Your Financial Situation Is Not Hopeless

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 am, Rachel Cruz, hosting today's show with Jade Warshaw, bestselling author. Good to have you, Jade. Glad you are here. Good to be here.

Toll-free.

Toll-free. 888-825-5225.. So give us a call. Again, we're talking about your life, your money, your relationships. We are here for you.

Thank you so much. First, I'd like to say thank you for all the education you guys have given me over the last few months. It's been very helpful in my journey.

I'm so glad. Thank you.

So here's my story. I got divorced about four years ago, separated, took about four years to get divorced. I was married for almost 25.. Oh, man. So I've been navigating my life for the last couple of years, trying to figure out what works for me.

Oh, wow.

So I have $1.6 million in the bank, and I'm looking to build a house, and my financial advisor is telling me I shouldn't pay cash for my house. And I am just like, it's stressful for me. I don't know what the right thing is to do, and that's why I'm calling.

Is he giving you a reason? What's his reason for that?

He says it just doesn't make sense to take 37% of my money to build a house, that it just doesn't make financial sense.

So, Debbie, what other debt do you have? Do you have any debt?

I have no debt.

Okay. What's your current home valued at?

I don't have a house right now. I live in an apartment.

Okay. Okay. And how much are you looking to, how much are you willing to spend on this build?

So the quote for the house is $630..

And you just want to plop down the cash, pay for it outright, and that be that? Yeah.

And do you have retirement? Do you have anything, any other savings?

Well, I have the $1.6 million.

Which would dwindle to $1 million, which would, you'd knock that down to $1 million, right? Right. Okay. And what's it, what are you living off of right now? Like what's your, are you still working?

So I, I, I get alimony, which is about $62,000 a year, tax free. And then I have, while I call them my side gigs for my jobs that I absolutely love, that I make about $25,000, which is, I'm a nanny and I truly love my job.

Yep.

But my alimony's lifetime.

Yes. Alimony's lifetime. Okay.

So, Debbie, your, well, I was going to say your financial advisor is naturally always going to yield in the sense of investing your money. Of course. Because that's, you know, how most of them make money. And again, we're not mad at that. There, you know, there is a time and a place to invest money, and that is a wise thing to do.

And you know, there's always, there's always that equation of peace. Who wants to enter into retirement with a mortgage payment?

Right. Right.

And that's just more that you'll be, that's more money you'll be pulling out of that investment anyway. I mean, it's going to get paid for regardless. So you may as well pay for it up front. Yeah.

And Debbie, the 630, that's, that's, that's everything, right? Land, build and all, correct?

I've already bought the land. Okay. The land is already purchased. Yeah. Yeah.

Yeah. If I woke up in your shoes, I would definitely do this.

Yeah. And you mentioned earlier, Debbie, and just to kind of give some clarity around it, you said you'd listened to the show and heard about interest rates and all of that. So one deterrent for people for paying off their house is they may have a low interest rate on their mortgage at two to 3%, right? Where in the market you could be making 10%. So a lot of people say, why would you, you know, why would you take money that could be making 10% and pay off something that you're only paying 2%, if that makes sense.

I just think it's, you know, money is so much more. Sometimes we're just looking at the numbers and the dollars and the cents. But in this case, it really humanizes, because it takes into account, like our psychology and our emotions and the way we feel, not just a math equation. And so, honestly, you're right. This is one of the one times where the math, it's not always about the math and how the math maths.

That's right. That's right. Yes. Yes. Yep.

I've got some good news and some bad news. The good news is that people have started buying life insurance to protect their families at levels not seen since the 1980s. The bad news is many of them are still buying crappy cash value type plans. I don't care what you call them, whole life, universal, variable, adjustable, flexible. They're nothing but a waste of your money.

Welcome back to the Ramsey Show. I am Rachel Cruz hosting today with Jade Warshaw and we are taking your calls at 888-825-5225.. Up next is Emily in Pensacola. Hey, Emily, welcome to the show.

Hi, thank you so much for taking my call. I appreciate it.

Absolutely. How can we help?

Okay, so my husband and I had gone through a financial piece, gosh, over a decade ago, but you know, life happened and five kids happened, and right now we're back on it. but finishing up baby step number two. We have no consumer debt, a little bit of student loans left that we expect to be paid off by the end of this year, and then we'll just be left with our mortgage. We are in a 30-year veteran loan, but we plan to pay it off early within hopefully 10 to 15 years. My question is, so right now we have, my question is kind of regarding my credit score.

So there is something to be said about when you're going through the process of paying off debt. There's kind of this spoken or, in some cases, unspoken thought that, okay, when we do this, we're not borrowing money again, therefore, we wouldn't need our credit score again, therefore, we can close our credit cards. And so in your case, you're kind of thinking about, well, we don't plan on borrowing money anymore, but we want to refinance. And I can just tell you, just from personal situation, we have a mortgage and we don't have any other credit cards and we don't have anything else. And before we had our mortgage, our credit score went to zero.

Yeah. And I, so ultimately, like we do want our credit score to be undeterminable. Like that is our ultimate goal. We don't plan on taking out any more debt. Like you had said, like we have two cars, they're old, they're paid for.

What's your interest right now?

Like 6.8..

Okay. So you guys just recently bought, in the last year or two. Okay.

Yeah.

If I were you, I'd cancel them sooner than later, so that your score has the ability to kind of do what it's going to do and then even out to where it's going to even out. And then, when the time comes, who knows, when these interest rates get lower, then you will have a clear indicator of what it will be, and it won't be in that fluctuation stage.

Yeah. And Emily, when you look at the calculations of how a credit score is, even mathematically determined, one of the pieces of the pie is new debt, and you guys aren't doing that. So in one sense, you got everything frozen, but you're not taking on new debt. So you're not playing the game, naturally anyway. So there is a chance, even because of that, mathematically speaking, you may even see a downtick, slowly because you're not playing that game.

100%.

All right, next, let's go to Kyle in Charlotte. Hey, Kyle, welcome to the show.

Hey, how are y'all?

We're doing well. How can we help?

So I got a little dilemma. I just started watching the Ramsey show probably two months ago, and I'm currently in baby step one. I did get the every dollar app and using that created a budget. So I have me and my fiance, we have a three month old baby girl. She has a 14 year old daughter that actually lives with us as well.

When do you get married?

We actually don't have a marriage date yet. That's what I was going to say as well. So our relationship is actually hanging on by a thread, because we don't see eye to eye on the financial state.

That's a big deal. It is a big deal for me.

Kyle, has that changed in the last two months since you've been watching us, or has it always been like that?

It's been like that more since my daughter was born.

So when you ask her her philosophy on money and you're asking her, hey, are you at a point in life where you're done borrowing? How do you feel about paying off debt? Is she able to give an answer that has any promise?

So she will say she don't want to borrow any more money. But it's just like now, you know, she's made some financial decisions that I didn't agree with. And, you know, I don't, I don't have, I didn't have the control over that. at that point. She can go do what she wants.

The hard part is, you guys are in a, the situation is made more complex because you're not yet married, but you're kind of in this situation where your life seems like you're married. So you, you feel like, listen, I have to step in and pay off this debt. Her debt's my debt. Her debt's my debt. And so the whole thing is very confused.

Yeah. And Kyle and I would have the conversation with her from a vulnerable, you know, not just, well, what are you, you, you pointing? Tell her you, like what's going on in Kyle? What is the fear that you have? What is going on?

She says, my husband graduated college about 10 years ago and has not paid off a dime of his $80,000 in student loans. Anytime I approach him about it, he just blows me off. I'm a stay at home mom with our third baby on the way and I'm afraid the government is going to garnish his wages. What should I do? Oh, well, I mean, yeah, you're getting up to it.

Yeah.

100%. Like if you don't pay your student loans that first day that you're past due, that's considered delinquent. Yep. And then if you're delinquent for 90 days, you're considered default. And then at that point, like a lot can happen.

Yeah. Yeah. And if he's a husband that blows, blows me off, that's a problem. It's probably not just in this scenario either. Right.

That's usually not the case.

Usually there's a pattern in who you are as a person. that's pretty consistent through all the situations in life. And so my fear, Taylor, is that there's probably more of a marriage issue here than the fact that he's just not paying his student loans, which is an issue too. So yeah, I think there's, there's a lot of work to be done, I think, on the marriage side of this, because a husband that just blows off what a wife says or a wife that just blows off what a husband says, there's obviously not a level of respect and empathy and humility there. And those are some ingredients that you need to have a lifelong, healthy relationship.

That's a case for counseling. And if I'm in your shoes in the effort to keep my family safe financially, I'm just going to reach in and pay the bill. I'm going to reach in and I'm going to say, what's the log in? And I'm going to pay the bill. And if that causes a problem, again, to Rachel's point.

Well, the fact that he's functioning, like he doesn't even owe the money and isn't even paying on it. That's crazy. Yeah. It's pretty wild. Yep.

It's the same thing. Like if the mortgage wasn't being paid and you knew the money was there, pay the mortgage. Like, don't wait for somebody to do something that you can do to keep the family safe financially and then deal with everything else in counseling. That's Jada's take.

I love it. All right. Up. next, we have Emily in El Paso. Hey, Emily.

Hello. How are you? Hi.

We're doing well. How can we help?

I want some advice on how I can start tackling my student loan. I'm still in school and I have about two years left, and I want to try to get ahead of it, even though I don't have much income, so that I'm not really drowning in it when I get out.

How old are you? Are you a traditional student or?

I'm 25.. I'm in my, I'm about to start my third year of medical school.

Okay. And what, how much income are you bringing in?

My income is really just allowance that I get from my parents. It's $400 a month and I realized I don't need to be spending that much on food every month.

So what's your plan? Do you want to go ahead and take half of it and start paying student loan payments?

Yeah. I thought I could probably manage to do two or $300 of it per month and put that towards my loans.

So this is medical school, Emily. So how much, how much do you owe now being two years in?

I currently owe a little over $23,000..

Okay. That's not, that's not bad.

Wow. Okay. Good.

How are you doing that? Is it the school you chose or do you have scholarships? Do you have, do you have situation that you're getting help?

It's a combination. I am doing school in state to where I live. So the tuition's already a little lower and my school has, my school pays for about half on scholarship. So in general, I usually only need to take like 10 or 12 grand out per year. So I'm, I think, on the conservative end, I'll probably need to do the same for the next two years and probably double what I've taken out now.

Honestly, if I were in your shoes, I would flip it because these student loans aren't due yet. I would focus on piling up cash for the coming semesters so that you're not continuing to take out more debt. And, if possible, I don't, listen, I know medical students, it's crazy. If there's any way to pick up any extra work that you can on your off days, on the weekends, whatever it is, I would do that and I would see, okay, like, can I stack up a thousand dollars a month? Is there any way where I can find that and make that happen?

Per year.

Okay. Then yeah, I love that goal. Try to get a thousand bucks a month and then you're not taking on any more debt and when you graduate, you can tackle this 23,000.. My guess is they're subsidized, so they're not going to gain interest while you're in school.

Emily.

They're unsubsidized.

Well, that sucks, but I still would not change the course of action.

What do you think you'll be?

I shouldn't worry about them, right?

No, I'd worry about not accumulating more debt.

When you graduate, Emily, what type of work are you going into? Do you know how much, on average, people are making in that field?

So I want to go into surgery, but in general, a first year resident, regardless of specialty, I think that the general average in Texas is around 50,000 a year.

Okay. Then what's your earnings? beyond that? What do you see your potential being in year one, two, three, four, five?

It goes up a little bit per year, but it depends. I might be able to find better numbers. I'm not really sure. No, you're fine.

I was just trying to get a gauge, because the goal would be, like Jade said, if you can do something where you work weekends, even some nights throughout the week, and bring in a thousand bucks a month, that would be huge to cashflow the next two years, which means you'd have $23,000 left to pay. At that rate with what you're making, it could take two years at that point, but if you work extra above your normal salary, you can get it paid off even faster, right? So I think it's this idea of looking at the math, looking at the numbers, and making a plan, knowing when you graduate, you're probably still going to be living like a college student while you get these paid off.

Yeah. I don't mind that.

Yes. No, that's great. Well, I appreciate you even thinking about it too in mid-school, because for a lot of people it's once they graduate and the bills start coming that they're finally like, oh my gosh, how do I do this? How do I navigate this?

She's probably seeing that balance grow because the interest is accumulating and she's probably like, oh, crap.

Yes. Yes. So yeah, what Jade said, though I think is wise, is to be able to do as much as you can to cash flow that next semester. But man, this is a great story, though, for all of you that want to go to medical school, because usually, when we get these calls, law school, medical school, on the show, it's six figures in debt. And so, listening to somebody that stayed in state, picked a school, possibly because she got so much scholarship on that side that half is getting paid for, which is just incredible.

It's possible. Where there is a will, there's a way, clearly.

Yes. Where there is a will, there is a way. And those student loans, Jade, for you and Sam, that was a big chunk of your debt. So I'm like, it's the one that just, I feel like people, it gets dragged.

And I think people think that they can just forget about it. and, oh, I'll just put it on the shelf and it won't bother me. I'm like, yes, it will bother you and it will continue to accumulate. And even if your wallet's not feeling it, because I know a lot of people are on zero payments because of the administration, your body feels it. Make no mistake, as John Delaney would say, your body keeps the score and your body knows when you're not safe and debt puts you in an unsafe position.

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Welcome back to the Ramsey Show. Let's go to Anne in Pittsburgh. Hi, Anne. Welcome to the show.

Hi. How are you today?

Hi. We are doing well. How can we help?

Well, I hope you can help. That's my question. Is there any hope for our situation? We have been married 19 years. We're in our 50s.

Are you thinking about walking away from this?

At this point, I really can't. right now. I can't right now. My business is here on the property. And if I would leave, the other thing is I would be taking my autistic child away from the only home.

And your husband's not... Is he... I'm guessing, based on what you said.

I think he knows that he's in the toilet. I think he realizes... I mean, he's paying the minimum on the credit cards, that's it.

Where's the revenue of your business going in? What account is that going into?

It's going in with everything else. I mean, I don't make much. Last year, he... I had it written down here last year.

Hey, do you suspect that there could be IRS debt as well? Because when you tell me that all the business bills and all the personal bills and everything's together, that sounds like a mess.

I don't. I think he's pretty OCD about keeping track of stuff. Last year's gross income was 233, but then, by the time we got to the bottom of the income, the income is 26,000.. Once he takes off depreciation, vehicles, all that kind of stuff.

What type of business does he have?

He's an electrical contractor.

So he's making 26,000 a year. He's paying himself 26,000..

Technically, yeah. And it's just him. He doesn't have employees.

And what about you?

Just myself.

And what do you bring in? What's your payment from your business?

I'm lucky if I bring 10,000 or less.

So you guys combined are living off of 36,000 and you've got the 21,000 in car debt. And how much in credit cards, 206?.

209..

209.. Okay. And is there anything else that you think might be out there, not including the mortgage?

No. And of that, 209, 40K is just for his business. But of course, I'm pretty sure I'm liable for that as well.

But everything else. Right, of course. And so is he using these credit cards to keep you guys afloat just month to month? Yes. Yep.

I mean, there's increased alcohol.

Yeah, I do too.

Yep. So I think, Ann, it just sounds like my first protection is for you. And the fact that you don't have any access to anything, Ann, I mean, there could be a whole other life. he's living, right? I mean, on different levels, on different scales, financially not, I'm like, you have no clue what's really going on, because the money is kind of the paper trail, to a degree, on life and being able to see that.

Right.

How'd you find out about the 209?. Just curious. Did he tell you or you discovered it?

Oh, he did not tell me. I discovered it. I started going through his files and I made, like, the biggest Excel spreadsheet you'd ever want to see in your life. And I just, you know, tried talking to him, and, you know, we were okay there for a while. Oh, I'm paying it down, I'm paying it down.

Yeah. For me, this falls into what I would call a level of financial abuse and infidelity, because he's keeping everything on his side. He's making moves without sharing them with you. And they're at the detriment to you and your family and your son. And I would push back on the fact that there's nowhere for you to go.

Right.

Right. So whether that's, I'm going to offer counseling and I'm going to give him 60 days to agree to it, or I'm going to ask him for these account passwords and I'm going to ask him for, you know, transparency and I'm going to give him 45 days to wrestle with that. and get to that point. You've just got to make it very clear, write it down on paper. If you have a friend, get a friend.

Yes. Okay. Yeah. A few friends, close friends and family members.

And what are they suggesting? What are they saying, since they know the situation even more?

And they know him and they know he's not, he's not right. He's, you know, I married a 37 year old man who was set in his ways and unfortunately he is a collector. And that's where the money has gone. He collects things and to the point I said, can we sell some stuff?

So is he hoarding too? Like, are you in that sort of a situation?

No. Okay. No, it's just enormous collections of things that are really our only hope. These assets that could help us get out from under this, but he's not willing to touch them. I'm not selling any of my stuff, he says.

So you're just seeing a deterioration. So, Ann, I would bring in a third party in that and again, and it's so hard to say this on this side of the desk, because now, Ann, we, you know, we have to go, but you're going to be living this life. But not only is it a secret, but you're also behind. You're trying to live on $34,000 a year as well. So there's, there's two ends of this that are really urgent.

Hi, Rachel, how are you?

Doing well. How can we help?

Well, a quick question. So recently, I'll get to try to give you a little background or context here. Recently, my brother, who is 57 years old, and a friend of mine, who is 42, I believe, they recently came to me and asked me for some advice of how they could get out of debt. Based on their circumstances and situation, I felt the best advice to give them, even though I've given them Dave's book, even though I try to have them listen to the show, that, based on their situations, bankruptcy, I think, is the best option. So my question to you, when is taking baby steps or filing for bankruptcy is the better option than taking baby steps?

Well, I mean, I'd want to know more about their situation, but I'm almost,

Well, first of all, Rachel, they have no assets, the only assets that my brother has, he has a, uh, he is turning, uh, 58, uh, he will be able to retire from the police department in a year. Okay. He has a pension. He has, uh, he has $210,000 worth of debt.

Okay. Then the answer for me is automatically no.

Automatically no.

That, that I would not file bankruptcy, because I think that $210,000 of debt is something, an amount of debt that can be paid off, especially when you are able to make an income. If you told me that there was something, a disability, something that was keeping him from being able to work, you're talking to, listen, you're talking to someone on the line who paid off $460,000 of debt with my spouse. So it's going to be hard to convince me, um, otherwise, but keep going. Keep going. Yeah.

But, so, but, uh, so some of the debt, uh, uh, I would say, well, there's student loans, which I think you, uh, if I'm not mistaken, they did not, that does not, uh, not bankruptable.

That's right.

Uh, but a lot, some of the debt, even, uh, some of the debt is to me, is personal loans that they owe to people. Uh, we're talking about when you add it all up, is probably, they probably owe a hundred thousand dollars worth of debt that they just owed to people that they cannot pay back. I was in a situation like that myself at one point where I loaned, uh, people money, trying to help them out because they got behind on their mortgage and this, and that. I went to each of them and just said, look, just give me as much as you can. And the way, the only way, the best way for me to put it, is, is I probably left 50 grand out on the street.

Does he owe you money, James? Pardon? Does he owe you money? Are you one of those hundred thousand?

Oh, yes. I am one of those. My mom is one of those.

How much does he owe you?

And is it in a formal state? Because if you file bankruptcy, is it formally money that has been lent out? Like it's like, it's not through a bank. It's just people giving their own personal money. So even bankruptcy and that.

So it's personal for the case with my brother. It's personal money. It's a car debt. It's a title loan debt.

So you were loaning him money to pay his car note and his title loans?

No, no, no, no, no, no, no. I will not loan him money. I will not loan him money.

Hey, help me understand. I have loaned him money in the past. Help me understand this, because I understand it's not your situation. You're calling on behalf of a brother and a friend. You told me he was a police officer, law enforcement.

Living beyond his means. like everyone, Rachel. Yeah. Living beyond his means. Credit card debt.

And here's the thing.

Bankruptcy doesn't change that.

Probably got $50,000 worth of credit card debt.

Did you hear what Rachel said? And it's a good point.

Yes, I did.

Yes. And bankruptcy is not going to change that. And here's the thing. If he was ready to change his behavior, he'd be calling us, not you. And, like you said, you gave him the total money.

Yeah. Yeah. Okay. I was wondering if that was an option. When is that option?

It's a...

Because when I say bankruptcy, Rachel, I'm not just talking, I'm talking life bankruptcy. That's going to every person that you owe and just say, look, I can't pay you. I can't go. I'm talking about literal bankruptcy, but also life bankruptcy. For all the personal loans that he owes to people.

Yeah, he can do that.

He can go to someone and just say, look, I can't pay you. Yes. I have to reorganize. I got to get out of this debt first, which is not fair to me, his mom or a friend.

No, it's not. Right. I agree.

I agree. He's never going to pay them back.

That's right. And I think he can have that conversation, because this is the reality of what it is. They're not going to get their money. Mm-mm. So the reality is...

No, they're not going to get their money.

That's right. That's right. So he can, in good conscience...

I realized that at one point where I... With all the people that I tried to help, I'm not going to get my money. So I went to them, like, for example, there was someone who owed me $8,000 because they were behind on their mortgage, and I helped them out. I asked them for 10%. I said, could you give me 800??

James.

Hey, we've been... Oh, no, no. This was... Wait, wait, wait, wait, wait.

We've been talking about the brother and the friend. Now I'm going to talk about you. You need to stop. You're not a loan shark and you're not a bank. You need to stop lending people money, especially family members.

Which I did 15 years ago.

Okay, good.

Which I did 15 years ago. I made that decision. I said, I will never loan anyone money again.

I think that's a great lesson.

And I've stuck with that and I've stayed on my financial plan and my investment plan. It's my brother. My mother. It's everyone.

You got to pray for him. You got to pray for him, James. Yeah.

And it is tough. And I totally hear the care in that. But also, James, there is a healthy boundary for you to draw. This is not your life. And you sound way more concerned than maybe your brother even is.

Big deal. That's a big deal.

All right. Next is Jenny in Oklahoma City. Hey, Jenny. Welcome to the show.

Hey, thanks for taking my call.

Absolutely. How can we help?

So a little bit of backstory. My husband and I have three kids and one on the way.

Congratulations.

Thank you. I just started listening to you guys, probably about consistently, for like a month or so now. So I'm really fresh and I got super excited, but I realized after listening that it was probably the worst time to get excited, because I know you guys have something called stork mode.

Yes.

So I'm just curious. I'm due in April and I have a student. We have a student loan for $4,900 and then a credit card. that's about at $4,500.. And then we have our car loan.

How much do you guys owe on the car?

$26,000..

$26,000..

What's it worth if you were to sell it?

About $22,000.. So there's that little gap there too.

Yeah. Okay. And how much do you guys make a year?

Well, I'm just currently on leave. So what we usually make would be about $98,000..

Okay. And then you have another vehicle that's paid for?

Yes.

And what kind of vehicle is it?

It's a Honda. It's a four-door Honda Accord.

So if you were to sell this $26,000 one and put $4,000 with it from your savings, this is assuming after the baby, by the way, and then let's say you took the other $4,000, maybe put another $1,000 with it and bought a $5,000 car, I'm assuming the main car would be the other car you have.

Right. Because once we have the baby, we won't all be able to fit in the little car.

Okay. Are you able to fit in the car you have now that you owe on?

Yes.

I see.

Okay. So yeah. I mean, April's coming up fast, so you're good. So the first thing I would do is the IRS, what you owe in taxes, for sure. That's my A1..

I might keep it. Yeah, I think I will too. If you think you can pay it off in two years or less, which you can, I think I'd keep it, because the size of your family and the option, if your family were different, it might, if things were different, it might make sense for you to sell it. But, honestly, in this case, with the amount of money that you guys earn and with the size of your family, you need a vehicle that will fit your entire family.

Yes, yes, yes. Yeah. And it's not an outrageous percentage to your income either, right? If you owed $26,000 and you made $36,000, then, yeah, we got to get rid of this car. But you guys make $98,000, which is great.

What's the car payment?

It's $450..

$450.. Okay. I've heard worse. Like it's not great, but it's not like $768, right?

Or $1,100..

Yeah, exactly. So yeah, I would do it exactly like Rachel said. When you have this fourth baby, what's the plan? Are you going back to work or you stay at home, mom, from here on out? And how will that affect the income?

Well, I currently have the option of hourly pay. So, like I've got a job that I can go back to or I can do real estate. Real estate hasn't been exactly the best right now, as you guys probably know.

Starting from scratch real estate, or you were doing real estate before?

No, I've had it on the hook for about seven years off and on, just kind of. I'm pretty established, but kind of going back into rebuilding because I did take some time to just work hourly. I've been working more consistently, so it would be a little bit of a rebuild, but nothing too complicated, I think.

So you think you'd still hang out around $98,000?.

Yeah, for sure. No matter what, that would be where we would be to make ends meet. And then, if real estate took over, we'd revisit it at that point. But we would definitely want to stay around the $98,000 just to suffice.

Yep. That's great, Jenny. Well, you guys are in a great position. I mean, I think after baby comes, knocking out the IRS, the other two debts, and then tackle the car, which you guys can do. So.

Thank you.

Absolutely. How can we help?

Well, I want your advice on whether or not I should finance a house for my son.

All right. Tell us the situation.

Well, yeah, he has always followed Dave's advice, so he has never in his life borrowed money or had a credit card. So when he went to the bank to get a mortgage, he had no credit history and no one would loan him the money. He doesn't. It's not like he has to buy a house, but he would really like to. We would like him to own his own home.

He's 36..

Yeah. We were originally going to go partners on the house where he has saved up a significant and sizable down payment. But with the cost of, you know how the house cost of housing just shot up in the last year. And so we said we would go partners originally.

Is he married?

No, he's single.

He's single. Okay.

So he's been living with you?

No. Oh, no. He hasn't lived with us since he was 21..

So he's just been renting?

He's been renting with me.

He should be able to do manual underwriting. So you can show rental history with payments and you can prove employment for two years. Did he try manual underwriting?

I'm sure he's never heard of that.

That's what you got to do.

So if you don't have a credit score, you have to do a process called manual underwriting, where the bank or the mortgage company actually looks at you, the person. And again, you have to be current on all of your bills for two years. Show renter's history that you pay on time and employment for almost two years. So there's a little bit of work in it, but they can actually underwrite you the mortgage. And again, Louise, I think it's a kind mother's heart in it, but I would let your 36-year-old son do it on his own.

And every mortgage company doesn't do that. You have to do your due diligence. Yes.

Go shop options. This is The Ramsey Show.

Hey, Rachel. Hi, Jade. Thank you so much for having me.

Absolutely. How can we help?

Well, I am in, well, JM doesn't begin to explain it, I guess. I'm a bivocational pastor. I work 60 hours a week for my secular job and about 30 hours a week in the ministry. I'm married. I have two wonderful boys.

Oh, Jared, I'm so sorry. So tough. I know it's really stressful, and especially when you feel like you're trying to do the right thing and it's not getting traction, then that is difficult. But, yep, hopefully we can help here. Okay, so what do you do for your vocational job that you said?

So I'm an on-call supervisor. And what I do is I take care of people with developmental disabilities.

Okay, so $1,900 every two weeks.

Correct.

So how much do you make as a pastor? What does that bring in?

My salary is $1,500 a month. And then I have housing allowance and stuff like that, too. I don't know if that figures into this or not, though.

Yeah, it does.

So what's your housing allowance? Because is that going towards your mortgage?

It is, yes, and it's $1,900..

Okay, good.

So is your housing allowance covering your mortgage, then, if your mortgage is $1,700?.

Yes, it does cover that, and it usually covers most of the electric bill as well.

Okay, okay.

Yep, that's big. Okay, and then how much do you owe on the cars?

For mine, I owe just under $25,000, like 24-7.. Okay. And then for the other one, I owe $8,900..

Okay.

And how much in credit card debt?

$12,500 for the one, and then the other one is a total of $13,000..

Okay.

And does your wife work outside the home at all?

She does. She works from home, yes.

Okay. What does she earn each month, bring home?

It depends on the hours she's able to get, but I'd say she's about $800 a month or so, somewhere in there.

What does she do?

She does medical billing.

Okay.

Okay, so I've got you $8,000 a month between the two of you, obviously. $1,700 of that is going to the mortgage.

Yeah, the housing allowance.

Okay, so help me, when I look at this, I'm like, okay, mortgage is covered, there's some debt here.

It's like $6,500 left after mortgage. So where's it going?

Yeah. Are you guys on a budget?

Yes, we are on a budget. Where we're at now, too, so the credit card debt that I gave you, one of them was the $12,500.. The other two are through, I'm doing a debt consolidation because they were maxed out and I couldn't afford the minimum payments. So I moved that into one payment. And then also, hang on, I'm trying to, I'm nervous, I'm nervous.

We have time, we have time, you're good.

And then, in addition to that, I pay for my son, he goes to a private Christian school.

Okay, that might be an area. How old are the boys?

My oldest is seven, my youngest is four.

So, seven and four, how much is tuition for the private school?

It is $3,700,, I want to say, for the year.

Okay.

Yeah, I'm curious, Jared, where the $6,500 is going, though. Because how much is, how much are payments for your car? How much are they for your car?

My car is $480 a month. Okay. And then I pay for my wife's car as well, and that is... Which is how much? $240..

Okay, so I've still got you at $5,280.. Keep going.

Okay.

Well, let's pretend, let's just pretend. What would the minimum payment, what was it?

$200..

Okay, minus $200.. So now we're at $5,080.. Keep going. I'm just helping you work through this. It's not to try to call you out.

No, not at all. I appreciate it. Let me think.

Okay.

Okay.

So $800?.

Yeah.

Okay. $3,900..

What's been on these credit cards, Jared? What are you putting on that for $13,000 and $12,000??

Well, a lot of that was just trying to make the ends meet, not having enough to make the bills. I just recently, my income is higher the last couple months because I started asking for more hours at work.

Okay, that's good. So that's new.

So it was below that.

Okay. Okay. Okay. So, Jared, I mean, just looking at these numbers, there's not like a, oh, I forgot the $3,000 bill here, whatever that is. Right?

Well, I wouldn't disagree.

Jared, and I'm going to say this because you mentioned this, and as believers in this room, I think we're spiritually somewhat consistent. Scripture has nothing good to say about debt. Nothing. Every time debt is mentioned, it is in a negative fashion. Now, it's not a sin.

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Hi, Jade. Hi, Rachel. I absolutely adore you guys. And I'm very thankful that I could ask you guys my question.

Oh, I'm so glad you called. How can we help?

So, me and my husband, we purchased our house. It's 1,100 square feet. We purchased it five years ago. We figured, okay, in five years we'll be able to buy our next home, you know. But then it turns out that market, everything, our house that was our dream is now what our current house is worth.

Best laid plans, I tell ya.

Yeah. So, I'm self-employed. My husband works for a company. I pay currently $550 in rent every month for the space I have. We currently owe $136,075 on our house.

Oh, gosh. That makes no sense.

And what happens if they disapprove it after it's built?

I can't use it for work, but I can. It can be a part of our house. And so, that's the thing. What they say is, it's kind of risky, but basically what happens is they'll have a town council. They'll open it up to the public, and if one person says, Hey, we're not comfortable with her having a business out of her house, it could be like JK.

So, is this just in an effort? Like, you just don't want to pay rent for office space anymore? That's the whole point?

No, it's not that. It's every single place I've rented at, I feel like I just keep getting issues of either last minute changes on management. So, I left my last place because I knew the girl was about to sell, and I was like, Let me find another place soon. I found a place. The guy was great.

What would cause your city limits not to approve? I mean, we haven't talked money yet, but what would cause them not to approve it?

It would just be the matter of, of course, they would send out letters saying, Hey, here's the town council. I would be a little snippet, but I'm just like praying that that little snippet, no one would pay attention to. But if anyone says, Hey, I'm not comfortable. But once that town meeting's closed, it's approved if no one said anything.

And do you live in a neighborhood where there's, like, a lot of people that could get upset because of parking? Help me understand it a little bit better. Because if I had a business out of my house, I live in a cul-de-sac, and I was running eight or 10 people throughout the day.

People would be annoyed.

Yeah, if I'm having people park on the street and they're having to go around, there could be a nuisance there. Are you in that sort of situation? Or are you out in the field?

I am in a neighborhood. I am blessed with the fact that we live on almost an acre. So, I could expand our driveway to create parking. So, no one would have to be on the street.

It feels so risky, Lauren. It feels so risky. No, I don't think I would put that much. I know. Because it's going to be a lot of money to do this addition.

I'm an esthetician.

Okay. Yeah. I mean, I think a little bit of me is like, this is the tax to do business. Like, you have to have space. And if you're in a situation that you would build something out, and then they can come back and say, you can't use it.

Have you priced it out?

When we priced it out about two years ago, the lumber and everything was up. They quoted us around $120..

Okay.

And so, I don't know if it's going to be $120 or $150.. Who knows, now? It went down a little bit. But we have to go through that whole process again. We basically, once we got a quote, we were like, okay, this is scary.

I don't think that I would. I think that we're solving the, I think that we're using the wrong tool to solve the problem. I don't think going up to a $300,000 mortgage is the solution to a $550 rent. I agree with Rachel. I think it's just part of doing business.

That is what I was going to ask you. If you would recommend me purchasing.

I don't recommend you doing anything on debt. Let me make that super duper clear. Whether it's this addition or you've got your eye on a commercial space, you know, that's, you know, whatever that is. But based on what you're saying, I would not do this addition. OK.

You could put $120,000 in, which, again. No. Yeah. Which is exactly the amount of rent you would pay, more than the rent you would pay over the lifetime of you working for 20 years at 100.. You know what I mean?

True that.

And then number two, yeah, I just don't think that y'all are in a position right now to do it. So, I would just pay for it, which again, there's things all the time, Lauren, and it's not outrageous, but there are things, as adults, that you have to do. that you're like, man, I kind of hate that, but it's the price to be able to do what I do. And that's it. And the thing.

that's glaringly obvious to me is it's going to cost somewhere between $120 to $150 to do this build. In your mortgage, you only owe $136..

I know. We can pay it off within like six years.

No.

I'm like, suddenly the $550 you're paying in rent for your workspace, it don't matter.

Do you guys have other debt, Lauren?

We don't. No, it's just the house. All of our cars are paid off. And another thing is like our cars are 10 years old. Who knows if we need a new car?

eventually. So things scare me,

but yeah, so now the one question, though, just to tack on it really quick, is, okay, say we didn't do that. Would you rather us pay off the house within like six years and then do an addition? Not for the work stuff, but just say, hey, we wanted to say.

I would. I would. And with what you're making, I think, Lauren, you guys can pay it off in five, four. I mean, I think you can really get aggressive with it and just say, let's like really make this our big goal and we're going to throw everything at this. and then, when you look up and say, okay, do we want to save now for the addition?

who knows where.

the world is and you guys could have a paid-for house and then realize, okay, we actually like this one over here. That's much better, and we'll take out a hundred thousand dollar mortgage. now, move there, get a step up or, like, you know, do what you got to do in that regard too. But I think having, having no debt, especially a mortgage, it gives you so many options and it frees up so much income. It's amazing.

So true. Rachel, you make such a good point with the timeline. You don't know what's going to happen. Four years ago, I had one kid instead of two. I know.

Like, you, don't know.

what's going to happen.