Don’t Get Trapped in the Cycle of Debt!
2024-02-26 01:58:39
The Ramsey Show believes you can build wealth and take control of your life—no matter what stupid mistakes you've made with money. Join as Dave Ramsey and his team of experts answer your questions on the top problems holding you back. Listen now or ask your question live by calling 888.825.5225 weekdays from 2–5 p.m. ET. Learn more at www.ramseysolutions.com
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. I am Jade Warshaw, one of your hosts for the day. Joined next to me is Dr. John Deloney, your other host for the day. That is his voice that you hear if you're listening on podcast.
And hey, if you're listening on podcast, try checking out the YouTube show because it's amazing. But if you want to talk to us, give us a call. The number's 888-825-5225.. We will chop it up. We'll talk about your life, your money, and the good doctor is in so he can talk to you about all those things that involve relationships and mental wellness.
Love it. John, let's get to these phone lines right away, shall we? Let's do it. Let's go to Brian in Los Angeles, California. Hey, what's going on, Brian?
Hey, how's it going, guys? Thank you for taking my call. So I got a quick question. I'm on baby step two. I have one credit card left with about $12,000 on it.
And then I have a car loan with $49,000 left on it. My wife suggested we refinance the car loan when we're done with that other credit card to try to get the payments higher and paid off sooner. But once we're done with that credit card, I believe we might be able to double or even triple what the payment is. I was thinking of what would be the best option for that car loan. I think you're right.
I think you've got.
the $12,000 and the $4,900.. You do them in order. You pay off the $4,900.. And when it comes time to do this $12,000 deal, you just pay as much as you can, as fast as you can. Why does she want to?
refinance it? Does she want to lock y'all into higher payments like that? Does she not trust you?
No, it's actually $49,000 that we owe. We just got this car last year.
Oh, $49,000.. Yeah, $49,000.. Why don't you sell this car, dude?
Well, it's the only big car we have. We've got five kids, man. And it's a Suburban. It's...
What do you earn a year?
We... Well, monthly, we bring in about $10,000 net, me and my wife.
What do you earn a year?
Well, see, last year, we didn't earn much because we were both... I'm currently on what's it called? Workers' comp. My wife was a maternity leave. So we made in like...
We brought in like $50,000 something last year, $40,000 something. But our regular pay, we bring in like $100,000 something, $120,000 a year. $120,000?. Is this your only car? No, we have two other cars that are paid off.
Two other cars paid off, and what are they worth?
Yes. One's about $7,000.. The other one's about $9,000..
Okay.
You had to go out and get a real nice car, didn't you?
No, we just needed it because we've got five kids. No, we don't fit in those smaller cars.
I think that you're half right. I think that you need a vehicle that fits the size of your family, but I don't think that it has to be a $50,000 car. Here's my rule of thumb here. Technically, there's two rules to kind of think of. Number one, you don't want your vehicles to be more than half of what you bring in for the year, right?
And you're under that, for the most part. I understand last year was different. So for the most part, you're under that. But then the next rule of thumb is, can you pay it off in two years or less? And in your case, I don't think that you can.
And you've got another $12,000 of debt laying around. If you wanted to make and simplify your situation right now, it would look like selling this $50,000 truck or van, or whatever you're calling it, and downsizing to something that's way used and way cash.
Like you're just rolling down the streets, not smoking endo, but just riding a minivan.
Sipping on grape juice. Laid back. It would be not cool at all. At all. Not cool.
But it'd get you out of debt.
There's no way you're going to do it. I know you're not going to. I know you've got a $7,000 car, $9,000 car, and you've got this nice suburban out there. You can fit everybody in it. You kind of feel like a little bit of a miniature baller.
You're not going to sell it, but Jade and I are both telling you, this would be a way to accelerate freedom in your house.
Well, what if I'm upside down on it?
How upside down?
About, I think it's like $7,000 or $10,000..
Sweet. Take one of those cars out of the driveway that's just sitting there.
Yeah. You have options.
Yeah. I was thinking of doing that. Selling one of the cars that we do have. that's straight off.
That's exactly what I would do. And then to get out of it, don't paint yourself into a corner. I think you've kind of said, we need this car. This is the only car we can get. And maybe I won't sell the car because I'm upside down.
So we're just kind of showing you that there's lots of options here for you. This $7,000 car, what type of car is it?
It's a Infiniti N37 2011..
Okay.
I'd put that up and have it sold by this weekend on Facebook marketplace, have it gone. Take that cash. I mean, that would wipe out almost, that would more than wipe out half of your $12,000 debt, right?
Yes. And that's one last credit card that we just have. We've been doing your baby steps. We've pretty much paid off like seven or eight credit cards already. So this is just the last one that's worth $12,000.
right now that we owe $12,000..
Think about this. If you decide to hang onto that Suburban, by the way, I love Suburban. It's a great car. I love them.
You're going to work real hard over the next 10 months, real hard. And you're going to pay off about $10,000 of that car.
Okay.
And that's about what it's going to go down in value.
Yeah. It went down already. You already felt it. I know.
So all this work you're throwing into it, it's like you've got a shovel and you're filling up a hole with sand and the hole's getting deeper from the bottom. Okay. You know what I'm saying? And eventually, eventually, you're going to depreciate the whole thing out, right? So you can buy a Suburban with like 150,000 miles for like 20 grand.
I mean, at some point it just is going to be 20 grand forever. What Jade and I are saying is sell this one and go buy one that somebody else funded, like somebody else paid all the depreciation on it.
Yeah.
And it won't be as nice, dude. It won't be as nice. It won't be as fancy. It won't be. And Brian and his family will be free.
That's the plan.
I'm going to put this in, I'm going to put this, John, just laid it out in the best terms possible. I'm going to put it in even more relatable terms. I want a Suburban, like I either want a Suburban or an Escalade, or a Tahoe, like a nice one, right? I can't afford that right now. And so I have a 2012 Tahoe XL.
It's 2012 and it's just as big, and I bought it in cash. It gets us around.
And from the outside, it's way nicer than my car, because she actually takes care of them and washes them. It's fine. But only Jade knows. I saw it. I was like, man, what are they paying these new personalities, man?
She must be rolling in here. It's a 2012.. She takes great care of it. It looks fantastic.
My other one's a 2013 Cadillac XR. I don't even know what it's called. It'd be nice to have a 2018 is all I'm saying, or a 2020, but that's not a huge priority for our family right now. One day we'll get it and we'll pay cash one day soon. And my point is, that's what that looks like.
It's this place in between where you're able to pay cash. You get as close to what you want to get. And here's the thing. I don't have a car note. So we can save up that money really, really fast if we want to.
And what's your car note right now?
It's $824 a month.
Brian, what are you doing?
Wow.
Hey, can I tell you the most annoying part of all of this, just globally speaking?
And I say this because this is how families get trapped. Jade is going to buy your Suburban from you at some point. And she's going to buy it-.
Think of me when you sell it, Brian.
At a $10,000 loss to you, right? So because she bit the bullet for two years and saved cash, she's going to buy your car from you less than you paid. I mean, she's going to end up making money off it. And that's how people who are disciplined with money become wealthier than people who get trapped in these cycles where they just want to look rich, but they actually aren't.
I'll be laughing all the way to the bank at Brian's expense.
We love you, Brian. This is The Ramsey Show.
Hey, what's up? Dr. John Deloney here. The temperature of your environment plays a critical role in deep and restorative sleep. But if your house is like my house, I like things freezing when I sleep.
And my wife would prefer to sleep on the surface of the sun. I've held out hope that somebody would crack the code on a solid mattress cooling technology for years. And now the masterminds at Eight Sleep have done it. They've created a fitted sheet with cooling and heating technology embedded. It's called the Eight Sleep Pod.
I'm so, out of my mind, excited to tell you guys about this. The pod cover can be easily added to your existing mattress, like a fitted sheet for individualized temperature adjustments down to 55 degrees and up to 110 degrees, based on your environment and your body temperature throughout the night. And either side of the bed can have a different temperature. This is the ultimate sleep experience, and it's proven to give you up to 34% more deep sleep every night. I can tell you from personal use, my sleep has transformed.
Go to EightSleep.com slash Ramsey to learn more and save up to $400 on an Eight Sleep bundle. That's E-I-G-H-T Sleep.com slash Ramsey for up to $400 in savings on an Eight Sleep bundle.
You are listening to The Ramsey Show. I am Jade Warshaw. To my right is Dr. John Deloney. We're taking your calls.
So call us up. The number is 888-825-5225, and we'll get into it. Today's question of the day is sponsored by Neighborly, your hub for home services. Before the weather warms up, Neighborly can help you find local service pros like The Ground Guys, Five Star Painting, and Mosquito Joe to turn your outdoor space into your favorite place. Find the help you need at Neighborly.com slash Ramsey today.
Today's question comes from Help in Illinois. Help writes, We've been married 23 years and my husband has struggled to find a career. He currently has a business which is not profitable. So he currently has a hobby where he spends our money. I have a full-time job and make about $400,000 a year.
My husband is supposed to contribute a set amount per month, but he doesn't and will not even mention when he misses contributions. When he does bring in a big check with his hobby, that's, uh, I added that, we argue about what he's going to contribute to the household. He thinks he shouldn't have to tell me when he spends from our joint account. I am the one paying everything, so I need to know. How do I fix this?
Wowzers. So this is, Jade, a marriage that is in way more trouble than it appears to be. It looks like, Hey, we make a whole bunch of money. My husband's just in there making a time machine that never works. Right.
And, um, I have to go to work. It's like, honey, I shrunk the kids. Right. He's in there making that thing.
And yeah, he just loses money, loses money, loses money, gets a big check. And then he's like, it's all mine. But this is a wife that is fully resenting, um, her husband. This is a husband who completely disrespects his wife. And this is a, this is a train wreck in slow motion, happening in real time.
Yeah. It sounds like she's, they've been in this wheel over and over and over. Yeah. This business is going to be the one.
Yeah. And all the while she clearly is co-rushing it. The top 1% of earners in America. Right. So she must be amazing at what she does.
Whew. What a mess. What a mess. What a mess.
So, okay. Well, let's think about this on both sides, because there is a world where, what do we think, John, he should be contributing because he may not make 400,000.. He may not make 200,000 a year or even 100,000 a year, but he's got to contribute something to the household. If he says he's going out and working every day.
Well, I think the important thing here is less about the set amount, and both because she makes 400 grand a year.
There's something in here that says she wants him to be making a certain amount.
Yeah, but I don't think it's about the money. I think it's about, I want you to participate in this home and you don't, you just extract from this home, right? You're a cancer. You continue to grow and pull nutrients away from the mothership and you're not contributing anything. I want you to have a purpose here.
And so they and their family have defined purpose as dollar amount, which I think is a dangerous place to be. Instead of saying, here's our money in this pot. Here's our values outside of this pot. How are we going to live those things out? And he is saying, I don't care what your values are.
I'm going to go do what I want to do when I want to do it. That's not good. Yeah. Right?
Yeah, I agree. I also think, though, where do they start? Because on the one hand you say, I think if he just contributed anything, but reading this, I have a feeling if he made $40,000 a year, she'd be like, no, that sucks.
I bet not.
You bet not?
Yeah, I bet if he did anything. Um, I think there has to be a, um, this is one of those, I, I normally will say, you got to stop the dance, right? You got to turn the music on, turn the music off, turn the lights on. What I mean by that here is, um, this is a moment where you say, Hey, starting next month, I'm pulling, I'm going to open my own checking account and we're going to split this thing up and we're going to have a hard conversation about contribution and participation and what love looks like in our home.
Because, um, this is a recipe for not just a, um, like a, a divorce. This is a recipe for an implosion. Somebody's going to do something dumb if they're not already doing something dumb.
Okay. So that's step one. What's step two? Some sort of counseling, right?
Absolutely. Yeah. This has reached a point where two people can't sit down and navigate this on their own. This is too big of a mess. This is shame.
This is control. This is, I'm tired of, of playing both the feminine and the masculine role in this home. This is, you don't love me. You don't listen to me. This is all that.
It's very challenging to navigate that on your own. So, yeah, go sit down with professional help. And here's what we have to say. We are not trying to save our marriage. We're trying to build something new.
If you try to save it, it's, well, what about this? And I don't cool that the, this, this marriage that they had for 23 years, has fallen and crashed. We got to build something completely new. And, thankfully, money's not going to be an option. I mean, it's not going to be a barrier.
We got $400,000 a year. We can do whatever we want to do. Finances aren't going to constrain us. It's just going to be our own egos and our own decisions to build something together. That's what's going to constrain us.
That's good. That's good.
What a mess. What a mess.
That is a mess. That is a mess. Yeah. I think that both people definitely need to be contributing in some way. that is agreed upon.
It's like, if you stay home and you're not making money, you better be taking care of kids is all I'm saying. All right. Let's go to the phone lines. We got Ben in Fayetteville, Arkansas. Yep.
That's it. Let's go, Ben. What's going on?
Uh, yeah. Hi, how are you guys? Doing good.
How are you?
Oh, pretty good. So we actually just finished paying off the rest of our credit cards and we still have a house loan, but we are, we have the, we have the three to six month cushion in our bank and we're actually just looking for somewhere to start investing money. Um, I, I, I'm 30 and never really invested anywhere, and I'm, I just want to, you know, start having something to show for that extra money that we're bringing in, uh, that's not going toward those credit cards and, uh, car loans.
So, technically, you're in baby step four, which is, for those listening, that's the step where you start investing 15% of your gross income every single month. And so a great place to start is to look at your employment situation. I mean, are they offering you a 401k or 403b or anything like that?
No, no. This is just a small business. It's me and one other guy, uh, working for a guy who owns the business. Okay. And, um, they don't even offer health insurance.
I have that already. Um, so that's not a big deal, but yeah, the 401k that he doesn't offer.
So then, if that's the case, I would just start with a Roth IRA. You can max one out. I think the limit this year is $7,000.. And so you could start with that. And then, if you still have money to go to get to that 15%, you could open up like a simple 401k and set aside some money for yourself.
Cause are you basically treated as a contractor? Is that right?
No, no, I'm an employee. Yeah. I'm still, I'm still, I still have a W two and a W four. I'm not at 99..
Then I would start, I would start probably with that Roth 401k or Roth IRA. And then from there you could look into something, since you do your own, um, healthcare, you could look into an HSA. That's another great place to start. And then there's always the brokerage account, which is great. So you've got some options there.
I always suggest working with a Ramsey, uh, trusted pro on that, because they can help you get started in choosing the funds. The way that we teach here is kind of just like this basic umbrella. Of course, you want to start with mutual funds and we want you to mix that 15% of money that you get over four different types of funds, so that you're spreading your money out. You're, you're not just putting it into one or two or three stocks, right? So you want it to go into growth funds, growth and income funds, aggressive growth funds and international funds.
So that's how you're splitting your money up when you buy investments within your Roth IRA. Does that make sense?
Yeah. So, so doing something like cause, my, me and my wife are looking into it before I, you know, I called you guys. So doing something like the app fidelity or, or anything like that, that's not something that is, is good, right?
We need to, you're saying like if you were to go on the fidelity app and do your, your investments through them.
Yeah. Not by ourselves, right? That's not a good idea. It's better to do it with someone who's more knowledgeable, I guess.
Yes. I mean, you can choose the brokerage that you want if you wanted to, but the whole idea is you're getting someone who's got more expertise than you do. I think it is good to kind of get in there and, and see for yourself what these things are and read about things and get your eye on things that you think, Hey, I think this could be a good idea. And then run it by that pro. And you guys can actually talk about it like adults and you're understanding what he's saying and he's understanding what you're saying.
And you're working together, not just hiring a guy, you know, that'll automate it and be like, Hey, this is what you do. Cause you don't, you don't want somebody to just take it over for you. You want to feel like you're speaking into it as well. Does that make sense?
Yes.
So that's how this works. Work with a Ramsey smart, trusted, smart Vestor pro on your investing, especially to get started, just so you know where you're going. This is the Ramsey show.
Buying your first home is a big deal and sets the stage for your financial success. So work with a mortgage advisor you trust, not just some random website. Churchill Mortgage is Ramsey trusted because they help you avoid hidden traps and expertly guide you through every step. Learn more at churchillmortgage.com.
This is a paid advertisement and MLS ID 1, 5, 9, 1 and MLS consumer access.org. Equal housing lender, 1749 Mallory lane, suite 100, Brentwood, Tennessee, 3, 7, 0, 2, 7..
What's going on everybody. You're listening to the Ramsey show. I am Jade Warshaw. This is John Deloney. The other voice that you'll hear on the line.
I'm John. Just wanted to clear it up. Just in case people were wondering who that other voice was, John, we're taking your calls. The number is 888-825-5225.. So jump in and we'd love to hear from you.
Let's go to Jennifer in Sioux Falls, South Dakota. What's going on, Jennifer?
Well, hi. Hey, thanks for taking my call. I'm so excited. It's Jade and John.
We're excited to talk to you.
So I'm looking for some ideas on how to deal with my adult son. I just want to say it's so hard to be a parent to adult children. Um, so we've, my husband and I have three adult children. They're all college graduates. They're all, uh, gainfully employed.
So our plan, because it was important for us that they go to college. So our plan was that we would pay for 25% of their college need, you know, their tuition and room and board. And then they were responsible for the other 75%.
Okay.
So then, of that 75%, whatever they would need to cover that, um, we would just loan it to them. And our gift to them was that it would be interest-free.
So one of your kids is not paying you back, are they?
Well, he's paying me back, but boy, it's like a turtle. I, I meet them. I, I'm just like our daughter. She got after it right away. And she, you know, within five years, she was all paid off.
And then our other son, his amount is so much smaller, but I'm really not too worried about him. And so it's that little son. I'm just like, wow, honey, this is a lot of money.
How much?
His grand total was $57,750..
Have you written out terms and handed them the terms of the loan repayment plan?
And John, that was our mistake. In hindsight, we should have had some, something written down, some kind of goals or rules or payment plan or something. But we didn't, we just said, you know, nine months after you graduate, the payments will start. The payments will be whatever you can handle at the time. And that's kind of just how we left it.
So in hindsight, we should have done it differently.
Oh, my goodness. Okay. So how much, how much would you say you're receiving? Are you receiving anything or you're getting some, but it's sporadic? Tell us a little bit about middle child paying back.
Yep. So he, he has a pretty decent job. I'll say, I really don't know what he makes. We don't talk about that. And I'll start out by saying our relationship is good.
Hold on. No, it's not. That's not good.
It's not good.
He's got this hovering over him. You've got a hovering over you. And even coming out the gate saying he's got a good job. You don't know. He could be making 30,000 bucks a year, or it could be making 250..
You don't know. And so you're already bringing some baggage. Like things are good, except that, you know what I mean? It's important to call a spade a spade on this one.
So when, okay. So, at nine months, we decided together that $250 a month would be his payment.
Okay.
That's what he said he could handle. So I said, great. So like, two years went by and he was still only at 250.. But in the meantime, he's gotten a few raises. And of course he's probably gotten some tax refunds.
Oh, okay.
So you're trying to spend his money for him. You can't. Y'all made an agreement. He's keeping up the agreement.
Well, I know he's never missed a payment.
He's doing exactly what y'all sat down and agreed to. The bank can't call you and be like, hey, we see you make more money. You should pay us back faster for this car note.
Like y'all shook hands. Was it a terrible deal that y'all shook hands on? Both of you? Yes. 250 bucks a month.
He's going to owe you for the rest of his life. And y'all are...
I know, 19 years. I calculated it.
But you shook hands on it with him.
Jennifer, you're in the wrong.
You can't spend his money for him.
Yeah, it was. And on many ways was this not the right choice. And I hope that you see this in retrospect. Number one, you can't lend money to family members. You have to give it or don't do it at all.
Because it changes the relationship. Like you said earlier, oh, our relationship is good. And then John went through and told you why it's not as good as you think. And then the next thing is, you guys decided the terms. And you shook on it.
or spit shaked or pinky swore on it. Whatever you did. And then you changed him in your mind, based off of what you think that he's making more. And what he should be doing. That's not fair.
I know.
I know, girl.
Hold on. Hold on. Jennifer, in a perfect world, you're right. He should go. My parents gave me $57,000 extra to go to school.
$75,000 in total, but $57,000 is mine. And I'm going to knock this out as quickly as possible. Should that be the way the world just works? Yes, it should.
But he doesn't have... Here's the thing. Unless he starts listening to The Ramsey Show and he becomes motivated to get out of debt, he has no real motivation. There's no interest on it. Mommy holds the loan.
She's not going to come repo my house or my car. You have not built in any sense of urgency around this deal.
So can I create a payment plan?
You can do whatever you want. Just know it may come at the cost of the relationship with your son. Or it's going to have to be, Hey, I agreed to something. I agree to $250 a month.
And we're going to begin to plan in three months or 90 days, or in six months. I want to move that up to $500 or to $600.. Or I want this whole thing done in five years. It's starting to weigh on us, our relationship or whatever. But you don't know that he's not talking to his friends saying, My mom and dad really set me up for success.
They gave me an interest-free loan to go to school. They're barely requiring me to pay it back. And it's really setting up me and my family. They may think you were the greatest parents ever. And on your side, you're like, I've got a degenerate son who doesn't...
He's just doing exactly what y'all agreed on.
What's your son like? What's he like?
I love him to death. Of course. But it's just money. He just... His whole life, he's just ignored money.
Because I think it gives him a lot of anxiety. I think he just thinks, if I don't address it, and I can make all my payments, and I'm in good standing everywhere, I must be making enough money. He just doesn't think beyond tomorrow.
And can we be honest about why? He's never had to.
Yeah. You've always taken care of him. You've always come up with the money for him. And then, secretly, you see that he wasn't like your other two kids.
Yeah, I wish he'd be more like his sister.
Exactly. And you know what? Here's the deal. He feels that from you. He knows he's not enough for you.
And because everything's been taken care of, he doesn't know why. He just knows mom doesn't like him. Mom's always asking about my money. Mom's always asking about my tax return. And there's this hovering 50 something thousand dollar gap that makes sitting down at the dinner table really tough for us.
So what you're saying is just leave it alone? No. And I just have to...
No, if you and your husband say, hey, we need this money for retirement, or you and your husband say, hey, we think we're setting a bad example, I think you sit down. But as part of the conversation, you can't start the conversation with, your sister did this and your brother did this, and you're just, it can't do that because y'all shook hands on it. It has to be, hey, I messed this up. Your whole life, I have let you go around the issue of money, which accelerates anxiety. It pours gasoline on anxiety instead of holding your hand and walking you through the middle of it.
And I didn't do my job and I'm sorry,
but I'm not going to have my son in debt to me for 19 years. I love you too much for that. And that means we're going to have to accelerate the payment plan. I'm willing to help you with a budget. Jade and I, we're going to give you Financial Peace University and every dollar for you to hand to him as a gift and say, here's a path on how to walk through that anxiousness to healing on the other side of this deal, to where money is not an anxious, it's not an anxious thing.
But to change the terms, and he might say, I don't have it. I don't got it.
And then what?
And then what, right?
Yeah.
And then you just have to accept the fact that you, if you say, I want to change the terms and he says, I don't want to do that. I can't do that. Or I have these other responsibilities. There does come a point where you kind of have to accept.
Yeah, you got a choice to make. You're going to lose your son. You're going to, this is what we agreed on.
And so that's what, that's what he has said to me, but I don't think he's really sitting down and looking at his finances to know if he couldn't even bump it 50 bucks a month.
Yes, but you don't get to choose that.
You don't know, yeah.
You want to choose it, but you don't get to choose it. Let me tell you something. We, my husband and I, had a parent plus loan that was in his mother-in-law's name. And it got to the point, cause she wanted us to pay it off quick, more quickly than we were. It got to the point that it was getting frustrated and we finally had to decide.
when you're around us, you have to choose the mom hat or the bill collector hat. You can't be both. And so, once she realized that and it's like, okay, like mom hat time, I love you, all these great things. And the less that she chose to put on the tax collector hat, the better the relationship got.
You have to own your mistake on this one and not be mad at him that he's not thinking 50 more dollars or a hundred more dollars. You're going to change the terms, sit down and change the terms like adults. But you got to go first and say, I messed this up.
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. Comparison is wired into us, but comparison can also become the thief of joy. We can feel like we're not enough and begin acting and thinking in ways we would never think otherwise. When all gets to be too much, think about contacting BetterHelp. BetterHelp is 100% online therapy staffed with licensed therapists.
It's convenient, flexible, and suited to fit your schedule. By the way, therapy isn't just for those who've experienced major trauma. It's for all of us who are ready to get out of the comparison spin cycle and find our own peace and joy in the life we're creating. Stop comparing and start focusing with BetterHelp. Visit BetterHelp.com slash Deloney today to get 10% off your first month.
That's BetterHelp, H-E-L-P.com slash Deloney.
All right, all right. You're listening to the Ramsey Show. I'm Jade Warshaw. This is Dr. John Deloney.
We're taking your calls, America, or wherever you want to call in from. Just know that the number is 888-825-5225.. John Deloney, I'm so excited because tomorrow morning, George Camel, fellow Ramsey personality, George Camel and I are gonna be doing this really cool bonus hour that we're calling the EveryDollar Bonus Hour, where we're coming in at nine in the morning. Yeah, 9 a.m. Tuesday, the 27th.
And we are helping people live on YouTube with their budgeting questions. Now you might be thinking, okay, Jade, what's the big deal? That's what the Ramsey Show does. This one is different because, A, we're gonna have EveryDollar pulled up live. Like they're showing it on the screen right now.
We're gonna have EveryDollar pulled up. so when you ask the question, we can actually show you, you'll be able to see it in real time. Like, hey, Jade, I have a problem with a regular income. What am I supposed to do? We'll actually be able to show you in the app EveryDollar how to do it.
You can ask whatever question you want and we'll be able to actually let you see it, which I think is a big piece to learning. It's one thing, to hear it. It's another thing to see it happening. And so I'm really excited because I think that's gonna really help people get their budget and their money on track.
Once in a while. Dude, we've all been to like work presentations where some guy gets up and starts talking you through like a tech thing. He's like, you're gonna wanna click on the third box. Yeah. And by the time I'm- Snooze.
Yeah. I'm out.
Just falling out.
So, yeah, being able to watch you guys do this will be fantastic.
I kind of feel like you made it sound like it's the same thing, though.
No, I'm saying like, if I'm sitting here like, okay, when you get the EveryDollar app, you're gonna open it up. You're gonna like, oh, you already lost me. But hey, you guys are gonna sit here and answer questions in real time. I'm gonna show you. Now I'm in on that.
And EveryDollar is really, it's just, it's intuitive. It's brightly colored. Like I feel like there's things that are gonna make you stay engaged. Plus, it's your question. It won't just be us just talking about it.
Like we're not gonna just be yapping about budgets. It'll be because of your questions. So come join us tomorrow, Tuesday, February 27th, at 9 a.m. Remember, it's on YouTube. Matter.
of fact, you could go there now and click the little alarm button. So it'll remind you to be there. It's bright and early. At least central time it is. So tune in whatever time it is in your neck of the woods and we'll see you there.
All right, let's go to the phone lines where we've got Kelly from Oxford, Mississippi. What's going on, Kelly?
Hey, Jade. Hey, Dawn. I'm really nervous to be sitting here. I'm really nervous.
You don't have to be nervous. We'll be nice.
I've been listening for like three to four weeks. I'm kind of being jealous of them actually. So I'm just, you know, I'm 22 and I fell in the hole with the trap that America sets that, you know, new cars, they're great. So I have a car payment and I'm looking to try to get out of it and just trying to figure out the best way to get out.
All right. Well, let's hear more about it. This car payment, what's the car payment and what's the entire balance on the car?
I pay about $65,000 a month and I owe $27,000, Okay.
And what is your take-home pay? Like, what do you bring home every month?
Let's see. Right now I'm bringing home around three every month.
$3,000?.
$3,000 and your car payment is $560,000?.
Yipes. Yes.
Oh, that's a big box of farts. I hate that. for you. That's so much money.
That sounds terrible, John.
Okay, what other debts do you have? I mean, it's just debilitating. That's so... Because rent is so expensive right now. Groceries are so expensive.
All right, I'll be quiet. I'm just sad for you.
What other bills do you have? Like, what other debt do you have? Is this your only debt?
That's the only thing I have. I'm on my own phone plan. I still live at home with my mom and dad currently. So I don't have rent, and I think that's why I fell into a trap. so easy is that I didn't have payment at the time and it was...
Are you paying any rent to your parents?
On my left. Yeah.
Okay. Yeah, we got to get out of this car. So if you were to sell it today, you owe $27 on it. If you were to sell it, what could you get for it? Have you looked it up in Kelly Blue Book?
Yes. Posit 40.. It said anywhere from $30 to $32..
Listen.
Bye, Felicia.
I know, that's right.
Car's gone. She gone. Gone, gone.
And you're going to pocket a little bit of change to get you a car in cash. This is a perfect scenario.
Right.
And your next car is going to be ridiculous.
$5,000 ridiculous. Max.
Listen, what do you think? You're silent.
I mean, it's kind of scary, but I mean, if that's what gets me out of it and gets me to where I can sleep at night and not have to worry about debt.
And here's the thing. Let's put it in terms that are a little bit more exciting. So you sell the car, you pocket $5,000, you go turn around and buy a $5,000 car in cash. Now you're no longer paying $565 a month. You pair that with whatever other savings you have.
Think how quickly you could save up another $5,000.. Trade in your old 5,000 junker. You're probably going to get 5,000 back for it, because it's already taken all of its hit. Now you buy a $10,000 car. And then you still don't have a car payment.
Think how fast you could save up another $5,000, trade it in. Now you got yourself a $15,000 car. Do you see how this works? And before you know it, you're going to be driving a $27,000 car that you paid cash for.
And not living at your mommy's house anymore.
Well, let's talk a little bit about that. So if you're living at your mom and dad's house, and this is not just for Kelly, but anybody listening, it will behoove you to pay your parents some rent so that there's a paper trail, because the time is going to come when you're going to want to move out, whether it's because you want to get an apartment or whether you've saved up enough of a down payment that you're going to buy a house. And they're going to want to see at least a year's worth of rental and renter's history, especially if you do our plan and you don't have a credit score. Okay. That's not just for you, Kelly.
That's for anybody listening. Don't just live at mommy and daddy's rent free. Make sure that you can show that you paid something, even if it's 500 bucks a month, show and pay something. It does. It helps you out in that way.
And it just helps you out in the way of being an adult and kind of paying your way through it. Does that sound fair enough, Kelly?
I think I scared her away. Are you all right?
Yeah, I'm surviving.
Okay, you're surviving. I know we came at her hard in the paint, but honestly, that's what you need to do to experience more peace. This car payment is, that's just ridiculousness. So sell it, buy yourself a car in cash. All right.
Let's go to another phone caller. We've got Jair. He's in Indianapolis, Indiana. What's going on, Jair?
Hey, how's it going?
Doing good. How are you?
Thank you for taking my call.
How can we help?
Yeah, my question is, how do I go off and tell my, or not go off, but how do I go on and tell my parents that renting is okay? They believe that renting is just a waste of money and I don't know how.
How old are you?
22..
Are you living at home?
Yeah, I'm living with my parents. I have my wife and son with me as well.
Whoa. Yeah, I would tell you that your parents don't get a vote. You have a wife and son. You've got your own family. Go, get yourself a place.
Yeah, that's what I talked to my other relative that I'm very close with.
Well, as long as you live in their house, they're going to think they have a vote, by the way.
Yeah, and they do have a vote as long as you live in their house.
Right, and yeah, they just, it's just, they believe my parenting is not as good as theirs and they always have, they always make it seem like they have a say in it.
They do, because you're living in their house. Take your family out and get your own place.
Yeah, it's simple as that. What's keeping you from renting a place?
It's just, I don't know. I'm scared. I've never been out in the real world.
John, come on, come and get my guy. You should have thought of that before you made a human and before you got married. So you're in it, bro. You jumped in the deep end of the pool and you dragged a wife and a child with you. And so you don't have the luxury of saying, well, I never took swim lessons.
You got to figure out how to swim. right now. This is when you move out this weekend and get a one bedroom apartment and you get job number two and job number three. You're going to figure out like, quote unquote, what I got to do and what I'm passionate about and what I'm interested in as you're flying down the highway, brother, because you have a wife and a child to take care of.
Right. What do you make right now?
I make about $2,200 a month.
Yeah. You're going to triple that.
Yep.
Triple that.
But yeah, I also talk to my wife and my wife's thinking about going back into the workforce as well.
When? How old's the baby?
Uh, he's about to be one. He's one years old and four months. Yeah.
Okay. So she needs to get back into the workforce. He's a year and four months. You guys have got to, you've got the family there. So you've got some daycare.
Obviously, if you were living with them, they'll probably be willing to help you out in this way, but you've got to start making some major moves. to John's point. If you want to see the needle, move on this. Thanks for listening to this hour of the show. This is the Ramsey show.
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. I am Jade Warshaw. John Deloney is to the right of me. I'll be taking your money calls.
He'll take your calls on really just everything else, John. I feel like you run the gamut.
We're just talking off air. This whole show exists for one reason, to provide hope. That's just what this show is about. But, man, I tell you what, sometimes that light gets real dim out there. It does.
Like when you just, I'm not a big news reader, but occasionally I'll just dip my toes back in. God, almighty, people have lost their minds.
Oh yeah.
Across the gamut. When it comes to schools and marriage, we had a caller in a former hour that was like, Hey man, like my parents are speaking into my marriage. I'm married with a kid and we live in their, like rent free in their house.
And it's like, yes, yes.
Well, I'm scared to, like, you know, grow up. And it's like, I. just, I don't have a psychology for it sometimes. And that's why I'm glad you're my friend, Jade.
Listen, at the very least, we are always going to tell you the truth.
I'll tell you the truth, man.
And the truth should bring hope. At first it'll make you be like, Oh crap. And then, if you turn that corner, there's hope on the other side.
And we can always look over here through the glass, at the mighty Bob Borges.
That's right.
Between two of the most hopeless people sits Bob Borges, who brings joy and light into everyone's life.
Oh boy. And he has a great radio voice. All right. The best. Give us a call.
The number is 888-825-5225.. And we will chop it up with you. And John, hopefully you can shine the light.
You can find that group that you need. All right. Let's go to the phone lines.
We got Stephanie in Albany, New York. New York. What's going on, Stephanie? Thank you for stopping me from getting into it.
I'm hoping you can give me some hope.
We got you.
Trying to, trying to get some perspective on a big decision that my husband and I have to make pretty soon pertaining to his career. He's finishing up a medical residency, which is very exciting. And he has two offers. And we're trying to weigh the pros and cons of each.
And yeah, we're kind of stuck on where to go, which, which one to pick.
Tell us about the offers.
Well, one is where we could say where we are living now, would not have to move. It's offering about $90,000 more than the other offer. That's in like student loan repayment and a sign-on bonus and a little more salary. The other one is still a good offer, but would get us closer to my family and friends in Pennsylvania.
So both good options, but we just don't know what to do.
Well, let's think about it. How much student loan debt is he going to have coming out of this?
$300k.
So my initial thought, and you can start poking holes in this, my initial thought says, okay, if there's $300,000 of student loans that we're going to have to pay off and we can stay where we're at and make $90,000 more, that's looking like, it's starting to look like a green light for me. Help me see why it could be better simply moving closer to family, your family.
Well, that's what I'm struggling with. I think, financially, on paper, that does make more sense.
But you've been dragged around through med school for the last seven to 10 years and you're ready to get back to your family, right?
Yeah. Yeah. So I just don't know how to look at it, like from a financial point of view, or I felt like I've been looking at it through a microscope through every angle possible. And now I just, I don't know where to go.
All right, let's change the whole, let's back all the way out. Okay. It's sometimes the more, the finer the microscope, the more we think we're learning, but actually it just blurs up the whole thing. So let's back all the way out. What Jade said is right.
The math is, the math is the math. And you can try to make the math, not the math, but the math just is. Right. Instead of, should we do this or should we do this? Stop looking at this as a right decision versus a wrong decision.
And just exhale and say, what a crazy, fortunate season of life that we got two options. And that means that you're going to pick one and six months, six years down the road, you're going to have more, you're going to have different ones.
And reverse. engineer this whole thing. And ask yourself in nine months, when your husband comes home from work and your kids come be bopping in the house, what do you want that to feel like? Where is that going to be?
And build the life that you want to have. Don't look at it as a scarcity, like, well, it's got to be this one. It's got to be that man. There's. so it's such a more, it's such a more vast picture than, than, than when you're trying to look at it under a microscope.
Are you tired in New York?
I'm hot and cold with it. There are things that are really great about it.
But do you, is the thought of living next to your family life giving to you?
Yeah.
Okay. Have you been honest with your husband about that?
I have. Yeah.
Okay. As he said, I don't really care. We're going to make a whole bunch more money, get my loans paid off. So we're staying in New York.
No, no, he has not said that. But that's, that's another thing. that's just kind of complicating. this, for me, is like, it's not really my career. You know, it's his.
It's your home.
It is your home.
It is your home. What is y'all's home?
Yeah.
What is your career? Are you able to just easily move?
Yes. Yes, I was. I owned my own business for 10 years, but gave it up a couple of years ago. And so I'm mobile.
Okay.
But, and now I'm staying home with the kids.
Okay. So, okay. I see.
Well, many times people call in and I don't know, maybe, maybe John and I are opposing. I don't know that we're opposing. We might just be focusing more.
No, I say to stay, stay in New York for 24 months. Y'all shake hands 24 months and we're going to live Spartan and we're going to pay these stupid things off. Okay. And then we're going to see how life looks.
Yeah. I'm with that. I'm with that.
Once we've exhaled and then say, and by the way, we're going to budget for 10 grand because we're making a whole bunch of money for flights for me and the kids to go to Pennsylvania and spend some extended time. And so we're going to build some of that in and you can practice life in Pittsburgh, but also you can get these stupid loans out of your hair because y'all have made a bed that you got to sleep in for a minute. And then you can begin to decide what kind of life do we want to have? That's my, that's my picture.
No, I'm with that because so many times, Stephanie, people call in after the fact they've made the move, because they've kind of followed their heart on the journey, and now they're in it. And now the reality of the money that they owe comes, you know, crashing, hurtling back at them. And it's like, oh man, what do I have to do? And it's in those moments that I'm always telling people, listen, you, you have to choose, like there there's, whenever you've made a, uh, I'm going to call it a mistake, because I think that debt is a mistake, because it's something that you always have to go, and you're, you're having to fix the past. Right.
So in that way, I'm kind of calling it a mistake. Uh, you do have to trade off, and I'm kind of hoping that you can make that, that trade on the front end. Like John was saying, instead of moving to Pennsylvania now, or as soon as he takes this residency, and then finding out, oh man, like we've got this crazy debt. It's not as great as I envisioned it would be, because, yeah, I'm close to my family, but now my husband's got to work, you know, three times as hard. And it, it just, I don't think it will be all it's cracked up to be if you don't have that freedom very closely in your, in your mirror.
So I would do what John said, this is the Ramsey show.
If recent times have shown us anything, it's that the least expected events can and will happen. And we have to deal with them. That's why everyone who has a family counting on them needs term life insurance. For over 25 years, the only company I've recommended is Zander insurance. That's because Zander is a broker that works for you.
They search all the top term life plans out there and find you the best rates and make the process of getting coverage quick and easy. You can apply online or over the phone in just minutes. And they offer plans with super competitive rates that don't require a medical exam, making it faster and simpler than ever to get the coverage you need. I trust Zander for all my insurance needs, and you can trust them too. Don't put off getting term life insurance until it's too late.
Go to Zander.com or call 800-356-4282 for a fast and easy quote today. That's Zander.com or call 800-356-4282..
What's going on? party people. This is the Ramsey show. I'm Jade Warshaw. This is Dr.
John Deloney. We are taking your calls. So give us a call. Number is 888-825-5225.. And we will give you our best advice that we can come up with.
Some say the advice is worth what you pay for it. That's an old school.
Davism.
Yeah, that's a Davism. Guys, I want to tell you about a new event that's coming up that I'm super excited about. This is the Total Money Makeover Weekend event.
TMO.
Yeah, TMO. Here at Ramsey, we like to make acronyms for everything and just say the abbreviations. So it's T-M-M-O-W. Total Money Makeover Weekend, happening May 10th and 11th here in the Ville. Nashville, is what I'm talking about.
We've got an event center up on a hill. It's really amazing if you've never been there. And so the point is, it's a smaller or limited venue, I would say. So you got to get your tickets right away. These tickets are starting at $99, guys.
So please believe that they're hot potatoes. They're going fast. You can get your tickets now at RamseySolutions.com slash events. And I think that you should get a ticket because this event is very different, John. This is a crash course on everything we teach people about money.
You'll hear everything from brand new content. Brand new. So if you've been to one of our events before, you're like, I already know what it is. No, this one's different. All the personalities are going to be there.
We're talking a different spin on budgeting and beating debt and investing in more. And so what I like about it is no matter what baby step you're on, it's for you, because we're talking about all the baby steps. So whether you're paying the house off or you're just trying to get $1,000 saved, this is the event for you. One of my favorite things that we're implementing is more and more Q&As. So you'll get to ask your questions and we'll be answering them.
I don't know about you, John, but I have some pretty fun stuff up my sleeve planned for this event. So I'm looking forward to it.
Yeah, I think it's going to get off the rails a little bit, which I'm looking forward to. Yeah.
The first 500 tickets have already been sold. And so you got to keep going. Oh, I'm sorry. I read this. I read this wrong.
It says, with the first 500 tickets sold, you'll get a copy of Total Money Makeover signed by Dave. Wow, that's great. Very cool. That's going to go really fast. So make sure you get your tickets.
Again, $99 for a limited time. RamseySolutions.com slash events. That's cool. I'm excited for that. I don't know about the rest of you guys.
Let's go to Travis, who's in Portland, Oregon. What's going on, Travis?
Hey, hey, good. Hello, guys. Thank you so much for taking my call.
And I really appreciate your time.
And I'm happy to be here.
Oh, we're happy you called in. How can we help?
Well, I was just hoping you guys could shed some light on maybe what angle I should be thinking towards our debt and getting out of debt and what steps I should be taking. So the premise of it is we have $65,000 in debt to go. We were at $127,000.. We were semi-Gazelle intense. Then my Gazelle got a leg cramp there for a second.
But we're back on it.
Okay, good.
Yeah, we're back on it. I'm personally active duty, and I'm a nurse. And my wife is also a nurse, but she has got the harder job, which is being a full-time mom. She homeschools. She has a teaching background.
So we're really trying to put an emphasis on giving our kids a home education. In the past, I've tried to look at maybe getting extra work. But being in government, it's really hard sometimes because there's what's called conflict of interest. So I found it, in my opinion, too difficult for me to look for extra work without breaking our rules.
What makes it a conflict of interest? Can you give me an example?
Sure. And I'd prefer not to give the details of the agency, if you don't mind. But I one time applied for a job, and I got accepted. So I had to go through our HR department. And because the other company received grants from the federal government, we can't work with that company.
So it's that kind of thing. And it seems like that happens a lot in the medical world, because a lot of things come from the federal government, payment-wise or grant-wise, right? So I mean, unless I want to be doing... And I'm not against it, but I could be like DoorDash or something. But I prefer to do nursing shifts because they typically are going to pay better.
Right. If you can't, then... Because it sounds like you're saying you're trying to, but you're running into this red tape. So the question is, what are you going to do instead?
Yes. Yeah. And I guess the other part of that question, and I have so much respect for my wife, so I'm not saying this. I don't want to be misquoted or misheard. But my wife also has a nursing license, and I thought about her maybe picking up two or three shifts a week.
That's great.
She's going to... Yeah, but I guess the issue is, I don't think she's quite on board with that, and I don't know if I am either. And I'm just wondering what you guys think is the best course to take, because...
You're both working. You're working at your nurse job, and she's working with the kids. So I don't think it's bad to ask the wife who's at home to also pick up work. if you're also willing to pick up work. I feel like it's both of you sacrificing in the way that you can with the hours that you have.
John?
Yeah, and it's easy to paint these as forever conversations. And what I hear a lot on the show is people calling, and they've boxed themselves into a cage with their own variables. We have to homeschool our kids. We have to do this. We have to get this paid off.
We have to do this, and we have to do this. Well, then there's nowhere to go. And so what I always want to recommend people do is just think in six-month increments. For six months, could you take the shifts that you're able to work? And because you're also active duty, you're going to become a part-time, stay-at-home dad, while your wife goes and picks up shifts that y'all can send to the creditors that you owe.
Y'all created a world where you owed $120-something thousand. You got down to $60-something thousand, but that journey's not over yet. Or can we put our kids in a local small school or in a public school for just one year, and it's going to make us so uncomfortable that we are going to go bananas, getting this stuff paid off, working every shift we possibly. can. You see what I'm saying?
And then, if you make that, you know this, you're in the military. You make that short-term sacrifice, it pays off forever. It's just being able to say, hey, this is not forever. This isn't the way this is going to be. And, by the way, this is not how we drew this up.
We don't want this to be true, but it is. What do we have to do right now? And I think y'all are too smart. Y'all could solve this problem. It's just.
you've trapped yourselves with your own have-tos and shoulds and musts, and it's going to keep you paralyzed.
I appreciate the insight.
Does that make sense?
It does. It does. Yes, it does. I think it'd be something that I would want to talk to my wife more about, because I think she's a bit more apprehensive than I am, and I don't want to come across as disrespectful to her. Because I think what she does is incredible.
I think you've got to stop apologizing. You're tiptoeing in, and I think that tiptoeing makes her think something's wrong. And both Jade and I are telling you, man, there's no tiptoeing. Y'all are both working your butts off to try to meet the values of your family. And y'all are both in service-oriented jobs.
That's just who y'all are. You're both great people. It's just a matter of saying, okay, for this season, can we align our energy in this direction? that's not the direction we want to go forever, but just for right this second? And you said something really important that I think everybody needs to hear when you're heading into these hard conversations, or the ones that you're kind of apprehensive about with your spouse.
Start with, hey, what about? this scares you? And it could be, I don't want our kids to get behind, because if they get behind in school, then this, they're not going to know algebra. And then, all of a sudden, they're not going to get into the college. Okay, we're going to be okay there.
Or maybe it's something more existential. Maybe it's bigger. It's more X or Y or Z. But let's start with, hey, what's scaring you to death about this? Not, here's the plan.
Let's do the play. You see what I'm saying?
Yeah, I can come across the way you just said it. So that's why I try to bite my tongue a little bit. You know what I mean?
Yeah, totally. But here's the deal. By not biting your tongue, your wife is looking for some sort of strategic direction. And because you hem, haul around it, because you don't want to come across as a guy who's an active military guy with, here's the plan. Let's execute the plan.
So you end up handing her no plan. And that's when fear takes over sometimes. So let's sit down and co-create one together and start with, hey, what scares you to death about this? You say, we owe 60, something thousand dollars and I can't breathe. And I don't feel like I'm being a good husband or a good dad chasing this debt around.
Now you go, what scares you to death? Here's our kids, someone else raising our children. All those things factor into it. And once we get the fears out of the way and on the table, everybody's got fears on the table. Now we can start together co-creating a plan.
And then we're just going to follow the plan and knock it out. You'll get there. What do you think, Jade?
I love that. I think just remembering everything is short term. Short term. It's temporary. It's not going to be like this forever.
And just always remembering that some people are just afraid of the unknown. I've never had to work this hard before. I don't know what it's going to feel like. I've never had to have two jobs. And that's fair and that's okay.
But I think together you guys will be able to work through that. This is The Ramsey Show.
What's going on? This is The Ramsey Show. Thank you for listening. I'm Jade Warshaw. He's Dr.
John Deloney. Give us a call. The number is 888-825-5225.. And we'll do our best to hook you up with the right advice for your situation. Let's go straight to the phone lines where we've got Chantel in Charlotte, North Carolina.
What's going on, Chantel?
Hey, I have kind of two questions. I just recently cashed out my retirement from an old job. I paid off my car because I had a $700 a month car payment. And I was just kind of really struggling, like having to work overtime just to make my regular bills instead of working overtime to pay extra. Okay.
So I took a pretty big hit. I had about $34,000 in that account. They took 20% of it. So I was able to cash out about $26,000.. So I used that in combination with the money that I had in savings, and I paid off my car.
So now I'm just questioning, how do I prepare this next year for tax time? I know there's going to be like a 10% fee.
At minimum.
And also, I'm questioning, do I turn around and sell this car and put that money towards my other debt? I do have another 05 Camry that I bought in cash just to run around for work, because I drive a lot of miles, but it has 208,000 miles on it.
You would cash out your whole 401k to pay off a car, then turn around and sell the car to pay off another debt?
That's what we're talking about doing.
Yeah. So I'm torn between, do I keep the car?
Yes.
Whenever you're in the medical field and you find yourself going down to treatment, and the treatment is making everything worse, even if you don't know what treatment to go to, the first thing you do is stop doing the thing that's hurting you. And right now you are spinning out.
Okay?
You're making some long-term decisions with a very short-sighted lever. Okay? So just take your hands off the wheel, take your foot off the gas, and just slow down for a second. Okay?
What'd you pay for the car?
I paid about $41,000 about two years ago.
And what do you earn every year? What's your yearly income?
My base salary is just over $80,000, but with the overtime I've been working, my taxable income for last year was $102,000.. Okay.
All right. The car's paid for. It's not more than 50% of what you bring in. It's now paid for at a very, very, very, very, very steep cost. I'd keep that car and I'd sell the other one, the one that you're running around town in.
Okay. Tell me about the rest of your debt.
I have three credit cards and a line of credit.
Those total up to right around $10,000 total.
Okay.
And then I have about $14,000 left to pay for my attorney that I had to use for a child. That is 0%, no interest or anything. I just kind of pay what I can when I can.
What else?
And then I have a large $65,000 federal student loan.
Okay. All right.
Are you scared, honey? You sound scared.
Well, I'm a single mom, so...
This is a lot. This is a lot.
Yeah.
Okay. I just want you to know you're not by yourself. We're way across the country, but we're sitting here with you. Okay. I know this one's heavy.
So are you receiving any child support from the dad, or is that included in the 102??
No, I just don't get child support. It's 50 custody and it's actually pretty cordial, and we handle things on our own now.
There's no child support because the judge didn't rule it or because you didn't care to go through with it?
Both. Part of it was because I earn significantly more income than he does, and I thought...
I'm sorry. Speak directly into your phone. Hey. Hey, Chantel, you got to speak directly into your phone. Yeah.
Tell me that last part again. Can you hear me? I can. Tell me that last part again.
I didn't pursue child support because I earn significantly more than he does, so I was afraid that I would end up having to pay him, but now things are actually pretty cordial and he pays for his half of things for the children, so it's not something that we do.
Okay. Okay. So here's your choices. If you wanted to sell the car that you have, you could, and it might behoove you to do that and now that I know the debt that you have, swap the situation and you keep the runaround car and you sell this other car. If you were to sell it, how much could you get for it?
You paid $41,000.. What do you think you could get?
It's only worth like $15,000 private party.
Didn't you say you bought it two years ago?
Yeah. It's depreciated really, really fast because work from my car and I put a lot of miles on it. I drive a ridiculous amount.
Because of work?
Yeah. In the first year that I have this car, I put 65,000 miles on it.
Okay. Well, I wish it was worth more, but I'm still going to have you get rid of it, because you have a $5,000 car sitting there. that works just fine, like you said, to get around town. Um, do you still have to drive an exorbitant amount for work?
I do. Yeah. I work from my car. I drive to different places. I don't have like an office or anything that I work in.
It's just from my car.
Like how far are we driving? Tell me more.
Um, so I'm a hospice nurse. Um, so I drive to different facilities and homes. Um, it varies. I drive a lot more miles when I pick up overtime because I'm covering like the whole Charlotte market. Um, so it can be a lot.
Okay. All right.
Could you do the... Be level with me. I want you to be 100% real. Can you do the job that you do in the older vehicle?
Yes, I do. That's my daily driver. I hardly ever drive, um...
Okay, then.
Which is the car that I just paid off.
Okay. Then we're selling the Buick. We're taking that 15,000.. We're going to pay off these three lines of credit. These three credit cards in the line of credit.
And we're going to take the additional 4,000 left. And you're going to pay 4,000 on the attorney. That's going to leave 10K left on the attorney. And it's going to leave you $1,000 save.
I'd leave about 4,000 bucks. I'd check with the tax person because she's going to owe the taxes on that too this year.
She does. But I think she's got some time to...
Or you got to save up for it. Yeah.
Yeah. And I would talk to a tax professional to find out. But that's your first order of business with the money from the sale of the car. And then everything else goes into the debt snowball. So you've got the 10,000 for the attorney.
You've got the student loan for 65K. And know that you're on the hook for taxes come the end of the year. And I want you to find out what that's going to be sooner than later. So that you can put that into your, you know, debt snowball. And kind of put a sinking fund where you're putting a little bit aside every month.
So that by tax time, you'll have that money. When did you take the withdrawal on your 401k? Was it 2024? Or did you do it last year?
It was 2024..
Okay. So you'll have until next April. You'll have a year more or less to save up for that. So in the meantime, you've got to just be... There's no way around this other than to say that you're working like a crazy person.
Luckily, you have an asset that you can sell. Do you have any other money laying around?
Stocks? Anything?
No, I have $1,800 in savings now. It was close to $8,000.. But I took a good chunk of that to pay off my car.
Okay. So you're going to... Since you already have $1,800 in savings, I want you to take $800 of that. And I want you to put it towards this attorney bill. And that's going to knock that down.
Because I already kept $1,000 aside. That's going to knock that down even further. So $1,000 saved. Everything above and beyond your minimum payments on your bills goes to the student loan. You're working like crazy, girl.
Take all the shifts that you can get until this debt is paid off. It's not going to be easy. This is the Ramsey Show.
All right. Let's cut to the chase. It's easy to get discouraged about crazy house prices and interest rates. But when you have the right real estate agent to help you buy and sell the right way, you'll have confidence to make smart decisions. Ramsey Trusted Agents aren't just experts who guide you through buying or selling.
They're someone you can trust to have your back from the first call to closing day. Find a Ramsey Trusted Agent near you at RamseySolutions.com slash agent. RamseySolutions.com slash agent.
You are listening to the Ramsey Show. I am Jade Warshaw. Dr. John Delonious, sitting right next to me, will be your hosts for this hour and the next hour. If you want us to take your call, you can call in.
The number is 888-825-5225.. And hey, if you're listening to this on whatever podcaster you listen to, or if you're watching on YouTube, or you listen to it on the radio, thank you for doing that. Obviously, we exist here because of you guys. There would be no show if there were no listeners or watchers or subscribers. So thanks for doing that.
And if you could continue to do so, wherever you listen to this show or watch the show, be sure to like it, subscribe it, and share it with other people. Because when you do that, it just spreads the love around. And that is good for everybody. And of course, I don't have to tell you guys, the algorithm loves such things. So keep doing that.
We're sure, grateful that you do. All right. Let's go to the phone lines. We got Ashley in San Angelo, Texas. What's going on, Ashley?
Hello. Thank you for taking my call. I am calling because I have a couple questions about life insurance, first of all. So I just got on Zander. probably about a month or two ago.
I had my counselor that told me about it. So I got onto it. My husband actually got onto it as well.
My payment's about $30 a month for it. My husband's is $100, just because he has a history in the past of atrial fibrillation. Hasn't had any issues since, but they dinged it because it's about $100 a month. So my question is really, because we also have a whole life insurance that we got before we were married, that my in-laws advised us to get. But, listening to y'all, I know y'all don't recommend it.
But we've been paying on it for... Do we got married in 16?? So we've been paying on it since right before then. It's $91.98 a month. And I've called and tried to talk about canceling it.
But I wanted to get y'all's recommendations. Like, since we're already so far in, it's a 15-year note. Should we go ahead and cancel it?
So the policies you have now, the policies you have now, the one that you have for $30 and the one that your husband has for $100, those are term life, correct?
Yes. Yeah.
You know, I would go in and I would cancel and cash out that whole life one immediately.
Do you know why?
Well, my stepdad, he follows y'all. He's, I mean, been phenomenal with it. And he's kind of explained it to me. But if y'all could explain it to me and probably help me understand it a little better.
Yeah. You know, big picture, you know, when you have a whole life insurance policy, part of it goes to your policy and part of it goes to an investment. That's why you pay more for it. So $91.98,. part of that payment goes to cash value, which is...
And part of it goes to an investment. So you might have a face value of, hey, you're covered for this much, but we're also going to take a piece of that and we're going to invest it for you and have this cash value over here that at the right time, you can have access to. But the problem with that cash value that you're investing in is number one, the rate of return is poo-poo. And number two, it dies when you die, which kind of defeats the whole purpose of the insurance policy. Why not just have a policy that you're paying into?
that's there when you pass away? That's the whole point of it. And so we always say that if you were to take, let's just say, you paid into a whole life policy and, you know, $40 of it was going into the cash value and they were investing that. If you were to take that $40 and invest it yourself in good mutual funds that had an annualized rate of return of 8% to 10%, you could far outweigh what any of those whole value policies would earn you in cash value. So we're just pointing out the fact that the investment side of it is absolutely terrible.
v1.0.0.260408-1-a910ba6_os