The Baby Steps Break You out of the Paycheck-to-Paycheck Cycle

Speaker 1 From Ramsey Network, this is 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 Dr.

Speaker 1 John Deloney, and we're taking your calls at 888-825-5225.

Speaker 1 Hunter's gonna kick us off in Calgary, Canada. What's going on, Hunter? How can we help?

Speaker 3 Hey, so I believe in the Ramsey method. Save up a good amount of money.
I want to buy a house.

Speaker 3 I have this girl, like I want to marry her, but she doesn't believe in

Speaker 3 she believes in like credit cards and I don't want credit cards

Speaker 3 because that's what you guys teach.

Speaker 3 How can I convince her? She thinks that like you can't rent a place or you can't get a house. And I've tried to explain her otherwise.
What do you guys think?

Speaker 2 How have you tried to explain it?

Speaker 2 Like, role play it with me. How have you tried

Speaker 2 to teach your girlfriend or to talk to your girlfriend about the way she thinks about a problem is wrong?

Speaker 3 Well, I just, I don't know. I try to go soft like you guys do.

Speaker 3 I don't know.

Speaker 3 I'm like, well, this served me well. The Ramsey method served me well.

Speaker 3 I saved up over like $120,000. I'm only 22 years old.

Speaker 3 I think, yeah, I think there's just less risk.

Speaker 2 So you are making, I don't want to overgender this, okay? You are doing it exactly the way I would have done it at 22,

Speaker 2 which is I would have sat down with a spreadsheet and said, look how old I am. Look how much money I am.
And by the way, can I just George and I high five you? You're doing. Well done, man.

Speaker 2 99% of Americans don't have as much money as you have in the checking accounts.

Speaker 1 That's because he's in Canada.

Speaker 2 Yeah, Canada. There you go.
Well, on behalf of Americans, they don't have that much money either.

Speaker 2 But so you're doing a great job there. But I think getting beneath that

Speaker 2 is the only way I've heard and or seen it be successful, which is

Speaker 2 I don't want

Speaker 2 like you, you firsthand know the turmoil that's been going on in the Canadian government over the last few years, right? The last few days. Of course, yeah.
Yeah. To your girlfriend,

Speaker 2 I'm nervous and scared about any entity, the government, a bank, a car dealership,

Speaker 2 anybody owning me and you.

Speaker 3 Okay, that's a good way to put it.

Speaker 2 This is about safety. This is about,

Speaker 2 I want to have a family with you, and I want us to control our destiny. I don't want a bank to tell us that you can't stay home with the kids.

Speaker 2 I don't want a government to tell us that we have to leave our house. I want us to be completely free.

Speaker 2 And that's a different conversation than the ROI. George and I get calls all over the world about, well, I've got a 2.7% mortgage, but a 5.
I don't care. I'm going to start with freedom.

Speaker 2 I don't want anyone to own my family. Yeah.
And if she says, screw you, you know how good of a deal we can get on a suburban, then y'all have a deeper relationship challenge, right?

Speaker 3 A huge one, yeah.

Speaker 1 And Hunter, I cover in my book, Breaking Free from Broke, I went through every single thing I've ever heard about using credit cards, and I debunked it, not with just opinions, but with facts, with research, with my experience, with hundreds of others.

Speaker 1 And so I'm going to send you a copy of Breaking Free from Broke. And here's what I would do.

Speaker 1 Hey, as part of our future together, I want to make sure we're aligned with money because I know that money fights and money problems are one of the leading causes of divorce.

Speaker 1 And I want this relationship to succeed. Would you be willing to read this book with me about personal finance or listen to the audio book? Would she say yes?

Speaker 3 I think so, yeah.

Speaker 1 Because then it's not you telling her. It's, hey, what do you think about that chapter? That was interesting.

Speaker 1 Like how he was talking about how you can rent a car without a debit card and the steps you need to take to buy a house without a credit score.

Speaker 1 And then it starts a conversation instead of you telling her how it's going to be. And I think that will help this go better.

Speaker 1 And

Speaker 2 this is for you, dude, but it's also for everybody listening.

Speaker 2 It's really important that

Speaker 2 a future husband and wife, a current, you know, like just a partnership, right? Two people who are married. That their values are aligned.
But, dude, beliefs will change all over the place.

Speaker 2 My wife and I believe different things,

Speaker 2 right?

Speaker 2 That's why we read different books, listen to podcasts. I want my beliefs to always be challenged and always be changing.

Speaker 2 It gives us stuff to talk about when we go on dates, but our values are aligned.

Speaker 2 And so maybe a fun exercise for y'all too is like going into marriage, by the way, they'll change over time, but going in, what do we value?

Speaker 2 And if you start with, as for me and my house, I'm really going to value being free. Nobody's going to tell me what I have to do.

Speaker 2 I'm going to be able to control my destiny. And I want me and my wife to have that, to share that.

Speaker 2 Who can disagree with that, right?

Speaker 3 No, it's true. It's a good way to put it.

Speaker 2 And then she'll give you some values. And then from there, you can get into the belief stuff.
And belief is where the fun fights and the fun no ways and the fun like, oh, you changed my mind.

Speaker 2 That's the beauty of relationships that I love. George and I believe different things.
He believes that there's a Sasquatch. I don't think there is, but he does, right? Yeah.

Speaker 2 And so that's awesome, but both of us value like hanging out as friends and so that value is going to override any silly beliefs either one of us have right

Speaker 2 okay that's awesome values are different than beliefs and so good for you yeah and tell me your age again and how much you have saved up i'm 22 and i have over uh 120 000 saved up and i'm making over six figures and what do you do man do you like get dispose of bodies what do you do i'm a heavy-duty mechanic close enough hold on you can't make that kind of money doing um heavy-duty machinery stuff.

Speaker 2 You can only make that kind of money if you're a physician. Is that true?

Speaker 3 No.

Speaker 3 You just gotta work hard, put your time, and yeah.

Speaker 1 Do you go to college or trade school?

Speaker 3 Yeah, I went to trade school.

Speaker 1 How much was it?

Speaker 3 Maybe, I don't know, $8,000, whole tuition.

Speaker 1 That's pretty sweet, ROI. You paid cash for it, no debt?

Speaker 3 Yeah, cash, all cash.

Speaker 2 Oh, my goodness. Hunter, you're making a whole bunch of listeners, like millions of people, very uncomfortable.

Speaker 3 I hope so.

Speaker 2 Because right now they're watching a lot of news thinking that everyone else is going to save their problems. And then there's guys like you who it's like, 8,000 bucks, game on.
Good for you, brother.

Speaker 2 I'm proud of you, dude. Thanks for the call.
It's an honor that I got to talk to you today. I like, man.

Speaker 1 There's an angry parent listening who's like, I just sent my kid to four years of college. It's 200 grand for a sociology.
Oh, my gosh, what do we do? What did we do? Hunter's making 100 grand.

Speaker 2 And there's also millions of fathers of 22-year-old daughters who are like, no, no hunter before you marry her here's my daughter's number right you mean you're gonna be a person of integrity and you're gonna work real hard and you're committed to a household of freedom for the rest of your life amazing I like making a bet with this girlfriend going hey let me be wrong Cut up the cards.

Speaker 1 Let's live our life and let me be wrong if we end up hitting a wall because of this issue.

Speaker 2 Okay, that could be a fun. So we're going to put, I'm going to put 5,000 of my 125,000 in an account.

Speaker 2 If we ever go to get an apartment and we don't have a place to live because we don't have a credit score, that $5,000 is, we're going to put it in the budget that much as spend-a-thon.

Speaker 1 Per spending money. That's right.
That's a fun game to play. That could be.
I love that. Well, Hunter, hang on the line.
I'm going to send you a copy of the book, Breaking Free from Broke.

Speaker 1 And in there, specifically the credit cards chapter and the credit score chapter, those two will unlock a whole lot for you and your girlfriend about how to live outside of the system.

Speaker 1 That's why I wrote it, John.

Speaker 1 I wanted people to buck the system entirely because they go, I hear this, well, George, you can't live life without, you're so out of touch that you think you need a credit score and a credit card to live your life.

Speaker 1 I'm like, you're out of touch thinking this is the only way to live. You've been so brainwashed.

Speaker 2 And can we say, can everybody just recognize?

Speaker 2 It's not so much about living outside the system right now. The system as we know it is being taken apart brick by brick

Speaker 2 right in front of us. So you're going to be on a different train.
I want to be on a train that I'm driving, not that I get thrown in the back of because there was no other options.

Speaker 2 That's right.

Speaker 1 John's going to be.

Speaker 2 The system driving changing.

Speaker 1 It's going to be an

Speaker 1 autonomous vehicle, John. Will you actually be driving?

Speaker 2 I'm going to keep my old truck just for that reason.

Speaker 1 With a stick shift, this is the Ramsey Show.

Speaker 4 There's a time in your life and at the baby steps for renting, but you don't want to do it forever because when you rent, you're still paying for a mortgage, just somebody else's.

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Speaker 1 Welcome back to the Ramsey Show. I'm George Campbell and joined by best-selling author Dr.
John Bologna. Taking your calls at 888-825-5225.

Speaker 1 To Canada again we go. To Toronto, Noah joins us there.
What's going on, Noah?

Speaker 3 Hi, how are you guys?

Speaker 1 Doing well.

Speaker 2 How can we help?

Speaker 3 So I'm 21 years old.

Speaker 3 I know pretty much next to nothing about finance.

Speaker 3 And right now, currently, I'm sharing a vehicle with my mother. And over the next couple of years, I'd like to sock away some cash in buying my own car.

Speaker 3 And the car I want to buy will be worth a resale value of roughly 15,000 by the time I want to buy it.

Speaker 3 My parents suggest that I take out a loan on this car instead of paying up front with cash, which

Speaker 3 I mean I've been listening to the show for a little bit but it even just on my basic instinct doesn't really seem totally right. I mean if I have the cash and if it doesn't swap my net worth then

Speaker 3 I don't see why I shouldn't just pay up front for it. And

Speaker 3 basically their argument to why I should do this is they claim that the interest that I'd be paying on the car loan would be less than the interest that I would gain through some sort of stock market portfolio with the rest of the cash.

Speaker 1 Got it. So they're saying, hey, you could leverage that money in the stock market instead of sinking it into a car.

Speaker 3 Yeah.

Speaker 2 So I'm wondering. George is the finance guy.

Speaker 2 George knows way more about numbers and money than I do. My first response to that is

Speaker 2 maybe,

Speaker 2 right? So maybe,

Speaker 2 like just number for number. So if you get a car at 7%, maybe you can put it in the market and get 8%.
So maybe.

Speaker 2 But that evaluation doesn't take into consideration that the value of that car goes down every day.

Speaker 2 And so it doesn't factor depreciation. So you're paying.

Speaker 2 money back on something that's worth less and less every single day.

Speaker 2 Do you get what I'm saying? So

Speaker 2 you're trading one thing for another, but if you don't factor in the depreciation cost of that used car, then you're not taking in the entire financial picture.

Speaker 1 Right.

Speaker 1 And there are no guarantees in the stock market. And I don't know what they're invested in and what's going on in Canada, but I'll tell you here in the U.S., we don't know what the future holds.

Speaker 1 And there's a guaranteed return when you pay cash for that car instead of going, all right, I spent 15 grand and in the end I paid 20 with interest and now the car is only worth 10 by the time I pay it off.

Speaker 1 That's the reality of the math of how cars work. And therefore, cars are one of the dumbest things to go into debt for because they're continually going down in value while you pay interest on it.

Speaker 2 And the market return may be lower?

Speaker 2 So I think a couple of years ago, I'm trying to remember off the top of my head, but I think my whole thing went down 17%.

Speaker 2 Last year, it was up 24% or something like that. That's cool if I'm looking at a 50-year play, right?

Speaker 2 Or if I've got this stuff in the market for 30 years, if I'm holding a four-year car note, that's horrifying because the one consistent that never changes is that car payment is due every month.

Speaker 2 No matter what. You get what I'm saying? So it sounds to me, tell me if I'm wrong, your parents just want to stop sharing a car with you.

Speaker 3 Um, I mean, i i it's kind of just

Speaker 3 the car was actually my idea, like to say for my own car. Um

Speaker 3 it's just uh

Speaker 3 the car we're sharing, or at least the one I'm sharing with my mother, is quite old. And

Speaker 3 by the time I'll be getting this other car, that car will probably be about 20 or so years old.

Speaker 2 Why did she pay off her car?

Speaker 1 Did they pay cash for theirs?

Speaker 3 I actually don't know.

Speaker 2 Might be something to ask them.

Speaker 1 If it's such a good idea, why aren't they doing it? They should be taking out as many car loans as they can get and putting into the stock market,

Speaker 2 beating the market. Right.

Speaker 2 I know that uh the car that my father bought when i was very young i know he took out a low on that one but the most recent one he bought he paid fully cash for yeah what a dumb idea that was he could have been leveraging that in the stock market noah do you see where i'm going with this it's okay to be misaligned with your parents this is why i'm confused yeah don't be confused here's it is your mom and dad have whatever algorithm they've worked out they think it's the best and they're probably trying to love you in the best way they know how it's all good they're not bad people they're not bad people the reality is um the best thing I can tell you is at my house, in George Camill's house, in Dave's house, in Jade's house,

Speaker 2 we write a check for cars.

Speaker 2 Almost always, unless you're Dave, almost always used cars.

Speaker 1 And if it gives you any solace, I still disagree with my father to this day anytime we talk about money. So this is just a thing of life.
You're going to have to get used to.

Speaker 2 Me and my father do not talk about money anymore.

Speaker 1 We just laugh it off and go, thanks, Dad. I'm good.
I'm good.

Speaker 1 But the truth is, Noah, you can do this on on your own, and you're a grown man who probably will soon move out and have his own life, right?

Speaker 1 Of course. And they don't pay your bills, and so they're not going to get a vote in your financial choices.
And so you got to do what is in your gut is the best thing for your financial future.

Speaker 1 And you know too much to go into debt at this point. And so the next goal is: how do I save up really quickly to get a car I can afford in cash? How long will that take?

Speaker 1 Okay.

Speaker 2 It's going to take you about two years, you said?

Speaker 3 Oh, you were actually asking. Oh, yeah, it'll take

Speaker 3 about two years.

Speaker 2 Are you living at home?

Speaker 3 Yeah, I am.

Speaker 2 What do you make a year? I could say

Speaker 3 per year, I'm not totally sure. I mean, I'm about to be

Speaker 3 hired for a landscaping company that pays about $22 per hour, which is roughly,

Speaker 3 I guess, $5,200 per month before taxes and pension deductions and all that.

Speaker 2 So you could have a car in five months.

Speaker 1 Yeah, Yeah, I don't like this two-year plan where you're saving up five, $600 a month. You should be able to save up a grand a month and knock this thing out within a year.

Speaker 3 No, absolutely. I guess,

Speaker 3 I mean, yeah, you're absolutely right. I guess I'm just not too much of a rush to get a whole separate vehicle.
You know what I mean? I guess.

Speaker 1 Well, the longer you're tethered to mom's vehicle, the longer this is going to get played out where you're just intertwined with family finances. I'd love to see you out on your own.

Speaker 1 And that's going to give you a sense of independence, maturity. And I've just seen it too often where growth is stunted when you stay at home for too long when you don't need to.

Speaker 1 You're right. So even if you get three roommates, you grow up fast when you're living with three dudes.
All right. You start to learn some things and it prepares you for marriage.

Speaker 2 And it boosts your immune system too, because a house full of guys is disgusting. Absolutely.
Just kind of as a general.

Speaker 1 I'll tell you, my mom was just in town, Noah. I revert to a child, right? She's like, no, I'll get the dishes.

Speaker 1 I'll fold the laundry there's just a piece of you that turns into a child when mommy and daddy are there and so i think it's going to really help you financially spiritually emotionally mentally to move on and do your own thing sooner rather than later

Speaker 1 i agree but good gut instincts brother you're on your way i love it that's big so john this comes up a lot there's a rub between there's a thing this other person believes and they're projecting it onto me and i love this person i respect this person and it's easy to say well just have a boundaries conversation and tell them to kick rocks and pound sand.

Speaker 1 But the reality is these are your parents. These are your loved ones.
Right.

Speaker 2 Can I tell you what I think so what's happening? Our culture has told us if you have a disagreement with someone, you have to hate them.

Speaker 2 If somebody believes strongly about debt and you believe strongly about borrowing money, then inherently we have to hate each other.

Speaker 2 If you vote differently, if you want to go to this church and I'm going to go to this church, we have to hate each other. And that's so nonsense.

Speaker 2 I know he's from Toronto. the whole american exchange the whole idea of the united states is

Speaker 2 you believe this i believe this and we're going to figure out figure out a way that we can both live together move forward so man people like your parents most of the time there are evil actors out there and there's morons out there most of the time a mom and her dad sits down and well intentioned gives their kid what they think is the next best right step for them period so you don't have to hate them and you don't have to do everything that they say all the time especially when you're a grown-up.

Speaker 2 Now, if you're 22 and you still live in mommy's house and you're borrowing mommy's car, then you're going to do what mommy says.

Speaker 2 And if mommy says be home at 1030 at night, because I'm uncomfortable with those, what's going on out on these streets because I watch tons of news,

Speaker 2 then you have a choice, be home at 10:30 or move out, right? But that's the world we're in.

Speaker 2 So golly, dude, if you can make peace with people who just have different thoughts than you and then go do what's the next right move, especially, I love what he said.

Speaker 2 My guts are telling me this is the wrong thing. Follow your guts, man.

Speaker 2 It's just the wrong move.

Speaker 1 Apparently multiple.

Speaker 2 This is plural guts. Yeah.

Speaker 1 I thought you had one, but I love that John has multiple. That's the kind of man he is.

Speaker 2 Yeah, and he's got

Speaker 2 hashtag biology and science.

Speaker 1 Hashtag microbiome. We'll look into that later.
Hey, more of your calls coming up. Triple 8-825-5225.
This is The Ramsey Show.

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Speaker 1 Welcome back to the Ramsey Show. I'm George Camill here with Dr.
John Deloney. One of the best things to do for your finances is to have a really good tax pro in your corner that you can trust.

Speaker 1 They'll help advise you on the best moves to make for your situation or for your small business, especially if you've had some big life changes in the past year. So, do what John and I do.

Speaker 1 Go to ramseysolutions.com/slash tax pro to find CPAs and enrolled agents in your area that have been vetted by the Ramsey team. Take the stress out of it.

Speaker 1 All right, Tyler is up next down the road here in Nashville, Tennessee. What's going on, Tyler?

Speaker 3 Hey, how's it going?

Speaker 1 Good. How are you?

Speaker 3 Oh, I'm doing all right.

Speaker 3 But starting off, so I'm a 22-year-old in Nashville currently. I'm originally from Indiana.

Speaker 3 I am living paycheck to paycheck as of right now, but I have, every now and then I get like a little bit spare some money to put aside. And I'm trying to start my own two businesses.

Speaker 3 So I was my main question is, should I put that money aside and put it towards the businesses? Or should I invest it in something else to get me and my old lady a house?

Speaker 3 Considering I have no credit card debt, I have no debt to my name. I have always paid cash for everything.

Speaker 3 I'm just trying to figure out what I should do.

Speaker 1 Well, you started off the call by saying you were paycheck to paycheck. So it doesn't sound like you're coming from a place of strength, ready to start a business or buy a house.

Speaker 1 So we've got to look at what's going on underneath here that's causing you to have no margin at the end of the month.

Speaker 2 Okay.

Speaker 1 So what is your take-home pay every month?

Speaker 3 Roughly about, I want to know, I want to about $1,200, I'd say, at the job that I'm at currently. My old job, I made more, but I'm going back to that job at the end of this year.

Speaker 3 I'm going back to Indiana to go to that job.

Speaker 1 Okay. What will you be making then?

Speaker 3 Roughly, I mean, I made $1,200 a week, so I'll be making roughly $5,000 a month at that job.

Speaker 1 So why did your income get cut?

Speaker 2 You were making four times what they were.

Speaker 3 So the job that I took down here, it's actually the same job. It's a traffic flagging position.
I'm not making near as much money, and it's not union-based, so it's not like a laboring job, I guess.

Speaker 1 Yeah, but are you working full-time and making $300 a week?

Speaker 3 Roughly, yeah. I mean, I'm not making much, and I don't know why.

Speaker 1 Well, is it an hourly job or is there a salary?

Speaker 3 It's hourly.

Speaker 1 Okay, so what are you making making per hour?

Speaker 3 Roughly $1,850.

Speaker 1 Okay, something's not tracking here because that's closer to a $40,000 salary. So you should be taking home closer to $2,500 a month instead of $1,200.

Speaker 3 Yeah, exactly. That's what I'm saying.

Speaker 1 Have you looked at your checks? See what's going on?

Speaker 3 I'm actually in the current I'm in the currents of doing that right now. Okay.
I'm in talks with my company.

Speaker 1 Right now is not the time to start businesses or buy a house. You're in a season of life where things are changing pretty rapidly.
And so I would be looking for stability.

Speaker 1 And starting a business, there's very little stability. And there's a lot of startup costs.
There's a lot of risk in that. Right now, do you have any savings?

Speaker 3 Currently, no, I do not because I had to use it to pay for bills whenever they came around because I ran into an issue.

Speaker 1 Okay. So your A1 is to get some savings.
You said you have no debt to your name whatsoever.

Speaker 3 Yeah, no, I mean, I'm paying on a trailer, but it's not under credit. I have no credit at all.
I don't have a credit line. I've always paid paid for cash.

Speaker 1 So you owe on this trailer. How much do you owe? And to who?

Speaker 3 Roughly $1,600 to a trailer dealership.

Speaker 2 Okay. It's me.

Speaker 3 I already made it, I think it was like a $200 down payment. My first payment comes out next month.

Speaker 1 So if there's a payment involved, it's debt.

Speaker 3 Okay.

Speaker 1 Regardless of lines of credit or whatever. So we need to make sure the definitions are clear here because that's now your A1.

Speaker 1 With every future paycheck beyond your basic bills, necessities, you got to throw money at that thing, get it knocked out within a month or two. Okay.

Speaker 1 Then beyond that, let's get a fully funded emergency fund, three to six months of expenses. For you, that might mean 10 grand right now.

Speaker 1 And that's going to take getting your income up because this should not take a year or two to get 10 grand saved up. Do you agree?

Speaker 3 Yeah, I got you.

Speaker 1 Then beyond that, we can talk about investing for the future in retirement accounts, saving up for a house, starting a business.

Speaker 1 That's when you would do that once you have a financial foundation of no debt and a fully funded emergency fund.

Speaker 3 Okay.

Speaker 1 So you've got your work cut out for you.

Speaker 1 I love the dream of getting these businesses started up and investing for the future, but we got to pay for the past before we can build for the future and get some foundation under us because here's what happens.

Speaker 1 You try to start these businesses. One emergency happens.
You're looking to a line of credit to save the day. And that's going to rob you from your future.
So I appreciate the call, man.

Speaker 1 We're rooting for you. And best of luck getting that income up and with the move.
A lot going on. Alan is up next in Orlando.
What's going on, Alan? How can we help?

Speaker 3 Hi, thanks for taking my call.

Speaker 1 Sure. How can John and I help? help?

Speaker 3 Yep, so I'm age 31 and currently married, no kids yet, but that's coming up around the corner, maybe a year out.

Speaker 3 I'm currently on baby step four. I've been saving for retirement and had a luck of fortune or strike of fortune in the past year.
I've been investing in a brokerage account for my 401k,

Speaker 3 and

Speaker 3 that's grown actually to just shy of a million dollars in the span of a year.

Speaker 2 Whoa. Really, really high.
What do you invested in?

Speaker 3 COVID recovery and some tech technology growth. And I was very fortunate there.

Speaker 1 So how much did you put into these single stocks?

Speaker 3 Two years ago, it was about 50 or 60K.

Speaker 1 So you turned 50K into a million dollars?

Speaker 3 Just about.

Speaker 1 In a year.

Speaker 3 It was two years.

Speaker 1 Wow. You and Nancy Pelosi are really great at stock trades, man.
Good for you.

Speaker 2 Right. You have a friend who had coffee.
He's like, I'm thinking of starting this company called Open AI. You got 50 grand, so congratulations, dude.
That's awesome.

Speaker 1 So what's your question today?

Speaker 3 So being on babysit 4 and having this locked in a 401k account,

Speaker 3 I'm starting to understand how can I use this to looking forward ahead to babysit 5 and 6.

Speaker 3 It is still, you know, it's in a 401k account. I understand mathematically it makes sense to keep it in there, but psychologically

Speaker 3 using that net worth towards towards some freedom. I'm curious on your thoughts there, what makes sense and when it makes sense to tap that resource.

Speaker 1 Well, if you feel like that 401k, it's super volatile right now if you are invested in single stocks versus mutual funds. So is it in single stocks?

Speaker 3 It was, and I've diversified that out to kind of lock it in.

Speaker 1 Okay, so you rebalanced and you got out of single stocks and into some bigger funds. Correct.
Okay.

Speaker 1 So I would not touch this money because I don't like paying the government anything more than I have to pay. And if you pull money out before that 59 and a half threshold, you are in a world of hurt.

Speaker 1 You're going to be paying probably upwards of 35, 40 percent for the pleasure of the money.

Speaker 2 Alan, I want to ask George a question on your behalf. So if Alan had called the day before he

Speaker 2 sold those single stocks and spread it out, would you have told him sell the single stocks and hold some money back just to get in a brokerage account for buying a house and whatnot?

Speaker 1 Well, he did this all within his 401k. That's in a retirement account.
If he had done it in a brokerage account, that would be a totally different story.

Speaker 2 If it was in a non-retirement account, so the fact that it's locked up now means it's going to have those massive tax penalties

Speaker 2 attached to it. Okay.

Speaker 1 So for the future, Alan, if you, I mean, I would still invest 15% of whatever your household income is into retirement accounts. And do you have it? You said you have a house?

Speaker 3 I do have a house.

Speaker 1 Okay. What's left? What's left on the mortgage?

Speaker 3 About 230K.

Speaker 2 Okay.

Speaker 1 And what is your household income?

Speaker 3 Ironically, about 230K as well.

Speaker 2 Amazing. Okay, so Alan, I'm going to ask another question to George on your behalf.

Speaker 2 So basically, he scratched a lottery ticket and won, and he took all that money and dropped it into 401k, who has a million dollars in retirement. It's going to double every seven years-ish.

Speaker 2 Would it be okay for him to pause retirement for a year and a half and pay off his house?

Speaker 1 You could at this rate because you're so far ahead. Yeah, I mean, at this point, that 401k is going to grow without you if you never put a dime in.
I would still add to it.

Speaker 1 But to John's point, if you were like, hey, I want to just knock this thing out, I want freedom faster.

Speaker 1 It sounds like you're wanting to potentially retire early or do some kind of encore career at an earlier agenda.

Speaker 3 Absolutely. Yep.

Speaker 2 Okay.

Speaker 1 So at that point, you know,

Speaker 1 if you've got 15% invested of your amazing income, that would be, let me crunch the numbers here, 34 grand a year. which is enough to max out a 401k and an IRA,

Speaker 1 right?

Speaker 1 So anything beyond that, I would just start dumping in a brokerage account and paying the house off with, and that'll set you up to probably have, you know, the freedom you desire by the time you're 40 with this level of income.

Speaker 2 How old are you again, Alan?

Speaker 3 31.

Speaker 2 Yeah, so here's the, as the guy on the back end of my 40s, here's what I'm hearing. By 33, you can have a paid-for house, more than a million dollars in retirement, and a brand new spouse.

Speaker 2 That's a huge win. You're way ahead of the game, my brother.
Congratulations.

Speaker 1 Way to go. You and Nancy Pelosi, man, they're doing something, John.
I don't know how.

Speaker 2 Maybe Alan's been calling her stop.

Speaker 1 We need to be in Congress or Alan. That's the only options to build wealth fast.
This is the Ramsey Show.

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Speaker 1 Welcome back to the Ramsey Show. I'm George Campbell, joined by Dr.
John Deloney. Open phones at 888-825-5225.

Speaker 1 From time to time, we love to hear from real life baby steps millionaires to see how did they do it? Can it still be done in America today?

Speaker 1 And we found just the folks, and that is Jefferson and Rachel in Twin Cities, Minnesota. How are you guys?

Speaker 3 Hi, how are you?

Speaker 1 We're doing great. Thanks for sharing your story with us.

Speaker 2 Of course. Is Rachel on the line too?

Speaker 3 She is not.

Speaker 3 We just had our second son, so she is taking care of the baby right now.

Speaker 2 Congrats.

Speaker 1 That's amazing.

Speaker 2 Okay. Figures, Jefferson.
She's taking care of the baby, and you're talking on the phone with your baby. It must be nice.
Figures. Figures.

Speaker 2 She is listening.

Speaker 2 No, I'm playing.

Speaker 1 Okay. Tell us y'all's net worth.

Speaker 3 $1,020,000. So

Speaker 3 right over that mark.

Speaker 1 Just hit the threshold. That's incredible.
Okay, what is that made up of?

Speaker 3 Yeah, so it's about $400,000 of real estate. We actually just paid off our house in October of last year.
So we just paid that off.

Speaker 2 Way to go. Yeah, and thank you.

Speaker 3 Yeah, and then we have about $500,000 in just investments, like different types of retirement funds, and then about $100,000

Speaker 3 split into other assets, like $50,000 in cash for emergency funds, and then cars and other

Speaker 3 things like that as well.

Speaker 2 Incredible. How old are you two?

Speaker 3 We're 33. Both of us are 33.

Speaker 2 Oh, my goodness.

Speaker 1 You guys are too young to be this wealthy. That's incredible.
What's your household income? Thank you.

Speaker 3 So last year was one of our best years. We just made $330,000.
So in sales.

Speaker 1 And what was your worst year?

Speaker 3 It was right out of college, about a little less than 80K.

Speaker 1 Incredible. What do you do for a living?

Speaker 3 Yeah, I'm a sales rep for a software company, and my wife is a stay-at-home mom, but she also has her master's degree in marriage and family therapy.

Speaker 2 Oh, John's going to love that. So she's a real counselor.
That's awesome.

Speaker 1 Okay. Did you get a college degree?

Speaker 2 Four-year?

Speaker 1 I did. Yep.
What was it in?

Speaker 3 Mine was in business finance.

Speaker 1 Okay. Do you remember your GPA?

Speaker 3 Yeah, mine was about 3.3.

Speaker 1 Okay. And your wife?

Speaker 3 She's got her master's and she's got a 4.0 in her master's.

Speaker 2 I had a feeling.

Speaker 1 I was like, I bet hers is going to be sky high. Very smart.
Okay.

Speaker 3 She's a smart one.

Speaker 1 I love it. So you're 33 years old.
When did you really begin to focus on this stuff? Did you catch it?

Speaker 1 Were you financial peace babies, or was this when you were out of college, you found out about the Ramsey way?

Speaker 3 Yeah, so

Speaker 3 it's funny.

Speaker 3 It's always been a focus of mine, but we weren't really super intentional about it until... about two years ago when our first son was born and my wife stopped working and things got really tight.

Speaker 3 We had a car payment. We had the house and all these different things.
And my wife and I,

Speaker 3 we found Ramsey while we were going through church, and we got really intentional. We combined everything.
We paid off our car quickly.

Speaker 3 And then we got really diligently focused on paying off the house. And we paid off about $270,000 in two years.

Speaker 2 Whoa.

Speaker 3 Just really focused on the intensity of

Speaker 3 making sure that we got that house payment done. So

Speaker 3 if we want to have more kids and my wife wants to stay at home, we've got that flexibility to do so you are solving for freedom as john deloney would say

Speaker 2 okay so what was your mortgage interest rate

Speaker 2 uh it was about three point five percent oh wait a minute you can't pay that off jefferson that's against the law or something

Speaker 3 yeah we we've heard it all we've heard it from a lot of co-workers friends saying you know you're crazy for doing that but the peace that we have you know now that we have our second son here and we don't have to worry about things we can just choose to do whatever we want to do with our money and choose to do whatever we want to do with our life.

Speaker 3 It brings a lot of peace to us.

Speaker 2 Wow. So even though you're a superstar,

Speaker 1 you'll never have a 3.5% interest rate again on that mortgage. You're going to be stuck with a 0% rate with no payment for the rest of your life.

Speaker 2 You blew it.

Speaker 2 You blew it. And when you spend

Speaker 2 $30,000 a year in interest income, you're not going to be able to deduct $12,000 off of your taxes. So, man.

Speaker 1 Do your friends talk to you like that? Like, do you have people in your life who think you're crazy for doing all of this and following the Ramsey plan?

Speaker 2 Absolutely.

Speaker 3 Absolutely. We do.

Speaker 2 What do you tell them?

Speaker 3 But we also, well, we just tell them the peace that, you know, that we have about, you know,

Speaker 3 having a paid-for-house, being able to make decisions about what we want our life to look like in the future just brings us so much joy.

Speaker 3 And that it's not about the, like, it's about the money, of course, but it's not. It's not about the interest rate.
It's not about that tax deduction.

Speaker 1 It's about the peace that comes with our house and the ability to make the decisions that we want to make for our family beautifully said and you've been doing this for a while as far you know you've been investing for a long time just have half a million in retirement accounts at 33 is really impressive yep so you you guys were doing a bunch of things at once it sounds like you had some debt you were trying to invest you were trying to save you got the house you weren't aggressive about paying it off but you started you know on the ramsey way with some focused intensity and you went man what could we do if we just really focus and hunkered down for two years couldn't have said it better better myself.

Speaker 1 Okay, so I'm just making sure I'm hearing that right. I love it.
Did you inherit any of this money?

Speaker 3 We got a small, small gift from my parents to help pay for the down payment of the house. It was like 20, 30K, but that's okay.

Speaker 1 So, mathematically, this did not cause you to become a millionaire, but it did help you get a foot in the door in the housing market. And I'm sure this house is appreciated in value.

Speaker 3 Yes.

Speaker 2 What did you buy it for?

Speaker 3 We bought it in 2019.

Speaker 3 $325.

Speaker 1 And it's worth over $400?

Speaker 3 $420? Yeah.

Speaker 1 Way to go. And now what's next? You're 33.
You've got your whole life ahead of you. You're in baby step seven.
What does the future hold?

Speaker 3 You know, the world's kind of our oyster. I mean, we got a second kid, so right now we're focusing on sleeping is the biggest thing.

Speaker 2 But other than that, you know, we want to maybe get another, I don't know, right?

Speaker 3 Get another house one day, but we'll pay for cash for that and just continue to grow our wealth and save for our kids and save for our future.

Speaker 3 And we're just, we're excited for the future now that we're not paying for our past decisions we get to focus on the future now all right jefferson um

Speaker 2 i kind of smiled george smiled george george has a baby in his house um

Speaker 2 but i i want to double click on that beneath the smile there's some real seriousness to what you just said without a doubt the number one conversation i have with couples who have a toddler in the house is downstream effects of one or both of the parents not being able to sleep.

Speaker 2 And this idea that you get to create this, whatever you want your world to look like because you don't owe anybody anything.

Speaker 2 That's so profound.

Speaker 2 And the ripple effects through your kids, through that toddler who's not going to have a mom who's super anxious all the time, not going to have a dad whose head's 500 different directions.

Speaker 2 He can be present in his own house. That is ultimate change your family tree kind of stuff, man.
Like, congratulations on that. That's really, that sounds fun.

Speaker 2 Like, we're focusing on sleep, but dude, that's also a huge deal. That's amazing.
Yeah.

Speaker 3 Yeah. We're, we're, this, uh, our second kid is a lot different than our first kid just because we do have a paid-for house and things are much more peaceful here.
So we're, we're loving it.

Speaker 2 Well, my second kid was a human hurricane compared to my first kid. So ha ha to you guys.

Speaker 2 Oh, I love it.

Speaker 1 Can I ask what you guys drive?

Speaker 1 Given that you're making moments?

Speaker 3 Yep.

Speaker 3 I drive a 2017 Ford F-150, got that used, and my wife drives a 2017 Honda Accord and we might be getting her a 2020 little

Speaker 3 SUV here soon.

Speaker 2 Oh, both used cars.

Speaker 1 Amazing. So if you guys wanted to know listening out there, what do actual millionaires drive?

Speaker 2 It looks a lot like an eight-year-old, reasonable car.

Speaker 1 I mean, and that's what we saw in the millionaire study, Jefferson, is most millionaires are driving a Honda, Toyota, a Ford, and they bought it used. It's four years old, 41,000 miles on average.

Speaker 1 And so you guys are right there and at a very young age. Most people don't reach millionaire status until 49 is what we found.
So you guys, it tells me you're way ahead of the pack.

Speaker 1 You're going to build generational wealth, and I can't wait to see what you guys do with it.

Speaker 3 We appreciate it. We appreciate the Ramsey show.
We listen all the time.

Speaker 3 We love you guys, so we appreciate it. Thank you.

Speaker 1 You're an inspiration. Tell your wife we love her.
We're thinking of her. And congratulations.

Speaker 2 Get off the phone and quit talking to your friends and go help your wife.

Speaker 1 Go help your wife. John, here's what I want.
I want a sleep study comparing those who have debt and those who are debt-free.

Speaker 2 Yes, and I want to- Can we do that? Yes, I can do that. Can you commission this?

Speaker 1 You have power.

Speaker 2 So I have no power, but any researcher out there, grad student who wants to do that study, I promise you, I'll make you famous. I'll put it on this show.
Results, either way, up or down.

Speaker 2 I'll call it out. You can reach out to us and

Speaker 2 I'll put you and the study on air. All right, let's go.
I can all

Speaker 2 guarantee you that we know how this will end. My hypothesis would be: if you don't owe anybody any money, you sleep pretty good.

Speaker 1 You're doing better. Your brain chemistry, and it's just things are, synapses are firing up there in a good way.
We like to see. Hey, this has been the Ramsey Show.
Thanks for joining us.

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Speaker 1 From the Ramsey Network, this is the Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Camill, joined by Dr.

Speaker 1 John Deloney, and we're taking your calls at 888-825-5225.

Speaker 1 John is going to kick us off this hour in San Diego, California. What's going on, John?

Speaker 2 Hello. Hey.

Speaker 3 Hi, how are you doing?

Speaker 1 We're doing great.

Speaker 2 How can we help?

Speaker 3 Hi.

Speaker 3 So, my name is John. My girlfriend moved

Speaker 3 from

Speaker 3 Atlanta to San Diego, moved in with me, and she has about $472,000 in debt from med school.

Speaker 2 And

Speaker 3 she's wondering if there's going to be a proposal soon. Well, before she moved, I had told her that I was a bit concerned with the debt and that we had to figure that out before things moved forward.

Speaker 3 And

Speaker 3 yeah, long story short, she's moved over and we've been living together for about six months. And

Speaker 2 she so she wants you to propose.

Speaker 1 She's like, hey, when are you going to pop the question? And you're like, hey, when are you going to get rid of the half million dollar loans that you got?

Speaker 2 Hold on. But even before that, she was like, hey,

Speaker 2 I want to move in. And you're like, I've got to get some reservations about you owing half a million dollars.

Speaker 2 And then you just made it sound like she just showed up at your house.

Speaker 3 No, we were dating or we've been dating for about two years now, long distance, because she was going to school, finishing up school.

Speaker 3 So as she was getting ready to finish, she was like, okay, so I'm getting ready to finish. And, you know, like, what's going on?

Speaker 3 So I told her, you know, like, I mean, I don't mind you moving over, but

Speaker 3 I know where this is gonna go once you move over here, and I would rather have a concrete plan to tackle.

Speaker 2 So, that probably would have been a better conversation before you were sitting on her couch that's in your living room. But here you are.
So, what are you gonna do?

Speaker 3 Well, that's what I'm trying to get help with.

Speaker 2 Well, she already moved in, so

Speaker 2 like

Speaker 2 what are you gonna do? You gonna kick her out?

Speaker 3 I'm not gonna kick her out, but, you know, like, just

Speaker 3 having

Speaker 3 a question getting asked, like, every,

Speaker 3 I don't know, once a month or every three weeks.

Speaker 1 What's her urgency for you to propose?

Speaker 3 Well, most of her friends are married, you know, like getting along with a life,

Speaker 3 with their lives, and she's just wanted to know what they're doing.

Speaker 1 Well, now you're playing house, so she's like, hey, can we make this a home? I feel like, you know, we've already committed to each other in this way. Why aren't you proposing?

Speaker 1 So I'm trying to see from her perspective. And I also know in this show, I've never told someone not to get married to someone because of their debt load.

Speaker 1 Now, I would tell them to pause if we're not aligned in how we're going to deal with the debt. So is that the part that worries you? Has she said, eh, I'm not worried about it.
Pay it off when I can.

Speaker 1 What's her plan? Yeah,

Speaker 3 what worries me is: okay,

Speaker 3 she's a physician and um

Speaker 2 she

Speaker 3 got a job, a consultant job, where she only works four days a week. And she works out of the four days a week, she works like four hours a day or five hours a day.

Speaker 2 Okay, so can we cut to it, dude?

Speaker 2 Like, um

Speaker 2 You feel over water because you don't respect the woman that you thought you were going to marry.

Speaker 3 she's not who you thought she was going to marry i just feel concerned that she isn't um

Speaker 2 he's taking it as serious as it is okay so get beneath that she's not who you thought she was

Speaker 2 and you made a huge step by inviting her to move across the country into your home

Speaker 2 and

Speaker 2 on a day-to-day basis living this thing out you realize she's not who i thought she was when it comes to work ethic when it comes to when it comes to work

Speaker 3 work ethic, especially, yes.

Speaker 2 But also, what does that mean?

Speaker 2 That means that she doesn't have a full picture of the state of emergency that she's in because she owes a half a million dollars and she just wants to get married and just pretend like, ah, we'll be fine.

Speaker 2 You won't be fine. You have a half a million dollars in a non-dischargeable loan, right?

Speaker 3 She keeps telling me that, you know, she knows other people, other

Speaker 3 physicians that have just as much debt and they're able to live their life.

Speaker 2 I know, but as a guy who sat with physicians who are on the brink of losing everything, and if you look at the suicide rates and you look at the mental health challenges, I don't give a crap.

Speaker 2 That's like saying, that's like going to a cancer ward and being like, yeah, but look, everyone else is sick. I still don't want to have cancer.
I don't want to be sick.

Speaker 2 And so it doesn't matter. That's just, that's a weird way to anesthetize the pain of reality, which is she owes a half a million dollars, but she's not on the phone.
We can't help her. I can help you.

Speaker 2 And I think you have to be honest

Speaker 2 about,

Speaker 2 I don't know that I respect this woman anymore. And I'm not going to judge you right, wrong, or indifferent.
You get to respect who you want to respect, but that plays into,

Speaker 2 can I love this person? What happens when we have a kid and she just decides fill in the blank? Everyone else does X, Y, and Z for a kid. What happens when it comes to the kid's car?

Speaker 2 We can't afford this car. Everyone else is giving their kid a BM'd up, right? That might be the rest of your life.

Speaker 2 And I think you're wise to listen to your innate alarm systems that, like, whoa, something's not whole here. But what's not fair for her is you're not being honest with her.

Speaker 2 You're trying to be annoyed that she keeps hitting you up to get married, get married, get married, and you're not sitting down saying, I don't know if I can marry you because we're so far from being aligned on

Speaker 2 things like integrity, character, respect,

Speaker 2 my fear of owing other people money, etc. Do you get what I'm saying?

Speaker 3 Yeah, well, I've brought it up to her, and she keeps telling me that she's working on it and she's, you know, like

Speaker 3 possibly looking to get a different job.

Speaker 1 What does she make now?

Speaker 3 About the same, like $150.

Speaker 1 And what do you make?

Speaker 3 About $150.

Speaker 1 And do you have any debt?

Speaker 3 I do not.

Speaker 1 Do you own your place or do you rent?

Speaker 3 I rent.

Speaker 2 Okay.

Speaker 1 So as part of this, that you worked so hard to avoid debt, to create this life for yourself, to build this work ethic, and now you're tethered to someone who doesn't align in that way?

Speaker 1 Yes.

Speaker 2 Have you said, I don't want to have a household where other people decide what we do every day? I want to be free.

Speaker 3 I've told her that I don't feel comfortable with the debt.

Speaker 2 Okay.

Speaker 2 And she has said, I don't care what you think. When are you going to marry me?

Speaker 3 Well, not verbally, but she keeps on telling me that,

Speaker 3 you know, like there are other physicians in her field that owe just as much or even more.

Speaker 1 She's going to spend her whole life comparing hers to others. That is a red flag in and of itself that I think you need to address with her.

Speaker 1 Everything so far has been, well, her friends are all getting married and her physician friends all have debt.

Speaker 2 And she's not even a physician, so that doesn't even hold.

Speaker 2 But here's the thing. Either, good man.

Speaker 2 Either make the choice in your mind. I'm not going to leave her.
We're going to get married.

Speaker 2 And the two of us making $300,000 a year are going to spend the next 24 to 36 months paying off this debt like crazy. Or we're going to have a harder conversation about values.

Speaker 2 And we may have to part ways because our values are so deeply unaligned.

Speaker 2 But what you're doing right now is you're playing ping pong in your own mind and you're making yourself bananas and you are worth having a peaceful life.

Speaker 2 So have the hard, real, honest conversation underneath it all. Talk about values and then you have to have your or what statement.

Speaker 1 What are you going to do if she says, I'm not doing that?

Speaker 2 That's your call, brother.

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Speaker 1 Welcome back to the Ramsey Show. I'm George Campbell here with Dr.
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Let's get to the phones.

Speaker 1 Alec is in West Palm Beach. What's up, Alec?

Speaker 3 Hey there. How are you doing?

Speaker 1 Good. How are you?

Speaker 3 Good. I'm doing good.
Me and my wife are here. We're just calling because we have,

Speaker 3 we're only, my wife's 23. I'm 24.
We moved down to just

Speaker 3 north of West Palm Beach. We moved here six months ago and we're currently renting.
Our rent's about $2,500 a month for just a standard, you know, three-bed, two-bath.

Speaker 3 We have a two-and-a-half-year-old daughter. And

Speaker 3 what our question is, is, you know,

Speaker 3 we really want to buy a house. And

Speaker 3 the housing market's so crazy down here in Florida, you know, so it's

Speaker 3 hard to afford a house, just even a basic house like what we have right now

Speaker 3 on my income because I'm just a carpenter. I make about, you know, $40,000 to $60,000 a year, depending on how it goes.

Speaker 3 And, you know, I'm basically, and my wife's a stay-at-home mom but right now she's going to school so then she can in about nine months she'll be working too

Speaker 3 but um

Speaker 3 basically it's like I'm just basically just getting by you know making ends meet get paying the bills and then you know just whatever we have left over is what we have and a few hundred bucks you know at the end of the day and

Speaker 3 but on the other side of things we my wife she got she she was in a pretty serious

Speaker 3 court

Speaker 3 trial thing for about eight years and she finally won it and she got she got about a half a million dollars from it wow and we have it invested we have it invested right now with the financial advisor because we didn't want to squander it you know it's a good steward we want to be good stewards of our money that the lord blessed us with and uh it's trying to do things the right way you know and But right now we found a house that's $50,000 under the under any comp.

Speaker 3 It's a 3-2, 1,500 square feet, you know, nice, nice, beautiful curve appeal. And, you know, it needs a little bit of updating on the inside.

Speaker 3 It was a one-owner house, and the people passed away, you know, grandma and grandpa type of thing. And

Speaker 2 how much does it cost?

Speaker 3 Me and my wife are looking. What'd you say?

Speaker 1 What's the cost?

Speaker 3 It's $3.14.

Speaker 1 Okay. So you have the money in cash from this court settlement?

Speaker 3 Yeah, and we have 516 right now in the account. We have 80,000 liquid.

Speaker 3 And

Speaker 3 we can pull out the 315 by the time closing ends.

Speaker 3 We have the house under contract right now. However, I keep hearing from like my dad,

Speaker 3 my dad keeps telling us to pay cash for the house, like pay cash, pay it off, don't take out a loan.

Speaker 3 But then like our financial advisor who's doing the investing for us and a few other people are like, well, why don't you just take out a loan and then you don't got flexibility.

Speaker 2 So do you know why?

Speaker 1 Because your financial advisor gets a pay cut if you cash out of that portfolio. Do you understand why they would be a little more likely and biased to get you to want to keep that money invested?

Speaker 1 Not saying they're a bad person. That's just the reality of what's going on here.

Speaker 2 I'll go one step further. You need to get a new financial advisor because that's an advisor that's not looking out for you.

Speaker 2 I can't think of a better thing I would want for my son or my mom and my dad.

Speaker 2 And so both sides of my question than a paid-for house that nobody can take from them.

Speaker 3 Yeah, we're going to be the first ones in our family since our grandparents

Speaker 3 have a home that we own.

Speaker 2 And that makes me want to.

Speaker 2 I want to hug your dad.

Speaker 3 The only reason why they own it is because they paid the 30 years of mortgage and they just lived through it. That's the only reason why they own their house.

Speaker 2 I want to hug your father because he gave you the right advice. Son, don't ever owe anybody money.

Speaker 2 He's probably spent his whole life having to make payments on stuff, and he sees an opportunity for his son to be free.

Speaker 2 And I'm not even playing, dude.

Speaker 2 My Smart Vestor Pro, when I had money in in a high-yield savings account, I had money

Speaker 2 with him. And he said, hey, take this and go pay off your house because I have a financial advisor who is invested in me doing what's best for me and my family, not for making himself rich.

Speaker 2 I'd get a new guy. I'd go to Ramsey Solutions, Smart Investor Pro, go check that out and get with somebody else, man, because this guy's looking out for him, number one, you number two.

Speaker 3 Yeah, because, well, he's saying like, oh, you, you know, he's like, oh, you'll make about, you know, 15 to 20% on your 500,000. Well,

Speaker 3 but we're looking at it like,

Speaker 2 what's he investing in cocaine? What's he

Speaker 2 making 20%?

Speaker 1 Any advisor saying you're going to get 15 to 20% in this account is lying to your face. No good advisor.
Every advisor would be like, hey, here's been the historical return.

Speaker 1 We don't know what the future holds. Not you're going to make 20% if you just leave it.

Speaker 2 That gives me hemorrhoids on your behalf, Alec. Pull it out.
Pull it out. All right.
Thanks. Yeah, go buy your house.

Speaker 3 I'm looking at it like go buy your house.

Speaker 3 Yeah, that's what we want to do. And I'm glad you guys are all about it, too, because

Speaker 3 we're looking at it like

Speaker 3 if we pay cash for the house with all our total bills at the end of the day, if we pay cash, you know, insurance, or not, we're not going to have to get insurance because we won't have a loan.

Speaker 2 I know, but you live in Florida. You should get insurance.

Speaker 1 You need insurance. That's a non-negotiable.

Speaker 2 Put that in the budget, dude.

Speaker 2 Can I do some math for you?

Speaker 3 That's about $1,000 a month. And then the loan would be $2,000 a month.
And then it, you know, and then we're just looking at like, it just keeps adding on if you take out any kind of loan, right?

Speaker 3 But if we don't take out a loan, our bills would be about $800 a month, you know?

Speaker 2 Yes. And then you can start putting money into retirement savings.
You can be insanely generous to that exhausted waitress that's bringing y'all dinner when y'all went late that one night.

Speaker 2 It changes how you do everything.

Speaker 3 Exactly. That's how we're looking at it.
I'm glad you guys were saying that

Speaker 2 because

Speaker 3 I was just, you know,

Speaker 3 you try to pray and try to get as much information from God as you can, but sometimes you just got to kind of make the leap.

Speaker 2 And

Speaker 3 I think this is our golden opportunity because we're still going to have about $200,000 left over.

Speaker 3 And if we put $5,000 into the property, it's done. We don't need to, like, it's just little things.
Like, you know, take the carpet out, paint the walls.

Speaker 2 Oh, yeah.

Speaker 1 So let me give you some solace here that you're doing the right thing. You are very young.
You said you're 23 and 24.

Speaker 1 Yeah. You'll still have 200,000 invested.
Let's say you just took half of what you're paying in rent, $1,250 a month, right?

Speaker 1 And you put that in an investment account now that you're completely debt-free with tons of margin, right?

Speaker 1 Yeah. From 23 to 63, if you just did that, you would likely have $18 million in that one account.

Speaker 1 If you never added, just $1,250 a month, even if you get a raise, just keep doing $1,250, $18 million from 23 to 63. And that's a 10% return on average.
So I just want to give you some solace.

Speaker 1 You have plenty of time to build wealth. You're not 68 going, should I rob my entire nest egg to pay cash for a home?

Speaker 1 So, this situation gives me a lot of peace that you are now freeing up your income for the rest of your life.

Speaker 1 And you're not desperate for that next job. You can do the work you love, and you don't need to go make six figures.
You can be a.

Speaker 1 And when you said, here's what bothered me, Alec: you said, I'm just a carpenter, just a lowly carpenter. Like, I need to knock the Eeyore spirit out of you.

Speaker 2 Yeah, Jesus was one of those two, dude. You're in good company.

Speaker 3 Hey, thanks, guys. You do good work.

Speaker 3 I try to follow his footsteps the best I can and help people out and stuff. And, you know, it's just tough living in Florida, man.
Prices are so high, and we're looking at it.

Speaker 2 Guess what?

Speaker 1 You can move one day to wherever you want.

Speaker 2 Yeah, you don't have to live there either. It's been fun.
Y'all are young, and it's been cool living by the beach.

Speaker 2 And now maybe you move, take that $500,000 and get yourself a four-bedroom, three-bath house that you don't have to to move from when you start having kids.

Speaker 2 And it's going to cost you $300,000 in another state somewhere. But y'all can do whatever you want to because you don't have a house payment.

Speaker 1 Go build a table for your new house, man. You've earned it.

Speaker 2 And get a new financial advisor, Ramsey Solutions Smart Vestor Pros. Go check them out.

Speaker 2 You know, one of the first things I discovered working in the financial world is how absolutely devastating it is when the breadwinner of a family dies and there's too little life insurance or none at all.

Speaker 2 Grieving Grieving families are suddenly left behind scrambling to pay bills and trying to make ends meet.

Speaker 2 I also discovered that there are a lot of rip-offs in the life insurance world like that whole life crap posing as an investment opportunity.

Speaker 2 What you need is level term life insurance, usually 10 to 12 times your income, which is the smartest, most affordable way to protect your family.

Speaker 2 The key is finding an independent broker who represents a ton of companies and works for you, not for the insurance company.

Speaker 2 This is exactly what my friend Jeff Zander and his team at Xander Insurance are all about. They shop the term life companies to find you the best options and they've been around for over 95 years.

Speaker 2 So you know they'll be there when you need them. Xander is the real deal and that's why they've handled all my personal insurance for over 25 years.
I trust them and you can too.

Speaker 2 Visit zander.com for instant online quotes or for a more personal touch. Give them a call at 800-356-4282.

Speaker 1 Let's play a game. Raise your hand if you've already filed your tax return.
Ready? Go.

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Speaker 1 That's Ramseysolutions.com slash Smart Tax.

Speaker 1 Welcome back to the Ramsey Show. Open phones at 888-825-5225.
The Ramsey Show question of the day is brought to you by YReFi.

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Speaker 2 All right, today's question comes from Travis in Utah. Travis writes, I'm about to purchase a new home and have well over 50% saved for my down payment.

Speaker 2 Should I use all of it for the down payment or keep a portion out to add to my retirement investing? I can afford to put less down and still make the monthly payments.

Speaker 1 Hoy, yo, yoi. Well, the answer is easy.
I'll tell you what I would do and what I did, which is put as much down as possible.

Speaker 1 And we put down, John, I believe for our first townhome when my wife and I were married, we put down

Speaker 1 45%. So close to what he's doing.
No regrets.

Speaker 1 What ended up happening was we paid off the mortgage way sooner within a few years because we had a smaller mortgage with a much more affordable, with a much lower payment, which means we had margin to throw at the principal.

Speaker 1 So, by doing that, we ended up freeing up our mortgage payment way sooner, and we had the ability to invest that payment at a very young age.

Speaker 1 So, I would encourage Travis to do the same and not see it as one thing or another. Should I put this in the equity of the home or in the stock market?

Speaker 1 I see this as a hedge going, hey, if I can get rid of this mortgage faster, it's going to allow me to invest more for the long term.

Speaker 2 And the only question I would have for Travis is a huge temptation I had, especially getting going, and that is, I look at all of the money I have saved, including my emergency fund,

Speaker 2 including anything in a high-yield savings account that might be for college. It's not in a 529, and money for a house.
And so it's so easy to look at a $300,000 house.

Speaker 2 And between all those accounts, I have $150,000 saved. I'm going to put all that in there.
So my only hesitation would be this is 50% saved for down payment above. You still keep your emergency fund.

Speaker 2 You still got cash there. You still go ahead and

Speaker 2 put cash aside for how much it's going to cost to move because you're going to hire movers to come over and help you do all that kind of stuff.

Speaker 2 Save a little money to get your electricity turned on because some people want a month's advance. Like all those things add up.
Furniture. Furniture.
Like whatever those things are. Closing costs.

Speaker 2 And then put everything else on there, right? And so go ahead and go into that with your eyes wide open.

Speaker 1 Yeah. Homeownership is more expensive than you think.
And so having a lower payment, all that does is give you more margin to cover it without breaking a sweat.

Speaker 1 You just kind of yawn and move on instead of, oh my gosh, we were already at the limit with this mortgage payment. Now we have to replace the HVAC.
You don't need that in your life.

Speaker 1 There's no need to. You have the money.
You've done so well.

Speaker 1 And my guess is he's young enough that he's going to have plenty of time to build wealth, have compound growth on his side, and invest that 15%.

Speaker 1 And then once the house is paid off, invest even more, 20, 30%, 40%, 50% of your income if you want. So great question, though.
I would put down as much as possible.

Speaker 1 As Dave says, the best plan is the 100% down plan, but he knows that will get him lambasted in today's culture. People are going, Dave, you know how much a house is in today's.
Yes, he does. He does.

Speaker 1 He's just saying it's the best plan is to avoid debt. But if you're going to do it, 15-year fixed-rate mortgage, make sure that payment is no more than a quarter of your take-home pay.

Speaker 1 All right, CJ's up next in New Orleans. What's going on, CJ?

Speaker 3 Hey, guys. Thanks for having me.

Speaker 3 So I'm just wondering, what can I do to break the cycle of getting out of debt and into debt?

Speaker 3 As someone who's kind of young, but has a pretty high income and kind of comes in waves and cycles, and I can't get out of the habit.

Speaker 1 How much do you make?

Speaker 3 So last year I came out pre-tax, about $2.55.

Speaker 2 Wow. How old are you?

Speaker 3 29.

Speaker 1 Goodness, that is mind-blowing.

Speaker 2 What do you do?

Speaker 3 I'm a commercial wholesale insurance broker.

Speaker 1 And you're really good at it, apparently.

Speaker 2 I'm pretty decent, yeah.

Speaker 1 How much debt do you have?

Speaker 3 So I have about $330 in a home, $46

Speaker 3 in a car,

Speaker 3 and 35

Speaker 3 student loans, and 6 in

Speaker 1 markets. And what? What was the last one?

Speaker 3 Still six in cards, like credit cards.

Speaker 2 Oh, in credit card debt.

Speaker 1 Okay, cool. So tell me how a guy making $2.55 is still looking to lenders when he has the Bank of CJ available.

Speaker 1 Like what caused you to turn to debt? Because you have the income. I mean, you're making what, $1,500, $16,000 a month take-home pay?

Speaker 3 Well, my base, well, last year my base was only about $90,000, and then the bulk of that was

Speaker 3 biannual

Speaker 1 commission.

Speaker 3 Bonuses that I got, yeah. Okay.

Speaker 2 So what do you do with those when they come in?

Speaker 3 Part of it, I usually set back about to 50% of my expenses coming for like bills and everything for the next six months. I put that aside so that half of my actual paycheck is going towards bills.

Speaker 3 And then the other half is coming from what I set aside. And then the other part of my paycheck, I kind of just

Speaker 3 end it.

Speaker 1 So what would you say if you were going to list the top three things this money's disappearing into, what would you list them as?

Speaker 3 Food and going out.

Speaker 1 So you're living life as a 29-year-old going out to eat all the time.

Speaker 1 Is there pressure, outside pressure from friends, or is it just, nah, I want to get takeout again? Another Uber Eats.

Speaker 2 Who cares? Yeah, let's do it.

Speaker 3 All the above, especially Uber Eats.

Speaker 1 Okay. And you've been doing all of this on a credit card?

Speaker 3 Not all of it. It's kind of just jumped.
You know, if I have to have the cash, I'll use the cash. But, you know, if I'm in a crunch, I'm like, well, the cards are right here.

Speaker 1 So can I tell you what I did that really helped me? I cut up the cards and I closed the accounts and I froze my credit.

Speaker 1 Right. And if you do those, here's what's going to happen.
You're going to stop borrowing money. It will freeze you.
You're not going to be able to open up new lines of credit.

Speaker 1 And so right now we have to stop the bleeding. That's step number one.
You asked me how to get out of the cycle.

Speaker 1 You got to just stop the behavior that's getting you into the cycle and keeping you there. Because the truth is, you got less than $100,000 in consumer debt.
You make $255,000.

Speaker 1 I'm guessing you have some money in savings.

Speaker 3 um a little how much

Speaker 3 uh since we're at the end of the six-month period of me having bills and everything split maybe closer to like five or six five or six thousand

Speaker 1 yes okay so once you have a thousand dollar starter emergency fund i would use the rest of the savings and knock out these credit cards and call it done and close the accounts sayonara that leaves you with a car loan and the student loan if you want to keep the car your income can support it because is this your only vehicle only thing with wheels and motors just my truck.

Speaker 2 Okay.

Speaker 1 It's a nice truck. You make amazing money.
So I'm not going to tell you you have to sell it.

Speaker 1 But if you're really going, hey, I want to burn the ships and restart, you could sell that thing if it's just too much car for you.

Speaker 1 But that, I mean, you're going to get out of this thing if you just go, I'm going to get on a budget. I'm bringing in 15 grand on average.

Speaker 1 When I get these big bonuses that come in, I'm going to throw all of it at the debt. What if you just told yourself, I'm not going to even see this money?

Speaker 1 It goes to the account and it goes to the lender.

Speaker 1 Could you do that?

Speaker 3 Maybe.

Speaker 1 Maybe is what gets us in debt again. The absolutely, that's where you need that level of fire.

Speaker 2 Let me ask you this, why did you call, CJ? There's something in your guts. Why did you call?

Speaker 2 The stress of it. It's it's kind of,

Speaker 3 you know, because it's every six months, you know, right before I get the windfall of the bonus. I'm, you know, as I get closest to that, that, to February, it's like, oh, wow, I'm

Speaker 3 crashing by. Let's wait to the end of February, get that.

Speaker 2 All right, can I ask

Speaker 2 you? This is a personal question. This is a personal question.
Did you grow up with money?

Speaker 2 No.

Speaker 2 When you say no, do you mean y'all, was money a big struggle for you?

Speaker 3 Yeah, it was a single wide trailer

Speaker 2 in the middle of nowhere.

Speaker 2 So let me.

Speaker 2 I didn't grow up in a single wide. We grew up in a small house in a suburb in North Houston, right? So I did not have that level, but I just remember money was so tight.

Speaker 2 It was such an anxious thing all the time.

Speaker 2 And the story that I told myself was, when I make a certain dollar amount, everything will be okay, including how I feel about myself.

Speaker 2 And what you're finding is the Uber Eats, the not budgeting, you don't want, you make a ton of money and you don't want the quote-unquote hassle of having to think through it all.

Speaker 2 And I get that sentiment. That's the story you've been telling yourself your whole life.
And what I want to tell you is, bro, I want you to have peace and I want you to have freedom.

Speaker 2 That's what we're solving for here, not another Uber Eats night. Hang on the line.
We're going to send you Financial Peace, University, and Every Dollar Premium to get you going.

Speaker 2 You make way too much money to be this stress. And we're going to set you free if you'll just follow through.
Brother, thank you so much for the call.

Speaker 2 Are you sick and tired of being sick and tired? You can take control of your money and your relationships. And it starts with just one night.
Join me and Dr.

Speaker 2 John Deloney live in a city near you on the Money and Relationships Tour. We're covering the real life stuff that matters so you can break the cycles that have left you stuck.

Speaker 2 It's coming up fast, so get your tickets for Louisville, Durham, Atlanta, Phoenix, Fort Worth, or Kansas City at ramseysolutions.com/slash tour today.

Speaker 1 Welcome back to the Ramsey Show. I'm George Camille, joined by Dr.
John Deloney. Hey, are you staying on track with the baby steps? Well, we made a way for you to find out.

Speaker 1 You can take a quick quiz to check your progress and receive a personalized plan just for you.

Speaker 1 Simply head to the show notes on this episode, click on the link titled, Are You on Track with the Baby Steps? and complete the quiz.

Speaker 1 Timothy is up next in Oklahoma City. What's going on, Timothy?

Speaker 3 How are y'all?

Speaker 2 Doing well.

Speaker 1 How can we help today?

Speaker 3 So me and my wife have been married for a year now. We're on baby step two.
We're tackling her student loans.

Speaker 3 And then about three years ago, I bought a house from my aunt and uncle, and they were in some tax problems. They couldn't sign the house over to me.

Speaker 2 Oh, no.

Speaker 3 I know.

Speaker 3 But so we've got two years left until they can sign the house over to me, deed it over to to me, and I will right now, currently, I still owe them $60,000. And I'm just curious if

Speaker 3 I should sock that money away after I'm done paying student loans off and then just keep it in a bank. And then that way, two years from now, I can just, you know, deal's done.

Speaker 3 I don't have to take a mortgage out. Or should I go into investing after we pay off the student loans?

Speaker 2 Oh, boy.

Speaker 1 I'm still stuck on the fact that you didn't buy a house. You thought you bought a house.
What was the legal process for you to buy a house that couldn't even go into your name?

Speaker 2 Well, it's a handshake agreement?

Speaker 3 Yeah, pretty much.

Speaker 1 Oh, my God. Is there anything in writing?

Speaker 3 Yeah,

Speaker 3 we did write something out that we all signed.

Speaker 1 This whole thing just worries me.

Speaker 2 What if they don't get out of this mess?

Speaker 1 And you've been paying on a property that you have no claim to.

Speaker 3 So the way I justify it to myself is...

Speaker 2 Hey, can I just say right now? Hold on. Before you even speak.
Really low rent. Good for you.
High five to you for saying it like that. The story I'm telling myself is this.
So

Speaker 2 at least we're operating in reality. Good on you.
Okay, so what were you saying?

Speaker 1 So just know that there might be a scenario where you go, hey, at least we had cheap rent. Well, we stayed here, but it's not.

Speaker 3 And that's what I'll have to tell myself if something bad happens.

Speaker 2 All right. Hey,

Speaker 2 your glasses are not rose colored, so fair enough. So in two years, you make the last payment and you own this thing outright?

Speaker 3 No, so in two years, so they had to to go to court with the IRS. The IRS said, fine, we're going to forgive everything.
You cannot make any extra money for five years.

Speaker 3 So three years, and this was three years ago. So they had this house.
I said, okay, well, I need a house.

Speaker 3 We came, we agreed on a price, and I gave them some money down, and then I pay them a monthly payment.

Speaker 3 And at that five-year mark, the agreement is either I'll take out a mortgage to finish paying what I owe, or I'll have the money, or whatever it takes. And then they can deed it over to me.

Speaker 1 I thought they couldn't get extra money. Isn't this down payment and you paying them rent considered extra money? Breaking the law.

Speaker 2 Breaking the law. Cash money.

Speaker 1 Oh, under the table. Sure.
Oh, that makes it. George.
Okay. Hey, it's just a national radio show.
What do I know? Okay.

Speaker 1 So what is your question, Timothy?

Speaker 3 If I should sock what I owe them away into a savings account so when the day comes that they can deed the house to me, I can just pay them off or

Speaker 3 should I be investing and then take out a mortgage?

Speaker 2 Wait, you're talking about not paying them anymore?

Speaker 3 No, I would still make the monthly payment, but just put extra away every month.

Speaker 1 But you still, how much do you have left on the student loans? When are you guys going to be completely debt-free?

Speaker 3 About seven months.

Speaker 1 And then how much longer to get a fully funded emergency fund?

Speaker 3 That would take about

Speaker 3 another three to four months.

Speaker 1 Okay, so let's call it a year. One year from now, you guys are completely debt-free with an emergency fund.
That puts us in baby step four when we can begin investing.

Speaker 1 I would begin investing 15% while making rent. Any money beyond that, you can sock away to try to lower the loan that you'll have when you do take this house over.

Speaker 1 Okay. But I would just take a small loan out.
You guys are going to knock it out quick.

Speaker 1 And so I'm not concerned about that, but I wouldn't hang on to the student loans and pile up money to make this transaction happen.

Speaker 3 Okay. I could have all of the money in about 25 months.
That includes student loans and the house all in 25 months.

Speaker 1 So you're saying you could get out of debt, get the emergency fund, and save up to 60K by the time this transaction is ready?

Speaker 3 I think so, yeah. We save about 5,000.
Well, we pay about $5,000 a month now towards student loans.

Speaker 2 Okay.

Speaker 1 Well, once you free up the payment, that'll help even more. So I like this plan.

Speaker 1 I would have a goal to go, hey, by the time they're ready to make this deal happen, we have the money to buy it from them.

Speaker 1 Are you buying it at a deal or is this market value based on all the rent you pay?

Speaker 3 So we agreed at $105,000. I had a realtor out a few months ago, and they put it at $248.

Speaker 1 Is what it's actually worth. And the money you put in with the rent down payment plus the $60 will be $105.

Speaker 3 Yes, sir.

Speaker 2 Okay, so two things here. I have to say this.

Speaker 2 I think you may be complicit in tax fraud. So I have to just say don't do that.
But you're doing it anyway. I just feel compelled to tell you.

Speaker 2 If this whole ship goes down or the government finds out they've been making side money on this deal and they take the house, you're going to be in a mess.

Speaker 2 Or if they know anyway so that's number one number two i hear a secondary question should you just let them continue to be your bank after this god no

Speaker 2 the second they can take

Speaker 2 the second you can i would take out a mortgage and end this relationship the business relationship with my aunt and uncle

Speaker 2 and then deal with a bank because it's already so sketched and right again i don't want to talk bad about people who aren't in the room, right?

Speaker 2 But you've got a couple who was so bad off, they had to enter into an agreement with, they're so bad with their finances that they had to enter into an agreement with the U.S.

Speaker 2 government, and the government said you can't make any extra money. And then they're doing something shady under the table with their nephew.

Speaker 1 And letting go of their house for less than half of market value.

Speaker 2 The best predictor of future behavior is past behavior. And so I've got a couple here who's not good with money, who kind of does things under under the table.

Speaker 2 If they don't sit down the month before you clear this and say, hey, the house is worth $240 now, we're going to up the cost of this thing, I would be stunned.

Speaker 2 I have no problem being wrong, but my goodness, man, you are dancing with the devil. And

Speaker 2 I would want to end that as soon as possible. Let them go back to being aunt and uncle as soon as humanly possible.

Speaker 1 That's, yeah, this whole situation gives me the heebie-jeebies. Oh, yeah.
Let's see if we can help Sarah out real quick. Sarah, get right to the question.
We're up against the clock.

Speaker 3 Yes. So thank you for taking my call.

Speaker 7 I have been an FPU coach for the last few years, and my sister opened up to me about her financial struggles. Last year, I've been helping her work through the baby steps.

Speaker 7 She's paid about 10K off now and has fifty still to go. But today, she was served with papers, being sued by one of the banks for not paying off her balance.
So I assume nothing really has changed.

Speaker 7 We're still going to have to negotiate with with them, settle eventually, but wanted to get y'all's advice before I pass it along to her.

Speaker 1 So was she behind on payments for a significant amount of time?

Speaker 2 What happened?

Speaker 7 Yeah, so by the time she came to me, she had already stopped paying her minimum payments. So we assumed that one was going to go to collections.

Speaker 7 And we figured we would settle with the collections company. And then that's where she,

Speaker 7 you know, we didn't have at the time the wiggle room in her budget to pay the minimum payment that they wanted her to.

Speaker 7 So now that's where they're coming to her and requesting that full sum again.

Speaker 1 How much is it?

Speaker 7 About $22,000.

Speaker 2 Whew.

Speaker 1 What kind of debt?

Speaker 3 Credit card.

Speaker 1 All credit cards. Okay.
And is this all one credit card with one lender?

Speaker 7 The $22,000 is one credit card, one lender. She does have a debt consolidation loan, and then she has two other credit cards.

Speaker 1 And is she able to stay current on all of her other debts? Is the only one in collections?

Speaker 7 She has three that have gone to collections, including that one, the credit card.

Speaker 2 Okay.

Speaker 1 I would put these collections at the top of the list to deal with. I honestly doubt they're going to negotiate with you since they're such fresh debts.

Speaker 1 They may not take, you know, pennies on the dollar for this. You can help her by just being a support for her, but she's going to have to fight this thing.

Speaker 1 and fight the behavior that got her into this mess.

Speaker 2 Yeah. So if you can avoid

Speaker 1 going through court and try to find some kind of settlement agreement, a payment plan, whatever it may be, I would go that route to avoid this escalating.

Speaker 1 But there's nothing much else you can do if it's already, if they already have a judgment against her.

Speaker 7 Right. Does she need to lawyer up at this point or can she settle that herself?

Speaker 2 My guess is they just they're sending a threatening letter basically. If it's the first one she's got, unless she's been served papers, they're just sending her.

Speaker 1 Yeah, I don't know that it's worth hiring a lawyer to deal with this because she owes the money. And if they have proof of that, she's going to owe the money.

Speaker 1 There's not really a way around this to where she's going to get out scot-free.

Speaker 2 If she's got the cash, she can settle it. But short of that, then it's begging for a payment.

Speaker 1 Stack up as much cash as she can and see if they'll take it. This is the Ramsey Show.