Don’t Be Middle Class Fancy (aka Broke)

I'm George Campbell, joined by the one and only Jade Warshaw, and we're taking your calls at 888-825-5225.

I know y'all are DMing us all your questions, and I say, call The Ramsey Show.

Okay, I can't sit here all day in the DMs. This is where we answer the world's questions.

So call us up, and we will help you. Zachary has chosen to do so, to kick us off. He's in Madison, Wisconsin. What's going on, Zachary?

And my wife, she doesn't have a retirement plan, and we don't have any debt right now. We have about $200,000 in savings.

And we don't have much of a retirement, and we were looking to buy a house, but we didn't know whether to just put all of our money that we have in savings into our retirements, or to try and buy a house.

Right now, we have a Roth IRA. I have about $50,000 in that, and then she has like maybe $20,000 in hers.

So your luck is not lost, and those Roth IRAs are retirement plans. So you do have those options at the very least right now while you're doing this travel nursing.

I imagine you're going to eventually be in a more stable situation with work?

So you could be investing, you could just put all this into a house. I would recommend a mix of both.

Trying to talk her out of this guy.

So that's kind of what your aim is.

And if you were looking to put $150,000 down on a $350,000 house, I'm sure you'd be just fine.

Because I do want you to keep, you said you had $200,000 saved. I do want to make sure you're saving out 3-6 months of expenses.

And that you're not thinking, hey, I'll just dump this whole $200,000 into a mortgage because houses come with upkeep.

And so you want to make sure you go in with 3-6 months of expenses into that just as an emergency fund there.

So the retirement doesn't include, it's not included in that $200,000, so it's all liquid in the $200,000.

Do you recommend setting any of that aside to put into a longer term retirement?

If you said to yourself, listen, I'm going to, like I said, I'm going to keep out $40,000 of this for 3-6 months of emergency.

And from this point on, I'm investing 15%.

You could do that. How long did it take you to save the $200,000? I'm curious.

Because kind of as a rule of thumb, we also say if it's going to take you more than 2 or 3 years to save up a down payment,

you should probably start investing something. So how long did it take you to save this $200,000?

and the rest can become your down payment, that leaves you with $146,000 to put down.

And then you can start crunching these numbers to go, hey, we can afford a $400,000 house right now.

Or we can wait another 6 months and bump up to $450,000 if we keep saving.

And so you guys are in a position where you have those kinds of options.

But I would at least start the search. And you can get connected with a Ramsey trusted real estate agent

who sells a whole bunch of houses, and they know what they're doing in this weird wild market,

even in your area in Wisconsin, and they can help you get your homework going

to see what you can actually afford and even start getting some game plan of what you're going to do

and what you're going to buy.

and then another $34,000 in Robinhood.

That app makes it so easy. Those apps are made to take your money, not make it.

So be careful. I would move it all to high yield savings, including your emergency fund,

and you could be making 4-5% guaranteed without making a stupid decision because of an app notification.

Like, listen, you may as well put it somewhere where you can get a little return on it.

So, pretty good couch money right there, my friend.

You got it.

You got to ease my nerves on it. I appreciate it.

You bet.

I mean, what a problem to have. $200,000 sitting there. We want to buy a house. We know we should be investing.

But, hey, no debt to pay off.

My house is too expensive. I don't have anything saved in retirement, which we hear that every other call.

We have these goals. We have no debt except the mortgage.

And I said, what's the mortgage? He said, it's a million dollars.

And they made $160,000, which is a great income.

But he said 60% of their take-home pay was going toward the mortgage.

Because they got a little starry-eyed while zillowing.

Yes.

And they went, well, woe is me. The housing market's crazy. Let's just buy our dream home now.

Yeah.

And the dream home becomes a nightmare.

That's costing you way too much to live in.

I wouldn't leave my house. I'm like, I pay too much for my mortgage to ever leave.

Do this so that it's a blessing, not a burden.

This is The Ramsey Show.

Welcome back to The Ramsey Show.

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

And we're taking your calls at 888-825-5225.

Chris is up next in Cincinnati.

Chris, welcome to The Ramsey Show.

Woo-hoo!

Yeah, super excited.

And we've been paying off debt very consistently, putting back a lot of money.

We are looking to get rid of the motorcycle that I currently own,

which I am upside down on.

And in our order of debt, it would be second to the house.

So, I was wondering if I should, since we were trying to get rid of it,

if I should skip the credit card and truck payment and move straight to that and chip away at it,

or if I should just continue to follow the order?

I mean, the point of listing the debts from smallest to largest,

it's more psychological than it is me getting my hands on more money in one moment,

because you want to feel those wins.

My question for you is, this motorcycle, what do you owe on it, and what is it worth?

Okay. What's the payment on it? Just curious.

You've got a Jeep.

Do both you and your wife work outside the home?

and your wife's probably going to be going on maternity leave if not already soon here.

I would sell this truck for $30,000, and you've got $10,000.

If you wanted to just pick up a cash car, if you needed it, you could,

but you don't necessarily have to because I have a sneaking suspicion

mom is going to have a baby. She's going to be at home for a little while.

They can probably make the one-car thing work for a while.

He could knock out this $4,300 credit card and have some money to put towards

the upside-downness of this motorcycle for when he does sell it.

We're going to use the $10,000 and maybe take six of that and get a used car for now

for you to get around in. You leave her with the Jeep until baby's here,

and then stack up cash until baby and mom are home safe.

Once that happens, you may have enough to get rid of this upside-down motorcycle.

Right.

That's probably what I would do in that order.

If you could find an even cheaper car, I'd love you to knock out the credit cards

and then just stack up money until mom and baby are home.

I would never tell you to do something I never did.

When I was pregnant, we had one car because we sold the other one.

I'm just saying it's an option to you.

It just depends on how quickly you want to go.

Carpool, whatever you've got to do to get by for a little while.

Right.

You've got some options.

What's your household income?

Her plan is to eventually return to the nurse in a nursing home.

I believe her game plan is to go back to work.

Are you guys doing any investing right now?

I wasn't sure if we should.

You're right.

and that would free up some money as well.

You can then start throwing into savings.

And think how quickly you could.

I mean, the $10,000 aside, because there is a world where you just keep that $10,000 sitting there

until the baby is born, you don't do anything.

And that's probably the best choice here.

But even with that $575,000 cleared up, think how quickly once baby is born

and once everything's back up and running.

Think how quickly you could pay off this credit card, close the gap on that motorcycle.

There's just, it's so much money.

That's right.

Making no other sacrifices.

Okay.

So it would be smart then to, once that is all out of the way, what you guys just talked about,

to chip away at the bike until it's down to what it's worth and just sell it and break even as far as...

And the other option you could do is go out and take a smaller loan against the difference

with a credit union to get out from under this sooner.

Because you don't even need the motorcycle.

You don't need it for transportation.

So you don't need to go get another one.

So at least you'll be $14,000 in debt instead of $31,000 in debt.

That's going to make your snowball a lot bigger payment-wise too.

That's when we're turning the keys to start doing real things.

Right?

Yeah.

Okay.

I love it.

Congrats.

Great.

You know, I want to give you guys a little baby moon gift, if you will.

I'm going to gift you guys Financial Peace University and every dollar to give you guys a little bit of hope,

a little pep in your step as you make this journey, grueling journey of not only getting rid of this debt,

but also a third trimester.

That's a real one.

That's a real one.

Tempers flare, George.

There's a lot of emotion.

I enjoy the nesting phase because I like organizing.

So I was like, finally, game on.

She's ready.

Let's do this thing.

You know what I did enjoy was she got real into sugar in that third trimester.

And so it was like ice cream and Oreos again.

I need to get my own pint.

Husbands, this is a real advice.

You're here for the financial advice, but you stay for the third trimester advice.

Yes.

That is-

But that is a good financial piece that people don't think about.

We call it stork and storm mode.

That's right.

Only time to pause the baby steps, pause the debt snowball, is if you're in a major storm.

I'm not talking about a flat tire.

I'm talking about a major medical event, a job loss, where we got to go, hey, we got

to pause and save up.

And babies fall into that category.

Because when things go right, it's wonderful.

But it's when the medical bills start to stack up.

And you were in the hospital for more weeks than you thought.

And you didn't think about insurance not paying out 100%.

That's right.

And what your deductible and out-of-pocket max is.

And so all of that adds up.

But if your deductible is $5,000, you know you're going to hit it when you have a baby.

So it's worth talking about, you know, making sure you've at least, at the very least, got

that deductible in cash ready to go.

Because you're going to be handing out some cash when you have a baby.

Yes.

It's on the insurance company now.

That's important.

More of your calls coming up.

888-825-5225.

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Welcome back to the Ramsey Show.

I'm George Campbell joined by Jay Warshaw.

Our question of the day is brought to you by Neighborly, your hub for home services.

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He says, I'm 18 years old and earn $42,000 a year.

I got into an accident this week and totaled my Camaro.

I'm expecting the insurance settlement will be about $10,000 and I still owe $6,300.

The problem is I want a new car, don't we all?

I'm into muscle cars, aren't we all?

And found a 2023 Mustang for about $46,000.

My parents said it's too much. Thank you, parents, for what I'm making and for being so young.

I'd like a second opinion from you.

Listen, we'll give you a second opinion, a third, fourth and fifth, because I'm sure the booth guys probably agree with us.

This is not a good situation.

The world is my oyster and I can easily make a $650 payment. That's what he sees.

And so I get it, but he asked for an opinion.

Nobody looks at a Camaro and goes, I hate that.

I actually did the math for him, Jade.

What is it?

He'd be paying, get this, over $12,000 in interest alone.

$42K. And by the way, once you pay it off, it ain't worth close to $58K. It's probably worth $25K.

That's a good fact.

Because new cars, on average, lose 60% of their value in the first five years.

You know what's funny? These car dealerships are so smart, Jade.

They talk about loans like they're babies.

It's like, how old's your baby? She's 84 months old.

Just say it's a seven-year car loan, because that makes you think twice.

In terms of months, for like, I don't know, 84 months?

A month is only 30 days, Jade. This will fly by.

He's like, listen, I'm getting $10,000.

He owes $6,300 still.

I only owe $6,300. It sounds like after he applies the...

Well, the way I read it was, he's getting $10,000. He owes $63,000.

So he'll come away with $4,000 or whatever.

$3,700.

Yeah. That he can use as his down payment on this car, is what I'm thinking.

I don't think it's that he'll owe $6,300 after the fact.

But even still, no matter how you slice this...

It's stupid.

I'll just replace it with a brand new car.

And for what I've been through, I should be able to get what I want.

And that's not it.

If you've got $3,700 or $4,000, just buy a car in cash and slowly trade up.

Think of this as an opportunity to not go into debt again.

Because I'm guessing the Camaro that you had before, clearly you had payments on it.

Because, you know, there you have it.

And see what life is like without a car payment.

Think about all the things you could do.

My guess, like I said before, is you're living at home.

Think how quickly you could save for the car that you want, making $42,000 a year.

At 18, that's amazing.

Instead of trying to level jump.

Yeah.

This kid's very smart in a lot of ways.

But you have to be ultimately smart that you don't kind of go, oh, you know, get too big for your britches.

And think, listen, I'm doing good for myself.

I can just jump into debt.

Because debt is...

It's interesting.

When I was that age, I remember thinking people who had cars...

Let me be real.

I thought people who leased cars were like...

Wanna be a baller.

That's what I thought.

I'm like, if you're leasing a car, if you've got a credit card and you've got like a $15,000 limit,

I thought that that's what you were supposed to aspire to.

And I learned the hard way that all that is is a facade.

And what's behind it is stress, anxiety, payments, the inability to get ahead.

And I'm like, okay, you're unemployed and you live with your parents, bro.

Like, let's not pretend.

Right.

Like that owning a vending machine is you being an entrepreneur.

Okay?

I mean...

Goodness gracious.

But that's okay.

I'm right there with you.

Anyways, Lucas...

Get off my lawn.

Don't do this.

Please.

Don't do this.

You make $42K a year, save up and pay cash, get you a little hoopty until you can upgrade in cash.

Yeah.

That's what I did.

Uphill both ways.

Good job, George.

Good job.

That's good.

You paid cash for it.

I had goals.

I love it.

So there you go.

There's your question answered, Lucas, if that really is your name.

All right.

Moving on to the phone lines.

Bethany is in Salt Lake City.

Bethany, how are you doing today?

How are you?

How can we help?

We're definitely planners.

So, so far what we've been doing is we've been trying to put all of our savings into various thinking funds, but mostly focusing on a deposit for a house.

But now that I'm pregnant, I'm wondering if, should we totally pause on the house and only focus on building like a baby thinking funds and the health, like our health bills funds, or should I equally doing all of them?

I'm just not quite sure what to do.

Uh-huh.

And that may delay the dream of homeownership.

It may not.

We just have to wait and see.

But are you guys debt-free with an emergency fund right now?

Where are you at financially?

So we're debt-free.

We're a single income household.

My husband works.

We have about four months saved on the emergency fund and about $25,000 in our home fund.

Okay.

And then once baby and you are home safe, we can unpause the dream and see where we're at with our savings account.

I'd want six months.

With a single income family, I'd bump that emergency fund to six months.

Then whatever's left over becomes your down payment fund.

I'm not far along now, so I figure we'll try and do what we can.

But if we get closer, should we take money out of the home fund to put in those other places?

Yeah.

Yeah.

It's just a matter of labeling it differently, right?

You've got $50,000 total, whether it's $25,000 and $25,000 or $30,000 and $20,000.

The goal here is to have six months.