The Baby Steps Break You out of the Paycheck-to-Paycheck Cycle

Summary

The Ramsey Show: The Baby Steps Break You out of the Paycheck-to-Paycheck Cycle

Release Date: February 7, 2025

Introduction

In this episode of The Ramsey Show, host George Campbell and co-host Dr. John Belloni delve into strategies for escaping the paycheck-to-paycheck cycle using Dave Ramsey's renowned Baby Steps framework. They address various callers grappling with financial challenges, offering tailored advice to help them build wealth, eliminate debt, and achieve financial freedom. Throughout the episode, George and John emphasize the importance of aligning financial goals with personal values, fostering healthy relationships, and making informed financial decisions.

---

Caller 1: Hunter from Calgary, Canada

[00:40]

Hunter, a 22-year-old heavy-duty mechanic, reaches out seeking advice on purchasing a home. He has saved over $120,000 and wishes to buy a house without relying on credit cards—a principle he fervently follows based on Ramsey’s teachings. However, his girlfriend disagrees, favoring credit card usage for its perceived flexibility.

Notable Quote:

George Campbell [03:17]: "As part of our future together, I want to make sure we're aligned with money... Would you be willing to read this book with me about personal finance or listen to the audiobook?"

Advice Given: George recommends that Hunter and his girlfriend read Breaking Free from Broke together to foster discussions about financial alignment. This approach promotes mutual understanding and collaboration rather than confrontation, strengthening their relationship while addressing financial discrepancies.

---

Caller 2: Noah from Toronto, Canada

[10:10]

Noah, a 21-year-old aspiring entrepreneur, contemplates whether to finance a $15,000 car purchase outright or take a loan. His parents advocate for a loan, suggesting that the interest saved could be invested in the stock market for higher returns.

Notable Quote:

George Campbell [12:11]: "There are no guarantees in the stock market... cars are one of the dumbest things to go into debt for because they're continually going down in value while you pay interest on it."

Advice Given: George advises Noah to pay cash for the car, highlighting the financial wisdom of avoiding depreciation and interest payments. He emphasizes prioritizing financial stability over leveraging debt for potential, but uncertain, market gains.

---

Caller 3: Alan from Nashville, Tennessee

[21:20]

Alan, a 22-year-old living paycheck-to-paycheck, seeks guidance on whether to invest spare funds into his two fledgling businesses or save for a future home. With no current savings and a fluctuating income, Alan faces the challenge of balancing immediate financial pressures with long-term aspirations.

Notable Quote:

George Campbell [24:54]: "Then beyond that, we can talk about investing for the future and retirement accounts. Saving up for a house, starting a business. That's when you would do that."

Advice Given: George emphasizes the importance of establishing a financial foundation by eliminating debt and building an emergency fund before pursuing investments or homeownership. He advises Alan to stabilize his finances first, ensuring he can handle unexpected expenses without jeopardizing his financial goals.

---

Caller 4: Jefferson and Rachel from Twin Cities, Minnesota

[31:58]

Jefferson and Rachel, both 33, share their success story of achieving a net worth of over $1,020,000 by aggressively paying off their mortgage and investing diligently. Having recently paid off their $400,000 house in just two years, they exemplify the Baby Steps approach to financial freedom.

Notable Quote:

Jefferson [35:37]: "The piece that we have... having a paid-for house, being able to make decisions about what we want our life to look like... brings us so much joy."

Advice Given: Their journey underscores the benefits of focusing intensely on debt elimination to gain financial independence. By reducing major expenses like a mortgage, they’ve liberated resources for investments and personal growth, providing a template for listeners aspiring to similar financial milestones.

---

Caller 5: John from San Diego, California

[43:03]

John faces a dilemma where his girlfriend, a physician with $472,000 in debt from medical school, moves in with him and pressures him to propose marriage. John is concerned about their financial alignment, fearing that her substantial debt may impede their financial stability and shared goals.

Notable Quote:

George Campbell [48:32]: "She’s gonna spend her whole life comparing hers to others. That is a red flag in and of itself that I think you need to address with her."

Advice Given: George advises John to have an honest conversation about their financial values and goals. Aligning on debt management and financial priorities is crucial for a harmonious relationship. He suggests setting clear financial boundaries and ensuring both partners are committed to tackling debt collaboratively before making significant life decisions like marriage.

---

Caller 6: Alec from West Palm Beach, Florida

[54:09]

Alec and his wife, both in their early twenties, are eager to purchase a home priced significantly below market value. Alec grapples with advice from his father to pay cash versus recommendations from his financial advisor to take out a loan to continue investing.

Notable Quote:

George Campbell [56:15]: "Any advisor saying you're gonna get 15 to 20% in this account is lying to your face."

Advice Given: George supports Alec’s inclination to pay cash for the house, cautioning against overly optimistic investment returns suggested by biased financial advisors. He emphasizes the security of owning a home debt-free, which provides financial flexibility and peace of mind, over leveraging investments with uncertain outcomes.

---

Caller 7: Timothy from Oklahoma City, Oklahoma

[75:24]

Timothy, married for a year and on Baby Step Two, seeks advice on managing inherited debt from purchasing a house from his relatives. With student loans and a pending transfer of the house deed, Timothy contemplates whether to save the owed $60,000 for future payment or invest it to manage a potential mortgage.

Notable Quote:

George Campbell [79:17]: "Once you free up the payment, that'll help even more. So I like this plan."

Advice Given: George recommends prioritizing debt repayment and building an emergency fund before considering investments. By eliminating existing debts and securing financial stability, Timothy can approach homeownership with greater confidence and reduced financial strain, ensuring a solid foundation for future financial endeavors.

---

Caller 8: Sarah's Brother from New Orleans, Louisiana

[83:03]

Sarah’s brother seeks guidance on assisting his sister, who is being sued by a bank for unpaid credit card debt totaling $22,000. Despite paying off some of her debt, she has fallen behind on minimum payments, leading to collections and legal actions.

Notable Quote:

George Campbell [84:28]: "I would go that route to avoid this escalating. But there's nothing much else you can do if it's already."

Advice Given: George advises addressing the collections aggressively by negotiating settlement agreements or payment plans to prevent further escalation. He emphasizes the importance of supporting Sarah in breaking the debt cycle, advocating for immediate action to resolve outstanding debts to restore her financial health.

---

Conclusion

Throughout the episode, George Campbell and Dr. John Belloni effectively illustrate the transformative power of Dave Ramsey’s Baby Steps in overcoming financial instability. By addressing diverse financial concerns—from managing debt and purchasing assets to fostering healthy financial relationships—the duo provides actionable insights and relatable advice. Their empathetic approach underscores the importance of financial alignment, disciplined saving, and strategic debt elimination in building lasting wealth and achieving financial freedom.

---

Notable Quotes Recap:

• George Campbell [03:17]: "As part of our future together, I want to make sure we're aligned with money... Would you be willing to read this book with me about personal finance or listen to the audiobook?"

• George Campbell [12:11]: "There are no guarantees in the stock market... cars are one of the dumbest things to go into debt for because they're continually going down in value while you pay interest on it."

• George Campbell [24:54]: "Then beyond that, we can talk about investing for the future and retirement accounts. Saving up for a house, starting a business. That's when you would do that."

• Jefferson [35:37]: "The piece that we have... having a paid-for house, being able to make decisions about what we want our life to look like... brings us so much joy."

• George Campbell [48:32]: "She’s gonna spend her whole life comparing hers to others. That is a red flag in and of itself that I think you need to address with her."

• George Campbell [56:15]: "Any advisor saying you're gonna get 15 to 20% in this account is lying to your face."

• George Campbell [79:17]: "Once you free up the payment, that'll help even more. So I like this plan."

• George Campbell [84:28]: "I would go that route to avoid this escalating. But there's nothing much else you can do if it's already."

These quotes highlight the key financial principles and strategies discussed, reinforcing the episode's focus on disciplined financial management and proactive debt elimination.

Transcript

[George Campbell]

Foreign Ramsey network. This is the Ramsey show where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, joined by my good friend Dr. John Belloni. And we're taking your calls at 888-825-5225. Call us up and we'll right next step for your life and your money. Hunter's gonna kick us off in Calgary, Canada. What's going on, Hunter? How can we help?

[Dr. John Deloney]

Hey, so I believe in the Ramsey method. Saved up good amount of money. I want to buy a house. I have this girl, like, I want to marry her, but she doesn't believe in. She believes in like, credit cards. And I don't want credit cards because that's what you guys teach. How can I convince her? She thinks that, like, you can't rent a place or you can't get a house. And I've tried to explain it otherwise. What do you guys think?

[Caller]

How have you tried to explain it? Like role play it with me. How have you tried to teach your girlfriend or to talk to your girlfriend about the way she thinks about a problem is wrong?

[Dr. John Deloney]

Well, I just. I don't know. I try to go soft like you guys do. I don't know. I'm like. While this served me well, the Ramsey method served me well. I saved up over like $120,000. I'm only 22 years old, I think. Yeah, I think there's just less risk. But.

[Caller]

So you are making. I don't want to over gender this. Okay. You are doing it exactly the way I would have done it at 22, which is. I would have sat down with a spreadsheet and said, look how old I am. Look how much money I am. And by the way, can I just.

[Dr. John Deloney]

Yeah.

[Caller]

George and I high five you.

[George Campbell]

You're doing.

[Caller]

Man. 99 of Americans don't have as much money as you have in the checking account.

[George Campbell]

So it's because he's in Canada.

[Caller]

Yeah. O Canada. There you go. Well, on behalf of Americans, they don't have that much money either, but so you're doing a great job there. But I think getting beneath that is. Is. Is the only way I've heard and. Or seen it be successful, which is I don't want like you. You. You firsthand know the turmoil that's been going on in the Canadian government over the last few years, right? The last few days.

[Dr. John Deloney]

Yeah. Yeah.

[Caller]

To your girlfriend.

[Dr. John Deloney]

Years. Yeah.

[Caller]

I'm nervous and scared about any entity, car dealership, anybody owning me and you.

[Dr. John Deloney]

Okay. That's a Good way to put it.

[Caller]

This is about safety. This is about. I want to have. I want to have a family with you. And I want us to control our destiny. I don't want a bank to tell us that you can't stay home with the kids. I don't want a government to tell us that we have to leave our house. I want us to be completely free. And that's. That's a different conversation than the roi. George and I get calls all over the. The world about, well, I've got a 2.7% mortgage, but a 5. I don't care. I'm going to start with freedom. I don't want anyone to own my family.

[Dr. John Deloney]

Yeah.

[Caller]

And if she says, screw you, you know how good of a deal we can get on a suburban? Then you all have a deeper relationship challenge, right?

[Dr. John Deloney]

Huge one. Yeah.

[George Campbell]

And, Hunter, I cover in my book Breaking Free from Broke. I went through every single thing I've ever heard about using credit cards, and I debunked it. Not with just opinions, but with facts, with research, with my experience with hundreds of others. And so I'm going to send you a copy of Breaking Free from Broke, and here's what I would do.

[Dr. John Deloney]

Hey.

[George Campbell]

As part of our future together, I want to make sure we're aligned with money, because I know that money fights and money problems are one of the leading causes of divorce, and I want this relationship to succeed. Would you be willing to read this book with me about personal finance or listen to the audiobook? Would she say yes?

[Dr. John Deloney]

I think so. Yeah.

[George Campbell]

Because then it's not you telling her, it's, hey, what do you think about that chapter that was interesting, like how he was talking about how you can rent a car without a debit card and the steps you need to take to buy a house without a credit score. And then it starts a conversation instead of you telling her how it's going to be. And I think that will help this go better.

[Caller]

It's awesome.

[Dr. John Deloney]

Thank you.

[Caller]

This is for you, dude. But it's also for everybody listening. It's really important that a future husband and wife, a current, you know, like just a partnership, Right? Two people who are married, their values are aligned, but, dude, beliefs will change all over the place. My wife and I believe different things, right? Yeah. That's why we read different books, listen to podcasts. Like, I want my beliefs to always be challenged and always be changing them. It gives us stuff to talk about when we go on dates, but our values are aligned. And so maybe a fun exercise for y'all too is like going into marriage, by the way. They'll change over time. But going in, what do we value? And if you start with as for me and my house, I'm really gonna value being free. Nobody's going to tell me what I have to do. I'm going to be able to control my destiny. And I want me and my wife to have that, to share that. Who could, who can disagree with that, Right?

[Dr. John Deloney]

No, it's true. It's a good way to put it.

[Caller]

And then she'll give you some values and then from there you can get into the belief stuff. And belief is where the fun fights and the fun no ways. And the fun like, oh, you changed my mind. That's the beauty of relationships that I love George and I believe different things. He believes that there's a Sasquatch. I don't think there is, but he does. Right? Yeah. And so that's awesome. But both of us value like hanging out as friends. And so that value is going to override any silly beliefs either one of us have. Right.

[Dr. John Deloney]

Okay. That's awesome.

[Caller]

Values are different than beliefs. And so good for you.

[Dr. John Deloney]

Yeah.

[Caller]

And tell me your age again and how much you have saved up.

[Dr. John Deloney]

I'm 22 and I have over 120,000 saved up and I'm making over six figures.

[Caller]

And what do you do, man? Do you like, dispose of bodies? What do you do?

[Dr. John Deloney]

I'm a heavy duty mechanic.

[George Campbell]

Close enough.

[Caller]

Hold on. You can't make that kind of money doing heavy duty machinery stuff. You can only make that kind of money if you're a physician. Is that true?

[Dr. John Deloney]

No. You know, work hard, put your time in. Yeah.

[George Campbell]

Do you go to college or trade school?

[Dr. John Deloney]

Yeah, I went to trade school.

[George Campbell]

How much was it?

[Dr. John Deloney]

Maybe, I don't know, $8,000 total tuition.

[George Campbell]

That's pretty sweet, Roi. You paid cash for it? No debt.

[Dr. John Deloney]

Yeah, cash. All cash.

[Caller]

Oh, my goodness, Hunter, you're making a whole bunch of listeners, like millions of people very uncomfortable. I hope, I hope so because right now they're watching a lot of news thinking that everyone else is going to save their, their problems. And then there's guys like you. It's like 8, 000 bucks. Game on. Good for you, brother. I'm proud of you, dude.

[George Campbell]

Thanks for the call.

[Caller]

It's an honor that I got to talk to you today that I like, man.

[George Campbell]

There's an angry parent listening who's like, I just. Four years of college is 200 grand for a sociology. Oh my gosh. What do we do? What did we do? Hunter's making 100 grand.

[Caller]

And there's also millions of fathers of 22 year old daughters who are like, no, no, Hunter, before you marry her, here's my daughter's number. Right? You mean you're going to be a person of integrity and you're going to work real hard and you're committed to a household of freedom for the rest of your life. Amazing.

[George Campbell]

I like making a bet with this girlfriend going, hey, let me be wrong, cut up the cards. Let's live our life. And let me be wrong. If we end up hitting a wall because of this issue.

[Caller]

Okay, that could be a fun. So we're going to put. I'm going to put 5,000 of my 125,000 in an account if we ever go to get an apartment and we don't have a place to live because we don't have a credit score. That 5,000 bucks is. We're going to put it in the budget that month as spend a thon.

[George Campbell]

Her spending money.

[Caller]

That's right.

[George Campbell]

That's a fun game to play.

[Caller]

It could be.

[George Campbell]

I love that. Well, Hunter, hang on the line. I'm going to send you a copy of the book Breaking Free from broke and in there, specifically the credit cards chapter and credit score chapter. Those two will unlock a whole lot for you and your girlfriend about how to live outside of the system. Yeah, that's why I wrote it, John. I wanted people to buck the system entirely because they go, I, I hear this. Well, George, you can't live life without. You're so out of touch that you think you need a credit score and a credit card to live your life. I'm like, you're out of touch thinking this is the only way to live. You've been so brainwashed.

[Caller]

Can we, can everybody just recognize it's not so much about living outside the system right now. The system as we know it is being taken apart brick by brick right in front of us. So you're gonna be on a different train. I want to be on a train that I'm driving. Not that I get thrown in the back of because there was no other options. Right?

[George Campbell]

That's right. John's gonna be driving. It's gonna be an autonomous, autonomous vehicle. John, will you actually be driving? We don't.

[Caller]

I'm gonna keep my old truck just.

[George Campbell]

For that reason with the stick shift. This is the Ramsey show.

[Dr. John Deloney]

There's a time in your life and.

[George Campbell]

Did the baby steps for renting, but you don't want to do it forever because when you rent, you're still paying for a mortgage, just somebody else's. Plus, rent means instability in your budget because it always goes up, never down. So when you're ready to buy, make sure you work with a mortgage partner. You can rely on Churchill Mortgage. Churchill is Ramsey trusted to help you make the move from renting to home ownership wisely.

[Dr. John Deloney]

Churchill understands that when you buy a home the Ramsey way, your mortgage payment.

[George Campbell]

Will be a consistent, manageable part of your monthly budget.

[Dr. John Deloney]

Plus, when your home is paid off.

[George Campbell]

That was your largest expense. Now it's extra money in your pocket.

[Dr. John Deloney]

And an asset towards turning you into.

[George Campbell]

A baby steps millionaire.

[Dr. John Deloney]

So get started on the American dream.

[George Campbell]

Of home ownership [e-mail] that's churchillmortgage.com this is a paid advertisement in MLS ID 1591 in mlsconsumeraccess.org Equal Housing Lender, 1749.

[Caller]

Mallory Lane, Suite 100, Brentwood, Tennessee, 37027.

[George Campbell]

Welcome back to the Ramsey Show. I'm George Campbell joined by best selling author Dr. John Baloney. Taking your calls at 88825. 5225 to Canada again. We go to Toronto. Noah joins us there. What's going on, Noah?

[Dr. John Deloney]

Hi.

[George Campbell]

How are you guys doing? Well, how can we help?

[Dr. John Deloney]

So I'm 21 years old. I know pretty much next to nothing about finance. And right now, currently I'm sharing a vehicle with my mother. And over the next couple years, I'd like to sock away some cash and buying my own car. And the car I want to buy will be worth a resale value of roughly 15,000 by the time I want to buy it. My parents suggest that I take out a loan on this car instead of paying up front with cash, which, I mean, I've been listening to the show for a little bit, but even just on my Basic instinct doesn't really seem totally right. I mean, if I have the cash and if it doesn't swap my net worth, then I don't see why I shouldn't just pay up front for it. And basically their argument to why I should do this is they claim that the interest that I'd be paying on the car loan would be less than the interest that I would gain through some sort of stock market portfolio with the rest of the cash.

[George Campbell]

Got it. So they're saying, hey, you could leverage that money in the stock market instead of sinking it into a car.

[Dr. John Deloney]

Yeah.

[Caller]

So I, and I'm wondering, George is the finance George. George knows way more about numbers than money than I do. My first response to that is maybe, right? So maybe like just, just number for number. So if you get a car at 7%, maybe you can put it in the market and get 8%. So maybe. But that evaluation doesn't take into consideration that the value of that car goes down every day. And so it doesn't factor depreciation. So you're paying money back on something that's worth less and less every single day. Do you get what I'm saying? So you're trading one thing for another. But if you don't factor in the depreciation cost of that, of that used car, then you're not taking in the entire financial picture.

[Dr. John Deloney]

Right?

[George Campbell]

And there are no guarantees in the stock market and I don't know what they're invested in and what's going on in Canada. But I'll tell you, here in the US we don't know what the future holds. And there's a guaranteed return when you pay cash for that car instead of going, all right, I spent 15 grand and in the end I paid 20 with interest and now the car's only worth 10 by the time I pay it off. That's the reality of the math of how cars work. And therefore cars are one of the dumbest things to go into debt for because they're continually going down in value while you pay interest on it.

[Caller]

And your, your, the market return may be lower like so I think a couple years ago, I'm trying to remember off top my head, but I think my whole thing went down 17% last year it was up 24% or something like that. That's cool if I'm looking at a 50 year play, right? Or if I've got this stuff in the market for 30 years, if I'm holding a four year car note, that's horrifying because the one consistent that never changes is that car payment is due every month no matter what you I'm saying. So I, it sounds to me, tell me if I'm wrong, your parents just want to stop sharing a car with you.

[Dr. John Deloney]

I mean it's kind of just the car was actually my idea like to save for my own car. It's just the car we're sharing, or at least the one I'm sharing with my mother is quite old. And you know, by the time I'd be getting this other car, that car will probably be about 20 or so years old.

[George Campbell]

So why did she pay off her car? Did they pay cash for theirs?

[Dr. John Deloney]

I actually don't know.

[George Campbell]

Might Be something. If it's such a good idea, why aren't they doing it? They should be taking out as many car loans as they can get and putting into the stock market, beating the market.

[Dr. John Deloney]

Right? I know that the car that my father bought when I was very young, I know he took out a loan on that one. But the most recent one he bought, he paid fully cash for.

[George Campbell]

What a dumb idea that was. He could have been leveraging that in the stock market. Noah, do you see where I'm going with this? It's okay to be misaligned with your parents.

[Dr. John Deloney]

I'm confused.

[Caller]

Yeah, don't be confused. Here's this. Your mom and dad have whatever algorithm they've worked out, they think it's the best, and they're probably trying to love you in the best way they know how. It's all good.

[George Campbell]

They're not bad people.

[Caller]

They're not bad people. The reality is, the best thing I can tell you is at my house, in George Campbell's house, in Dave's house and Jade's like, we write a check for cars almost always. Unless you're Dave. Almost always used cars.

[George Campbell]

And if it gives you any solace, I still disagree with my father to this day. Anytime we talk about money. So this is just a thing of life you're gonna have to get used to.

[Caller]

Me and my father do not talk about money anymore.

[George Campbell]

We just laugh it off and go, oh, thanks, dad. I'm good. I'm good. But the truth is, Noah, you can do this on your own. And you're a grown man who probably will soon move out and have his own life. Right, of course. And they don't pay your bills, and so they're not going to get a vote in your financial choices. And so you got to do what is in your gut is the best thing for your financial future. And, you know, too much to go into debt at this point. And so the next goal is how do I save up really quickly to get a car I can afford in cash? How long will that take?

[Dr. John Deloney]

Okay.

[Caller]

It's gonna take you about two years, you said.

[Dr. John Deloney]

Oh, you were actually asking. Oh, yeah. It'll take about. About two years. Yeah.

[George Campbell]

Are you living at home?

[Dr. John Deloney]

If I. Yeah, I am.

[George Campbell]

What do you make a year?

[Dr. John Deloney]

I could sit per year. I'm not totally sure. I mean, I'm about to be hired for a landscaping company that pays about 22 per hour, which is roughly, I guess, 5,200 per month before taxes and pension deductions and all that.

[Caller]

So you could have a car in five months.

[George Campbell]

Yeah. I don't like this two year plan where you're saving up, you know, 5, 600 bucks a month. You should be able to save up, you know, a grand a month and knock this thing out within a year.

[Dr. John Deloney]

No, absolutely. I guess. I mean, yeah, you're absolutely right. I guess I'm just not too much of in a rush to get a whole separate vehicle, you know what I mean? I guess.

[George Campbell]

Well, the longer you're tethered to mom's vehicle, the longer this is going to get played out where you're just intertwined with family finances. I'd love to see out on your own. And that's going to give you a sense of independence, maturity. And I've just seen it too often where growth is stunted, when you stay at home for too long, when you don't need to.

[Dr. John Deloney]

You're right.

[George Campbell]

So even if you get three roommates, you grow up fast when you're living with three dudes. All right, you start to learn some things and it prepares you for marriage.

[Caller]

And it boosts your immune system too, because a house full of guys is disgusting.

[Dr. John Deloney]

Absolutely.

[Caller]

Just kind of as a general, I'll.

[George Campbell]

Tell you, my, my mom was just in town, Noah. I revert to a child, right? She's like, no, I'll get the dishes, I'll fold the law laundry. There's just a piece of you that turns into a child when mommy and daddy are there. And so I think it's going to really help you financially, spiritually, emotionally, mentally to move on and do your own thing sooner rather than later.

[Dr. John Deloney]

I agree.

[Caller]

But good gut instincts, brother. You're on your way, man.

[George Campbell]

I love it.

[Caller]

It's awesome.

[George Campbell]

That's big. So, John, this comes up a lot. There's a rub between. There's a thing this other person believes and they're projecting it onto me. And I love this person, I respect this person. And it's easy to say, well, just have a boundaries conversation and tell them to kick rocks and pound sand. But the reality is these are your parents, these are your loved ones.

[Caller]

Right. Can I tell you what I think? So what's happening? Our culture has told us if you have a disagreement with someone, you have to hate them. If somebody believes strongly about debt and you believe strongly about borrowing money, then inherently we have to hate each other. If you vote differently, if you want to go to this church and I want to go to this church, we have to hate each other. And that's so nonsense. The whole. I, I know he's from Toronto, the whole American exchange. The whole idea of the United States is you believe this, I believe this, and we're going to figure out, figure out a way that we can both live together, move forward. So, man, people like your parents, most of the time there are evil actors out there and there's morons out there. Most of the time a mom and her dad sits down and well intentioned gives their kid what they think is the next best right step for them, period. So you don't have to hate them and you don't have to do everything that they say all the time. Especially when you're a grown up now. If you're 22 and you still live in mommy's house and you're borrowing mommy's car, then you're gonna do what mommy says. And if mommy says be home at 10:30 at night because I'm uncomfortable with those what's going on out on these streets because I watch tons of news, then you have a choice. Be home at 10:30 or move out. Right? But that's the world we're in. So golly, dude, if you can make peace with people who just have different thoughts than you and then go do what's the next right move? Especially. I love what he said. My guts are telling me this is the wrong thing. Follow your guts, man. Just, it's just the wrong move.

[George Campbell]

Apparently Multiple. This is plural. Guts.

[Caller]

Yeah.

[George Campbell]

I thought you had one. But I love that John has multiple. That's the kind of man he is.

[Caller]

Yeah. And he's got biology and science.

[George Campbell]

Hashtag microbiome. We'll look into that later. Hey, more of your calls coming up. 888-255-2225. This is the Ramsey Show. What does the future hold for business? Ask nine experts and you'll get 10 different answers. Economic growth or a recession. Business taxes will go up or down. AI will help us work or it.

[Caller]

Will replace us all.

[George Campbell]

But there's no such thing as a crystal ball. That's why more than 40,000 businesses have future proofed themselves with NetSuite by Oracle. The number one cloud enterprise resource planning system. Ramsey Solutions uses NetSuite and you should too. Whether your company's earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities with one unified business management suite. There's only one source of truth for the visibility and control you need to make quick decisions. NetSuite's real time insights and forecasting help you see into the future with actionable data. And when you're closing the books in days, not weeks. You can spend less time looking backward and more time focusing on what's next. And speaking of what's Next, download the CFO's guide to AI and machine learning at netsuite.com Ramsey it's free at netsuite.com Ramsey welcome back to the Ramsey Show. I'm George Camel here with Dr. John DeLoney. One of the best things to do for your finances is to have a really good tax pro in your corner that you can trust. They'll help advise you on the best moves to make for your situation or for your small business, especially if you've had some big life changes in the past year. So do what John and I do. Go to ramseysolutions.com taxpro to find CPAs and enrolled agents in your area that have been vetted by the Ramsey team. Take the stress out of it. All right, Tyler is up next down the road here in Nashville, Tennessee. What's going on, Tyler?

[Dr. John Deloney]

Hey, how's it going?

[George Campbell]

Good. How are you?

[Dr. John Deloney]

I'm doing all right, but starting off so I'm a 22 year old in Nashville currently. I'm originally from Indiana. I am living paycheck to paycheck as of right now. But I have every now and then I get like a little bit spare some money to put aside. And I'm trying to start my own two businesses. So I was, my main question is should I put that money aside and put it towards the businesses or try to invest it in something else to get me and my old lady a house? Considering I have no credit card debt, I have no debt to my name. I have always paid cash for everything. You know, I'm just trying to figure out what I should do.

[George Campbell]

Well, you started off the call by saying you were paycheck to paycheck. So it doesn't sound like you're coming from a place of strength ready to start a business or buy a house. So we've got to look at what's going on underneath here that's causing you to have no margin at the end of the month. Okay, so what is your take home pay every month?

[Dr. John Deloney]

Roughly? About 1200, I'd say. @ the job that I'm at currently, my old job, I made more, but I'm going back to that job at the end of this year. I'm going back to Indiana to go to that job.

[George Campbell]

Okay, what will you be making then, roughly?

[Dr. John Deloney]

I made 1200 a week, so I'll be making roughly 5000amonth at that Job.

[George Campbell]

So why did your income get cut? You were making four times what you were.

[Dr. John Deloney]

So the job that I took down here, it's actually the same job. It's a traffic flagging position. I just, I'm not making near as much money and it's not union based, so it's not a. It's not like a laboring job, I guess.

[George Campbell]

Yeah, but you're working full time and making 300 bucks a week, roughly.

[Dr. John Deloney]

Yeah, I mean, I'm not making much and I don't know why.

[George Campbell]

Well, is it an hourly job or is there salary?

[Dr. John Deloney]

It's hourly.

[George Campbell]

Okay, so what are you making per hour roughly?

[Dr. John Deloney]

1815.

[George Campbell]

Okay, something's not tracking here because that's closer to a $40,000 salary. So you should be taken home closer to 2,500amonth instead of 1200.

[Dr. John Deloney]

Yeah, exactly. That's what I'm saying.

[George Campbell]

Have you looked at your checks, see what's going on?

[Dr. John Deloney]

I'm in the currents of doing that right now.

[George Campbell]

Okay.

[Dr. John Deloney]

I'm in a thoughts with my company.

[George Campbell]

Right now is not the time to start businesses or buy a house. You're in a season of life where things are changing pretty rapidly. And so I would be looking for stability and starting a business. There's very little stability and there's a lot of startup costs. There's a lot of risk in that. Right now. Do you have any savings currently?

[Dr. John Deloney]

No, I do not because I had to use it to pay for bills whenever they came around because I ran into an issue.

[George Campbell]

Okay, so your A1 is to get some savings. You said you have no debt to your name whatsoever?

[Dr. John Deloney]

Yeah, no, I mean, I'm paying on a trailer, but it's not under credit. I have no credit at all. I don't have a credit line. I've always paid for cash.

[George Campbell]

So you owe on this trailer. How much do you owe and to who roughly?

[Dr. John Deloney]

1600 to a trailer dealership. Okay. I already made it. I think it was like $200 down payment. My first payment comes out next month.

[George Campbell]

So if there's a payment involved, it's debt.

[Dr. John Deloney]

Okay.

[George Campbell]

Regardless of lines of credit or whatever. So we need to make sure the definitions are clear here because that's now your A1 with every future paycheck beyond your basic bills necessities, you got to throw money at that thing, get it knocked out within a month or two.

[Dr. John Deloney]

Okay.

[George Campbell]

Then beyond that, let's get a fully funded emergency fund. Three to six months of expenses for you. That might mean ten grand right now, and that's going to take getting your income up. Because this should not take a year or two to get ten grand saved up. Do you agree?

[Dr. John Deloney]

Yeah, I gotcha.

[George Campbell]

Then beyond that, we can talk about investing for the future and retirement accounts. Saving up for a house, starting a business. That's when you would do that. Once you have a financial foundation of no debt and a fully funded emergency fund.

[Dr. John Deloney]

Okay.

[George Campbell]

So you've got your work cut out for you. I love the dream of getting these businesses started up and investing for the future. But we gotta, we gotta pay for the past before we can build for the future and get some foundation under us. Because here's what happens. You try to start these businesses, one emergency happens, you're looking to a line of credit to save the day. And that's going to rob you from your future. So I appreciate the call, man. We're rooting for you and best of luck getting that income up. And with the move lot going on, Allen is up next in Orlando. What's going on, Alan? How can we help?

[Dr. John Deloney]

Hi, thanks for taking my call.

[George Campbell]

Sure. How can John and I help?

[Dr. John Deloney]

Yep. So I'm age 31 and currently married, no kids yet, but that's coming up around the corner, maybe a year out. I'm currently on baby step four. I've been saving for retirement and had a luck of fortune or strike a fortune. In the past year I've been investing in a brokerage account for my 401k and that's grown actually to just shy of a million dollars in the span of a year.

[George Campbell]

Whoa.

[Dr. John Deloney]

Really, really lucky.

[George Campbell]

What are you invested in?

[Dr. John Deloney]

Covid recovery and some technology growth and I was very fortunate there.

[George Campbell]

So how much did you put into these single stocks?

[Dr. John Deloney]

2 years ago was about 50 or 60k.

[George Campbell]

So you turned 50k into a million dollars?

[Dr. John Deloney]

Just about.

[George Campbell]

In a year.

[Dr. John Deloney]

It was two years.

[George Campbell]

Wow. You and Nancy Pelosi are really great stock trades, man. Good for you.

[Caller]

You have a friend who like had coffee like. I'm thinking of starting this company called Open AI. You got 50 grand, so congratulations, dude. That's awesome.

[George Campbell]

So what's your question today?

[Dr. John Deloney]

So being on baby step 4 and having this locked in a 401k account, I'm starting to understand how can I use this. Looking forward ahead to baby step five and six. It is still, you know, it's in a 401 account. I understand mathematically it makes sense to keep it in there, but psychologically, using that net worth towards some freedom. I'm curious on your thoughts there. What makes sense and when it makes Sense to tap that resource?

[George Campbell]

Well, if you feel like that 401k, it's super volatile right now. If it's. If you are invested in single stocks versus mutual funds. So is it in single stocks?

[Dr. John Deloney]

It was. And I've diversified that out to kind of lock in.

[George Campbell]

Okay, so you rebalanced and you got out of single stocks and into some bigger funds.

[Dr. John Deloney]

Correct.

[George Campbell]

Okay. So I would not touch this money because I don't like paying the government anything more than I have to pay. And if you pull money out before that 59 and a half threshold, you are in a world of hurt. You're going to be paying probably upwards of 35, 40% for the pleasure of using.

[Caller]

Alan, I want to ask George a question on your behalf. So if Alan had called the day before he sold those single stocks and spread it out, would you have told him sell the single stocks and hold some money back and just to get in a brokerage account for buying a house and whatnot?

[George Campbell]

Well, he did this all within his 401k. That's a retirement account. If he had done it in a brokerage account, that would be a totally different story. If it was in a non retirement account.

[Caller]

So the fact that it's locked up now means it's going to have those massive tax penalties.

[George Campbell]

Exactly.

[Caller]

Attached to it.

[George Campbell]

Okay, so for the future, Alan, if you. I mean, I would still invest 15% of whatever your household income is into retirement accounts. And do you have it? You said you have a house.

[Dr. John Deloney]

I do have a house.

[George Campbell]

Okay, what's. Well, what's left on the mortgage?

[Dr. John Deloney]

About 230k.

[George Campbell]

Okay, and what is your household income?

[Dr. John Deloney]

Ironically, about 230k as well.

[George Campbell]

Amazing.

[Caller]

Okay, so Alan, I'm gonna ask another question to George on your behalf. So basically he scratched the lottery ticket and won and he took all that money and dropped it in a 401k. Who has a million dollars in retirement, it's gonna double every seven years. Ish. Would it be okay for him to pause retirement for a year and a half and pay off his house?

[George Campbell]

You could.

[Caller]

At this rate, you're so far ahead.

[George Campbell]

Yeah, I mean, at this point that 401k is going to grow without you. If you never put a diamond, I would still add to it. But to John's point, if you were like, hey, I want to just knock this thing out. I want freedom faster. It sounds like you're wanting to potentially retire early or do some kind of encore career at an earlier, earlier age.

[Dr. John Deloney]

Absolutely. Yep.

[George Campbell]

Okay. So at that point, you know, if you're if you've got 15% invested of your amazing income, that would be, let me crunch the numbers here. 34 grand a year, which is enough to max out a 401k and an IRA, right. So anything beyond that, I would just start dumping in a brokerage account and paying the house off with. And that'll set you up to probably have, you know, the, the freedom you desire by the time you're 40 with this level of income.

[Caller]

How old are you again, Alan?

[Dr. John Deloney]

31.

[Caller]

Yeah. So here's the. As the guy on the back end of my 40s, here's what I'm hearing. By 33, you can have a paid for house, more than a million dollars in retirement and a brand new spouse. That's a huge win. You're way ahead of the game, my brother. Congratulations.

[George Campbell]

Way to go. You and Nancy Pelosi, man, they're doing something, John. I don't know how maybe Alan, I.

[Caller]

Thought I had a year last year. It did not have that year.

[George Campbell]

We need to be in Congress or Allen. That's the only options to build wealth fast. This is the Ramsey Show.

[Dr. John Deloney]

You know how when you go against.

[George Campbell]

What society thinks is, quote, normal, like avoiding debt, it feels weird at first? Well, I'm here to tell you that is okay. I want you to be weird if that means you're being intentional, including how you budget. And one way to be intentional about how you spend your healthcare dollars is.

[Dr. John Deloney]

With Christian healthcare ministries.

[George Campbell]

CHM isn't health insurance, they're a biblically based alternative. CHM is a health cost sharing ministry.

[Dr. John Deloney]

That'S helped hundreds of thousands of families.

[George Campbell]

Take care of healthcare costs without sacrificing their freedom. As a CHM member, you'll share 100% of your eligible healthcare costs with a dedicated Christian community. And in return, your monthly contribution goes.

[Dr. John Deloney]

Towards other members medical costs.

[George Campbell]

So no matter where you are in your financial journey, CHM can help you.

[Dr. John Deloney]

Reach your money goals and still get.

[George Campbell]

The care you need. Plus, programs start as low as $98 a month.

[Dr. John Deloney]

So go to chministries.orgbudget to find out more.

[George Campbell]

That's chministries.orgbudget. welcome back to the Ramsey Show. I'm George campbell joined by Dr. John Deloney. Open phones at 888-255-225. From time to time we love to hear from real life baby steps millionaires to see how did they do it? Can it still be done in America today? And we found just the folks and that is Jefferson and Rachel in Twin Cities, Minnesota. How are you guys.

[Dr. John Deloney]

Hi, how are ya?

[George Campbell]

We're doing great. Thanks for sharing your story with us.

[Dr. John Deloney]

Of course.

[George Campbell]

Is Rachel on the line too?

[Dr. John Deloney]

She's not. We just had our second son, so she's taking care of the baby right now.

[George Campbell]

Congrats. That's amazing.

[Dr. John Deloney]

Thank you.

[George Campbell]

Okay.

[Caller]

Figures. Jefferson, she's taking care of the baby and you're talking on the phone with your friends. Fig.

[Dr. John Deloney]

She is listening. So.

[Caller]

Yeah, I'm playing.

[George Campbell]

Okay, tell us Yalls net worth.

[Dr. John Deloney]

1,020,000. So just right over that mark.

[George Campbell]

Just hit the threshold. That's incredible. Okay, what is that made up of?

[Dr. John Deloney]

Yeah, so it's about 400,000 of real estate. We actually just paid off our house in October of last year. So we just paid that off.

[George Campbell]

Way to go.

[Dr. John Deloney]

Yeah. And thank you. Yeah. And then we have about 500,000 in just investments, like different types of retirement funds and then about split into other assets, like 50,000 in cash for emergency funds and then cars and other. Other things like that as well.

[George Campbell]

Incredible. How old are you two?

[Dr. John Deloney]

We're 33. Both of us are 33.

[George Campbell]

Oh my goodness. You guys are too young to be this wealthy. That's incredible. What's your household income?

[Dr. John Deloney]

Thank you. So last year was one of our best years. We just made 330,000. So.

[George Campbell]

And what was your worst year?

[Dr. John Deloney]

It was right out of college. About a little less than 80k. So.

[George Campbell]

Incredible. What do you do for a living?

[Dr. John Deloney]

Yeah, I'm a sales rep for a software company and my wife is a stay at home mom. But she also has her master's degree in marriage and family therapy.

[George Campbell]

Oh, John's gonna love that.

[Caller]

She's a real counselor. That's awesome.

[George Campbell]

Okay. Did you get a college degree? Four year?

[Dr. John Deloney]

I did, yep.

[George Campbell]

What was it in?

[Dr. John Deloney]

Mine was in business finance.

[George Campbell]

Okay. Do you remember your GPA?

[Dr. John Deloney]

Yeah, mine was about 3.3.

[George Campbell]

Okay. And your wife?

[Dr. John Deloney]

She. She's got her master's and she's got a 4.0 in her master's.

[George Campbell]

I had a feeling. I was like, I bet hers is going to be sky high. Very smart. Okay.

[Dr. John Deloney]

She's a smart one.

[George Campbell]

So I love it. So you're 33 years old. When did you really begin to focus on, on this stuff? Did you catch it? Were you financial peace babies or was this, you know, when you were out of. You found out about the Ramsey way?

[Dr. John Deloney]

Yeah. So it's, it's funny. We, you know, it's always been a focus of mine, but we weren't really super intentional about it until about two years ago. When our first son was born and my wife stopped working and things got really tight, we had a car payment, we had the house and all these different things. And my wife and I, we found Ramsey while we were going through church and we got really intentional. We combined everything. We paid off our car quickly. We. And then we got really diligently focused on paying off the house, and we paid off about 270,000 in two years. Just really focused on intensity of, you know, making sure that we got that house payment done. So if we want to have more kids and my wife wants to stay at home, we've got that flexibility to do so.

[George Campbell]

You were solving for freedom, as John Deloney would say. Okay, so what was your mortgage interest rate?

[Dr. John Deloney]

It was about 3.5%.

[Caller]

Wait a minute, you can't pay that off, Jefferson. That's against the law or something?

[Dr. John Deloney]

Yeah, we, we've heard it all. We've heard it from a lot of co workers, friends saying, you know, you're crazy for doing that. But the piece that we have, you know, now that we have our second son here and we don't have to worry about things, we can just choose to do whatever we want to do with our money and, you know, choose to do whatever we want to do with our life, it brings a lot of peace to us.

[George Campbell]

Wow. So even though you'll never have a 3 1/2% interest rate again on that mortgage, you're going to live with a 0% rate with no payment for the rest of your life.

[Caller]

You blew it. You blew it. And when you spend, you know, $30,000 a year in interest income, you're not going to be able to deduct $12,000 off of your taxes.

[George Campbell]

So, man, do your friends talk to you like that? Like, do you have people in your life who think you're crazy for doing all of this and following the Ramsey plan?

[Dr. John Deloney]

Absolutely. Absolutely, we do.

[George Campbell]

What do you tell them?

[Dr. John Deloney]

But we also. Well, we just tell them the piece that, you know, that we have about, you know, having a paid for house, being able to make decisions about what we want our life to look like in the future, just brings us so much joy. And that it's not about them. Like, it's about the money, of course, but it's not, it's not about the interest rate. It's not about that tax deduction. It's about the peace that comes with our house and, and the ability to make the decisions that we want to make for our family.

[George Campbell]

Beautifully said. And you've been doing this for A while. As far. You know, you've been investing for a long time. Just have half a million in retirement accounts at 33 is really impressive. So you, you guys were doing a bunch of things at once. It sounds like you had some debt, you were trying to invest, you were trying to save. You got the house, you weren't aggressive about paying it off, but you started, you know, on the Ramsey way with some focused intensity, and you went, man, what could we do if we just really focus and hunker down for two years?

[Dr. John Deloney]

Couldn't have said it better myself.

[George Campbell]

Okay, I'm just making sure I'm hearing that right. I love it. Did you inherit any of this money?

[Dr. John Deloney]

We got a small, small gift from my parents to help pay for the down payment of the house. Like 20, 30K. But that's okay.

[George Campbell]

So mathematically, this did not. That didn't cause you to become a millionaire, but it did help you get a foot in the door in the housing market. And I'm sure this house is appreciated in value.

[Dr. John Deloney]

Yes.

[George Campbell]

What did you buy it for?

[Dr. John Deloney]

We bought it in 2019. 325.

[George Campbell]

And it's worth over 400.

[Dr. John Deloney]

420. Yeah.

[George Campbell]

Way to go. And now what's next? You're 33. Get your whole life ahead of you. You're in baby step seven. What does the future hold?

[Dr. John Deloney]

You know, the world's kind of our oyster. I mean, we got a second kid, so right now we're focusing on sleeping is the biggest thing. But other than that, you know, maybe get another, get another house one day, but we'll pay for cash for that and, you know, just continue to grow our wealth and save for our kids and save for our future. And we're just, just, we're excited for the future now that we're not paying for, you know, our past decisions. We get to focus on the future now.

[Caller]

All right, Jefferson. I kind of smiled. George smiled George. George has a baby in his house. But I want to double click on that beneath the smile. There's some, some real seriousness to what you just said. Without a doubt. The number one conversation I have with couples who have a toddler in the house is downstream effects of one or both of, of the parents not being able to sleep. And this idea that you all get to create this, whatever you want your world to look like because you don't owe anybody anything that's so profound. And the ripple effects through your kids, through that toddler who's not going to have a mom who's super anxious all the time, not Gonna have a dad whose head's 500 different directions. It can be present in his own house. That is ultimate change your family tree kind of stuff, man. Like congratulations on that. That's really, that sounds fun. Like we're focusing on sleep. But dude, that's also a huge deal. That's amazing.

[Dr. John Deloney]

Yeah, yeah, we're, we're, this, our second kid is a lot different than our first kid just because we do have a paid for house and, and things are much more peaceful here. So we're, we're loving it.

[Caller]

Well, my second kid was a human hurricane compared to my first kid, so. Haha to you guys.

[George Campbell]

Oh, I love it. Can I ask what you guys drive? Give us the year, make and model.

[Dr. John Deloney]

Yep. 20. I drive a 2017 Ford F160. Bought that used. And my wife drives a 2017 Honda Accord and we might be getting her a 2020 little SUV here soon.

[George Campbell]

But used cars, amazing. So if you, if you guys wanted to know listening out there, what do actual millionaires drive? It looks a lot like an 8 year old reasonable car. I mean, and that's what we've saw in the millionaire study, Jefferson is most millionaires are driving a Honda, Toyota, a Ford and they bought it used. It's four years old, 41,000 miles on average. And so you guys are right there. And at a very young age, most people don't reach millionaire status until 49 is what we found. So you guys, it tells me you're way ahead of the pack. You're going to build generational wealth and I can't wait to see what you guys do with it.

[Dr. John Deloney]

We appreciate it. We appreciate the Ramsey show. We listen all the time. We, we love you guys though. We appreciate it. Thank you.

[George Campbell]

Inspiration. Tell your wife we, we love her, we're thinking of her. And congratulations.

[Caller]

Yeah, get off the phone and quit talking to your friends and go help your wife.

[George Campbell]

Go help your wife.

[Dr. John Deloney]

John.

[George Campbell]

Here's what I want. I want a sleep study comparing those who have debt and those who are debt free.

[Caller]

Yes. And I want.

[George Campbell]

Can we do that?

[Caller]

Yes, absolutely.

[George Campbell]

Commission this. You have, you have power.

[Caller]

So I have no power. But any researcher out there, grad student who wants to do that study, I promise you I'll make you famous. I'll put it on this show. So results either way up or down. I'll call it out, you can reach out to us and I'll put you and the study on air.

[George Campbell]

All right, let's go. Researchers.

[Caller]

I guarantee you that we know how this will end. My hypothesis would Be if you don't owe anybody any money, you sleep pretty.

[George Campbell]

Good, you're doing better. Your brain chemistry, synapses are firing up there in a good way. That's what we like to see. Hey, this has been the Ramsey Show. Thanks for joining us. Hey, what's up, guys? It's Jade Warshaw. And look, if there's anybody who knows student loan debt is a problem, it's me. My husband and I had $280,000 of it, but we were able to dig ourselves out. And you can, too. If your student loan payment and interest rate are burying you, refinancing could be the solution. Now, I recommend contacting my friends at Laurel Road today through their online application. You can get an initial rate quote in less than five minutes. And if you have a more complex situation, you can schedule 30 minutes to talk to an actual human being. Thank goodness Laurel Road makes it simple. There are no fees involved and you could save thousands over the life of your loan. Remember, you should only refinance if it makes sense in your situation. So if you're looking for a low rate or a shorter term so that you can pay off these student loans fast, talk to my friends at Laurel Road about their competitive interest rates and how you could actually get a lower rate by signing up for Autopay. Listen, nobody's coming to save you from student loan debt. If you want them gone, you can't mess around. Go to LaurelRoad.com Ramsey to find out more about student loan refinancing. Again, that's LaurelRoad.com Ramsey. Laurel Road is a brand of Key Bank National Association. All credit products are subject to credit approval from the Ramsey Network. This is the Ramsey show where we help people build wealth, do work that they love, and create amazing relationships. I'm George Camel, joined by Dr. John DeLoney, and we're taking your calls at 888-255-225. John is going to kick us off this hour in San Diego, California. What's going on, John?

[Dr. John Deloney]

Hello.

[George Campbell]

Hey.

[Caller]

Hi.

[Dr. John Deloney]

How you doing?

[George Campbell]

We're doing great. How can we help?

[Dr. John Deloney]

Hi. So my name is John. My girlfriend moved from Atlanta to San Diego, moved in with me, and she has about $472,000 in debt from med school. And he's wondering if there's going to be a proposal. Well, before she moved, I had told her that I was a bit concerned with the debt and that we had to figure that out before things moved forward. And, yeah, long story short, she's moved over and we've been living Together for about six months. And she.

[George Campbell]

So she wants you to propose? She's like, hey, when are you going to pop the question? And you're like, hey, when are you going to get rid of the half million dollar loans that you got?

[Caller]

Hold on. But even before that, she was like, hey, I want to move in. And you're like, I've got. I got some reservations about you owing half a million dollars. And then you just made it sound like she just showed up at your house.

[George Campbell]

No, we.

[Dr. John Deloney]

We were dating. Or we've been dating for about two years now, long distance. Because she was going to school, finishing up school. So as she was getting ready to finish, she was like, okay, so I'm getting ready to finish. And you know, like, what's going on? So I, I told her, you know, like, I mean, I don't mind you moving over, but I know where this is gonna go once you move over here. And I would rather have a concrete plan that tackle.

[Caller]

So that probably would have been a better conversation before you were sitting on her couch that's in your living room, but here you are. So what are you gonna do?

[Dr. John Deloney]

Well, that's what I'm trying to get help with.

[Caller]

Well, she already moved in, so, like. Like, what are you gonna do? You gonna kick her out?

[Dr. John Deloney]

I'm not gonna kick her out, but, you know, like, just having a question getting asked, like, every, I don't know, once a month or every three weeks.

[George Campbell]

What's her urgency for you to propose?

[Dr. John Deloney]

Well, most of her friends are married, you know, like getting along with her life, with their lives, and she's just.

[George Campbell]

Wanted to know, well, now you're playing house. So she's like, hey, can we make this a home? I feel like, you know, we've already committed to each other in this way. Why aren't you proposing? So I'm trying to see from her perspective. And I also know in this show, I've never told someone not to get married to someone because of their debt load. Now, I would tell them to pause if we're not aligned in how we're going to deal with the debt. So is that the part that worries you? Has she said, I'm not worried about it, pay it off when I can. What's her plan?

[Dr. John Deloney]

Yeah, the. What worries me is, okay, she. She's a physician, and she got a job, a consultant job where she only works four days a week. And she works out of the four days a week. She works like four hours a day or five hours a day.

[Caller]

Okay, so can we cut to it, dude, like you feel over water because you don't respect the woman that you thought you were going to marry. She's not who you thought she was going to be.

[Dr. John Deloney]

I just feel concerned that she isn't. He's taking it as serious as it is.

[Caller]

Okay, so get beneath that. She's not who you thought she was. And you made a huge step by inviting her to move across the country into your home and on a day to day basis living this thing out. You realize she's not who I thought she was. When it comes to work ethic. When it comes to.

[Dr. John Deloney]

When it comes to work. When it comes to work ethic especially.

[Caller]

Yeah, but also, what does that mean? That means that she doesn't have a full picture of this, the state of emergency that she's in because she owes a half a million dollars and she does. She just wants to get married and just pretend like I will be fine. You won't be fine. You'll have a million dollars in a non dischargeable loan. Right.

[Dr. John Deloney]

She keeps telling me that, you know, she knows other people, all the physicians that have just as much debt and they're able to live their life.

[Caller]

I know, but as a guy who sat with physicians who are on the brink of losing everything and if you look at the suicide rates and you look at the mental health challenges, I don't give a crap. That's like saying. That's like going to a cancer ward and being like, yeah, but look, everyone else is sick. I still don't want to have cancer. I don't want to be sick. And so it doesn't matter. That's just, that's a weird way to anesthetize the pain of reality, which is she owes a half a million dollars but she's not on the phone. We can't help her. I can help you. And I think you have to be honest about. I don't know that I respect this woman anymore. And I'm not going to judge you. Right, wrong or indifferent, you get to respect who you want to respect. But that plays into can I love this person. What happens when we have a kid and she just decides, fill in the blank. Everyone else does. X, Y and Z for a kid. What happens when it comes to the kid's car? We can't afford this car. Everyone else is giving their kid a BMW. Right? That might be the rest of your life. And I think you're wise to listen to your innate alarm systems that like, whoa, something's not whole here. But what's not fair for her is you're not being honest with her. You're trying to be annoyed that she keeps hitting you up to get married. Get married. Get married. And you're not sitting down saying, I don't know if I can marry you, because we're so far from being aligned on. On things like integrity, character, respect, the. The. My fear of owing other people money, et cetera. Do you get what I'm saying?

[Dr. John Deloney]

Yeah. Well, I've brought it up to her, and she keeps telling me that she's working on it and she's, you know, like, possibly looking to get a different job.

[George Campbell]

And what does she make now?

[Dr. John Deloney]

About the same, like 150.

[George Campbell]

And what do you make?

[Dr. John Deloney]

About 150.

[George Campbell]

And do you have any debt?

[Dr. John Deloney]

I do not.

[George Campbell]

Do you own your place or do you rent?

[Dr. John Deloney]

I rent.

[George Campbell]

Okay. So as part of this, that you work so hard to avoid debt, to create this life for yourself, to build this work ethic, and now you're, you're. You're tethered to someone who doesn't align in that way.

[Dr. John Deloney]

Yes.

[Caller]

Have you said, I don't want to have a household where other people decide what we do every day? I want to be free.

[Dr. John Deloney]

I've told her that I don't feel comfortable with the debt.

[Caller]

Okay. And she has said, I don't care what you think. When are you going to marry me?

[Dr. John Deloney]

Well, not verbally, but she keeps on telling me that, you know, and, you know, like, there are other physicians in her field that owe just as much or even more and they're able to.

[George Campbell]

She's gonna spend her whole life comparing hers to others. That is a red flag in and of itself that I think you need to address with her. Everything so far has been, well, her friends are all getting married and her physician friends all have debt.

[Caller]

And she's not even a physician, so that doesn't even hold. But here's the thing. Either good man, either make the choice in your mind, I'm not going to leave her. We're going to get married, and the two of us making $300,000 a year, going to spend the next 24 to 36 months paying off this debt like crazy, or we're going to have a harder conversation about values. And we may have to part ways because our values are so deeply unaligned. But what you're doing right now is you're playing ping pong in your own mind and you're making yourself bananas, and you are worth having a peaceful life. So have the hard, real, honest conversation underneath it all. Talk about values. And then you have to have your or what statement. What are you going to do if she says, I'm not doing that? That's your call, brother.

[George Campbell]

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[Dr. John Deloney]

Hey there. How you doing?

[George Campbell]

Good, how are you?

[Dr. John Deloney]

Good, I'm doing good. Me and my wife are here, we're just calling because we have, we're, we're only, my wife's 23, I'm 24. We moved down to just, we're just north of West Palm beach. We moved here six months ago and we're currently renting. I rent about 2500 bucks a month for just a standard, you know, three bed, two bath. We have a, we have a two year, two and a half year old daughter. And what our question is is, you know, we, we really want to buy a house and the, the housing market's so crazy down here in Florida, you know, so it's hard to, hard to afford a house, just even a basic house like what we have right now or on my income because I'm, I'm just a carpenter, I make about you know, 40 to 60,000 a year, you know, depending on how it goes. And you know, I'm basically, and my wife's stay at home mom, but right now she's going to school so then she can, in about nine months she'll be working too. But basically it's like I'm just, basically just getting by, you know, making ends meet, get paying the bills and then, you know, just whatever we have left over is what we have. And a few Hundred bucks, you know, at the end of the day. And. But on the other side of things, my wife, she got, she, she was in a pretty serious court trial thing for about eight years and she finally won it and she got, she got about a half a million dollars from it.

[George Campbell]

Wow.

[Dr. John Deloney]

And we have it invested, we have it invested right now with the financial advisor because we didn't want to squander it. You know, it's a good steward. We want to be good stewards of our money that the Lord blessed us with and just trying to do things the right way, you know, and. But right now we found a house that's $50,000 under the, under any comp. It's a three, it's a three two. 1500 square feet, you know, nice, nice beautiful curb appeal. And you know, it needs a little bit of update. And on the inside it was the one owner house and the people passed away, you know, grandma and grandpa type of thing. And how much does it cost? Me and my wife are looking.

[George Campbell]

What's the cost?

[Dr. John Deloney]

It's 314.

[George Campbell]

Okay, so you have the money in cash from this court settlement?

[Dr. John Deloney]

Yeah. And we have, we have 516 right now in, in the account we have 80,000 liquid and we, we can, you know, we can pull out the 315 by the time closing ends. We have, we have the house under contract right now. However, I keep hearing from like my dad, my dad keeps telling us to pay cash for the house. Like pay cash, pay it off, don't take out a loan. But then like our financial advisor who's doing the investing for us and a few other people are like, well, why don't you just take out a loan then? You don't got.

[Caller]

So do you know why?

[George Campbell]

Because your financial advisor gets a pay cut if you cash out of that portfolio. Do you understand why they would be a little more likely and biased to get you to want to keep that money invested? Not saying they're a bad person. That's just the reality of, of what's going on here.

[Caller]

I'll go one step further. You need to get a new financial advisor because that's an advisor that's not looking out for you because the. I can't think of a better thing I would want for my son or my mom and my dad and so both, both sides of my equation than a paid for house that nobody can take from them.

[Dr. John Deloney]

Yeah. We're going to be the first ones in our family since our grandparents.

[Caller]

That's exactly right.

[Dr. John Deloney]

Have a home that we own and.

[Caller]

That Makes me want the reason why our. I want to hug your dad.

[Dr. John Deloney]

The only reason why they own it is because they, you know, they paid the 30 years of mortgage and they just live through it like that's the only reason why they own their house.

[Caller]

But I want to hug your father because he gave you the right advice, son. Don't ever owe anybody money.

[George Campbell]

I've.

[Caller]

He's probably spent his whole life having to make payments on stuff and he sees an opportunity for his son to be free. And I'm not, I'm not even playing, dude. My Smartvestor Pro, when I was. Had money in a high yield savings account. I had money in, in a what with him. And he said, hey, take this and go pay off your house. Because I have a financial advisor who is invested in me doing what's best for me and my family, not for making himself rich. I'd get a new guy. I'd go to Ramsey Solutions, Smartvestor Pro. Go check that out and get with somebody else, man. Because this guy's looking out for him. Number one. You. Number two.

[Dr. John Deloney]

Yeah, because, well, he's saying like, oh, you, you know, he's like, oh, you'll make about, you know, 15 to 20% on your 500,000. What? But we're looking at it.

[George Campbell]

First of all, what are you investing in?

[Caller]

Cocaine? What's he making? 20%.

[George Campbell]

Any advisor saying you're gonna get 15 to 20% in this account is lying to your face. No. Good advice. Every advisor like, hey, here's been the historical return. We don't know what the future holds. Not. You're gonna make 20% if you just leave it.

[Caller]

That gives me hemorrhoids on your behalf. Alec, pull it out, pull it out.

[Dr. John Deloney]

All right, thanks. Yeah, I'm looking at it like, go.

[Caller]

Buy your house, you know.

[Dr. John Deloney]

Yeah, that's what we want to do. And I'm glad you guys are all about it too because, you know, we're, we're like, we're looking at it like if we, if we pay cash for the house with all our total bills at the end of the day, if we pay cash, you know, insurance are not. We're not gonna have to get insurance because we don't have a loan.

[Caller]

I know. If you live in Florida, you should get insurance.

[George Campbell]

You need insurance. That's a non negotiable.

[Caller]

Put that in the budget, dude.

[George Campbell]

Can I do some math for you though?

[Dr. John Deloney]

That's about a thousand bucks a month and then the loan would be, you know, $2,000 a month and then it you know, and then we're just looking at, like, it just keeps adding on. If you take out any kind of loan. Right, but if we. We don't take out a loan, our bills would be about 800amonth, you know.

[Caller]

Yes. And then you can start putting money into retirement savings. You can be insanely generous to that exhausted waitress that are. That's bringing y'all dinner when y'all went late that one night. Like you. It changes how you do everything.

[Dr. John Deloney]

Exactly. That's how we're looking at it.

[Caller]

Yeah.

[Dr. John Deloney]

I'm glad you guys are saying that. Yeah. Because it's. I was just, you know. You know, you try to play pray and, you know, try to get as much information from God as you can, but sometimes you just got to kind of make the leap. Yeah. And I think. I think this is our golden opportunity because we're still going to have about 200,000 left over. And if we put $5,000 into the property, it's done. We don't need to, like, it's just little things like, you know, take the carpet out, paint the wall.

[George Campbell]

Oh, yeah, easy. So let me give you some solace here that you're doing the right thing. You are very young. You said you're 23 and 24.

[Dr. John Deloney]

Yeah.

[George Campbell]

You'll still have 200,000 invested. Let's say you just took half of what you're paying in rent, 1250amonth, right. And you put that in an investment account now that you're completely debt free with tons of margin, right?

[Dr. John Deloney]

Yeah.

[George Campbell]

From 23 to 63. If you just did that, you would likely have $18 million in that one account. If you never added just 1250amonth, even if you get a raise, just keep doing 1250. 18 million from 23 to 63. And that's a 10% return on average. So I just want to give you some solace. You have plenty of time to build wealth. You're not 68 going, should I rob my entire nest egg to pay cash for a home? So this situation gives me a lot of peace that you are now freeing up your income for the rest of your life and you're not desperate for that next job. You can do the work you love, and you don't need to go make six figures. You can be a. And when you said, here's what bothered me, Alec, you said, I'm just a carpenter. Just a lowly car. Like, I need to knock the Eeyore spirit out of you.

[Caller]

Yeah. Jesus was one of those two. Dude, you're in good company.

[Dr. John Deloney]

Thanks guys.

[George Campbell]

You do good work.

[Dr. John Deloney]

You know, I try to do as, try to follow his footsteps as best, the best I can and help people out and stuff and you know, it's just, it's just tough living in Florida, man. It's prices are so high and we're like, we're looking at it like freedom.

[George Campbell]

You can like move one day to wherever you want.

[Caller]

Yeah, yeah. You don't have to live there either. It's been fun. Y'all are young and it's been cool living by the beach. And now maybe you move, take that $500,000 and get yourself a four bedroom, three bath house that you don't have to move from when you start having kids. And it's going to cost you 300 grand in another state somewhere. But y'all can do whatever you want to because you don't have a house payment.

[George Campbell]

Go build a table for your new house, man. You've earned it.

[Caller]

And get a new financial advisor. Ramsey Solutions. Smartvestor pros. Go check them out.

[George Campbell]

You know, one of the first things I discovered working in the financial world is how absolutely devastating it is when the breadwinner of a family dies and there's too little life insurance or none at all. Grieving families are suddenly left behind, scrambling to pay bills and trying to make ends meet. I also discovered that there are a lot of rip offs in the life insurance world like that whole life crap posing as an investment opportunity. What you need is level term life insurance, usually 10 to 12 times your income, which is the smartest, most affordable way to protect your family. The key is finding an independent broker who represents a ton of companies and works for you, not for the insurance company. This is exactly what my friend Jeff Zander and his team at Zander Insurance are all about. They shop the term life companies to find you the best options and they've been around for over 95 years so you know they'll be there when you need them. Zander is the real deal and that's why they've handled all my personal insurance for over 25 years.

[Dr. John Deloney]

I trust them and you can too.

[George Campbell]

Visit Zander.com for instant online quotes or for a more personal touch, give them a call at 800-356-4282. Hey guys, Rachel Cruze here. All right, I'm about to say what everyone already knows, but budgeting is a.

[Dr. John Deloney]

Good thing to do now actually starting.

[George Campbell]

Well, that's where people freeze up. And you guys, it doesn't have to be that way.

[Dr. John Deloney]

With the everydollar budgeting app.

[George Campbell]

Getting started is super easy and so.

[Caller]

Is sticking to it.

[Dr. John Deloney]

You can set up your first budget in less time than it takes to.

[George Campbell]

Go through the Chick Fil A drive thru. It's fast. And the best part, with unlimited budget categories, you can customize it to fit your life. Grocery runs, coffee runs, or planning your next family trip. Whatever you have going on, everydollar helps you see exactly what's happening with your money. You'll know what's coming in, what's going.

[Dr. John Deloney]

Out and what's left over for some fun.

[George Campbell]

Because let's be real, you need some.

[Dr. John Deloney]

Fun in your budget.

[George Campbell]

Everydollar keeps budgeting simple and stress free just the way you want it. So go download the app for free and get started today. Again, go download everydollar today. Welcome back to the Ramsey show. Open phones at 888-825-5225. The Ramsey show question of the day is brought to you by Wyoming Refi. Why Refi refinances defaulted private student loans, which are different than federal student loans. Y Refi refinances your defaulted private student loan and builds a custom loan based on your ability to pay. So kick your private student loan debt out of your life by going to yrefi.comramsey that's the letter y r e f y.com Ramsey may not be available in all states.

[Caller]

All right, today's question comes from Travis in Utah. Travis writes, I'm about to purchase a new home and have well over 50% saved for my down payment. Should I use all of it for the down payment or keep a portion out to add to my retirement investing? I can afford to put less down and still make the monthly payments.

[George Campbell]

Oi yoy well, the answer is easy. I'll tell you what I would do and what I did, which is put as much down as possible. And we put down John, I believe for our first townhome when my wife and I were married, we put down 45%. So close to what he's doing. No regrets. What ended up happening was we paid off the mortgage way sooner within a few years because we had a smaller mortgage with a much more affordable with a much lower payment, which means we had margin to throw at the principal. So by doing that we ended up freeing up our mortgage payment way sooner and we had the ability to invest that payment at a very young age. So I would encourage Travis to do the same and not see it as one thing or another. Should I put this in the equity of the home or in the stock Market, I see this as a hedge going, hey, if I can get rid of this mortgage faster, it's going to allow me to invest more for the long term.

[Caller]

And the only question I would have for Travis is a huge temptation I had, especially getting going. And that is, I look at all of the money I have saved, including my emergency fund, including anything in a high yield savings account that might be for college, it's not in a 529. And money for a house. And so it's so easy to look at a 300, 000 house. And between all those accounts, I have 150 grand saved. I'm gonna put all that in there. So my only hesitation would be, this is 50 saved for down payment. Above. You still keep your emergency fund. You still got cash there. You still go ahead and cash, put cash aside for how much it's going to cost to move, because you're going to hire movers, come over and help you do all that kind of stuff. Save a little money to get your electricity turned on, because some people want a month's advance. Like all those things add up. Furniture, furniture, like whatever those things are, closing costs, and then put everything else on there.

[George Campbell]

Right.

[Caller]

And so go ahead and go in that into that with your eyes wide open.

[George Campbell]

Yeah, Homeownership is more expensive than you think. And so having a lower payment, all that does is give you more margin to cover it without breaking a sweat. You just kind of yawn and move on instead of, oh, my gosh, we were already at the limit with this mortgage payment. Now we have to replace the H Vac. You don't need that in your life. There's no need to. You have the money, you've done so well. And my guess is he's young enough that he's gonna have plenty of time to build wealth, have compound growth on his side and invest that 15%. And then once the house is paid off, invest even more. 20, 30, 40, 50% of your income, if you want. So great question, though. I would put down as much as possible. As Dave says, the best plan is the 100 down plan. But he knows that will get him, you know, lambasted. In today's culture, people are going, dave, you know how much a house is in today's. Yes, he does. He does. He's just saying it's the best plan is to avoid debt. But if you're gonna do it, 15 year fixed rate mortgage, make sure that payments no more than a quarter of your take home pay. All right, CJ's up next in New Orleans. What's going on, CJ?

[Dr. John Deloney]

Hey guys, thanks for having me. So I'm just wondering what can I do to break the cycle of getting out of debt and into debt? As someone who's kind of young but has a pretty high income and kind of comes in waves and cycles and I can't get out of the habit.

[George Campbell]

How much do you make?

[Dr. John Deloney]

Last year I came out pretty tax about 255.

[George Campbell]

Wow. How old are you?

[Dr. John Deloney]

29.

[George Campbell]

Goodness, that is mind blowing. What do you do?

[Dr. John Deloney]

I'm a commercial wholesale insurance broker.

[George Campbell]

And you're really good at it.

[Dr. John Deloney]

Apparently I'm pretty decent. Yeah.

[George Campbell]

How much debt do you have?

[Dr. John Deloney]

So I have about 330 in a home, 46 in a car, and 35 student loans and six in corporate.

[George Campbell]

And what, what was the last one?

[Dr. John Deloney]

Like the credit cards.

[George Campbell]

Oh, and credit card debt. Okay, cool. So tell me how a guy making 255 is still looking to lenders when he has the bank of CJ available? Like what caused you to turn to debt? Because you have the income. I mean you're making what, 15, 16 grand a month take home pay?

[Dr. John Deloney]

Well, my base, well last year my base was only about 90. And then the bulk of that was biannual commission bonuses that I got. Yeah.

[George Campbell]

Okay, so what do you do with those when they come in?

[Dr. John Deloney]

Part of it. I usually step back about 50% of my expenses coming for like bills and everything for the next six months. I put that aside so that half of my actual paycheck is going towards bills and then the other half is coming from what I set aside. And then the other part of my paycheck, I kind of just spend it.

[George Campbell]

So what would you say if I. If you were going to list the top three things this money's disappearing into, what would you list them as?

[Dr. John Deloney]

Food and going out.

[George Campbell]

So you're living life as a 29 year old going out to eat all the time. Is this, is there pressure outside pressure from friends or is it just. Nah, I want to get takeout again. Another Uber eats. Who cares?

[Caller]

Yeah, let's do it.

[Dr. John Deloney]

All the above especially.

[George Campbell]

Okay. And you've been doing this all, all of this on a credit card?

[Dr. John Deloney]

Not all of it. It's kind of just jumped. You know, if I had to have the cash, I'll use the cash. But you know, if I'm in a crunch, I'm like, well, the card right here. I mean.

[George Campbell]

So can I tell you what I did that really helped me? I cut up the cards and I closed the accounts and I froze my credit. And if you do those, here's what's going to happen. You're going to stop borrowing money. It will freeze you. You're not gonna be able to open up new lines of credit. And so right now we have to stop the bleeding. That's step number one. You asked me how to get out of the cycle. You gotta just stop the behavior that's getting you into the cycle and keeping you there. Because the truth is you got less than 100 grand in consumer debt. You make 255. I'm guessing you have some money in savings.

[Dr. John Deloney]

A little.

[George Campbell]

How much?

[Dr. John Deloney]

Since we're at the end of the six month period of me having bills and everything split, maybe closer to like five or six.

[George Campbell]

Five or six thousand?

[Dr. John Deloney]

Yeah.

[George Campbell]

Okay. So once you have a thousand dollar starter emergency fund, I would use the rest of the savings and knock out these credit cards and call it done and close the accounts. Sayonara. That leaves you with a car loan and the student loan. If you want to keep the car, your income can support it because is this your only vehicle, only thing with wheels and motors?

[Dr. John Deloney]

That's my truck.

[George Campbell]

Okay. It's a nice truck. You make amazing money. So I'm not going to tell you you have to sell it. But if you're really going, hey, I want to burn the ships and restart, you could sell that thing if it's just too much car for you. But that, I mean, you're gonna get out of this thing if you just go, I'm gonna get on a budget. I'm bringing in 15 grand on average. When I get these big bonuses that come in, I'm gonna throw all of it at the debt. What if you just told yourself this, I'm not gonna even see this money. It goes through the account and it goes to the lender. Could you do that?

[Dr. John Deloney]

Maybe.

[George Campbell]

I get maybe is what gets us in debt again. The. Absolutely. That's where this, you need that level of fire.

[Caller]

Let me ask you this. Why did you call cj? There's something in your guts. Why did you call.

[Dr. John Deloney]

The stress of it. That's kind of, you know, because it's every six months, you know, right before I get the windfall of the bonus, I'm, you know, I think it closes to that. That to February. It's like, oh, wow, I'm scratching by. Let's wait to the end of February. Get that.

[Caller]

All right. Can I. This is a personal question. This is a personal question. Did you grow up with money?

[Dr. John Deloney]

No.

[Caller]

When you say no. Do you mean y'all did? Was money a big struggle for you?

[Dr. John Deloney]

Yeah, it was a single wide trailer and there you go, the middle of nowhere.

[Caller]

So let me. This is this. I didn't grow up in a single wide. We grew up in a small house in a suburb in north Houston.

[George Campbell]

Right.

[Caller]

So I did not have that level. But I just remember money was so tight. It was such an anxious thing all the time in the story that I told myself was when I make a certain dollar amount, everything will be okay, including how I feel about myself. And what you're finding is the ubereats, the not budgeting you don't want. You make a ton of money and you don't want the quote unquote hassle of having to think through it all. And I get that sentiment. That's the story you've been telling yourself your whole life. And what I want to tell you is, bro, I want you to have peace and I want you to have freedom. That's what we're solving for here. Not another Uber Eats night. Hang on the line. We're going to send you financial peace University and every dollar premium to get you going. You make way too much money to be this stress and we're going to set you free if you'll just follow through.

[George Campbell]

My brother.

[Caller]

Thank you so much for the call.

[George Campbell]

You spend hours researching before making a major purchase like a home or car. But it's also a good idea to put in the work searching for the right insurance coverage to protect your biggest assets.

[Dr. John Deloney]

I recommend using Ramsey trusted pros.

[George Campbell]

Whether you're looking for car, home or any other type of insurance.

[Dr. John Deloney]

Ramsey trusted providers have been coached and.

[George Campbell]

Vetted to serve you like we would. Find what you [e-mail] insurance foreign welcome back to the Ramsey Show. I'm George Camel, joined by Dr. John DeLoney. Hey, are you staying on track with the baby steps? Well, we made a way for you to find out. You can take a quick quiz to check your progress and receive a personalized plan just for you. Simply head to the show Notes on this episode, click on the link titled are you on track with baby steps? And complete the quiz. Timothy is up next in Oklahoma City. What's going on, Timothy? How are y'all doing? Well, how can we help today?

[Dr. John Deloney]

So me and my wife been married for a year now. We're on baby step two. We're tackling her student loans. And then about three years ago, I bought a house from my aunt and uncle and they were in some tax problems. They Couldn't sign the house over to me, so no payments. I know, but. So we've got two years left until they can sign the house over to me, deed it over to me, and I will. Right now, currently, I still owe them 60,000, and I'm just curious if. If I should sock that money away after I'm done paying student loans off and then just keep it in a bank. And then that way, two years from now, I can just, you know, deals done, I don't have to take a mortgage out. Or should I go into investing after we pay off student loans?

[George Campbell]

Oh, boy. I'm still. I'm still stuck on the fact that you didn't buy a house. You thought you bought a house. What was the legal process for you to buy a house that couldn't even go into your name?

[Dr. John Deloney]

Well, yeah, pretty much.

[George Campbell]

Oh, my goodness. Is there anything in writing?

[Dr. John Deloney]

Yeah, we do have. We did. We did write something out that we all signed.

[George Campbell]

This whole thing just worries me.

[Caller]

Good.

[George Campbell]

What if they don't get out of this mess and you've been paying on a property that you have no claim to?

[Dr. John Deloney]

So the way I justify it to myself is.

[Caller]

Hey, can I just do it right now? Hold on. Before you even speak.

[Dr. John Deloney]

Really low rent.

[Caller]

Good for you. High five to you for saying it like that. The. The story I'm telling myself is this so I. The least we're operating in reality. Good on you. Okay, so what were you saying?

[George Campbell]

So just know that there might be a scenario where you go, hey, at least we had cheap rent while we stayed here. But it's not.

[Dr. John Deloney]

And that's what I'll have to tell myself if something bad.

[Caller]

All right, if. Hey, your. Your. Your glasses are not rose colored. So fair enough. So in two years, you make the last payment and you own this thing outright.

[Dr. John Deloney]

No. So in two years, that. So they had to go to court with the irs. The IRS said, fine, we're gonna forgive everything. You cannot make any extra money for five years. So three years. And this was three years ago. So they had this house. I said, okay, well, I need a house. We came, we agreed on a price, and I gave them some money down, and then I pay them a monthly payment. And at that five year mark, the agreement is, either I'll take out a mortgage to finish paying what I owe, or I'll have the money or whatever it takes, and then they can beat it over to me.

[George Campbell]

I thought they couldn't get extra money. Isn't this down payment and you paying them rent considered extra money?

[Caller]

Breaking the law.

[George Campbell]

Oh, under the table.

[Dr. John Deloney]

Sure.

[George Campbell]

Oh, that makes it George. Okay. Hey, it's just a national radio show. What do I know? Okay, so what is your question, Timothy?

[Dr. John Deloney]

If. If I should sock what I owe them away into a savings account so when the day comes that they can beat the house to me, I could just pay them off. Or should I be investing and then take out a mortgage?

[Caller]

You're talking about not paying them anymore?

[Dr. John Deloney]

No, I would still make the monthly payment, but just put extra away every month.

[George Campbell]

But you still. How much do you have left on the student loans? When are you guys going to be completely debt free?

[Dr. John Deloney]

About seven months.

[George Campbell]

And then how much longer to get a fully funded emergency fund?

[Dr. John Deloney]

That would take about another three to four months.

[George Campbell]

Okay, so let's call it a year. One year from now you guys are completely debt free with an emergency fund. That puts us in baby step four when we can begin investing. I would begin investing 15% while making rent. Any money beyond that you can sock away to try to lower the loan that you'll have when you do take this house over. Okay, but I would just take a small loan out. You guys are going to knock it out quick and so I'm not concerned about that. But I wouldn't hang on to the student loans and pile up money to make this transaction happen.

[Dr. John Deloney]

Okay, I could have all of the money in about 25 months. That could student loans and the house, all in 25 months.

[George Campbell]

So you're saying you could get out of debt, get the emergency fund and save up to 60k by the time this transaction is ready?

[Dr. John Deloney]

Yeah, I think so. Yeah, we save about 5,000. Well, we put pay about 5,000amonth now towards student loans.

[George Campbell]

Okay, well, once you free up the payment, that'll help even more. So I like this plan. I would have a goal to go. Hey, by the time they're ready to make this deal happen, we have the money to buy it from them. Is this. Are you buying it at a deal or is this market value based on all the rent you paid?

[Dr. John Deloney]

So we agreed at 105. I had a realtor out a few months ago and they put it at.

[George Campbell]

248 is what it's actually worth. And the money you put in with the rent down payment plus the 60 will be 105.

[Dr. John Deloney]

Yes, sir.

[Caller]

Okay, so two things here. I have to say this. I think you may be complicit in tax fraud. So I have to just say don't do that. But you're doing it anyway. I just feel compelled to tell you like if this whole ship goes down or the government finds out they've been making side money on, on this deal and they take the house, you're going to be in a mess. Or if they know anyway. So that's number one. Number two, I hear a secondary question. Should you just let them continue to be your bank after this? God no. The second they can take. The second you can. I would take out a mortgage and end this relationship, the business relationship with my aunt and uncle.

[Dr. John Deloney]

Okay.

[Caller]

And then deal with a bank because it's already so sketched. And again, I don't want to talk bad about people who aren't in the room. Right. But you've got a couple who was so bad off they had to enter into agreement with. They're so bad with their finances and that they had to enter into an agreement with the US government and the government said you can't make any extra money and then they're doing something shady under the table with their nephew and.

[George Campbell]

Letting go of their house for less than half of market value.

[Caller]

The, the, the, the best predictor of future behavior is past behavior. And so I've got a couple here who's not good with money, who kind of does things under the table. If they don't sit down the month before you clear this and say, hey, the house is worth 240 now we're going to up the cost of this thing. I would be stunned. Now I have no problem being wrong, but my goodness, man, you are dancing with the devil. And I would want to end that as soon as possible. Let them go back to being aunt and uncle as soon as humanly possible. That's. Yeah.

[George Campbell]

Situation gives me the heebie jeebies.

[Caller]

Yeah.

[George Campbell]

Let's see if we can help Sarah out real quick. Sarah, get right to the question. We're up against the clock.

[Dr. John Deloney]

Yeah. So thank you for taking my call. I have been an FPU coach for the last few years and my sister opened up to me about her financial struggles last year and I've been helping her work through the baby steps. She's paid about 10k off now and has 50 still to go. But today she was served with papers being sued by one of the banks for not paying off her balance. So I assume nothing really has changed. We're still going to have to, you know, negotiate with them, settle eventually, but wanted to get Yalls advice before I pass it along to her.

[George Campbell]

So was she behind on payments for a significant amount of time? What happened?

[Dr. John Deloney]

Yeah, so by the time she came to me she had already stopped paying, like her minimum payments, so we assumed that one was going to go to collections and we figured we would settle with the collections company. And then that's where she, you know, we didn't have at the time the wiggle room in her budget to pay the minimum payment that they wanted her to. So now that's where they're coming to her and requesting that full sum again.

[George Campbell]

How much is it?

[Dr. John Deloney]

About 22,000.

[George Campbell]

What kind of debt?

[Dr. John Deloney]

Credit card.

[George Campbell]

All credit cards. Okay. And is this all one credit card with one lender?

[Dr. John Deloney]

The 22,000 is one credit card. One lender. She does have a debt consolidation loan, and then she has two other credit cards.

[George Campbell]

And is she able to stay current on all of her other debts? Is the only one in collections.

[Dr. John Deloney]

She has three that have gone to collections, including that one, the credit card.

[George Campbell]

Okay. I would put these collections at the top of the list to deal with. I honestly doubt they're going to negotiate with you since they're such fresh debts. They may not take, you know, pennies on the dollar for this. You can help her by just being a support for her, but she's going to have to fight this thing and fight the behavior that got her into this mess.

[Dr. John Deloney]

Yeah.

[George Campbell]

So if you can avoid working, going through court and try to find some kind of settlement agreement, a payment plan, whatever it may be. I would go that route to avoid this escalating. But there's nothing much else you can do if it's already. If they already have a judgment against her.

[Dr. John Deloney]

Right. Does she need to lawyer up at this point or can she settle that herself?

[Caller]

My guess is they just. They're sending a threatening letter, basically, if it's the first one she's got. Unless she's been served papers, they're just sending.

[George Campbell]

Yeah, I don't know that it's worth hiring a lawyer to deal with this. Because she owes the money and if they have proof of that she's gonna owe the money. There's not really a way around this to where she's gonna get out scot free.

[Caller]

She's got the cash, she can settle it. But short of that, then it's begging for a payment.

[George Campbell]

Stack up as much cash as she can and see if they'll take it. This is the Rams.

[Caller]

The right questions are the key to unlock personal and professional potential.

[George Campbell]

That means if you're not where you.

[Caller]

Want to be, you are not asking the right questions. I'm Ken Coleman and this is what my new show, Front Row Seat is all about. Over my career, I've had the distinct privilege to interview successful people from all walks of life and to coach over 10,000 professionals who wanted more. What sets successful people apart is a.

[George Campbell]

Never ending desire to learn and grow.

[Caller]

Each week I'll be joined by industry leaders and world class experts to have a conversation about how to get better, move up and lead well in work and life. But the best part of this show is you get to be a part of the conversation. Live in Studio will have a group of professionals just like you who have the power to ask questions and steer the discussion in real time. It's an opportunity to get real answers to real questions like how to make the right decisions, have hard conversations, live a balanced life and discover your next steps to growth. Join us every Tuesday for conversations that are guaranteed to surprise, challenge and inspire you. Check out front row seat wherever you get your podcasts.