Stop Messing Around & Follow the Plan That’s Proven To Work

brought to you by the every dollar app start budgeting for free today from the ramsey network it's the ramsey show i'm jade warshot next to me is your co-host george camel we're chopping it up with you taking your calls about your life and your money so let's get right into it ge, you ready to do this? I'm pumped. All right, let's go to the phone lines, man.
We've got Abby who's in Fort Worth, Texas. What's going on, Abby? Hey guys, thanks for having me on today.
So I have, my husband and I are currently in the process of converting our Chapter 13 bankruptcy into a Chapter 7.

And we just found out a couple weeks ago that our home has some pretty expensive foundation repairs that could be necessary. That could cost around $25,000.
And we don't want to go into any more debt for that. So we're wondering if we should sell our home and rent in the meantime in order to kind of restart our lives back after this bankruptcy.

Man.

So $25,000.

Have you gotten multiple quotes on this or is just one guy said this?

It's one, but half of the house has already had foundation repairs.

So that half is already warrantied.

So it's kind of a weird situation where we feel like we need to use that company in order to use the warranty on the half that has been done. So that half hasn't been paid yet? No, it has.
It's like, we've done like Texas foundation is weird. Whatever half of the foundation only needed it at one point.
So they only did the repairs back in like 20, like a long time ago. And now the other half has kind of shifted and need about the same repairs.
But that part's not under warranty. They would.
No, it's not. And they would use the warranty to do adjustments on the half that has.
And that would lower the cost. Is that what you're saying? I'm just asking, could there be another company out there? It's been a couple of years, I guess.
Could there be another company out there where you could get it done less and it still be under warranty once the work is done? Possibly. I haven't looked too much into it because I'm a little hesitant to do foundation repairs at all because in in order to do that, we have to move completely out of our house for about two weeks and then move back in.

So even if it was, you know, $10,000 or $15,000, it's still kind of as a put-off to me.

Well, let's talk about those numbers a little.

Yeah.

Tell us what you're on the hook for after the bankruptcy, that the bankruptcy didn't clear. And tell us the numbers, what you owe on your house and what it's worth.
We'll have two cars left after the bankruptcy. One is $18,000 and one is about $43,000 left.
And then just a student loan for about $3,000. And that will be all that's left after the bankruptcy.
So what was the bankruptcy clearing? We had, in 2019, I had a surgery that went bad and was out of work for about a year because I was a fighter student. And so I was paying rent on credit cards.
I mean, I did everything using a credit card and all of the really expensive medical bills and therapies that I was having to do. So you said you did chapter 13, which would be the payment plan.
Yeah. Yeah.
So I did chapter 13. We were keeping up with the payment plan as best we could.
Um, but my son got diagnosed with autism. He's two and a half.
And so his therapy costs are through the roof. And so we couldn't even keep up with the chapter 13 payment plan anymore.
And so after about a year and a half, we've done a conversion into a chapter seven. So are they going to, are they going to take any of your assets to pay this off? Like, are they going to take your cars and sell them to try to make this happen? No, because we are worth so little that we fall under all of the exemptions.
I have all the homeset exemption and the wild card exemption, I think, or something in Texas. Nothing we own is...
So are you current on your payments on the cars and the student loans? Yes. Yeah, I was behind on the student loans for quite a while um and we i just made a payment this month and caught it back up okay um okay question with the car one of them my parents bought it for me because i wrecked my car while literally right after we had filed for chapter 13 which one one was that the 18 or the 43? The 18.
So I couldn't even get a new car if I wanted to. So my parent, my lovely parents said, let's, let us do it for you.
We'll pay cash. You pay us.
So you're paying them right now? Kind of calling. Yep.
So I pay them 400 a month when I can. Okay.
The $18,000 car, what's it worth? About 17.

It's not, we're not underwater too much.

Like if I did private party, I looked and it was like maybe 17 was on the higher end.

And the $43,000 one, what is that one worth?

About 34.

Okay.

And what's the, can you tell me what you're paying your parents every month?

How much is that just to see? I pay 400 for my car. All right.
Yeah. What you didn't tell us the house.
What do you owe on it and what's it worth? That's okay. Yep.
We have 294 left of our principal. And if we put it on the market today, we would list it for $345.
With the repairs needed? That's as is? No, as is. Okay.
So you could still come out of this thing and make a little bit after fees. Just a little bit.
Yeah, and like our hope was maybe if we sell it, and even if we get $10, $, 15 after closing costs, we put that into a high yield savings. We rent for two years, build up a down payment and then, you know, hopefully get into that debt free, start immediately working on.
Well, we wouldn't put it in the high yield savings. We'd really put it towards once you get settled in your new rental, the rest would go towards debt technically, right? Because at this point we're working those baby steps in order.
What's your household income? Did you guys mention that? We make annuals combined about 153. So not bad at all.
We bring in good monthly income. It costs us so much, it feels like, to live.
Our mortgage right now is, is, um, 3,100 a month. Okay.
That's going to give you a lot of breathing room. My question for you is if the, if, is there any way to roll back this bankruptcy and give you guys control back over this? Because if you sell the house, that's going to give you a lot more money back in your pocket.
I mean, I didn't ask you, what's it going to cost you to rent? We've been looking at places because I told my husband, if we're moving and renting, I want to have as soon as little as possible. So we're looking like at places that are max 2,400.
Okay, good. But we do have two, a two-year-old, a one-year-old and one on the way that's coming in August.
Well, the good news is it has to be like, it's, well, the thing is kids, kids, no, it doesn't. Kids are crazy, but they don't take up a whole lot of space, right? They take up a lot of space with our energy and mental space, but like physically they don't take up a lot of space.
So this is your season. I want to encourage you, Abby, this is your season to do the most.
And by doing the most, I mean, sacrifice to layers that you never thought you had in you. This is the season where you live in that really small, really cramped apartment that you'll tell stories about, you know, 20 years from now, right, when they're grown.
And you'll say, when you guys were kids, we lived in this little apartment because this is you taking your life back. And so you're going to have to make decisions that are vastly different than anything you've ever done before.
The fact that you understand that you need to sell this house is so important. But look, if you sell this house and you don't gain the margin out of it monthly that you need to make this happen, it was all for naught, right? So make sure that you don't let your eyes get big and see an apartment that goes, oh, well, that would be a lot nicer because then you're taking the whole sting out of this punch.
So make sure that you live in something smaller

and try to, if you don't have to go through

with converting this bankruptcy, don't.

If you can get out of it and say, you know what?

We're taking control of this.

I would do that immediately.

I'd get current.

And I'd also see if you can get rid of that $43,000 loan.

Oh man, sell it.

It's insane.

Yeah, find the amount you're underwater

and get rid of that thing.

Even if you take out a loan to cover the difference. All right, Dave, you have some strong opinions.
Possibly, yeah. Yeah, I think so.
Okay, because you really prefer credit unions over big banks. Well, credit unions, for one thing, are non-profit, which means that the members, the customers, own the credit union.
So any profits that the credit union makes goes back into customer pricing. So you get better interest rate on savings, cheaper checking, and so on, that kind of thing.
But what's more important than that, though, is the fact that the customer is the owner changes the spirit on the credit union. So I find very few credit unions that aren't very customer-centric.
Well, and I think we have found one that is incredible, and that's Fairwinds. They are an incredible credit union that is really out with the heart to help the customer.
They're the right kind of people with the right kind of values. And they've done a really, really good job with customer service.
And the deals that they're offering, the Ramsey Tribe, is incredible. Yeah, absolutely.
And I love that the things that we teach, they so line up with. And you're right, their customer service is unbelievable.
Winston and I just signed up and we got an account. Yeah.
And I'm not kidding. It took less than five minutes.
It was so user-friendly. Like the step-by-step approach was unbelievable.
And then the next day my phone rings and it says fair wins on my phone. So I answered it and talked to someone there.
And they said, yeah, they give calls to every new customer. And so again, they just really care about your experience.
And I so, so appreciate that. Plus anything that you can do at a traditional branch, you can do with them at fairwinds.org or on their app.
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And so for me to do this is a

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Our question of the day is brought to you by Why Refi? If you've got defaulted student loans that don't let you gain any momentum, I get it. No judgment, but also nobody's coming to bail you out.
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Remember, it may not be available in all states. Today's question comes from Chelsea in New Hampshire.
She says, I'm currently on baby step two. I recently followed George's advice and put half my emergency fund in a Laurel Road HYSA.
It's a high yield savings account. I didn't move at all because it made me a little nervous.
But after seeing roughly $2.35 of interest deposited in the high yield savings and the measly one cent of interest in my regular savings account, I really want to move it all over there. My fear is that if I have an emergency, it's going to be difficult because there's no debit card attached to the account.
Not having direct access kind of scares me. What should I do? Oh, it doesn't sound like you got much to cover an emergency at this point.
I did the math, Jay. There's probably 800 bucks in this account if it's making two bucks in interest a month.
And so I would be more concerned. Now you're in baby step two.
So here's a thousand. She's saying I put 500 over here.
I got 500 over here, but I need direct access. Here's what I found when it comes to emergencies.
Very rarely is it I need cash within the next hour. If that's the case, you're probably getting scammed.
It's probably some kind of Western Union transfer thing. They want you to buy some gift cards.
Most emergencies I found, there's time to transfer it out of the savings account to the checking account. And so you've got a little bit of time.
You can take a day or two to get that money in there. And so it's really not that big of a deal.
I found I keep all of my money in high yield savings. I will say, you know, this might be you and I might vary on this a little bit because, you know, George, he's very level headed, very cool, calm and collected.
I, on the other hand, tend to freak out. So I kept my so when we were on baby step one, George, I kept the thousand dollars and like the same account that's connected to your check.
Yeah. Just like a normal savings because I'm like, which that's fine.
I'm not trying to earn interest on this. Like, I don't care.
I just want to be able to get to it. And then when we moved up to the three to six months, then I popped that in the HYSA because it's true.
I do feel like those bigger emergencies like your foundation or your roof or, I don't know, you need a new car or something like that. Yeah, then it's like, yeah, I can take some time.
I'll take some days. And to your point, George, it gives you time to think rationally.
Is this the best decision? Have I spent time on this? And then by the time the funds transfer, you can feel like a responsibly, a financial responsible adult. Yeah.
The bigger problem is when you have the access is too easy and you go, whoops. Oh, man.
I just moved it from savings to checking and now it's gone. Yeah.
That is all. That's a good point.
You kind of have to know your personality, right? I like a little boundary line there, but you can also do, you know, wire transfers and things like that. You need it a little quicker.
So that's a good point you kind of have to know your personality right i like a little boundary line there but uh you can also do you know wire transfers and things like that if you need a little quicker so that's true question though and i appreciate that that is a good question wait let's take this a step further so you could do there's three options here so let's say you bank with um you know well i'm making up a name wall street bank right and you've got your checking account at wall street bank and so you then put your savings there to keep your thousand dollars at Wall Street Bank. Then there's an option of saying, hey, I don't want it there, but and I want to put it somewhere else.
So you put it on an online high yield savings account. But you feel like, hey, that's that's kind of too far away.
I have to do the transfer. You could do another checking account at another bank that's not online.
So you do have the debit card, but it's not the kind of thing that whenever you pull up your, your bank balance, you just see it sitting there. Cause my thing is if I see it, then I'm tempted by it.
But if it's on a whole other app on a whole other bank, I'm not out of sight, out of mind, out of sight, out of mind. This is just, this is the way my mind is when I have needed the money faster than, you know, the two business days or whatever it is, I just do a wire transfer.
I call them, do wire transfers, say they're within 24 hours, you know. What was the last emergency you had? Oh my goodness, that I really needed the emergency fund? Yeah.
I can't remember. I only remember the ones when I was broke and didn't have it.
But once you have the emergency fund, I started doing better maintenance. I would just cash flow it out of our checking, out of our budget and switch around some line items.
Isn't that funny how that happens? I don't remember the last big, it was like a $5,000 emergency. It tended to be like a plumbing guy, the electrician, a few hundred bucks.
Yeah, that's true. The last big one we had was, let me think, our washer and dryer.
Our washer went out. Oh boy.
And course, I did what any American would do and say,

well, if you've got to replace the washer,

you've got to replace the dryer so they can match.

That wasn't the smartest choice.

Aesthetic.

It's all about aesthetic.

It was all about aesthetic.

I don't regret it, but it might not have been the most savvy choice.

Let's go to the phone lines.

We've got Sarah in Seattle, Washington.

What's up, Sarah?

Hey, how are you guys?

We're doing good.

How can we help?

So I want to do my snowball out of order, and I have a reason.

Thank you. Hey, how are you guys? We're doing good.
How can we help? So I want to do my snowball out of order. And I have a reason.
So I am a full-time working adult student. I have paid off several debts till now.
My next four debts are student loans. Because I'm still a student, I don't have a payment due on them.
So I wanted to jump to my fifth debt that would make it so that I can free up a payment and do my snowball, grow my snowball faster. Oh, I see.
So you're not doing the baby steps out of order. You're doing the debt snowball out of order.
Yes. Okay.
What's that debt that's outside of the snowball you want to start on? So I had some legal issues with my ex-husband, and I had to take a personal loan. So if I get that payment feed up, that's almost $1,000 a month that I'm having to pay.
So it would contribute significantly to growing my snowball. Is that your only debt outside of the student loans? No.
What else? So pretty much all of my debt is related to the legal issues I had with my ex and then my house. How much is the personal loan? You said how much it is a month, but how much is it total? That loan right now is about $8,500.
Okay. And is that technically the next smallest after the student loans? Yeah.
So my student, my four student loans range from 5,500 to about 8,000. So they're, they're right in order.
It's just, yeah. It would come before the personal loan.
The only question I had in this is, and this is kind of getting in the nitty gritty, but I'd be wondering, okay, are these loans subsidized? Are they unsubsidized? Do they have the ability to gain interest even though I'm still in school? Do you know the answer to that? Yes. Three are subsidized or not subsidized.
The smallest one is subsidized. So only one is not gaining interest.
But my employer is paying for my tuition now. And before this legal issue with my ex, I was cash flowing school.
I see. I see.
I mean, knowing that my loans are active, even if I'm not, would still make me want to work this in order. But I understand the temptation that you're saying of getting like the thousand dollars back because you're spending that.
So that's what my brain would do. My brain would be like, listen, student loans are a major problem.
I want to knock these things out as soon as I can. How amazing to have paid them off before you've even graduated.
That's kind of where my mind goes. What about you? Well, I want to zoom out a little bit and go, what is your total debt amount right now? Excluding the house? Yes.

About $78,000.

Okay, and what... what is your total debt amount right now? Excluding the house?

Yes.

About $78,000.

Okay, and what is your income?

About $135,000.

Wow, a full-time student?

Yeah.

Wow, you're amazing.

I'm not a full-time student.

I work full-time and I'm doing school online.

Okay.

Well, what's the other debt?

Because you named about $30,000 in student loans, I feel like, give or take. What's the other debt? In student loans and personal loans.
So literally it is all related to legal issues. So I've got the 85 I said, another personal loan for 14, credit card for about 27.
I owe my mom some money and then my house. How much do you owe your mom? About 17.
Okay. That's some for sure.
Yeah. It was a two-year legal battle.
Here's... This is going to sound nitpicky, okay? And there's method to my way of thinking of this, and George might have another take on it.
But my husband and I paid off $460,000 of debt, $280,000 of it was student loans. And it's just daunting to look at a task like that, and I'm sure you feel the same way, Sarah.
But I found that there's something about if I have found a system and a solution, if I can build the muscle of sticking to the plan, every time I stick to the plan, I stick to the plan, I stick to the plan, it takes the guests out of it. And it causes me to be more consistent long term, then kind of jumping around and picking and choosing because this is you're going to hit peaks and valleys on this, there's's gonna be times where you're ready to run through a wall because you're so like geared up to do this.
And then there's gonna be times when you wanna quit. But if you build up the muscle of, I stick to the plan, I do, I stick to the plan, then there's something about that that really helps.
And so in this case, I would stick to the plan, even though that thousand dollars is waiting there, build the muscle of doing the plan the right way so that when the rubber meets the road, you'll do the plan the right way. I love that.
You're going to free up a lot of money cleaning up those student loans too. Those payments will also get

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Let's go to the phone lines. Eric in Seattle, Washington.
Eric, what's up? Hi, this is Eric. How do you do? How do you do? We do good.
I'm good. Thank you.
Do you have any questions for me before i ask my question um should i i've never done a pre-questionnaire i think you should start this one out for us eric okay well here's a story um i have uh i have two children i have a son 37 and a daughter 27 and I have you know for a few years

I've had a dream of two children. I have a son, 37, and a daughter, 27.
And I have, you know, for a few years,

I've had a dream of becoming wealthy and being able to afford to buy a home for my children. and that is starting to look like a reality, but I was thinking about it, like, is this something I really want to do? And I realized that by giving them a home, I'm not really giving them anything.
I'm taking away the thrill that they would have of achieving this milestone on their own. So mean, are you picking the home or are you just giving them the cash? I was thinking I would help them pick a home, but I just don't think it's a good idea.
I think it'd be more satisfaction if they could do it themselves maybe ask them so I came well I came up with the idea of putting an incentive plan together for them to start saving up for a down payment okay and is this a home together can you you clarify? Are you talking about buying like a big family home or are you talking about buying individual homes for each of them? I'm talking about buying individual homes for them. Oh, wow.
How much money do you have for this purpose? Not that much right now, but I own two software companies. They're both doing well.
Okay, so are you worth multiple millions of dollars? So here's what I would do. Let's just make this cut and dry.
If you're wondering if it would steal their joy or not, just ask them. Say, guys, here's what I was thinking of doing.
I was thinking of saving up some money to buy you guys a house, but I don't want to steal your joy out of this. Would you want me to help you pick it out, or would you prefer to just be gifted this cash? Would you prefer to help me with for me to just help you with the down payment? I think if we have questions in these situations, George, the best thing to do is just ask.
And I listen, I'll tell you, I, for one, would have loved if somebody was like, let me give you a special gift. Ask any Gen Z millennial who's struggling to wonder if they'll ever afford a home.
And they went, I don't want to steal your joy. Oh, come on.
I think they'd all say, no, I'll take the house. I'll be very joyful.
Ultimate joy. Oh, yeah.
The question is, how are they doing financially? Right. Because if they're already struggling, broke, and they can't take care of this home, it could be a burden instead of a blessing.
That's true. There's a lot more we need to dig into to understand, are they responsible financially already? What is the cause? Yeah.
What's causing them to not be able to afford a home right now yeah and is this home going to cause some level of entitlement there's a lot to dig into but it starts with a conversation with them yeah that's right so if your kids are like like george said if they're entitled if they're doing something that's like a failure to launch and they're struggling yeah monetary gifts probably aren't the right thing or if there's a lot of misbehavior and they're just going into credit card debt, just buy stuff they can't afford, I wouldn't just throw a home at that. No, but if they're great citizens and they have great jobs and they're managing their money well, that is a wonderful gift.
And I think something like that, especially younger in life like this, he said they're 37 and 27, that truly has the ability to set somebody up for life. Like truly.
Can you imagine? I mean, well, George, you're the exception. You bought your house early and you paid it off pretty fast.
Yeah. But I've thought about this exact question.
What I want to buy my daughter. My daughter's not even two yet.
Like what I want to save up because who knows what a home is going to cost when she's 25. Yeah.
Is it going to be a million dollars? That's true. And so I kind of want to be ready, but I also want to make sure she has some skin in the game.
Yeah. And that this doesn't turn into an entitled Brad who goes, well, daddy said he's going to buy me a house.
I don't need to try in life. Well, that's always the fear as a parent.
That's true. Like Sam and I, we put aside for our kids.
We have two of them. They're five and seven right now.
And in my mind, I'm thinking, yeah, like I don't know when that day is going to come for them if it's when they're in their 20s or 30s or 40s. But the thought is, yeah, we'd like to be able to give them, if not the whole thing, like, at least the down payment.
Because Sam's mom helped us quite a bit when we bought our first house. And it was such a blessing.
Like, it was such a blessing. Did you feel robbed? No! I was like, oh, thank the Lord for Nina Warshaw.
Like, she is a saint. Like, that's, it's such a gift.
It's grace and mercy right there. Yeah, man, I know that.
So I think it really depends on the person. But if the kids are working hard, they have a great work ethic, they're debt-free, they have an emergency fund, and they're just plugging away at this down payment, and it's tough because of where they live, then yeah, I think it's a really awesome thing to do.
Leave the legacy while you're alive. Instead of when you're in the grave and you throw a bunch of money at them.
Yeah, because by then they're probably all right anyway. Exactly.
So I like that mentality of sort of leaving the inheritance while you're still around to watch them enjoy it and help them grow. Yeah.
I think we can help Chris and Moses Lake real quick before we go to break. Let's go.
What's going on, Chris? Hey, yeah, I got a quick question for you. So me and my, um, wife were trying to get out of debt as fast as we can.
Um, we've got a pretty big mortgage that we took out two years ago on the house. So, um, we, it was 637,000 for the house.
We put 20% down. So we had, we're at, um, 508,000.
We've been paying it for two years our interest rates is 5.99 um payments are 3446 a month but i've been making additional payments on it because i don't want to be it forever good so right now i'm um we've been for a year and a half we've been doing about 5 000 to 5200 on it and this is your only debt um this is your only debt. Um, this is my only debt.
I don't have credit card debt. I want all my houses, I mean, all my cars.
Um, I don't have, don't use credit cards. I only use them for like a debit card.
Basically it's a credit card, but I pretend like it's a debit card. We just paid off.
I'm just going to glaze. I'm a glaze over that for now and pretend like you didn't say that.
So we can answer your next real question. What's the question you have today? So my thing is, is me and my wife, we're working on it real hard to pay it down.
We're looking at, we're on track to pay this off in 11 years. It's a 30-year loan, but if we keep paying the way we are, we should be done in 11 years.
I've also been putting money aside, saving, because I believe that if you have a savings on the side, more fee doesn't show up in your life as long as you have a good savings on the side. Well, we would teach for you to have three to six months of expenses.
And then after that, you're in baby steps four, five, and six, where you're investing, saving for the kids' college and putting extra payments towards the house. So that's all good.
How can we help you today? So my thing is, so me and my wife, I'm doing that. We've been putting away.
So in savings, I've got $95,000. And I've got it in a high savings interest.
It's at 3.7%. So we're making some off of it.
Good. But my thing is, I'm trying to talk to my wife.
We've been kind of waiting and hoping that the interest rates would go down. But I don't think they're going to.
We were thinking about taking a big lump sum right now and from my savings and putting a big down payment to knock the loan down even more. Or do I just stay the course that we're doing because we are knocking it down pretty quick? I wouldn't use your emergency fund if that's what you're talking about.
If the 95,000 is your three to six months of expenses, I would leave that there because you need that there as a cushion. I'm guessing that's more than that.
So anything above six months, I would take that as a lump sum and throw it at the mortgage because the less principal you pay, or the more you throw at the principal, the less interest you'll pay the following month, which will save you money in the long run. So I would not wait for interest rates to do anything.
I would just be plugging away at that mortgage every single month like you're doing consistently and knock that thing out and try to even beat your goal. Do it in 10 years or less.
Yeah. That's what we found the average millionaire does in our study.
10.2 years. Ooh, that's so, that's lightning fast.
I imagine that when a person who's not used to hearing our show hears that, they're like, George, you're lying. It's the data.
Oh, I would have made 10.2 is too random to make up. That's just what the data said from 10,000 millionaires.

And it wasn't necessarily their first home.

That's right.

That is true.

Could have been their second home.

They rolled equity into it.

But 10.2 years, they got that mortgage knocked out.

They didn't hang on to it for interest deduction or anything crazy like that.

Yes, because they were going to invest it and make the spread.

Heard that one before, Jade.

Don't get me started.

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So, George, it's time for one of my favorite segments on The Ramsey Show. Talk nerdy to me.
All right. Let's do this.
What is our topic today for Talk Nerdy to Me? Okay. We're talking about what the heck is a mutual fund? Wouldn't you like to know? Well, Jade knows, but for the benefit of the group, a lot of people go, okay, I know Dave talks about that a lot, the good growth stock mutual funds, right? That's a classic Dave line, but what is actually going on there? So let's talk about this.
Mutual funds are investment vehicles that pool money from multiple investors, aka you..a. you.
And me. And Jade.
And me. To purchase a diversified portfolio of stocks, bonds, or other securities.
So how do they work? So you're buying shares of a collective portfolio. So you're buying a tiny piece.
Wait, wait, wait, wait, George, George. A share.
George, I heard equities. I heard securities.
I heard what? I'm pushing my glasses up for you. Make it, make it, put it on the bottom shelf for us.
All right. So shares are tiny pieces of a company, tiny pieces of ownership.
So mutual fund, let's say there's 90 to 200 companies within this one fund. And so when you buy a piece of the fund, you're really buying a piece of these 200 companies.
Amazing. Got that? Yeah.
So investors, we all benefit from this diversification because we all know, oh my gosh, Elon burped and Tesla stock went down 40%. Right.
Well, we don't have to worry about that when there's 199 other stocks from other companies to balance it out. So when you say that you could have a fund that's got everything from Procter & Gamble to Pfizer to Coca-Cola to Apple, all of that, all of those different stocks in one fund.
Exactly. So the benefits here, instant diversification.
You have lower costs because trading single stocks can get expensive. Mutual funds make it really affordable to invest in a range of stocks without all these transaction fees because you're not doing these little nickel and diming transactions.
And with an actively managed mutual fund, which is a lot of the time what we're talking about on the show, there's a team of investment experts that have come together to decide which stock should go in here. And they're actively going, hey, should this one move out? Should this one move in? And what are they trying to do when they do that? Well, they're trying to get the best return for us, the investors.
So that's the goal. So when you hear about a few types of mutual funds, for example, good growth stock funds.
So what that means is these are equities. They're stocks.
These are not bonds. They're meant to grow.
So we say good growth stock. These are companies that we expect to see some growth from.
That's right. When you hear the word index fund, well, that's really just a type of mutual fund.
And what people are generally referring to is a passively managed mutual fund. So nobody's deciding what's in the fund.
It's just taking the top 500 companies. So an S&P 500 index fund is just going to take the top 500 companies and buy those stocks.
That's right. And you could have different indexes.
Yes. So we talk about the S&P 500 a lot.
That's kind of like the holy grail of indexes that people follow. But you might have heard of others like NASDAQ, Dow Jones, ticker symbols.
So they're just different pools of companies. Some are tech focused, some are other health care focused.
And then you've got bond funds. And these are really fixed income.
These are for people who don't like the volatility of the market. They just want something stable.
So these invest in corporate or government bonds. There's regular interest income, lower volatility.
So some people like that. This is just getting nerdier and nerdier.
I'm liking it. It's yeah, I'm trying to put it on the bottom shelf so that in five minutes we can all go, great, we learned it.
Yeah, we can move on. And then lastly, a money market fund.
So you hear about that. It's almost like a high yield savings account, basically, where it's just sort of sitting short term debt instruments, but it's high liquidity, meaning you can take that money out and you're not going to worry that it's going to go up and down.
It's just going to sort of sit there making a little bit of interest like a savings account. Love that.
So, George, how do mutual funds make money? I mean, you told us what they are, but technically, how are they making money? Are we making money every time the company makes money, or how does that work? Yeah, so as the company stock share value goes up, we make money. And sometimes that's paid out in a dividend.
So think of that like profit sharing. The company made some profit.
They're going to reward the shareholders for holding onto these stocks for the long term by giving them a little bit of money. Love that.
Or it can be reinvested. And so that's what we do in our retirement accounts.
We're not getting dividends off of that. We're just reinvesting the growth.
That's right. And that's what creates this amazing compound growth.
And the other way is capital gains. So when you sell it for a higher price, if I buy Apple stock at $100, and five years later, it's $150, well, I made 50 bucks per share.
That's great. That's another way I make money if I sell that.
And now you don't want to do that in a retirement account, but unless you're of age to retire. That's true.
But if you're, you know, under 60, you want to just hang on. But if it's in a taxable brokerage account, meaning it's non-retirement, you would sell and you would have capital gains tax, either short term or long term, depending if you've held it for a year or longer.
So, George, I hear Dave and you guys and myself all the time. We talk about the four different types.
Can you go through those so that people know once and for all what we're talking about? So you'll hear Dave say growth and income, growth, aggressive growth, and international. Here's what you might see that listed as if you're looking at your 401k, for example, you might see it listed as large cap.
That would be your growth and income. These are large, boring, stable companies like your Home Depots.
They're out there. They're not going to be skyrocketing.
They're not like innovating in crazy ways, but they're stable. Consistently, yeah.
You need these as the foundation. Then you have the medium cap, which is going to be your growth funds.
So these are medium to large companies. Then you have small cap.
These would be considered your aggressive growth companies like small tech startups. And those are going to be the wild child.
It's going to go really high. That's right.
And then finally, international. So you want to have this as a hedge.
Think like BMW, LG, Samsung. These are international companies.
And what we found, Jade, when the U.S. market just took a dip like it did recently, what happened? International funds went up.
So they balanced each other out. So it balanced out.
And people have said, well, Dave, international funds have been out, you know, underperforming the U.S. stock market for a long time.
Should we switch that up? And we just saw a great example of why Dave keeps international as a quarter. So when you talk about investing in your retirement account, we recommend just a quarter in each, one fourth.
So 25 percent in that large cap, 25 percent medium, 25 percent small, 25 percent international. And if you just choose those four funds in your 401k that have a long track record and have a solid return, you're going to be okay.
It's as simple as that. You don't need to overcomplicate it.
I love that. I feel like you made it very clear for us.
This is good. I tried.
And we do have, there's some great next steps you can take. And number one is connecting with a SmartVestor Pro.
So these are financial advisors that can teach you all of this stuff in depth so that you understand what you're doing. They're not making decisions for you.
The ball is in your court, but you need to know what's going on with your investment. So you can reach out, connect with a SmartVestor Pro, RamseySolutions.com slash SmartVestor, or click the link in the description if you're listening on YouTube or podcast.
Very, very good. I like it.

Painless.

This is very, very helpful stuff. All right, George.
I'm the Miss Rachel of mutual funds. You know, I try to just keep the cookies on the bottom shelf.
You said the Miss Rachel? Yeah, that's for kids. Oh, I was going to say.
You're beyond that phase. I'm in the Miss Rachel phase right now.
Oh, so this is like Coco Melon, that kind of deal. Yes.
Got you. All right, George, let's take a social question.
Okay. Let's do it.
All right. So Jane from Instagram asks, does Dave or George ever recommend not paying off your home if you are retired? I got to think about that.
That's like a little riddle here. If Jane retires at 67 and Dan retires at 68, who will pay? It's like a word problem.
Would we ever recommend not paying off your home if you're retired? I mean, you need to have the money. So if you're retired and you don't have an, all you have is enough income to keep up, well, you don't have the extra money to throw at the mortgage.
Right. But if you're able to knock it out and then still have the rest of your retirement.
Now, we don't know. It'd be great if we know when you were going to pass from this earth.
That would really help us with our calculations. Also true.
true but we don't so if you're able to pay it off and able to throw extra at the principal why not i've never heard dave say no it's a terrible idea keep the mortgage around i agree i've never heard it either all right we've got another one kindle from tiktok i like this one she asks what do you think is the hardest baby step oh that's a tough one What do you think, Jade? You went through a slog with baby step two. I do think that baby step three is a sleeper.
Like I think people sleep on it thinking, oh, it's going to be easy. I'll finally be paying myself.
And I felt that way. And then once I got in it, I felt tried.
I was like, you guys told us that this was going to get easier. And it for us it felt, and I don't want to say harder, because baby step two, that's a struggle.
But baby step three, man, people sleep on it. Well, it's almost like you run the marathon, and at the end, they go, okay, the 5K starts now.
And you're like, can I just get a break? Exactly. I got to keep doing this.
Exactly. I mean, what did you think? Oh, man.
I don't know. I think hardest is an interesting term because baby step two, while it is really difficult, it's also kind of exhilarating.
Yeah, it's gratifying. Yeah.
You get angry at the debt and it's kind of this us versus them. And you feel it.
You feel the progress. But you're right.
The baby step three part where you're not quite building for the future, but you're done paying for the past. It's just this purgatory in the baby steps.
so for that i'm gonna go baby step three today don't hold me to it wow we both said baby step three my mind could change wow okay will rudder is saying baby step two a lot of folks are saying okay oh two a little day i guess we were wrong baby step two is difficult like nobody like no don't put shade on us for that we're saying it is difficult hey that does it for this hour i'm not going to talk about it anymore you'll have to hang on and check us out in the next episode statistics show that half of americans don't enough life insurance, or they don't have any at all. I don't understand this, John.
Why don't people want to take care of their family? They think they're going to die or something? Well, I used to be one of those guys. I didn't even think about it.
And one of my buddies said, hey, the only reason to not have life insurance is if you hate your wife and kids. And I immediately went and got term life insurance.
That's a gut punch. And you're telling me, and for decades, Dave, I've sat across people who've lost a spouse.
They've lost somebody important to them. Me too.
They don't know what to do next. Me too.
I mean, you're going to have a crisis here. And you know, you got two options while you're sitting and talking to a young widow.
She's concerned about how she's going to invest all this money properly and not mess this up, or she's concerned how she's going to eat tomorrow. That's exactly the two options.
And take care of your dadgum family, man. Term life insurance can replace income, pay off debts, cover funeral expenses.
So your family can actually have the opportunity to just be sad. Yeah.
To just miss you. That's exactly what it's supposed to be.
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Thanks for hanging out with us on the Ramsey show. I'm Jade Warshaw, George Camel.
It's always good to be here with you. We're taking calls about life and money.
It's a free call-in show. If you didn't know, you can call in 888-825-5225.
It's how you get your call onto this show and onto the board. And Alex did exactly that.
He's in Tampa, Florida. So let's go to Alex.
Alex, what's going on, man? Hey guys. Thanks for taking my call today.
You're welcome. How can we help? Sure.
So, um, I want to know if I should sell my car or not. So I'm on baby step two and I'm doing the debt snowball right now.
I'm working on a credit card that's about 3000 and then paying the minimum payments on my car. And I'm not sure if I should sell it or not.
What's the car worth and what do you owe? Yeah, so I owe about $11,000 on it. And I did the Kelly Blue Book.
It's between six and eight, so eight private. Okay.
And what do you make a year? My take home is about 50K, 41 a month.

Okay.

Now there's no reason to sell this car.

Okay.

Number one, you're underwater on it.

And number two, you're going to have to turn around and buy a $6,000 to $8,000 car.

So it's not going to do you much good.

Yeah, that's what I was battling with.

I wasn't sure because I'd heard in other different segments, like to get rid of it and take you know the the little bit of hit but i wanted to call because well if you if you owed like thirty thousand dollars and you're making fifty thousand a year that's way too much car and we'd say hey sell it for that reason and even if you have to take a little hit but you got 14 grand total in debt or is there more? No, no. 14 total.
Okay. And you make 50 K a year.
So you're going to be done with this thing in 12 months or less. Yep.
That's the game plan. Right.
Are you throwing at least a thousand toward these? Yeah. I put about 1100 into my debts per month.
Perfect. Yeah.
You're right on track, man. Knock it out and try to get your income up, maybe get a side hustle.
But the car is not the main problem and it's not going to be the solution to sell it. So I would just keep on going with the debt snowball, knock out that credit card debt, and then really hunker down on that car loan, get rid of it, and never do it again.
Good question. Thanks for the call.
Yeah, George, you're so right. Sometimes it's like once you've done all you can do, you just just make those payments.
There's nothing else to do except just make the payments until it's done. And it's not probably not that big of a payment if he owes 11K on it.
I don't know where it started, but it sounds like the car is a reasonable purchase outside of him using debt to cover it. Agree.
All right. St.
Louis, Missouri. We've got Blake on the line.
Blake, what's up? Hey um i was just calling because uh about a month ago i finished baby step two and i am i've been doing it for six years and i'm just like not feeling the excitement that i see other people doing it i still feel like a gazelle hunting by a lion why tell us more us more. I don't, I, that's the thing is I just can't figure it out.
You know, um, why'd you start this in the first place? Huh? Why'd you start this whole thing six years ago in the first place? What was going on in your life where you decided I'm done? Uh, I had a business that, uh, got destroyed by a tornado tornado ripped the roof off my house whoa um and uh blew blew both of my uh business buildings to the ground and i ended up in severe debt um and i was about 120 000 in the hole and opened up my fridge and i had no food in there. And I had about $1.50 to my name.

And I just fell on the ground crying.

And I was like, I got to change something.

So I got a second and third job and hustled my way to where I am now.

Wow.

Was this the big tornado that we heard about on the news years ago?

Yep.

The Joplin one?

Yep.

Wow.

Uh-huh.

Wow.

Wow.

That's crazy.

That context helps. Yeah.
How much debt was this total that you paid off? To date, it's about 125, 126. Wow.
So you started your whole life over essentially. Yes.
So my guess is, you know, I think that when we do these things, as much as we do them out of a must, like I must do this. This is the right thing to do.
It's my only choice. Like when your back is up against the wall, a lot of times you're like, this is my only choice.
But if you also don't have that clear vision for the future, kind of like the sunny side of it, the why, then sometimes we can accomplish those things. And it's like, OK, I did what I was supposed to do.
I did what I had to do, but what was it all for? And it sounds like you're kind of feeling that, right? Yeah. You know, I, um, you know, I know Dave normally says like, Hey, go, you know, talk to a pastor or something like that.
Unfortunately, my pastor is just left the church two months ago. I'm kind of, you know, I don't really have family relationships.
I don't have any like mentorship. Are you just feeling a little down and depressed? Is that what it is? You're just kind of down in the dumps right now? Yeah.
Well, you know, everything in my life is going very well, but I just like don't feel excited the way I think I should be. Yeah.
I mean, listen, Dr. John is not here, but sometimes you just kind of go through those periods of melancholy.
And I don't know, it sounds like you linked it to the debt payoff. Maybe it has nothing to do with that.
But I do know like when you go through those seasons where the things that are supposed to kind of light you up, you're just kind of numb and you're just kind of melancholy. Yeah, that's a time where I would reach out and talk to somebody.
And if your pastor is not available, you know, I'd get on BetterHelp or I'd get on, you know, get on with a counselor or somebody who can help me just talk through it and kind of give me some tools to work through it every day. I think you're stuck still in this fight or flight from all the trauma that you experienced and just paying off the debt you thought would solve everything.
It solved something. It got rid of the money stress, but it didn't just magically give you this dream life either.
And so I think there's a lot more to now explore. Now you got the money out of the way.
Now we can focus on career and relationships and all the other aspects that make life worth living. It's just when you're broke, it's hard to focus on those things.
And what George just said is a big deal. What you experienced, and I know this is a buzzword in society, but here I really think that it applies.
Dude, you experienced a trauma. Like that's wild to have a tornado of that impact and that size and magnitude, not only to experience that like in your emotions and that be in your neck of the woods, but for it to actually destroy your business and your home.
Like that is a big deal. And that is not something that is just going to go away because the storm passed.
You know, you're going to have to unpack that with some people because the truth is a lot was in danger. Your life was probably in danger more so than, you know, it wasn't just a financial thing to George's point.
And baby step two kept you so busy, you didn't have to really deal with all of that.

You sort of just probably numbed from it and went, I'm just going to work hard and get rid of this debt.

So you know what to do, Blake.

It's going to take a little bit of work to get there, but I'm rooting for you, man.

That's a tough one.

Just know it's going to get better from here.

It is.

You solve for peace.

Do you remember seeing that on the news when that came through?

I didn't put two and two together.

I think there's a Netflix documentary about it now. I think I saw that.
That would make sense. The Twister or the something like that.
I mean, it feels like now there's big events happening all the time, but that was a huge one. It was a big one.
Okay, I'm going to ask another quick question. Wondering what banks have the best interest for your money.
I'm going to read this, but I don't know what they mean by it. Uhondering what banks have the best interest for your money.

I'm going to read this, but I don't know what they mean by it.

Wondering what banks have the best interest for your money.

Is a redneck bank a good one?

What does that mean?

That's a real place.

I've never heard of this.

I just Googled it.

But their tagline is where banking's funner.

That's pretty funny.

But no, wondering what banks have the best interest. There's a lot of, there's a bajillion banks.
The one that I personally use is called Laurel Road for high yield savings. And the rates change all the time.
So I don't rate Chase anymore. Yeah, they've stayed very competitive.
So Laurel Road is the one I personally use. Jade probably uses a different one.
I use Marcus by Goldman Sachs because a good friend told me about it. And I also use Ally from time to time.

Yeah, I wouldn't rate Chase.

They're all going to be solid.

What you want to make sure is FDIC insurance, no minimum balance required to open an account and no monthly maintenance fees.

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Let's go directly to the phone lines where we've got Liz in San Diego, California. Liz, what's up? Hey, so my dad and mom bought a house in 2019 that I'm currently living in with my five children.
And I want to buy it from them. But there's a problem.
But I don't know if I can necessarily afford it just with everything going on with economy and my personal finances. And I just and I feel like right now it's a little bit of a like I need to.
I might the timeline has been rushed because my dad, my mom passed away and my dad's going to get remarried soon. And so I just feel like my financial security with my kids is up in the air a little bit.
Okay. Were the parents living there with you or you were living there alone with the kids? I was living there alone.
It's considered a second home. And so your dad's getting married to a new new wife so i'm trying to understand why that's connected to rushing you out of the house um just because he's been because he just retired as well and so i think that he wants to kind of gain more financial freedom from us like and get rid of well you know what i mean like not so does that house have a mortgage on it it it does um they bought the house for 510 and um it was in the middle of my divorce so we didn't want to put my name on it so it wasn't going to be tied at all to any of the proceedings and then um what's left on the mortgage he i'm pretty well he we agreed that i would buy it for the price so it it doesn't really matter 510 are you assume are you trying to assume the old mortgage or you're just like trying to start from scratch with your own to give him the money? I guess that's the thing is I don't know.
I don't know which route because we've never done this before. What would be the best for both of us going into this? Like, should I? But I don't think I would qualify by myself.
That's the hard part of this. So it sounds like you're wanting to keep the house more so for stability of your family

because your family has been living here since 2019. And it's just a rental.
It's not like the house you grew up in or anything like that. Right.
Right. Yeah.
But it's become my kids home. Sure.
My question is, I mean, here's the thing. If you buy this house and you can't afford it, you will not be able to keep it long term and you will end up moving because you won't be able to afford it.
So I think it's really important to run those numbers out. And the way we teach it here, which is really the best way to buy a house, is when you run those numbers out, Liz, if it's going to be any more than 25 percent of your take-home pay, you can't afford it.
And if it's creeping up over 35%, especially like that is just a rope tightening around you. Like it's going to make you feel completely bound up.
You won't have the money to do any of the things that you need to do really to further your life. You won't have the money to invest.
You won't have the money to help pay for your kids' college, that sort of thing. So that's why we teach it that way.
Have you done any rough estimate on this to see what that might look like? No, because I'm not sure if I should try and get my own conventional. And I don't think I would even, I don't know if I would qualify or if there's some kind of a way for me to assume.
Well, assumption is even harder because now you're dealing with the equity that's already there and you're kind of on the hook with that. So I can't see that being the route, especially if you already feel like you can't afford this.
I would be thinking, yeah, run it out as a conventional loan and see what where you where you match up what's

your income um i so gross from my job i make about 80 000 a year um but then i i have alimony for the next three years and um i'm just i'm graduating soon with my doctorate and so i'm hoping to get a bump and increase in my circumstances.

But, I mean, it's not set and down yet.

George has got the mortgage calculator pulled up.

Let's just run some quick math and see.

Are you debt-free?

I have about $11,000 in debt.

$11,000 in debt?

My cars are paid off. What's the $11,000 in debt? Mm-hmm.
My cards are paid off. What's the $11,000? Just credit cards.
I have medical expenses. I have special needs kids.
Okay, so I see even more why you're wanting that. And no savings? No, because it's been used.
That's the part that worries me is you haven't built a foundation to now support being a homeowner and the expenses that go along with that. And so not only do you not have an emergency fund, you still have debt, you also don't have a down payment.
And so to buy this house for $500,000, you need to take out the full amount as a conventional loan, right? Yeah, that would have to be how that would have to be it. And that's what I don't.
And that's what makes me nervous is I, I mean, like, I just don't think I can do it. You're talking, you know, that's going to be $4,000 a month, which is going to be most of your take home pay.
Yeah. Right.
Yeah. Because I think my take-home is about, I'm trying to think cause I have 401.
I try to pay in as much as I can. Okay.
Let's give you, let me give you a couple of tips. Cause I hear a lot of things that you're saying, Liz, and I think we can do, give you a couple of practical things to really help you.
Number one, if you want to be ready for this house, like what George said, you need the foundation. You need to pay off this $11,000 of debt.
And we want you to save up three to six months of expenses. That way, if something happens, let's say you do buy the house and the AC goes out, you've got the money to fix it.
You get a hole in the roof. You have the money to fix it, right? Homeownership is expensive and you want to have the money there so that you don't go into debt to deal with the things of home ownership.
So number one is that foundation. Number two, you got to have a budget because I can always tell when somebody doesn't have a budget when I ask them how much they make.
And it's kind of like, and I don't say that to throw any shade. That is most Americans.
So I want you to be better than average and know your numbers through a budget. So before you get off the line, we're going to give you every dollar.
And Liz, just having that is going to give you so much control because you're going to know exactly where your numbers are, exactly how much is going out, exactly how much you can put on this debt. And then you can start doing the calculator, the mortgage calculator that George has here, and we'll make sure you have the link to that.
So then you can project out and say, okay, here's the margin I have. With every dollar, you'll be able to see how quickly you'll have it paid off with their financial roadmap.
And you'll be able to see how quickly can I actually buy this house? And then maybe, Liz, you can sit down with your dad and say, dad, my kids have been living here since 2019. You know the situation.
I'd really like stability. And you can start a path forward.
I will have my debt paid off by X, Y date. I will have my emergency built up by then and then it'll take me this long to save for the down payment.
Is there any way that we can elongate this so that I can keep my kids stable? That's your best bet here, but definitely getting into a house you can't afford is not. Yeah.
Would he be willing or does he need this money? I think he's, it, it's one of the, it's, yeah, I think he's willing. Like he's been, he's been pretty supportive up till now.

I think it's just because my mom's death was very unexpected.

I'm sorry.

That it, um, it, it, it just, um, increased the, uh, fine wine. Yeah.
Sorry. No, don't apologize.
That is a tough thing that you're walking through and you've got a law on your plate. You got five kids you're taking care of by yourself.
Yes. Yeah.
You've got a lot, Liz. And here's the thing you're, you're searching for something to grab onto, right? You've got a lot going on and you're searching for that thing that can just anchor you in right now.
And a lot of times we do find that when people go through something really tough like this and they've got this kind of overwhelming, it is easy to reach for something that's the wrong choice and it ends up making it worse. And so if you don't remember anything else from this call, just remember right now I can't afford this house right now.
I can't afford this house. And that way you won't do something that you'll regret.
And getting these numbers will help you make a case with your dad. And honestly, yeah, you know, that's the best.
I mean, that's the best I can tell you right now. I hate that you're going through this.
Home ownership. You need to make that decision from a place of strength.
And right now we're in a place of weakness and desperation. And dad really needs

this. And that's not the right time to make the biggest financial decision of your life.
So I

would push pause, find another way, rent for a while, build your own foundation and buy a house

when the time is right, whether it's his house or another one. Yeah, we're rooting for you, Liz.

This is a tough season, but it's not going to last forever. You're going to look up months and a year from now and you're going to feel a lot

better about what your life is looking like.

I've been helping people get out of debt and change their lives for over 30 years. So I know change isn't always easy, but it's worth it.
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All right, let's cut to the chase. It's easy to get discouraged about crazy house prices and interest rates.
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Trusted Agent near you at RamseySolutions.com slash agent. That's RamseySolutions.com slash agent.
Around here, we like to do something called the debt-free scream. It's when we invite folks out.
Really, anybody can come. You can sign up to do your debt-free scream.
But we've got an amazing lobby here where we host guests of the show. And if you want to do your debt-free scream, there's a really nice stage here where you can do it on.
These are people who have paid off debt. They've been walking the baby steps, and they're excited about it.
And they want to truly shout about it, right? That's what it is.

And so we've got Jonathan here.

He's from Franklin, Indiana, here to do his debt-free scream.

Jonathan, what's up?

Hi, how's it going, Jade and George?

It's going good.

Oh, very good.

Very good.

Well, I just paid off on November.

I paid off $89,600 approximately and it was my house.

Whoa!

All right, exciting. Way to go.
Thank you. you nonchalantly drop that in there right yeah yeah like it's no big deal but it really was a big deal in my life absolutely oh that's a big deal all right how old are you i'm 36 holy smokes 36 years old how long did it take you to do that it took me well paying off the house it took me about eight took me about eight years.
But when I started the Ramsey plan, it was about six and a half years. Nice.
Wow. So you had debt previous to the house that you paid off in six and a half years.
Then you turn around and do the mortgage in eight. Is that what I understood? Yeah.
Yeah. So I started following the baby steps in about July 2018.
I heard about it in January. It took me about six months to ditch the credit cards.
You know, I thought I was winning with my 800 credit score, my credit card rewards, but from July, 2018, it took me, you know, about six and a half, six and a half years to pay off the house from when I got full, like full gazelle intense, like on the day plan, 100%. Holy smoke.
So 89,000. How much money were you making during that time? My range of income50,000 to $80,000.
Wow. What kind of work do you do? I'm a middle school languages teacher.
This just gets better and better. Because you know you're breaking through all the stigmas, right? Oh, yeah.
What stigmas? I mean, people think, oh, a teacher, you know, on a teacher's salary. So single.
So one income, teacher's salary, and you paid off your house. Yes, absolutely.

That's rare.

And you did it so fast.

Yeah, absolutely. Well, number one, I bought a house that I could afford and also just worked extra jobs and came home from school and just ready to game on.
I was just ready to get the house paid off. I was really, really happy about getting it done.

What caused you to be so intense about it? What clicked in your brain? What caused that? A lot of times people have an I've had it moment or there's something that's kind of driving that intensity. What was that for you? Yeah.
I mean, for me, I was already a little bit weird. I already knew like before I'd ever heard of Dave that I really wanted to get the house paid off.
But once I heard about Dave and I had, you know, really had the baby steps and I really started following them a hundred percent, it was just, it was just game on and I was just ready to ready to do it it really became an obsession honestly he sounds like a numbers guy like a logic like I just want to follow the system to get the thing done what was the did you have a specific goal in mind if I want to pay it off by this time or in this many years yeah I kind of I called the show back in um 2018 and that's when I really started getting full game. And Dave told me, he said, it's just going to be a short amount of time where you have to pause retirement, that kind of stuff here.
Dave told me, I think you'll get paid off in five years. Well, it took me just over six from that point, so I'm sure he's not too disappointed.
Oh, no, he's cheering for you, dude. Oh, yeah, absolutely.
What were the side gigs you had? Oh, I u.s census i worked for subway for a while i worked as an interpreter i interpreted spanish over the over the phone so yeah a lot of a lot of side gigs and i'm also in the air force national guard and everything wow yeah that's incredible thank you you're you're a guy who makes the most of his time like you're not sitting around much. Yeah, definitely not.
He's either serving sandwiches or serving his country. He's doing something.
He's out there. Yeah, thanks for your service.
Well, thank you. Who was cheering you on? Or tell me, was it folks cheering you on or folks looking at Jonathan going, man, this Jonathan guy, he's bizarre.
This guy's nuts. I would say definitely a little bit of both.
People were definitely rooting me on when they heard about the story. They said, maybe I couldn't quite go that fast, but definitely were cheering me on, thought it was great.
So I got a lot of encouragement from friends, family, and just people that I'd met who found out about the journey. That's crazy.
What's your next financial goal now that you've hit baby step seven? Oh, it's awesome. My next financial goal, well, number one, I've kind of been putting off some of the repairs on the house.
I got to get that, saving up a little bit for that, eventually get another car. But what I would love to do is go over to France and just learn French for a while.
Yeah. Save up for that.
That's incredible. I definitely think you should do the travel abroad thing.
That's incredible. Of course, Jade's going to vote for the fun thing instead of the home repairs.
You know, you have plenty of time for that. I mean, gosh, you're only 36 years old.
You're going to be a bazillionaire, number one, and you've got all the time in the world. Yeah, it really feels great.
It feels like a big load off my shoulders. I don't have to work these extra jobs anymore, so it feels kind of nice to come home from work and not have to work anymore.
So it's been wonderful. It's been a great, great journey.
Really glad it's over and really excited for the future. What's the home worth? The home is worth just about

$200,000. Nice.

What do you have in the nest egg? Nest egg

of God, just shy of about $200,000

as well. Amazing.
You're well on your way.

You're halfway to Baby Steps Millionaire.

Yeah, it just doesn't seem real, but yeah,

it's definitely coming. It's incredible.

Well, you know, teachers were the number three career

out of our millionaire study, and so you are

living proof of, well, I don't understand our teachers.

Well, here's how you do it.

You just follow the principles, stay out of debt.

And at 36, you're going to be a millionaire.

Probably by the time my guess is early 40s, you're going to hit that.

Wow, that sounds about right.

It's kind of crazy when you say that out loud.

But yeah, that does sound right.

Have you played with an investment calculator?

Yeah, a little bit.

A little bit.

I would say probably definitely realistically within the next five, 10 it's it's probably gonna happen oh yeah i'm excited for you so what do you tell the person listening i mean we hit on it earlier um you you busted through a lot of stigmas right single income a lot of people think oh they look at us nice to be married right and and you're like no didn't have. Now you're on a teacher's salary and you're purchasing a house, which a lot of people think it's hard enough to purchase it, let alone pay it off.
But you've done all of this in eight years. What do you say to that person? I say it's definitely possible.
Like I said before, you got to buy an affordable home. So this might not be a nice house.
A lot of people want to upgrade their houses. A lot of people want to take a, you know, take a HELOC out to get things upgraded.
Just if you're

laser focused and really willing to work extra jobs and really willing to stay focused on that

goal, it is definitely possible. You know, if you live by what you guys teach them, you mentioned

it before, 25% of your take-home pay. If you start with that and you work very hard and you put

All right. Definitely, definitely possible.
Wow. You know, if you live by what you guys teach them, you mentioned it before, 25% of your take-home pay.
If you start with that and you work very hard and you put all the extra income you can on the principal, the balance, it'll get paid off in no time. And that's exactly what I did.
Word of, wow. Way to go.
Well, here we have it. We've got Jonathan from Franklin, Indiana, paid off $89,000.
It was his house. He did it in eight years, George, making $50,000 to $80,000.

Jonathan, count it down.

We want to hear your debt-free scream.

Three, two, one.

I'm debt-free.

That's what I'm talking about.

That's what I'm talking about.

They say it can't be done, George, but we see it's done right here.

The proof is in the pudding.

The proof is in the pudding. I'm sure his middle school students are now watching him as a YouTube sensation now going, that's our teacher.
Oh, yeah. Oh, yeah.
I mean, he's got all the time. He's 36.
That's like, he's a young gunman. That's wild.
Yeah, he's not even old enough for a midlife crisis yet. I'm inspired by this.
What do you do now? Yeah. What do you do now? Well, he's going to France.
I'd like to go to France. Saint Tropez.
I bet he'll never eat a Subway sandwich again, though. No.
Once you do the side hustle, you're like, you see how the sausage is made. You go, all right, I'm done with that.
Yeah, I know that's true. If you're taking a trip abroad, George, where are you going? Oh, France is definitely, France and Italy, I think, are my top two right now.
Top two. Because I think I'm in my bougie phase, so I just want to eat really good.
Yeah. So I think as far as food goes, maybe grease would be nice too.
Grease is cool. So you're saying the bougie-ness is a phase.
I feel like this is just who you are. Well, you know, some people want to go for adventure.
They want to like go hike. I'm like, no, no, no, no, no.
I want to eat. Take me to the finest dining.
Yes. I want to eat.
I don't, I mean, I'm an active person. I don't mind a walk.
I'll take a walk after I eat. A walk for you is a hike for me.
We have different definitions. Jake goes on 10 mile walks.
I don't want to do that on vacation. On vacation, I'm like you.
I want to sleep in late. I don't want to have like this big itinerary that I have to wake up at 6 a.m.
and check all the things off the list. I want to sleep in.
I want to order room service. It's all about the food.
That's where it's at for me. So Italy.
When I say I want to experience culture, I really just mean I want to eat their amazing food. I think that's a great way to experience it.
Oh, we have a gift for Jonathan. We forgot to mention.
Oh, we did. What is our gift? Two every dollar premium subscriptions.
Good for a year. So you can use that.
You can pass it on to someone who cheered you on. Maybe even a naysayer.
Give it to the hater and say, hey, this is how I did it. If you want to know, the budget was the key.
It's on me. I love that.
I love that. And it's just a reminder, you know, when you do things like this, you got to dream about it.
Like Jonathan reminded us, let's dream. Why are we doing this? Why are we paying off our debt? Why is it important for us to build the savings? Have that really clear picture so that you can actually see it through to the end.

I don't care if it's a trip to France.

I don't care if it's, you know,

you buying your dream car or a new pair of Jordans.

But having that why, having something to shoot for,

man, you can stop wondering

where it went.

So if you're going to start winning with money, you have to get on a budget.

The easiest way to get started and stick to it is with the every dollar budget app.

It'll help you make a plan for every single dollar coming in and every single dollar going out every single month.

And guess what? It's free, so no excuses.

Download every dollar in the App Store or Google Play today.

We'll see you next time. George, we just witnessed that amazing debt-free scream from Jonathan, paid off $89,000.
It happened to be his house. He did it super quick, eight years and on a teacher's salary.
And we found time and time again that what allows people to win like that is the foundation of having a really, really good budget. And our EveryDollar budget is just that.
And so our EveryDollar team has multiple free trainings for you this month, which is basically trainings for you to use EveryDollar at its optimal capacity is basically what it is. So join a live team and a live webinar to learn how to break the paycheck to paycheck cycle in just 90 days.
And you'll get a step by step walkthrough of the EveryDollar budget app. This is the only budget app that I use.
It's the one that George uses. And so you'll get the biggest budgeting questions answered.
It's a live Q&A. And yeah, it's just for you.
Over 160,000 people have already done these webinars. And I'm sure they would say that it was a breakthrough for them, right are limited they're always going to be limited so sign up now for free at www.everydollar.com slash webinar i haven't said www yeah i was shocked you took us there jade that's what it says on the paper surprised also known as everydollar.com slash webinar HTTPS colon slash slash.
Listen, I'm reading.

I respect it.

Let's go to Summer.

She's in Orlando. Also known as everydollar.com slash webinar.
There we go. HTTPS colon slash slash.

Listen, I'm reading.

I respect it.

Let's go to Summer.

She's in Orlando, Florida.

Summer.

How can we help today?

Hi, thanks so much for taking my call.

So my question is, should I start increasing my investment contributions as the stock know, to capitalize off of some of these like lower prices and costs right now. You got a crystal ball we need to know about? How do you know it's going to keep dropping? You're saying you want to buy them when they're on sale is what you're saying? Yes, ma'am.
Yes. The answer is I don't increase or decrease investing based on anything the market is doing.
I'm accidentally dollar cost averaging, meaning I just invest 15%. Well, now I do more because I'm in baby step seven.
But if you're in baby step four, five and six, invest 15% of every single paycheck, regardless of the market's up, the market's down. And so I don't time it.
I don't go, well, it's on sale. I'm going to buy more.
I just keep buying exactly the amount I was. And you're going to naturally buy more because 15% of something on sale is going to be more shares.
Okay. Where are you in the baby steps, Summer? Like five, six, and seven.
I don't have any debt. I do more than the 15% now, and I'm just trying to save up to buy a house in addition to my retirement.
So you haven't bought a house yet. Correct.
I see. How much are you investing? What percentage? It's over 15%.
Um, cause I do. So at probably 18 to 20%.
And how much are you putting aside for your down payment? Or is that just not something you're like gunning towards just yet? That I am saving up that. I mean, I want to pay full cash.
Right now I have about $12,000 for a down payment, but I'm looking eventually, you know, for six years from now to pay full cash for all. Oh, so that's your plan.
You're like, I'm just going to save up over the next six years and just knock it out in cash. Yes.
Interesting. What I listen, I Listen, I love that plan.
What's your thought on that versus saying, hey, if I really put the pedal to the metal, I could put a really nice down payment now, get in the market sooner. Do you know what I'm saying? Yeah.
Because from, you know, let's say 2019 to 2022, we saw home prices skyrocket. So the fear is with that length of timeline, housing market could increase to where it's a moving goalpost.
And you went, oh my gosh, I saved up 250,000 and now that house is 300. And so this sounds crazy to say, I'm all for paying cash, but if it's going to take you that long, it might be wise to ratchet down to 15% with investing, throw everything else that you can toward a down payment.
And once you can buy the home that you want, where it's going to be 25% of that after tax monthly income, pull the trigger on a 15 year fixed rate and then aggressively pay it off. Okay.
That essentially locks in a lower price for that home and allows you to have margin because 25% on a 15 year is about as conservative as you can get with a home. And then you're still going to have a paid-for cash home within six years.
And you have had that time to also build equity in the home all of this time, which is nice. Okay, perfect.
Thank you so much. Just a thought.
Yeah, you're doing a lot of good things. I would just make those light tweaks of just, hey, let's bring this down to 15%, freeing up a little bit of money toward that down payment so we can speed that up so that you're not looking at a six to 10 year journey to get into a home.
Exactly. Very good question.
Good question. Let's go to Jenny.
She's in Columbus, Georgia. Jenny, what's up? Hey, how are you? We're good.
How can we help? Good. So my husband and I, we finally took financial peace this spring.
We are almost out of debt and we have reached a three-month fully funded emergency fund when my motor needed to be replaced. But we were able to pay in cash to get a motor to put into our 15-year-old vehicle.
And a few weeks later, the car started acting up again. The shop told us that the transmission is going out, but it can wait a little bit longer and we don't have the cash right now to cover all of it.
So we decided to wait. Yesterday, the same car started smoking.
We don't know the source of this yet or what it might cost to fix it. Currently, our savings is down to about a one month emergency savings because of the motor.
We have three children and we are expecting our fourth to arrive in about three weeks. Oh my goodness.
Yes. We have, um, our 15 year old car has 175,000 miles on it and it will cost a minimum of $5,000 to fix.
That's just the cost of the transmission. We don't know about what the new thing is.
We have found a decent replacement car, but the price tag is $15,000 before interest and all the fees. But this car only has 85,000 miles on it.
Our concern is that since this is the only family car we have, should we go into debt fixing a 15-year-old car or should we go into debt by getting a used car? I would not do that. I mean, hear me.
Yes. My car's pretty old and the car I had before that was pretty old and our family rides in it just fine.
And the 145,000 miles, my car's got more than that. No, it's 175,000.
Even still, you can't see who I'm looking at through the glass right now, but one of our producers, Will Rudder, has got one of the oldest cars. What is it? His has got $350,000.
Oh, $450,000. Oh, wow.
$380,000. $380,000, Bob.
And he's going strong. So my point is, I'd rather, you know, when it's your car, it's like you know what's wrong with it, right? And you're like, okay, let me just go ahead and get this thing fixed.
It doesn't make sense to spend $15,000 when you could really spend five because it's still money, right? Don't forget math just because one's dead and one isn't. So I would be coming up with the money to get your current family vehicle fixed.
Now it's about figuring out how we can do that. So can you tell us what your income is? Yes.
Our monthly income is $9,000. Okay.
How much of that could you put away? Because this baby's coming in three weeks, you said. Yes.
So like next, in three weeks time, how much more money can you set aside? Like about $3,500. Okay.
So plus you have how much in savings right now? We have about $3,000. Okay.
So that's $6,500. So that gets the repair done without going into debt.
Right. I'm just, I think my husband is very concerned about us even being in the car before it being fixed.
We're going to get it looked at and understand where the smoking's coming from.

Is it a solvable problem?

But I don't like the option A, go into debt for this, option B, go into debt for this.

I think that's where we painted ourselves in a corner.

The goal is to avoid debt and also stack up cash and make sure that you and baby are home safe before we do anything else and make any big financial decisions.

How much of the 9K is your mortgage payment?

So we don't have a mortgage right now.

We have a rental cost right now, which is only $1,200. Okay, great.
So there's a lot of money here. I think that if you guys get really creative, if just in a month you've got $3,500 of margin, I think you guys can get really creative to find the other 1,500 you need to get this car fixed really fast.
But worst, worst case, you could rent a car for a while, borrow a car for a few weeks just to get by. And I think those are good options versus going into debt for a car we can't afford.
Okay, okay. Yeah, George has a really good, that's a really good thing.
George, we hear it. I hear all the time.
I mean, I have a personal story of a friend of mine who, um, I don't want to give away who it is. Uh, so basically their car broke down and they showed up the next time I saw them and they had a brand new vehicle and they were like, well, it was going to cost $800 to get the car fixed.
And we didn't have that. So we just rolled the equity into another brand new vehicle.

And next thing I know, they've got like this super nice. And I'm like, oh, my gosh,

that is the definition of broke. The train has left justification station.

Yeah, that is the definition of broke right there. So that's a good indicator that it's time to make some changes with your money.
We'll help you do that. This is The Ramsey Show.
Hey, what are you still doing here? You know the rest of the show is happening on the Ramsey Network app, right?

So you got to jump over there to continue watching.

You can download it for free.

Just go to your app store, type in Ramsey Network.

It's completely free.

And I'll drop a link in the show notes to make it easy for you.

So if you're watching on the app, you're in luck.

But if you're watching anywhere else, this show is over for you.

So jump onto the app and let the fun continue.

All right, go on now.

Don't make it weird.

Okay, I got nowhere to go, so you need to go.

Okay, bye-bye now.

All right, this is getting weird over there, guys.