You Are in Control of Your Own Future
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Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I am Rachel Cruz, hosting this hour with my good friend and bestselling author, Jade Warshaw, and we are here to answer your questions about life, money, career, anything and everything. So give us a call at 888-825-5225.

Up first this hour, we have Chris in Raleigh, North Carolina. Hey, Chris. Welcome to the show. Thank you. Thank you for taking my call. Absolutely. How can we help? So I'm asking this question for my daughter and her fiance. And I wanted you guys to give your best explanation of why you should not buy a house together before you are married.

Oh, I like that. So, I mean, the first thing is there's no legal protections. I mean, you're kind of just his word against her word and you're commingling money together. And so at the end of the day, if it doesn't work out, there's not really a process in place to decide who gets what. That would be my first thought. Okay. So with you saying that, of course, nobody goes into a marriage thinking that it's not going to work out and these two are no different. But

They both still live at home. They both have jobs. She's in college, and she's finishing up a teaching degree, which is going to take her three years to do that, and they're scheduled to get married in April of 26th. They're trying to understand how you wait until you're married to buy a house because they say, well, where are we going to live at? Well, that's a good question. And I tell them, you've got to look at Rennie. And if they decide to –

I mean, I want you to explain to them why that's a good thing, I guess, is what I'm saying. To wait to get married or to wait to not buy the house together? Wait to not buy the house together. I think they understand the finance part of it. But I think they're like, if we don't have it when we get married, we don't have it when

we don't have nowhere to go. So that's what I'm kind of getting at and wanting them to understand and hear it from somebody else. Well, there's two conversations, I think. There's the value side of it and then there's the money side of it. So on the money side, yeah, we don't recommend combining money until you're married. So up until this point, they should be viewing...

Her money is her money. His money is his money. So her money is used to buy her rent, her food, pay her bills, that sort of thing, and vice versa for him. The moment that they start combining it, it just becomes kind of a web together, which when you're married, it's a good web. But when you're not married, it's a bad web because if something happens and they end up not staying together, then that's a lot that has the ability to be lost. Right? Would you agree? Yes, I would agree 100%. Mm-hmm.

Yeah, and then... I just want Indy. Well... I'm sorry. Yeah, no, it's fine. And when you own something with someone, and this is even a car, Chris, we would say this about a car, when both of your names are on the ownership of something, to detangle that is very difficult to do. And when you have an asset like a house...

very difficult. And then I would say to them as well, financially speaking, they're just going to be out of school. They can't afford a house anyways. The upkeep of home ownership already is going to add stress to their life. And they don't need that. That's down the road. And we want that to be part of their plan long term. But it

It almost kind of steals a level of joy and freedom. Like when you can just rent and everything's taken care of for you, like enjoy your early 20s. Don't, you know, if you're in a place financially that you're, you know, you're settling down and you can buy a home and can afford it. That's one thing. But when you're first starting out, like, yeah, understand that, you know, it's very, very expensive. So, so on that end, Chris, it's very unwise, very unwise to put your name on

when you are not married on an asset, because just like Jade just said, untangling that, it's a mess. It's an absolute mess. And then a house is magnified in that. That is not a wise move. And then you have the values conversation. And again, people can do what they want to do and believe what they want to believe. But I think there is something to be said about

acting like you're married and pretending like you're married when you're not. You're not married. And there is a level of something sacred to say, hey, I'm going to join my life with this person under a vow and under a covenant. And we are going to then merge our lives together and actually do this life together. And there's something that nowadays it's just like, you know,

You gave it all away right up front. And it's like, man, there's just something about saying we're going to do this in a order that, again, some would say is old fashioned, but I think is wise because it actually gives you options. And too, Chris, I've talked to so many people that, you know, they live together and worse, they have a house together. Mm-hmm.

And they're not like, oh, I don't even know if I want to marry this person. And the law, you know, creating this timeline of the breaking up lasts so much longer versus like, hey, we're just trying to figure this out and it's not working. And it's so much easier to cut ties with people. I think so. That point. What I think is going on here is there there's a lack of foresight.

obviously, because they're thinking under best case scenario. And that already is a red flag to me because the truth is life happens. You don't know what life's going to happen. So having the right protections in place is important. The other thing is, I think that this is more out of convenience than anything else. I think they're trying to create a certain level of convenience instead of living their lives as they are. How old did you say they are?

They're they're 20 now. OK, they're 20 now. So, yeah, I feel like they're going they're going. It's just easier to do it like this as opposed to taking the smarter route in the more independent route.

Does that make sense? I mean, I know this is not for you. It's for them. Absolutely. That's why I called because what you said is right on the money, and I can't wait for them to hear this. Well, let us know how they take it. I hope they'll take it from two ladies who, you know. Yeah, for sure. And it's a hard thing, too, Chris. I mean, granted, she's 20, so I do feel like her –

You being able to speak into her life, the door is starting to close with her becoming an adult, but it's still open, hopefully. But also knowing that as your kids get older, and especially when they start entering adulthood, the conversation does look different. The tone you take, the perspective you take. And I would just say to you, Chris, that the biggest way to influence

I would think her as a 20-year-old who's in college knows what she wants to do for a career. She's obviously very smart and she knows a path that she's walking down. But to engage this conversation as much on a friend aspect than like, I'm a dad, I'm going to tell you what to do. I just feel like you start to get to that age in the late teens, early 20s, where it's like the persuasiveness of a parent conversation.

comes into play much stronger than I can control you. Like when you have like a three-year-old and you're like, this is what you're going to do. But some of it still gets in. Like truthfully, I remember when I was in my 20s, I was dating this guy. And I remember my dad telling me, he was like, Jade, like before you go too deep into this, just know like your tastes change. Like what you want changes over time. And I think he told me something like what you want is going to change like five or six times. Uh-huh.

So, and I mean, it was weird because he was like, you know, you were dating this guy and you thought, and then you were dating this. He's like, this guy's like number four. Like you might change your mind again. And as at the time I was kind of like, oh, this guy, dad doesn't know what he's talking about, but he was right. And so there's part of it. I'm like, you're 20 years old. Don't get me wrong. Some people, they marry their high school sweetheart, whatever. I'm not saying against that, but there is a part of it that that is such a,

growth period for most of us. Oh yeah. You change so much from 20 to 25 even. Right, right. And so there's part of that where it's like you guys...

you don't know what's going to happen in the future. Yeah, yeah, yeah. And you certainly don't want to be like locked into a financial asset like a house. Yeah. That might make you feel trapped. Yes. Let the timeline unfold naturally, right? And let the turn of events, the order of events play out in a natural way versus trying to force it and rearrange everything because it's just going to make it more difficult. Hope that helps, Chris. Thanks for the call. This is The Ramsey Show.

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Fieldofgreens.com slash Ramsey. Welcome back to The Ramsey Show. I'm Rachel Cruz with Jade Warshaw, and we are answering your questions this hour. Up next, we have Elizabeth in Grand Rapids. Hey, Elizabeth, welcome to the show. Hi, how are you guys doing? We're doing great. How can we help?

I have a question. So my husband and I decided that I'm going to become a stay-at-home mom once we have kids. And right now, our take-home pay and our mortgage, our mortgage is about 25% of our take-home pay. If

If I stop working, it goes up to about 50% of his take-home pay for our mortgage. Yeah, and we're wondering, should we pull back on retirement to pay down on the house, or should we keep our retirement at 15% and just do the best that we can for the next year or two and recast or refinance the house as we can? Are you expecting now?

No, I would like to get pregnant maybe sometime. I would like to have a baby in my arms in like two years. I'm a bit of a planner. Okay. I'm here for it. That's great. That's great. Okay. Yeah. So if the time came, yeah.

But you guys have some time to kind of, you know, mitigate some of this. But I mean, if you were to call us today and said, hey, I'm choosing to stay home next week and I'm not going to be working anymore. My first question would be, is his income at all going to be increasing significantly in any amount of time that you see in the foreseeable future?

And if the answer was no, then I would say you probably have too much house. And you guys are that's part of the, you know, the give and take of making these life decisions is that you can't afford your house on one income. But you guys are two years out. So there can be possibly, you know, again, some planning to go along with this. Tell me again what baby step you're on.

I guess technically six, but if we were to try to pay down our house more, then we'd go back to two. And we also have three months of emergency fund and I would want to bump it up to six before I stopped working. Yeah, I think that's a great idea, bumping the emergency fund up to six months. How much do you think that you could, what do you owe on the house now? And what do you think you can knock it down to? Like what's the timeframe on getting this thing paid off?

We owe about $350 on it right now. We just got it. And I also just found you guys a few weeks ago. I think we could bump it down maybe like $50 to $70. Okay.

And my husband's wondering if we knock down our retirement. He thinks we have enough in retirement to knock it down long-term to pay more on the house just so we have more options. We have about $210,000 in our retirement accounts, not including any HSAs. And he's saying instead of investing 15% like we would teach, what's his thought there? Bump it down so that our house is 20, until our house is 25% of his take-home pay.

Yeah, I don't agree with that. I think that it's really important for you guys to build because for you, this is a long-term decision. You're not saying, oh, I'm just going to stay home for a year. It sounds like you're wanting to stay home indefinitely. And so the fact that you guys would bump down your retirement contribution long-term, that does bother me because I want to make sure that you do have enough there when the time comes. I think the issue here is

You have two places you can look. One is income. Is there anything else that he can do? Is there a pathway for his income to go up? And the second place is the house because living with your house at 50% is not sustainable. Like you have stars in your eyes now and I get it. Staying home with the baby is wonderful. But let me tell you, when you're strapped and you're also staying home, that is stressful. Yeah.

Yeah, I would also have the option to work part time, but it wouldn't be super sustainable. I'm an engineer who can do consulting work. And then my husband and I are also graduating with our MBAs soon, which we paid for in cash. So we don't have any student loans. So his income will definitely go up over the next two years. I just don't like relying on your imaginary numbers. What's the amount you need to get it to 25 percent? Like what's that magic number?

If it were a refinance, depending on if interest rates could get down to like five, five and a half percent, it would be about $50,000. And if we were doing a recast, it would be closer to 70. No, I'm talking about in your monthly budget. What's the dollar amount that you would need for this to be the right ratio? Like how much income per month? We would need, right now our income is at $11,000. And so we would need to keep it at around $11,000 because our mortgage is about $2,800 a month.

$2,800. Okay. And what is that? What I'm getting at is your income is going away. How much of it is that? Oh, mine, I'm six of that 11 take-home pay. So you need $6,000 added back to your budget to make this right, or you need that amount monthly eliminated from your home payment.

Yes, that's the answer to that. I'm saying that you either need to replace the $6,000 with him and you combined some way, or you need to find a way to cut that from your existing budget, whether it's from the home payment or something else, because this has got to balance, right? Yeah, but we only spend his income right now. And so we have my income every month to put into Roth IRAs, savings accounts, or pay down the house.

Yes, but that doesn't change the equation. The fact that your mortgage would be 50% of all of that. Because the thing is, the things that you're saying that would go to the wayside, those are very important things. I mean, you've got to save for retirement and you've got to have extra margin. Without it, you will be living paycheck to paycheck indefinitely. Elizabeth, you guys are getting...

MBAs right now. Will his income go up? Did you guys get those degrees knowing that there's opportunity that you're going to see some ROI on those degrees? Do you see him and his income drastically increasing?

I do see it happening in about two to three years. We are still relatively young. So obviously, it doesn't, you know, fix everything. We're only 26 years old. Okay. So management positions don't really happen until you're, you know, in your late 20s, early 30s. Totally. Okay. So yeah, I would say two things, Elizabeth, for you. I appreciate your planning and looking so far ahead. I really do because I think it does give you some peace just to be like, hey, and my

My piece of encouragement, number one, is you never know what's going to happen. You never know. Between now and two years, I mean, who knows, Elizabeth? That's true. You could look up in three months and be like, whoop, got pregnant, didn't mean to. Or, you know, you guys can have a totally different journey to walk down. You know, like...

People can change jobs. There could be someone sick in your family and you end up moving. You have no idea in two years. So I would give yourself a lot of grace in that. But again, I appreciate the planning, but just know a lot of things can change from jobs, location, income, family status, all of it in two years. And then the other thing I would say is just kind of paint some best case, worst case scenarios and just say, okay,

realistically in two years, here's probably what he's going to be making. And here's how much we can pay down the house between now and then without sacrifice. I know that the sacrificing the retirement, I kind of, I hate, I would hate for you guys to do that, but it,

If you choose to do it for two years, you choose to do it, but I probably wouldn't. I don't want to. Yeah, so I would just do a worst-case scenario. And the worst-case scenario, Elizabeth, is you get pregnant, you have a baby, you can't afford your house, you move to a smaller house. That's right. You know what I mean? At the end of the day, I know the housing market is so stressful. There's so much that goes on. I don't want to make light of that. But also, it is just a house. You guys could look up and make a different decision because value-based decisions on your life

And you guys as a couple is going to give you more peace versus staying somewhere. Like just pretend you don't want to work and you're staying in a job just to pay a mortgage. Well, that's going to make you bitter at the house. Like that's not a, that's not a great way to live. So free yourself up from that. But that may mean some give and take a freeing yourself up.

from this asset and changing it up a little bit, but to get ultimately what you guys want. So again, the timeframe, there's a long timeframe here. So give yourself grace there. And then always know you can make different decisions. You can, you're not married to this house, even though it feels like a big investment, but you can change it. You guys can, but it's hard. And I think that's one thing that, you know,

why we talk about money on this show. So much of the conversations, it is not just about the money. It's not just about the percentages of the budget. It is what you all want as a family. And I'm talking to you all as listeners and viewers. What do you want for your life? And money is a tool to create that. And there's going to be some give and take. And I know two friends and they're both lawyers. They work

crazy but they make great money they go on great trips with their family the way they've set up their life is what they love they're passionate about it and it's great and then you know I had another friend and she quit her job similar to Elizabeth and they had to move probably 15 minutes you know outside from where they were to be able to afford yeah and not be stressed but that's what they choose you do so so you know being an adult you have to figure out though from a value standpoint what do you want your life to look like and then use money as a tool to get you there

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Well, this March, I can tell you where Jade and I are going to be. We're going to be on a cruise ship with the Live Like No One Else cruise. We're both going to be there, as well as all the Ramsey personalities, including Dave. Dave will be there as well. And we are celebrating you guys. So if you are on Baby Steps, 4, 5...

six or seven and you're out of debt, you have your emergency fund and we always say around here, you live like no one else. You sacrifice to get out of debt. You sacrifice to get that emergency fund. You sacrifice to get that financial foundation under you that is so hard.

It's not fun, but man, once you do it, then you get to really enjoy your income and you get to live like no one else. And that is what this cruise is all about. So the dates are March 22nd through the 29th. So a full week and more than 90% of the cabins are full. So they are getting taken every day. Every day they're selling. So make sure you guys jump on.

To RamseySolutions.com slash cruise and reserve your cabin today. And this is a really nice cruise ship. I was laughing because someone was like, oh gosh, what kind of ship is it? It's nice. I was like, let's be honest. If Dave and Ken Coleman are going somewhere, it's going to be a little bougie. It's going to be a little bougie. So this is a very nice ship. And we're going to Turks and Caicos, Puerto Rico, St. Thomas, the Bahamas. I think Winston's going to come for about half of it. Same. My family too. Good, good, good.

So yeah, so we'll be there. So make sure to check it out. Again, there's a fitness center, pickleball courts, spa excursions, some great entertainment like Trey Kennedy, the comedians coming, Dina Carter, Stephen Curtis Chapman. So it'll be fun. And we'll be teaching too, like throughout the week. So different things when it comes to your money and your life and your mental health and your marriage and all of it. So there'll be some really good content too. And you'll have a boat full of people that think

and live just like you do when it comes to money. We'll be best friends with all of you by the time it's over. That's right. So go to RamseySolutions.com slash cruise and we would love to see you there. All right. Next is Garrett in Phoenix, Arizona. Hey, Garrett, welcome to the show. Hi, how's it going? Thank you for taking my call. Absolutely. How can we help?

So I'm looking for advice on how to not make any major mistakes that's kind of going to set my family back as we're preparing for some big changes and just trying to avoid the advice that comes from like social media. Okay. That's good. What are the big changes? So,

I used to be the sole income person in my house, and my wife was a stay-at-home. We have four kids, and she stayed at home. She homeschooled our kids, but we have swapped so that I could go back to school and I could get a degree, and we're kind of approaching the end of that. Like I said, she went back to school. She's working as a teacher, but I'm about ready to finish that upcoming in May, and we're just kind of trying to plan. We currently don't really...

Our only debt really is our mortgage. We don't have any student debt. We've paid everything off for my schooling. We paid off of her schooling. We have no credit cards, no car debt. We're really not in any kind of debt. We do have our, um, our six month emergency fund saved up. Nice. I just don't know where to go from here because we don't owe a whole lot on our home. Uh,

But I also, I'm a little bit older, a little bit later in life, and I don't know how much I should be focusing more on retirement or I should be focusing on home. And I just get a lot of mixed signals online. Well, this is kind of similar to the last call we took. So the way we teach in the order of baby steps, technically you guys are on baby steps four, five, and six. So you have no debt. You've got six months of emergency funds saved. So right now you should be investing 15% every single month off of your gross monthly amount.

And so once that's kind of going and it's, you know, you don't touch it, then you can say, okay, do we want to put anything in, you know, 529s or for college savings for our kids, educational savings? And you can decide how much that is. And then whatever is left after that, you can say, okay, what does it look like for us to start working on this house? And that could look like,

I don't know, at the end of the year, we'll get a bonus and that goes towards the house. It could be a monthly amount that you set that you both have agreed on. There's really no rules on exactly what that looks like. The biggest rule to keep in mind is that we don't stop baby step four to do baby step six. That's really the crux of this. Yeah. So what are you going back to school for? I'm currently in school for nursing. Okay. So tell me, give me like a...

what are we? It's October. Give me October of 25. What does life look like? Have you graduated at that point and working? Yeah. So yeah. So I'll be a graduated at that point. I'll be working. There's like an entry level salary. And then eventually at some point it will go up after that, but I'll be full working. And then my wife could or could not be working depending on how, you know, intense we're trying to hit the mortgage or save up for retirement. Okay, perfect. So how much do you think you'll be making out of school?

Uh, somewhere between 80 ish right around. That's a good guess. And I was like, probably more like low ball. Yeah. And what will she make teaching? She makes about 50 teaching. Okay. So great. Okay. So when that time comes, you guys will kind of just reevaluate, Hey, how fast do we want to hit these financial goals? Maybe she works another two to three years. Maybe she doesn't. She just goes home. What will the kids do if you guys are both working full time?

We get a lot of help, but we probably would have to do something at that point. We've been getting help from grandparents and from different friends that have been helping us to kind of keep the homeschooling because we really value that. So if we had a goal in mind, which is kind of why I'm trying to develop a plan now, if we had a goal in mind, then we can say, hey, for the next year, we're going to work to do X, whether it's retirement or it's going to be the mortgage.

And then we can kind of reevaluate at that point. But with no goal in mind and just kind of hitting the minimums of like the 15%, which we are meeting, we're above that. And then also just kind of sitting there on the mortgage, it's hard to say, hey, can people...

keep helping us out. So we're trying to find a balance of like, where do we shoot for? How do we start planning what our kids do? Totally. So I would give you, this is my thought, and Jade, you could have a different opinion on this. You know, when you're in debt and you don't have any savings, your like priority is to get yourself financially in a place where you can breathe and sleep at night, right? Like that's the value, in my opinion, because it makes everything else then kind of fall into place when financially you're in a good spot.

And you guys are there, Garrett. So in a way, I almost would flip it and say, what do we value? We actually value homeschooling and we don't want to piecemeal friends and grandparents for the next four years just to pay off the house. Maybe this is what we value. And then now we value that. So now with my income...

We're going to map out how long will it take us to pay off the house. And then from there, if it's, I'm just making up numbers. If it's eight years and y'all are like, oh, gross, we could really do that in four if we sacrifice two years of her teaching. But I almost would start with what you guys want your life to look like because we just talked about you live like no one else. So later you get to live and give like no one else. And you guys have the ability, Garrett, to,

to create a life that you want right now. And then from there, set your goals versus letting the house payment drive if your wife works or not. Or maybe not. That's how I am. But some people are more money focused where they do flip it. But nothing's on fire. There's absolutely nothing on fire here. I feel like you have an urgency that's

Like, I love that you're thinking about this, but I don't think that it's necessary to have that level of urgency. I think something that probably could help you is you said you're investing more than 15%. My guess is that if you backed that down to 15%, you'd be able to do both comfortably.

do your investing and as needed throw a little extra on the house but the key word here is just about being intentional and I think that there's a way where you can do the homeschooling on less income you're still investing 15% of whatever that income is so you know that you're building the retirement that you're going to need one day and you also know the house is going to pay get paid off and it's going to be paid off in less than 30 years and it's going to be paid off in less than 15 years

And that's pretty awesome. I really appreciate that advice. Yeah. And go to RamseySolutions.com, Garrett, because we have an investment calculator. Maybe you've already done this, but plug in some numbers from the retirement side and say, hey, this is probably what we're going to want to live off of in retirement. You can kind of just, I mean, it's probably more of a guess, but and then back yourself out and say, OK, are we are we making putting enough away for retirement? And then same with the mortgage calculator and

And just say, run both scenarios that if she works for, you know, one, two, three, four years, how fast can you pay off the mortgage versus if she doesn't work at all and see how those numbers sit with you guys. Because your whole life has to go into the context of this as well from the kids and the homeschooling and all of it and what you guys want out of your day to day life too, because you're past the sacrificial stage.

lifestyle from the early baby steps. And you guys really have set yourself up really well to have some of these options. And the encouraging thing too is, Garrett, I was just running numbers for this talk I'm doing for our Money in Marriage event this weekend. And

And even an extra more on a 30 year mortgage, one extra payment a year. Yeah. Decreases it by almost six years. And you save like 80 grand in interest, like one payment a year extra does that. So I can't even imagine, Garrett, if you guys were like, hey, maybe she does something part time. And yeah, we we have a goal to throw three payments a year. Yeah. I mean, or whatever it looks like. But it's kind of a game that you guys can sit there and just.

I don't know, kind of move the numbers around and see what gives you some peace in this because you guys deserve it. You've worked hard. You've set yourself up well. So enjoy that. Thanks for the call. This is The Ramsey Show. Are you working the baby steps? One of the smartest and most impactful changes you can make is to ditch your cash value life insurance plan, if you have one, and replace it with a term life policy. Listen, the only thing a cash value policy is good for is overcharging you

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Welcome back to The Ramsey Show. It's a free call at 888-825-5225. And we are answering your questions about life and money. I'm Rachel Cruz, hosting today with Jade Warshaw. So give us a call. All right, up next, let's see if I can get this right. Mahea, Mahea from Honolulu, Hawaii. Welcome to the show.

Hi, Rachel. Hi, Jay. I appreciate your time. You're welcome. Did I butcher your name or did I get it kind of right? No, my hair. Yeah, you got it on the nose. So good. So good. Well, thanks for the call. I was just calling.

Oh, sure thing. I've been listening to you folks since the beginning of the year. At that time, I had a baby, so I was kind of waiting a little bit before getting gazelle intense and just kind of starting now. My question is, is it okay to do baby step three before baby step two if you live in a high cost of living area? And if not, what is your reasoning?

That's a good thought. I mean, I think that there's a reason that the baby steps are in order. It's because you're going to be most efficient. Because here's the thing, as long as all of your money every month is going towards payments, it's going to take longer and longer for you to save that three to six months of expenses. Right. And so the idea is we want to be able to move quickly. Right.

And that's the first part of that. And so having $1,000 saved, I get it. It feels like it's not enough. It feels like you need more. But the key thing to remember is that that part's temporary. And so just know if you put the $1,000 there, you start paying off the debt and something happens and you dip into the $1,000, you replenish it, and then you're quickly back into it.

Okay. What do you anticipate happening? Because my screen says, can I do this first? I'm in a high cost of living area. And what that tells me is you're thinking it's high cost of living. Maybe every once in a while I'll need to dip into this just to live. Whereas the emergency fund is truly, truly an emergency. So what are you thinking might pop up that's causing you to reevaluate the order?

I guess what makes me hesitant, my husband and I just bought a home late last year. And as soon as we moved in, you know, there were some things that needed to be fixed up. And I guess just to have $1,000 in savings makes me a little hesitant, you know, seeing as you can't foresee, you know, what can happen or any issues that come up. Yeah.

So there's part of this where as much as you can think ahead and project the future, it's a good thing. So for instance, if I put myself in your shoes and I said, okay, I have debt, but I just purchased this home.

let's say the house is on the older side, there is part of me that I'm going to go, okay, how many years do we think we have on the roof? How well is the AC and the heating doing? Is there anything that I can see that's probably going to crop up in the next year to two? And if that's the case, I'm keeping that in the back of my mind and knowing, okay, this could come, but...

knowing that will also help me know, okay, if there's nothing that I can see, if I'm just kind of projecting something that's not even there, then I'm going to go ahead and hit play full speed on baby step two. The next question is what's really the timeline? Because if you're thinking, because a lot of people think that it's going to take them longer than it actually does to get out of debt. If you're thinking this is going to take me six years, of course, a thousand dollars isn't enough, but let's see what the real numbers are. So how much debt do you have?

I just have, we have our mortgage and I have a car loan for $17,000. Okay, $17,000. And what's you guys' income? Combined, we make about $180 a year. So you're telling me that this car is not going to be done in one year and that $1,000 won't cut it for a year?

No, that's not what I'm saying. I'm just saying that it makes me just kind of want to cruise up my emergency fund for the next 10 months and then pay off the car. Listen, you can do what you want to do. But if you're asking me, I would tell you, I'd say, hey, clear out this car. You're eliminating risk. That's the true elimination of risk from your life. It's not having debt. Mm hmm.

So go ahead, go ahead, Rachel. I feel like you're going to say something. No, yeah. So I mean, that's what I would do. And usually if things come up like a house repair or something, that's when you can pause the baby steps, save up the cash and do the repair. You know, for some of it, it's not, you know, you'll get a bill 30 days later or whatever it is.

So you'll have that time if something big does come up. So we do say to pause the baby steps and the debt snowball. If something does come up, you can always pause it and put some cash aside. But overall, yeah, knocking out with $180,000 income, knocking out a $17,000 car loan, I would do that ASAP and I would throw all the money I have at it to get it paid off as quickly as possible.

Because again, it's going to continue to take longer to save up that baby step, baby step three. It'll take you a bit to do that while you're still paying for

a payment and paying interest on that payment mathematically on something that's going down in value. And that's where, you know, yeah, eliminating the risk of not having any debt, it's worth it. That's the baby step two, baby step three thing I feel like is, I don't want to say it's a difficult one for people, but I do think people question, why would I do this first? Most people say, I value security. And because I value security, I want savings first.

To which my thought is like, well, what's going to make you feel more secure? Because the truth is, if the worst happens, you get laid off, you lose your job, something happens and a spouse is unable to work or you're unable to work. What truly makes it difficult is finding the money to make all your payments. That's who's calling you. 1-800-PAY-ME is saying, I want my payment. That's what's making it stressful. But if you can eliminate payments...

then if something were to happen, let's say you just were debt-free tomorrow, right? And then you lost your job. Well, at least it takes probably 50% less to make your household run than it did before. So I want to eliminate like what's inflating my lifestyle and what's inflating what I have to spend every month. I want to get that down and mitigate that risk. And then it's like, oh, suddenly it's,

Then what I even need to save in order to cover myself for three to six months goes down because my cost of living has gone down. And so when you think about it like that, it's like, okay, when I had debt, it costs us $8,000 to make the household run. If I eliminate the debt, it costs $4,000 to make the house run, which means if I need three months of expenses, it's only $12,000. So that is kind of at least the way my mind works when I do this.

Yeah, what's the real risk if something were to happen? Yeah, that's good. All right, up next we have Jenna in Indianapolis. Hey, Jenna, welcome to the show.

Hi, thanks for taking my call. Absolutely. How can we help? So we're debt-free, and I was wondering, should we borrow from our 401k to help purchase our next home or our replacement home, I guess I should say? Yeah. What's causing you guys to want to borrow off of that versus just saving up for a down payment or using the equity in your current home? Well, we were hoping to sell our house, and then in order to...

purchase, we made an offer on a home. And so we, yes, so we, and we don't think we're going to get as much for our home as we were hoping. And so then to make up the difference, we were thinking we could borrow from our retirement. Wow. Okay. So it wasn't like a contingent offer. It wasn't based on your house selling for a certain amount.

It's contingent on our house selling. Yes. But yeah. And what's the difference? Like how far were you off? It would be well, we'd be able to borrow up to forty four thousand from my husband's 401k. So it probably wouldn't be that amount. It probably be close to thirty thousand that we would need to borrow. So you were thirty thousand off in what you thought your home was going to sell for or did you kind of know going in?

We were off because of that. Does that change? Okay, yeah, yeah. Well, my question is, number one, would you not just roll that $44,000 into just the mortgage that you take out? But if you do that, does the math still come out well for you guys from like a monthly payment percentage and everything? Absolutely.

I just want to make sure you guys can afford this house without having to borrow in retirement. So our house is currently that we live in is currently paid off. We paid it off in 2020. Oh, wow. Okay. That's great. So we'd be taking all of that from the sale. Um, and then, um,

So we don't want to take out a mortgage, I guess. Oh, okay. We could and we'd be qualified to do it, but we'd rather if we did have to take out a loan, you know, if we borrow just from ourselves. I hear you. I hear you. The least amount of risk is for you to take out the small mortgage. Yeah, for sure. Because if you have a 401k and you guys somehow leave that job, that's the very first thing they're wanting and you're unplugging.

completely, you know, the machine of the retirement. So no, I would take out a small mortgage and pay it off fast. But well done, Jenna. You guys are doing great. And you could actually go to our real estate home base at ramseysolutions.com slash real estate. And there's so much information on there when it comes to mortgages, paying your house off and all of it. So make sure to check it out. Thank you, America, for listening. Thanks to all the guys in the booth and you, Jade, as well. This is The Ramsey Show.

For free tools and resources to help you reach your home goals, go to ramseysolutions.com slash real estate or click the link in the show notes. Do you ever feel like you're finally making progress towards your goals only to get quickly distracted by something else in your feed? Well, that's why we created the Ramsey Network app, your single source for content that keeps you motivated. The Ramsey Network app is designed to keep you laser focused on reaching your goals. Loaded with over 700

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Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I am Rachel Cruz, hosting this hour with my good friend and best-selling author, Jade Warshaw. And we are here to answer your questions, so give us a call at 888-825-5225. We'll be talking about your life, your money, your jobs, your family's relationships, so give us a call.

All right. Up first this hour, we have George in Los Angeles, L.A. Hey, George. Welcome to the show. Hi. Thank you for taking my call. Absolutely. How can we help? I have $140,000 in debt right now. And also my wages are being garnished already. I've been sued from a loan I didn't pay. I'm taking 25% of my income every week.

every two weeks. So I just taking a lot of money. I make about 90,000 gross. I take home about 75,000 a year. My wife recently started working. I'm doing everything I possibly can to take, you know, more income, everything. But I'm already up to the point where I'm kind of thinking of filing bankruptcy or selling my house. So I'm thinking what, what's the better option either sell the home or file for bankruptcy?

Okay, so tell me, what's the debt, the $140,000? Basically, it's three loans, three personal loans. One of them is $50,000, the other one's another $50,000, and the other one is $40,000. One of them is $20,000. One of them is a car, but I'm thinking I want to pay the car off, so I'm not going to.

But that one. The $20,000 is the car? Yeah, one of them is $20,000. That one's still good. I'm paying that one off. And the other is just all personal loans. What were the loans for? What did you use them for? I got hurt a long time when I was working and I needed...

I needed some money just to stay afloat on mortgage. So I just took out a lot of, took some loans and just kept paying it off. But then another one I took out to consolidate debt and ended up just splurging the money. Didn't really do what I had to do. So yeah, that happened. When does your wife start adding to the income? Because you're making around $6,000 a month. I started working like four months ago. And what's she making? About...

I would say $1,600 a month. Okay. What is she doing job-wise? She just works at a veterinary place. Okay. Do you guys have kids? Yeah, I have two. You have two. Okay. And which of the loans are the ones that are garnishing your wages? Just from a bank, the personal loan. Is it one of the personal, one of the $50,000? Yeah. Okay. And are both of those personal loans with the same bank? No.

No. No. Okay. And have you been current on the other $50,000 loan? No, I haven't paid anything to anybody for a while already. Okay. Okay. And so you've got the house. Everything's in collections, basically, except the car and the house. So they're taking almost $2,000, a little under $2,000 a month, right? Garnishing from you. Yeah. And then what percentage of your mortgage is, what percentage of your take-home pay is your mortgage? Yeah.

I pay $1,800 a month for my mortgage. Okay. Okay. Oh, boy. All right. Yeah, we need, you're not able to do anything here. Okay. So the key here is we've got to find a way to get more money coming in. And I'm wondering with the garnish, is there any way that you can say, can we set up another payment program because this one is like burying me alive?

I've tried everything already, spoke to the lawyers. I've done everything on my part to make some adjustments. I've done pretty much all I can do. Even if I get another job, they're still going to garnish. So at this point, I'm already maxed out. It's just I don't see like another solution. They're just not budgeting at all. How old are your kids?

One of them's eight and another one is five. Okay. Is the five-year-old in kindergarten? Is anybody in daycare is what I'm getting at. They're both being homeschooled. Oh, that's right. Okay. Okay. There's part of this that you and your wife are going to have to sit down. I mean, you're pretty much up against it and you could use all of the money that you can get. Right. Right.

Is there any way that because I don't know, I'm not going to pretend to know a ton about homeschooling, but I know that there's some programs where even though they're not going into school, they're going into a program that's outside of your home. Like a co-op. Like a co-op type situation. Is there a way that you can still keep the value of homeschooling, but it's not your wife that's actually doing it so that she can work?

Um, that's something I haven't, I haven't thought about. And I'm not saying forever, but I think that you're in a, your back is against the wall. And unfortunately, when that happens, something, you have to let go of something. Something has to change in order for you to change your situation. And usually that is a sacrifice of some nature and there's just no getting around it.

But I'd rather you keep control of this situation. And Rachel, you can speak more to this. But once you hand it over to bankruptcy, you lose control. And I don't want you to lose control of the situation. I want you to make every choice and feel like you have a say in everything that's going on. Okay.

For the house, George, give me some of the numbers around that. How much do you owe on it? How much is left on the mortgage? The house is right now, 390 is what we owe and it's worth about five, almost 600,000. Almost 600, okay. You know,

The car, I would probably, I would sell the car, George. I know you're making payments on it, but that's something that can easily be swapped up to earn some money and margin back into the budget that you can go back and get later after all of this. But again, back to that sacrificial thing

Like what can you scorched earth do to have any means to be able to get ahead on some of this? Cause some of it isn't in collections and keeping a car payment afloat, um, is something that I, I would, because I mean, everything else is, is in collections. And if you get on that, I don't want even re, you know, being repoed on, like, I don't want anything like that. Like you're in a little bit of that situation that again, back to that control that Jade's talking about, um,

um how much could you sell the car for have you kelly blue booked it uh yeah i i think i can sell it for like maybe 18 18 grand around there okay thousand it's i and i owe like about 18 000 so i mean i could break even yeah that one it's it's just you know i mean that's not i mean i i guess i could do something like that i mean what's the payment on it it's just uh 500 a month that's a lot okay

I mean, $500 to have that freed up is a big deal. And if you are upside down, like this is one of those cases, if you're upside down, you go down to the credit union, get a loan for the difference and a little bit more in order to get yourself a beater if you need it. And I'd rather have a $5,000 loan than a $20,000 loan. Agree?

Plus you freed up $500, you know, a little bit less than that a month when you take into consideration the new payment. Yeah, you're going to have to make some tough choices. Mama's probably going back to work. You're probably getting rid of this car. And you might have to consider what's the equity. And a part-time job. And then the house, yeah, could be in play. But I just want your habits to change as well, George. But you guys got this. This is The Ramsey Show.

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And go to Yrefy.com slash Ramsey. That's the letter Y, Re-Fy, R-E-F-Y.com slash Ramsey. May not be available in all states. All right. Today's question comes from Justin in California. He says, I've been working hard to save money for a house. My wife and I have no debt and have a six-month emergency fund. So far, I've saved $175,000.

thousand for our down payment we have a combined income of 140,000 we live in California and are looking at houses in the 650,000 dollar range I want to save more so that we can put more down on the house my wife has been asking me to buy her a diamond ring that costs about three thousand five hundred dollars

I am holding off on buying the ring because we can use that money to pay for closing costs. Should I buy a diamond ring for her or wait until we buy the house? This is wild. Um, I'm assuming that the diamond ring is not like an, like a wedding ring or like, I'm assuming it's just a gift that she wants. Right. Um,

Yeah, I think based on what you've laid out here, I would have loved to hear her side of it. But based off of what you've laid out here, it sounds like you have decided that the priority is the house. And at the end of the day, you both need to sit down and re-talk and say, okay, what's more important, us trying to get into this house? Because if I buy this ring, this is how much it sets us back.

So, yeah. And I would want to know the timeframe on how much, like how, how many months or how, you know what I mean? Like just to know, like how, what is this setting you back? And is that, are you, are you okay with that? Both of you? Yeah. And I do think it's okay. And Rachel, you can drop in here. I think it's okay. Like as a couple, when you set a focus and you're going towards that thing and as the time passes, other things crop up and you're like, oh, that could be cool or that could be fun. Yes. And I do think it's important to have those conversations and,

and decide are we realigning back on what the goal was or are we going to divert here for a moment because at the end of the day it is your life and you get to decide you know how how urgently are we moving that's right and i don't know if this diamond ring was something you've been promising her maybe you guys got engaged and you never got her a ring i don't know any of that but have the conversation but it sounds like the house is

what's most important. And I would say, you know, the down payment, you guys are, you know, above that 25%. Yeah. So I'm like, you're in a good, a good spot for the down payments. You know, like it's a, I don't know. You, you have a lot there percentage wise for what the house is worth. So how much would 3000 really set you back? But also I'd want to know from her, like, you know, there's about, and I do, you know, don't get me wrong. I love jewelry. I love shopping all of it. But also you're like, okay,

What what is that going to get me in the in the near term? Right. Maybe. Yeah. Maybe maybe God or just like a band when they got married and always promised her like an actual like diamond ring. I don't know. That's valid. That's valid. If there's something there. But I would want to see time frame how long this would set you back to the goal that you want to have for your down payment on the house. That's what I'd be curious about. Hope that helps, Justin.

All right. Up next, we have Haley in Omaha. Hey, Haley, welcome to the show. Hi, thank you for having me today. It's such an honor to be on the show. Absolutely. Thanks for calling. How can we help?

So my parents took out a universal life policy on me when I was born, me and my sister both. And now that I've turned 21, I have the option to continue paying those payments for the universal life policy or cashing it out at the cash value and giving that back to my parents and just moving on for the future. Oh, you have to give it back to them when you cash it out? Yes. Is that what they said?

Yeah. Okay. How much will it be? It's just $750 for the cash value. Okay. I'm just curious because you said you have the option to keep paying on it or cash it out. Yeah. So that's interesting to me that you would keep paying on it. And then but if you were to cash it out, you have to give the money back to them. This is very odd. Either way, I would cash it out and get out of that. Yeah. How old are you, Haley? Did you say?

I'm 21. 21, okay. So the difference between what they have, a universal life policy is similar to, it's like basically a whole life policy. And you're paying probably four times the amount.

than what you would pay for just a standard term policy. Because what you have, this universal life, what they basically pair is this like investment savings account with life insurance. And what ends up happening when you pair and marry those two products is

you kind of get crappy on both and especially the saving side so the rate of return usually within these policies is like it's terrible you could do better in a high yield savings account much less like actually investing your money with the 10 12 return you know that the market brings

So the savings investment portion sucks on these, and that's the selling point. So always remember this, Haley, going forward into adulthood, that you want to keep your insurance and your investing completely separate. Never combine them. Because when you combine them, you're not getting the best of both worlds. You're paying more for a policy, and you're getting a crappy investment with it. So it's a horrible product. And a

And a lot of parents, yeah, you took it out when you were born. I mean, that's the Gerber life insurance. I mean, like all these companies go and they do this, you know, these policies for babies. And why you need life insurance too, Haley, is if someone is dependent upon your income.

So if I were you, Haley, I would cancel it, say goodbye to the $700, give it back to your parents, and live your life. Don't be paying monthly on this. And then when you need life insurance, aka usually when you become a parent or even if you get married and someone is dependent upon your income to live the lifestyle that you guys are living, then I want you to go. You did mention...

That I could have this policy if I were to like pass away and then someone were to have to pay for my funeral costs. So that's why this policy is around like $25,000. Sure. Okay. Is that something you would recommend having savings for or a policy for? The purpose of insurance is for people who are dependent on your income. Typically when you have life insurances in place, it's because like, for instance, I have life insurance in place because my

My family depends on my income. My husband has life insurance in place because we depend on his income. We have children. And so if one of us, God forbid, if something were to happen, the family will feel that. And so we say, let's have this policy in place so that if the worst happens, everybody who depends on this income will be set, not just enough to pay for funeral and burial costs, but they won't have to worry about money. That's the blessing that can come out of a really tough situation. So in this case,

Your parents having a policy on you was completely, truly unnecessary. Yeah. And the funeral costs, you know, idea funerals, they are getting more expensive, but at 21 years old, I would not have the burden of feeling like I need to have savings for my funeral. Right. So like that, I would not add that into the conversation. Some people may be like, that's irresponsible, but as a 21 year old, your parents will take care of it. If something were to happen to you, Haley. So yeah, I would not be paying monthly into something just for that. Yeah.

And that is a selling point, they say, too, right? Yeah, that's right. To cover the funeral and all of that. So again, Haley, when you get in a position in life, though, that you need life insurance, remember term life is going to be your best friend. And the earlier you get it, the younger you are, the healthier you are. It is so inexpensive. Even for me, I'm in my late 30s, and it's still inexpensive at this point. I mean, like,

It is a fraction of what you pay with whole life. And the coverage you get for that is so much better. Yes. And for term life, it is for a term of your life, right? Whole life is for your entire life.

Term is for a 20-year, 30-year, whatever policy you buy. But as you're doing the Ramsey Baby Steps and you're walking through getting out of debt, you have an emergency fund in place. You're funding retirement. Eventually, your house is paid off. Baby Steps millionaires are doing all of this on average in about 9 to 12 years, doing everything. And at that point, you're self-insured. If something were to happen to you and there's no house payment, there's no debt, and you have...

I don't know, 300 grand and a 401k or whatever it is. Like, you know, everyone's fine. So you won't need life insurance for your entire life if you're doing the Ramsey way when it comes to your money, which is what we recommend. I feel like... It's a great call, Haley. Great question. Whole life, universal life. It's like the spork.

It's a spork. It is. It's not really a fork. It's not really a spoon. Yeah, and if you go to Zander. It sucks. Zanderinsurance.com, you guys. Check out Zander because you're able to get a quote so quickly with them. Just to even see and compare maybe the insurance that you all have that are listening or watching. And maybe you can get a better deal because they go and shop many companies. And it's a great, great company. So check out Zander.

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Maybe I'm paying for insurances I don't need. Maybe I have some and I haven't checked on them and I can run some new numbers and maybe get a better deal. So make sure to check that out. Again, you guys, RamseySolutions.com slash coverage. Up next, we have Kion in Houston, Texas. Hey, welcome to the show. Hey, how you doing? Doing great. How can we help? Oh, yes. So like almost about a year and a half ago, my parents had separated and

Now my mother's currently raising my little brother who's autistic on her own. She's on government assistance, like Social Security. And I'm just trying to figure out, like, you know, how to go about, like, helping her because I try to, like, give her, like, advice of, like, going back to work and stuff like that because, you know, she's only making, like, $1,000 or something like that a month. So I'm just trying to see, like, how do I help her because I'm currently in debt as well.

And, you know, it just hurts me to see my mother and my little brother in that situation because they have an apartment and everything, but he's constantly, you know, like asking me for money and stuff like that. So it's kind of hard to give it to her when I'm currently in like the same situation getting out of debt. That's right. Yeah. What kind of advice could I get?

Well, Keon, you're an amazing human being. You're an amazing guy. You are. Your heart and the fact that this is even on you is incredible. So how old are you? I just turned 25. 25. Okay. How old's your brother? He's nine. Well, he'll be nine next month. Okay. Okay. Does he go to school full-time? Yes, he goes to school full-time. Okay. Okay.

And your mom, have you, what's the situation with your dad? They just separated, I know you said, but is he in the picture at all or child support or anything?

Sure. Okay.

their relationship at that moment. Yeah, yeah. You said she's getting government assistance and then you said that she's making $1,000. Do you get the sense that she's kind of limiting her income so that she can keep getting this government assistance or do you feel like she's just not sure what she can do to make money? She's sure. I'm positive she's sure. I think she's more limiting her income just to maintain that because she doesn't want to go back to work

because she had left work, I think, like two and a half years ago because she had vertigo. Okay. But, you know, I always tell her, like, go back to work because she seems fine, you know, like there's no issue with her mental or anything like that. It wasn't something that caused her to be, like, on disability. Right. I mean, at the time it was, you know, due to the headaches and stuff like that, so she just went ahead and took that disability leave.

But now she's doing fine from what I see, but she says, you know, she still has those moments. Is there something, so maybe you can help her brainstorm a job that she can do full-time. Maybe it's a work-from-home position. Maybe it's, because here's the thing. Here's where I'm at. I ordered a chair from Wayfair. It didn't work out. I sent it back, and I called customer service, and every bit of the customer service was via text. So my point is there's jobs out there.

for people who might not be able to exist in a typical work environment is what I'm saying. So I think, I mean, I, yes, yes, go ahead. There's, there's two parts of this. The first part is your mom has grown up.

And you can't necessarily change her. And it sounds like you've been attempting to say, mom, what about this? Mom, what about that? And that's probably one of the hardest things to accept as a child and especially as a grown child. The next part of it is I would choose if I were in your shoes, Kian, I would choose to focus on my financial situation because I

What we teach here, the seven baby steps, the budgeting, all of it is there's a so that at the end and you get to choose what the so that is. Some of it is so that I can retire with dignity. Some of it is so that I can find fund missions, you know, in Africa. So if that so that for you is, man, I just want to be able to help my mom out with my brother. And I want to know that I have the cushion to be able to do that. And it's all a gift. Right.

I don't need anything in return. Let that be your why and let that be your motivator. And that way you can happen to this situation instead of waiting for somebody else to change. Exactly. You know, because currently like my dad, my sister, my mom, my little brother, and even my other distant brothers, none of them have money or anything like that. So I just feel like I'm the only one that's in this situation.

this opportunity to change because everyone kind of thinks the same as far as like yeah and if you change that if you change that they're all going to look at you and be like what did he do what's he doing but right now since you're all since at eye level it looks like you're all kind of doing the same thing you've got you've got the information you're still putting into practice but once that actually starts to develop fruit and people can see oh wow they're going to start asking you

How did you do it? And you're going to have the opportunity to teach. But mostly they're going to learn just by watching you. Yeah, so Kiana, I... I mean, I just started the whole process of getting out of debt, the baby steps and everything. Like, I'm on baby step one. I have $500 so far. Good for you. It's great. Yeah. Well, I would echo what Jade just said, though. Kiana, putting your energy in...

trying to get your mom to see a certain way ends up being wasted energy. Even though it feels like love, it feels like, oh, I can help her. And I think we all have this feeling of like, if we could just have that one conversation and like say that right sentence, the light's going to go on. The light's going to go on and I'm going to be able to help them, you know. And I'm not saying abandon your mom and relationship by any means, but the energy that you would put, and maybe you have one big conversation just to check it off your list from a soul level, just to say, I tried one last time.

But I would take all that energy, Keon, and do exactly what Jade said. Control what you can control. And what you can control is you and what you do with your money. And I'm telling you, at 25 years old, Keon, if you get this and you say, I'm going to walk this path out, you're going to retire forever.

a millionaire, you're going to, I believe, change people's influence. And exactly what Jade said, not even by saying anything, but the people that want change around you are going to see you actually have hope in an area that's been so hopeless for them.

and see something different and probably start asking, okay, what is going on? You know, we say that part of this, um, whole process is changing your family tree, you know, winning with money. It's not just for you. It is really to impact and to be generous to other people. And part of that generosity is, is the beauty of your influence of, of people around you and your family seeing something different. And not, not all of them will choose that path, right? Like all of us sitting up here, like not everyone chooses that path. Um,

But you have the ability to do that. And I do think, you know, having some goals ahead and kind of painting out a timeline to say, okay, by the time my brother is...

you know, 12 years old, I want to be able to help in this way and that way. And I want to help my mom not enable and making sure that the, you know, whatever you choose to go forward of helping them, that there's some boundaries. It's a very mature adult-like, you know, system that you may get plugged into in a really beautiful way, but to really let that help them and help your brother. I mean, this could change the course of not just your life, Kian, but your family's. It's amazing. Yeah.

Yeah. Well, I'm excited for you. Because I currently have a daughter now, too, so...

That's even a more reason to, you know, start this whole plan to be successful. That's right. When you're in these situations where everybody's kind of had the same mindset and it hasn't gotten you very far and you finally pop your head up and go, it's time for me to do something different. It literally is that quote where you have to be the change that you want to see. And the moment that you become that change, it gives everybody around you hope that they can be that change. And Kian, hold on the line. Christian's going to pick up and we're going to give you Financial Peace University and EveryDollar.com.

just to help you get kick-started on this journey because we're cheering you on. Call us back if you need us. Thanks for the call. Hey, guys. Dave Ramsey here, and I got a big announcement. I'm coming to a city near you live on the Money and Relationships Tour with Dr.

with Dr. John Deloney. This is the most interactive event we've ever done. You get to decide what we talk about. You do not want to miss this. We'll be coming to Louisville, Durham, Atlanta, Phoenix, Fort Worth, and Kansas City in April and May of 2025. Get your tickets and more information at ramsaysolutions.com slash tour.

Welcome back to The Ramsey Show. I'm Rachel Cruz hosting today with Jade Warshaw and we are answering your questions. Up next, we have Kayla from Medford, Oregon. Hey, Kayla. Welcome to the show. Hi. Thank you for taking my call and also thank you for everything that you do. Oh, thank you. I appreciate that. Well, we're glad you called in today. How can we help?

So my end goal is to sell my house so that I can move to another state. But I told myself I couldn't do that until I was debt-free and then I had a fully funded emergency fund. So I was wondering if I could get some help brainstorming ideas on how to get out of my house for the most amount of money. That way I can pay off as much debt as possible. Oh, I like this. This is giving like...

I don't know, an HGTV vibe. So how much debt do you have, Kayla? So I have $144,000 and that's not including my mortgage. Okay. What's the debt in? The debt is in $19,600 as a credit card. $96,400 are personal loans that were for the remodel. So you already started a remodel?

I did. Correct. Okay. And then what else? And then my car is $28,000. My car is currently for sale online. Okay. So hopefully I can get rid of that pretty soon. Oh, great. How much do you make a year? I make $102,000 a year. Okay. Is the $19,000 on credit cards, did that go towards the remodel as well? Yes. About three quarters of that is for the remodel. Okay. So the house itself...

What do you think after the remodel and everything's done? Yeah, what will you sell it for? Do you know? I don't know. And I think that's part of the problem. Another right now, it's currently a two bed, one bath. My idea was to turn it into a three bed, two bath.

because that'll let me sell it for at least $100,000 more than what I can now. But I'm done taking out money to fix the house. And so I feel like I'm kind of stuck where I'm at. Well, let's work it back. So what'd you buy the house for? I bought it for $325,000. Okay. And then you've put about $120,000 into it? Yes. Okay. And then when it's all said and done, just based off of basic research you've done, what do you think it should sell for?

So another two bed, one bath, same condition closed in the same area closed about a month ago for 325. That one also did not have a garage and I have a two car garage. And then it looks like another one sold for 315. The house right next to me, my neighbors, they sold last year for 500, but it's also a three bed, two bath and over a thousand square foot bigger.

So I wouldn't come close to that. The hard part for me is I'm struggling with the numbers because unless you've paid off a bunch of this that I don't know about, what do you owe on it currently? $315,000. Okay.

I'm not seeing how this is going to, unless it brings 500 like you think it could, but you said that that's not an equal comp. How much will you need more in the remodel to make it the three bed, two bath that you started, right? I mean, this is what the almost $100,000 personal loan was the construction to do that. Is that right? Yes. Okay. So how far are you with that?

I barely even started, so it doesn't even have the extra bedroom and bathroom yet. That was just doing the garage, doing a bunch of outside stuff, adding a porch, concrete.

So I would probably need another $20,000 maybe to add in a really basic extra bedroom and bathroom. Okay. Have you already done like demo work inside already because that was your plan or that hasn't been touched? It's just two bed, one bath right now with really nice concrete. Yeah.

Yeah, so I haven't done anything extra. Okay, that's good. Because if you're in the middle of something and it's like, oh my gosh, we have to put drywall up, we have to do this as cheap as possible, but nothing interior has happened, which is good. Because you're right, I don't want you going more and more into debt, hoping that you're going to be able to see the resale value. Because I think you're getting yourself underwater kind of quickly. Yeah.

Yes. Okay. So go ahead. I think you have to proceed very carefully because you're right against it right now. Like let's say you did those changes. You sold your three 15 now is what you owe. Let's say you did sell it for 500 after closing costs, after everything like that. And we're not even including like moving fees or like getting into another house and you wanted to pay off all of your debt, which is 144,000.

I mean, you're right at it. Well, and 500 isn't going to be. I mean, that's a thousand square foot. That's what I'm saying. Yeah. Yeah. So you're not going to get that. So you're probably going to get closer to 350, 375 with some of the upgrades that you've done. So if that's the case. Yeah. I mean, you're you're you may break even Kayla. I hate to say I don't know if there's equity in this to be the thing to help get you because you were hoping to get 100,000 more, but you've already put in more than 100,000 extra. Yeah.

Yes, which is definitely unplanned. Once you start doing something, things just start adding up. I tried to replace water lines and so many unforeseen things. And so it kind of got out of control. Yes. Yeah. Rachel is more of the flipping queen than I've never flipped a house. So I'm not going to act like I have. I just watch the shows and I know how to do math. So that's where I stop at. Yeah.

I'm not Rachel could tell you if you need to keep going to like make this right or not I can't I can't in good conscience tell you to keep borrowing money on something like this Kayla I mean if I were you yeah I would I would lose it because you're wanting to move states right like you're wanting to get out

Yes. I don't have a timeline, though. So the good thing is I can wait one or two years. So yes, I don't have a timeline. So I thought maybe do I just stay put and just work on paying down the debt?

Yes. Yeah, that's what I would do. Yeah. Instead of the remodel being the thing that like breaks you free, I think at this point you cut your whatever losses or if you're breaking even whatever that is, you just stop and go, okay, this is the house. Yeah. Finish whatever project you are right in the middle of.

you know, to the best of your ability. And then, yeah, pay off your car, you know, get it to the point that you're able to get out of this house. You're not losing money and you can start your new life somewhere else. Yeah, I would start working my way out of debts just from working

I wouldn't look at the house as being the thing that's going to help you do that. And what's wild is, you know, I mean, who knows what's going to happen? I mean, the market could go up and you could actually, you know, be better off in a year because, you know, your house overall will continue to go up in equity, which is great. And maybe at the end of the day, you know, you sell everything, you're debt free.

You sell the house, maybe you cash in, I don't know, 50, 100 grand that can help with the next move and you kind of cut your losses that way. But I think looking, I understand what...

How you got there thinking okay if I put some money into this I'm going to be able to my the value of the home increase so much that the difference is that's going to help me pay off all this consumer debt so like I understand how you got there it's just that the math now isn't mathing because it goes fast and that's the hard thing about remodels and flips or you know that whole world and people make it seem so easy on Instagram and on social media and

But it costs a lot if you're not careful and if you don't know what you're doing. And especially if you're handing the keys over to other people saying, okay, you do this, you do that. You know, the concrete guy comes in at one bit, the roof for another. I mean, like it just, it can build on each other if you're not really careful. That's why I don't think it's a great business for people to be in unless you really know what you're doing. So I totally get how you got there, Kayla. But if I were you, I would press pause. I would not put anything else into this house.

unless you had the cash to do it yeah how much more painful when you go into debt and it doesn't that's right yes totally yeah that's right that's right so I would um I think you know selling your car is going to feel great and I think you're making a you know you make a great income and maybe Kayla I would even say this that you know if it gets to be a place in your life that you're like man I kind of went out you know you know if we talk to you October of 2025 and you're like

man, I still have, you know, 30 grand of debt left, but I kind of want to get out, then you can move still. You know what I mean? Yeah, being debt-free is not a prerequisite to moving if you need to, right? I would just rent at the next place. That's exactly right, for sure. Well, Kayla, I hope that helps. Sorry, I wish we had better news for you, but thanks for the call. Now, if you guys are listening on YouTube or podcasts,

Make sure to head over to the Ramsey Network app. If you're listening on traditional radio, we are still here for another hour. But again, the Ramsey Network app is free. Thanks, Jade, for being a great co-host. Thanks to all the guys in the booth. And thank you, America. This is The Ramsey Show.

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