Your Emergency Fund Is A Force Field Between You And Life

build wealth, do work that they love, and create amazing relationships.

I'm George Campbell, joined by Jade Warshaw this hour.

The number to call is 888-825-5225.

Don't be scared.

You jump in, we'll talk about your life and your money.

That's all we want to do is help you take the right next step, and maybe talk you off

a ledge if you're about to do something stupid.

That's always a fun call.

That's the preventative medicine versus the emergency surgery.

All right, let's kick it off with Maria in Denver, Colorado.

What's going on, Maria?

I purchased a home from a meth addict, and I'm now $33,000 in debt because I had to

do remediations on the home after I closed.

I'm just curious how I should best pay this off and salvage my credit.

I did receive a settlement from the owner after discovering this problem, but I still

have probably 80K in repairs to make to the home, and so I'm just curious how I can pay

it down and salvage my credit.

All right, we got troubles, we got troubles.

So tell me a little bit more about this, did you call it a remediation?

porous, anything wood.

So I basically bought the home and then they stripped it.

I found out two days after closing that she had a drone problem.

I had received every other police report and they had some police activity at this property

because I did my due diligence and I looked through it, but I didn't receive the one

report that had the previous owner handing over the mess to the police at her home saying

she had a problem until two days after closing.

I don't know what happened to that one report that held it up, but every other report was

about a dog or about...

Even at that level, you still have to remediate.

And you said there's still $80,000 of repairs.

Is this related to that or this is just other repairs that you were planning on doing?

They stripped the home after I purchased it, and so I couldn't really go back and take...

I couldn't, like, undo the loan.

Essentially, I sued her and I got...

Thankfully, I got about $60,000 back, but still...

Yeah, what happened to that $60,000?

Like, do I pay it on one month's sum?

Because I'm just worried that if I pay off my debt in one month's sum, it's going to

crash my credit more.

I would knock out all the credit card debt today, the rest becomes your emergency fund,

and then we cash flow the rest of the repairs.

And so just make the rest of the repairs as...

Yeah.

But leave three to six months of expenses in there for actual emergencies, which is

not known repairs.

Okay.

Because we want to avoid you going further into debt.

I don't know why you're concerned about the credit at this point.

You're not going to go take out more debt, are you?

Listen, you've got a home.

You're going to make a mortgage payment every single month.

You're going to be just fine.

And you're not planning on taking out more credit.

So...

No.

You're right.

You're right.

Well, I do want to...

I was planning to start buying other homes and...

We're done buying homes right now.

We need to focus on our problems today, and we can become real estate moguls down the

line when you have a paid-for property and money in the bank to pay cash.

We're not...

And hear us when we say we're not...

The point of...

We're not intentionally trying to tank your credit.

However, George and I both know that when you set down the path of paying off debt,

you're also simultaneously saying, not only am I paying off this debt, but I'm not going

to borrow money in the future.

Otherwise, what's the point of paying off debt?

Just so you can get more and pay it off again?

That doesn't really make sense.

So there's kind of this assumption that if you're paying off your debt, if you're working

this hard to do that, if you're taking this lump sum and you're being diligent in that

way, you kind of have to think about the future and go, okay, well, if I've done all

this work, then in the future, I'm going to pay cash.

The same way you're going to pay cash for these other remediations that have to take

place.

In the same way, in the future, if you do choose to buy real estate, you'll save up

and pay cash for it.

Even though that sounds like a mountain load of cash, it's just good to kind of draw that

line in the sand.

Well, great.

Then that makes my solution easy.

Just pay down and work with the remaining cash.

It's 51% of your take-home pay.

No.

Go ahead, George.

There's a lot going on here now with the roommate situation and making these repairs.

Are they chipping in?

Yeah.

I want to know, can we have some clarity?

So you own the house.

Are they chipping in at all for any of the repairs?

Tell us more.

Or what's the deal there?

They are helping with the repairs by helping come in and actually do the repairs.

So their time, they're paying me with their time.

Right.

And that's fine.

So that's been helpful.

And then also, my mortgage lender offered two years free refinancing.

I think that hopefully, if all goes well, not predicting the future, but if all goes well, I'll be able to refinance.

Okay.

they can't afford the rent on their own, so they have roommates.

I always like a situation where you can float the rent on your own and you can do the mortgage

on your own.

You don't need the roommates in order for it to not be dangerous for you.

And I don't like the fact that this would be dangerous for you if something happened

with the roommates.

That's my only red flag on this.

So what I told you, the mortgage, I guess I should clarify, that also includes utilities,

insurance, all of the things bundled.

I have no car debt.

I have no other debt.

outside of food.

Okay.

So I can definitely float the rent on my own.

Cut up the cards, don't look back, use the rest of the emergency fund and cash flow the

rest of these repairs.

Do not go into debt ever again.

I'm sorry you're going through this.

That's crazy.

Goodness gracious.

These inspectors.

That's crazy.

Should I just go become an inspector?

I'm like, it looks good, guys.

It's crazy.

Wow.

This is the Ramsey Show.

Welcome back to the Ramsey Show.

I'm George Campbell joined by Jade Warshaw.

The number to call is 888-825-5225.

Well, it's time for our long running segment, Jade.

Okay.

It's long for me, you know.

So it's called pick a side.

And this is where we have two people on the line and we have to help them kind of settle

a debate.

And you and I, at the end of it, have to pick a side after we hear them out and hear their

I enjoy this thoroughly.

They didn't like that.

That's so much cooler.

All right.

I give up.

Here we go.

Let's see what Jennifer and Joe have to say in Denver, Colorado.

What's going on, guys?

Yeah, I'm ready to buy a new car and my husband thinks I'm fine with the one that I have.

Wow.

Joe, what do you have to say for yourself?

She just wants to spend way too much on a new car.

Okay.

Yes.

Where are you guys at financially?

Yes.

No debt.

Love it.

And what's your net worth?

Yes.

600,000.

Okay.

Nope.

And what's the household income?

So last year we did 150.

And I got 10,000 in my business account.

If you were to buy this car, A, were you thinking of getting something brand spanking new?

And two, how are you going to pay for it?

Okay.

And I don't necessarily want something new.

It's just what I want just came out.

So I want to wait a couple of years until I can buy one a couple years old.

Can you tell us?

Highlander.

That's what he ended up getting.

I don't really know what that is.

I'm going to Google it.

Really great cars.

Okay.

So what is the car you're currently driving?

And it's getting close to 200,000 miles on it.

Okay.

Love that.

And what is he driving?

I'm curious.

And then we also have a 2020 Transit Connect van.

I'm self-employed, and so I use that van for work.

Okay.

Might be time for both of you to upgrade.

I know, right?

Baby step seven, living like no one else.

I know, that's right.

So I'm guessing you guys have a sizable margin in your budget now to save up.

How much could you throw every single month just to kind of a side savings account?

Yeah.

That's pretty impressive.

That's pretty simple.

So, yeah, I mean, we could save $5,000, $6,000 a month.

Obviously, we know Jennifer wants this $50,000 Toyota Highlander, slightly used.

In your book, what's something a little bit more reasonable?

Maybe not the Grand Highlander, but the regular Highlander.

This one I'm looking at is like $30,000 2023 Highlander LE.

Is that not the one?

Got you, got you.

Where'd you get that $35,000 number from?

Just your heart?

Okay.

Interesting.

We have a lot of information here.

I feel like I've been living like nobody else.

We're on Baby Steps 7.

When do I get to live like nobody else?

So tell me, when was the last time you did an activity that you would call a live like no one else?

The latter.

Yeah.

Where you're like, we dropped some money on this.

Yeah.

Okay.

So you guys are enjoying life.

Yes.

So we would say you've driven like no one else, now it's time to drive like no one else.

You've driven the hooptie Dave car, now it's time to drive the Dave car.

You know what I'm saying?

All right.

I know how I'm going to vote.

You keep playing.

Tell us more.

She's really playing it up.

Like you cannot reset my clock.

You can't tell what time it is in there.

I got my Apple Watch in the car.

I know what time it is.

It's fine.

That's not a big deal.

But I'm with you.

Okay.

Can I vote?

Are we casting votes?

Are you guys ready to hear the verdict?

The name of the person that we think is right.

Say the name of the person you think is right on three.

One, two, three.

Jennifer.

Yeah!

Jennifer, you just won a brand new.

I'm just kidding.

Wow.

A dinette set from Broil Hill.

Are you shocked?

I'm shocked.

Here's the thing, because I know this.

We bought my wife a new to us car.

It was a slightly used luxury car, and it hurt my soul, Joe, to write that check.

Yeah.

But I also knew this is part of living the plan.

But when you pay for it in cash, you go, oh, my gosh, that was a lot.

And then you go, this is paid for.

This is amazing.

This is a huge blessing, and it's why we lived like this for so many years.

And so I think you guys are doing the right thing.

Just so you know the parameters here, you don't want all things with motors and wheels

to be more than half of your annual income.

So that's where I'm going.

All right, $150,000 is your income.

Everything you own should be $75,000.

So even the $20,000 plus the $50,000 for hers, that would be $70,000.

You still got some wiggle room there.

Not too much.

Not too much.

And maybe you wait three years, and you get the Highlander.

But I think you go for it, and two years from now, and you get a two-year-old Grand Highlander.

And if you can't wait that long, then just go for a normal Highlander,

and you can always upgrade later.

Nothing says you have to drive this car for the next 20 years,

which is kind of how you guys have been living.

He was waiting.

No, you shouldn't spend more than $30,000.

But I think that will help you guys to go, okay, half of our income shouldn't be tied up in these things.

Yeah.

That means we do need to scale back because this transit plus the car Joe is going to get

plus the car Jennifer is going to get, it's going to add up to be a large part of our world.

And then once you hit millionaire status, you can go buy that brand-new car, and here's why.

It's not a fundamentalist thing.

It's just that too much of your world would be tied up in a depreciating asset.

But when you have a million-dollar net worth, you can stomach that hit on depreciation a little easier.

And so you guys will be there in no time.

How old are you two?

And I'm 56.

You've got so much time to live and drive like no one else.

And you know what, Joe?

I think it should be time for you to upgrade after.

What is your dream car, Joe?

We know that.

I actually love my truck.

It's got an 8-foot bed.

It's got the diesel, and I'm good.

Thank you, Joe.

All these new pavement princesses out here got the tiniest little beds.

I'm like, what are we even buying pickup trucks for anymore?

If you could spend $30,000 on anything, not a vehicle, what is your thing?

Like, what's your live like no one else thing?

There we go.

Now we got it.

Thank you guys so much for the call and for letting us have some fun.

Excited for you guys to make that cash purchase of that beautiful new-to-you car very, very soon.

More of your calls coming up.

888-825-5225.

This is The Ramsey Show.

You know, it doesn't take a degree in statistics to realize this one stinks.

93% of undergraduate private student loans are cosigned.

So when you're delinquent and drowning, Mom or Papa or Uncle Joe is stuck in that financial stress along with you.

But there is a way out.

Why refi?

Why refi offers a custom refinancing option with a fixed rate loan based on your ability to pay.

And the average interest rate why refi offers is 3.9%, which can significantly reduce your monthly payment and decrease your total cost.

Contact why refi at 844-2-RAMSEY or go to whyrefi.com slash Ramsey.

That's 844-2-RAMSEY or the letter Y, then R-E-F-Y.com slash Ramsey.

Why refi is not licensed by the California Department of Financial Protection and Innovation.

Why refi is not authorized by the New York State Department of Financial Services to service any New York loans.

Funding may not be available in all states.

Welcome back to The Ramsey Show.

I'm George Campbell joined by Jade Warshaw this hour.

The number to call is 888-825-5225.