I Don’t Think We’re Going To Convince You…

Summary

The Ramsey Show Highlights: "I Don’t Think We’re Going To Convince You…"

Release Date: December 5, 2024
Host: Ramsey Network
Duration: Approximately 8 minutes and 54 seconds

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Introduction

In this episode of The Ramsey Show Highlights, the Ramsey Network delves into a compelling caller scenario that underscores the challenges of managing finances without a steady income. The call revolves around Diana, a 48-year-old single individual without children, who finds herself navigating the precarious balance between maintaining her mortgage and living without a regular paycheck. The hosts, represented by Speakers A and C, engage in a candid discussion with Diana, offering insights and advice on financial stability and responsible money management.

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Caller's Background

Diana's Financial Situation:

• Age & Personal Status: 48 years old, single, no children.
• Housing: Owns a condo valued at approximately $700,000 with a remaining mortgage balance of $13,000.
• Investments: Holds $38,000 in investments, which are inaccessible until age 55.
• Employment: Recently quit her job after eight years, currently unemployed for a year.
• Income: Former salary of $55,000; anticipates a similar income upon reemployment.
• Debt: Accumulated an additional $10,000 on her credit line over the past year by covering her mortgage and maintenance expenses without a regular income.

Key Quote:

Diana (00:06): "So basically I am 48, I've got no kids, I'm single, I've got my mortgage that I've got about 13k left."

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Discussion and Concerns

Living Without a Steady Income: Diana explains her decision to quit her job was driven by the need for a change and exhaustion after eight years of employment. Without a new job lined up, she has relied on her credit line to cover essential expenses, resulting in significant debt accumulation.

Notable Quotes:

Diana (00:53): "This is not the first time I've been in this situation. I've quit my job before and I've been, you know, not wisely paying my mortgage and my ministries on my credit line."

Speaker C (01:10): "That's such a risky way to live."

Financial Risk and Sustainability: Speaker C emphasizes the unsustainable nature of Diana’s financial strategy, labeling it as "emergency mode" and expressing concern over her reliance on debt without immediate plans for reemployment.

Mortgage Repayment Strategy: Diana questions her urgency to pay off her mortgage quickly, especially since her condo holds substantial equity. This prompts the hosts to clarify their stance on mortgage repayment.

Speaker A's Insights (03:14):

"The rush to pay off the mortgage is not about having kids or not. It's about managing the most significant line item in your budget, freeing up money once the mortgage is paid off."

Financial Freedom: Speaker A highlights the benefits of paying off the mortgage early, including both emotional and financial freedom, which allows the individual to redirect substantial monthly payments towards other financial goals or investments.

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Advice and Recommendations

Encouragement to Reenter the Workforce: The hosts strongly advocate for Diana to seek employment to stabilize her financial situation, even if it means taking a position that may not align perfectly with her desired career path.

Speaker A's Advice (04:54):

"I want you to work. I mean, I don't want you to sit there and, like, be racking up debt."

Planning for the Future: Speaker C questions Diana’s long-term plans regarding her condo, suggesting that without a clear strategy, her current financial trajectory could lead to significant debt accumulation.

Emergency Fund and Budgeting: Diana admits to having a small emergency fund and relying partially on Employment Insurance (EI) benefits. The hosts point out the insufficiency of her financial cushion in sustaining her lifestyle without a steady income.

Speaker A on Mortgage Focus (03:14):

"When your house is paid off, not only is there emotional freedom, but there's also financial freedom because you don't have payments."

Encouraging Practical Steps: The hosts recommend that Diana prioritize securing employment to avoid further debt and to utilize her home's equity more strategically, possibly considering selling the condo to fund her travels or other financial needs.

Speaker A's Practical Advice (06:20):

"You have great progress. So I'd get a job but Diana hold on the line Kelly's going to pick up bring of you Ken Coleman's book and in the book is a get clear assessment because I want you to get some focus on what you love."

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Key Insights and Conclusions

Risks of Lifestyle Inflation Through Debt: The conversation underscores the dangers of using credit lines to sustain a lifestyle without income, highlighting that such practices can jeopardize long-term financial health.

Importance of Strategic Mortgage Repayment: While paying off a mortgage is beneficial, it should be part of a broader financial strategy that includes maintaining an emergency fund and ensuring income stability.

Balancing Financial Freedom and Practicality: The hosts emphasize the balance between achieving financial freedom through debt repayment and the practical necessity of maintaining a steady income to support one’s lifestyle and financial obligations.

Speaker C's Final Warning (08:24):

"You can't out earn bad spending habits for long... you could look up and really have racked up a lot of debt and you're starting halfway to where you were... you have great progress... just get a job."

Encouragement for Self-Assessment: Diana is encouraged to reassess her professional goals and consider taking practical steps towards securing employment, even if it requires adjusting her career expectations temporarily.

Speaker A's Closing Remark:

"Create your free every dollar budget today the simplest way to budget for your life."

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Conclusion

This episode serves as a vital reminder of the importance of maintaining financial stability through balanced budgeting, responsible debt management, and the necessity of steady income. Diana's situation illustrates how even with substantial assets, neglecting income sources and relying on credit can lead to financial instability. The Ramsey Network provides actionable advice, urging listeners to prioritize securing income, wisely managing debts, and strategically planning for both short-term needs and long-term financial freedom.

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Notable Quotes:

• Diana (00:06): "So basically I am 48, I've got no kids, I'm single, I've got my mortgage that I've got about 13k left."
• Speaker C (01:10): "That's such a risky way to live."
• Speaker A (03:14): "When your house is paid off, not only is there emotional freedom, but there's also financial freedom because you don't have payments."
• Speaker C (04:54): "I want you to work... be racking up debt."
• Speaker C (08:24): "You can't out earn bad spending habits for long."
• Speaker A (08:19): "Create your free every dollar budget today the simplest way to budget for your life."

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For more detailed budgeting tools and financial advice, visit EveryDollar and consider exploring Ken Coleman's "Get Clear Assessment" for focused career and financial planning.

Transcript

[A]

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[B]

So basically I am 48, I've got no kids, I'm single, I've got my mortgage that I've got about 13k left.

[A]

Nice.

[B]

I have, yeah, I have some investments, 38k that I can't touch until I'm 55, unfortunately. I mean, well, fortunately that's right around the corner. But my thing is I haven't been working for a year. I quit my job because I needed a change. My salary is only 55k, so when I do eventually get a job, you know, it's not very high. But in the year I've been paying my maintenance and my mortgage on my credit line, so I've accumulated another 10,000.

[A]

In the last year.

[B]

But here's the thing. This is not the first time I've been in this situation. I've quit my job before and I've been, you know, not wisely paying my mortgage and my ministries on my credit line, but that's been a little buffer for me. And then I'll get a job and I'll, and I'll pay it down.

[C]

That's such a risky way to live.

[B]

It is, it is. And you know, that's what we call cash poor, right? Where, you know, I'm not making a lot of money, but I'm smart with my money. You know, I'm not paying to get my nails done and stuff like that. I'm, you know, putting every cent that I have to that mortgage when I am making money. But here's my main question. I have no kids. I. And my condo is worth about 700k, right? Why am I rushing? Because I only have 13k left on this mortgage. Why am I rushing to pay down this mortgage?

[C]

I don't know. I want you to answer this question because you laid out a very interesting plan that I don't understand why you're, it's, it's strange to me that you are rushing to pay off your mortgage and that you're going into debt to do it without a job. This, this is what I would call emergency mode. But I feel like you're kind of living it like a normal lifestyle. When do you plan on working again?

[B]

Well, I'm looking for a job, but here's the thing here in Toronto, like salaries are very low and I'm being, I'm cherry picking, let's be honest.

[C]

But what caused you to, what caused you to quit your job before you had another one lined up? Was something bad going on?

[B]

Yeah, I just didn't. I was sick of it. I was working for a company eight years and I was tired of it. Like, I was just.

[A]

How are you?

[B]

I need a break.

[A]

How are you eating, Diana? Like, and I'm not being facetious, honestly, like, how, how are you having money to live?

[B]

Oh, again, that's why I've accumulated the 10,000, because I've been paying.

[C]

You're.

[A]

Oh, so you've been paying your mortgage and your lifestyle off this line of credit.

[B]

So that's what. That 10,000 is my mortgage. Yeah. So that's, I mean, accumulated over a year.

[C]

It could have been a lot worse.

[B]

Exactly, exactly. And you know, and technically it's only 8,000. It's crawling up. I'm rounding up here.

[A]

But the thing, how did you get by on $8,000? Did you have savings?

[B]

You know what, I had a little bit of savings and I was technically collecting EI for like 6 months. So let's be honest, only 8k is only.

[A]

Really. I gotcha.

[B]

So I'm very much the way everything.

[A]

Yeah. But I think that there's. Yeah, I would say a couple of things, Diana. So the rush to pay off the mortgage because you have no other debt but the line of credit. Correct, the $8,000 and then that's. That's it. So the rush to pay off the mortgage, number one, we don't tell people to rush to pay off mortgage, their mortgage. We say that it is in the baby steps at which after you're investing, you don't have kids, so there's no kids college. Then you would pay extra on the house. So it's not this urgency to pay it off quickly, but it is an intentionality that you want to pay it off faster than for Americans, the typical 15, 30 year mortgage. We want, we wanted to do it faster than that because your housing line item in your budget, whether it's rent or a mortgage, is always usually the most expensive thing that you pay for every single month. And when that's freed up, that means you have all of that money. And for some people, I mean, it's a thousand or more dollars that's freed up every single month that you can turn around and use for your life or to invest or all the above. Right. So that's the purpose of paying it off. It's not if you have kids or not. It's truly a line item issue in a budget. And when that's when your house is paid off, not only is there emotional freedom because you don't have payments, but there's also a financial freedom because you don't have payments. So for me and you, I mean, you have. I mean, you don't have a lot left. $13,000 on a. Did you say a $700,000 condo? I mean, that's incredible. Diana, I want you to work. I mean, I don't want you to sit there and, like, be racking up debt. And it may not be the job you want, but in the meantime, I would be getting something to earn some kind of money to live off of. So you're not living off debt.

[C]

Yeah, because you plan on living here, right? Or is. Do you have a big plan to sell this and get access to the money? Like, what. What are you thinking? Long term? And by long term, I mean, like in the next eight years, five years?

[B]

Yeah. Okay, so. And here's the thing. I just got back from Jamaica because I was like, look, I know it's not wise. Let's add another couple of grand on that. On that.

[C]

Diana, you're so different. Hold on, hold on.

[B]

But only. Only because I haven't traveled in seven years. You know what I mean?

[C]

And, no, I don't. Diana, I have to tell you, I don't know what you mean, but.

[A]

No, I know, but you don't have a job, Diana. You're going into debt for a vacation. You don't have a job. How much was Jamaica? How much was Jamaica? And how are you paying for it?

[B]

It was only two grand. That was only two friends.

[A]

So you're telling me. I'm not kidding. You're telling. You're telling us. This is great, by the way. I really appreciate you calling because he's a free spirit. You got $8,000, and you're telling me for a full year you have lived off of 8,000. I understand. Six months. You were getting some unemployment and you took a $2,000 trip. So technically, you only had $6,000 that you were using. I just don't know if I believe your numbers. I feel like that's impossible.

[B]

Well, eight grand, because let's be honest. That. That. That credit card payment is this month. So that'll push me over to the 10,000.

[A]

Now we're at 10,000.

[B]

Yes, that's right.

[A]

So, Diana, listen. You're. You're smart. You've. Because you've. You've paid down this condo. That's the reason I'm giving you credit. I'm like, okay, you paid down this condo, so you have something in you that works hard. And you are smart when you're Making an income. But you're not ma. I mean, this isn't smart like what you've been doing so far. The decisions in this last year are, are really, it's just interesting.

[C]

It has the ability to ruin what you have built if you keep this up. And that's my biggest fear.

[A]

It's a rhythm and a pattern that's begun. And I'm, and I'm scared for you to stay in that long term because that it will be financial disaster. You've made so much progress financially, so much in your life. I mean, you look at your condo, I mean, seriously, like, it's amazing. I just don't want you keep going backwards because there's not a job that's paying you what you want. Like just get a job and pay something.

[B]

See, and that goes into my next question because my mentality, maybe it's a good thing I'm calling in because I'm like, maybe I should take another year off and just travel, just enjoy my life.

[C]

Look, look, I get it. Traveling is fun. I'm right there with you. Is it possibly. Is it possible you don't know what you would want to do professionally and instead of figuring it out, it's easier to just.

[B]

Because let's be honest, I don't want to get another admin customer service position where I'm only making 55k. You know, the fact that I was able to pay my mortgage and all that stuff.

[C]

If you could do anything you wanted to do professionally, like if there was no barriers, what do you think you'd do?

[B]

I don't, I don't know. That's. I don't know.

[C]

So you're, you want to go on an Eat, Pray, Love journey and figure out the travel.

[A]

I just want you to have money to do it.

[C]

I do too. Okay, so this is a fun call. I don't think that we're going to convince you to change your philosophy on life right now. I mean, I hope we can, but I think you're, I think you're in a mode right now.

[B]

But you're really just look, because I think. Because I have the cushion because my mortgage.

[C]

Because scenario, you. Here's the thing, you can't, you can't out earn bad spending habits for long. And although you do have this equity built to your own point, it's not like you're saying, you know what, guys, I've got 600,000, you know, $777 of thousand dollars of equity here. I'm gonna sell it and I'm gonna travel the world and use that as.

[A]

My nest that would be a yes.

[C]

That's different but you're holding on to it and you don't seem to have a plan to sell it and for that reason you could look up and really have racked up a lot of.

[A]

Debt and you're starting yeah I mean you're starting halfway to where you were you're just making you have great progress so keep at it so I'd get a job but Diana hold on the line Kelly's going to pick up bring of you Ken Coleman's book and in the book is a get clear assessment because I want you to get some some focus on what you love. I think you I think you have a lot I mean you have a lot to offer the world you offered us a lot you did you were I appreciate the call Diana. Create your free every dollar budget today the simplest way to budget for your life.