This Is Why You Don’t Let Fear Drive Your Financial Decisions

Live from the headquarters of Ramsey Solutions, this is the Ramsey Show, where we help you win in your life. We want you to win with your money, we want you to win in your work, and we want you to win in your relationships. And so we take your questions. I'm Ken Coleman, George Campbell joins me this hour. The phone number to jump in is 888-825-5225..

Yeah.

And you have self-designated as the Root Beer, and so that leaves the vanilla ice cream for me. We'll see how it goes today, but we do enjoy being with you. We enjoy having fun while giving you advice. That's the goal. So you ready to go?

I'm excited.

All right, Jonathan starts us off in Pensacola, Florida. Jonathan, how can we help?

Hey, gentlemen. Thanks for having me on.

You bet. What's going on?

I had a quick question. I'm trying to consolidate my snowball for paying off my debt, and I wanted to know how to properly break it up. So I have a student loan, a credit card loan, and then I have a medical debt, but the medical debt is going to the same collection group. It's just. they have it in two different accounts, and I wanted to know, on my snowball, do I separate that debt into two different accounts?

Yes, and they have different payments?

They're to the same people. They're two different accounts.

Okay, with different payments. So one has a $200 payment, one has a $500 payment?

Yeah, basically.

Okay, then I would keep them separate, because the key with the debt snowball is that you keep them separate on purpose. You said the word consolidate, which is meaning to bring together. I want you to keep them separate so that when you free up a payment, you roll that next payment into the next debt, and you feel the momentum faster. That's the psychological win of the debt snowball. So if you just laid out the balances, smallest to largest, regardless of the payment, which one would come first?

The $3,000 one.

Perfect. Followed by one of the credit cards, I assumed. Are these multiple cards?

No, it's just one. It's a little over $6,000..

Okay, followed by your $10,000 medical, followed by a student loan? Yes. Nailed it. Okay, so that's the order you want to attack these. Make minimum payments on all of the debts except for that smallest medical debt, and throw as much as you can extra to that debt until it's knocked out.

Oof. I mean, I could have it done by the end of the year, for sure.

End of the year? $3,000 is going to take you all year long?

Uh...

What are you making?

Maybe not. Annually, I bring in a little over $48,000 a year after tax.

Okay, what are you doing for work?

I'm a pastor.

All right. Well, can you do things on the side, like officiate weddings or funerals, and get some honorariums for that?

I do some things on the side already. There's another... What I bring from pastoring is a little over $38,000.. There's another $5,000 I do in cleaning work that I do.

Okay.

And I do hospitality events as well. Great.

All those side hustles are going to help you create more margin. That's what you need right now. Because if you don't have an extra $500 or $1,000 to throw at this debt, then something is wrong with your expenses and your income.

Right.

So that's your next goal is to free up as much as you can to throw at those debts. And we'll help you out. I'm going to give you one year of every dollar premium so that you can lay out your debt. snowball, track every expense, track the transaction, connect to your bank account, and feel the momentum of this snowball.

Oh, thanks. I appreciate it. Thank you.

Absolutely. Thanks for calling in.

There you go. You were starting to get a little agitated there, but you pulled it back. I thought maybe you're going to challenge the pastor with some type of parable, maybe a little biblical challenge.

Oh, I should have done that.

Because I think he can get there.

But he can out-pastor me. He knows a lot more verses than I do off the top of his head.

I know. I thought you were going there. You didn't, but that's okay. It's risky. It's a first call.

We're only one call in. You don't want to break out Proverbs 22,, 7 too early.

You don't. All right, let's go to Palmer next in Raleigh, North Carolina. Palmer, how can we help?

Hey, my question is basically, should my wife and I take money out of our retirement account to pay off our house?

Are you of age? Good sir.

Yeah, I'm 62 and my wife is 61..

Okay, and what's in the nest egg?

We've got about $650 in the nest egg, and there's about $82 left on the house.

Are you working now?

Yes, yeah. We bring in probably about $130,000 between the two of us a year.

And how long would it take you to pay off the house from today to? what would be the payoff if you just kept paying it or got aggressive towards it? What's the quickest you could pay it off, the $82?.

Well, the normal payments right now would be another 10 years.

Yeah, but that's not...

But if you put extra, because I'm guessing you guys have some extra margin.

To be honest with you, I have no idea. I don't...

I think your next homework assignment is to make a budget with your wife and go, how much money do we have if we follow this plan to put towards the mortgage principle on top of our normal payment?

Yeah, could you... Like, let's just throw some numbers out, just for the heck of it, not holding you to it, okay? Could you throw $1,500, excuse me, could you throw $1,500 a month towards that, extra?

Rob, that might stretch it a little bit. Yeah, we probably could.

And what's your normal mortgage payment?

$970..

So think about that. If you could double or triple that payment, it's going to fly. It's not going to take 10 years.

Right. I'm trying to get him to the two to three year...

Yeah, if you can pay this off in two to three years while you're still working, I would rather you do that than... I would too. Rob the nest egg too soon, because $650 is a wonderful start, but that will deplete it by almost $100,000..

Right. And what's your house worth?

Probably about $250.. Yeah.

And do you guys see yourself staying there long term?

Well, we'll see. We'll see what God has for us in the future. We're not too sure.

So the reason I'm asking that is based on your responses to that, we don't know that. this is your long-term play. I hate to say only, I know $82,000 is real money, but you make good money, and I think I would rather leave that money in retirement and let that keep building. I would not pull a big chunk out of it. I'd let that keep building, pay off the house.

Yeah. I mean, if you could throw $2,500 at this mortgage, it's gone in under three years while you're still working.

Okay.

Without robbing the nest egg, because I want this nest egg to continue growing for you. Yes. And history shows us, if you just leave it alone, it will double about every seven years. Right. Exactly.

I agree.

If you had $5 million in there, I'd say go for it. Right. But it's just not enough.

Right.

The juice may not be worth the squeeze, as my friend Ken would say.

I love it, George. I love when you borrow some of my phrases that aren't really mine.

I try to give you credit.

I'll take it. I'll take it as much as I can get it.

Juice-related quotes. That's your sweet spot.

Thank you. Thank you very much. All right. I'll tell you what. We've got to step away for just a couple of minutes.

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Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. The phone number for you, because it is your show, we're here to talk with you about your life. That phone number is 888-825-5225, 888-825-5225..

I am.

You are? I thought you were. I don't see your name on here.

Well, you know, Dave gets all the love these days.

Well, yeah. So, from what I understand, this is Dave sharing his personal playbook on investing.

Some people have been asking for it for a long time.

We talk a lot about it on the show, but this is a deep dive.

Yeah. So, of course, we'll cover the basics. We'll talk about 401ks and mutual funds, but we're also going to be talking about the way Dave has personally invested to build his wealth, including real estate investing. That's been a hot topic on the show. Dave's going to unpack the right way to do it, even in this economy.

And you don't even have to put on your church clothes.

You don't have to.

Your work clothes. You can watch it in the sweatpants at home. It's a two-night virtual event. May 21 and 22 are the dates. May 21,, May 22..

Looking forward to it.

All right, let's go to Los Angeles, California, where Charles joins us. Charles, how can we help?

Hey, how are you guys?

We're having a blast. What's going on?

Great. So, my wife and I are on Baby Step 3B. And her question is, should we use some of our money that we have saved up for a down payment to start a business?

What kind of business?

Yeah, so the business consists of creating an app. We have been working with some developers. And it will cost us $20,000, in which we have the option to pay monthly for 12 months, which is $1,667 a month. So, we can cash flow these payments without touching our savings. But we know that eventually we would have to pay for marketing, lawyers, etc.

Well, I don't think you've given us enough facts for me to say. I'd want to know, okay, I get, the $20,000 is for the actual development of the app. Does that include testing as well? Or is it just they're going to give you an app and then you start messing with it from there?

No, we do all the testing and make sure everything is on point.

Okay, and then what are your expenses? Let's just fast forward $20,000 later out of your house savings fund. And let's say we got an app. It's been tested, debugged. It's actually working, but now we actually have to get people to use it.

Yeah, I can't tell you. Obviously, not at that point.

Well, so there's my answer.

You're not ready.

Well, the biggest question is, will this even ROI? Would you be okay if you lit $20,000 on fire and it delayed your house dreams by a year or two?

He doesn't know.

If we play it out, if you play out a worst case scenario. If this is a total failure, you build an app. I'm just playing it out to get you to a decision here. And so if this did not ROI, you just blew $20,000.. Now you're behind on your house dream.

I feel like that would be okay.

Okay.

These are $20,000. with the cash flow. We don't even have to touch those $60,000 at the moment.

Yeah, but I appreciate George's question. I'm going to be a little bit more strict on this. The fact that you can't tell me what the next stage of the business looks like, I'm not knocking on you. I'm not trying to be unkind. That's horrible.

You're out. I'm out. You just got shark tanked.

You're not ready. You're not ready.

Well, think about this way, Charles. You put $20,000 into the house, that's a guaranteed return in the form of guaranteed equity.

Ding, ding, ding.

You put $20,000 into an app, and we've seen it happen too many times. People get excited about this business idea. They pay this company to produce it. And all of a sudden it just sits there because they didn't think about what's next. How are we going to market it?

Okay, so it's a app for dog and daycare boarding. So it wouldn't be for the U.S. It would be for the country my wife and I were born and raised at. We're just doing some Google research. Roughly 50% of the population have at least one dog in their household.

Okay, so this would be you live in the U.S. You're going to try to create an international app where that's just for one country?

Yeah, so we have dual citizenship, so it would be easy for us to just go there and start developing there.

And so the app would allow dog owners to use your app and get daycare services when they're looking for some.

Right, we've done some research and there's no app like that in that country.

Well, there might be a reason,

We have a wait list of 20,000 people who want access to it. That's where I get excited and go, all right, this has some legs on it. So maybe start small. Maybe build a website where it's very archaic and primal, and you go there and you click a few links. But that's going to cost you $100 versus $20,000..

Oh, I like that, George.

So I think there's better ways to go about this before you go drop that kind of money. So I don't want to squash your dreams. This could be a brilliant idea. Yeah. But I want you to do it in a way that doesn't derail your other financial goals.

That's right.

I appreciate that. Can I ask a real quick follow-up question?

Yeah, go.

Yeah, so since my wife and I are self-employed, should we both open a Roth IRA and max them out during this process?

Well, if you're in Baby Step 3B, many choose to invest 15%. And so 15% gets you two maxed out Roth IRAs. That's great. But because you have multiple goals happening right now with the home-down payment savings, some people choose to invest less than 15%. Some choose to go zero or up to a match.

Okay. And we're also putting $200 in S&P 500.. So should we stop doing that?

In a brokerage account outside of retirement?

Yeah.

I would pause on that and stick to your tax-advantaged accounts first in retirement. Later on down the road, then we can start looking at those brokerage and bridge accounts.

Gotcha, gotcha.

Yeah. Good question, Charles.

And hey, man, we're for you. We really are. We just want you to be really, really smart, really, really slow. Slow and smart don't get a lot of clicks on TikTok and Instagram when it comes to advice for businesses. They just don't, because you know why?

They're not impulsive.

Because they've done it over and over again. People that are impatient, wannabes, oh, they like the fast.

Fast and dumb leads to broke.

Fast and dumb. Woo-hoo! I love it. But this TikTok guy said, and he's got 9 million views. Yeah, well, he's broke, living in his parents' basement.

We're doing great.

You're doing good? Okay, good, good, good. And that tells me, you're here to do a debt-free scream. Is this true? This is true.

It wasn't too bad.

Okay, nice, nice, nice. All right, let's get the details. How much debt did you pay off?

We paid off $81,188..

$81,188?. Is that what I heard?

$81,188, correct.

Oh, $188.. Excuse me. George, I don't know what's going on with my voice here. It's all right. We'll get you there.

It took 14 months.

14 months. Okay, and what was your range of income during that time?

Range of income was $72,000, all the way up to about $86,000..

Okay, great. What do you guys do for a living?

I'm military. Okay. I stay home with the children.

Yay, love that. That's awesome. And what branch of military are you in? Army. Okay, great.

Well, it was about nine months before we started that our firstborn Layla over there, she was born, and she just turned two the other day. Well, we transitioned to one income, and we were doing okay, but we weren't really just saving enough that we wanted to. We weren't investing as much as we wanted to. We knew that we wanted to optimize things in one way or another, and so we found the Ramsey Show, and I started listening to it on my commute to work. And I brought it to Alexis here, and I said, hey, I think we can maybe pay our debt off in a year, maybe a little bit more.

So fun. Wow. So what I understand here, there wasn't a lot of pushback at all, if any, from Alexis. In fact, she probably made the idea a reality, sounds like. That's correct.

It was student loans. It was a personal loan. It was a car loan, a little bit of credit card, and some medical debt, a little bit of everything. Yeah. Pretty normal.

Yeah, you had a nice little buffet.

A little potpourri, if you will. Cornucopia.

That's even better.

So were you guys just normal? Like, how long have you been married now? Almost three years. And you'd never been debt-free? You got married, had some debt, kept some debt, accrued some debt, and then there was this wake-up call when you go down to one income.

Yeah. Talk about the community of people that you had with you.

Oh, yeah. So my parents are here with us. They were some of our biggest cheerleaders. And then I've got to shout out my grandparents. They were doing the Ramsey Plan before the Ramsey Plan was cool.

Yeah.

That's amazing. So we drew a lot of inspiration from them as well. Just common sense, debt-free living.

That's correct.

Oh, that's incredible.

So you've got some other young couples. You've got middle-aged couples. Maybe you've got some older couples that are listening right now. Yes, we do. What would you tell them?

We have some good friends, Adam and Emily Fisher. They're actually going through the plan right now. Oh, good. Yeah, so they kept us in it, and we're keeping it with them, and we're staying on the path together. Yeah, make the budget and stick to it.

So, for you, it's budget, budget, budget. That's the key. All right. Anything else, Lucas? What's the key?

Budget's big. I think consistency is also a big thing. Life happens, and you've got to replace the tires, and the car breaks down. But you can't let it take you too far off the path. You've got to get right back on and get back into it.

I love it. All right. So are we ready? Are we going to get the Littles in there?

Can we get the kiddos up here? I think we can.

It looks like—is it Claire, the youngest? Yeah. She looks like she's out cold.

She's about to wake up from the scream anyways, so we'll see. And the two-year-old's meandering somewhere on the lobby. There she goes with the parents.

Okay, good. We've got the kiddos.

All the support.

So we've got Layla, who's two, and Claire is a newborn.

I hope you're watching on YouTube, America, because this might be the cutest family you'll see today.

They're super, super cute. Okay. All right. Here we go. Let's run it down.

We're debt-free! There it is.

And the babies aren't crying, so that was a good one.

The baby survived it. Yeah, I like that. And we've got a special gift for you guys as well. We forgot to mention two EveryDollar gift cards, good for a one-year membership. So you guys can use those EveryDollar memberships, or you can pay them forward to someone else to get them on the journey.

Yeah, that EveryDollar premium comes with a lot of bells and whistles and makes life a lot easier.

A hundred percent.

That is your gift, and you get to give one away to somebody.

I like that idea. I like the two. Maybe you give both away if they already have it, but, you know. That is true. Or use it for yourselves.

No judgment at all. It's free. It's Dave's stuff. You and I love to give away Dave's stuff for free.

It costs us nothing, and it makes Ken look good.

That's right. We love it. It's like a bumper sticker. I like that. You know, it's interesting, George, because this is really cool.

Yeah.

I mean, just set the table right now, okay? So, let's say they're making the 86, or maybe somewhere between the 72 and 86.. Now they're debt-free, and so now they begin the process of whether it's Baby Step 3, then 3B, you know. And then they start that 15%. I want you to paint a picture to what wealth looks like for this young couple at their age.

He's 25.. Let's say they get through 3 in the next year, and they begin investing it. Let's say he's 26.. Well, from 26 to, let's say, 62.. That's fair, right?

All right, drop it down to 8%.

All right, let's go down to 8%. Just for the cynics. Let's be more conservative. $2.7 million. Okay.

That doesn't include his military retirement. So this is just the process as we teach it. And you look at doing it that young, it's really huge. And this is great, too, because this is a young couple that had, again, normal situations, all different types of debt, $81,000, and they knocked it out really quick. That's really dual.

And with a stay-at-home spouse. That's huge.

So they went from two incomes to one. So we're not pitching get-rich-stuff here, quick stuff. We're not pitching this unbelievably impossible thing that only a few fortunate souls accomplish.

Yeah, there was no trust funds, no lottery winners here, just hard work and sacrifice.

It's doable, and that's why I love this story. So good stuff. All right, we're going to go out and celebrate with Lucas, Alexis, Layla, and Claire. And, George, don't kiss the babies.

I stay away, okay?

It's a little creepy these days. Don't do that. But we'll be back right after that with more of your calls. This is The Ramsey Show.

Hey guys, thanks for taking my call. I'm looking for your advice and guidance on something that feels like a no-win scenario. I'm unfortunately in the business transaction of a divorce with my wife and determining equitable division of the marital assets. One of the bigger items in this division is my retirement account. I have about $140,000 more in my account than she does.

I'm sorry to hear what you're going through. That is not fun, even at a transactional level. Are you guys working with mediation? Is this court-ordered? What's been the judge's side?

We're just starting in the process, so we both have attorneys. We're hoping to work things out on our own to minimize any mediation that might be needed and not go to the court to have it decided.

Financially speaking, it makes more sense for you not to touch the retirement as much as possible when you look at the future growth of that. Taking that money away, unplugging that growth, would have a lot of zeros on the end as you fast forward.

No, I will not have enough money to pay that off.

What are the other assets here? Did you guys have a home together?

We do have a home. That's not likely to cover the difference that's there either.

You would sell the home and split it 50-50?. Right. What would that amount to?

I don't have a number on that yet. We just had our appraisal done, so we're waiting for those numbers to come back.

Okay. And do you have any other money in the bank or any other assets?

Just the savings that we will split. It'll come out to probably around $7,000 each for that money.

Okay. And do you have any debt?

I will have one small loan, but beyond that I have no other debt.

Okay. Hmm.

Yeah.

How old are you? I'm curious. What's your age?

I'm 50..

Okay.

What's your income?

I gross about $104,000 and bring home roughly $63,000..

Yeah. Which way were you leaning?

I'm sorry. Go ahead.

Well, I'm just curious. I agree with George and the way he broke it down. It's not really two exciting options at all. Right. But I think his is the best.

I'm trying to stay away from debt as much as I possibly can. And when I run my own numbers, it'll take me about three years at my current investment to make up that $70,000.. But I could also divert all of that investment money into paying off the debt that I may take on from her to get through it quicker and still maintain my retirement at some level. So, yeah, I kind of want to protect my retirement, but it's also not that far of a timeframe for me to get back to where it was.

Right. But I think, if you weigh that, though, versus, okay, let's just say we take on the 70s at the number, to make sure I'm remembering.

Approximately, yeah. That's how much would come out of my retirement if we split it.

No, but I would rather you consider, okay, what would I have to do? What would need to be true in my life, to knock the 70 out a lot faster than I think and not touch the retirement? And I think it's more doable than you think. Do. I think you're going to have to hustle?

And with some quick calculations, David, just to help you grapple with this, that 70,000, if you just left it there, just that portion alone, just growing at 9%, from 50 to 62, that's over 200 grand.

There's an opportunity cost.

So that's the opportunity. cost is you're really, by giving her 70 out of a retirement account, you're giving her 200 grand.

Yeah.

And that's why I want you to minimize how much you take out of retirement. And, if at all possible, you avoid it.

Yep.

Right. Exactly.

Well, I wouldn't give her 200 grand.

This is probably going to be it. We only have one minor child, and we're splitting custody equally. And she makes about the same that I do, so there's really not that difference in income.

Good. Okay.

I just think, David, that George's advice, I agree. I just think this minimizes the damage from an already damaging situation. And there's just no sense in hurting your retirement potential. I'd leave the 70 in the retirement. And I'd gut it out.

Well, and it feels weird to now take on debt that he didn't technically have, even though he did, because they were married. So that's a whole other situation. That's right. So that's why I see it differently, just to go, all right, I'll take on this debt. Even if it was 70K in debt, I'm going to pay that off aggressively and not have to unplug my retirement at all.

I agree. Just the compound interest is the game. And I love the way you set that up. That is the real question to answer.

And especially at 50, and he's heading into retirement in the next decade. I'd rather see him have that nest egg intact. That's where the spirit of it comes from.

All right, let's see if we can answer Chloe's question really quick. Chloe, how can we help? We've got about a minute and a half. What's your question?

Hello. So I recently received a large amount, $300,000, as a gift from a relative. After paying off our debt, we'll be left with about $200,000, and that does not include our mortgage. So my question was, you know, basically the best way to maximize the rest of that money.

Well, maximize, that's a loaded word. What's left on the mortgage?

So we have about $260,000 left on our mortgage. The reason we are hesitant to put that towards it is because the house that we are currently living in is in a bad area, and it needs about $30,000 worth of improvements. So if we were to take the money to complete those improvements and then sell the house we live in, I don't believe we would get that money back.

You're not going to get the money back if you make the improvements?

Yes, correct. So basically, when we bought this house, it was a flip. It was supposed to be renovated. We paid up front for extra inspections, the whole nine yards, and the quality of the work that was completed ended up being quite subpar. So we would basically be redoing the renovations that we basically paid for up front when we bought the house.

This is a flip gone wrong. Correct. I would minimize what you put into this, put in what you need to to sell it, and get out of there. And whatever money is remaining, add into the new down payment for the new house, and that's what I would use that money toward.

Okay, so then you wouldn't necessarily put anything in investments or accounts or anything like that?

I mean, you can give, save, spend as long as you're investing 15% of your income. if you want to consider that income. If you want to consider part of it giving money and the rest, enjoy some of it and put the rest towards that next goal. But I would definitely not sink it all into this house and then be underwater on it. That's not a good plan either.

Yeah, love that. Well, you've got some good options, Chloe, and I agree with George. So run that out. I think you're going to be in a much better situation. All right, that does it for the first hour.

How are you guys today?

We're having a blast. What's going on with you?

Good. I'm excited. It's the Rupert Float combo today.

There it is. There it is.

My husband and I are on baby step four and six, and we've had a lot of life happen to us the last couple months, and so I'm trying to figure out if you guys would go on vacation or cancel the vacation and put it towards the stuff we've got going on.

All right. Lay it out for us. What's going on?

All right. So we have emergency surgery at the beginning of January, and we actually have all of that covered. I have to have surgery in May, and that's where kind of the contention is coming in. We have a vacation booked at the end of April, and we've already paid for it, but we can cancel it and get a full refund.

How much would that be?

It would be $3,900..

That'd go a long way to helping, wouldn't it?

Yes. We have his medical bills covered. We'll have my surgery paid for by the time the date rolls around, but we don't have the $200 besides our emergency fund to cover for the car.

So what's in the emergency fund?

We have $20,000..

Okay. So you're saying you would dip into the emergency fund $200 out of $20,000?.

It would be $2,000 for the truck repair.

Okay. So dip down to $18,000, you'd replenish that, and you'd be back?

Yes.

Oh, man. Where's the vacation?

It's in Alabama, Gulf Shore.

Okay. And this is just the two of you, the kids? Who all's going on this vacation?

Just the two of us.

All right. Ah. I mean, I don't see this as a detrimental oh-my-gosh moment. You're not going into debt for the vacation. It's paid for, and, truthfully, my worry is that you guys never go on vacation because there's always going to be something in life.

Yes, and another problem is we may owe on taxes, but that's the only unknown expense that we have out there right now.

When are you going to file your tax return?

Our accountant is working on it, and so we should probably know within a couple weeks.

Okay.

But then the 15th of next month is coming pretty quick.

Yeah. Well, once you know that, I mean, if that changes it drastically, if you owe $10,000, this might be a different situation. But if it's something where you guys can cash flow all of this and still enjoy the trip and come back and cash flow the rest of the surgeries and the car repair, and if you need to dip into the emergency for a legitimate emergency, don't feel bad. That's what it's there for.

Mm-hmm.

And then replenish it as soon as you can and get back on the horse. But I don't know that I'd go ahead and just cancel the trip at this point.

That's what I was thinking, because I, like, experience it. So I would love to still go, but if he's stressed, then he's not going to enjoy it.

That was my bigger worry. I was like, if this guy is going to be on the vacation stressed the whole time, that is going to add a little wrench in the plan.

Well, I agree, but I think I would sit down and talk with him. The way George just walked it out with you, you guys need to have the same conversation. Okay, let's look at our reality, okay? Let's find out the tax bill. I think that's the last piece of information.

And you're about to go into another season where you're having the surgery. And so I think it's okay to go, you know what, it's been a heck of a year. We need to just go decompress and enjoy some time away together. Okay. And I think there's value in that as well.

Okay, awesome. Well, thank you guys. I appreciate it.

You bet. You know, I get that. I get the concern there. But, man, that time away is huge.

And a lot of people as they follow the baby steps, they're out of that baby step. two, three land. It can be hard to enjoy life again because you've been sacrificing. You've been living like no one else. But you've got to remember the purpose of that was on the other side, to live like no one else.

Let's go to Nate now in Salt Lake City, Utah. Nate, how can we help?

Hey, guys. Thank you for your time. You bet.

What's going on?

Hey, my wife and I, we are on baby step two. We've got $20,000 in credit card debt, $50,000 in a home equity loan, and about $100,000 equity in the home. My question is do we sell the home to pay off our debt? We got into this house super excited and put basically all our savings, all our money, into fixing it up. And now we had a kid, and life's just getting a little hard right now.

What do you guys make?

We make $90,000 total.

Okay. And you've got $70,000 between the credit cards and the home equity loan?

Correct. Yep.

Okay. So how aggressively could you pay this off? Could you pay this off in two years? Could you pay $35,000 on these debts a year and knock it out in two?

Not the way things are going right now.

What does that mean?

I work in sales.

Oh, so you've got some slow months? Yeah.

Slow months and just inconsistent. Like one month will be nothing, next month will be great. So I can't plan as much as I'd like to.

Is she working outside of the home?

She is, yes.

Okay. And collectively, you guys are making $90,000?.

Correct.

Okay. I wouldn't go ahead and just sell the house as a shortcut, because shortcuts are what got you here. I think we need to look at some behavior change and some career change and try to get that income up. Because if you can knock this out in two or three years, it's not worth selling this house. Yeah.

I think your sales job needs to get replaced with a better sales job. I really do. I think that's your first step. I'd like to give you something that, at least, I think, pave a path for you. Let's give you the Get Clear Assessment in my book, From Paycheck to Purpose.

Very interesting.

If I'm reading this right, why are we celebrating people who get scholarship money from their state? That's the question. And you're tying it to the fact that it came from the lottery. And then you're also saying that's the same as someone taking out a credit card and piling up purchases and points and using them that way. I don't think it's the same.

It isn't. And the question behind the question is we're always going, hey, don't play the points. The credit card system is disgusting. You don't have to be a part of it. And he's saying, well, hey, you were cheering on a caller who went to school debt free thanks to these scholarships funded by a gross system.

It's very different. He didn't sign up for a credit card.

And that state has a program which has these funds available.

Again, we're playing moral gymnastics here. Sounds like it. So we're going to celebrate anybody who gets a scholarship because they got a scholarship. And it means they don't have to go into debt.

Yes. Now, if I had to play the lottery in order to get a scholarship, I think I would say. Now you can see the moral equivalent. Yeah.

But again, I mean, listen, this is not moral either. This is just what we believe are sound financial principles. And morality is not the issue here. The issue is what do we think is wise versus what do we think is ridiculously silly and harmful to your finances? So it felt like a gotcha question, and there's no gotcha there.

Well, I mean, he's right in that both do prey on lower income people. I mean, lower income people disproportionately purchase the most lottery tickets. And so I agree. I'm not happy about any of this. I wish people didn't play the lottery.

Do poor people disproportionately take out credit cards?

No, many of them can't. even. They won't even get it. Yeah. Accepted.

So that's not true either.

Well, the span, the spectrum of people who have credit cards is low to high income. Now, who's benefiting the most from these rewards programs? We know it's the higher income earners. Right. Which makes sense.

Good question, though. Thank you for the question.

Good discussion. And one that I still want to grapple with and chew on for a while. Really?

What are you grappling with?

Well, I think there's more to dig into here. But I think this particular question has been answered. Yeah. I think it's an interesting thing to look into. Where are all these things coming from?

Yeah. How much of the actual lottery gate is going to education? Is it 100%? I get questions as well. I get that.

But essentially, you're adding a tax for things that we would also—like a cigarette tax. No question. Tax those higher. Use that to fund good things.

I'm sorry. It's a consumption tax. No question about it. Let's go to David. now, who joins us in Atlanta, Georgia.

Hey there. What's going on? I've got a question for you, and I appreciate you taking my call. My wife and I are first-time homebuyers. We have no debt.

Great. So how much do you guys have allocated just for a down payment?

Yeah, we can put down 20%. We'll probably wind up at like 15%, just to try to preserve a little bit of cash.

So 15K down?

15% down.

Oh, 15%. So what's the home value that you guys are looking at? What are the home prices? Yeah.

Looking at just north of five.

Wow. What's your household income?

About north of 150..

Great. And what's your average monthly take-home pay?

We bring in about 10 a month.

Fantastic. So the parameter you're asking for, we do have one in this category, and that would be 25% of after-tax income. So after-tax income, but before other deductions like your healthcare, premiums, you're investing 15%, your 401K. So if you did the manual math just to take out taxes, that would give you the number, which I assume is maybe even a little more than 10K.

Got it. Okay, that makes sense.

So you'd be looking at around $2,500 for a payment on a 15-year fixed rate mortgage. So that tells me you might need more down. I'm doing the math for you right here. 75 down, that's 15% out of 500 on a 15-year fix. with current rates.

That makes total sense. Awesome. That actually answers my whole question. I appreciate it.

Thank you. All right. Thank you, David.

But based on what you just told us, yes, right now you would be buying too much house. And you might need to look at a townhome or a condo that's in the $300 range and then upgrade later. And that's what my wife and I did.

And it's important to point out, just based on everything that I'm reading and seeing, I want to preach patience on the down payment, not patience on the rate. If people are going to... What I mean by that is if you're waiting around going, well, let's see if those rates drop back down. a point, two points, I don't know that that's a wise...

Don't sit on the sidelines. Whenever you're ready financially, go for it.

So the patience would be wait until my income is at a place and my savings are in a place that I can get the house that I want. Patience there? Yes. But just waiting game to see that the interest rates are going to get back to where they are. I got to tell you, George, I don't see it.

We don't know.

Well, the answer is we don't know. That's right. But I don't see it.

It's not going to go back down to 2%.

It may not in our lifetime. I'd be willing to say...

Maybe our grandkids can one day.

Yes. Yes. I just think that those crazy rates, that people were getting, the high twos and the threes. I mean, mine's in threes. It's just bananas.

And that's where I go, well, following the Ramsey plan, you've got no debt when you're saving up for this down payment. So they're making 150.. How much of that can they throw toward a down payment? Right. A large portion.

So are you beginning to see the appetite for getting back into the housing market, with the American people starting to go, okay, well, it seemed shocking a year ago. Now I'm starting to reconcile with it.

I think there is a little bit of that. And as people are sort of forced to move, whether it's for work or family, they're going, they're buying houses still. And we know four and a half million people bought a home last year. So it's happening. But I think a lot of people are in one or two spots.

That's right. And remember, renting is not a sin. It's not wasting money if it's giving you freedom and flexibility to get in a position to where you can buy a house and not be house poor.

Pastor Ken Preaching. I love it. There it is.

There it is. We'll take an offering on this commercial break. This is The Ramsey Show.

That's your move. You've done it, yet? You filed your tax return? Oh, yeah.

How'd it go? I haven't gotten the numbers yet.

Oh, boy.

It's in the process. So technically, I've not filed. If that's what you're saying.

That's what I was asking.

No, my guy, David, he's listening. He listens to us, by the way, day behind. Oh, nice. He's one of our tax pros. Wonderful.

We go together.

Right, right, right. It's a group effort. Yeah, but he's working on it right now. David, let's go, buddy. I need some money.

Let's see if this tax tip will impress your friend, David. All right. You ready for this one? Let's go. You've got two choices for claiming tax deductions, and understanding the difference can save you some big bucks.

Yeah, yeah, and we do. So. it is a great, great resource. Again, ramsysolutions.com slash tax, ramsysolutions.com slash tax. All right, taking your money questions and your work-related questions, how about some more money in your pocket?

Hey, how are you doing today?

Good, how are you, Troy?

So I am a senior in high school, and the reason I'm calling is I'm facing a pretty hard decision about college here. So if I stay in state here in Illinois, they have a dumb rule where you have to live on campus for the first year, and just doing some rough calculation, that over eight semesters is probably going to cost $50,000 to $80,000.. I don't know the total yet because we haven't gotten the FAFSA back. But recently I got accepted into the University of Hawaii, and it's my absolute dream school, but I'm not dumb enough to spend $200,000 on undergrad. So I've been in contact with the National Guard in Hawaii, and through them paying for some of it, that total over four years would be $30,000 to $65,000..

All right, Troy. Troy, I'm having a hard time keeping up with you, buddy. You got the facts down, so what's your question?

I just don't know if going to Hawaii is a financially responsible decision when the cost of living is so high and if I want to open up my own business, that's going to be an extreme amount of money. if I come back to the States. I just don't know. I want to stay out of debt is my main thing.

I get that. Okay, so let's just boil this down. You want to stay out of debt. We're thrilled for that, and we want to walk you through some steps to take. Okay?

Yes. Okay.

So what is the path to getting those degrees without going into debt? And it seems like you know the answer to that. It seems like you're going to have to be really patient, right? It seems like you're going to have to go, okay, what are my options? to just go get a four-year degree?

Yes. Okay, then.

And so, when you're asking a question like this, the only thing that people don't like about the answer to this is that it can be done, but it takes time.

A hundred percent.

But what?

Well, my big thing is that, like, I've had a lot of my friends or family members that, you know, don't make past 30.. And if I'm working all the time, trying to save up the money to go to college, like what happens if, you know, I tragically in a car accident or something, and I don't get to experience those things I would want to do if my life was to be cut short.

So, so you're saying, all right. So what that, what I'm hearing you say is waiting to your late 20s to be able to be in the physical therapy world and enjoy the benefits that come with that. The thing you're worried about is, is what if you die before that?