You Can't Outrun Your Debt

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'm George Campbell, joined by my good friend, Ken Coleman. This is your show, America, so make it happen. Give us a call at 888-825-5225, and we'll help you take the right next step for your money, your work, and your life. My friend, Ken, here, he is the expert on helping you get to that work that you love, helping you get that bigger shovel, help you work on that greatest wealth-building tool, your income.

We love being together. People, a lot of chatter out there on social media. So much chatter. A lot of chatter. We really do like each other.

That was my encouragement to you, since you're a fuddy-duddy, normally. I'm...

Your words. Fuddy-duddy. It's a great word. The youngsters don't know what that means, but we're going to help some people today. So let's get to it.

That's what we're all about. All right, let's do it. Miles joins us up first in Nashville, Tennessee, right down the road. Miles, how can we help you today?

Hi, yes. Thanks for taking my call. Question. I was in an accident on Thanksgiving.

Oh, no.

I'm okay.

You okay?

And unfortunately... Yeah, I'm okay now. So the vehicle is a total loss, and at the moment, I don't have the funds to purchase another car. Now, I am currently using a family member's car just to get back and forth to work, but I don't want to use that for an excessive amount of time. What suggestions do you have that you recommend before I proceed?

Well, what the heck happened with insurance?

So, yeah. So the insurance paid out. I'm on a gap insurance. Essentially, it paid out what I owed on the vehicle. So I broke.

What kind of income are you making?

I do about 45 a month.

Is that before tax or after tax?

Before tax. I'm sorry.

Okay. How quickly can you save up money for a car? Be realistic. What's that number?

Honestly, I couldn't really tell you, and the reason being is because the vehicle was part of the biggest expense that I had. So I haven't even gone a full month of seeing what my income would look like without that expense.

What was your car payment?

So the car itself was about $270, but then, because of the type of vehicle I had, I paid $400 a month in insurance. So I was, I guess, collective, right at $600 a month.

So $270 plus the four. So you're talking, you freed up $670 a month plus gas, plus maintenance and repairs. And so we can at least put that towards the savings on top of whatever margin we can find with this income. Do you have any other debt?

I've got some older debts and personal loans and credit cards that I've been actively paying down. Now I'm probably right at $10,000 total for all of that.

$10,000 in debt still? Correct. And I'm assuming nothing in the bank, paycheck to paycheck right now?

Got about maybe $1,500 in savings at the moment.

Okay. That's a start. So let's say you've got this $1,000 starter emergency fund. You have $500 left over. And now we're going to get to the point where our one singular goal, we're going to make minimum payments on the rest of our debts.

Making more money. Like right now, you're trying to come up with 20, 30 hours a week of hourly work to get this car funded. I'm pulling up, you know I love to do this, it's my favorite thing to do. Use cars for sale in Nashville under 5,000..

Well, I tell you this, Miles, I have confidence because I helped a Ramsey team member here get a car for two grand, not long ago. Right. And it's not a flashy vehicle, but it's running. It's still alive.

What were you driving before?

A 2018 Sonata.

All right. And how long can you drive this family vehicle?

They're patient, and I can tell they're patient, but I kind of want to get it back to them relatively quick.

What does that mean? But what does that mean?

Would they be okay for four months if they didn't have this vehicle?

I'd probably say maybe two months max.

Okay. Well, I would get real good clarity with them, say, hey, I'm trying to save up. Here's my goal. My goal is to get you this car back in a few months. What's the urgency?

I almost wonder if they wouldn't be willing to have you pay for the car a little bit, you know?

What's this car worth? Could you buy it from them, or is it too nice of a vehicle for you right now?

So we talked about that as well, about the opportunity of me buying it. They declined on that because they want to keep it as a backup vehicle in case theirs goes down. Got it. Because they only have one vehicle as well.

What's your commute like, as far as work goes?

10 miles, so not far at all. Like I said, worst case scenario, I could walk if I have to, but I know it's going to be getting pretty cold here pretty soon.

Sure. But you could also, you know, if you had to Uber for a few weeks, that's not going to be a deal breaker.

No, no Uber. He can walk. I'd rather him walk than Uber.

Have you walked 10 miles, Ken?

Have I walked it? I've never walked 10 miles, I've ran 10 miles.

I'm just saying, walking 10 miles in 28 degrees in Nashville.

I'm making up a point. Sure. It's the principle. He doesn't need to be spending Uber money to get to work.

I'm just saying, worst case, if he loses this vehicle, it's not a deal breaker.

All right. Yeah, I sound like the curmudgeon. All right. You're right about the walk. He said it.

Yeah, I had a buddy of mine that lived on my bedroom floor because he needed a place to crash and he would bike to work at TGA Fridays back in the day, and he survived to tell the tale.

It's been done before. This guy's in a situation here where he's got to scramble, and so you can come up with it. But I'm telling you, I'm looking at cars right now. Well, I can tell, Miles, $3,500 will get you a decent car for a season.

Yeah. I'd start looking around, start doing your homework while working these side jobs. But my guess is within three or four months, you've got a beater car, and that's okay. And six months after that, you can upgrade that by a few thousand bucks, and you're going to be out of debt soon, and this will be a blip in the grand scheme of your life. But I hate that you're going through this, man, but I'm glad you also got rid of the car payment.

Yes, sir. I appreciate it. Thank you for taking my call.

Yeah. Best of luck with this situation, and there's a lot of local dealerships and mechanics, Ken, that I think would be happy to let go of a vehicle that has been sitting on their lot. that needs some work.

But I mean, listen, the bottom line is, if you're looking for cars under three grand, they're all over the place.

Facebook Marketplace. Yeah. It's true. They're out there, man. Oh, man.

If not, he's going to have to get some really good walking shoes.

I would probably buy a bicycle before I walk.

How long would it take you to walk 10 miles?

My little legs? I'm going to give it at least 45 minutes. Is that fair?

I don't know.

I think you speedwalk. You could beat that. I'm not a marathoner. I would love to see you walk 10 miles.

I'd outwalk you on any day.

Not a chance. Guarantee you, I'd outwalk you.

That's for another episode of The Ramsey Show, but for now, more calls coming up. We'll be right back.

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That's really walking fast.

I just looked up the average time it takes to walk a mile. It's about 20 to 30 minutes a mile. Yeah.

I was going to say the world record for the fastest mile is what? I'm not sure about that, but the average walking speed is about three miles an hour. Right.

That's average. You don't know my speed walking ability.

But like the fastest mile of all time, I think it's just under four minute mile, I think. But we were all discombobulated because I was just generally saying, I was playing the boomer role. Ah, he said walk. All I could think, all I could think. as soon as he said it, I went.

They're little, but they are quick, my friends.

Them feets be nimble.

Them feets be nimble. I love it.

Oh, it's too much fun. We're already having fun.

Let's see if we can screw some more stuff up, Ken.

All right, here we go. What do you say?

Let's go to Renee in Miami. What's going on, Renee?

Hi. How are you? Thank you for taking my call.

We're doing well.

Good, good. Quick question. I've made a little bit of money this year. I don't really have any debt other than maybe 15,000 that I owe on a car. And I have a really good accountant that has advised me to open up a few different accounts to put some of that money in.

So you have a pile of money sitting in the bank right now? Is that what you're trying to figure out, what to do with it?

I do.

All right, so hold on. So I thought I heard you say you don't have any debt except for $15,000, and I'm confused because that's debt.

Well, it's a car. So if I could just pay off the car, I'm assuming.

So what's been holding you back from paying off the car?

Trying to decide if I want to keep that car or not.

But the debt can go today. You can make the car decision later.

Yeah, you're exactly right.

How much money are we talking that you have in the bank?

About $150,000..

Okay. So you got $150,000.. That's pretty much everything to your name in liquid cash? And what's your income?

This year, close to about $200,000..

Awesome. Good for you. What do you do?

I'm in real estate.

Nice. Way to go, Renee.

Fantastic. Okay. Thank you.

You got plenty of cash, so you shouldn't be holding on to the car payment just because you're not sure if you're going to keep it or not. You have enough cash to pay it, be debt-free, and that's what we teach. We want you debt-free before we start investing.

Okay.

So if you became debt-free today, and then you put some of this money aside for an emergency fund, let's say that leaves you with about $100,000.. Is that fair?

Yeah.

Okay. So, with the $100,000 left, are you a homeowner right now? Do you want to be?

I'm not right now, and I do want to be next year. So that's kind of the next step that I'm going to take in the new year.

Okay. Awesome. Good. And you're in real estate, so you know the stuff inside out. But what I would do, you don't necessarily need a financial planner right now.

Okay. So my accountant, because again, I'm sitting here at December 15, and they've advised me to open up HSA, 401K, a Roth, and a high-yield savings.

Awesome. Those are all good things. There was no red flags on any of those. And I think you are on the cusp of being ready to do that, in which case I would start that conversation. There's a SmartVestor program where you can get connected to InvestingPros at RamseySolutions.com.

Yep.

But you're there. But the thing is with real estate people, what I found, Renee, is that they tend to want to get fancy and complicated instead of just following a simple, proven plan.

Okay, got it.

So what you don't want to do is go invest this money, because someone told you you can make a lot more. You can turn your $100 into $300.. Instead, I want you to use it toward your very soon-to-be financial future of being a homeowner, which is going to get real expensive, real quick, especially in Miami.

Right.

Yep. So you may need more than $100,000 down in order to afford a house in your budget.

What's your car payment right now?

Oh, like $350,000..

So the reason we want you to pay that off today is because, A, you have the cash, and now it gives you more options, because you can sell that car right now. if you want to. You can hang on to it. It's not costing you any money. In fact, you give yourself a $350 raise per month right out of the gate.

Instantaneous, which is awesome.

So that's the great news.

This is not a six-month journey to do all of this. You're going to be there real soon, Renee, so keep it up.

Good job. Great income. Way to kill it.

Let's go over all the way across the country to Spokane, Washington. Sandy joins us there. Sandy, how are you?

I'm good. How are you guys?

We're doing great. How can we help today? Go up.

So I am a homeowner, and I had a piece of property that was deeded to me 20 years ago, and I decided I was probably never going to live on it, so I sold it while the market was kind of up, and I got about $170 for it. I paid off my car and all the other debts that I had, so now I'm basically debt-free, except for my house payment. Okay. But I also don't have much of a retirement because I've always worked in jobs. This never worked out.

Well, first order of business, you just let the cat out of the bag. You still have some debt, Sandy. You've got those student loans to pay.

Oh, well, student loans. Yeah, well, just literally my first payment is due this month.

Okay. What's left on the student loans?

I didn't have anything. Yeah.

What's left on them?

It's $18,000..

Okay. So what would you have left after you pay off this $18,000 in student loans? How much money?

About $110,000..

Okay. What's left on the mortgage?

$190,000..

Okay. Awesome. And you have an emergency fund on top of that, or is this it? It's all tied up in this $110,000..

Well, yeah, no, it would be, I have, no, because it's all dumped into savings. So out of that $130,000, that's in savings, I guess $10,000 of it would be my emergency. Okay. So I'm probably $100,000, to be fair.

We need to bump that up. $10,000 feels real low for you. for an emergency fund. I would lean towards three to six months, maybe on the six-month side. Are you single, married?

Yeah, I'm single.

What's your income?

Not enough.

Okay. What were you making prior? So, prior to that, you were making over $50?.

Yeah, I was making $30 an hour. Now I'm making $20..

Yeah. If I were you, I would, George, I'd like her emergency fund to be based on the $30 an hour.

Yeah. Look at your household expenses today as they stand and multiply that by six, and that'll give you that number that you need to keep aside from the savings.

Yeah. And then we got to get back in the game, you know? Right. You've got a master's degree. That's something.

Love it. And Sandy, once you get the emergency fund, I would max out that IRA for the year with some catch-up contributions that you have at your age and throw the rest at the house and begin that journey. This is The Ramsey Show.

Hey, listen up. Everyone is at risk of identity theft. I don't care if you're a hermit living off the grid listening to the show on a battery-powered radio. All of your data collected by every company you've ever done business with, lives online. Your bank, your doctor's office, retailers, the apps on your phone, the gas station where you have loyalty rewards, they all store your info online, making them ripe for a cyber attack or data breach.

Welcome back to The Ramsey Show. I'm George Campbell, joined by my friend Ken Coleman. The number to call is 888-825-5225.. Well, Ken, we've got some news here, and it's not Ramsey news. This is national news from CNN, what the Fed's looming rate cuts would mean for you.

Well, as we sit here right now, the 30-year fixed mortgage rate has dropped to 7.07%. As you said, the 15-year is at 6.31.. This is today. This is today's numbers right now.

Might see a temporary spike in home values and prices.

I mean, selfishly speaking, that's what I want to see. But I'm not a young couple and I know a lot of young people are going, man, the price of homes just continues to go up. And I think that's still going to be the case for a while. So I say all that to say this, I would not wait. I would not have the mindset.

Yeah, twos and threes. So for those of you that want to be homeowners, this could be huge for you, because even a small percentage change, that can mean big savings. We're talking thousands and thousands over time. So no one knows for sure what will happen. But if you've been sitting on the sidelines and you're wanting to be a homeowner, do it when you're financially ready and don't try to time the market.

I'm doing great, guys. How are you?

Doing great. How can we help?

Well, first off, you two are two of my favorite personalities.

Two of, Ken? Two of?

Yeah. Well, you really... That kind of got... That was not a compliment. You started with, you're my two, and then you went...

I took it as a compliment.

Two of my favorite. There's only five of us. Okay, we'll take it.

George, my only complaint with Smart Money Happy Hour is that it's only once a week, so...

I'm sorry about that. I'm sorry. We're doing our best out here. Blame Rachel Grace.

Hey, Justin. Inside baseball, George is only allowed to have one drink a week, so that's why we do that.

They keep me limited. He can't handle more than that. We stick to the mocktails for that reason.

Thank you, Justin. You're very kind. We appreciate it.

What's your question today?

Yeah, so short question, just to make it simple, then we can move on from YouTube. So, should my fiancé and I move closer to her new job, even though rent is higher?

That's a long way to drive, an hour, huh?

You know, Ken, I knew talking to you, you kind of have that sentiment. So, here's the thing, right? I live in Maine, and you know the snow. She's okay with the drive, and that's awesome, but I don't know how I feel about it.

Yeah, I don't like it.

Is she going to be on some kind of maternity leave?

She is, yeah. Once the baby comes, she'll be on a six-week maternity leave. And I guess that's another layer to it.

I just wonder, can we punt this? Can she make the drive for a few months, then she's on maternity leave, then we can have this discussion in the summertime to move?

Yeah. Yeah, it's not a bad idea.

That's one option.

Okay, so let's run the numbers on this with George, though. So, what is the...it would be how much more to your budget for both of you if you made the move to this new apartment? Was it $300 more? Did I get that wrong?

Yeah, so the total increase... Again, things are split, but so the total increase is between three and almost $700 more, depending on what we can find. It's just, there's not a whole ton of rentals. There's a good amount, there's just not a whole ton. And a lot of the times, you know, the more expensive you go, the more utilities are included, but then it's just paid off.

All right, so practical question. So, this apartment, these numbers you're giving me, is this based on apartments that are right there, close? So, instead of an hour, they're five minutes away? Because I'm wondering if we could pull back and go, if it's a 20-minute drive or a 15-minute drive versus an hour, that's significantly better, but I wonder if the cost is different.

Yeah, so if we were to be five, like, within 10 minutes, it's going to be over $2,000.. The numbers I'm looking at are giving her a half-hour commute, which I'm much more comfortable.

with. Okay, gotcha. So, you're already thinking that. Okay.

But I mean, $1,500 out of six, that's 25%. So, you guys are right on target as far as those numbers go. It hurts because it's more than you're paying now, but it's not going to crush you guys financially.

Okay, and do I factor utilities into that, or is that added on?

That would just be. your actual rent. Utilities would fall outside of that 25%. So, you'd be okay. You guys have the margin to do it.

This is why you and I should have an online license. We could have done the ceremony right here on the show.

Oh, on the air, Justin. That would have been fun.

We need to look into that, guys. I would love to do that. I think that'd be great.

You're doing great. You're saving $2,400 in the stork mode until baby and mom are home healthy. That's going to get you guys $10,000 right there. Do it. If they're healthy, throw it at the debt.

It's quality of life here, George.

Get married today, my friend. Congratulations. This is The Ramsey Show.

Hey, guys. It's Rachel Cruz here to tell you about a faith-based alternative to health insurance that can make health care more affordable, Christian Health Care Ministries. CHM allows members to share each other's health care costs, and it's as easy as 1, 2, 3.. Step 1, choose the health care provider you want. Step 2, submit your eligible bills.

Welcome back to The Ramsey Show. I'm George Campbell, joined by my good friend, Mr. Ken Coleman. The number to call is 888-825-5225.. Well, hey, it's Christmas time.

Oh, it's a cute book.

It's a sellout. And that's great news. there. Our friend, Jade Warshaw, has a new book called Money's Not a Math Problem that just released.

Hand me that bright orange one right there to your left, because this is the one that— This is the creme de la creme. I'm a little excited about this bad boy. Look at that. Look at this guy. Right there.

It took a whole team of editors to make this happen.

Breaking, free from broke.

That's right.

George's first book. This book is so good, and I'm proud of my friend. Let me tell you something, folks. I've watched George live this out. I've watched him live it out.

That means the world.

It's all the financial wisdom that you would expect. But it's extremely practical, and because it's practical, it's hopeful. This is an absolute must purchase. if you've got someone in your life that just has no stinking clue about the financial game. They just don't get the game.

Absolutely.

Who's coming out, and they need to understand it, because George speaks the language.

And the parents never learned it. So this is a great way for the parents and their kids to go, all right, I've got to learn the truth about money. George cuts through the noise. That's what I attempted to do here with a lot of human research. And, of course, snark.

And you hand this to them, and they go, well, this is no boomer talking to me.

No. Look at that little hipster.

You look cool. You've got your Gap jeans outfit on.

Oshkosh bigosh jacket.

You look so cute. It's so great.

I aim for cute, Ken.

Look at that. So anyway, go get that. That's available at ramsaysolutions.com.

Yes, it's on presale right now. We also have, Ken, some limited edition autograph copies. I signed a few hundred of those, and there's still some available.

Can you call that a limited edition?

Well, there's only a few hundred, and after that, they're gone.

You're never going to sign a book again?

Never again. So it's special. So you go in the Ramsey store, you can search for Breaking Free from Broke, or search the word autographed, and you'll find it in there.

And, by the way, all my books will forever be signed if you want them. I'm not going to limit myself to the people. You just made a promise you can't keep. I'm a man of the people. I will sign any book.

Your mouth just wrote a check that you can't cash, my friend.

I don't even know what that means, but we'll see.

I've heard it said before. Okay. So go check all of that out, ramsaysolutions.com, slash store. Now's the time. You can still get some gifts, especially the digital ones, in time for your loved ones for Christmas.

There it is. Somebody's been paying attention. Ken would like that one. I appreciate that.

Marie, welcome to The Ramsey Show.

Hi. Thank you guys so much for having me. I'm still learning how to say boo-woo the right way.

There you go. That sounded pretty good.

Well, I've had a lot of practice since moving here. I've been here since June. But anyways, thank you guys for having me. I am just looking for a little bit of guidance on just how to attack the debt that I've got myself into over the past year. I'm 27 years old, and this debt spiral really started probably at the end of 2022..

How much debt do you have now outside of the mortgages?

Outside of the mortgage, it's $69,000 total. And the breakdown is $24,000 in car, $12,000 in personal loans, $9,000 in credit card, and the $24,000 in student loan. And before all of this, I had just the student loan.

What's your income?

I make between $140,000 and $160,000..

Good for you.

That's what we like to hear.

So, Marie, why can't you sell the house in the other state?

Does your real estate agent suck or is the home just overpriced?

I went through two different real estate agents, had it listed for the five months, and did decrease the price of the home. I just think the area that I was in, there was way more in inventory sitting on the market than there were houses actually being closed and sold. And I decreased the price. often, did a lot of analysis around that. I kind of think that it was probably just poor timing and I wasn't really in control.

How much equity do you have in that home?

The home is worth about $380,000 and I owe about $195,000 on it.

I got to tell you, kiddo, with the interest rates starting to drop, I'd be finding another really good real estate agent. I'd be thinking about that with you, George, because it's out of state. You don't want to be a long-distance landlord.

And I want you to be debt-free. I mean, you can claw out of this pretty quickly, making $160,000, paying off $69,000.. This is a solvable problem, but you could also leapfrog it. Go to ramseysolutions.com slash agentmurray and connect with one of our Ramsey Trusted Real Estate Agents. These folks are rock stars and they'll be able to help you figure out why this thing hasn't sold.

I have about $4,000.. I've completely stopped using the credit cards since becoming a landlord. I had about an $8,000 cash bill I had to pay that wasn't covered by homeowners insurance four days after my tenants moved in.

Well, that's the problem is you're trying to get out of debt, but you're also a landlord. And so you have to have this little side emergency fund right now to cover those expenses. So I wouldn't tell you to deplete that, to pay down debt in this weird season that you're in. But the rest of your income is going to go toward debt. You've got to cut your lifestyle down to nothing.

Yeah. Yeah. I mean, I don't only use my debit card anyway, since, you know, October. So I think that, yes, I can do that for sure. I just need the budget and put a plan together.

I love it. Yeah, if you can throw $7,000 a month at this debt, it's gone in less than 10 months. So that's the math on it. But now we have to get our behavior to line up with the math. And that's the hard part of being a human.

Oh, thank you, George.

When it comes to work questions.

Oh, I see how he did that.

That's a long pause.

You see that? He pulled me right in and thought it was a Hallmark card. Nope. Nope, just a sticker. Just a sticker.

But hey, you fell for it. Here we are.

We're at the end of the year, and a lot of people are thinking about, do I start a business in 2024?? Do I start that side hustle?

Do I finally quit that job?

How do I make more money? Forget the quitting of the job. Do you want to make more money? Who doesn't? I'm your guy.

Let's do it. Lizzie kicks us off in Austin, Texas. Lizzie, welcome to the show.

Hi, thank you for taking my call. I just found out I was pregnant with a Howard Merkel baby on Friday. Wow.

Wait a second. How is this a miracle, baby? Give us the story.

Because, unfortunately, we've had two miscarriages in the past 13 months, and we were actually going to start doing IVF. We'll save up for IVF, but we actually got back into the FPU, and we're, like, you know what? We're going to put that to the side, and let's just tackle the debt, because we have an overwhelming amount of debt, mainly business debt, but because everything is personal collateral, I just think it's all personal debt anyway.

You would be correct. You're right. Your name's on it.

Well, congratulations.

It's exciting.

I haven't even told my husband, because I don't even know. I feel like I can't even be excited.

You told us before your husband.

You told these two clowns and millions of other people before him. I hope he's in a hole somewhere safely that he can't hear this.

When do you plan on telling him?

I'm planning to tell him for Christmas, because I do want to. I have been doing the blood work and everything just to make sure everything's going good and that we don't have an unfortunate event again.

Oh, my goodness. I don't think this is a good idea. I don't think it's a good idea to put this out there on the show and then wait until Christmas to tell him.

I'd sit him down tonight with a smile on your face and say, Listen, I know we've been through a lot. You're not going to believe this, but here you go.

I feel like we should conference, call him in and tell him right now. That's what I think.

Yeah, I wouldn't wait for the morning moment for him to go, You are the father.

Yeah.

I'd go ahead and tell him now.

I'm actually going to meet him here, probably in about an hour, before he goes into work.

Yeah, that's a lot for you to carry. That's like your little secret for the next 10 days.

Listen, I want to get to the debt stuff, but I've got to say, you have got to tell him today before he gets into the office. I feel guilty. I'm a mess. right now. Our live studio audience is in a gap.

The funny thing is, too, is that he predicted it about three weeks ago, and I'm like, No, there's no way. And it's too soon anyway. And it turns out he was right.

That's when you sit him down and say, This guy called a shot. Hey, honey, your crystal ball was correct. You'll never believe it. Okay.

This is the craziest thing that's ever happened to me on the show.

That's pretty wild. All right. But it's an honor that you trusted us with this secret. Let me gather myself.

Let me gather myself, Lizzie.

The reason I feel like we can't be excited, or I can't be excited, is because we have $50,000, $50,500 in personal bill debt. On top of that, we have $651,500 of business debt. that is all tied to our personal.

Oh, my gosh.

What kind of business debt is it?

Construction debt, and it's anywhere from credit cards to personal loans. 80% of it is probably friends and family. Oh, boy. I say friends and family, but honestly, it's more like loan sharks.

Well, it sounds like your friends and family made a bad investment. Is this business still afloat? Is it doing well? Where is it?

It is doing well, and it's combined debt of my business with my ex-business, which is also a construction business, but I keep wanting to sit them down. That's the other issue, too, is that I keep wanting to sit them down and talk numbers, but it just ends up being a big ordeal, or we get into an argument, and we just can't seem to come eye to eye. I've showed them the plan of what I would do. We started doing FPU again, and I'm doing the everyday dollar. Not only I got the everyday Black Friday deal, a dollar Black Friday deal for the personal finances, and then, on top of that, I'm also doing it for the business.

What's the household income?

The household income for just my husband and I with his W-2 income, my W-2 income and the business income is about $18,300 a month.

A month? A month. And that's gross?

And that's gross. That's what we take home, yes.

Okay. Are you guys paying your taxes? Are you putting money aside for that? How is that working?

So, and that's the other thing. Included in the numbers I gave you that we're in debt, I'm assuming right now we probably owe about $15,000 to $16,000 worth of taxes.

Okay. That's going to go to the top of the debt snowball. Oh, my gosh. That's going to be. the first thing you pay off is the IRS debt.

One quick question on this. You said W-2, W-2.. So this company that's got the $600,000 in debt, is that separate from your day jobs, your normal jobs?

So that's separate from our day jobs. My husband already works 14 to 16 hour days, six days a week, and I do the same thing. on top of that. On top of that, that's including me managing the construction company.

Who's working for you? When you say manage the construction company and you're working 14 to 16 hour days, who are you managing?

I am managing, we have a group of, we used to, well, I own one. I used to have about 15 people. I cut it down to about eight. I weeded out the people that I feel like. instead of making me money, I'm putting money to them.

Okay, so you're like a general contractor essentially.

I'm a general contractor, yes.

And you're both working 14 to 16 hours a day.

Correct.

Is there any collateral that you guys could sell as part of this business? Equipment? Is there real estate? Yeah. This is going to take a decade to get out of at this rate.

Well, I crunched the numbers, and if I put $1,200, $1,500 towards the business debt and my dad puts $1,200, $1,500 towards the business debt, we'll be done in 28 months.

Wait, your dad is half partner in all of this?

Well, the 651, half of it is his. However, well, I say his rhetorically. I don't want to use the correct word because at the end of the day, it's under my name. Out of that, probably only 20% is under his name. So, no matter what, I have to pay.

But he's paying half. This is like a Common Core math question, Lizzie. We've got to sort this all out, and I'm excited for the baby, but you're right, we've got a mess on our hands. It's going to take some drastic choices for probably five to ten years to clean this up. But I hope it's faster than that.

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. Comparison is wired into us, but comparison can also become the thief of joy, because we can feel like we're not enough and begin acting and thinking in ways we would never think otherwise.

This is the Ramsey Show. I'm George Campbell, joined by Ken Coleman. The number to call is 888-825-5225.. Today's question of the day is brought to you by Neighborly, your hub for home services. There's never a good time for appliances to break down, but, Mr.

By the way, I was called Mr. Appliance in my early college years.

For as much as you were a handyman? Is that where that came from?

I just love these names. I'm jealous because I can't fix anything.

I can see if they called you, like, Mr. Toolbag. That one, I think, more appropriate.

Mr. Toolbag, I get you. All right.

I'm getting applause from the studio, the booth, guys. I like that.

I'm glad you guys are paying attention today. That's good. Today's question comes from Joseph. in Oregon. I work in biotech as a data scientist, and my company is experiencing financial struggles with cash flow.

If he was on the line, I'd ask, has there actually been layoffs? What has been said from leadership as far as the struggles? So I'd ask more questions, but I think when it comes to the employer, you're right, Ken, it's a red flag to the employer. They're going to ask, and so you better be ready to answer honestly and tactfully. Hey, what happened?

So I left. And that just makes you look a little flighty. Here's the thing. You know, when we get on the plane and they say, all right, we've got to go through the instructions. And, you know, if we have to make a water landing, they tell you all the things.

That's good wisdom. Appreciate the question, Joseph. Good stuff there. Let's head to the phone lines. Peyton awaits in Chicago.

Hey, thank you. Good afternoon.

Hey, how you doing? How can we help?

Yeah, I'm doing well. So I'm sitting pretty well in regards to my income and my debt, my investments. However, I have the opportunity to return to graduate school, and I'm not sure if that's a good financial decision for me, considering I'll probably end up taking out student loans to pay for it.

Did you say you have debt right now?

No, just my mortgage.

Okay. And what are you going to graduate school for?

That would be for a master's in engineering, and it's in MIT.

Wow, that's impressive. And I'm guessing you're in engineering now full-time?

Correct, yes.

Okay. What are you making now?

Making about $152,000 a year.

Amazing. And would this help you, I assume, get a big bump in pay? Are you looking to switch in a different field, or would you just excel in that field and get promoted there?

Yeah, I would hope it would have a pay increase. My larger hope, though, is I'm currently an individual contributor, and it's not looking like I have a clear path in my current company to become a people leader of technical people.

Which is what you want.

Exactly, yes. So my hope is that following this graduate degree, which is a joint program between engineering and business that MIT offers, that I'll more easily find myself in that trajectory to go to a supervisor of technical people.

What would it cost for you to cash flow this?

Probably around $90,000..

Total?

Yes. Yep. So I'm actually currently enrolled in the program. I'm a semester in my next semester, and then a year following. that is what I would need to pay for.

Could you somehow save up $90,000, pause all investing, and just stack it up, making $152,000??

Yeah, so I'd probably have to sell some of my investments to get to that $90,000..

Outside of retirement?

Yes, outside of retirement.

I would do that.

Do you know why we're suggesting that? Before we tell you, I'm just curious. When someone hears us say things like that, does that make any sense to you at all? Because if it doesn't, that's okay. But I'm just curious.

Yeah, I think I follow that train of thought. I also have the converse train of thought that maybe it makes more sense to leave that money there and accrue the gains in the mutual funds that it's in right now for that year, instead of pulling it and then repeating it again.

Okay, so let's fast forward.

Because it's a short amount of time.

Right, right. So let's fast forward to the end of the program and you're $90,000 in debt. Have you run the numbers on what that payment is going to look like when you've got to start paying that back?

No, I have not.

I would. I would fast forward to the end of the line with taking out a loan and think about what kind of money am I going to be making. Okay. Do you have an idea about what kind of money is realistic for you with this degree?

I would love to be in the neighborhood of $200,000 starting.

I know you'd love to, but is that realistic?

Yes, for an engineering supervisor.

Great. Okay, if you do your homework on this, George, all I'm saying is I like people to fast forward to the end of this thing and go, okay, what's it going to look like, even with that salary paying 90 grand back?

Oh, yeah.

As opposed to waiting, using your advice of cash flow.

How much do you have in investments outside of retirement, Peyton?

I have about $38,000..

So $38,000 plus your future income to save up, you could easily cash flow this in the next 12 months.

Sure.

So I would rather you move forward debt-free, and it's going to give you more options, more peace, and more freedom every time you work that plan. And I didn't ask your age, but it sounds like you're young. You've got plenty of time on your side. You're clearly brilliant. You're going to retire a multimillionaire.

Thank you. Thank you for having me.

What's going on?

I am 53 years old and just started the program about 2 months ago, and because of where I'm at in my life, with some of the debt, needing to build an emergency fund, et cetera, I'm doing steps 2,, 3,, 4, and 5 at the same time.

That sounds like a lot of things at the same time.

Yes.

How is that working for you?

Well, you know, I would love to just focus on two, but I have a child who's in college right now, another one who is going to college in the fall next year, so I'm real-time making payments, and I did not have any savings for college.

Why do you feel like the burden is on you?

My parents paid for my college. I feel it necessary to do the same.

Well, your story's different, isn't it? You're not in a place to do that.

The first one is going to in-state. The second one will not be.

Okay, and that was a decision that you both made or they just made?

We agreed with that decision, myself and the child.

Are they sophomores, freshmen?

I've got a freshman in college. I've got a senior in high school, and then I have a freshman in high school.

Okay, so we've got one on the way in, one that's in there, and one that's got a little bit of time.

Correct.

Okay, and how much debt do you have?

I have $30,000 in debt. It's made up of car at $21,000 and an interest-free credit card at $9,000 until April 2025..

Okay. What's your income?

$225,000..

That'll do. Hello. Awesome income. So what if, let's just play this out, if you do it the Ramsey way and you focused on one baby step at a time, what do you think that would do for you? Because you'd be out of debt within a few months.

Well, the way I've worked it out and the numbers,

Why not?

Other bills that have to be covered.

Well, college bills, let's say we put those aside, and let's say we're not putting anything in the emergency fund. Let's say we're not investing at all. Wouldn't that free up a whole bunch of money to throw at the debt?

Right. Correct. If I wasn't putting anything in the emergency fund, that would definitely help me.

And so that's why we tell people to work these baby steps one at a time. I mean, right now you're doing Dawn's plan, and I wish you the best, but I tell you with confidence that our plan works when you work it the way it's supposed to be worked, which is one at a time, focused intensity. until you get to baby steps four, five, six. And making $225,000, you're going to be there really fast. This isn't a whole lot of debt you're dealing with.

Dawn, are you buying what he's saying?

I am, yes. The concern is not having anything in an emergency fund. But I'm concerned about emergencies.

Okay, perfect. So glad, because I wanted you to poke holes in what he's saying, because George is right.

You should poke holes.

But listen, you have enough money in your salary to be able to deal with most emergencies. And if you had to pause baby step two, which we tell people to do at times if something big is there, so that you can cash flow it. But you're going to spend more time doing it your way than you'll ever spend doing it our way, because you're barely making any progress trying to do all those steps at the same time. You can see that, right? Your money's spread so thin.

I mean, you're bringing home $12,000 or $13,000 a month?

It is my net is about $9,000..

That's not tracking.

What I net.

How? You're only taking home?

You're taking 50% home?

So I am, well, that's, I'm so sorry. The net is, because I just gave you over one period, it's, yeah, it's $9,000 because of the 401K, the HSA.

So we're going to pause all of that, which is going to put a bunch of money back in.

Yes.

Yeah, and so what's an emergency that you would be really scared of happening? Give us a realistic emergency.

Well, the medical, any kind of medical with my children.

Well, they'll put you on a payment plan, and you pay when you can with medical.

So give me another one.

If I lost my job.

Okay. But again, we're not, we don't use emergency funds for job loss. We tell people, look, that's, emergency funds are for things like medical emergencies, a car accident, where, you know, you've got to pay more on a deductible. Your HVAC system goes out. You don't want to be living off of your emergency fund.

So, Don, if you look at your bare bones expenses, what does that add up to, to just cover food, utility, shelter, transportation, insurance?

Yeah, probably $6K a month I could get if I got rid of, you know, some other things.