You Have To Get to the Root of Your Debt Problem

Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I am Rachel Cruz, and co-hosting today with my good friend and fellow Ramsey personality, George Camel, and we are here to take your calls, America. It is a free call anywhere in the country, which it's been a free call for a long time, George.

When are we going to start charging, Rachel? We kind of poked about that. Inflation's killing us.

That's like a 2000,, and if you remember having to pay for long-distance calls when that was.

a thing, you would appreciate that.

But it is a call, any call in the country, at 888-825-5 at 225, and we will answer your money. questions, relationship questions, questions about work. We are here to talk to you. So, first up, we have Portia in Houston, Texas. Hey, Portia.

Hi. Hi, Rachel. Hi, George. Love your book, Breaking, Sleeping, and Getting Unbroken.

Oh, thank you.

That's a good shout-out. How can we help you today?

Yes. So I just graduated from school in December, and I feel like I'm late with everything. So I have, of course, debt, and I'm just trying to find the proper time to purchase my house. When I did the numbers, when I worked the numbers, it appears that, based on my income, I will be able to pay my debt off in about two years. So my car, I only have like two major debts, which is my car and my student loans.

Yeah. That's exciting. That's great.

And my student loans, it's $134,000..

What's your degree in?

It's my Master's in Finance and Investment Management.

Okay. And do you have a job? Did you get one out of school?

Yes, I did.

How much are you making?

$166,000 a year.

Good for you, Portia. That's awesome.

Thank you.

So what's your question today?

So when I pay this off, because I'm all for it, I'm disgusted by debt. I am not interested, so I'm passed. I cut up my credit cards, I'm done. I just want to know, I don't have any kids yet, and I am getting married too soon.

Oh, congratulations.

I just want to know, thank you so much. I just want to know, when would be a proper time to pay for a house, or do I rent? George, I've heard you speak on, don't get caught up in the hole where my kids are going to be. We're thinking family, the big yard, the whole nine. A townhouse, renting a townhome can be...

How old are you?

I'm 35.. I'm 35..

Oh, my goodness. Ancient. Throw in the towel to pack it up.

Portia, it's over. It's over.

Rachel hit her prime at about 24, and it's been downhill since.

You're doing great.

But I know, compared to your peers, you're seeing people in their 20s. They're like, well, I should own a home by now. But also, you had a different journey. And you got a master's, and you got further education, and you had debt. And so that's okay that you're delayed with this dream.

When are you getting married, Portia?

I'm getting married this summer.

This summer. Okay. That's great. And what's his status? Do you guys know where you want to live?

Well, he has no debt. He's never financed a car. He's awesome.

That's great. I like this guy already.

He sounds like a winner.

Do you know what his income is, or are you not there yet in the relationship?

I hope so.

They're engaged. You never know?

We've been together for years. Oh, okay. Yeah, he makes $72,000 a year.

Okay. So you'll have a household income of over $200,000 this summer. Yeah. Which is going to speed up your debt payoff process. Yeah.

Yeah. That's right. Yeah.

He's very encouraging.

So let's play this out. By April, the student loans are gone. You get married in the summer. You're attacking the student loans. And when do you think it'll be paid off with all that factored in with his income?

True. Well, when I did the math, I know I could pay my car off quick, like in three months. I'm already on track with that. So I'm paying like $2,500 every two weeks to pay that off.

So, like five grand a month, you're throwing a debt.

Yes. Okay. And now the student loans, it does... Well, the student loans is $134,000.. And I think it'll take me about two years, because I decided to live on just maybe 30% of my income, to pay it off.

Yeah. And that's great. And Portia and I, honestly, with you guys getting married, combining incomes, and, like George said, him, bringing anything into the marriage, you guys get it. You'll pay it off faster. I really do believe that.

Rent for a year or two and get that down payment saved up. And that may be four years from now. you guys get into this house, but you're going to do it with so much peace and patience and equity that it's going to be a blessing instead of a burden.

Yeah, that's right. Well, Portia...

I appreciate that.

Yeah, go ahead.

I appreciate that. Because family can... We ain't going to get a house.

I know. You got to turn that volume down. They don't pay your bills, Portia. That's the problem. If they did, that'd be great.

Right.

So that's the problem is avoiding all the pressure. That's the hardest part of this whole financial mess. Yes.

And I think people, you know, they say that from one element of like establishing roots and having your place, but also from a financial standpoint of, yeah, once you get in, you're building equity. You're building equity for your overall financial picture, but, Portia, you guys are going to be fine. You're going to be fine. You're going to get a house when it's best for you guys. You're going to both be investing.

Hey. Thanks for having me.

Absolutely. How can we help?

Well, I mean, not to be too long with it, but 2018 rolled around and Dave came out to a church nearby my house and I went and listened to him talk. And, you know, I've been broke and working hard. And decided that I'd follow him and be working hard and not broke. And over the last couple of years, I've worked real hard and put a lot, of, you know, seeds in the ground. And this holiday had some of my family over and I have a new property and some new space.

So have they asked you for money, or are they just upset and envious that you don't have debt and you're not strapped with payments?

Oh, yeah. No, all. All of it.

So they straight up said, hey, you're doing pretty well, boy, aren't you? You got any of that money laying around for us? Like, was it joking or was it pretty serious?

No, I mean, we went out for a, we have a mess of kids, you know. And so we went out one night for something and the ice cream was there. And I was like, you know, told my kids, grab ice cream, whatever. Kids, grab ice cream. Well, I ended up getting ice cream for everyone, which isn't a big thing anymore.

So there's assumptions and entitlement now of like, well, he'll cover it, because he's doing pretty well. So he should cover it. Yeah. And is this your direct parents? Like, who's involved here?

Everyone. Yeah, no, everyone asked throughout the course of the two weeks after that. You know, they found out about.

Aunts, uncles, cousins?

Doing different. Yes, sir. All of the above. Phone calls and everything.

Goodness, gracious.

It's like you won the lottery or something.

But it's taken you. How much money do you guys actually have?

A lot. I mean, I don't know. A lot for everyone is. A lot for what I thought. We, you know, my wife and I picked up.

Oh, my goodness. That's great. That is amazing. How old are you two?

Yeah, I'm 37.. We're 37. So.

That's incredible.

And this is mostly your family, not hers.

No, her family doesn't know. And they're. I mean.

You're like, they're not going to. We're not telling anybody else.

After this debacle.

They're good, though. They're all square. They're not. They're not my side. They'll be like, oh, good for you.

Is your family local, Seth? Do you guys have like day-to-day interaction with them?

Not so much right now. But yes, ma'am. Yes, ma'am.

Okay, but they're local. And you guys usually would like kind of do life together. You do dinners together. Like, they're a part of your rhythm in life. Yes, ma'am.

Well, I was upset the first night. And so I ended up calling everyone together the next night. And I was like, listen, my responsibility is to take care of my wife and my kids. And I'm going to do that. And I told them I would put them through FPU, you know.

You're not interested in learning.

Well, no, that's pretty bold, Seth.

Yeah, I'm proud of you.

I was expecting us to have, like, a conversation about staying in Boundary. You just did it the day after. So then, how do they respond to that? They ask for you to pay for their dinner, I think.

Yeah. Yeah, pretty much, you know. And they're like, well, if you don't have it or you don't want to share it, you know. And it was just a lot of guilt. And so I've been wrestling with it for a couple months now.

I can talk to you about it.

Yeah, this is not Bank of Seth.

But I'm not there.

That's right. Well, you've approached this with a lot of tact and wisdom and maturity, which I applaud you for. And the fact that you're even willing to have the hard conversation tells me that there is hope here. But it may take a few of these conversations and enough time to where they get the hint. And you know what?

Yeah. And Seth, just so you know, and I know you probably know this. But just to say it out loud, you've done nothing wrong. And I feel like what can happen is they can pin you in a corner where you feel like suddenly, if you don't do something, you're doing something wrong. Because, yeah, do you have the means?

Yeah. No, I agree. The thing that I kept pushing for was, they could do it, too. That's what was hard in my heart. I'm not trying to withhold from them.

And that was my heart. I was like, They're not interested in learning. Entitlement runs far away from work. That's generally how it goes. And so I love the old quote.

Yeah, that's pretty much what my dad said. Yeah, 100%. Hit him. Right on the head.

Dang.

Yeah. Man. It's an odd conversation. It's an odd place to be. But, you know, I don't know.

Best course is, I don't know, flee the country and change your name. But let's not do that, you know?

Go into the witness protection program.

Yeah, the right course is have the hard conversations as many times as you need to, and then you need to draw the line. You need to draw the line and say, listen, we've talked about this several times. This is where I stand on it. I love you guys, but our relationship can't be based on transactions.

Yeah, and again, they're choosing this. Like, you haven't done anything. You've just done the hard work for five, six years.

Seth is a good man. I know.

And this is what is being exposed in them. And you can't control them as much as your heart is so good and pure and wanting that. You can't. And I think it's going to be... It's going to continue to create that divide and you're going to continue not to want to let them into your life, which is so sad with family.

This show is sponsored by BetterHelp. This is Deloney, and I'm always railing against social media, especially in the summer, because everyone uploads the highlight reels of their perfect bodies and perfect vacations and perfect kids. And I know they're not real, and I also know that I'm blessed beyond my wildest dreams. but I still find myself wishing my life was like other people's. And, based on the data, I know this is happening to you, too.

The Ramsey Show Question of the Day is brought to you by Neighborly, your hub for home services. There are a lot of things that you need to remember when the weather is cold. Thankfully, Neighborly has a free winter maintenance checklist that can help save you time and hassle. Check out Neighborly dot com slash Ramsey. That's Neighborly dot com slash Ramsey.

Today's question comes from Brittany in Nevada. Or is it... Did I say it right? Yeah, you did.

Nevada.

Are you sure? Yes. I think it is. Now I feel bad for everyone in... It's Nevada.

No, it's Nevada.

Brittany asks, my sister only makes around $25,000 a year and recently found out our mom took out a credit card in her name which has a balance of $2,000.. No. Our mom habitually has no money and I don't see a world where she will pay this debt off. I ran a credit report and, as far as I can tell, she does not have one in my name. I make $72,000 a year and have been thinking about saving up to pay this debt, so it's not hanging over my sister anymore.

Man.

Well, there's a lot going on here. Most of it's relational. Only part of it's financial.

But goodness gracious. it's illegal. She stole her identity. It's fraud. And so I mean and I know people don't always...

And against your mom. That makes things extra awkward.

Yes, yes. I'm like... And so, Oh my gosh. Yeah, so what you would do is, yeah, in order to close the account, you have to have it paid off. Paid in full.

as possible. I would freeze every account with all three credit bureaus immediately.

And just making sure that no one, especially her, but also having the conversation with her. Like she, needs to be confronted.

Absolutely.

that this happened. You guys have the knowledge of it. I mean and I'm like, and you hate to threaten someone, but I'm like. you literally stole my identity and took out money and my name to somebody that makes $25,000 a year. And so going forward.

If it's considered fraud, she reports it and says hey, this was not.

she won't have to pay it. but then and again in some like world where you're like, yes, justice needs to be served, but then in the real world I'm like it's $2,000, and how much you're gonna pay a lawyer to do everything, I don't know.

Yeah, my first go would be contact the credit card company, say, hey, this is fraud, this was not a purchase I made, and have them try to reverse that. and secondly, like Rachel said, I would close this account, pay it off and if the sister wants to do that as a gift which it sounds like Brittany's wanting to do that, that's very sweet. that's a one time thing. and go hey, I'm gonna cover this and we're gonna fix this and freeze all of your accounts with all the credit bureaus, so this never happens again. and then confronting mom as the piece, as another piece of this, and helping sister get her income up.

and we don't know how old she is or what her situation is, but

she may be 16 for all. we know. I have no idea.

that's so hard and it's become a common thing, George, like we're seeing more and more of this.

I'm seeing it on TikTok and Instagram and people are going oh, open a card in your kid's name, add them as an authorized user at three years old. so they have great credit when they graduate, and then you tank your kid's credit accidentally or maliciously.

when life happens and a pandemic hits and you get strapped for cash and you have to go make these financial decisions that are not wise in a crisis and your kid's name is attached to it. and so again yeah, we're seeing like, but that in and of itself, is that legal? that's not, I mean.

to add them as an authorized user? yeah, that's legal, but opening one in their name.

that's illegal? yeah, without, obviously.

you can't ask a three year old for consent. no, you can't. you just add them as an authorized user.

which that's what parents are doing and the legal aspect of it. but again it ends up we see the horror stories we've had. people call this show same thing happening.

my parents tanked my credit. what do I do? they opened up cards in my name or added me as a user on this card, and it's affecting me financially. yes.

yeah, there was a study by Carnegie Mellon and this was in 2011, so again, it was a few years back but found that children are uniquely vulnerable to identity theft and, in their analysis, more than 40,000 American children, researchers at their university found that 10% of them had someone else using their social security number.

oh gosh.

and then in 21, a study came out that found 1 in 50 U.S. children fall victim to identity theft every year, with 73% of victims being targeted by someone they know personally.

goodness, which is probably going to be a parent, an aunt, an uncle, a brother, a sister. that's terrible.

and so much of it is financially related right. it's telling your identity to open up accounts and credit cards.

and they say here the founder of the law firm said the chief motivation behind these crimes was when a parent has had bad credit and is not able to make a debt based purchase. there you go and it says in most states this is a crime fraud, identity theft, misappropriation of funds or all possible charges a prosecutor could bring. so it's possible to go to court for this, but again the cost of lawyer fees add up to where you're like. I spent 10 grand to fight, 2 grand. was this worth it in the end and a lot of stress, sure emotional turmoil.

yeah, and again, you want justice in every legal sense of the word right, but but when you get down to it in the real world, it's like oh my gosh, for somebody out there, her making $72,000 a year. it's like is it realistic for her to go and yeah, go and hire a lawyer and do all of this, or do you pay it? close the accounts, have the threatening conversation with mom. but yeah, some people, some people choose the latter, so we'll see.

choose violence.

never alright up. next we have Bailey in Pittsburgh. hey Bailey, welcome to the show.

hi, thank you for taking my call and thank you to you too and your team for what you do.

oh, thank you. I appreciate that. how can we help?

so years ago back, when everything was paper, I, you know, started following your dad at that time and then kinda got off track. and here recently, in the last month, have just, you know, came back around and I'm trying to convince my husband to you know, let's follow the program to a T, which means stopping our investing in our 401ks and things like that. um, he's a numbers guy, so I thought he would get it, but I can't. he doesn't seem. he says that's leaving money on the table and I'm saying, let's do it temporarily so we can pay off some debt.

ok, so how much debt do you guys have?

um around 40,000 on a vehicle, so 7,500 on a credit card.

and he's a numbers guy.

yeah,

does he know what the APR is on that credit card?

uh yeah,

does he know what that car will have costed him after all the payments and interest versus what it's worth after the term is over?

I'm not the numbers person and I've laid all that out, which, if I can understand. that's what my frustration is, and I say to him you know, we've done some things ok through our years, like, for example, after this year we'll have three children through college. we fully paid for that, so they're not coming out with debt, how much.

do you guys make, not that.

I'm sorry.

how much do you guys make a year household income?

um, uh, combined now. just recently took a new job, so combined, now we're at 250 woo.

well, yeah, I mean you guys have the margin to for sure pause the investing and pay this off. I mean I know, you know that.

and at the end.

of the day too. Bailey, I'm like, and also the truth is, even if you guys continue to you know cause, how much are you putting in retirement now?

he's, he's maxing his and I'm maxing mine. and that's what I'm saying to him let's just pause. that I'm not saying, let's stop, but I'm just saying, let's pause. it pay off some of this other stuff, cause.

do you guys have money in savings?

we have 10 liquid cash, 10,000 liquid cash that I you know. something happened, yeah.

well, and the truth is, Bailey, over time, you know, if you guys didn't pause it and you guys just threw some extra money and got this debt paid off, you're gonna be fine. either way, my biggest red flag is that you guys are just not on the same page on your value system. so obviously your passion is more on getting out of debt, and I would and I would present not just the numbers but the why. why is it for you, Bailey? is it because it's stressing you out?

it's that the least expected events can and will happen, and we have to deal with them. that's why everyone who has a family counting on them needs term life insurance for over 25 years. the only company I've recommended is Zander insurance. that's because Zander is a broker that works for you. they search all the top term life plans out there and find you the best rates and make the process of getting coverage quick and easy.

so one of the topics that is really popular, I'd say, in in this line of work, George, but also in the world right now, is real estate, and so we are so excited to announce that Dave Ramsey has a brand new quick readout, which means it's a pretty short book you can finish.

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yep 70 pages and it's called the real estate the Ramsey way how to make home ownership a blessing, not a burden, and Dave has decades and decades of real estate knowledge, being an agent himself.

started at 18.

started at 18.

that's how he made his first few millions.

yep lost it all through real estate learned a lot.

and made it back largely through real estate. that's right, that's right. what a comeback story.

all the way around. I know 360 just back back.

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yeah, for sure, and we want to give hope that that it is still possible, you guys, but we want you to do it the right way. so it is all here. so again, whether you're buying for your primary home, investing in real estate, all of it real estate, the Ramsey way at ramsysolutions.com slash store up. next we have Mark in Minneapolis. hey, Mark, welcome to the show.

oh yeah, thanks for taking my call.

absolutely. how can we help?

well, I wanted to know if you guys had dealt with any, uh, anything like a promissory note. um being repaid. um, it's, uh, I have a promissory note kind of hanging over my head, about twenty six thousand dollars from a previous job. um, uh, the contract was, or I was supposed to stay there for two years. uh, left for personal reasons.

well, I mean this is a legal contract that you signed and it said hey, you get twenty six thousand dollars. what was this for relocation?

yeah, relocation.

and if you leave within the two years, you owe us this money back, correct? and so you broke that contract and there are consequences for breaking contracts, and one of those is you owe twenty six thousand dollars. so what happened to the twenty six? did you spend it all?

oh yeah, I mean we used it for a relocation from Texas, uh over here, so.

what made you leave three months before the contract was up?

uh, I just knew that I wasn't going to be able to honestly fulfill the duties of the role, and the travel just took too much time away from my family, and I wanted to to be with the family. okay, that's what I prioritized.

okay.

um, you knew you would owe this upon quitting like this. wasn't a surprise? well, yeah.

when I quit my boss, he wasn't sure that they would actually um do anything, but he didn't really know.

and they enforced it.

yeah, it's with an attorney right now.

and they've contacted you and expecting some type of payment.

uh correct.

other than trying to settle and negotiate. there's no way to skirt around the law if you sign the contract, so your best bet is to go. listen, I don't have twenty six thousand dollars. are you willing to negotiate a smaller payment? to call this good, that's what I would do if I was in your shoes.

do you guys have any money saved, mark?

no, and I'm sure we could talk for hours on our situation, but yeah, we have no money.

okay, how much are you making a year now?

uh, I make a hundred, okay.

does your wife work?

yeah, she makes um about sixty.

sixty. okay, so you take home, you pay one, one sixty um household income, and what? what other debt do you guys have?

um quite a bit. I would say uh, from credit cards to consolidation loans, around a hundred.

okay, how much is in the credit cards?

um, right now only about fourteen thousand.

okay and the remaining is a debt consolidation loan.

uh, yeah, like three of them, yeah.

okay, um so, mark, you realize the decisions you guys have made up into this point with money not great, right? is that? a consensus between you and your wife, like how you guys have been doing money, isn't working.

oh yeah, no, yeah, a hundred percent.

okay, um, and I hate that this twenty six thousand will be added to this list. I'm afraid it will be. I mean there's nothing unless they will settle, like George said. um, I think you guys are just gonna be on a hard journey here for the next few years, digging yourselves out of these mistakes. and listen, mark, nobody's perfect with money, so that's not a shameful thing, like nobody's perfect.

try to get on a payment plan of some sort to pay this over time. yeah, but the good news is mark you guys make a hundred and sixty thousand dollars. so let's just lay out some napkin math for you. if you're able to live on a smaller portion of that and throw 50 a year at your debt, you're done. two and a half years from now you're completely debt-free, even the relocation money.

that would be. that would be amazing. well,

the math says it's possible, but you have to believe it's possible and then your actions have to follow.

life up. yeah, and stay on the line, mark, Austin will pick up and we're gonna give you Financial Peace University, which is our second lesson course, and every dollar premium, which is our budgeting app, which is going to help you guys. look at your lifestyle and say, hey, we're, we're doing nothing. like we say beans and rice, rice and beans, you don't go out to eat, you don't go on vacation, you do nothing, and there's gonna be an extremeness to all of this, because I mean fourteen thousand credit card debt for the most part. I'm gonna assume, mark, that yeah, a lot of that's just the lifestyle creep of like.

the day. we are not lawyers, so good luck.

with that we want. we want it for you, that we want you and your wife and your family to experience freedom like it's life's too short mark to be living like this, and I think that, for for a lot of you out there, it just takes. it takes an extreme mindset shift, though, and an extreme way of looking at something so different than how you've always looked at it. and that's one of the hardest parts, George. for people it's just the change like it's gonna feel uncomfortable, not living with credit card.

you're enjoying extreme spending and now it's extreme sacrifice. yes.

and it's gonna. it's gonna feel off, it's. it feels like you're going backwards. but I'm telling you, if you stick to this, watch these videos and Financial Peace University, do the every dollar budget, you and your wife together, and in two and a half years, as George laid out the math, you guys can be done and have a whole new set of set of skills with for investing and building wealth and changing your family tree. so we're cheering for you, mark.

thank you for taking my.

call absolutely. how can?

we help. well, I have some. I need some advice on what you always suggest my husband and I do to pay off our debt. my husband is currently working two full-time jobs and going to school, so we are making the most we have ever made. however, we are both miserable because he's never home, and I have taken on the majority of the house, work with our children and I also work.

much debt is left, we have.

75,000. okay, and how much?

are you guys making currently with him working two jobs, you working a?

full-time job. we bring home on average of 10,000 a month. okay, what kind of?

debt is the 75 we have.

two car loans, a home equity loan, two credit cards and then one student loan for him. but it is deferred at this time, but it is included in that 75,000. okay, what's he going to school for? he's nurse.

practitioner. okay, so when is that over? that's going.

to and a half, two and a half years. okay he's.

working two full-time jobs while becoming an MP. yes, this man's impressive, so.

he is. he is a firefighter, so he actually does 24 hour shift. goodness, on his days off he teaches at our community college. he teaches the nursing classes, so by the time he gets home he is exhausted. it really has affected our whole lives, our marriage, our children, our health.

sure, sure, what's the?

current trajectory. if you keep all of this in your life, how soon will you be out of debt? that is a good.

question. so we recently have not been great with our money. so we recently, just January one, started working with a Dave or with a Ramsey coach on our budget. so we've completed baby step one. so I'm not.

throwing at the debt total, including extra payments.

well, we've just hit baby step one. so Tori, so you.

guys have been working this much. where was the money?

going out the window. so

did you increase your lifestyle as he took on the extra jobs? I mean we.

did so we. we bought the two vehicles I would sell.

these, these cars. I don't know what they're worth and what you owe on them, but that feels like a better sacrifice than losing your husband right now, sure I.

don't know. yeah, what, what is what? where are the car numbers for us, real quick.

so my. I have my vehicle and we owe about 23 on it. okay, I recently looked at what it was worth because I was considering selling.

upside down, probably about.

about $2,000. upside down, it's about 21. okay, that's about huge. okay. now, my husband, he purchased a truck and it is he.

that's what you think it's worth about that, if you're.

lucky or what? oh, he doesn't even think we could get.

that out of it. okay, so, Tori, how long, sorry, how long have you guys been on the schedule, the 90 hour a week schedule? he, he's about.

two and a half years, so.

so why, Tori? I'm a little bit confused, because usually, when we talk to people on this show, just in this perspective, they're working two, three jobs. they're going crazy because they're putting extra money to the debt. they're doing it for a reason. why did you guys choose to do this lifestyle two and a half years ago?

were just. you know, we weren't good with our money at that point. okay, and so.

it's just to keep your life.

afloat. yeah, just to keep.

going okay. okay, because what I would say, Tori, is that this level of sacrifice we've seen people do it, and they do it for a period of time maybe not, maybe not two years, but you know, a good six, nine months and then maybe they take a break for a little bit, then bring on an extra job to get out of debt. right, they're doing all this for a purpose. so if that was the case, there's a part of me that would say okay, you know, if someone was calling in and they hadn't done it yet. but like we're looking into this, if we just power through for two years, we could get all this cleaned up, like I feel like I would be like, yes, yes, yes, you guys have been doing it for two and a half years, just to keep your lifestyle afloat, which obviously is more of a lifestyle than what you were, you know, expecting, because you guys went into debt for it too.

I don't want you calling us two and a half years from now being like well, we still have 75 in debt and he's still doing this. so we need an endgame here, and that's what we're trying to show you. and based on math, if you bring 10 home a month, you said, can you put five of that toward debt, because that will get you debt free in 15 months and.

like like live on nothing, Tori like nothing, so yes, we.

could. I did like our what our four walls, yeah, payments would be, and it was about four thousand thirty five thirty five hundred.

perfect. so that means there should be, in a perfect world, sixty five hundred dollars of take-home pay left to throw it down with minimum payments plus extra. yeah, once you do that math with the debt snowball calculator, you should be debt free in a year. yeah, I can do about anything for a.

year you're calling us.

though, two and a half years after all this, so you guys are exhausted like two and a half years of night. I mean like that's. it's not sustainable. long term. right, this is how you guys are doing it.

full-time job. would it just take an extra year, because I'm okay with that if this takes two years for you guys to clean up and you.

survive it. yeah, yeah, but here's the deal, Tory. I'm like you guys have to be so committed to this process because if you're not, you will look up in two years and hadn't made much of a dent in this. if you're not like really committed to that process, you know, and maybe you guys stay on Tory through through the summer and maybe in the fall he pulls back. you know it doesn't have to be today, but you guys kind of do a game plan and just say but but we understand like we're, we're parents, we're human, like we know that it takes a lot of sacrifice and we don't want your mental health to be an issue.

suffering, sustainable, that's.

right. yep, but you guys got this, Tory, you can do this. this is the Ramsey show.

the number one question I get in the DMS is what's a good high-yield savings account? you guys talk about this. so we're going to talk about what a high-yield savings account is and the pros and cons. you just went to the punchline, oh was I.

ruined it back up, back up.

all right, go again back up.

10 seconds. so people always ask George, you know? on social media, where should I save this money? should I save it? you know, in a savings account do I invest it?

investing is a high-yield savings account. oh that's.

right, George. well, edit that.

post. tell no to the producers. I'm just so excited. it's one of the things I love the most.

couldn't wait to talk about an old high-yield savings account, but now it's a great spot. we call them.

HYSAs or hyces. for short, no, no, no one calls them that it's fine, god bless. so this is just literally a high-interest savings account. they're generally online banks because the brick and mortar banks can't afford to dole out as high of a rate because they've got a lot of overhead to pay for. that's right.

is amazing. yes, yeah, it's been incredible. and even when all the rates, mortgage rates, you know, everything has gone up debt, all the

things silver lining we.

savings rates go up and you know you earn more interest. and so that's what we really found. and Winston I, we have a high-yield savings account. we have one for our money market and one just for short-term savings that we just put. put money in and and, and I love it again because you obviously get a high rate of return for a savings account, right compared to a traditional savings.

one called Marcus by Goldman Sachs. again, we don't have a Ramsey partner advertiser in this space, but these are just the ones we personally use. so we can tell you at least that much, and the key is to do your research on these. I don't trust the ones that are offered by credit card companies or Apple, which makes you have a Apple credit card to use their savings account, or Capital One or one of these companies the big banks, yep. and so, while these are huge companies, you know, Marcus by Goldman Sachs and Ally, I have not noticed they've been marketing debt products or using my information to sell those products.

here. yeah, we would say, though this is not a place to park your money long-term right, so investing, don't mix.

it up. savings is not investing. that's right. two different things. getting some interest, yeah, and I always.

say, George, my rule of thumb is kind of that five-year mark. is that yours? or if you're shorter longer, yeah, I.

say, depending on the situation, three to five plus years is that's? I'm gonna invest that money versus parking it. yep, but you know, home down payment. what worries me, Rachel? people want to invest their down payment and I go, yeah, but three years from now, what if the market took that dip at the time when you want to buy that house?

interest, you're accumulating.

yeah, this is not free money.

yep, that's a great point, yeah. and and the emergency fund specifically, you guys, that three to six months like this is a great place to park. that. and well, we say it's not an investment. you want to be able to get to it quickly.

remember, your emergency fund is insurance, not an investment. this is money that's made to protect you. it's not made to make you more money. yeah, so don't be freaked out. if you're not getting a certain interest rate, at the end of the day, it's not going to be life-changing, that's right, but I think it's a great option and right now it's the highest rates I've seen.

exactly. yep and you guys, the way to find savings, one of the best things you can do is be budgeting, making sure you see, okay, here's my income, here's everything, and we talk about. you know, giving, saving and spending and what that looks like, and to really be intentional with putting money aside, letting that be a habit. and so, if you have never budgeted before, maybe you are a budgeter. I really recommend downloading every dollar.

category on every dollar. so you can kind of automate that and go all right, we're going to do a direct transfer from our paycheck or bank account to our savings account every month and the budget will help you track that, and it's all.

right there. yep, so every dollar is amazing for budgeting and to get you in a position to be able to say, yeah, we actually can find margin here and save some money again, for whether it's a car vacation, down payment, emergency funds, a high yield savings account, it's a great place to park that short term to make sure.

they are FDIC insured or NCUA. if it's a credit union, that's a good point to call out. so when you're on the website, which the ones we mentioned are, but you want to make sure that it's insured, I think it's up to two hundred fifty thousand dollars per depositor. so that's right, pretty sweet.

it's good, all right, let's go to the phones. we have eight of them, so we're. Hey Aiden, welcome to the show.

Hi, thanks for taking my call.

Absolutely. how can we help?

I'm just getting ready to purchase a new truck. I'm just trying to figure out what.

Truck. yeah.

Oh, George loves a truck, Aiden.

How much I can really afford when it comes to being a truck. buying a truck would be smart.

All right. How much do you make a year, Aiden?

This year I will gross anywhere in between from ninety five to about one fifteen.

Okay. Amazing.

And what debt do you have?

My current vehicle will be paid off in about two months. I owe about three hundred to my Mac dealer and a little little under five hundred to my Cornwell dealer.

Okay. And how much do you have in savings to buy the truck?

I have about eight, but that's I'm trying not to touch that so I can keep on growing that for a down payment on a house.

Eight thousand.

Yes. I plan on trading in my current vehicle.

Okay. Trading in for another, like a truck with a payment on it?

Yes.

What kind of truck are you going to buy?

I'm still trying to build my credit.

What was that? What truck are you looking to buy?

I'm looking to buy a twenty five hundred or thirty five hundred diesel.

What year?

Early. Early 2010s to late 2010s.

And what is that going to cost, you think?

It all depends. Anywhere I can get the trucks I'm looking at, I could get one for anywhere between about twenty to forty.

Okay. That's a big range. Well, Aiden, you're probably not going to like our answer.

If you listen back to this call, Aiden, you're going to hear that you have a lot of priorities right now, don't you? Yes. You're trying to pay off debt. You're trying to buy a house. You're trying to get this truck.

Uh, yeah. Not much.

And so we can clean up all of your debt within three or four months?

Yes.

In fact, you have $8,000 right now. you could use to pay off the car and pay off all of your debt. You could be debt-free today.

Yes.

And that would leave you with how much in savings still?

Okay.

A few thousand?

Yeah, a few thousand.

There you go. So that's going to be your starter emergency.

fund.

Yeah, that'll be your starter emergency fund, Aiden. And then, whatever cash you have beyond that, you can put with your truck, you're going to trade in and you only are going to buy a truck that you can pay for. No more payments, because debt is stealing this income. And especially with a car, you are taking a loan out and paying interest on an asset that's going down in value. Mathematically, it is not a smart move, Aiden.

next truck. Six months from now, you're going to be able to save up and pay cash for it. Yep.

Don't let the bank steal all your income, Aiden. Don't give them payments.

We love a good live event.

We love a good live event.

Our team is really good at them. Yes.

Some of the best events in the country, and sometimes we're out traveling to different cities, but this time, George, we're going to do one in our backyard.

Literally.

Here at Ramsey Solutions, up on the hill in our new event center, and we are doing the Total Money Makeover weekend, you guys. This is going to be a full weekend on May 10th and 11th, and we are going to help people when it comes to the subject that we talk about all the time, which is money. So actually, the night before, on the 10th, George and I, we may or may not be doing a live recording of Smart Money, Happy Hour, our podcast. So you can come and participate in that, and then an all-day event that next Saturday with all the Ramsey personalities, and it's going to be really fun. We're going to talk through, obviously, the baby steps and different parts of your money and your life, and we're going to do lots of Q&A as well.

Love it. People come from all over the country, even the world, to come to these events, which is so amazing. So go start budgeting for the travel and transportation and lodging and all the fun stuff, and Nashville's a great place just to hang out. So extend your trip and enjoy it while you're here. Ramseysolutions.com slash events, May 10th and 11th.

Yes, love to hang out with you guys. All right. Up next, we have Sarah in Charlotte. Hey, Sarah. Welcome to the show.

Hi. Thank you so much for having me. So my question for you guys is, currently, my husband and I are renting an apartment for about 32% of our net income, and in order to get closer to that 25%, we have to move to a low-income house, like a low-income community, and I'm not sure if that's wise, you know, because sometimes crime is higher in low-income communities.

I appreciate your intensity for the plan, but that 25% is really a guideline, and it's not a set in stone. If you're at 26,, time to move, bucko. So I think it's a good. I don't think this is on fire. You guys sound like you're doing a good job, paying attention to every dollar, and my assumption is your income will go up over the next year, correct?

Potentially. My husband put in some applications to become a police officer, and it could potentially go up a little bit, but he... It's going to stay about the same.

Okay.

Yeah, I mean, I would say, Sarah, I mean, obviously, we don't want, you know, you in a situation that maybe you feel unsafe, or whatever, you know, it may be for you. I mean, yeah, you want to be able to find a place that you feel good at, and I would say, too, that, you know, just because a situation is different doesn't always, you know, make it bad, right? And so I think there can be some places that you may overlook because of just the thought of, oh, gosh, you know, the high crime or whatever it may be, but to really do your research and dig in, because there's parts of cities, you know, that may be lower income, but they're great neighborhoods, and great people, and all of it. So I would do my due diligence to really look and see, I mean, ultimately, I want you to feel safe. I mean, I think that's a fair value to have in life, but also, you know, to maybe look at, yeah, maybe our life, maybe where we are, though, where we live, will look different than maybe what we thought because of our income, and George is right, like that 25%.

We make about $55,000.. Okay. Just, my husband works, and I'm a stay-at-home mom.

Okay. How old are your kids?

My son, he's almost two.

Okay. That's great. So great. Yeah. So, I mean, I think you guys talk about it.

We do. But, luckily, it's just to a family member who paid off our debt. So...

Okay. How much is that?

We don't have... It's almost $50,000..

Okay. Okay. And are you guys working on getting rid of that?

We are. Yeah.

Okay. That's great. Yeah. And once that's freed up, you know, that's going to feel like a breath of.

A little more breathing room. Yeah. Is it a monthly payment you're making?

Yeah. We're trying to do a monthly payment, and it's pretty low right now. Like, if we keep... Right now, we're only trying to give about $250,000 a month, so that'll take us, like, 10 years to pay it off.

Goodness, gracious.

Yeah. I wouldn't do that. I would be changing something in that formula, which is probably going to be the income on making more. I mean, you know, and what's so hard, Sarah, is, you know, math. It is what it is, right?

They'll see you. go on vacation and go, whoa, whoa, whoa. They owe us money, and they're going on this trip?

Yeah, that's right. That's right.

Even once you're out of debt. Yep. So, I would just make a plan to pay that off more aggressively, and that might mean making more income, but the point of the 25% guideline is so that you're not house poor, is so that you have more money to pay off debt, and so, again, nothing's on fire here, but I would make a plan to increase income over the next 12 months to create more margin to get rid of this debt faster.

That's great. All right. Up. next, we have Larry N. Evansville.

Hey, guys. Thanks for taking my call today. How are you doing?

We're doing great. How can we help?

So, I recently found you guys, and I'm really trying hard to figure out budgeting-type things. I grew up in a family that didn't really care about it, you know, and I'm trying to figure it out, and I've looked at every dollar, and I'm just overwhelmed with things. Like, I try and budget, and then something comes up, and it's just very overwhelming, and it's just. I'm to the point of, I'm tired of, you know, living every paycheck to paycheck, and, you know, the next week, I'm broke, and it's just hard, and I just need help. budgeting.

What's the problem right now, when you're trying and you say, I feel broke? Are there too many bills after your paychecks show up?

So, what happened is, you know, a couple years ago, I did some bad things. I got addicted to some things after an accident I had, and, you know, I screwed up our family, and when I did that, it meant a lot of debt for my family. I'm sorry. No, you're okay. And I'm trying to get out of it, and I try so hard.

Yeah. Yeah, how many kids do you have?

I have three.

How old are they?

Two, five, and eight.

Wow. So, you guys have been through a lot. lot, Larry, for over the last, what, how long has this journey been for you guys? And are you sober now?

Yeah, I've been sober for over a year now. A great guy from Boston, you know, took me up there and helped me out. And it's just the last six years before that, you know, I was working, but I'd leave the job because, you know, something would happen or I wouldn't go to work, and, you know, I'd get behind on things. And, you know, I'd say, oh, I'll push this off for now. And it's all just coming back to haunt me.

Yeah. So, Larry, we're coming up on a break. If you'll hold on the line, we'll come back to you, if that's okay, in our next segments, just to kind of walk through more of your story and to help you with just the overall picture, because I think budgeting for sure is a piece of it. But there's a lot of life in there and possibly some debt, and we can run some numbers and kind of help you walk away with a game plan. Does that sound good?

Yeah, I appreciate it.

Okay, absolutely. So hold on the line. Hold on the line, Larry. And you guys listening and watching right now, we will be back.

Hey folks, there's a lot of half-baked investing advice out there, but here's what you can do to get more confident about this stuff. Check out the SmartVestor program. SmartVestor connects you with local financial advisors who have the heart of a teacher. They'll help you level up your knowledge and build a retirement plan based on your goals, not theirs. Go to ramsysolutions.com slash SmartVestor to get connected and get more confident about your plan.

Welcome back. We were just talking to Larry, the segment before, and he was asking us really, how do you start budgeting? What does this look like? If you're just new to this process, because it just feels like something always continues to come up.

Car repair, something for the kids.

Yes, throughout the month. And they've walked a hard journey, he was telling us, with just some addiction. And he's been sober a year, and they're really trying to get in this place where they can get control of their money. Was that a good summary, Larry?

Yeah.

Okay, wonderful. Okay, so tell me this, Larry, how much do you guys make in a year, just household income?

So my wife makes about $30, about $28 before taxes. And then me, I just started back working about a year ago. And this past year, I made about $51, consistent with the same employer.

That's great. What do you do?

I work in home health care. I work with mentally handicapped individuals. It's something I've loved for a while.

Yeah, that's great. That's great. So you guys are making around $80,000, $81,000.. And what debt do you guys have?

So we have a car that got repoted a couple years ago because of me that I'm working to pay off. just to get that out of there. We got my wife's car. now that we had to have because we had to have reliable transportation for her.

How much is that?

It's about $8,000 right now.

$8,000, okay. And how much is it that you're repaying for the repossession?

About $14,000.. I had bought it for about $16,000, but I owed $14,000 and just basically stopped paying.

Yeah, okay. So the two cars, what else?

We have combined between just little loans that we tried to get by and loans to family, we have about $15,000 there. And then medical debt, we have about $6,000, but I'm trying to get some assistance from their financial aid there. But that's just a process of trying to get that figured out right now.

For sure.