? well. What's going on today?
Well, we are having an issue. We're trying to figure out how to increase our debt snowball. We earn $185,000 a year and are falling behind on our...
And is that due to debt payments, or you're just not paying attention to the money? What do you attribute that to?
Well, we have, not counting our mortgages, plural, we have $287,000 in debt.
Can you break that out for us? What type of debt is it?
Student loans. We have about $70,000 in student loan, most of it mine.
Okay.
We have $19,000 in a single car loan.
Okay.
We have $122,000 in two different HELOCs.
Okay. How do you... Can you split the HELOCs out for me?
Sure. One is on... We have $87,000 on a HELOC, on our property, on the house that we live in.
Okay.
And another $35,000 on a HELOC that my ex-wife lives in.
Okay.
And then we have another $38,000 in solar.
Okay.
And about almost $38,000 in credit cards.
Okay. So... And then you mentioned there's two properties. The other property is the property your ex lives in?
Yes.
And...
What's the arrangement there?
Yeah.
So the arrangement is she lives there with my kids and I pay the mortgage on it.
And is that the legal arrangement from the judge or what?
It's... It worked out to be just about the same amount as the child support alimony payment would be.
Okay. So this is in lieu of those?
Yeah.
Okay. So you're stuck making this mortgage payment. You can't go sell this property, for example.
Correct. I mean, I could go sell the property, but then...
Who gets the money if it sells?
We split it 50-50..
And is that part of the deal or you added that part in?
No, that's part of the deal.
Would that absolve you of having to make this mortgage payment and any financial tie? Or would you then still have to make alimony and child support?
I would still have to make alimony and child support.
Interesting.
And you have a new spouse now? Yes. And you're both working?
Yep. We both work full-time and I have a part-time job that I work 30 hours a weekend.
Okay. Great. So you're working hard, which is good news. But we have a giant mountain of debt in front of us. And do you know what all the payments add up to for all of those debts per month?
Yep. Without the mortgages, it's just $49.83..
$49.83?.
And that's before food, utility, shelter, transportation. That's just the minimum payments on all of these debts. That's correct. And then you still have the two mortgages. Right.
What do those add up to per month?
$28.16..
Okay. And what's your take-home pay between your wife and you?
$11.05..
Okay. The good news is those mortgages together, I mean, you could have a $2,000... You said the mortgages combined are $2,816, right? Yes. Okay.
So that's. the good news in all this equation is that the two mortgages combined are still less than 25% of your take-home pay, for the most part. Right. So that's good.
And you have $3,700 left. that hopefully covers insurance, food, utilities, all of that. Right. But is there anything left over? If you guys got on our tight budget, could you have an extra $1,000, $2,000 left over?
$3,000 left over?
Well, that's what we're trying to do, and that's why we're calling in.
Okay. Well, it starts with the budget. to me. That is your source of financial truth. And we'll gift you every dollar premium to help you and your wife put a plan on paper.
But right now, you're great at counting up all your debt, but we got to start figuring out how we can attack the smallest one with a vengeance, knock that out, knock the next one out using the debt snowball method. So have you laid this out in a budget yet, or is this new to you?
No, we have. We have. And we just don't... We just are struggling to try and find extra to throw at it. It seems like every time we start to...
You're breaking up on us.
I'm sorry. It seems like every time we start to get caught up and get ahead, life happens. We just had a $1,600 vet bill for one of the animals.
All those little things just keep happening.
Do you guys have any money in savings right now?
Nope. Just emptied it out for the animal yesterday.
So you had $1,600 to your name?
Yep.
Well, are you guys done with debt?
No, no, no. We have a retirement account.
Sure. We're not going to touch that, though.
Right. Should we stop investing in retirement?
Yes. How old are you two?
I'm 56, and my wife is 54..
At what point did you guys decide, we probably should stop going further into debt if we ever want to retire? What was your? I've had it moment?
Well, most of this debt was incurred, well, me. We started a business, and we just kept incurring debt to try and get the business to take off, and it just never did. So finally, about a year ago, that was it. We said, we're done, closed up the business, and now we're just trying to clean up the mess.
How old are the kids?
Youngest is 21.. The oldest is 24..
There's five of them.
Okay. What would you net if you sold the other property?
I would probably net about $150,000, $170,000..
That's after the split?
After the split, and after paying all the fees and all that.
Your best bet right now to get above this. Now, long-term, you still have to change your behavior. So I don't want it to feel like a shortcut, but that could knock your consumer debt down to $130,000 if you put all of the proceeds towards that. And of course, you would now have a monthly payment you're making in alimony and child support, right? But you also have freed up, you've knocked out over half the debt.
I think that's the move. If you can legally do this without, you're uprooting your family in a sense.
Right.
And they would have to find somewhere to live.
Right.
But the kids are all grown.
But yeah, the kids are about out of the house if they're not already, right?
One's, as far as my kids, not my current wife, Chris, my kids, one is out of the house. The other two are, one's living there, one's still in college, commuting.
Okay. Well, I think that's the move. And then, following that debt snowball method, using the EveryDollar Premium Budget that we're going to gift you, hang on the line and our team will make sure you get the link to get that app, and we'll hook you up with the premium version. But this is going to take some drastic measures. And I think part of that is taking the proceeds of the home sale and knocking out half your debt to free up enough payments to actually make some traction on this.
But you got to cut your life down to nothing for the next probably three years to clean this mess up and get back to investing. This is The Ramsey Show.
This is The Ramsey Show. Open phones at 888-825-5225.. If you need to get out of the house, join us. We got a brand new event called Total Money Makeover Weekend, happening on May 10th and 11th right here by the headquarters at our brand new Ramsey Event Center in Nashville, Tennessee. I know there's a lot of you out there.
You've been listening a while, but you've been sitting on the sidelines. You've been kind of Ramsey-ish. You're sort of dipping your toes in the water, or maybe you're in baby step seven and you need a little pep in your step because it's a long journey. It turns out after you pay off debt, life isn't over. You still got to live for decades, potentially.
So in just one weekend, you're going to get a crash course on everything we teach about money. We have brand new content from every single Ramsey personality, Dave Ramsey, Jade Warshaw, Ken Coleman, Dr. John Deloney, Rachel Cruz, myself, and we're going to light a fire under your butt to keep making progress on those money goals. And this is going to be interactive. There's live Q&As.
We've got Smart Money Happy Hour happening on Friday night. So this is a destination weekend event. So start budgeting for it and get your early bird tickets, which start at just $99 for a limited time. This is it. If you want the best deal, and if you're like me, I love a good deal, this is the time to get it.
The Ramsey Event Center holds about 2,400 people. So this event will sell out. So plan to join us. Get your tickets now at ramseysolutions.com slash events, ramseysolutions.com slash events. We'll see you guys in May.
All right, Jade, it is time for our question of the day brought to you by Neighborly, your hub for home services. Here at Ramsey, we believe in making home ownership a blessing and not a burden. So we recommend Neighborly's network of service pros to repair, maintain, and improve your home. Find the help you need at neighborly.com slash Ramsey today. Awesome.
Today's question comes from Ben in Oregon. He.
says, my wife and I own a house in our hometown where we have deep ties. Local real estate prices have gone through the roof, and our home is now worth more than we ever dreamed. I collect VA disability and work as a janitor, and my wife is a substitute teacher. We could move to another state and live much better than we do here. Emotionally speaking, it makes sense to stay here.
However, financially, it makes no sense at all. If you were in my position, what would you do? I have free reign over this. This is cool. Well, I have questions.
There's never enough information, because I kind of want to know what their dream is, right? They live in Oregon. We know there's many places in Oregon where real estate has gone crazy. I want to know. if they have kids.
I want to know. Do you know what I mean? I want to know more about it. What's the?
relationship like with their family and in-laws and parents? Is everyone nearby? Is it close-knit? I said deep ties, but we all have deep ties to our hometown, in a sense. It's emotional.
It's sentimental. We know it well. The fact they're even asking this question tells me their heart is kind of going... There's something stirring in there, saying,
I feel like we should just move. Well, let's give them some scenarios to play out. My thing is, let's say they live in a really small place, and they know they want to start a family, and there's no way to get the home that they want. for the family size that they are thinking about, then moving could be a good option. If you're in a house that's working for you, you just know that it's doubled or whatever tripled in value, and you just are kind of like antsy to get at that money, that might be a reason to kind of slow down and just say, hey, just enjoy the fact that your property has appreciated in the manner that it has.
I really just think that there's... Let me think philosophically for a moment, because I do think that it's great to be able to financially live the life you want, but you have to ask yourself at what cost, and are you doing this as a necessity or as something you just want? maybe? Because if they're debt free, if their house is a fine size for them, and they're just like, oh, but we have $600,000 in appreciation, they might just be wanting to get at that money. But if they're out of debt, kids are fine, space is fine, they might regret moving just to get a.
bigger house. Yeah, the grass always seems greener, and then you move and you go, gosh, I just miss my hometown and the family, and people end up moving back. And so what's good is that none of this is fatal or final. And so what I would do personally, if I was in your shoes, which is how Ben asked it, I would go travel and go to the places I'm thinking about living and explore the neighborhoods and see what's around there, and is this the place we want to live? and talk to a real estate agent and ask about schools and all the things you're wondering about before you make a move.
And so he said financially, it makes no sense to stay there, which tells me it may be an expensive area, and it's not a sustainable place to live. So the other thing is looking at their careers. Yeah, I don't know about his VA, disability income and the janitor and substitute teaching. They may want to find careers that they can really sink their teeth into and increase their income to where they can stay there and make it financially sustainable. Yeah.
That's our hot takes, Ben. You got some homework to do, my friend. But thanks for the.
question. That's an interesting one. Yeah. Guys, when you sign in these questions, be detailed.
It helps us. It does help us. That's why we like the phones, because we can dig in with the questions. The question of the day, while fun, harder to do that. So appreciate the question, Ben.
Best of luck, no matter what you do. Olivia's up next on the phone lines in Cincinnati. Olivia, welcome to the Ramsey Show. Hi, thanks. Thanks for taking my call.
Sure. What's going on today?
How can we help? So my husband and I are both 25 years old. We've been married for about a year and a half now. Pre-tax, we make about $130,000 a year. Awesome.
We have $13,000 in an emergency fund. We have another account with $32,000 in it for a down payment on a house. The only debt that we do have is that before we were married, my in-laws purchased a car for my husband, and they said, we'll pay the first $12,000 on it, and then we have to pay the remaining $9,000.. And that is going to come up this July. We'll have to pay that.
We have $5,500 of it set aside, and we will have the remaining $3,500 in July. So we will be able to pay that off as soon as July gets here. I guess my question is, we're renting right now in Cincinnati, and we're kind of in a crossroads, not sure what to do. October, our lease is up, and we're saying, okay, do we keep renting or do we buy a home? We are really young, only 25, but we do feel like kind of that itch to have something that's our own and not just keep renting from someone.
So I would be interested to hear what your take on our situation would be.
I mean, can you afford the house that you're looking at with $32,000 down? Because, at the end of the day, what you're looking at is to fulfill an equation. You want to make sure that you're on a 15-year fixed rate mortgage where the payment's no more than 25% of your take-home pay. So if you can meet that requirement, you know the area you've been renting in Cincinnati,
then you're seeing a lot of green lights. You've got your emergency fund here.
Yeah.
And you're saying this $5,500 is outside of the emergency fund or down payment account?
Yes. So I have all separate accounts for everything. And so, yeah, I have $5,500 set aside for it. And then by July, we'll have the remaining $3,500 that we need to pay the $9,000 off. Because my in-laws have been paying payments on the car, and my parents kind of drilled into my head my whole life, do not get a car unless you pay cash for it.
So when they told me we were going to have to have $9,000, I was like, okay, no, we will not. Because they said, you could just take over the payment. And I was like, we're not going to do that. I don't.
want a payment in my life. Absolutely. You're doing it the right way, getting rid of this car debt as soon as possible. And so I would go do the math. We've got a mortgage calculator on our website that you can use to start to crunch those numbers.
And so really, it's not about the timing issue. If you need to sign another six-month lease because you need $40,000 down, I'm totally okay with that. But do not jump into a house before you're ready to where you're like, well, we could do it, but it's on a 30-year and it's going to be 40% of our take-home pay, because you're going to be calling us back going, we're stressed. We somehow can't make this mortgage payment. This house has become a burden instead of a blessing.
And I don't want that for you.
Okay. That is really good advice. I love it. Well, thank you so much for the call.
Love that question. Young couple wanting to be homeowners, but wanting to do it the right way. I looked in the constitution. There's nothing that says you have to be a homeowner by 25 or that you have to own a home as soon as you're married. So for all the couples out there, whether you're 25 or 55, don't just buy a home because you've heard it's smart to own a home and that you've heard renting is a waste of money because you're not building equity, because you're going to be calling the show a few years from now saying, the home is too much, should we sell it?
We thought it was going to be fun, but it turns out. homeownership's really expensive and there's property taxes and insurance and maintenance and repairs, and the HVAC went out and the roof needs to be repaired. That's just too much stress. Life's too short to have that level of stress. So just rent.
It's buying you patience. Do it wisely and you'll be far better off in the long run. You'll have financial peace and it's always worth the price you pay for it. More of your calls coming up. 888-825-5225..
This is The Ramsey Show.
Welcome back to The Ramsey Show. I'm George Campbell, joined by Jade Warshaw. We've got a fun live stream happening next week, Jade. Do you know anything about this?
I do know about this live stream.
What do you know about this live stream?
Okay. So what's cool about it is it's George and I, we're chopping it up right after The Ramsey Show, whatever Ramsey Show airs that day, right after we're going to come on and we're going to pull up. Oh, that's right. It's in the morning. I forgot we changed it.
James, give us the details. 9 to 10 AM. central. Okay. Wonderful.
Well, there you have it.
James tells us all. I don't have the notes in front of me.
Okay. So let me run it back. Last time we did it, it was immediately after the show. This time we're going to do it in the morning, so that more of you can watch it. But the thing is, we pull up every dollar right on the screen.
Never been done before.
Never been done, except that one time we did it before.
That's right. It's going to be the second time in history it's ever been done.
But you guys call in and you give us your budgeting questions and we can actually show you and every dollar how to do it.
So Tuesday, the 27th of February, 9 to 10 AM central. That's 10 to 11 Eastern, if you're doing the math at home.
Give a specific time.
Join us on the Ramsey Show YouTube channel. And what's cool is you can go hit the little bell to be notified when we're live. Because a lot of people forget when it's like a YouTube live stream. So hit the button to get notified on the Ramsey Show YouTube channel. You'll see a little thumbnail there that our team has got prepped.
It's called something like how to build wealth with every dollar.
That's right.
So check that out. And we're going to have some fun walking you through not only your questions about budgeting, but getting to show you how to tactically live this out with the EveryDollar app. So, looking forward to that. Don't miss it. It's going to be a good time.
And it's completely free. So you get nothing to lose. Ooh, free?
If it's free, it's from me.
If you hate it, we'll give you your money back. How's that? Zero dollar refund. All right, let's get to the phones. Alina joins us in Charlotte.
What's going on, Alina?
Hi, George. Hi, Jade. I have a question about my budgeting slash credit score. And so I am currently about $74,000 in total debt. This is including credit cards, student loans, an eviction, a car loan, and I'm including car insurance and phone bill in there.
Are you behind on those?
I'm sorry.
These are the car loan and the other, or I'm sorry, the insurance, that's things that you're behind on?
That's things I'm including in my total debt, but I'm not behind on anything besides the credit card.
Okay, so let's not include it. if we're not behind. Let's just call that a fixed expense on our budget. Is that fair?
Yes. Okay.
Okay. So what's your question?
So, for budgeting purposes, my credit score has gone down. So I wanted to ask you guys, would it be smart to eliminate one of these credit cards to begin with, or start paying down, like through the snowball effect, just my smallest amount up to the biggest one?
Yeah, definitely. So. the purpose of paying off debt is so that we don't have to go into debt again. And when you don't go into debt again, that's also you simultaneously making this decision that I don't borrow money and I don't care about my credit score anymore. They go hand in hand, whether people realize it or not, because you don't pay off debt to go back into more debt.
The hope is I paid off this debt. I'm never doing that again. And when you make that decision, credit automatically kind of goes with it, because you cannot have a credit score if you're not borrowing money. And so the piece I want to give you about that is when you pay this debt off, you will have money to where you won't need that credit score. So, to answer your question, I would do it the way the debt snowball says, list them from smallest to largest by balance, by full balance, not by payment amount.
And if your credit card is not the smallest balance, then I would not pay it first. What is your smallest balance?
For my credit card, well, the smallest balance is like a payment plan. But that's the total balance, for that credit card is actually one of the biggest. And I have...
So just focus on balances instead of payments. If you ignore what the minimum payments are, what actually has the smallest loan balance out of all your debts?
Oh, one where the credit card company is going to pay off half the balance. If I pay one half in the next two weeks.
Is that a settlement?
Yeah, it's like they'll pay the difference to like cancel out. But basically the credit cards are zero.
Okay. What's the catch here?
Why is this credit card company... Has it just been delinquent forever?
Yeah. Are you way behind on this? to where they're just willing to settle? They said, hey, give us 50%. We'll call it good.
Yeah, I think so. Yes.
Okay, make sure you get that in writing and make sure that you don't give them access to your checking account.
Okay.
Did you already give them access to your checking account?
No, they just said it's like a credit card reduction where, you know, I pay the 50%, they'll cover the other...
Is this the actual company or is this the collection agency?
This is the actual credit card company.
Okay.
Get it in writing.
What's your income?
My income currently is about $1,400 a month.
What are you doing for work?
Currently, I'm a weekend receptionist at a senior care facility, but I have been looking for more, like full-time work, including the weekend work that I currently do.
Do you have kids?
I do. I have one son. He's three years old.
Okay.
What's the childcare situation?
Childcare, he's with me during the week and I will have help with childcare if I do get a job during the week.
Okay. You need to be working full-time starting tomorrow. And if that's retail, whatever, hospitality, whatever you have to do, you've got to be working at least 40 hours a week if you want to make headway on this debt. Because you're making... You're at the poverty line right now.
You're making $16,000 a year. And so trying to pay off 80, making 16, you're not going to have any margin to throw. You're going to continually go into debt because you have nothing, no margin in your income. And so we need to get the income up. That's the big factor here.
And then we'll figure out childcare from there. What's left on the car loan?
Car loan, I just got the car last year, so it's $15,000..
Ooh, gracious.
I think we need a downgrading car. What's it worth?
I actually don't know. It's a 2013 Volkswagen Passat, so it's a used car, too.
I doubt it's worth $15,000.. Yeah. I think you got screwed on that deal.
Tell us about this eviction.
Yeah, so basically, I chose to work. I switched jobs, so my income did change drastically. Like $5 an hour, but I was much happier at the other job that I chose over the other one. So it was just really just the decision of my overall well-being and stress level to work a job that was less paying, but I was more happy with the work.
Well, your current life feels real stressful financially. And so I'm OK being a little stressed when it comes to work, if it means we can clean up this debt.
So the eviction happened because you couldn't make rent anymore, because you lowered your income?
Yes.
Hey, is there a medical reason you're not working? Like, is there a medical reason, like, mentally speaking, that you're not working?
No, I just moved from a different state. So I moved back home with my family here in North Carolina, and I moved from Florida. So Florida does have high rents and everything. And as a single mom, not the brightest idea.
Now you've got your family around you, right? So you've got the support system?
Yes.
Are you living with them?
I am. OK.
I think you need a sense of urgency. I feel like you're kind of like lollygagging, and it's like, oh, this is not great, but here I am. And that job, I just didn't like it. And I mean, I'm going to talk tough to you a little bit, but I'm like, you've got a kid. Like, you got to go after it.
You got to go, get it. And right now I feel like you're kind of like leaning back a little bit. And I feel like I can talk tough to you now, because there's nothing. There's not a health issue. There's nothing standing in the way other than you just getting after it.
You moved back to Florida to be with your family. You cannot use this as an opportunity to get lackadaisical. You've got to get moving, and you've got to do it like yesterday.
Hang on the line. We're going to send you Financial Peace University. I want you to watch all nine lessons, Alina. I hope that puts some fire in your belly. to get outside of this and change your family tree and give that little kid a wonderful, debt-free life.
This is The Ramsey Show.
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I'm George Campbell, joined by Jade Warshaw. This is The Ramsey Show. If you're enjoying this show, be sure to check out all of the great shows on The Ramsey Network. Many of the personalities are out there doing their own thing, with Ken Coleman's show filming next door, and The Dr. John Deloney Show, which has just been blowing up, The Rachel Cruze Show, Smart Money, Happy Hour, and, of course, yours truly, with a YouTube channel.
So go check all of that out. We've got content hitting you every day to keep you inspired, keep you on the path, and keep you growing on your money, relationships, and work life. Christine joins us up next in Chattanooga, Tennessee. Christine, welcome to the show.
Thank you.
What's happening?
So I was just wondering if we should use our gift fund that we have to put towards debt. We're currently in babysit two, but all five of our kids' birthdays fall between November and January. So instead of giving ourselves permission to not put as much towards debt during those months, we put $100 in a fund each month throughout the year. But at the same time, I just don't know if we should be adding that extra hundred, what we're paying off, or, if we should, what we should do, yeah.
So you've got five kids. You're putting away $100 a month for gifts for when their birthdays come at the end of the year.
Yes. Does this include Christmas too?
Yes, it's Christmas Day. We're pretty much trying really hard to get the debt paid off, so we've been pretty light on Christmas and birthdays the last couple of years. So that's about as low as we've been able to get it.
So this covers everything.
So you're saying do we forgo all gifts this year and tell the kids, sorry, kids, mom and dad are paying off debt, you're not getting anything? Or what are you planning on? No.
What I would say is the other option would be to come November, December time, basically not put as much towards debt during those months. I'm just a little afraid to give ourselves permission to stop spending as much as we are right now towards it. So you can become a habit.
George, you can say what you're going to say. You have five kids. You're putting away $1,200 a month, or $1,200 a month. To cover five birthdays plus Christmas gifts.
for five kids.
I'm not going to stop. I think that's very reasonable.
It doesn't sound outrageous. Okay. Again, truly, it's not going to make that big of a dent. How much debt do you have?
So we have $42,000 right now.
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