You Can’t Win With Money if You Don’t Know Where Your Money Is

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 actual, amazing relationships. Rachel Cruz, number one best-selling author, host of the Rachel Cruz Show, co-host of the Smart Money Happy Hour on the Ramsey Network, and my daughter is my co-host today. Open phones at 888-825-5225, and we're going to talk about you right in front of you. Dwight starts off this hour in Seattle. Hi, Dwight.

I'm doing okay. How are you, Dave?

Better than I deserve. What's up?

So, I'm going through divorce right now. I've got no money saved. My bank account's actually negative. I'm about $40,000 in debt, and I'm just trying to figure out where to start. I've only recently started listening to your podcast.

What's your income?

So, right now, I work at the post office. I make, and I also have a side job at Applebee's. I do once a week on my day off from the post office. So, I make roughly $5,000 to $6,000 a month right now. Why do you have no money?

Okay.

Dwight, is the divorce, is it final?

Not yet.

Not yet. Okay.

No. How old are you?

24.. I'll be 25 on Thanksgiving Day.

Wow. Okay.

Um, we've done, I've done, and Ramsey has done crisis financial counseling, Dwight, for almost 40 years. And one of the things I've learned to do when I'm in these kinds of situations, or when I'm helping somebody like you that's in a situation like this, is we need to boil this down to the next right three or four things and not worry about the big stuff off in the distance right now. Because right now, you've got some very immediate things that you need to address, and I really don't care about your retirement investing right now. You follow me? It's not a big deal.

So I actually don't have a car right now.

You don't have a car. Okay. How are you getting around?

Where I'm living has a public bus system that's free of charge.

Okay. All right. And so you and your soon-to-be ex had one car?

So technically, I have a car, but it's in Texas, which doesn't help me.

Okay. So she's in Texas?

No, she's here with it. It was a very sudden transition up here due to the given situation.

Okay. You were living in Texas before? Correct. Okay. So you just jetted out literally.

Correct.

And the car is parked where? At your family or with her?

My family, on my grandmother's property.

On your grandmother's property. You have a relative that can bring you your car?

It's honestly not worth bringing up here.

It is. It's more than walking.

It would cost more than it's worth in gas to bring up here.

So the car's not worth $400?.

So the problem is, it only gets eight miles per gallon. It would cost roughly $2,000 in fuel to drive it up here.

And do you think that's what it's worth?

I wouldn't even say it's worth that.

Okay. So do you have a relative that will take the car for you and sell it today?

I can... The biggest issue is trying to find a buyer.

No, it's not. They can sell it today. It's a $2,000 car. Just go to the local junkyard, go to the Tote the Note lot and sell it today. You need money.

The lease you signed, Dwight, for a living, is it, is it reasonable for what you're making right now?

So it's $850 a month, and it includes utilities and internet.

Okay. That's great.

Yeah. You can handle that on $5,000.. Yeah. Okay. And your job is in Seattle.

So I actually, I don't actually live in Seattle. I live out on one of the islands, about two, two and a half hours from Seattle. It's just the closest place to me.

Okay. So the, but, but my point is you, you're making $5,000 working for the post office there. Yeah. Okay. Not in Texas.

Yeah. Correct. Not in Texas.

Okay. All right. So what you've got to do is break this down, hon, and a little bitty baby steps about three or four right things to do right now. Turn the car into cash right now. Get some more jobs right now.

And any expenses, Dwight, you can cut that. We just, you get in the habit of just having, whether it's subscriptions, memberships, like restaurant, like, whatever the thing is, like, whatever you can cut, finding that margin is going to start to give you peace. Even if it's 30 bucks here or there at this point, that's huge. So like, go through and cut things.

Exactly. No car payment, $850 rent. that includes utilities. Dude, you're making 5,000 plus 1,000 with Applebee's on the weekend. That's $6,000..

Contentment, yep.

And it is, the illustrations are world-class, because the illustrator that we brought in is world-class.

Yeah, Lauren's amazing, yep.

Lauren...

Gallegos.

Gallegos, okay. I knew I was gonna mess up the name, but yeah. But the book comes out Tuesday, and we've already sold thousands and thousands of them in pre-sale. Some of you have heard about it on Rachel's Instagram and so forth. But the quality of these illustrations and the quality of the message for the little ones is...

Yep.

And so, we've got a bunch of those in the Ramsey clan right now. So, Papa, Dave and Mimi will be reading this, reading Rachel's own book to her own kids and her cousins. Yes. They're cousins, I guess.

I know. I know. If you're a parent...

I got two of them tonight. I got Charles tonight, and Eli tonight.

And then I just got a text from mom. Y'all are gonna have all of them, I think, tomorrow night. Oh, how wonderful. All seven. Thanks.

It's like magic.

Oh, yeah. My kids think that...

If you're five years old, stuff just appears.

Oh, my three-year-old was like, we should just Amazon it, Mom. I was like, oh, gosh. Yeah, that's like a thing now. So I wanted them to fully embrace this idea. And it's something we talk about all the time, is that it's okay to have stuff.

So I'm glad for what I have.

That's right. So pre-sale is now.

You can buy it now at Ramsey Solutions and we'll ship them Tuesday. That's what it amounts to. Yes. So they'll start being on the shelves officially on Tuesday and you'll find them wherever great kids books are sold and certainly ramseysolutions.com. In other news, on the other side of the spectrum, Mint is shutting down the largest budgeting app.

It's kind of a big deal in the budget in our world. Some people may be like, OK. But I'm like, but it is.

Well, they paid $170 million for this. They went into it, bought it a few years ago, purely as a lead magnet. It's there just to draw customers into their debt products, like credit cards, and into the credit cards. And so Intuit paid almost $200 million for it. And then, gosh, I don't know how many years ago that was.

We'd love to have you. We don't need it, though. We've got EveryDollar.

We don't need it, but I'd love to help all those people. And so that's the thing. So any of you that are there, spread the word that EveryDollar still is the only one of the top budgeting apps that does have a free feature, that you can just jump into it for free. So I recommend the premium. It's much better, because when you connect to your bank, the transactions show up automatically and you just drop them into your budget.

But it's such a, especially for those of you listening that are kind of newer to all of this, I'm telling you, getting in the rhythm of budgeting, it gives you that level of control, because money can feel so out of control if you don't have a plan, if you don't know what's going on. And it just feels like this, like, mystery, when things are just in your head. I think they are magnified, the fear, the disillusion, all of it. And so, having facts down and seeing your numbers and just knowing, knowing what the month is, knowing what you're planning to do and food for groceries and restaurants and, you know, kids, you know, Christmas presents coming up. We have a, we have a Christmas line item in our budget for this month because we're gonna start buying Christmas gifts.

Even if you're in a freak out zone, it takes a lot of the freak out away.

I almost wanted to tell Elliot that, where I'm like, you'll know where your money's going if you do EveryDollar, like, do a budget. And it just gives you this sense of control. And it does make you say no at times. And we all hate that.

Well, it makes you know that you shouldn't say no. It doesn't say no.

That's true. That's true. That's true.

You know, you are saying no to you because you want to say yes to you later. And you're making a decision on purpose instead of by chaos. Here's the weird thing. The opposite of good times, or the thing that is more stressful than bad times, is not knowing.

Yes.

Not knowing where you are is much more anxiety-inducing than knowing where you are and knowing in detail that it's bad.

And that you can get out of it, right?

Even if it's bad, knowing is less stressful than, well, I have no idea. Because the drama gets all twisted up in your head and you do a little drama queen dance between your ears and blow everything out of proportion. And so, but when you write it down, when you put it down, you go, okay, I got enough for food. I got enough for lights and water. I can pay the car payment.

Hi, Dave and Rachel. I'm doing well. Thank you so much.

That's okay. We've never lost a patient.

What you got? You're good, Cara.

So actually, it's kind of funny. I tried to get in last week to call, but I just couldn't get through. And I just want to really express gratitude to the screener for letting me be on today. The timing is very funny because basically eight years ago, my boyfriend and I moved in together and I ended up accidentally getting pregnant. And we basically just reacted to life.

Oh, congratulations.

Well, congrats. That's awesome.

Thank you so much. Yeah. No, we, we, we never like not planned on getting married. It just, you know, when you're, you've got, you know, two kids, 18 months apart, it's, you know, like John.

You just didn't plan on anything.

Yes.

And we, you know, I have to say we ended up okay. Like I said, we're healthy. We have a beautiful home, this and that. But, like, we're ready to do, you know, we've done things our way for so long and we're ready to do things the right way.

I'm happy for you. Congratulations. How can we help you?

So I guess my question was, I'm a newer ish listener. Um, and I just, I understand the practical of, okay. Yeah. You go to the bank, you, you, you know, you have a joint bank account, but I would just love to hear your thoughts on combining finances for the first time, as, you know, as a couple, I know there's probably a lot of people out there who are, like me, um, you know, been shacking up, as you know, you were saying, but, uh, you know, what is your advice on taking that step and combining finances and moving forward?

Yeah, that way. Well, I think it's a great question, because, yeah, combining the finances happens when you are legally married. So, just like what you're doing is exactly right. Um, just from so many different stances. Um, so I think, yeah, the, I mean the, yeah, the logistics of it, you know, of getting a joint bank account, you guys, combining that, uh, budgeting together, you know, all of that is, is pretty, you know, in a sense self-explanatory, but I think the bigger underlying picture of all of that is knowing that you are on the same team with the value system around money.

You might want to model generosity before them.

We want to be givers. And what does that look like?

Our family wants to be generous. We want to be a generous family.

So, combining it, you know, I think the value system, combining those together, is really important. And then also to know Kara, you know, and I know, you know, this, cause. you've been with him for eight years, but you know, people are opposites too. So, like forever and ever, amen. My husband will always love having four Excel sheets, looking at all different parts of our money all the time.

He's the nerd. She's the free spirit.

We're going to have different interests in our involvement to the detail of it. But overall, as our family, we see ourselves as one and we're moving in the same direction from a value standpoint. And then the tactical side does play in that. I think is important that you guys, yeah, you, you see yourselves as one income, that it's not just his income, your income, that together we are this family. We are one in that.

We have a hundred thousand dollars in debt. We have a household income of X. We are doing this, not his truck, my truck. Now we still call it his car, my car and my house, because it's the one that Sharon drives, but we understand that we own those cars. And I've actually owned a car that she has not, has never driven.

Oh, funny.

And I was scared to death, but yeah, but she, she drove it. She's a better driver than you. I couldn't breathe. But yeah, it's still our car, right? And so, yeah, you got to change your pronouns and you're going to put the whole thing, our income, into this account.

Thanks. Yeah, I am. I'm resonating with all that. I am definitely the, the nerd, I guess, you know, I'm.

Yeah, you made this phone call. You called the Ramsey show on the day you're getting married and you want to know about money. You're definitely the nerd. Free spirit would have never called today.

So great. And I'm the nerd.

I would have done that. I'm planning out everything.

We're going to give you a wedding gift and we're going to give you Financial Peace University and EveryDollarPremium together, because you guys sit down and go through these nine lessons together, join a class. They're doing classes now by Season of Life. So you guys can do the newlyweds, a bunch of newlyweds in there, but do that, go through this, because this, that will give you guys a common language too, especially when you do something together like that, where you're watching these videos, you're going through these exercises, do that together. Cause that's a great foundation. And then EveryDollarPremium, that's just, it's amazing.

How old are your babies?

Seven and five.

Okay. We're also going to send you Rachel's brand new book. I'm glad for what I have for the five-year-old. Okay.

Thank you so much.

You're the first. That's the first one of those we've ever given away.

I'm so glad. Yes.

What a great wedding gift. Very cool.

Thank you.

All right. You hang on, we'll have Austin pick up. And since he was so nice to you before, now, he's even going to be nicer and give you a bunch of free stuff. So.

Congrats, Kara. And I just appreciate you even asking that question. And especially given your situation, you guys have been together for eight years. You could have legally had the document and kept living as you did, but you're feeling this shift of what marriage does, of, oh my gosh, there's this level of unity that I want, and I want something different. And you guys, you said you had like a hundred thousand dollars in debt and a mortgage and all of this, right?

Increased communication. One of the few things you can find a total agreement on. when surveyed ladies that are married, they ask, what would you like more? And they said 97% of the ladies surveyed, 97, but that's all of them. So you know what they want?

And so it's a communication stuff, school stuff. I mean, it all comes out there.

Where are we going for Thanksgiving? Which parent's house? It's in the budget. It makes you decide. This is the Ramsey show.

This show is sponsored by BetterHelp. This is Deloney, and I'm always railing against social media, especially in the summer, because everyone uploads the highlight reels of their perfect bodies and perfect vacations and perfect kids. And I know they're not real. And I also know that I'm blessed beyond my wildest dreams, but I still find myself wishing my life was like other people's. And, based on the data, I know this is happening to you too.

Rachel Cruz, Ramsey, personality, number one, bestselling author, and my co-host. today. Brett, is in Providence, Rhode Island. Hi, Brett. Welcome to the Ramsey Show.

Hi.

Hi. How can we help?

Um, so I, we are moving, um, and we're selling the house and we're making a profit on it. And, um, recently I have been seeing your show on like, uh, little clips and I've been changing my mindset of maybe, you know, having leased vehicles isn't the best and smartest, uh, decision I've ever made. And, uh, also, though there's, we have a plan to use a good portion of the money, uh, from selling the house to use that as a down payment, uh, after a year of us renting, because we don't know the area, we're moving down to Orlando. So we're trying to get a, you know, it didn't feel right, quite unseen, just to purchase a house type thing. So we're like, we'll rent there, get a feel for the area, you know, know where, where we want to be school wise.

That sounds wise.

I'm guessing anywhere between 50 and 60,000..

Okay. And what's it take to pay off your cars?

Um, to pay off, we want to be able to pay off both of them.

If, uh, so I have, you owe more than $60,000 on your cars.

Uh, well, they're leases.

So I know, but they have an early buyout provision. If you call and ask for the early buyout, have you done that yet?

Uh, yeah. So I know the early buyout for my truck is 49 and, uh, the other vehicle is probably around, I would guess around like 40 or so. Wow.

You're deep in some cars, dude.

Yeah.

Uh, what is the, uh, what's your household income?

But, um, I do 180 a year.

Okay.

All right.

Well, a good rule of thumb, if you want to build wealth, is to not have more than half your annual income tied up in things with motors and wheels. You are right on that bubble. Okay. Yeah. You're not over it, but you got a lot of car debt, um, and you ain't got much home equity, which is kind of weird with that income.

Um, I've been making, uh, I made 160 last year. Yeah. Um, so, you know, a little bit of bump. Um, I've only been making this money since, like about, I would say, 2021..

Okay. Just a few years. Okay. And how old are you?

We bought this house. I'm 35.. I bought this house with a VA loan. So we did no money down.

Yeah, I can tell.

Yeah.

Okay.

And I purchased the house and in two years, somehow we're selling it, um, for a profit, which is just craziness.

But, Brett, I love, I love vehicles. I'm a car nut, um, mathematically, uh, as a financial person, I hate them. Because they're the largest thing that we all buy that goes down in value, and they go down in value rapidly. And so you've got a lot of money tied up in, um, things that go down in value. Uh, and so here's what I would do if I woke up in your shoes.

Do you have any money saved, Brett?

Um, no, um, because, obviously, with moving and expenses, um, our savings has been burned, paying for, you know, transportation of one of the vehicles because we're driving, but we can't drive both vehicles, and, you know, paying for a pod to transport.

Yeah. But all of that still, you're making almost $200,000 a year and you had no money. You just had 10, 15,000 bucks to make. the move was all when you burned it. So you've got to get some money back in your hands because you put it all into vehicles.

And so in Orlando, you don't have to even transport them.

Yeah. Probably too late. They're probably already moved, but the, uh, but either way, and just be, be free of all this. And it's cause, if you're sitting there with no car payments and you're renting, you can stack some serious cash for your down payment now.

Yep.

And, um, and then just draw a line in the sand. It says I pay cash for things from now on.

Yeah. And don't be afraid to rent for two years if you guys have to too, because you felt the pain of putting nothing down and not having a lot of equity. So even if you guys kind of slow pace it into that move, that's okay too.

But if you got no payments in the world and you make 200, stack a hundred, I mean, I mean, oh darn, I have to live on a hundred thousand in Orlando. I don't know if I can do that or not. Of course you can't. People do it every day. So, I mean, yeah, stack a hundred in a year, you know, uh, and that's a pretty strong down stroke for a house that puts you in a good place.

Yeah.

That'd be pretty neat. This is the kind of thing you can do when you're not giving it all to the car company in the form of a fleece. So, Brett, you'd already come to these conclusions, but I probably took you, uh, about four notches along. the radical steps, uh, you know, took you a little bit more radical than you wanted to go when you called in. Be careful what you wish for when you call the show boys and girls, but, um, that's what I would do, man.

Yeah, absolutely. Okay. So talk through, cause we, we always say, and it's been proven, that leasing is the most expensive way to finance a vehicle. So talk through the lease aspect of it, just from like the, the, the number standpoint of basically renting before you have to buy it out.

When you finance a vehicle, the federal truth in lending laws, the regulations require them to hand you a sheet that shows you what your APR is, the interest rate they're ripping you off with. Okay. When you lease a vehicle, you don't own it, so you're not technically borrowing money under the law, so they do not have to disclose the interest that they are charging you. But there is an interest calculation because you can take the actual cost of the car versus the stream of payments called your lease payments versus the price at the closed end, lease at the back end. These are three or four financial variables.

Well, I'm better than I deserve.

Good for you. I love it. How can we help?

Yes. I'm just trying to come up with a good investment plan. Both my husband and I, we've been married now 20 years. this month. I'm always just trying to look for better opportunities to try to keep investment up.

Okay.

Yeah. He wasn't saying the full $20,000.. He was like, you could start out putting $10,000 in money market funds, which, like I said, I'm not very familiar with it.

Yeah. Well, money market fund is a fancy savings account. It doesn't pay much. Pays more than a bad savings account at a bank. It's basically a high-yield savings account.

So, it's about $16,000 and $18,000..

Wow. Okay. And you've only got $20,000.. What's your household income? Right.

My household income's about a little over $100,000..

Good. Okay.

A year.

All right. So, if I woke up in your shoes, we teach a process to get you to wealth by getting you out of debt, called the Baby Steps. Baby Step 1 is $1,000 in the bank. Now, how much do you have in Apple stock? What is it valued at today if you cash it in?

$21,000..

Excellent. Okay. All right. This is going to jar your system. Can you hold on to your chair for a second?

Oh, my. Just be kind.

I'm going to be kind, but it's going to scare the crap out of you. Are you ready? I'm cashing in the Apple stock and the $20,000 and paying off my cars today.

Well, of course.

I mean. Now, that would be stupid if you don't do the next thing. And the next thing is your. first thing you got to do now is rebuild your emergency fund, which is what that $20,000 is. It's not supposed to make any money.

Thank you. And you'll have $7,000 left after that. Yeah. So you'll start your emergency fund.

Which is great. I do want to set that over in a money market or a high yield. And I want you to get about $20,000 back in there. That's your three to six months of expenses. That's baby step three.

Which will be easy, Heather, because there's no car payment. To your point earlier. Yep. Then you freed up so much income. Do you know any?

Yeah, you start adding $1,000, $1,500 a month to your retirement plan. That's $15,000, $18,000 a year, making $100,000.. Then, and if you've got a match at work and these mutual funds go up. This year, it would have made a little over 10% this year, year to date. If you put it in January one to right now, you would have made 10% on good mutual funds.

In election time, it is always crazy.

There's always been stupid people in Washington of both brands. And there's still stupid people in Washington of both brands. Right now, some of them are more stupid than normal. But there's stupid people in Washington. Okay.

No, but to her point, election time, people do. Things do kind of stall out. People hold, they watch, they see.

I know, but the stock market doesn't crash on election year.

No, it doesn't crash, but you're going to see a little bit of that volatility. And that's normal. You can go back to basically every election year, every four years, and you see the same thing. So it doesn't mean it's going to crash.

It goes up, it goes down.

And you're in the ride. You're in the ride of it all. So you're just riding around.

You're just dumping $1,100, $1,200 a month, $1,400 a month, every single month, automatically out of your check, into your 401k with a match or into Roth IRAs.

And I think, Heather, you're a prime example that so many people experience with their money, honestly. You're trying to do like five different things. You've got a single stock here. You're trying to do some retirement. You've got car payments.

If you pay off the cars and have $7,000 left over today, by the end of the year, you'll have your $20,000.. And in January, you'll start saving 15% from this point forward of your income going into retirement. You'll retire wealthy if you'll do those things. But you've got to be on a budget to do it. You've got to be in agreement with your husband.

Yeah, and honestly, the message is great for parents, for adults too.

You adults, get this and read it over and over to yourself and get some contentment.

I need the message, so I wrote it. It's all good for us to remember.

I'm glad for what I have. The brand new children's book by Rachel Cruz comes out Tuesday, so it's in the store for Christmas as well. It's all there and free money. You just can't beat it. Go to ramsaysolutions.com slash giveaway to register for the free money.

And today's question comes from Warren in Washington, DC. I have a large amount of debt. Wouldn't it be better to file for bankruptcy to have a fresh start and then build wealth, instead of taking years to pay off debt and then start to build wealth? When is bankruptcy a good option?

Yeah, I don't tell people to file bankruptcy and I don't tell people to file divorce, with the exception of a situation where the wife is a punching bag because her husband's, in that case, file divorce, get out of there. He's scum. But other than that, I don't tell people to do this stuff like this. I don't make decisions like that for you. on this show.

And yours was all real estate.

It was not beat out. It was all real estate oriented.

It wasn't consumer either.

I didn't have any consumer debt, hardly at all. I borrowed on the cars to buy houses. So, I didn't have car payments, but I had car payments. But anyway, all that aside, Warren, you're not bankrupt.

Get out a free jail card kind of thing.

That's childish. And no, you don't use bankruptcy that way. And, by the way, the way the bankruptcy laws are written right now, if you've got a big income and this debt's just an inconvenience to you, and you go in, you think you're going to file bankruptcy and wipe out the stuff, the bankruptcy laws are written now where they're going to take you out of that chapter seven and put you in a chapter 13 and make you pay payments. A chapter 13 is a payment bankruptcy that lasts five years, 60 months. There are formulas that the law has in place, the regulations have in place that force you to do that.

Well, yeah, because you don't change. And that's why we even our costs, just when people get a lump sum of money, whether from, like an insurance settlement or, you know, from what is it when someone passes?

An estate?

No, an insurance.

Life insurance?

Inheritance. That's what I was thinking of. Inheritance. But when people call and they have a sum of money and they're like, I can go and pay off my debt. We're like, OK, that's great, because, yes, we want you debt free and you can use it.

Yeah, I'll go a step further. If you can pay your bills and you just refuse to, that's stealing.

Great. How are you, Dave?

Better than I deserve. Welcome. Where do you live?

York, Pennsylvania, which is a small town outside of the capital of Harrisburg.

Absolutely. Welcome to Nashville. It's a bit of a haul down here.

Just a little bit.

Good to have you. So how much debt have you paid?

$56,610.32.. Way to go.

How long did that take?

25 months.

All right. And your range of income during that two years?

Started at $56,000 and end this year at about $80,000..

Wow. Good for you. What do you do for a living?

I'm in retail management and I have a small business that I run as well.

Cool. What's your business?

We sell seat inserts for race car drivers. It helps reduce the risk of spinal injury when there's a crash.

Yeah. Wow. That's awesome. Good for you. What kind of debt was the $57,000?.

It's $44,000 student loans and then $12,000 business loan.

Okay. All right. Good for you. How old are you?

24..

And no payments in the world. That's amazing. Good for you. Absolutely amazing. So tell us the story.

So I was in college and I was a huge personal finance nerd. So I was watching a lot of content. And I know, Dave, you have very thick skin, I'm sure, after 30 years. But it's like, these people are bashing this Dave Ramsey guy. Maybe I should check it out.

So it turns out the casino is not a wealth building method.

It is not.

You know, the fun thing about some of those haters in our space is I've met many of them over the years and they don't really hate me. I'm just really good. clickbait. Yes. You know, so if you put Dave Ramsey in the title of your thing, it just shows up everywhere.

Thank you. Yeah. I mean, and you look at your income and what you paid off. I'm like, you, you did a lot. You did a lot of just sacrifice.

The good news about going on the road less traveled is there's no traffic. And that includes six o'clock in the morning, five o'clock in the morning with the blinking yellow light. That's, there's nobody there because nobody's willing to pay that price. That's why there's nobody out there. So, you know, if I get out where there's a whole bunch of people, I'm worried because that means I'm in the wrong place, because they're all in the wrong place.

I think it's, I think it's sacrifice, work, ethic and vision. Those three things, that combination, and, you know, making sacrifices, you know, not buying the first car and things like that that go a long way. You know, you know, everyone's on their own journey, but, you know, it's freeing to know that there's no more payments or. Oh, yeah. What do people in your life say?

Did you get your own haters? You know, you need your own haters, man.

People were very supportive. I have a very good crew here today, and I'm very appreciative and grateful that we were able to make the trip down. So, you know, I think there's always haters. I'm sure you guys know that. And but a lot, a lot of support.

So is this family and friends or just friends?

Yes. So my parents, my grandmother, my cousin and his wife and two friends. All right.

Very good. That's perfect. That's good. That's a good support group, because it is tough to do this by yourself. You can do it, but it's tough.

What are you going to do? now? You're 24, no payments. You'll get your emergency fund in place, I'm assuming. So, beyond that, what's your, what do you want to do?

Where are you going to, you know?

Europe for a week with my buddy, Tom.

That's fun.

Yeah. We're going to Barcelona and London.

Oh, both good stops. You spent some time in Barcelona, didn't you?

No, I was outside of Madrid.

Outside of Madrid.

In college.

Yeah. She did a little study abroad thing. Back in the day. Which means I'm on vacation and we're paying tuition. That's what that means, but yeah.

Congratulations. Thank you.

Well done. Hey, we've got the live and give box for you. It's got the Baby Steps Millionaires book, because that's definitely where you're going, my man. 24 years old and already rocking it. Well done.

Thank you.

Well done, man.

Great job.

It's got to feel studly.

Yes. Thank you very much. Good stuff, man.

Very cool.

A lot of hard work.

Absolutely. Yeah, the blinking yellow light, man, that's a thing. That's when you know you've been getting it. That's good. I like that a lot.

Three, two, one. I'm debt-free!

Yeah!

I love it.

So great.

Rachel, I've been saying for years that while people in my boomer age group have been trashing the Gen Z and trashing the millennials, that there are ones worthy of being trashed. But we also run into the good ones. Oh, yeah. We run into them on this debt-free stage quite often these days, from 24 to 34 years old. Some of them in 34 paying off their home and that kind of stuff.

Smart. Hardworking.

Mission driven. There we go.

Nicholas.

That's it, man. Way to go, man. You're an absolute hero. This is the Ramsey Show.

Ramsey Solutions is a paid, non-client promoter of participating pros. Learn more at RamseySolutions.com slash SmartVestor.

Rachel Cruz, Ramsey Personality, my co-host today. This is the Ramsey Show, where we talk about your life and your money. Open phones at 888-825-5225.. Jay's in Kansas City. Hi, Jay.

I am blessed. How are you, Dave?

Better than I deserve. What's up?

Well, before I start, I want to thank you for your foundations curriculum for high schoolers and homeschoolers, because without that, I wouldn't be that free today. Wow.

Wow.

Very cool.

Were you a student in it or a teacher?

I took it as a homeschooled student years and years and years ago.

Wow.

That's fun. Good for you, Jay.

So my question today is, I'm baby step four, five, and six. I have about $120,000 saved for retirement. That's across my IRA, my Roth IRA, my wife's Roth IRA, and the 401k.

How old are you?

And I'm 30 years old.

Good for you. Well done.

Thank you. I feel, from what I've been running the numbers with, that I'm on the teetering edge of coasting financial independence, and I'm trying to best understand my plan with the end in mind. So how I'm going to turn that nest egg when I retire into income. I found on your website a little article that talks about a 4% to 5% withdrawal rate. And I was trying to run the numbers around that, and I thought I was close.

Okay. I'm a little confused, because I don't know what the hell George is doing doing a 3% withdrawal rate, because that's absolutely wrong. I'm going to have to find out where that video is and get it taken down, because that's just wrong. You don't need to have a 3% withdrawal rate. That's ridiculous.

Was it 4% to 5%?

No, it shouldn't be 4% to 5%. It ought to be more than that. I mean, if you're making 12 in good mutual funds and the S&P is average 11.8, and if inflation for the last 80 years has averaged 4%, if you make 12 and you need to leave 4% in there for inflation raises, that leaves you 8..

Well, I was trying to back check it, because, you know, 3 to 5, I thought that was a big range. And a lot of the studies I found showed that.

Well, there's a lot of studies that are stupid in this space. It's just wrong. Listen, man, the math I just gave you is the math. If you're making 12% and inflation is 4, and you leave 4 in there, so your nest egg grows by 4.. It's simple.

Why is it that stupid, though?

It's too low. It's too low, because it's not realistic. You do not need to live on 4% of your money for your nest egg to survive.

Yeah, even if you did a rate of return of 10% or something.

And what it sets up is, this guy now, he doesn't think he's got enough money. And he's already got $120,000, and he's 30 years old, and he's on a plan. He's on a plan to be very wealthy, and he's worried he's going to have enough money or not. Yeah. You know, because stupid people put out low withdrawal rates.

Go a 10% rate of return. Go a little bit more conservative with your rate of return. Go 10%. What would you do with 10%?

Well, then 4% off of that. So 6%. 6%. Yeah. But why are you going to underinvest?

Was 10%.

...is 10%. And we're not even at the end of the year yet.

Yeah.

You know? And everybody's talking about how bad the economy is. So, you know, most years, mine have done much better than 12%. And so I'm...

But if you can do your standard of living, though, lower than what you... Like, if you don't need...

If you don't need it, that's fine. Yeah. Like, I'm 62.. I'm pulling... Or 63..

Right, right, right.

I don't need any of it. So it's all just sitting there growing.

But you could do 4%.

The problem is when you go down these stupid nerd rabbit holes in these Reddit threads with these morons who live in their mother's basement with a calculator, and then you put that out into the dadgum community, and then people go, I don't have enough money. It's hopeless. I'll never be able to save enough to retire. A million dollars should create for you an $80,000 income, boys and girls. So you should...

So I did. Yeah. I can see the hope.

Because it makes people think they need $2 million when they only need a million dollars. Or it makes them think they need $8 million when they only need $4 million. And here's the way the end of the story is this. No one ever actually ends up ever with what you thought you were going to end up with.

Right.

Ever. So you're sitting there at 30 or 29 years old and you're doing these projections, which it's okay to do the projection.

Sure, sure.

And you project out there and you go, okay, I'm going to have $1.7 million at this current rate. Yeah. But you know, what you haven't factored in is between now and 35 years from now, when you're 65, you're going to run into flying monkeys, wicked witches. Have you seen the Wizard of Oz? You're going to be on the yellow brick road sometimes.

And Glenda, the wonderful witch.

And sometimes you're going to have money drop in your hands out of nowhere. You're going to make more money than you ever need. You're going to have ruby red slippers sometimes. And sometimes you're going to have flying monkeys stealing them. And, at the end of the story, your little projection is not accurate.

Right, right.

Because you never, you know, like here's another thing. Here's what happens between 30 and 65.. Your income goes up. almost every freaking year. Your income goes up.

Hi. Great. How are you guys?

Better than we deserve. What's up?

So I'm working my way, actually, my wife and I are working our way through the baby steps. I got your book, the Total Money Makeover. I'm reading through that. We have a nice emergency fund for now. It's about $3,000 in it.

Um, a debt on the HELOC or an amount that is not used on the HELOC?