Chapter 1: What is discussed at the start of this section?
Brought to you by the EveryDollar app. Start budgeting for free today. Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studio, this is The Ramsey Show. I'm George Campbell, joined by bestselling author Dr. John Deloney, and we're taking your calls at 888-825-5225.
We're here to help you take the right next step for your life and your money. Rob is in Kansas City. What's going on, Rob? How can we help today?
yeah hi george how you doing this afternoon great what's going on with you i'm doing all right uh long time listener and i uh figured it'd be time to give you guys a call um i'm in an interesting situation here and i'm kind of pushing back so a couple of my best friends are very good with financials i would say i trust them and
My situation here, and I'm looking for your advice, is that I owe $8,000 on a credit card, and that stems from a gambling issue that I had years ago that is no longer a problem. I balance transferred that money to a 0% interest card for 15 months. I have $20,000 in cash and savings. I have a truck payment. I drive a F-150 Raptor used. I owe $28,000 on the truck.
I make roughly $100,000 a year, and I'm 26 years old. So the question here and what my friends are advising me to do, George, is for me to take the $20,000 that I have in cash and put all $20,000 towards my truck and my credit card debt. And the pushback that I gave to them, George, is that I don't want to completely wipe out my cash that I have on hand in case of an emergency.
And baby step number one is to save $1,000. So just wanting to see what your thoughts are on that. Thank you, George. Wonderfully put. Okay. And so you don't agree with your friends and in turn, you don't agree with us, which is fine. You know, you can hang on to the debt as long as you want and hang on to the emergency fund as long as you want.
What we have found is that people generally get comfortable with their debt when they have a pile of money in savings. And so it's actually psychologically going to take you longer to pay off the debt because you don't feel the fire that is actually happening in your backyard right now.
And so I think if you put 19 of that 20 toward the debt, that would knock out your credit cards completely, giving you a lot of momentum, and knock out a significant portion of your car loan. Correct. Yeah, the issue that I have, George, is I've become cheap because of the issue that I had years ago with gambling. I lost pretty much everything, but I've rebuilt what I had lost.
And it felt good to save that money back. And obviously, I know I have $20,000 minus $8,000 in credit cards, like $12,000. And then you take... I basically have a negative net worth with my car payment and my car loan. So... It's just me being kind of impatient of like, oh my gosh, I have to start over again. Yeah, it feels like you're going back to rock bottom.
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Chapter 2: How does Rob's financial situation impact his decision-making?
Well, Rob, I want to throw something at you. This is John sitting next to George. I'm his sidekick. He doesn't let me talk very much, but occasionally he does. I have a mute button for John. Can I throw something else out there? And I'm throwing spaghetti at a wall and you can say, nope, you're an idiot. That's not real. Okay. Go ahead. Are you completely through with your gambling past? Yes.
Okay. Let me rephrase that. You're done gambling. You've done what you need to do. You've healed from that. Are you okay with you? Are you okay with that guy who gambled and created a big hole for himself? Yes, because it was a decision that I made. It was right. It was wrong. It was indifferent. I made the decision. I'm an adult. I have to live with it.
And, uh, I'm a man of faith and I just leaned on my faith with God and, uh, you know, honor him, praise them and, you know, look for him as pleasing him in all decisions that I make. Okay. So I want to take that.
I'm going to take you at your word and I want to tell you what it looks like from the outside that you still haven't fully completed the full circle of healing when it comes to that gambling debt, because you're still hanging on to it. And I don't know that you're going to have that full exhale.
And what I mean by that is you've hacked your way to safety, meaning you've done some amazing work to get yourself a bunch of cash. And instead of leaning on gambling, instead of leaning on excitement, instead of leaning on what's the next cool thing, now you're leaning on something else, which is cash, as this warm blanket to keep you safe. Yeah. And that's what I feel daily.
When I look at my bank account, I see $20,000. I'm like, oh my gosh, that's great. It is. I remember when I didn't have anything. But you still haven't finished the gambling debt yet. Right. I just need to get to the point of being comfortable with saying, all right, I'm going to spend $8,000 here. That's not how comfort works. Comfort is through the other side of discomfort.
And you have this big uncomfortable path ahead of you and you're not walking through it. Because you've walked through a lot of discomfort to get here and you want to call that the end. It's like you're running a marathon and you found mile 15, 15 to 17, which is when everyone's, no matter how good a shape you are, that's when people are like, dude, this is stupid, I quit.
And you're saying to yourself, you know what, I ran 15 miles, that's enough. And what I want to tell you is the true exhale you're looking for is on the other side of finally being done with all of the gambling stuff. And it's going to be uncomfortable to write an $8,000 check. Send it. Send it today. And be forever done with both the action of gambling and the consequences of that.
Because the consequences are still floating out there. And you've created a story that makes it kind of okay, which is it's at 0%. But it's still in your backpack. Set it down, man. Can I ask you another? I actually just thought of something, too, that I wanted to ask but I forgot to mention to you guys. Of course.
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Chapter 3: What advice do George and John give about managing debt?
Yeah. So it's a combination of both. I mean, these loans aren't, there's really no emotional aspect to them for me because I haven't set up in some different bank accounts where it's direct deposit straight from my paycheck. So I really don't feel it at all. And then my car loan is just Same exact thing. So I'm not actually making those monthly payments. So I really, I don't.
You're not making the monthly payments? I'm so confused. No, it's automatic. It's all automatic.
Chapter 4: How does Rob's past affect his current financial mindset?
Okay, so you are making the payments. You're making monthly payments, homie. You've just automated it. You're saying you don't feel it emotionally because everything's automated and you go, whatever. It's money out of my account. It's not there anymore. Who cares? I'm not that concerned about the debt. Are you trying to make money by keeping the cash in the bank instead of paying off the debt?
Is that your question? No, I just don't know. So my car loan is $15,000 left on it, and my student loan has $71,000 left on it. Those are the two big ones. I have a mortgage as well that I just started, which is $620,000 left on it. That's obviously, that's my highest interest rate and my biggest loan.
But really, I feel like I put a decent dent in... How much money do you have that you could allocate toward the debts? So right now in my savings... I have $60,000. Um, part of it, the reason this whole came up, I got a raise at one of my jobs and I didn't update the percentage of direct deposit that was going into my account. That was just covering my student loan.
Um, I knew that, but it was just additional savings. Um, so it's now $17,000 in that account. That's just sitting there. So I figured, does it make sense to put that towards my student loan? to eliminate a lot of the interest and shorten the length of this. You have way overcomplicated your whole financial life. You've got like 17 accounts sitting there.
You get direct deposits coming every which way. I would simplify it all and take all cash you have minus $1,000 and just knock out your debt. Could you just about knock out all of your debt if you did that today? You have $60,000 plus the $17,000? Yeah, 60 plus the 17. So it's about $73,000 in my savings.
So you could knock out the car loan today, free up that payment, knock out most of the student loan, and probably be debt-free by Christmas. Yeah, I guess my question was, like, I'm kind of towards... It's $80 a month in interest right now for the car loan. The student loan is about $220 per month in interest. So I just wasn't sure if it makes more sense...
going really just keep paying the car loan and wipe out that whole student loan first. And then that's all my savings. Is it smart to eliminate all my savings? The interest savings is not going to matter with the speed that you're going to attack this if you do it our way.
Now, if you're going to hang on to the debt forever and keep playing games, then I think you should start looking at the math and the interest. But if you do it our way, you're debt-free by Christmas. We're talking the difference in pennies. You're talking two months, you're completely debt-free. Or think about it this way.
You've made it easier for yourself by thinking about the interest that you're paying on the loan on top of the principal. How much is the interest rate on your student loan? My student loan is, that's the lowest one. That's 3.74%. Okay. So if you have your money in a high-yield savings account, that's a wash right now. Yeah. Right? What are you paying on the interest of your car note? 5.79%.
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Chapter 5: What financial strategies are suggested for a $200,000 bonus?
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So every time you swipe at this Christmas season, it's a reminder that you're choosing a different path, to spend no more than you actually have, to avoid that January budget hangover, and to be free from debt traps. Go to fairwinds.org slash Ramsey to open your smart bundle and get your Ramsey Be Weird debit card today. That's fairwinds.org slash Ramsey, insured by the NCUA.
Michael is in South Carolina up next.
Chapter 6: How can we manage multiple mortgages effectively?
Michael, welcome to the show. Hey, guys. Thanks for taking my call. Appreciate what you guys do. So I'm in a sales position that has a base plus a bonus that you get throughout the year. Then you get a bigger bonus at the end of the year. End of the year is here, and I'm expected to get a bonus, or I will get a bonus that I will most likely never get again. So I want to use this money wisely.
as best my wife and I possibly could. How big is this bonus? It's about $200,000 before taxes. Hey, Gene, is there any openings? You guys hiring? Well, yes, there are. I'm interested.
Chapter 7: What are the implications of not having a will for estate planning?
Why do you think you'll never have this good of a year again? So the way our structure is that you get your base salary and then based upon the quota, your percentage of your quota, you get a bonus based on what percentage of your quota you get to. And that bonus is a percentage of your base salary. It's confusing. It's actually pretty common in the sales world these days.
But so I basically had a pretty low quota last year and blew it out of the water. And so I know my quota this year is just going to get higher and higher and higher. And hey, yeah. I expect to blow it out of the water again. Why don't you blow that one out of the water, dude? Yeah, man. So what's your total salary for the year if you get this $200,000 bonus?
So my base salary right now is about $80,000. Okay, so $80,000 plus the $200,000? That's just one bonus.
Chapter 8: How can we encourage wise financial decisions in family estate matters?
I got commissions throughout the year that totaled about $60,000 or so. Nice. Homie had the year, man. $340,000? Yeah, it was a good year. It was a good year. Great. Are you married? I am. I'm married. We have two kids. And the dilemma that we're in, so we have a house that we bought like five years ago. And we just recently moved into a new house, new to us. And we rent the other house out.
It's got about $100,000 left on it at a 3% interest rate. The new house we're in has like $290,000 on it at a 7.25%. So you're probably getting at where I'm going. Sure. How much do you guys have in savings? So in our savings, if I log into my apps, about $20,000. We have about $10,000 to $15,000 in a brokerage account that's totally separate.
And then I have some retirement accounts and stuff as well. And any other debt outside of these two mortgages? So I would normally say no, except I did recently buy a mower, and it's 0% down for a year. So I've just been paying what it would cost to pay it off. I know. Bro, you make $340,000 this year. But I'm going to finance a mower. It's only $1,000, but I'm putting like $200 a muck on it.
$200. Okay, well, we'll pay that off with your bonus. How about we start with that? We're going to stretch and pay that off. Okay, deal. What will be the actual net from all of this? How much will you net by Christmas to be able to throw at these mortgages? I'm hoping to have, I'm going to say $100,000, but it could be possibly $120,000 to $130,000 that I could do anything I want with. Okay.
Okay. So if I was in your shoes, normally we'd say let's knock out the primary mortgage first. But if you can knock out this rental mortgage with one fell swoop and free up that payment to now apply to the other mortgage, I would go that route and attack the primary aggressively at that point. Okay. That's kind of where I was leaning as well. Yes.
Can I just say, dude, out of the gate, you know what you're thinking? You're thinking like a farmer, right? Like the old school farmers that have a homestead. Yeah. Do you have a homestead? We do. We have some garden, some animals that bring in some stuff. Yeah. Okay.
So like this, like this idea has been lost on us as a culture, but the farmers for all of human history would have a year that was just record yield. And it was amazing. And they knew that doesn't happen every year. And every five to seven to 10 years, there's a bust year. And so the fact that you're as young as you are, as successful as you are, knowing I crushed it this year.
I made $340,000 this year. I'm probably not going to make that next year. Most people in your situation go buy a house based on I make $340,000 a year. And they buy two stupid cars. Good on you, man. This is awesome. I would enjoy some of it too. So I think you and your wife sit down and go, hey, we're going to knock out the mortgage. Anything above and beyond that. Well, and the mower.
Anything above and beyond that. We're going to enjoy some of it. We're going to give some of it, maybe stack some in the emergency fund if you want to beef that up a little bit. And, man, that's going to free up some cash flow because now that property is cash flowing pretty nicely with no mortgage on it. What will you be netting from that property once it's paid off?
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