“I Have a Big Problem”

Summary

Podcast Summary: "I Have a Big Problem"

Podcast Information:

• Title: The Ramsey Show Highlights
• Host: Ramsey Network (Featuring Dave Ramsey, Jade Warshaw, and other experts)
• Description: A quick, daily dose of advice on life and money in under ten minutes, featuring insights from financial experts.
• Episode: “I Have a Big Problem”
• Release Date: January 9, 2025

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1. Introduction to Katie's Financial Dilemma

In the episode titled “I Have a Big Problem,” Katie reaches out to The Ramsey Show seeking guidance on managing her finances. Faced with significant debt, limited savings, and uncertainty about investing, Katie feels overwhelmed and unsure where to begin.

Notable Quote:

• Katie (00:10): “How do I tackle my debt while establishing an emergency fund and investing at the same time?”

2. Assessing Katie’s Financial Situation

Katie provides a detailed breakdown of her current financial status:

• Savings: $47,230 accumulated since age 16.
• Debt:
  • Credit Card 1: $6,563
  • Credit Card 2: $6,783
  • Car Loan: $11,170
• Household Income: Approximately $60,000 annually.
• Monthly Expenses: Estimated at $6,000.
• Marital Status: Married with one baby.

Notable Quote:

• Katie (00:22): “I’m exhausted of seeing it just sitting there. I want to do something with it. My frustration is I’m not knowledgeable in investing and I don’t even know where to start.”

3. Dave Ramsey and Jade Warshaw’s Strategic Advice

Immediate Action Plan: Dave and Jade commend Katie on her substantial savings and present a clear, actionable plan to address her financial challenges.

Key Steps:

1. Baby Step One: Secure a $1,000 emergency fund.
2. Baby Step Two: Pay off consumer debt using her existing savings.
3. Establish a Robust Emergency Fund: Aim for three to six months of expenses.
4. Begin Investing: Allocate 15% of combined income towards retirement accounts like Roth IRAs.

Notable Quotes:

• Jade (01:15): “The good news is you'll be out of debt basically today if you follow our plans by tonight.”
• Dave Ramsey (04:28): “Three to six months is enough to cover those big things without getting frustrated with low returns.”

4. Detailed Debt Repayment Strategy

Katie's debts are meticulously addressed:

• Total Debt: $24,516, comprising two credit cards and a car loan.
• Jade’s Guidance (02:10):
  • Sell the Boat: Considering selling the watercraft to alleviate debt.
  • Pay Off Debts: Use the majority of savings to eliminate credit card debts and the car loan.
  • Maintain a $1,000 Reserve: Keep a minimal emergency fund to start.

Notable Quotes:

• Dave Ramsey (03:02): “We want to establish new habits so that we don't get back into this place of debt again.”
• Katie (08:54): “You've taken on some debt, right? So there is still a level of risk there.”

5. Building a Strong Emergency Fund and Investing

Post-debt elimination, the focus shifts to building a comprehensive emergency fund and initiating investments:

• Emergency Fund Goal: $26,000 to $27,000 over the next 8-10 months.
• Investment Strategy:
  • Open Roth IRAs for both Katie and her husband.
  • Allocate 15% of their combined income towards retirement accounts.
  • Utilize high-yield savings accounts for the emergency fund to ensure accessibility and security.

Notable Quotes:

• Jade (05:27): “You could effectively say, okay, now I've got my three to six months. And then start investing.”
• Dave Ramsey (06:17): “A Roth IRA is a great option... within that Roth IRA, you'll invest in mutual funds.”

6. Enhancing Financial Cooperation in Marriage

Dave and Jade emphasize the importance of unified financial management within Katie’s marriage:

• Joint Financial Management: Transition from separate finances to a unified household checking account.
• Team Approach: Viewing finances as a collaborative effort strengthens the marital relationship and accelerates financial goals.
• Transparency: Open discussions about income, expenses, and financial responsibilities to prevent future conflicts.

Notable Quotes:

• Dave Ramsey (07:10): “Are you guys working together with your money? Are you guys have a combined checking account?”
• Jade (08:13): “When both people are working together to accomplish one goal, you go faster...”

7. Addressing Emotional and Relational Aspects

Katie’s anxiety stems from past experiences, notably her parents’ divorce over financial issues. Dave and Jade acknowledge the emotional weight of financial decisions and advocate for rational, team-based approaches to mitigate stress and build trust.

Key Points:

• Emotional Security: Transitioning to a debt-free life enhances the feeling of security.
• Mutual Support: Partnering in financial planning fosters unity and reduces individual stress.
• Future Planning: Establishing clear financial goals together ensures long-term stability and peace of mind.

Notable Quote:

• Dave Ramsey (12:01): “With money, emotions drive so much of this. And the more logical we can get, the safer I think you're going to feel with some of these decisions.”

8. Concluding Recommendations and Next Steps

Dave and Jade conclude the episode with actionable steps for Katie:

• Immediate Debt Payoff: Utilize savings to eliminate existing debts, including selling the boat.
• Emergency Fund Building: Gradually save towards a robust emergency fund.
• Investment Initiation: Start investing through Roth IRAs and other retirement accounts.
• Financial Unity: Transition to joint financial management to enhance cooperation and efficiency.

Final Quote:

• Dave Ramsey (15:42): “You have a lot of your income, Katie, leaving, and a lot of it's gonna be coming back to you, and you'll be able to build this emergency fund up back very, very quickly.”

9. Additional Resources Offered

Before concluding, Dave mentions Financial Peace University, a comprehensive nine-lesson course designed to guide individuals and families towards financial stability and peace.

Notable Mention:

• Dave Ramsey (16:35): “Stay on the line. Katie and Emily's going to pick up and we're going to put you guys through Financial Peace University...”

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Conclusion:

In this episode of The Ramsey Show Highlights, Katie’s financial struggles are comprehensively addressed with practical, step-by-step advice. Dave Ramsey and Jade Warshaw provide her with a clear roadmap to eliminate debt, build a substantial emergency fund, and begin investing, all while fostering a unified approach to financial management within her marriage. The episode underscores the importance of strategic planning, emotional resilience, and cooperative financial practices in achieving long-term financial health.

Transcript

[Dave Ramsey]

Brought to you by chm, a biblically based alternative to health insurance. Learn [e-mail] budget I have a big problem.

[Katie]

Well, I don't know if it's too big, but my question is, how do I tackle my debt while establishing an emergency fund and investing at the same time?

[Dave Ramsey]

I can see how you're overwhelmed with that because that is overwhelming, trying to do all of that at the same time. Um, why? What. What's causing you? What's the motivation and trying just to. To get it all done? Do you feel like you're behind on investing? You don't feel like you have enough savings? There's a lot of debt. What. What's causing you to do this?

[Katie]

So I've held onto this large amount of money in my savings account. I started saving since I was 16 and I just, I'm exhausted of seeing it just sitting there. I want to do something with it. My frustration is I'm not knowledgeable and investing and I don't even know where to start. I don't know.

[Dave Ramsey]

Yeah.

[Jade]

How much is it?

[Katie]

It's $47,230.

[Jade]

Okay. And that's just sitting in savings. And then how much debt do you have?

[Katie]

I have $24,516 in debt.

[Jade]

Okay. Well, the good news is we'll give you a plan so that you feel like you're going in a direction and you feel confident about what that direction is. Also, the good news is you're going to be out of debt basically today.

[Dave Ramsey]

If you follow our plans by tonight.

[Katie]

So that's exciting to hear.

[Jade]

It is. Listen, you've done a wonderful job saving and it sounds like you weren't really sure what direction to go. So you kind of just try to do everything. And the way we teach kind of narrows it down and you do one thing at a time for a period of time and then you kind of are freed up to do more. But for you, the first step, and you've already covered it, we always say the first baby step is you just need a thousand dollar saved. You got that? So. So check that one off the list. The next step is we take any additional savings that we have or we work really hard to pay off our consumer debt. And for you, you have the money to do that. So that would be baby step two, pay off consumer debt. Get the green check.

[Dave Ramsey]

That's right. And Katie, what is the 24,000? What kind of debt is it?

[Katie]

One credit card in the amount of 65, 63, another credit card in 6783 and my car, that is 11 170.

[Dave Ramsey]

Okay. So yeah, so part of this paying off debt. For most people that call the show Katie, I would say nine out of ten of them don't have money to pay off these credit cards in this car. So we're going to be talking to them about working, extra sacrificing lifestyle, all of it. But your position is completely flipped because you, you have that cash. So like what Jade was saying is that's a big green checklight. But also Katie, we want to establish new habits so that we don't get back into this place of debt again. So what were you using the credit cards for? The the two.

[Katie]

Just spending monthly spending. I have a problem of I like seeing the money there. I like feeling secure, I like feeling safe. My problem is just letting go of that money.

[Jade]

Listen, I think for personalities like you, when we reframe what security and safe is, I think they thrive even more. Because if you're a person who loves being secure, being safe, you're going to love a debt free life. Because debt really does equal risk. Because using credit cards, that's a form of debt. It equals risk. Because for most of us, we go about our life, right? You put, yeah, maybe you put shopping on the credit card, maybe you take out a car loan. But if you were to lose your job, suddenly you feel the risk of that because you go, oh my gosh, I don't have the income I used to have coming in and I have this car payment due, I have to pay the credit card off. And, and suddenly we feel the risk of that weight that we've been carrying in debt. Right. So if you're a person who says no, I love security, then paying off your debt truly is ultimate security. And then turning around and saving up three to six months, which is the next step, baby step three, having that three to six months of cash sitting there, that's actually your money. It's not money that you owe to credit cards or card notes. That is the ultimate form of security. Because then you can say, no matter what happens, I'm prepared for a storm. If I lose my job, I know I have the money to keep everything going for the next six months. If an emergency comes up, you know, the water heater goes out or something happens with H Vac, I have the money that I can cover it.

[Dave Ramsey]

Yeah. And in the three to six months to Katie is enough to, to what Jade saying when these big things come up to cover with cash. But it's also not so Much that you're getting frustrated that you're not making a lot on a return. Right. So it is that perfect medium. Are you seeing single, married, kids? What's like your life status?

[Katie]

I am married. I have one baby.

[Dave Ramsey]

Okay. So since you like security, Katie, I would go more the six month emergency route versus the three month.

[Jade]

Yep.

[Dave Ramsey]

So I would stick with that six months. Do you know from an operating budget perspective how much money you guys need per month just to keep kind of where you're at? And I, and I'm thinking, you know, mortgage payments, utilities, gas in the car, food, all of that. What. What's kind of a. What would you guess to keep you guys afloat for a month? How much money.

[Katie]

For him and me, myself together?

[Dave Ramsey]

Yeah. As a household.

[Katie]

I want to say roughly 6,000.

[Jade]

Okay. So the good news is you have that even after you pay off the debt, I mean that still leaves you with a little over 20,000. So you could effectively say, okay, now I've got my three to six months. And then to answer your further question about like, do I invest this, what do I do that? Three to six months. You just keep it in a high yield savings account. It's there like we said, it's just that fully funded emergency fund for when you need it. And then above that technically, and, and I know I'm not going to dig into this too much right now, but it sounds like after that your household is debt free. Your household has three to six months of expenses. Now you could start to invest. And the way that we'd say to do that is really just taking 15% of yalls combined income every single month and putting it towards, yeah, your 401k, your Roth IRA, that sort of thing. And it just becomes a kind of set and forget rhythm for you to invest.

[Dave Ramsey]

Yeah. And when you're talking about, you didn't know much about investing, a great place to start, Katie. A Roth IRA is a great option. You and your husband both can open it up, you can both put $7,000 in and that grows tax free. And within that Roth IRA you'll invest in mutual funds. And I would sit down with a smartvestor pro to, to kind of get all this started. And then do you and your husband both have retirement benefits at work, like 401ks or a 403B?

[Katie]

I do not. I believe he does.

[Dave Ramsey]

Okay, so yeah, so I would, you know, use that 15% to fund two Roth IRAs. Go up to the match with his 401k. And how much do you guys Household income wise, are you making a year?

[Katie]

I'll say 60,000.

[Jade]

Okay.

[Dave Ramsey]

Okay. Are you guys working together with your money? Are you guys have a combined checking account?

[Katie]

How'd you know? No, we don't.

[Jade]

I think that's something you need to work towards.

[Dave Ramsey]

What's he say about all this? Does he want to. Does he feel out of control money wise, is he feeling like, a little bit like, oh, gosh, are we on track? Have you guys been talking about it and that's why you called, or is this just you on your own feeling it and you don't know where he's at with finances?

[Katie]

It's kind of, you earn your money, you make your money, we share the mortgage. So you just sell me the money and we're okay with that.

[Dave Ramsey]

Okay. All right.

[Katie]

Yeah. My money's my money and.

[Dave Ramsey]

Yeah. How long have you guys. How long have y'all been married?

[Katie]

Five years.

[Dave Ramsey]

Okay. How are you feeling about that? Do you like how that is? Or would you rather say, hey, we're a team in this and all together, we're, like, working towards our future together with investing and we, we know what's going on.

[Katie]

We're okay with working together. I'm sure he'd be okay with that, too.

[Jade]

Okay, good. I think you should work towards it. I mean, the truth is for a couple of reasons.

[Dave Ramsey]

A.

[Jade]

Just practically, when both people are working together to accomplish one goal, you go faster, and there's not much confusion. It's. This is what we're working towards and we're all pushing towards that same thing. And then there's just the. The relational, spiritual side of you're married and so you're one in all of these other areas.

[Dave Ramsey]

And so. Yeah, sorry, Jade. Does he have debt, Katie? Do you even know?

[Katie]

Yes.

[Dave Ramsey]

How much does he have?

[Katie]

Too much for me to handle. Oh, my parents, they. They. They got divorced because of money.

[Dave Ramsey]

So that's a big fear.

[Katie]

The background, my husband, he's. He has let some. A few credit cards go to collections recently. As soon as my daughter was born. He just. He's been underwater for what feels like a long time, probably two years already. And if I mention this, you're going to say sell it. Well, tell us the truck.

[Jade]

It's the truck.

[Katie]

He has 11,000 left on it, but it's these monthly payments of $600 that he wants to be free from.

[Dave Ramsey]

Okay. Okay. What other debt does he have? What's the credit cards and collections? What are, what are those amount to?

[Katie]

Do you know, I want to say roughly, it's 7,000.

[Jade]

Okay, anything else?

[Katie]

Now you've opened my eyes. Not. No, not that I know. Maybe I need to have a discussion with them.

[Jade]

I think so. Because don't get me wrong, I hate debt and I don't like any amount or form of debt. But I was again expecting for you to say like, he's got $200,000. I was expecting something way more astronomical. And when you told us, hey, yeah, he's got $18,000 of debt, I kind of just was like, oh, okay, cool. Like we can pay that off. And he's working, right?

[Katie]

Yes, he is. Okay, let me dig deeper. I just. It just came in. So he has. We have this watercraft boat.

[Jade]

Okay.

[Katie]

It is under both of our names, but he takes financial responsibility for it. And the balance is 11,000.

[Jade]

Okay, so there's another 11K.

[Dave Ramsey]

What else? Anything else?

[Katie]

Aside from his truck, the car and a few credit cards, there is nothing else.

[Jade]

So a truck and a car.

[Katie]

Sorry, the. The truck and the boat.

[Jade]

Okay, truck and the boat. So we're 28,000.

[Dave Ramsey]

How much. How much is the boat worth? Do you know?

[Katie]

No idea.

[Dave Ramsey]

Okay.

[Katie]

Okay. We haven't looked into it. It's very precious.

[Dave Ramsey]

Okay. And does he have any money saved in his name?

[Katie]

No.

[Dave Ramsey]

No. Okay. So. Okay, so, Katie, I think what this starts to open up and what you're feeling, and correct me if I'm wrong, but it is touching every security insecurity part of your story and in your life, like you've everything you can to stock money away, even taking out credit cards and spending over here. But just knowing the safety of money has been a lifeline for you and probably coming out of a lot of pain from your parents experience. And you've done everything to safeguard yourself, right, Against. I would say against debt. But what's funny is you've taken on some debt, right? So there is still a level of risk there, but you've padded yourself with the savings and it's kind of become your lifeline and, and you're gripping onto that and letting go of that is one of the scariest things for you to do. Would that be correct?

[Katie]

Yes.

[Dave Ramsey]

Yeah. Which is very understandable, Katie. Very understandable. And so I want you to as much as you can, because with money, emotions drive so much of this. And the more logical we can get, the safer I think you're going to feel with some of these decisions. And one of the first steps I would do is sit down with him because I don't know his. I'm not on the phone with him. And I can't ask him these questions. I don't know where he's at. If he is at a place, Katie, that he's like, I'm so overwhelmed. I'm so mad at myself. Right. He's probably not feeling great about himself. And it's like, I want to change. I want to turn this around. That's, that's one scenario. A scenario I would have a red flag and cause you to pump the brakes a little bit on all of this. If he's like, I don't care, I don't care. I'm going to do what I want. And we get those calls too, with some guys that are like, well, he wants to buy the truck. He doesn't care. He's going to buy it. And we're, you know, we can't make the payment, but he doesn't care. Right. So, like, that is a character issue. If it's. That, would you say it's kind of the first scenario or the second?

[Katie]

I'm pretty sure he will call the show tomorrow.

[Dave Ramsey]

Yeah, but so he's more of. On the first and on that first, you know, scenario, you would say he's all for it. Okay. Okay. So, Katie. Okay, I, I just, I want to encourage you that you're. This is all good, right? Like, I, I know you feel overwhelmed and we're gonna walk you through a very clear plan right now. So the first thing I want you to do is you guys together tonight. You can open a bottle of wine if you need, like just a good.

[Jade]

Sip of something, order a pizza, whatever.

[Dave Ramsey]

You gotta do to relax and say, okay, together we're going to look at everything. We're getting out our pay sub stubs. We're going to. Exactly. Because when I asked you how much money you guys make a year, you said, I think around six. Like, I want you to know, to the dollar, here's what we make combined, here's every debt. We're going to write it out and we're going to know everything here. And we're going to tonight shake hands and say, we are now a team together. No longer are we roommates, Venmo. Ing each other for the mortgage. No, screw all of that. No. We are one. Our income. When our income hits our new checking account that we're going to open on Monday morning, when our income hits that account together, we are working as a team. Because when you do that, Katie, not only from an emotional perspective, does it create so much unity and so much of a more beautiful marriage? Because you see yourselves as one, which is what you do when you choose to get married, to live life with another person. You're. You're living that out on a tactical little sense with your money. So that's such a beautiful part of it. And then together, tactically, as you start to trust each other in this, you're going to have this cleaned up. Katie. I would sell the boat immediately, but then by Monday, you guys can take this 47,000. And this is going to scare you, but I would pay off all. I would keep a thousand. And. And. And you would have. You have, I think, 42,000 if you. If you don't count the boat, because I want that sold, right. You're going to pay off everything else. Okay? And so you're gonna have $5,000 left. And you guys together are gonna have a goal, I would say, to save up Probably, I don't know, 26, 27,000 for an emergency fund. And you're gonna. That's your next goal together, Katie, is to work to buff up that emergency fund. Okay? And that's gonna take you guys, you know, maybe the next eight, nine months, ten months to do all of that for that emergency fund. But together, that's gonna be your goal for 20, 25 together, doing this, getting rid of the payments. We're done with payments. And now you're going to have your full income to be putting towards this emergency fund. What did you say?

[Katie]

Yeah, I would have 5,000 left. So I'm paying off my two credit cards?

[Dave Ramsey]

Yes.

[Katie]

I'm paying off my car?

[Dave Ramsey]

Yes.

[Katie]

Selling the boat. And you suggested paying off the truck.

[Dave Ramsey]

Yes.

[Katie]

Oh, gosh, that's scary.

[Dave Ramsey]

Is it scary because of what's going to be left? The 5,000 or it's scary that you're paying off his debt?

[Katie]

That's great.

[Jade]

You know what might make it less scary? If I were you, I'd calculate up all the monthly payments. I'd calculate what you're paying in car payments, what you're paying in credit card payments, what he's paying in credit card payments, what he's paying in boat payments, and what you're paying in truck payments. Add up all that money, and when you see that, that you're gonna have that back every single month, I think that's gonna make you feel less scared. Cause that's a lot. That's a hefty chunk.

[Dave Ramsey]

You have a lot of your income, Katie, leaving, and a lot of it's gonna be coming back to you, and you'll be able to build this emergency fund up back very, very quickly. And then beyond that, you can start investing. Hold on, stay on the line. Katie and Emily's going to pick up and we're going to put you guys through Financial Peace University. It's our nine lesson course and give you every dollar premium. So when you guys start looking at numbers today, you can start building out your first budgets. CHM isn't health insurance. It's a health cost sharing ministry. Check it out for [e-mail] budget.