Anyone Can Set Themselves Up for Financial Freedom
2024-01-19 01:56:02
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, this is the Ramsey Show. It's where we help you win in your life, specifically, win with your money, win in your work, and win in your relationships. Phone number to jump in is 888-825-5225..
That's 888-825-5225.
I'm Ken Coleman, George Campbell joins me. We're Ramsey Personalities co-host of the show.
Good friends, and I want to say, as we start, just a big congratulations. It is launch week. We'll talk more about George's brand new, soon-to-be best-selling book, Breaking Free from Broke, the ultimate guide to More Money and Less stress fabulous book.
Congratulations pal, thank you. Your first book launched this week.
It's been very humbling and overwhelming in the best ways.
Well, it's kind of like another type of baby and you're a new dad a lot, so yeah, it's a lot of similarities.
I had a baby about four and a half months ago.
Both keep you up at night.
That's true, I'm not sure which one was more difficult at this point, at least for me.
That's true, maybe the book at this point.
My wife will have a different story.
Thanks to Whitney, that's right. All right, let's get to the phones. We'd love to talk with you.
George is here to answer your money questions. I'll weigh in. I'm here to answer any questions around your work and making more money. George will weigh in on those as well. Let's go to Kelly in Indianapolis, Indiana.
Kelly, How can we help?
Hi hi, I have been kind of following the ransom plan, trying to follow it for maybe about a year or two. But I just have one last credit card I just can't quite seem to get rid of. I don't have a balance, but I'm just trying to convince myself to actually get rid of it.
I love this and Kelly. I break this down in the new book into eight different characters. So can you tell me which one you fall into? Is it out of fear, is it for the rewards?
Is it the convenience what is causing you to go? I can't cut this thing up.
I feel like it's more like, maybe the pressure of, like everyone said, you should always have one. Because you never know if you're going to get stuck in a situation where you're going to need it.
Okay, so for you, I'm going to call you the emergency shelter. That's the sixth personality in the book. I need my credit card in case of emergencies, right?
Probably yeah.
Okay, well, let me tell you there's a way better. Emergency fund, and it's where you become the bank instead of capital one, and that's called an emergency fund. Do you have $1,000 saved for Baby Step 1??
I do, I'm actually in four and six.
Wonderful. So how much money do you have in savings?
I have just a little over, like almost $11,000.
Amazing. Now, tell me when was the last time you had an $11,000 emergency?
Never.
Exactly so, a lot of this is paranoia. There's fear we have to deal with. And the other piece of the equation is you have insurance that will transfer the risk.
You have things called deductibles and out-of-pocket maximums, and so you're going to be protected and you don't need these credit card companies anymore. They were never your friend. And it's just a rubber crutch. And it's only a matter of time before they come knocking, saying, Hey Kelly, we'll come save you at 22 Apr.
Kelly is the $11,000. Does that represent three months, four months, five months, or six months of your expenses?
More like, closer to three.
Yeah, is there a number that? Let's say George and I were feeling like we could just cut a check here. Let's say we were having Dave's money here. We like to give Dave's money away.
I like that.
You and I have done it a lot in our role, that's true, we really have. Let's say George and I could cut a check right now and it would add to the $11,000 in your emergency fund. And when we cut that check and you deposit it, you would go, I'm cutting this credit card.
I feel so much better. Is there a number that we would add to the $11,000? be realistic here? What's the number that if? We wrote a check to add to the $11,000? Giving you a total of? In your emergency fund? Where you'd go? Okay, I don't need this stupid credit card, just curious.
What's that number?
I guess maybe another $9,000 to make it $20,000.
All right.
Now, George, you see what I'm doing there.
Absolutely.
I'll give it back to you, you're the money expert.
We just put some facts on the security gland, which is largely feelings, and we just said if you had $20,000, you would feel so secure. It would be a force field between you and life. And that would be more like six months of expenses, correct?
Yeah, probably.
So then I'm not saying you have to do that, Kelly. But I did a little experiment there because that's what George and I are trying to get you to. I think $11,000 is enough for you to cut the credit card up. That's what we think.
That's why we teach what we teach. We should have cut it up when you did baby step one, $1,000, that's what we teach.
But why not? Then? Why not put the $9,000 in? If that makes you feel better and it removes the temptation, I say, go for it.
That's the thing, Kelly. If you cut up the card today and an emergency happened, what would you do?
You would dip into the emergency fund.
Use the money.
Yeah, and that's what it's there for. And then once you use it, what are you going to do? After you use it? You're going to replenish it.
But you know what didn't happen, you never went into debt, you were never at the mercy of the credit card companies. Who are supposed to be blessing you with your 2 cash back and this emergency shelter? And so I'm going to encourage you to do the brave thing. And what's amazing to me, Kelly, is, as people have been reading the credit card chapter in my new book, they're telling me for years we couldn't cut it up.
And you finally coaxed us into it with all of the research and humor and every objection I've ever had. I address it in that chapter. So I'm going to send you a copy of the book and I want you to read that. And then send me a DM when you cut it up with a picture.
Can you do that for me? Sure, that's all I ask in return. So hang on the line. And then Austin is going to pick up and we'll make sure you get a copy of Breaking Free from Broke.
It's chapter three, specifically.
I want to do another little mindset trick if I might. George, I want you to join me on this.
You are like the David Blaine of the Ramsey show.
But Kelly, you said something at the start of the call when George was asking you, what's holding you back from cutting this up? And what you told him was what other people are going to say to me? Because other people in your life are saying, Kelly, you're a moron. They're not using that language, but that's how you feel, but they're going, Kelly. It's silly to cut the credit card up in case something were to happen.
And so you haven't cut it up because you're worried about what they'll say. But what if, what? If something happens? And when they hear about it, they're like, What, what did you do? You went, eh? I cut a check because I had it in the bank.
Or you said, Well, I kept that credit card, thanks to you, and I put it on the credit card. I got to pay it off quick because it's about 23 interest. Which of those two answers are your friends and family going to be impressed with the most? You tell me?
Probably the first one.
So Kelly, you're not going to be viewed as silly Kelly, you're going to be viewed as smart Kelly by the very people you're worried about. And being criticized by. True or false.
True.
There it is, and guess what, those friends are normal, Ken Normal's broke. We know 4 out of 10 people have nothing in savings.
25 of people have to use the credit card to cover the bills. That's not Kelly, you've unsubscribed from normal and fear is a terrible financial advisor. And so these credit cards, you know, using other people's money actually makes you feel less in control because your body's keeping the score.
It knows that you're not truly safe when you borrow someone else's money. When you don't use debt, you've got less stress and you become the bank. Kelly, That's what we want for you. We'll send you a copy of the book Breaking Free from Broke.
Let me know what you think of the credit card chapter and send me a photo, or, even better, a video of you cutting up that last credit card.
I love it, this brand new baby is coming your way, Kelly. For the rest of you, you can get it right now wherever books are sold or at ramsaysolutions.com. Don't move, we're just getting warmed up in frigid Franklin, Tennessee.
This is the Ramsey show.
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Welcome back to the Ramsey show. I'm Ken Coleman, I'm joined by George Camel and we are here for you this hour. 888-825-5225. George is taking your money questions.
I'll take any work-related questions because that has a lot to do with your income and your mental health and your emotional health.
It affects pretty much everything, considering how many hours of your life you spend working.
That's right, so I want to help you out in those areas. If you're thinking about some kind of transition this year, or you're just not happy there, you're trying to figure out, Do I start a side hustle? Is this the year to do it? Can I do it while I'm in the baby steps?
Any kind of work-related question? I'd love to help out on that, and George will as well. 888-825-5225. Let's go to Austin, Texas. Chris is there, Chris? How can we help?
Hey Ken, thanks for having me on man.
You bet what's up?
I've got a question regarding.
We're trying to kind of restructure our debt and everything. So fortunately, my wife did really well this year and her commission and bonus coming here in a couple months is going to be about $52,000..
Whoa way to go, wife. That's pretty phenomenal. You were pretty happy when you found out about that, weren't you?
Oh, absolutely absolutely.
So one of the big things that we're knocking down is the remaining credit card debt, which we have about $11,000 just under. With that, we're going to knock out. And then the next things we kind of want to restructure are our vehicle loans. So I own my own business, I'm in distribution beverage concentrate. So last year, about two years ago, it was pretty tough getting a rental car, a rental van.
So I went ahead and purchased a truck, ended up paying $63,000 for that truck at an $893 a month payment. And it's been fine because it's been overall savings versus paying $1,500 a month renting vans back then. But we're thinking about we're going to get rid of that truck, no matter what we do, because vans are available today. But we do have negative equity of about, I would say about $13,000 to $14,000 in that truck. Just because car manufacturers are getting competitive right now. And a new truck would sell for $3,000 less than the one I have with 44,000 miles on it. So my question to you two was, is we have a RAM 1500 and a Jeep Wrangler?
The RAM is $893 a month, and the Jeep Wrangler is $662.
So the first thought that I had was to go ahead and pay the negative equity on the truck and purchase a new vehicle. And we would basically assume a new loan on that new vehicle. So if we found a car for $25,000, we could go ahead and pay the negative equity of the truck of, let's say, $13,000..
Are you talking about the RAM, or are you talking about the van? Because I'm getting confused here? You said a van, and then I thought you said a RAM truck and a jeep.
Yeah, so I have a Ram truck and a Jeep. The reason why I purchased the truck was because I used to rent vans.
Okay, it took the place of a van.
It took the place, okay, I just want to make sure there weren't three vehicles in this conversation. So what you've been telling us is the RAM is the one that you've got the $13,000 to $14,000 negative equity on.
Yes, okay, go ahead.
So what I was thinking is we have two options. We can pay the negative equity by trading in the Ram towards a new vehicle for her. And we're setting ourselves a $25,000 budget. And then what we would go ahead and do is just pay that negative equity and then pay for that car cash. And then keep the Jeep payment of $662 a month. Or the other option was to go ahead and pay off the Jeep, which has a remaining balance of $16,326, and then pay the negative equity in the truck and put a bit of a decent down payment on that new vehicle and take out a new loan. Trying to get our monthly payment down to about $450 a month.
Well, George, I only want to weigh in on one issue. Okay, I just want to weigh in on the Jeep. Sure, those cars do not hold up well.
And so whatever your advice you're going to give him, I personally would pay off the Jeep and sell it or sell it if you've got.
Do you have negative equity on the Jeep or you got a little equity in that?
No, I have.
I'd say about $18,000 equity in the Jeep.
Dude, I'd sell the Jeep, those things, I'm not trying to knock Jeep, and I don't want to get any hate mail. But I'm just telling you I'd get rid of that. I'd sell that for sure anyway. George, go ahead.
The one issue that.
Oh, there's not an issue with it, it's just that. So the Jeep was a long-term goal for us to be able to even purchase one, and we use it.
We just had our first son about a year and a half ago. But prior to that, we use it about six times a year, going camping and going off-roading. And so we've made the commitment that this is the one vehicle that we're never going to sell. It's actually....
Oh, all right, there you go. Your reason for not selling it is because you use it six times a year.
Yeah, it's not a strong case.
Well, no, it's a daily driver, so we do use it to go to work and things like that, but it's a recreational vehicle in the sense that....
For six times a year, get you a little Honda Accord for the daily driver and go rent whatever the heck you want with your amazing income six times a year.
That's right.
So let's walk through the numbers. Let me figure out some options for you. You're getting $52,000 in the bonus, you're going to have to pay taxes out of that.
No, that's going to be gross income.
So you're going to have to pay taxes.
Sorry, not gross.
Net, That's net, okay, so let's say we are the only debts you have, the two car loans and the credit cards.
Yes.
Okay, so we knock out the $11,000 credit cards, we move on to the $16,000 wrangler that leaves you with $25,000, correct?
Yeah, yes.
Now we pay off the negative equity, it's another $13,000 out of that, leaving you with $12,000. But now you can sell the Ram and you'll get out scot-free. I don't think I would trade it in because the dealership's going to screw you on that.
I agree 100%.
So you're going to get way more private party and probably not be as underwater as you think if you do it that way. Yeah, and the dealership will convince you that you need a nicer car than the one you are currently looking for. And they're going to say, if you're going to spend $25,000, you might as well spend $35,000..
Get something new. That is how dealerships work. And so I would encourage you to not purchase it from that dealership. And instead search for a quality used vehicle that you can pay $12,000 for with the remainder in cash. Okay, and it's not going to be the prettiest vehicle, but what's your household income?
So just a standard salary, we're looking at about $138,000 a year.
That's good, dude, think about this.
Yeah, but he's getting good money for the Ram, George.
Yeah, but when you think about it this way, you spend $12,000 on a cash car, now you have no payments in the world, making $138,000. How quickly can you save up an upgrade in car and do it in cash? Versus trading in debt for more debt? But we're lessening the debt. I'm like, Dude, you guys make good money, you could solve this thing with this bonus.
What a blessing. Let's just be done with it instead of playing the debt game. Yeah, exactly. So that's what I would do if I was in your shoes. Because you're calling me, telling me, hey, we make great money, but here we are with payments all over the place. And you guys have been able to justify every single one of these, but I think we're done with justification.
I think we're ready for freedom instead.
Yeah, no, that's exactly where we want to get to.
You can find a $12,000 truck, it ain't going to be fancy, but for what you guys are using it for, it's a work truck, right?
Yeah, well, and I'm going back to renting a van when I do my job.
Yeah, he's not going to need it, it's going to be his driver, just his regular driver.
Then just get something reasonable for your daily driving.
Yeah, another reason that we're trying to get out of the truck, too, is our son. As he grew, it was a little easier when he has a baby to put him in the truck and everything. And my wife's actually pretty small and she has an issue getting him up in the truck. And she doesn't like it. She doesn't think it's big enough for her.
I relate to that.
Yeah, this is how Whitney treats George every time she has a hard time getting George up into the van. So they went to a sedan.
Sick of the booster seat? We joke, Chris. But I think we've got to start making decisions for what's best for our family 10 years from now. Instead of, hey, well, the kids and we've just got to make future-thinking decisions. And they all need to require cash and no debt. Once you take that off the table, it's going to change the decisions you make.
It's going to change your level of sacrifice, so you guys are. This is going to be all done so soon if you do it this way. But I would not trade debt for a little less debt. I don't like that game when you guys can get out of this scot-free.
Yeah, and get a sedan, get something, or a small SUV, whatever. You've got. One kid, right? George, did I get that right? So you know what's going to happen?
Kid's going to throw a peanut butter and jelly sandwich on the floor. You're right, all these young couples want to get the nicest car for their kids and toddlers. Let me tell you something, the amount of goldfish that are going to be in the floorboard and crammed between the seats, the smarty candies.
I could go on and on.
Pretzels. You'll be on a Lord of the Rings quest to try to find all the crumbs in that car.
Well, said.
Goodness, gracious. And by the way, they don't make the attachments on the vacuum cleaner that you need to truly get all this little goldfish.
Get it in all the nooks and crannies.
Yeah, it's not going to happen. Really good stuff, all right, don't move. We're going to take a quick break back with more of your calls.
This is the Ramsey show.
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Welcome back to the Ramsey show. I'm Ken Coleman. George Campbell joins me. Thrilled that you are with us. The phone number is 888-825-5225..
888-825-5225.
Taking your money questions, life questions, work related, your professional journey questions. We're here for you. This hour. Let's go to Joseph now, who joins us in Cleveland, Ohio. Joseph. How can we help today?
Hello, thank you for taking my call.
You bet what's up, Joseph?
I just recently started going through baby steps, I'm on baby step two. And as I've been starting to share my goal of paying off all my debt with family and friends, I've received a fair amount of pushback on why I shouldn't do that. And I wanted to see if you had any advice on how? I could have respectful conversations with my family and friends, while also being clear about my goals with them, man.
Well, you're not the first one to experience this. When broke people are giving you pushback about your financial plan, it means you're off to a good start. But, you know, I always love the quote the best revenge is success here, and so I think you just stop talking to them about it.
I mean, why do we have to have these arguments? Just go live your life, get out of debt. And when you've got peace and no payments and they're all looking at you going, man, you got a little pep in your step, what's going on, Joseph? you go, I got no payments.
And they go, I guess that plan actually worked, huh? What was that book? Oh, total money makeover. OK, that's how these things usually go.
So what kind of pushback are they giving you?
It's typically that I have a little bit of credit card debt and then the bigger one is my car payment. OK, so a lot of what I've received is well. You should keep your car payments over time so that you can build your credit and use the money that you could put towards that to do other things. And you share DNA with these people.
Ouch.
Yes, some of them. George, So not nice. But if you explain the credit score to them and you went, Hey, let's talk about this credit score idea. What do credit scores do? They allow you to get more debt?
And what is getting more debt do? When you play the game perfectly, you get a higher score, and what does that do? It helps you get more debt. And so, if your goal, Joseph, is to not accumulate debt. Because we know the pain that it causes millions of Americans, everyone's broke. Then I'm going to run the other direction.
And if they don't understand that, that's OK. Not everyone has to totally get what you're doing here, for sure.
Do you agree with them when they say these things?
No, because I can feel the excitement within me of the prospect of not having any debt and being able to save and do things.
And just the idea of trying to, you know, quote, unquote, wisely leverage debt or anything like that, just it sounds awful to me. So no, I don't agree with them at all.
So who is they? Do you mind?
Tell us who? Yeah, I have one of, like, probably like. My best friend has given me a lot of pushback. And I've kind of floated the idea of paying off debt to some family members that I'm close with, that I trust and do respect. But on this, we seem to have disagreement.
Yeah, is there another topic in life that you don't like to talk to anybody about? Or there's very few people you'll talk to about, like politics or something like that? I'm just curious, any other something you go? I just I don't want to get into that with people. Is there something like that for you?
I can't think of anything specific off the top of my mind.
This needs to be one of those things.
Okay.
I think you need to take George's advice, I think he's absolutely right. I think you need to stop talking to your best friend about this stuff, treat it like, you know, some weird conversation and you just go. I want nothing to do with that and I'm going to create some boundaries. I changed the subject.
I just think, and same thing with these other family members, if you disagree with them, then don't bring it up. Okay, I can just tell you without embarrassing any of my. There's a couple of my family members that I can't talk to about certain public figures. That's all I'm going to say. I leave the room.
I don't even want to, I don't even want to touch it, George, because it's just it's not.
It's a landmine. What's the point?
Well, but we're not going to agree, so we're past the point of fighting. I'm not worried about a fight.
But it's just a waste of time and emotional energy.
100, I'm not going to agree. Therefore I don't want to have the conversation and I think, George, this is one of those topics.
Agreed, it's why I don't talk to you about sports, Ken. We're not going to get anywhere, you're not going to teach me what a play-action pass is.
Because you'll never be able to understand it. That, again, is another waste of energy. There you go, Joseph, but I hope you get that, Joseph. So hey, you keep your eye on the prize.
Follow the baby steps. Because you believe in it and you believe that it's going to make a better life for you, and by the way, it's your life. And so I'll focus on that and just no more talking to everybody.
Unless someone pays my bills, they don't get a vote.
Yeah.
And so I'm just going to go, Thanks mom and dad, friend, uncle, broke, cousins. I'm good. I'm going to try this plan. And if I fail successfully by getting out of debt and it's terrible. I can always get more of it, but no one's ever come to me and said that.
So that's a tough one when people don't get what you're doing. When you're a salmon swimming upstream, all the other salmon are going, dude, we're going this way, man, this is the path, and you're like, No, that's a cliff, my friends.
And there's a giant bear right there about ready to eat you.
Bears love salmon.
Yes, they do. Capital one is the bear in that metaphor.
They're all heading toward the capital. One cliff.
Yep, those commercials are so winsome, they just make it seem so nice.
Well, you've got Jennifer Garner smiling at you.
She's the sweetest person on the planet. Good move getting away from Alec Baldwin.
100 yeah.
Let's go to Sydney in Atlanta, Georgia, Sydney. How can we help?
Hey, thank you for taking my call.
You bet Sydney, what's going on?
So I just need help with pretty much everything.
I'm 24.
I bought my first house when I was 20 for $97,000. It was just an older couple that wanted to sell it because they couldn't take care of it anymore. So I have a mortgage, I have a boyfriend that lives with me.
We have a daughter, she's a year old.
We have a car payment, you know, we don't have any credit card debt, but we do have, like a couple of small loans. We just can't seem to catch up, we can't seem to save anything, and I'm just tired of chasing and chasing and never being able to make any progress.
What's your income?
So I stay at home with our daughter. Because where we live, our daycare system around here is just not trustworthy. And it would take like half of my paycheck to pay for daycare anyway. So I stay home with her and my boyfriend brings about $50,000, but I do have a business myself. But that only made a whole whopping like $6,000 last year.
Okay, so you guys are making $56,000 and what do your payments add up to? Because so far, you've got some personal loans, the car loan and the mortgage if you added those up.
I have a car that's paid off, but it's always in the shop, so that's our only hesitation with selling his car. His car has $14,000 left on it, the house has $88,000 left on it. And then I have a part of my business, I have a sewing machine that's on a loan.
What's the sewing machine word?
It was originally like $1,500.
It's got like $1,000 left on it, but I'm planning on paying that off soon.
Okay.
As well as the computer.
How much do you guys have in savings?
We barely have $1,000 in savings.
Okay.
Whew.
Well, I feel your pain. Luckily, you guys have a small mortgage and so we're going to ignore that right now. If you added up the car loan and the personal loans on the sewing machine computer, are we talking $15,000, $16,000??
No, like I said, the sewing machine is only $1,100 left, and the computer is like $500..
Okay, cool, so it's about $15,500 is what I'm adding up to.
Yeah.
So here's what we're going to do, We're going to lay these out, smallest to largest. We're not going to get overwhelmed by the big picture and we need to get this income up. If that means your boyfriend is doing side hustles for the next six months to clean up this mess. Great if it means selling the car and getting something cheaper to get around in right now, great.
But this is a solvable problem. You make $56,000, We're trying to pay off $15,000. How quickly can we do it? How do we get that margin?
We've got to make more, we have to spend less. And if that means you going back to work for a little bit, even if daycare, you're going to net an extra $500, that's going to help.
Find a grandmother in the area that wants to make a little money, wants to get out of the house that you can trust. And she watches the child in your home. Go make more money. This is the Ramsey show.
Welcome back to the Ramsey show, I'm Ken Coleman. George Campbell joins me. We're here for You, America. Phone number is 888-825-5225, 888-825-5225..
This is big news, George. I've got to mention this because I just got the email a couple days ago. We've got a brand-new event entitled Total Money Makeover. Pretty good idea.
Total Money Makeover Weekend May 10th and 11th Named after the best-selling book that's ever come out of Ramsey Solutions, Dave's unbelievable classic Total Money Makeover. In one weekend, you're going to crash course on everything we teach about money, brand-new content from all of us Ramsey personalities. This is a great, great event because no matter what baby step you're on, it's going to fire you up. You're going to have a lot of q&a time with all the personalities and that's always really, really fun. We just get to hang with you.
Early bird tickets start at just $99, but this is only for a limited time. Get your tickets now at ramseysolutions.com slash events That's ramseysolutions.com slash events always fun.
I'm pumped for this.
Well, we have it here on our campus.
Rumor has it you could witness Smart Money Happy Hour Live with Rachel Cruz and I on Friday night.
And a special guest.
Ken Coleman.
I think it's time.
Is this the event? Are you manifesting this?
It's a soft pitch, but you have talked about having me on. And I thought to myself, I don't know if your regular audience wants the special guest that much.
I think it's time.
But I think at a live event, you, me, Rachel, cocktails and content.
If that's what gets butts in seats for the total money makeover weekend, I'm in.
I don't know that it will.
That is a great deal for an entire weekend event right here at the headquarters.
It'll be fun, I'm putting it out there, I won't lobby you. Thank you, all right.
Very good. Kayla's up in Atlanta, Georgia, Kayla, how can we help?
Hi, thanks for taking my call.
You bet what's up today, Kayla?
I'm a college student getting a biology degree. Initially, I was going to go to demo school, but I'm not really too interested in getting just a ton of student debt now.
Good for you.
I've always wanted to be an entrepreneur, so I prayed on it and I just decided that I wanted to start a clothing line. I took a business course and she was basically just telling how to secure business funding and stuff like that. I know how you all feel about business loans, but I created a business plan, but I didn't know that. They asked for collateral and stuff like that.
Right?
My parents aren't too interested in putting their house up for collateral. So now I'm just like, I don't know what to do now because I really do want to be financially free.
I'm glad you called, I'm glad you called.
You haven't taken any loans out, correct? No, okay.
Okay, so Kayla, business funding is just fancy for a loan, and now, you know that, can I just encourage you that you don't need a loan? Nor do you need a ton of capital to launch a business in America today. Now, the clothing business, I would tell you, that's a pretty high-risk, very competitive world. Would you agree with that statement?
Yes.
So if you were to go get a bunch of loans with a great business plan, all the collateral, all the things that you don't want to do, and you're right. By the way, you would still have a tremendous amount of risk, so how do we remove the risk by a small test? Now? Do you plan to design the clothing?
Yes.
What are you thinking in your business plan? Did you highlight two or three different articles of clothing?
Yes.
What were you thinking?
Like, just matching fits, I already talked to a manufacturer to find out how much it would be to get them.
Okay, what did you find out?
I think they were about $30 apiece for the matching top and the matching bottom.
So $60 for this matching outfit is this casual wear? What is it?
Yes, it's casual wear and no, together, they're both equal, up to $30..
Oh, okay, so your hard costs on both top and bottom are $30. And what have you found out in the market? As you were putting this business plan together? That this type of combo, this outfit? What's the wholesale or retail price?
About $115.
$115.
That's what your competitors are doing for something similar.
Yes.
Okay.
Well, it's a pretty good margin, but still you get into manufacturing. And I don't know if you've read the story. If you haven't, you should pull anything you can online. There's a lot of it out there. On Sarah Blakely's story, she lives in the Atlanta area, and Sarah is the founder of Spanx.
Have you heard of her?
Yes.
You need to read her story. There's a lot of hustle and effort on this, and my point here is you need to start smaller than right out of the gate with your dream item. I love the ideal item of the top and the bottom, and it's casual wear, and it's comfy, and we retail for $115. But there's a lot that goes into that. And you're going to have minimums that you're going to be required to upfront with. The manufacturer, manufacturing company is going to get paid upfront, or at least a portion upfront, right?
I'm not a super expert on this, but I know the basics and so I'm just walking you through this. So there will be some upfront capital and it needs to be cash. So to the extent that you can get out of college, start working. Save up a bunch of cash to get to a point where you go. Okay, I can at least invest this amount of cash. And I'm going to go with one or two items, I'm going to go online and I'm going to try some things.
That's the long term. What can you do in the short term with maybe some jewelry or a t-shirt, or a sweatshirt or something that you can test out online? I want to bring George in here because he really understands this world.
I weirdly do, and it's embarrassing, I'm holding back.
So I wanted to bring you in at this point and now walk her through what would be a let's call it, a low-risk economical test.
Well, the way I think about this, Kayla, is, you can't just get out there and be like, I have clothes for $100.
Why should they buy yours over the brand that they know? And so you need to create some unique value proposition here. And I would start by creating an audience. Do you have a big Instagram following?
TikTok following?
Somewhat yes.
So I would focus on that. And it doesn't have to be clothing you made. If you have good style, I assume you're very stylish and your friends compliment you on your outfits, right?
I think she sounds like she's very stylish.
So I would start doing Outfit of the day. Here's how I pick these outfits, here's the idea behind it, Here's my wardrobe. Here's some deals I found on clothes that I love.
And you start to become sort of a fashion influencer. Now, all of a sudden, you build up a following of 40,000 people. Brands want to work with you, you're getting money from that. Now you can launch your own line.
That's how all the people I've seen actually do it successfully.
And that's not going to happen tomorrow, right? This is a 6-month, 2-year, 5-year plan.
There's also no debt baked into that, Kayla.
Start small is what we're getting at start small, grow slow. This is not going to be your day job coming out of college. And I'm not saying that to shatter your dreams, I'm saying that to support your dreams.
Your day job will support this side hustle until you can get the boat close to the dock, to where that side hustle now makes more than your day job. Or close. And you can now pursue it full-time.
Are you tracking with us? Are we making sense?
Yes, I mean, at the end of this month I'm going to be getting my refund check, it's about $9,000. I was wondering if I should use some of that to invest into the business or whatever, but it's just that. My refund check does also cover my rent. So I was wondering if I should ask my parents if they can support me a little bit on the rent while I use some of the money.
Do you have any debt?
No.
And do you have an emergency fund fully funded?
No.
That's where that goes.
I think that refund just became your emergency fund once you have no debt and an emergency fund of 3-6 months of expenses. Now we can begin investing for the future, in retirement, in a roth IRA and for this business.
KAYLA Listen, I know you're grasping what we're saying, but you went right back to. I need to ask mom and dad for help to pay my rent so I can use. Listen. You don't need to use the $9,000 right now. That $9,000 as a safety net in the form of an emergency fund. For a graduating college student is phenomenal. You're ahead of the game.
No debt. Now, go get a really good-paying job, two or three paying jobs, and start doing what George is talking about. Where we test the idea of, Can I figure out how to sell clothing for a profit?
Post pictures of it and say, Would you buy this? or would you buy this and start to test this out? That's exactly right. We just took a call.
This week, this couple took out $200,000 in small business loans. The business failed. Now they're getting regular jobs and they're freaking out, and I don't want that for our friend Kayla.
Yeah, it's like a penalty for trying something that's not how it needs to be in America.
It just adds emotional and financial pain on top of the failure of the business.
Yeah, if you do it right, it's the American dream, not the American nightmare. But no debt. Folks, all right, good hour. Thank you George Campbell, thank you James Childs and all the guys in the booth that keep us on the air.
Thank you, America for listening. This is the Ramsey show.
Live from the headquarters of Ramsey Solutions, this is the Ramsey Show. It's where we help you win in your life, specifically winning with your money, in your work and in your relationships. I'm Ken Coleman, George Campbell, my good friend, is here with me this hour. 888-825-5225..
888-825-5225.
George will lead and guide on the money questions. I'm here to chime in on any of those questions, plus the work-related questions. Not happy in your work? want to make some more money?
Bigger shovel How do I make more income in 2024? I'm here for that as well. Also very excited. This is the last weekday of George's launch week, breaking Free from Broke, the ultimate guide to more money and less stress.
Look at that, that's a fabulous-looking book right there, the orange cover.
Thank you, Ken. Regardless of my face on it, the team did a great job.
You've got a great face, George.
Thank you, it's been a fun week, the feedback has been amazing, the reviews are pouring in. There was a guy on the live stream.
We did yesterday the q&a for the book launch, 51 years old, and he had tears and he was going. This book gave me hope that it's not too late for me. Wow, he's in customer service in Kentucky.
He's got some debt to pay off and I'm glad I could give him that hope. And I told him his name's Calvin. I said, Call the show today, so Calvin, if you're out there, call us up.
Hopefully, Calvin will call in.
Because I said, Ken's going to be able to help you with this work stuff, oh boy, and help you make more income. I hope so to clean up this mess.
I love it. Well, really good and very excited for you, George. It's going to help a lot of people. A new generation of people that never heard of total money makeover are going to really be helped with breaking free from broking. Appreciate that you can get it at ribsysolutions..com or anywhere.
Books are sold. All right, let's go to my old stomping grounds. When I worked for the governor of Virginia. Wow, Richmond, Virginia area is where Austin joins us, Austin. How can we help?
Hey, thank you so much for taking my call.
You bet what's up?
I've actually me and my wife. We're in a bit of a debt. But I keep seeing all this stuff about S&P 500. And how if you're in your 30s? If you start in your 30s, you can put like $100 a month and whatnot. And I want to know if that would be a good idea to start doing that, knowing that we're still in debt.
How much debt do you have?
$222,000.
Whoa?
That's a bit to you.
Wow.
What's that made out of?
$190 of it's out $31,000, yeah, $31,800 is a private loan and credit card. Okay, and plus my wife's car.
And then the $191,000 is for our house, and then I have $11,000 left on my car.
Okay, so we've got two car loans and credit cards and personal loans.
Just one personal loan and one credit card, Yes, sir.
Okay, and what does just the consumer debt add up to if you take out the mortgage?
Right at $43,000.
Great, so that's the number I want you to tattoo in your mind right now. How much money do you guys make per year?
She makes around $50,000.
I'm actually on disability, but I make around $19,000. I actually am able to do this delivery order thing. So I can make an extra $1,100 a month. So I make around $19,000, not including the $12,000 that's not guaranteed every month.
Okay, so maybe we'll call that $30,000.
So, around $60,000, $69,000.
Yeah, yeah, yeah.
So $30,000 for you, $50,000 for her, we're going to call that $80,000 and we've got $43,000 to pay off. So now this becomes a little math equation going, how quickly can we pay off $43,000 and make an $80,000, of course, after taxes? Mm-hmm.
Now, focus on the consumer debt instead of the mortgage and go. How much margin do we have outside of our normal bills that we could create to throw at this debt? Because I'm looking at this going, could you, after taxes, this become $55,000, $60,000 that you guys are working with?
Yes, sir. Okay, yeah, right around.
So we're talking $5,000 a month. What's your mortgage payment?
$1,450.
Okay, so once you subtract your normal bills, your basics, we're talking food, utility, shelter, transportation, insurance. Do you have an extra pile of money at the end of each month or are you guys in the red?
We're almost in the red. Yes, very, very close to it.
Because of all the debt payments.
That, well, the credit card is the main thing because the interest rate is outraging. So that's the main thing we're working on, but we can't work on it too much. So basically, every ounce of income I make outside, whenever I'm doing deliveries or things like that, I throw all that straight towards the credit card. Because the interest rate is so high and so little actually goes to the principal and the rest goes to the interest.
So talking about all this, do you see why investing right now is not a good idea?
Yes.
You don't have any money.
That's why I was so curious.
Do you know how you could get more money to invest?
No.
If you freed up all those debt payments, what would that add up to in your life? These consumer debts? That $43,000 free up all those payments, is that like an extra $1,000 a month in your life?
Oh, yes.
You could do some investing with an extra $1,000 and no payments, right? Yes, sir, so we're going to get you back to investing. I know you said you're in your 30s.
I'm 33 and my wife's 30.
Okay, I'm 34.
And let me tell you, you can pop onto our investing calculator and go all right. We're going to be debt free in two years, and then six to 12 months later, we're going to have a fully funded emergency fund. So you will be what, 36 years old by then. Yes, big whoop.
And you're going to be investing 15 of your household income, which for you guys is about $80,000.
So let's say $12,000 a year, right? Okay, and let's say you're starting with zero. I'm using this calculator right now to show you from age. This is pretty mind-blowing.
Yeah, I want you to share this because I'm looking at an eye-popping number here on your screen.
Well, okay, you ready for this? From age 36 to age 60, if you start with zero, and that's age 60, most people will work beyond that. $1,200 a month. Because, remember, you're going to invest 15 of your income, which is about $15,000 at 10 rate of return. Like you said, the S&P 500 on average 10 to 12 since its inception. You would have $1.5 million at age 60..
Holy, okay.
And that's if you start three years from now. Austin But can I tell you what most people do? Most people keep fiddling with debt, they're investing 2 3, putting money in acorns and some spare change, hoping they're going to have money one day. Instead, our plan says, Hey, one thing at a time, focus on the debt, focus on the emergency fund, then we can get to investing with a vengeance.
So that's what I want for you, and I think you'll get there in no time. But continue getting that income up. That's a huge part of it.
So can I do a little exercise with you? Let's do it. And I'm trying to think of the person who's maybe listening going. I'm not young, I'm not 33, 34, let's put in age 50..
Okay, let's make up, let's take 50 to 67. Is that fair?
Age 50 to age 67.
Okay.
And let's take a reasonable salary. The 15, what do you think is the right number?
I think 70 grand is the average in America for a household.
70 grand, okay.
So we're talking 15 is 10.
5.
10.
5.
Which is, Ken, if you're doing the math at home, going to be $8?
75 a month, so $8.75 a month. Let's say you started with zero.
At age 50.
At age 50, you start with zero and you invest $8.
75 a month At 10, you would have almost half a million dollars.
That's extraordinary.
At 11, over half a million, at 12, you would have almost $600,000..
Thanks for doing that because I want people to understand it's not too late. You can really make up some ground and that's on a very reasonable number there. So really fun stuff.
Yeah, most people in their 50s are at the top of their salary.
Yeah, absolutely fantastic. It is doable. Great call Austin. You guys are going to be okay. Just follow the plan.
All right, don't move. I'm George, actually, I'm Ken Coleman, I'm George, you're George Camel.
I don't know what's happening. I'd love to be Ken.
I know one thing this is the Ramsey show. We'll be right back.
Welcome back to the Ramsey show. I'm Ken Coleman. George Camel joins me. 888-825-5225 is the number. Thrilled that you're with us.
Grace is joining us now in Jacksonville, Florida. Grace, how can we help?
Hi, thank you for taking my call.
You bet?
So I'm calling for two reasons today. The first are my best friends. Alyssa and Brian completed baby step number two today, so I wanted to give them a shout out.
Aw, what's their names again?
Alyssa and Brian.
Alyssa and Brian Way to go, you guys are rock stars.
Congrats on debt freedom, hello.
Absolutely, but my husband and I actually have a question as well. We've been working the baby steps and we have two paid off vehicles, a car and a truck. We have a baby on the way, so the truck won't be conducive to our family. We are wondering if we should sell the truck and throw the money at our student loan.
Could you just live with one car? Is that the plan?
For a bit until we save up to pay in cash for our next vehicle, I think we could do that, yeah.
Okay, what's left on the student loans?
Well, so far, we've paid off $100,000 in total between our cars and the loans, and we have $40,000 left.
Awesome. So this will be knocked out pretty quick. What's your household income?
Household income is $150,000.
Love it. And what's the truck worth?
The truck is probably worth $16,000 right now at the low end.
Okay, so if you sell it for $16,000, it'll knock your student loans down to $24,000??
Yeah, that's correct.
Okay, so it'll just help you speed this up, but it's not going to be a—you're not knocking it out completely. Do you have any other savings?
We have our emergency fund and that's about it. We're full-blown doing the baby steps.
Okay, because one thing I'm going to mention is, while you're having a kid, we call this stork mode and we tell people, Hey, pause. The debt snowball. And you need to save up and just stack up cash until mom and baby are home healthy, so that you have money to cover any unexpected medical expenses.
Okay, so I might hold off and save up as much cash as you can. When's the baby due?
The 4th of July Woo.
Wow, very exciting.
Ken loves that he loves Independence Day.
I'm trying not to break out into the star spangled banner right now.
Where's Lee Greenwood when you need him?
Yeah, don't get me started.
There we go. So I think you guys are on to something here. Selling the truck if you don't need it, and I would stack up as much cash as you can, and then at that point we can sell the truck. We can clean up the student loans and making $150,000, do you guys just have the student loan payment right now?
Yeah, that's it, that's our only debt.
Okay, awesome, we do have a mortgage, sure? Well, I think I would set a goal for how quickly you're going to clean up the student loan.
I mean, it would be amazing if you could clean up the student loan and have the emergency savings by the time baby's here. Depending on what your income is doing.
Well, we're tracking having the student loans cleared right about when the baby's here or shortly after. We pay about $40,000 or $4,000 a month.
Okay, that's how much you're able to throw at it.
Yes.
That's fantastic. Well, if you can sell the truck, clean up the student loans and have an emergency fund in place by the time baby's here, then I would go with that plan.
That's the goal.
That's a fun, aggressive goal. Yeah, you guys are on track, love it, that's exciting.
Love it and love the shout out for their friends, that's really cool.
That's a good friend right there.
That's a great tribe to be a part of. People that are getting out of debt and taking control of their money. Let's go now to Salt Lake City, Utah. Grayson is on the line, Grayson, How can we help?
Hey, so I've listened to your guys show just a little bit here and there, seen videos on Facebook and that kind of thing. I feel like it's a lot of times about these big debts and those kinds of scenarios. Me and my wife, we're young, we're just trying to get started, we're both in school. And we're trying to figure out the best ways to get into a routine budget and get started on investing and that kind of thing, setting long-term goals.
Cool, So where are you guys at financially right now? What's the household income?
Yeah, so it varies on a month-to-month basis, just because we both work part-time and hours vary a lot. So as I look back over the last couple of months, it's probably somewhere between $2,500 to $4,500, give or take.
Okay, and that's your net income or gross.
Yeah, net.
Okay, cool, and what are you guys doing for work?
I ref high school basketball, and my wife works as a CNA for a senior care center.
How much do you make refing high school basketball?
It's $62 a game, actually.
Okay, and you're a full-time student, did I hear?
Yeah, okay, all right. When will you both graduate?
Next spring, if everything goes on track.
Okay, and then your incomes will go up after that.
Yeah.
Cool, And how much debt do you guys have?
The only thing that we have is my car and my parents. They bought it outright for it in cash, and I've just been paying them ever since. And there's about $9,000 left on that.
And you just owe that to your family, with no real terms and conditions.
Right, yeah.
Okay, how much do you have in savings?
$8,500.
Oh wow, well, this debt's almost gone. Once you got $10,000, I'd pay that off and have the $1,000 left for your starter emergency fund.
Okay.
And that'll clean up your debt, right? So you both would have no debt at that point.
Yeah.
Okay, and then we can begin to build a fully funded emergency fund of three to six months of expenses. So looking at your budget, I would go through all of the expenses. Add those up for one month on a given month. It costs us $3,000 to cover all of our basic bills. Let's have six months.
That's $18,000. We need to focus on saving up. Okay, that's probably going to take you guys another 12 months.
Sounds about right, yeah.
Okay, so about a year from now, you're ready to invest because you have no payments in the world, and you have a bunch of money ready to protect you. That's going to feel good, isn't it?
Yeah.
And you said, You guys are young, how old are you two?
I'm 21.
My wife is 19, she turns 20 in a couple weeks.
Oh, my goodness, think about that. 22 and 20 years old, no payments, fully funded emergency fund. You're graduating, your income is going to go up.
Now we can begin investing 15 of our income at that point and really start to build some wealth.
That'd be nice.
Yeah, and you talked about starting your marriage on the right foot, Goodness, gracious man. Having no debt payments and an emergency fund is going to help you avoid about 90 of your marital fights.
That's the goal. We've wondered, too, though, with both of our work situations, we would really like to get a second car. We've been holding it off, obviously, as much as possible. Because we don't want to go into debt, but we also like having a savings account that we can just have in case we need something. What would you guys recommend in that scenario of, you know, if we need a second car, how do we go about getting one?
You need more money, you buy the car you can afford in cash, and if you don't like that car, you need to keep saving. And you need to keep living off one car. But those are your only two options. Do not go into debt.
So one of the things that will help you here is because we say things like that and you go, OK, I get it. But what you need to start looking at is what would $7,000 buy me? I'm randomly picking a number, what would $10,000 buy me, what would $12,000 buy me in Salt Lake City?
Start shopping, OK, you can go look at used cars, go under $15,000, under $10,000, under whatever and just begin to go, OK, ah, all right. So now we have a target because it's really hard to chase something that's not clear.
And so if we go OK. I saw a couple of cars and I think I think, Babe, if we come up with $10,000, we're going to get you a great car or whatever. OK, now we have a very clear goal. So now, all of a sudden you go, What must I do to get $10,000 extra in cash? Well, I'm going to be reffing more basketball games or I'm doing something different, you know, I'm selling anything that I've got or whatever.
So now we go, OK, we work backwards, it's just reverse engineering. Good $10,000 car, $8,000 to $10,000 is going to get us a pretty solid car for us, so that's what we've got to come up with. And so now you have a very clear, attainable goal.
That's how you accomplish stuff like that. Got it?
Yeah, that makes sense.
All right, you're a sharp young man. Congratulations on being in a situation like this, with a young married couple their whole future in front of them. George and in good shape.
Yeah, 21 years old, that's amazing. He's getting this stuff now. If he actually does the stuff we just taught him, he's going to be a multimillionaire with a wonderful marriage.
Makes me think back to the last segment, when you got out the old investment calculator. They are not far from being able to invest and just really reap the benefits.
I thought, for a second, you were about to go coach some basketball. Ken. You're like, Hey, this is a good side gig. I'd love to see coach Coleman out there.
I mean, look, $62 a game isn't bad, but he needs more money than that. This is the Ramsey show. We'll be right back.
Welcome Back America, you're joining the conversation here on the Ramsey show. I'm Ken Coleman, George Camel is with me and we're here for you. 888-825-5225, 888-825-5225..
The Ramsey Show Question of the Day is brought to you by Neighborly. Your hub for home services, Neighborly, offers a helpful reminder maintenance checklist that's not written, right? You can download it for free at Neighborly..com. And for the more challenging stuff in and around your home. And that's basically everything for me.
Everything, George is an extra challenge for me.
Everything is a challenge for us, Ken.
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Com Slash Ramsey.
Today's question comes from Jason. In Virginia. My wife and I have taken the FPU class, we have no debt and we own a home worth $270,000. I feel like the focus of your programs are directed toward people who live in upper middle class.
We live in the country, we homestead, we grow a lot of our own food, and I work full-time and side jobs. My wife cares for her elderly mother full-time. We hire assistant care to give my wife one day a week to get out of the house.
But when I look over the list that I'm supposed to be living up to, I feel as if I have failed. I've never worked a job that has a retirement plan, I've never had a large income. I feel God has blessed us, but my present retirement plan is work till you die. Wow.
That's a strategy.
Well, let me say this before you break the money part down, you know? I believe we were made to work. And I think that there's certainly in the older season of your life, you certainly want to downshift. Yes, but not doing anything. Working to a point to keep your mind active is certainly helpful. So I understand we were talking about this the other day, Stacy and I with our retirement planner.
And he's like, Ken, you're going to work until you're 70.
And I go 70, like I want to be putzing around, driving around, still putting a suit on, trying to get myself together in the morning, to go do something, speak, communicate something. Well into my 70s. So to that end, I don't want to poo-poo this idea, but it sounds like there's a cynicism to it. Yeah, something's off here.
Or I'm going to have to work until I die, which is different. So he says, he's taken FPU. They have no debt, they have a home worth 270, He says. He's never worked a job that has a retirement plan.
Let me make it clear to everyone out there. Just because your job doesn't have a retirement plan doesn't mean you shouldn't be investing or that you can't invest. There are lots of ways to do this if you're self-employed. There's SEP IRAS and solo 401ks. Anyone with earned income can contribute to a Roth IRA or a backdoor Roth IRA if your income's too high.
And so there's no excuse to just not be investing. There's even taxable brokerage accounts outside of retirement that you can just shovel money away to grow with compound interest. So I don't like this idea that well, I don't have a retirement plan, so I don't invest. So we need to start. I don't know how old you guys are.
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