Debt Is a Trap That Will Hold You Back From Building Wealth

Speaker 1 Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual, amazing relationships.

Speaker 1 number one best-selling author Rachel Cruz Ramsey personality co-host of the smart money happy hour is my co-host today my daughter open phones at triple eight eight two five two two five carol is with us Carol is in New York City hi Carol welcome to the Ramsey Show

Speaker 2 Hello, thank you so much for taking my call. It's a thrill to talk to y'all.

Speaker 1 You too. What's up?

Speaker 2 I

Speaker 2 have a husband who's retired within the next 12 months, and we'd like to finish paying off the mortgage on the house.

Speaker 1 Good.

Speaker 2 Yes, but per your advice. And our financial advisor is advising us not to because the mortgage is at under 3%,

Speaker 2 and our investments are doing well above that. However, that doesn't matter to us.
We want to plow ahead and get this done.

Speaker 2 And our next question to him is, how can we best divest of our investments and pull the money out, make the cash available to do this.

Speaker 2 And his next tier of advice is to pull from our bonds that are earning at tax-free rates, as opposed to pulling from our mutual funds that we'll have to pay capital gains taxes on.

Speaker 2 What do you suggest we do?

Speaker 1 You probably got no gain on your bonds. Their probably value is down, even though the coupon rate stayed the same.

Speaker 1 as interest rates rise, bond values go down. And so my guess is that you bought them during a lower interest rate environment, so they're probably not even worth what you paid for them today.

Speaker 1 Is that right?

Speaker 2 I'm not sure. That's a good question.

Speaker 1 I don't think you're going to have any gain to amount to anything. So, I like his advice on that basis.

Speaker 1 Okay. And what is your total nest egg?

Speaker 3 $4 million.

Speaker 1 Okay. And how much is the mortgage?

Speaker 2 $800,000.

Speaker 1 Okay. Good.
Good. And you guys are how old?

Speaker 3 69 and 67.

Speaker 1 Cool. And how much have you got in these bonds?

Speaker 2 That I don't know.

Speaker 1 That's a good question.

Speaker 1 Is about 800 is enough to do this?

Speaker 2 I think so, yes.

Speaker 1 Yes.

Speaker 2 By the way, he was talking about it. I was not that specific with him.
Okay.

Speaker 5 Is he the one that puts you guys in the ponds, Carol, to begin with? Or was that something that you had? Yes.

Speaker 2 Nope.

Speaker 3 We've been with him for our entire working career.

Speaker 1 Oh, okay.

Speaker 1 Okay. Yes, I agree with his advice on that.
I would use the bonds first to answer your question.

Speaker 1 Okay. Okay.
This guy,

Speaker 1 you need to be aware of a couple things here with this guy.

Speaker 1 I'm not quite ready to fire him, but I'm close.

Speaker 1 Right. Okay.
I hear you. Number one, because

Speaker 1 his job is not to

Speaker 1 take his glasses on the end of his nose and speak down to you, little people, who have $4 million,

Speaker 1 and you shouldn't be paying off your mortgage. Listen to the wise financial advisor because bullcrap.
His job is to say, okay, what are your goals and how can I help you accomplish them?

Speaker 2 Yes.

Speaker 1 So I don't like his approach to this, and it's very typical in the financial advising world, this level of arrogance.

Speaker 1 It's just below the,

Speaker 1 it's not overt arrogance, but it's a sub, a subversive arrogance.

Speaker 5 But this advice is very prominent amongst the people.

Speaker 1 Yeah, it's a standard.

Speaker 1 That's the second problem I've got with him:

Speaker 1 he did two very standard things in the financial world that I completely disagree with. One is he told you not to pay off your mortgage, and the second is he put you in bonds.

Speaker 2 Right.

Speaker 1 And so these bonds,

Speaker 1 you have a fourth of your money tied up in something that's substantially underperforming because of this guy. Right.

Speaker 2 Gotcha. Okay.

Speaker 1 And that's these bonds. So I'm, um,

Speaker 1 and because here's the thing. Again, the simple thing to remember about bonds is this.
In the financial advising world,

Speaker 1 we have been taught, and everyone for some reason decided to agree with it rather than actually making their own decisions.

Speaker 1 But the people like me and him that are trained in this stuff, we've been taught that as you get older, we use what's called the asset allocation methodology or theory,

Speaker 1 and that as you get older, you should be in less and less and less risk. And so that by the time you're age, you should largely be in bonds and money markets and have very little in equities.
Okay.

Speaker 1 The problem is that everybody just accepted this as if it's a fact. It's not a fact.
It's a theory. It's an idea.

Speaker 1 And I disagree with it. I'm 64.
I have zero in bonds and almost the same amount in money markets.

Speaker 1 I got a little bit in money markets just because I like some cash, but I'm not sitting in the, I haven't moved everything away from equities because as you get older, you should limit risk because that's horse crap.

Speaker 1 If I live to 94 and I'm 64 and I've been in

Speaker 1 an entrance, an instrument making 8% instead of an instrument making 12 or 14, the amount of money I've lost during that 30 years is millions.

Speaker 1 So it's bad advice, this asset allocation methodology. It's bad advice.
And so he puts you in these bonds. The second thing you need to know about bonds is that

Speaker 1 they are not legitimately safer than stocks or mutual funds, okay?

Speaker 1 Because when you track the volatility of bond values versus the volatility of

Speaker 1 mutual fund stock values, they're very similar. It's not safer.

Speaker 1 It's really not. And the reason is the third thing, thing, and then I'll let you go, okay? Is this thing? I love it.
But I mean, it's teaching for everybody out there.

Speaker 5 It's good. It's good.
It's everybody out there.

Speaker 1 Thank you. Bonds, the thing you remember about bonds is there's a set interest rate on the bond.

Speaker 1 So when interest rates rise

Speaker 1 in order to achieve that same,

Speaker 1 a higher, let's say you got a 4% rate and interest rates are 7%.

Speaker 1 And so people are expecting seven, but your bond is only paying four.

Speaker 1 So the value of your bond goes down

Speaker 1 as interest rates rise. It goes up as interest rates fall.
Bond prices are exactly inverse to the prevailing interest rate market. So

Speaker 1 in a record low in the last 100 years, we had

Speaker 1 an unprecedented 3%

Speaker 1 interest rate environment for a decade, right?

Speaker 1 And in the middle of the lowest interest rate environment in known history, this guy puts you in bonds.

Speaker 1 And where's it going to go from the lowest in interest rate environment in history? Up. As interest rates go up, your bond values go down.

Speaker 1 And so I'm afraid you may have actually lost money on these bonds when you get into them. But I'm hoping you at least broke even.
That's what I'm hoping.

Speaker 1 So interest rates, folks, bond prices, the value of a bond goes down as interest rates rise. So you never would buy bonds in a rising interest rate environment.

Speaker 1 You would buy them in a falling interest rate environment if you were going to buy bonds at all.

Speaker 1 And that's because of the yield on the bond

Speaker 1 has to approximate the prevailing rate, and yet the coupon rate is fixed. Yeah.

Speaker 5 And I think one of the most important things we've learned with the financial advisor is exactly what you said at the top of this is that here are my goals.

Speaker 5 And if they're not respecting or hearing that,

Speaker 5 they're going to do the inverse of that, right?

Speaker 1 Where else have I got to figure out that you're giving me bad numbers? That's right. You know, yeah.

Speaker 1 So I'm not ready to fire this guy, but I really dislike bonds for him, from him, and I dislike his mortgage advice.

Speaker 1 And I dislike that he's kind of telling you what to do instead of asking you what you want to do. This is the Ramsey Show.

Speaker 1 So I remember

Speaker 1 year you were born, Rachel. I was standing in line

Speaker 1 at Croaker

Speaker 1 in at the corner of Bell Road and Murphysborough Road over there in Priest Lake, where we used to live back in the day. Those of you in the Nashville market will know that intersection.

Speaker 1 I think that Kroger is probably gone now.

Speaker 1 It was 30-plus years ago, right? So, um,

Speaker 1 and I'm standing in line and I'm buying

Speaker 1 basic basic groceries, not

Speaker 1 with your mom and a baby or two in tow.

Speaker 1 And

Speaker 1 we weren't really spending like a ton of money and we weren't buying anything frivolous. It was just meat and potatoes just to feed the family, right? We were broke.

Speaker 1 And I remember as I'm back in those days, you would write a check, not use your debit card.

Speaker 1 And as I'm writing the check, I'm wondering if by buying these groceries, if there's going to be enough money money left in the account to pay the electricity bill.

Speaker 1 And I didn't know, but I bought the groceries anyway, of course. And then just kind of on a hope and a prayer, get home and everything works out and I can pay the light bill, right?

Speaker 1 The reason I remember that specific experience is I think it's the last time that ever happened.

Speaker 1 Because I started doing right after that,

Speaker 1 Sharon and I, your mom and I started doing a written budget before the month begins, and we knew we had a certain amount of money to spend on groceries, and that by spending that money, we weren't worried

Speaker 1 about everything else because we knew it fit in the overall, because that was a line item, and the electricity was a line item, so we knew we didn't spend the electricity money on groceries or vice versa.

Speaker 1 We didn't worry because it was all laid out. We had a plan.

Speaker 1 And the amount of peace that we got having the month laid out, as long as we stayed within those guidelines, we we knew it was the whole thing was going to work

Speaker 1 instead of going from anxiety to anxiety to anxiety every time you're paying a bill there's a freak out a question always in the back of is this okay am i okay is this is this okay and even later on when we uh started having some money buying something a luxurious item is this okay

Speaker 1 And you've got to go, well, is it okay? And does it fit in this written out plan where every dollar has been giving an assignment.

Speaker 1 Folks, if you want to have that change of experience in your life where you go from when I'm doing something as basic as grocery shopping and that being anxiety, an anxiety event, going from that to peace,

Speaker 1 the only step that does that is a written plan, a detailed plan, and that's called a budget. Before the month begins, you're giving every dollar an assignment.

Speaker 1 You and your spouse agree to it, and then you stick to it. And that way, the electricity gets paid and

Speaker 1 the groceries get bought and the kids can have shoes and no one died. Yeah.
You know?

Speaker 1 It's just like, it's a thing.

Speaker 1 Most people, though, have that experience standing in the grocery line. Crap, I don't know when I finish this if we're okay.

Speaker 5 Oh, yeah.

Speaker 5 Well, and there's a thought too that a lot of people have that think, okay, if I know and I plan out and I do a budget and I see a number in a specific line item like groceries, then I can't just go and spend whatever I want.

Speaker 5 And that doesn't, that, that, I hear the opposite too, of like, oh, that's just, that sounds so constricting and like, oh, it's, that sounds so controlling. And I don't know if I want that.

Speaker 5 And then you start to realize there is an underlying level of anxiety, whether you address it or not, when you still have a question mark in your head of thinking, okay, as I'm taking stuff and putting it in my cart and I'm going to check out and I see that total, the feeling of, oh, I thought that was going to be restrictive when I know, oh, this is how much I have to spend each week, it actually becomes such freedom where you actually enjoy and have a level of peace with it.

Speaker 5 So

Speaker 5 on both ends, right? The level of anxiety of do we have enough?

Speaker 5 But then also people are saying, oh my God, I don't want to live on a budget because that just means I can't have any fun and that feels so restrictive.

Speaker 5 Well, you don't realize on that end, too, there's a level of anxiety because you don't know what's going on.

Speaker 1 You're creating anxiety with that immature look on life. That's right.
Because it's immature to go, I can just spend like I'm in Congress. Yeah.

Speaker 1 I mean, that's just a, that's a childish view because obviously we all know we can't do that.

Speaker 1 It's not, I mean, grown-ups know the money runs out somewhere. And so, you know, and,

Speaker 1 you know, even like we had to go so far as we went to, we went hardcore more than we recommend today on the envelope system. Like we had envelopes for everything,

Speaker 1 like envelope for groceries and envelope for restaurants and your mother would not buy herself clothing because she's a classic southern bell martyr

Speaker 1 and she's like well I'll just be scarlet o'hara I'll make something out of the drapes and the kids can have new clothes and it's like no that's not necessary we have the money to everything so what would happen is we would have clothing budget and she would spend it all on the kids wouldn't buy herself anything so I had to finally separate in the budget in the early days Sharon's clothes was a separate category, and she was not allowed to spend that on anything but Sharon's clothes.

Speaker 1 Amazing what that did

Speaker 1 to give her guilt-free spending. Yes.
It is such permission that, okay, we're okay. We can do this.
Not only permission, it became like a command. You have to buy yourself something.

Speaker 1 I mean, it's not, you know, I mean, really, because it's out of control.

Speaker 1 It just got weird. It got weird.
Right, right, right, right, right, right. So the thing, you know, and so we had envelopes for everything.

Speaker 1 And the first time we had a babysitter at home with you and Denise, and we're going out to dinner, one of the rare times we got to do that, as we're starting our climb out of being broke, and we got

Speaker 1 halfway to the stinking restaurant, 10 minutes away, and realized we did not have our restaurant envelope.

Speaker 1 Now we had.

Speaker 1 The car repair envelope,

Speaker 1 and most people would just go on and use the car repair money and when you get back home switch the money out. I probably would have done that.
Yeah.

Speaker 1 I would do that today probably. But we were so intent on something has to change.
We have to stick to something for the first time in our lives.

Speaker 1 We cannot keep doing the same stupid crap and expect to be anything but broke. We turned around, went back home and got the food envelope.
I specifically remember doing that. That's impressive, yeah.

Speaker 1 Blew the babysitter's mind because these people come back home 10 minutes after they left. Oh, God.
You know.

Speaker 1 So, but, or I guess her boyfriend probably ran out the back door. I don't know, whatever.
But, you know, the right. But anyway, I mean, so we got the.

Speaker 1 I'm kidding. I'm sure Angie wouldn't have done that.
But

Speaker 1 you remember Angie? Yeah. But anyway, she was a great babysitter.
But the

Speaker 1 anyway, the yeah, so this idea that I can,

Speaker 1 with my spouse, write down what we're going to do, and I have guilt-free

Speaker 1 permission to spend on a category because our plan is accomplished, and it includes this spending item. Yes.
Yep. That is so freaking powerful.

Speaker 1 People, it changes everything.

Speaker 1 And John Maxwell used to say, a budget is people telling their money what to do instead of wondering where it went.

Speaker 1 So download the Every Dollar app

Speaker 1 and start budgeting. It's free.
You can do that in the App Store or Google Play. It's a very simple plan and it has all kinds of extra paycheck planning.

Speaker 1 You can plan out not only the month ahead of time, you can plan out each paycheck ahead of time.

Speaker 5 Yeah, the premium version is so worth it, you all, because

Speaker 5 you connect it to your bank account. So your transactions drop in.
So you drag and drop them.

Speaker 5 So, you know, some people still use the cash envelope system, but most people, this is like the 2024, 2025 way of doing that.

Speaker 1 Version of it. Yeah.
Yeah. And you don't have to go back home.

Speaker 5 But you're sitting there and watching it and you're able to drag and drop these transactions to know per category what's left.

Speaker 5 And to your point, all the other features, the paycheck planning, because some people, you know, if you are paycheck to paycheck cycle, it is so difficult to break that because you're using that paycheck to funds your life up to the 15th.

Speaker 5 And if too much is getting taken out at the beginning of the month, you're going to be bouncing checks more. I mean, it just, it gets, it gets really complicated.

Speaker 5 So the paycheck planning helps even within that to get on a great cycle when it comes to your paychecks and to stay on top of it. It's so helpful.

Speaker 1 Guys, you got to start doing this. It changes everything.

Speaker 1 You'll breathe different. Your shoulders are dropped.
The tension will leave. Download the Every Dollar app.
It's free in the App Store or Google Play and get yourself started, boys and girls.

Speaker 1 This is the Ramsey Show.

Speaker 1 Rachel Cruz Ramsey personality is my co-host. If you didn't know, we have the Ramsey Network app.
It is a free download, and you can get the third segment, the third hour of this show

Speaker 1 every day only on the Ramsey Network app and many other things, including you can email us and ask us questions.

Speaker 1 You can enter a subject and it will search among the calls on that subject and present them to you.

Speaker 1 So you don't have to like... filter through 22 days of stuff to find the answer you're looking for.
The Ramsey Network app, You can download it for free. There is no subscription upgrade.

Speaker 1 No salesman will call. From the Ramsey Network app, we get our question from Corey.
Dave, you recently took a call where the person had 35 credit cards.

Speaker 1 How do the banks even allow someone to get that many cards?

Speaker 5 Actually, a good question, Corey.

Speaker 1 Corey, that's sweet that you are naive enough to think that the banks even think.

Speaker 1 That's sweet, that you would think common sense would enter enter into this transaction. That's so sweet, Corey.

Speaker 1 No, it doesn't.

Speaker 1 And, you know, this is the same kind of mentality, Corey, that you've got that people say, well, I must be able to handle the payment or they wouldn't have given it to me. No, they'll give it to you.

Speaker 1 The same.

Speaker 1 Whatever the payment is. They'll approve you for the loan way beyond.

Speaker 5 18-year-old, $200,000 in loans for college.

Speaker 1 Sure, sure. Right?

Speaker 5 They just

Speaker 1 like. I'll hand it to you.
So, Corey, the most aggressively

Speaker 1 here's an interesting fact. Let's just take it even a step back further.
We now, at this moment, in 2024,

Speaker 1 in America, the United States, live in the most marketed to,

Speaker 1 sold to

Speaker 1 culture in the history of the world,

Speaker 1 in the history of the human race,

Speaker 1 you will receive

Speaker 1 more marketing impressions on your ears and eyes and brain in this coming calendar year than any set of humans ever has in history.

Speaker 1 That's pretty interesting when you think about it. And when you are sold that much stuff, people buy that much stuff.

Speaker 1 And among the most marketed to group of people in the history of the human race, the most aggressively marketed product

Speaker 1 in the most aggressively marketed time in history is debt.

Speaker 1 Debt is a product. They sell it.
They sell home equity loans.

Speaker 1 They sell student loans. They sell car loans.
They sell private loans. They sell title loans.
they sell

Speaker 1 any kind of home loans,

Speaker 1 any kind of loan you can dream of.

Speaker 1 Put a word in front of the word loan, and it happens. Dog loans, cat loans.
There are loans for everything.

Speaker 1 I was trying to buy a t-shirt for God's sakes, and they offered me payments on it with Klarna the other day. I'm like, it's a t-shirt.

Speaker 1 Why would you, you know, three easy payments of $1.26. I mean, come on.

Speaker 1 You know, it's like, what?

Speaker 1 On a $5 t-shirt. I'm kidding.
I don't remember that. No, I know.
Probably wasn't the number.

Speaker 5 10 easy payments. It's at the end of every transaction.

Speaker 1 20 easy payments of $1.26. No, I got it.
Whatever it is.

Speaker 1 And they're always easy payments. No one says hard payments, right? Yeah.
And yet when you make them, they're always hard. They're not easy.
So, and among the most aggressively marketed debt products,

Speaker 1 the most aggressively marketed debt product, debt being the most aggressively marketed product in the most aggressively marketed to group of people in the history of the human race, is credit cards, Corey.

Speaker 1 American Distress,

Speaker 1 Visa,

Speaker 1 Master card,

Speaker 1 they're your new master,

Speaker 1 and Discover Bondage

Speaker 1 together spend those four names, spend more, American Express. I said that one, yeah, American Distress.

Speaker 1 Together, they will spend a billion dollars on marketing. It's more than beer.
It's more than Chevy pickup trucks going through mud puddles.

Speaker 1 More than all your car advertising put together. More than

Speaker 1 any

Speaker 1 other category of advertising. What's in your wallet,

Speaker 1 says the failed actor.

Speaker 1 The actor who can't get a part now.

Speaker 1 What's in your wallet?

Speaker 5 Or the great actress because they're paying billions or millions of dollars to her, too.

Speaker 1 So because they have it. Got to admit, I'm a Jennifer fan.

Speaker 5 There was a

Speaker 1 Jennifer Gardner.

Speaker 5 She's actually great.

Speaker 1 But Maverick, her dad, would not be proud of her saying.

Speaker 5 I know, and I'm trying to look up because it was sent to me by multiple people, and now I can't find it.

Speaker 1 So anyway, the credit card is the most aggressively marketed product out there.

Speaker 1 And so in the midst of that, they are issuing credit cards en masse to people who can't pay them, don't need them, including dead people,

Speaker 1 dogs.

Speaker 1 We used to collect bizarre credit card stories. I remember that.
And I had a guy send me one from Virginia.

Speaker 1 He, as a joke, which was fraudulent and he shouldn't have done this, but as a joke, he applied for a credit card in the name of Buck Naked. Okay.
They issued the card to Buck. Buck got him a card.

Speaker 1 Another guy sent me from New Orleans a credit card,

Speaker 1 an actual card. He sent me the card and a letter.
It was

Speaker 1 issued to Frufrou,

Speaker 1 who was his poodle, who had died.

Speaker 1 And that was unsolicited.

Speaker 1 I picked it up off the AKC registration and meant to send it to the owner of the dog. Instead, issued the card en masse to the dogs.
Literally, it's gone to the dogs.

Speaker 1 And so,

Speaker 1 I mean, this is the credit card world. So, please, God, don't think you're special if somebody gave you a credit card.
I mean, when I was in college, I thought, well,

Speaker 1 if I can get an American Express, then by God, I'm successful. And if I get a gold piece of plastic versus a silver piece of plastic, then I'm really someone because of the color of my plastic.

Speaker 5 And you get to pay more fees to get those goods.

Speaker 1 The color of my plastic dictates the quality of my personal identity.

Speaker 1 So, Corey, that's what you're dealing with. Yeah.

Speaker 1 Yeah,

Speaker 1 we've had people with 200 credit cards.

Speaker 1 There are people that

Speaker 1 believe that credit cards are excellent, and they have their own YouTube channel and all this stuff on how you can live off of the points and how you can be the card man or whatever and all this stuff, right?

Speaker 1 Yeah. So

Speaker 1 it's a thing because it's so prevalent that any moron can get more credit cards than they can pay.

Speaker 1 So that's how, Corey, because you know, you're making the sweet and naive assumption that the bank actually cares about you and would look at you and say, you can't afford this, so we're not going to do harm to you.

Speaker 1 No, they don't, that none of that is true.

Speaker 1 They will do harm to you in a heartbeat if they have the opportunity.

Speaker 5 And just to remember that

Speaker 5 they're here to make money off of you and they know how to do it. Like that's their job.
That's their job. And there was a recent clip.
It went crazy, but the one you were just trying to find.

Speaker 5 Yes, and I found it. The president of, or whoever it was, of MasterCard and Visa, it was the two, they have 80% of the market share, and they're in front of Congress

Speaker 1 because of antitrust.

Speaker 5 Yeah, well, and they can't, they won't lower fees for small businesses like they give deals to big corporations like Walmart, and they have to verbalize and say what they're making, their profit margin.

Speaker 5 It makes you sick. It makes you realize, literally, off the backs of Americans, this is what they're making.

Speaker 5 Like it is, they make, and we know we, I know, we know that they make billions and billions and billions. But as you sit there and watch these two people, you're like, oh my God.

Speaker 5 And they're not even, you know, from any level of integrity trying to help small businesses, even though we're against credit cards. But like, even that, right?

Speaker 5 I mean, everything is about making money. It's all they're in it for.
And so they know how to do it really well.

Speaker 5 And they market it to you and bring you into this cycle and this mindset of it that is very

Speaker 1 crazy. So just remember: if you're issued a new credit card, you're no better than Frufu or Buck.

Speaker 5 Moral of the story: look up the Congress clip, the dead poodle

Speaker 1 or the naked guy that doesn't exist.

Speaker 1 there you go one of the two i mean you're no better than either

Speaker 1 this is the ramsey show

Speaker 1 rachel cruise ramsey personality number one best-selling author my daughter is my co-host today open phones at triple eight eight two five five two two five jake in savannah georgia hi jake how are you

Speaker 6 Good. How about yourself?

Speaker 1 Better than I deserve. What's up?

Speaker 6 I was just calling

Speaker 6 regarding how I can stay focused on getting out of debt and not incurring more.

Speaker 5 Okay, how much debt do you guys have? Or do you have?

Speaker 6 I have about 20,000, and my fiancé has about 20,000.

Speaker 1 Okay.

Speaker 1 Why are you getting out of debt?

Speaker 6 I just want a better life, and we have a kid on the way, and I'm tired of living paycheck to paycheck.

Speaker 6 Okay.

Speaker 1 So

Speaker 1 the thing that we find is that the bigger and more pure

Speaker 1 the reason for getting out of debt,

Speaker 1 the why, why I'm getting out of debt, the more intense and sacrificial and disciplined you will be.

Speaker 1 It sounds like you have a really good why,

Speaker 1 and if you came to truly believe deep down in your soul that the only way

Speaker 1 you're going to become wealthy and provide an incredible life experience for your brand new bride and baby

Speaker 1 is to get out of debt, then the discipline starts to become easy. It's almost as if I said, if you don't pay off $20,000 in two years,

Speaker 1 Your child will not be alive.

Speaker 1 If you said that, you would find 20,000 bucks. Now, I'm not, obviously, that's crazy.
That's not going to happen, right?

Speaker 1 But I'm saying, you know, if you had to buy

Speaker 1 a thing to keep your child alive and you needed $20,000 to buy that thing and you only were allowed to pay cash, you'd find $20,000. Agreed?

Speaker 1 Yes, sir. Because your why would be so huge.
Your reason.

Speaker 1 Discipline wouldn't even come. I'm having trouble being disciplined to save the life of my child.
No, that would not be something that would come out of your mouth.

Speaker 1 And so the more deeply you understand and believe that by getting this $40,000 paid off between the two of you and the two of you getting married and creating a double income and creating a situation where you dive in and stay out of debt and build wealth, the more you believe that that is the path for your family to have an incredible next 50 years,

Speaker 1 the more disciplined you'll be.

Speaker 1 But if you just kind of go, well, being out of debt, it'd be kind of nice.

Speaker 1 And I think we'd probably be better off, but it'd be kind of nice. Well, that's like a three on a scale of one to ten, and I'm talking about a ten.

Speaker 1 You see the difference?

Speaker 6 Yeah, I do.

Speaker 5 Do you feel that, Jake? Where do you feel like you are on the scale?

Speaker 6 I feel like I'm definitely on the high end of the scale, probably a seven or an eight.

Speaker 1 How about your fiancé?

Speaker 6 Her situation's a little different. She doesn't see eye to eye with me on the getting out of debt thing.

Speaker 5 Okay, have you guys talked about that?

Speaker 6 We have, and I've kind of tried to explain to her, like, hey, us getting out of debt means less payments. It means more money to take towards our kid and ourselves and our life together.

Speaker 6 And she,

Speaker 6 her side of the coin is she's like, well,

Speaker 6 she has the mentality of, well, you can't have the nice car unless you have a payment.

Speaker 6 And you can't have the nice house unless you have a payment.

Speaker 1 You ought to see my house and my car.

Speaker 2 Yeah.

Speaker 1 It's just better than what she dreamed of and no payments.

Speaker 6 Yeah, and I tried to explain that to her.

Speaker 6 I'm fighting to fix my own debt as much as I can and we do basically everything together.

Speaker 1 Yeah, you're going to have trouble, Jake. You're going to have trouble being disciplined

Speaker 1 as long as the other side of your brain called your wife is tearing you down.

Speaker 1 So the two of you getting aligned on this is Jeral's biggest issue.

Speaker 1 You cannot singularly carry this household on your back to wealth while she simultaneously isn't in agreement.

Speaker 1 You guys have got to get on the same page.

Speaker 1 It's a problem in your marriage going forward.

Speaker 5 It's one of the top, it's always in the top five lists, sometimes the top three, sometimes it's number one, depending on which list you look at of reasons for fights and disagreement in marriage.

Speaker 5 It's a really big topic. So I would.
And I would talk to her, too, about, you know, the why behind it for you.

Speaker 5 And even on a deeper emotional level, too, Jake, not just, oh, yeah, so we don't have payments and we can build wealth, but there's a level of a value system at which you look at life that needs to be so aligned together to enjoy your marriage and your life together.

Speaker 1 Crystal's in Tampa. Hi, Crystal.
Welcome to the Ramsey Show.

Speaker 2 Hey, Dave and Rachel, thank you so much for taking my call.

Speaker 1 Sure. What's up?

Speaker 2 Okay, so I've been listening to you guys for about six weeks, really diving in. I actually look forward to the

Speaker 2 show every day, like at 2 o'clock.

Speaker 1 So

Speaker 2 I've been talking to my husband about all the things and kind of keeping him in the loop. I'm the main one that does the finances, and it's been that way for years.
But

Speaker 2 we're on baby step two, and so I have our snowball list. We don't have like a lot of line items.
It's just a big amount, unfortunately, in total. But

Speaker 2 obviously listening to y'all's advice, and I know it's going to take some time and and a lot of hard work, but

Speaker 2 my main question is,

Speaker 2 I have not taken into account the $5,000 worth of medical bills that we have sadly racked up.

Speaker 2 And so

Speaker 2 with my list, my snowball list, how do I incorporate or incorporate the payments?

Speaker 2 for the medical bills with like my loans and my credit card that we are currently working on or do I keep how did you prioritize your snowball list you listed it how

Speaker 2 smallest to largest so we're

Speaker 1 keeping out the small

Speaker 1 balance that we have or payment balance correct sorry balance so you have balances on the medical bills right

Speaker 2 I do have balances on them yes just redo your list

Speaker 2 okay so that's that's what I was curious on should I just yep because there's multiple lists of or multiple different bills of medical should I just add them into that list so then it'd be one single list okay no and um you know and and the problem the bad thing about the medical bills and the good thing about the medical bills some of them are tiny like you got a $78 from diagnostic just because you drove near a hospital Yes.

Speaker 1 Right? You know what I'm talking about? Yeah. We don't even know what the flip that is, but they sent us a $78 bill for it.
And it's like you got all these little mosquitoes flying around.

Speaker 1 They're not even big bills. They're just bothersome.
And so

Speaker 1 that's the bad news. The good news is you're going to plow through like one through number 10 really fast.

Speaker 1 And you're going to get this sense of, I just did something.

Speaker 2 Feels good. It does feel good.
I've paid off most of the little ones.

Speaker 1 Of the medical. The bigger ones that.

Speaker 1 Yeah. Yeah.

Speaker 2 Most of the little ones. So it's the bigger ones that.

Speaker 1 What's your smallest medical bill right now?

Speaker 2 Probably

Speaker 2 $190 right now.

Speaker 1 Still small. Smallest one.
Still very small. Yeah, it's still small, for sure.

Speaker 5 How much total, Crystal, is your debt snowball? I'm just curious what your journey is, how much you're paying off.

Speaker 2 So

Speaker 2 right now, without the medical bills, because currently it's a separate list, I've got about $80,000.

Speaker 1 So $85,000.

Speaker 1 Exactly.

Speaker 1 And your household income is what?

Speaker 2 So I think we make really good money.

Speaker 3 We've about $230 a year.

Speaker 1 Oh, great. You're going to be doing it in a year.

Speaker 2 I know. We've just made a lot of, what is it, you say, mistakes with zeros on the end.

Speaker 1 We've made a lot of those. Yeah, you paid a lot of stupid tax.
Yeah. But I mean,

Speaker 1 if you live on 100 grand, you're debt-free in a year, right?

Speaker 7 Yeah, that's the goal.

Speaker 1 That's pretty cool. That's the goal, and my husband is all on board.
Good, good. Well, yeah, the more he's involved, the more helpful he is.
I don't want him writing checks because you're the nerd.

Speaker 1 You're the good one to write the checks. But I do want him emotionally standing there, not just saying, honey, you're doing a good job.
I want him saying, honey, we got this.

Speaker 1 He is. He is.
Absolutely. Yes, I agree.
Thank you. I appreciate it.
That's good.

Speaker 1 I'm proud of you. Way to go, Crystal.

Speaker 2 Oh, thank you.

Speaker 1 Thank you so much.

Speaker 1 Very exciting. That's very well done.
Man, she's going to knock this out so fast. Yes.

Speaker 1 It's so fun when you have been going along and you don't know what to do and you suddenly discover fire.

Speaker 5 And you do it and you're like, oh,

Speaker 1 this is going to be done in a year. Look at that.
That's fire. That's awesome.

Speaker 1 I can cook stuff with that. Yeah.

Speaker 1 It's knowledge is powerful. It really, really is.
Very cool.

Speaker 1 That puts us hour of the Ramsey Show in the books.

Speaker 1 Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual, amazing... relationships.

Speaker 1 I'm Dave Ramsey, your host, Rachel Cruz, Ramsey Personality, number one best-selling author, is my co-host.

Speaker 1 You jump in. We'll talk about your life and your money.
The phone number is 888-825-5225. Sarah is in Boston.
Hi, Sarah. How are you?

Speaker 3 Good. It's so nice to talk to you, Dave and Rachel.

Speaker 1 Well, good to talk with you. How can we help?

Speaker 3 Yeah, my dream is to achieve financial freedom and continue to build wealth, but I feel like my spending habits are getting in the way of that.

Speaker 3 A little bit of background: I'm 25, I'm making over $150,000 a year.

Speaker 1 Good for you.

Speaker 3 Yeah, I have no debt. I'm putting myself through school, but I find myself spending unnecessarily on things I don't need.

Speaker 3 And I'm just wondering if I can get some advice on how to rein in my spending and

Speaker 3 start building wealth and achieve my financial freedom goal that I'm shooting for.

Speaker 1 What do you do, and what are you studying?

Speaker 3 I am studying engineering, and I am in pretty much an entry-level engineering position.

Speaker 3 And I love what I do. I'm able to work from home and I have a lot of great benefits, but

Speaker 3 I feel like there's more that can be done.

Speaker 5 So what are you wanting? Yeah,

Speaker 5 when you say there's more, because I mean, you're putting yourself through school debt-free, correct? You have no other debt. So is it investing you're looking at?

Speaker 5 Is it just your spending habits that you feel like you're making a lot, but there's not a lot to show at the end of the month?

Speaker 5 What's your biggest pain point?

Speaker 3 Yeah, I feel like i um

Speaker 2 have

Speaker 3 i don't have boundaries when it comes to spending i feel like i could be using my money um for better things like investing for for the long term but i find myself spending a lot of time online shopping or going out um and i don't have a lot at the end of each month to to put in my investment accounts like i'd like to okay are you on a specific budget like a pretty detailed budget

Speaker 3 um

Speaker 3 Not really. I just kind of spend

Speaker 1 on the account.

Speaker 5 I mean, honestly, for you, Sarah,

Speaker 5 that and an investing goal are the two things that will, I think, completely change your life. I mean, if you have it, if you have a budget, because you're doing well financially, right?

Speaker 5 You're not going deep into debt. You're not trying to, you know, pay off debt.

Speaker 5 You really are able to use the cash that is coming in from your income and you're going to be able to spend some.

Speaker 5 I mean, you're at this point that you will be able to enjoy some of it, but you're not able to really enjoy it because you're questioning every purchase.

Speaker 5 And so being able to put a line item and deciding a dollar amount ahead of time to say, okay, yeah, I can go shopping, but I'm just going to put this amount.

Speaker 5 And that automatically is going to give you a guardrail to enjoy it. And still, you know, because you're at the point again, I will reiterate, you don't have debt.
You have a great income.

Speaker 5 So you can enjoy part of it, but you want to do it with some level of control and purpose.

Speaker 5 And then knowing on the other end that you do have an investment goal, and I would tell you 15% of your income should be going into retirement.

Speaker 5 And knowing you're doing that as well is going to to give you a lot of peace and freedom.

Speaker 5 But that monthly budget, I think, is going to be a really great tool for you to help because I'm the same way. I'm a spender.
I enjoy spending, shopping, all the things. And

Speaker 5 I do it now with such more peace, knowing, okay, yeah, there's a specific dollar amount per month that I have the ability to spend, and I'm going to cut it off after that.

Speaker 5 And so that takes a level of discipline, but it also allows you to enjoy life and enjoy your money so much more.

Speaker 1 So, as an engineer, you're learning or have learned to project plan

Speaker 1 what Covey used to say, beginning with the end in mind.

Speaker 1 And with your money, what's happening is you're getting to the end with no plan and it's not satisfying because it didn't go where you wanted it to go.

Speaker 1 And so it'd be like building a bridge and making it up as you go. Well, you don't do that.
We lay out a plan.

Speaker 1 We do drawings.

Speaker 1 We run the math to make sure the structure will hold. And then we build the bridge.
We don't just kind of start moving dirt and hope it all works out.

Speaker 1 And that's kind of what you're doing with your money. So, let me ask you this.
Let me see if I'm getting this picture correct, okay?

Speaker 1 You're 25, you're single, you're in Boston, and you work from home, and you go to school, correct?

Speaker 1 Yes, is school online?

Speaker 2 Yes,

Speaker 1 so your work is online, and your school is online, and you said, I spend money shopping online and I go out, which would make you, thank God, a normal human being, because otherwise you're trapped at home online, and instead you actually go out for human connection.

Speaker 1 Good.

Speaker 1 Okay?

Speaker 1 So you should allocate some money.

Speaker 1 Yeah, you should allocate some money for what's called a social life. Yes.

Speaker 1 Because otherwise, your brain is going to melt. Okay? That's good.
Humans are, it's not good that man or woman be alone. We should be out seeing other humans.
Okay. So I want you to do that.

Speaker 1 Now, the problem is

Speaker 1 you need

Speaker 1 a,

Speaker 1 I'm going to recommend a non-internet

Speaker 1 hobby to be done on downtime, an analog downtime. Because your downtime now is Instagram, Facebook, and Amazon Prime.

Speaker 1 And there is a direct,

Speaker 1 there's research out there that says the more time you spend on social media, the more money you spend.

Speaker 1 Because social media is the world's worst Joneses next door.

Speaker 1 You see everyone else's highlight reel and they splash suggested products, mix it into your Instagram feed, mix it into your Facebook page, and whatever else you're consuming. TikTok is even worse.

Speaker 1 And so

Speaker 1 instead of when I've got 10 minutes, I'm going to doom scroll. Your spending is always going to be there if you do that.
Just unplug from, take, do a social media fast

Speaker 1 and say, I'm only going to do social media 30 minutes a day between 5 p.m. and 5.30.

Speaker 1 That's all.

Speaker 1 Or 5 and 5.15 would be okay with me. All right.
That's all. And your spending will go down.

Speaker 1 And you cannot go on Amazon ever again unless it is to specifically purchase a certain thing that you thought of as a part of your budget.

Speaker 1 You cannot go on there and scroll

Speaker 1 because Amazon is the world's best marketer. They will sell you crap.

Speaker 1 You following me?

Speaker 1 Does this sound right?

Speaker 3 No, this definitely sounds right.

Speaker 7 I definitely need a hobby outside of the screen.

Speaker 1 Yeah, you know, because it had to be with the way you're living your life because your life is in front of the screen and you go, okay, I got 10 minutes. I'm going to take a little breath.

Speaker 1 I'm going to, I'm going to, I'm going to have some brain junk food and I'm going to doom scroll for a minute just because my brain's hurting from class.

Speaker 1 Right? That would be, that's what I would do. And I'm 64.
I'm not susceptible to it like you 25-year-olds because you grew up with this crap. I didn't, but I still, I have to watch myself.

Speaker 1 If I get bored, I end up buying something if I'm not careful

Speaker 1 that sound familiar

Speaker 1 yeah that's definitely me okay and um i am putting money away for retirement i'm just wondering but you start with the i want you to go to amazon where should i put it yeah give every dollar an assignment before the month begins on your budget on your every dollar budget put your every dollar budget down and have and you cannot go to amazon unless it's to buy something you budgeted for and the other money to save she asked besides just retirement you know open up a high yield savings and have a savings goal to say, yeah, I need a fully funded emergency fund of six months.

Speaker 5 And beyond that, have things you're saving up for to at least have the motivation to put that money away.

Speaker 1 And do spend some money on social engagement. You need it.
It's good for you. This is the Ramsey Show.

Speaker 1 Rachel Cruz Ramsey Personality is my co-host today. The Ramsey Show question of the day is brought to you by Why ReFi.

Speaker 1 We trust YReFi because they help people who have defaulted private student loans. If you have a defaulted private student loan, they'll refinance it with a low fixed interest rate.

Speaker 1 Couldn't get anywhere else. Chris had a student loan, and he cut his payment by over 40% with YReFi.

Speaker 1 Try it out, yrefi.com slash Ramsey. That's the letter Y R-E-F-Y.com slash Ramsey.
Might not be in all states.

Speaker 5 Today's question comes from Lucy in Nebraska. My husband's daughter and son-in-law want us to get a mortgage on a house for them.

Speaker 5 Our house is paid for and we have no bills, but we're on a fixed income. They want to keep their house they have now and rent it out to pay the mortgage that they want us to get.

Speaker 5 He's a cop and she's a firefighter. We cannot afford a mortgage, but my husband is considering it, and I'm not in agreement with this plan.

Speaker 1 What do I do?

Speaker 5 Man, Lucy. Yeah, I mean, I would agree with you.
I wouldn't be in agreement with this plan either.

Speaker 5 And with you and your husband, yeah, I mean, I think continuing to sit down and understand and unpack why you're not in agreement. And it's not pointing fingers at him saying, well, you, you, you.

Speaker 5 This is talking about you and what, and your desires, your fears, what you are worried about in this.

Speaker 5 And just the simple math of even though, yeah, you said you guys, your house is paid for and you have no bills, but you're on a fixed income.

Speaker 5 I don't know if you're working towards retirement or what that looks like, but realistically running these numbers out,

Speaker 5 even for a decade, right? The next 10 years,

Speaker 5 and what the reality is for your situation. Because I do think some parents,

Speaker 5 the heartstrings get tugged so deeply that sometimes you lose the reality of your situation. And that's maybe what your husband's doing since it's his daughter.

Speaker 5 But I would be looking at not just the emotional side, but also the numbers side with him

Speaker 1 a lot and keeping the conversation going. Sometimes it helps to reframe the proposal

Speaker 1 and use words that explain what this actually is.

Speaker 1 Honey,

Speaker 1 your daughter and son-in-law, who have two good jobs, want us to borrow money so they can have a rental property.

Speaker 1 That's exactly what it is. When you say it that way, it sounds dumber than crap.

Speaker 1 Because it is dumber than crap. That's why it sounds that way.
Instead of like, oh, we're helping them get a home. No, you're not.
They have a home. They want a rental property.

Speaker 1 And they read this in some stupid thing on the internet to go to their retired parents to get a mortgage. Why can't they get a mortgage? They both have a job.
Oh, wait.

Speaker 1 They haven't been paying their bills on time and their credit is bad. Oh, hello.

Speaker 1 Yeah, this is, this just screams stupidity

Speaker 1 really loud, like with a capital S-T-U-P-I-D.

Speaker 1 Say the cheer with me, everyone. Give me an S.
Give me a T. Seriously.
Oh, no, don't do this. Absolutely.
And here's what happens at our house.

Speaker 1 We start

Speaker 1 with trying to reason and talk things through. And when one of us just absolutely is not going to do it, the heat just gets turned up.

Speaker 1 And so

Speaker 1 our rule is

Speaker 1 that if we're both not on board, we can't do it.

Speaker 1 And you're not on board and you're not going to get on board. Please don't get on board.
Please get through the fog of this.

Speaker 5 Yeah, and it's not anything.

Speaker 1 What do his kids need? They sell the house and they get their own mortgage.

Speaker 5 And not only is it not good for you guys, Lucy, but this is a disaster waiting for them. Like this could set them up to fail in a major way too.

Speaker 5 So it's on both ends ends not great, even though he feels like he's helping. It's actually putting them in a pretty dire situation having to float a mortgage through a rental property.

Speaker 5 Not good, not smart.

Speaker 1 Yeah, you're buying them a rental property.

Speaker 1 No,

Speaker 1 absolutely not. Heard this on TikTok.
Deb is in Oklahoma City. Hi, Deb.
How are you?

Speaker 8 Hi, guys. So great to talk to you.

Speaker 1 You too. What's up?

Speaker 3 So, my husband and I are on baby step seven.

Speaker 8 We have just over a million dollars in

Speaker 8 our net worth.

Speaker 8 And we have run into a scenario where we think that we have found our dream house and it would have us go back into

Speaker 8 into debt for it. We would take out a small mortgage to basically we'd sell our house for roughly 450 and then turn around and have a mortgage again for about $250,000.

Speaker 1 You don't have the $250,000?

Speaker 8 No, not all liquid.

Speaker 1 What's liquid mean? All in retirement?

Speaker 9 Not liquid. Not all.
No, I mean, yeah, we have about half a million in retirement.

Speaker 8 We have $45,000 cash and we have a $15,000 emergency fund, and then a little bit

Speaker 8 other money in some investments.

Speaker 3 I believe that's probably about 50 or 60.

Speaker 1 And you don't own any other property?

Speaker 8 No.

Speaker 5 How much do you guys make a year, Deb?

Speaker 8 200 before, and not including his bonus, that is kind of fluctuates every year. So 200 is

Speaker 2 like for sure.

Speaker 1 I mean,

Speaker 1 you can do that. It's not going to bankrupt you.

Speaker 1 Yeah.

Speaker 1 There's no possible way you could get me to go back into debt after I finally got out.

Speaker 1 That doesn't sound like a dream. That sounds like a nightmare to me.
But

Speaker 1 I mean, it's just a stupid house. There's no way I'm going into debt for it.
But,

Speaker 1 I mean, if you want to do that, you can do that.

Speaker 5 But yeah, in a reasonable time, you know, because a mortgage is the one type of debt we do talk about.

Speaker 1 Yeah, but you're out.

Speaker 5 Yeah, but if it's a small amount and you liquidate the 50 from the retirement, the other 45, you know, that's half of it.

Speaker 5 And if you guys commit to say we're gonna pay it off in 24 months or whatever, you know what I mean?

Speaker 1 Like, if there's a if you can do that, it's just save up the money and buy something.

Speaker 3 That's what he thought you were gonna say.

Speaker 1 Well, I mean, you never heard me call up and tell somebody in baby step seven to go back in debt.

Speaker 8 Yeah, no, I mean, no, and I think probably we've we

Speaker 9 deep down, we know that that

Speaker 8 we probably would have buyers' remorse.

Speaker 7 Yeah.

Speaker 1 I, in a way, screw up a little in my mouth, and it's not even my house.

Speaker 1 It's not even my house.

Speaker 1 Oh, gross. It's just gross.
No, I mean, if you want to do it, honey, I'm not going to be mad at you.

Speaker 1 We'll still be friends, but I, I, it, it, no, we do not tell people to go into debt in baby step seven to buy some, to buy a luxury upgrade.

Speaker 1 And if you want to do that, if you want to do that, you're not going to go bankrupt. It's not a sin.
You're not going to hell. We'll still be friends, and you'll just be my friend with a mortgage.

Speaker 1 And you know,

Speaker 1 death,

Speaker 1 you know,

Speaker 1 we have known people that this is like not for a car or anything.

Speaker 1 We don't tell people to do it for real estate in Baby Step 7. I just don't.
I mean, because the goal is to get out so that you don't have to go back.

Speaker 1 And voluntarily going back to jail after I've been set free, I don't want to go.

Speaker 1 I'm free.

Speaker 1 I like my freedom.

Speaker 1 I love my interest rate on my mortgage. Zero.

Speaker 1 So, Deb, I mean,

Speaker 1 I'm poking fun, but the truth is the borrower is slave to the lender. The truth is the fastest way to wealth is to avoid debt, period.

Speaker 1 The truth is there's more peace associated with that. The truth is, you guys have worked so hard to become debt-free that you will have some buyer's remorse.
You will feel

Speaker 1 this regret, this taste on the back of your tongue

Speaker 1 when you go, oh man, I just feel like I feel like I did something wrong because you did. So, I mean, it's not, you know, that's what it's going to feel like.
But is it bankruptable? No.

Speaker 1 Is it going to keep you from building wealth completely? No. It just slows down everything.
And there's the emotional and psychological.

Speaker 5 I think that's the biggest

Speaker 5 wagon. It's less about the math and debt situation.
It is. Cause I'm like reasonably all the things, but that's what we talk about is that personal finance, it is more than just the math.

Speaker 5 It is that element of like, ugh, we're going back in.

Speaker 1 You can buy a house just like that one in 36 months and pay cash for it.

Speaker 1 That's what I would do. This is the Ramsey Show.

Speaker 1 Rachel Cruz, Ramsey Personality, is my co-host today. Open phones at 888-825-5225.

Speaker 1 Jacqueline is in Minneapolis. Hi, Jacqueline.
Welcome to the Ramsey Show.

Speaker 9 Hello, thank you.

Speaker 1 Hey, what's up?

Speaker 2 So I just have a question on, I'm not familiar with the baby steps, first of all.

Speaker 2 We have mounting credit card debt and a mortgage and one loan on a car.

Speaker 2 And I do have some retirement

Speaker 2 para that could be cashed in, but that sounds like a terrible idea. And I just want help.

Speaker 2 and guidance knowing what is the not easiest because i know this isn't going to be easy but the the most efficient way to pay off this credit card debt.

Speaker 5 Yeah, that's a great question, Jacqueline.

Speaker 5 How much debt is it total?

Speaker 2 Credit card, I would guess $55,000 to $65,000.

Speaker 5 Okay. Is that over multiple cards?

Speaker 5 Correct.

Speaker 5 How many would you say?

Speaker 2 Three cards.

Speaker 5 Three cards. Okay.
What other debt is there?

Speaker 1 The car, how much is it?

Speaker 2 Car is $26,000 on my husband's. Mine is paid off.

Speaker 1 What's your household income?

Speaker 2 My husband retired last year.

Speaker 2 I would say

Speaker 2 $120,000.

Speaker 1 Currently, it is $120,000.

Speaker 2 Correct.

Speaker 1 Okay, good, good, okay.

Speaker 1 So what did you spend the credit card money on, do you think?

Speaker 2 My son

Speaker 2 has congenital chronic tumors, and

Speaker 2 we had to pay for those and so we had to put the credit card debt on things for living expenses just because it got too much

Speaker 2 so that it's not like frivolous spending or anything like that but it was you know things we needed how old is he

Speaker 2 my husband or my son or my husband your son

Speaker 2 eight

Speaker 1 How's he doing now?

Speaker 2 It ebbs and flows. He just, he has a lot of surgeries and the state I live in, Blue Cross, Blue Shield, and the Children's Hospital,

Speaker 2 couldn't come to an agreement

Speaker 2 over who got paid what. And so my son was in the hospital, and we were on the hook for the bill while he was in the hospital.

Speaker 1 Have you gotten that straightened out?

Speaker 2 We're working with the Attorney General right now on it.

Speaker 1 Good.

Speaker 1 So you've escalated this. I'm proud of you.
I'm so sorry you guys have been through this. There's nothing scarier than dealing with a child with medical stuff, man.
That's a big deal.

Speaker 1 So basically you had $50,000 to $60,000 of medical bills

Speaker 1 with your son that you paid for.

Speaker 1 and then used the credit cards to buy the things you would have used that money for.

Speaker 1 correct okay all right

Speaker 1 uh and but the prognosis going forward on your son's situation is that hopefully insurance will be picking up whatever he has to deal with going forward right

Speaker 1 correct okay so we've stopped when my husband

Speaker 1 we've stopped the the the the problem

Speaker 1 in terms of the caught that's caused the credit cards

Speaker 5 yes how old how old your husband jacqueline because you said he's retired

Speaker 2 Yes, he's 56.

Speaker 2 And so when he retired, I had to pick up the family health insurance. So I advised him to get a job with my company because if it's a dual spouse,

Speaker 2 if both spouses work for the company that I work for, the insurance is free. And so that saved us about $1,400 a month.

Speaker 1 Oh, wow.

Speaker 2 But obviously, he doesn't he was in law enforcement, so obviously he doesn't really want to be working, but such is life. So I'm happy that he was willing to go back to work.

Speaker 1 Well, if you're driving a $26,000 car, you can't afford. It's kind of one of the things you have to do.

Speaker 1 Right. So exactly.
Yeah, that's good. All right.
So the answer to your question is how do we efficiently get through this?

Speaker 1 And the reason we're asking all these questions is we're trying to figure out if, you know, where the spending came from so that it's stopped because you're going to have to reverse.

Speaker 1 You not only have to stop the trend, but you have to reverse it. Now, so in other words, now we got to find $80,000 to pay off a car and some credit cards, and we make $120,000.

Speaker 1 All right. And so if I take $80,000 and I say I'm going to do $40,000 a year out of $120,000, that means I got to live on $80,000 minus taxes, right?

Speaker 1 So you need to be paying off $3,000 to $4,000 a month in debt, and you'll be debt-free in two years. Now, how do we do that? Well, you're going to sacrifice some other things.

Speaker 1 There's no going out to eat. There's no vacations.

Speaker 1 And we're going to take lifestyle to

Speaker 1 ashes. Nothing.
You get nothing. You've got to be on beans and rice, rice and beans, and both of you got to work every hour you can work and still take care of your baby and

Speaker 1 get this knocked out as fast as possible. And that sounds like $3,000 to $4,000 a month towards this, which gets gets it done in two years.

Speaker 5 And would trim six months out of it too, Jacqueline, as if you guys sold the car and you got a crappy car for a season. Now,

Speaker 2 I have the opportunity to get a different job. I went back to school two years ago and I got a paralegal degree.

Speaker 2 And I want to use that. And so I do have the opportunity in the next four months or so to more than double my income.

Speaker 1 Great. Wow.

Speaker 2 Yeah. So, I mean, that's excellent you know it comes with the sacrifices of you know family time and whatnot so if I do get that job

Speaker 2 it would make most sense to me to live on my current on our current income and put

Speaker 2 the extra money you know the difference in income I would live below your current income

Speaker 2 okay so live below the current income

Speaker 1 live on nothing The faster you pay this off, the faster it goes away, the faster you get your life back.

Speaker 5 And Jacqueline, do you want to be a paralegal paralegal long-term? Like, do you want to do this for the next 10 years? Okay, you do. Okay, just making sure.
Yep.

Speaker 5 I wouldn't do it for a year just to make more money and then feel like you have to go back to your old job, right?

Speaker 5 So, I wanted to make sure that career shift was what you wanted in the first place, too.

Speaker 1 So, a written game plan lists these debts, smallest to largest. It sounds like there are four debts:

Speaker 1 three credit cards and one car.

Speaker 1 So, what is the smallest debt, a credit card? Which one?

Speaker 2 That

Speaker 4 one

Speaker 1 i believe it's twelve thousand dollars okay we're gonna pay minimum payments on everything else and i want you to pay that off in three months

Speaker 1 okay

Speaker 1 and that means no life

Speaker 7 i'm okay with that i just it's for a short period of time

Speaker 2 yeah yeah and stress is gonna you know the stress is causing a whole

Speaker 2 different set of stress. So I'm willing to do whatever it takes to do this.
And I know my husband is on board.

Speaker 2 There are some side jobs that I can also do to pay this off. I just

Speaker 1 well, and you know, here's the thing.

Speaker 5 And are you guys funding retirement too, Jacqueline? Because I would pause that. Yes.
Yep. I would pause retirement.
Temporarily. Yep.
For two years.

Speaker 1 For two years till you get this clear or one year till you get it clear, depending on how big the job is that you get. If you get that big job, you might be done really fast.

Speaker 1 Or both of you pick up some extra income. You might be done really fast.
I don't care. Let's just put it on a schedule where we get it done quickly and knock out the 12.
Then 12's gone.

Speaker 1 You don't have that payment anymore.

Speaker 1 You take that payment that's freed up and everything else we can squeeze out of the budget and we put it on the next one down and the next one down, the next one down.

Speaker 1 So you list your debts, smallest to largest, minimum payments on everything but the little one, and you attack the little one with a vengeance.

Speaker 2 Okay.

Speaker 1 And listen, you are a great

Speaker 1 mom and dad.

Speaker 1 You've done a wonderful wonderful, you took care of your baby.

Speaker 1 And now you're standing up like two grown-up adults and saying, what have I got to do to clean up the mess now that I took care of my baby?

Speaker 1 I love you guys. You're amazing.
We want you to go through Financial Peace University, our class, and I want to put you in the premium version of every dollar, our budgeting app.

Speaker 1 I'm going to pay for all of it. Just to say I'm proud of you.

Speaker 1 And I like having people like you in our audience that are good human beings, that take care of their family and take take responsibility even for messes that are beyond their control way to go you're amazing you got this you can do it

Speaker 1 Rachel Cruz Ramsey personality is my co-host today open phones at triple eight eight two five five two two five Erica is in Philadelphia hi Erica welcome to the Ramsey show

Speaker 1 hi how are you better than I deserve what's up?

Speaker 10 I wanted to get advice on an upside-down car loan that I'm in. I owe $20,864 on it.
It's a 2020 Chevy Malibu. I've been trying to get rid of it for a while now, but they're saying the value is down.

Speaker 10 It now is worth $7,000.

Speaker 10 And I guess I do have a little bit of damages on it, but they were saying, like, basically, the car, it's just so many of the cars and they're being used as rentals that the value of it isn't that great, pretty much.

Speaker 1 Wait a minute. What's a little bit of damage, Erica?

Speaker 1 Well,

Speaker 10 it's just the back cover mirrors are off, and there's like a couple scratches on it, but it's really nothing that bad.

Speaker 5 Okay, and when you're saying they are telling us, telling me who's they, the dealer?

Speaker 10 Yeah, the dealership.

Speaker 5 Have you just Kelly blue booked it at all?

Speaker 10 I did. It's priced now, I think, between like eight and nine.

Speaker 5 Man, that dropped a lot.

Speaker 1 You must have had a negative. It must have been upside down another car.
You rolled rolled it into this one.

Speaker 10 No,

Speaker 10 this is a new loan. I had a co-signer with great credit because my credit was trash at the time.

Speaker 1 How long ago did you buy the car?

Speaker 5 Was it a 2022?

Speaker 1 And what's your interest rate?

Speaker 10 11.89.

Speaker 1 Okay, you may be looking at the wrong number.

Speaker 1 I think you've got a subprime loan because they're screwing you on the interest.

Speaker 1 And I think the 21,000 is not the actual payoff. I think it's the total of your remaining payments.

Speaker 10 Well, yeah, no. So when I looked at the loan, it said we got the car for $27,000 and some change.
I can't remember the exact number. But right now, the payoff is $20,864.

Speaker 1 That's the payoff, not the total of remaining payments.

Speaker 10 Exactly, but I've made

Speaker 10 almost $14,000 payments. So I had called them and I was like, why? Where's the money going? And it's all going to interest, pretty much.

Speaker 1 Well, yeah, it's 11%. It's $2,000 a year.
Yeah.

Speaker 10 So I want a new car. I want to know what to do.
Like, should I pay it off and keep it at this point? And then just start a new, like, be on a new lease and not get a new car?

Speaker 1 How many miles did you put on this car?

Speaker 10 It's $95,125 right now.

Speaker 1 It was $95,000 when you bought it?

Speaker 10 No, it was like $46.

Speaker 1 Oh, you, but you've run it up to 125,000 miles.

Speaker 10 No, it's at 95,000 now. Oh.
So it was like 50.

Speaker 1 There's something wrong with these numbers, okay?

Speaker 1 Because Chevy Malibu

Speaker 1 has not dropped 70% in value

Speaker 1 during that period of time, okay?

Speaker 1 So

Speaker 1 when you pulled up Kelly Blue Book, did you look at trade-in or private sale?

Speaker 10 Trade-in, I believe.

Speaker 1 Yeah, I think you did. Okay.

Speaker 1 So maybe you could sell the car private sale for, let's call it $12,000. Okay.
Okay. And then you would have to to cover the difference, and so you'd still need $9,000 to do that.

Speaker 1 Do you have any money at all? I'm sure you don't.

Speaker 10 Not that, no.

Speaker 1 How much do you have?

Speaker 10 $2,000 in savings and then $1,000 in the checking.

Speaker 1 Okay. What do you make?

Speaker 10 $50,000 a year. Okay.

Speaker 1 All right.

Speaker 1 Yeah, you do need to get out of this, but, you know, basically, if you went to the credit union and you borrowed $9,000, $10,000 to get a $1,000 car and cover the difference and sell the thing for $12,000 to an individual, that would get you out of it.

Speaker 1 But you still have payments on $9,000 instead of $20,000.

Speaker 1 The thing I might do instead is I might just go make an extra $20,000 next year

Speaker 1 and pay it off in one year by working all the time.

Speaker 1 Like a maniac, like six jobs,

Speaker 1 and then get this off of you. She goes, Oh man, yeah.

Speaker 1 Well, I mean,

Speaker 1 listen, I don't, it depends on you, you don't have to do that, Erica, but you're trapped.

Speaker 1 And the way you get out of a trap is it hurts. Yep.

Speaker 5 Yeah.

Speaker 5 Do you have any other debt, Erica, or is it just this?

Speaker 2 School loans.

Speaker 5 How much are those?

Speaker 10 Close to $200,000. I think it's $189,000.
I know.

Speaker 5 What's the degree in?

Speaker 10 Master's. Well, I'm in school now for my Master's in Marriage and Family Therapy.

Speaker 5 Is the 180 include that master's? Is that the total once you get out, or will there be more?

Speaker 10 It might be exactly at 2,000 when I get out. I'm in my last year.

Speaker 5 200,000.

Speaker 5 Okay.

Speaker 5 And what are you doing now for a job?

Speaker 10 I'm a case manager at a rehab.

Speaker 1 Okay.

Speaker 1 Okay.

Speaker 5 yeah

Speaker 1 it's gonna be a it'll be a it's gonna be a long road long road but

Speaker 5 but can i just say though the number one we we hear people with these numbers okay and they get out it takes it does take years but this is going to be a total change of lifestyle for for the next probably five years yeah and you got to quit just every time you want to do something going freaking borrowing to do it that's true it's killing you i mean you're a quarter of a million dollars in debt.

Speaker 1 You got to stop.

Speaker 1 I mean, you're like an alcoholic. You got to stop.

Speaker 5 Well, it's all this. It's all student loans.
I mean, no, it's not.

Speaker 1 It's an 11, 12% loan on a car. Yeah.
She impulsed and then scratched it after she went out to happy hour. Stop it.

Speaker 1 No.

Speaker 1 Stop, stop, stop, stop, stop living like this. You're a case manager.
You see people doing stuff. Stop it.

Speaker 1 You've got to say no more debt next time I want a car the answer is no I don't need a car so bad I got an 11.8% interest rate what that tells me is I know enough about the car business they not only screwed you on the loan they screwed you on the car when they sold it to you because you paid premium for both they saw you coming a mile away they said here comes Erica we're gonna take her that's exactly what they saw You got had, kid.

Speaker 1 Same thing they did when they told you $200,000 was a good deal to get a master's to be marriage and family therapy. That's a complete screw job, too.

Speaker 1 You paid double what you should have paid for that degree. And

Speaker 1 you got to say, no more borrowing. My life is not better when I borrow to make my life better.

Speaker 1 It doesn't do it. You got to stop that, kiddo.

Speaker 1 So if I'm you, I'm going to go get that degree, finish that thing up, pass your dadgum bars, get out there, get your dadgum income up to 100K, live on nothing, and raise your right hand and swear I am never borrowing again because it has not brought me blessings.

Speaker 1 And yes, you have to work all the time. Ugh, that's the way it is.
That's how you get out. You've got to pay a price to clean up your dadgum mess.
That's the way this works.

Speaker 1 No other way around it, kiddo. You got to do this.
You got to lean into it. This is what they teach you in the field you are studying.

Speaker 1 You can't keep doing the same thing over and over again, expect a different result. That's the definition of insanity.
That's counseling 101.

Speaker 5 Well, and I think you made a good point earlier that, and this is good for people, especially young people that are entering into adulthood of buying new cars, maybe getting advanced degrees, getting jobs, like this whole thing is don't take the one offer out there, the one car, and go and take exactly what they say, the one school you look at and get accepted to and you just take, right?

Speaker 5 There's a life of options out there. And I don't think people do that, right? They, you know, they get into a situation and they just, okay, this is great.
This is what they're offering.

Speaker 5 And I'm just going to sign my name and do it. And so thinking through this stuff, getting multiple options.

Speaker 1 When your mind tells you there's only one way to do it, your mind is lying to you.

Speaker 5 And Erica, that could be your situation, right? You, you go and come into this car loan, you get accepted to a school, and you know, you accept it.

Speaker 5 It's just this one option path that a lot of people take that ends up usually not with a great deal, like you were saying, getting screwed in the car whole thing and the degree.

Speaker 5 And you're not ROIing things. You're not looking at other options and have five or six different things in front of you to say, what's the better deal? deal? So

Speaker 5 forward thinking.

Speaker 1 All education is not good.

Speaker 1 Some education is overpriced crap.

Speaker 1 Just to go to school,

Speaker 1 you got to go to school. No, you don't.

Speaker 1 Being stupid when you're doing your education is a bad plan. I'm not saying Erica was completely, but she got taken.
It's bad. I'm sad for her.
What a horrible situation she's in. I'm angry for her.

Speaker 1 This is the Ramsey Show.