My Friend Doesn't Want Me Pay Off My Debt Early (I Owe Him $500k)

Summary

Summary of "My Friend Doesn't Want Me to Pay Off My Debt Early (I Owe Him $500k)"

Podcast Information:

• Title: The Ramsey Show Highlights
• Host/Author: Ramsey Network
• Episode: My Friend Doesn't Want Me to Pay Off My Debt Early (I Owe Him $500k)
• Release Date: February 24, 2025

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1. Introduction

In this episode of The Ramsey Show Highlights, Dustin, a caller in his mid-30s, seeks advice on a complex financial dilemma involving a substantial loan from a friend. He shares his journey through Dave Ramsey's Baby Steps and the current hurdle preventing him and his wife from achieving Baby Step 7.

2. Caller Introduction and Background

[00:10] Dustin:
Dustin begins by explaining that he and his wife have diligently followed the Baby Steps, successfully paying off approximately $350,000 in debt over two and a half years. This achievement has brought them close to reaching their final financial goal. However, a disagreement has arisen regarding the repayment of a significant loan Dustin has from a friend.

3. The Debt Situation

[00:24] Dustin:
"We've knocked out all of our debt. Using the baby steps, we paid off about $350,000 worth over about two and a half years."
Dustin emphasizes the couple's dedication and success in eliminating their debts, which sets the stage for the current challenge they face.

4. The Vacation Home Loan Issue

Dustin explains that prior to his marriage, he purchased a vacation home from a friend, who is financing the loan. The terms include a 4% interest rate over ten years. As they plan to sell their primary residence to pay off the vacation home, Dustin anticipates a $500,000 payoff. However, his friend prefers to receive payments over the agreed period to manage his capital gains tax, complicating Dustin's goal to expedite the debt repayment.

[02:20] Dustin:
"I wish I didn't do this because now I'm in this situation... when we sell our primary home, to pay him off."

5. Advice from Dave Ramsey and George Kamel

Dave Ramsey and George Kamel provide guidance, emphasizing the importance of prioritizing financial goals over personal relationships when necessary.

[04:04] Dave Ramsey:
"Sorry, friend. He gets $500,000 and he's gonna have to pay some taxes on it."
Dave underscores that Dustin has a solid financial plan and that maintaining personal relationships should not override financial responsibilities.

[04:16] George Kamel:
"I just want a friendship over them paying me back."
George highlights the delicate balance between friendship and financial obligations, questioning the authenticity of the friendship if it cannot withstand this financial decision.

6. Discussion on Friendship vs. Financial Obligations

The conversation delves into the potential strains on friendships due to financial transactions. Both Ramsey and Kamel stress that while friendships are valuable, financial agreements should be honored to ensure long-term financial health and peace of mind.

[06:33] Dave Ramsey:
"If he really, Dustin is not your friend anymore after this, then like George's point, then he's looking to make money off of you."

[07:24] Dave Ramsey:
"Listen to your wife... You have a little bit of that people-please in you, Dustin."

Ramsey advises Dustin to align with his wife's perspective and prioritize their financial freedom, even if it means potentially straining the friendship.

7. Key Insights and Conclusion

• Prioritize Financial Goals: Achieving financial independence should take precedence, even when it involves challenging conversations with friends or family.

• Respect Agreements: Honoring financial commitments is crucial for personal integrity and financial stability.

• Communication is Key: Open and honest dialogue with all parties involved can help mitigate misunderstandings and preserve relationships.

[07:50] George Kamel:
"One more reason to not borrow money from friends."

The discussion concludes with a consensus that borrowing money from friends can complicate relationships and recommends maintaining clear boundaries to avoid similar issues in the future.

[07:52] Dave Ramsey:
"This is the Ramsey Show. CHM isn't health insurance. It's a health cost sharing ministry. Check it out for [e-mail] budget."

Dave closes the episode by reiterating the importance of budgeting and financial planning, aligning with the show's overall mission to empower listeners to achieve financial freedom.

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Notable Quotes:

• Dustin [00:24]: "We've knocked out all of our debt. Using the baby steps, we paid off about $350,000 worth over about two and a half years."

• Dave Ramsey [04:04]: "Sorry, friend. He gets $500,000 and he's gonna have to pay some taxes on it."

• George Kamel [04:16]: "I just want a friendship over them paying me back."

• Dave Ramsey [06:33]: "If he really, Dustin is not your friend anymore after this, then like George's point, then he's looking to make money off of you."

• George Kamel [07:50]: "One more reason to not borrow money from friends."

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This episode serves as a valuable case study on managing large financial obligations, especially when intertwined with personal relationships. It underscores the importance of sticking to financial plans and the potential complexities that arise when friendships and money mix.

Transcript

[Dave Ramsey]

Brought to you by chm, a biblically based alternative to health insurance. Learn [e-mail] budget so my wife and.

[Dustin]

I were in our mid-30s and we are so close to baby step 7. We can feel it. But we have one small hurdle that we got to jump over to get there and differing opinions kind of on how to resolve it and hoping to get some advice and maybe you guys can break a tie for us.

[Dave Ramsey]

Perfect. Can't wait. What is it? What's going on?

[Dustin]

All right, so we've knocked out all of our debt. Using the baby steps, we paid off about $350,000 worth over about two and a half years. Wow.

[Dave Ramsey]

$350,000 you guys paid off?

[Dustin]

Yeah, well. Well, not all paid off. We sold stuff. I mean, we had everything under the sun. Wow.

[Dave Ramsey]

Well done.

[Dustin]

Automobiles and campers and I don't even like camping, so. So all we have left now is our primary home, and we do have a vacation home. And what we want to do is sell our primary home and move into the vacation home, which we like better anyways. Net proceeds from selling our main house will pay off our vacation home, which will become our primary residence.

[Dave Ramsey]

Wow. Great.

[Dustin]

Problem. Yeah. So we're ready to go. The problem is I bought the vacation home prior to our marriage and I unfortunately bought it from a friend. He's carrying the note, and when I kind of brought up to him, you know, excited that, hey, I'm going to have a big, big check for you, he kind of pushed back and, you know, he's kind of saying he wants to spread his capital gains tax over the 10 year note that we'd agreed upon at the 4% interest rate and kind of just, you know, park his money in investment. So my question is, how do I, how do I do this? I don't want to burn a friendship. My wife wants me to just slap a check on his desk, but she doesn't have to play golf with him on Saturday morning. So I'm not really sure how to approach this conversation without, you know, so he basically.

[Dave Ramsey]

Yeah, so he basically kept the mortgage in his name and you just pay him the mortgage payment and he pays for it?

[Dustin]

No, we did it all legit. We went through a title and escrow company and we drafted up a purchase agreement. And basically it's. It's just a loan from him. Basically. You know, I did a 20 down payment with him and I do pay him, you know, basically as the bank, but I am on the title, the deed, all that stuff.

[Dave Ramsey]

Okay. Okay. So You're. So it is your home, correct? I mean, yeah, it's your home. And he's just the bank is what that is financing?

[Dustin]

Yes, correct. And I wish I didn't do this because now I'm in this situation, but yeah, basically when I brought up to him that, you know, you know, I owe him about 500,000 and you know, I have the ability will, once we sell this primary home, to pay him off. But he just doesn't sound very excited about it. He wants to just go, per the terms of our agreement, pay it off over 10 years so he can, you know, expense that capital gains over the 10 years rather than.

[George Kamel]

He actually talked to a tax pro to see if this loan repayment counts as income.

[Dustin]

Well, he said that was for. Yeah, so. Well, it does because he has to pay tax on the interest portion of it, I think. And then, you know, on the principal, he's, you know, it's capital gains rate, I believe, because. Because it was paid off for him. Yes. So to answer question, yes, he said he talked to a CPA and basically if I pay it off, he will have to pay capital gains on the proceeds. Yeah.

[George Kamel]

Is there anything in the contract that you signed with him that would prohibit you from just paying it off?

[Dustin]

And that's the issue. There's not. I've read over it a hundred times and it's like, legally and all that, I can go pay it off.

[Dave Ramsey]

Yeah. So boo hoo, friends, here's your 500,000.

[George Kamel]

Did he not make money off of this? Did he not benefit from this whole thing?

[Dustin]

No. Yeah, he's gonna make a lot of money off of it. You know, he bought it 25 years ago, so he's gonna make quite a bit. I, I guess my worry is that I'm either gonna upset my wife or my friend. Right. Because it's like she.

[Dave Ramsey]

Or your life, Dustin. Or your life. You guys have freaking paid off $350,000 in that. Like you guys are on a plan together for your life and you did this side deal with a friend and your life has changed and your priorities and your goals have changed. And so sorry, friend. It's not like you're putting your friend in debt. Boo hoo. He gets $500,000 and he's gonna have to pay some taxes on it.

[George Kamel]

He can wipe his tears with a hundred dollar bills.

[Dave Ramsey]

Like, sorry, dude.

[Dustin]

Right.

[Dave Ramsey]

And I'm being very insensitive. If I were you, I would feel much worse because it is a good friend.

[George Kamel]

I don't have a lot of empathy for the friend.

[Dave Ramsey]

I mean, yeah, Dustin, like, the writing's on the wall. You have to do what's best for you and your family. It'd be very unwise to make an unwise financial decision for you and your family because of the feelings of a friend.

[Dustin]

And so I guess that's. That's just going to be a hard conversation I need to have with him and say, listen, this is 100%.

[Dave Ramsey]

And I think you can give him some time and say, hey, I'm not doing this tomorrow. You know, our goal is to do this in 12 months or whatever the goal is for you guys when you sell your primary home, all of that, like, if you can kind of map out a timeline, give him some time and space and just say, hey, yeah, this isn't happening tomorrow, but it will be happening in the next year. And I looked over the agreement that we signed, and I'm sorry, I know it's not ideal in your situation, but, like, this is. This is our values and our priorities with our families to be completely debt free. And, yeah, this is what we're deciding to do. And again, Destiny, you're not, like, completely screwing the guy. Like, it's, you know.

[George Kamel]

You mean, like, I'm not paying you the debt back?

[Dave Ramsey]

Yeah, sorry.

[Dustin]

Yeah, he's a little older, and that was part of it, too, is he's like, well, you know, and he gave me a great interest rate at 4%. Then he's like, well, you know, I can kind of guarantee to make my 4% of that money where any legacy is a little older. In reality, he can just go park that in a high yield and make that. That was the point I was trying to bring up to him. And he. He just. He'll. He just didn't seem jazzed about it. And it put me in a weird situation where I'm like, man, I don't want to, like, burn a friendship with a guy that I, you know, I've had a long friendship with, but at the same time not matching up with the guy.

[Dave Ramsey]

And I'll be honest, too, if you're a friend, I'm, like, trying to put myself in his position, right? If I ever was in that deal and I had a young guy come to me and be like, you know, oh, my gosh, we're able to get out of this deal because we have the cash, we have the money. We're so excited. We're gonna be debt free. Like, you would hope that it doesn't burn a friendship that, in fact, be happy for you. He Celebrates with you and you know what I mean, Which I know like this way of thinking is different to celebrate being friends and get thankful.

[George Kamel]

A friend paid me back, which is very rare in today's world. And the other thing, Dustin, is that when he loaned you this money, the relationship already changed. It turned into a business partnership transaction and it moved away from friendship. And so this is what happens with friendships. So the truth is if you pay it off and he decides to not be your friend, was he really your friend?

[Dave Ramsey]

Yes, George, he's sure there's a piece of it though. I know what you're saying.

[George Kamel]

I just want a friendship over them paying me back.

[Dave Ramsey]

Like yeah, yeah, that's it.

[George Kamel]

So that's what I'm saying.

[Dave Ramsey]

If he really, Dustin is not your friend anymore after this, then like to George's point, then he's looking to make money off of you. You don't mean like it feels weird if he, if he is going to cut ties with you as a friend because of this move. That's weird.

[Dustin]

Yeah, that would be weird. I don't think that would happen. It's just, I guess I'm, you know, I hate to even say this. I guess I'm kind of just being a sissy about having the conversation because of the vibe I got when I brought it up, you know, a couple times over. And I even told, you know, my thought was just let's just park our money that we make from the primary home in the in a high yield and just pay him off. And then I kind of, you know, we're quote unquote, we feel debt free. Ish. Because the money's there. But my wife says, you know, she's so excited because we did so good on the first, you know, six steps. Call it that she's ready to just finish, finish the journey and be done.

[Dave Ramsey]

Yes.

[George Kamel]

My.

[Dave Ramsey]

Listen to your wife.

[George Kamel]

Her vote counts 1,000 times more than any of my friends. And I love my.

[Dave Ramsey]

And you have a little bit of that. People please are in you, Dustin. I hear it. And so yeah, this is, this is grown up stuff and be a man. Suck it up and talk to him. And again, if he is weird after this because of this whole thing, like that's a, that's a weird guy. Anyway, I'm gonna add this to bizarre.

[George Kamel]

One more reason to not borrow money from friends.

[Dave Ramsey]

That's the new book and family.

[George Kamel]

Yes, all of it.

[Dave Ramsey]

This is the Ramsey Show. CHM isn't health insurance. It's a health cost sharing ministry. Check it out for [e-mail] budget.