Break The Borrowing Cycle
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Normal is broken. Common sense is weird. So we're here to help you transform your life and your money. From the Ramsey Network in the Fairwinds Credit Union studio, this is The Ramsey Show. I'm Jade Warshaw. Next to me, Rachel Cruz. We'll be taking your calls about life and money for the next hour or so. So if you want to get in, get in where you fit in. The number is 888-825-5225. Rachel, you ready to get into it?
Oh, yeah, let's do it, Jay.
All right, let's go to the line where we've got Ethan on line four. What's going on, Ethan, from St. George, Utah?
Hi, how are you guys doing?
Doing all right. How can we help?
Okay, so I've got a question. Me and my wife, we just got married at the beginning of May, and we moved past baby step one. And we're on baby step two. And we recently found out that she's expecting in late April, early May.
Oh, congratulations.
Thank you. And I was just curious. I've got about $20,000 liquid cash, but I'm in about $62,000 in debt. I've got about $8,000 on a truck loan. And then I've got about $54,000 on a piece of property that we just signed on. And I was just curious, is it all right for me to keep like a $20,000 to $25,000 emergency fund temporarily until the baby comes?
Absolutely. I mean, that's exactly what we would teach. We kind of call that stork mode over here, which is the idea there's a baby coming, the stork's coming, you get it. And so there's some uncertainty during that time. And so financially to pause what you're doing on the baby steps is and stack up money to prepare for that is really the wisest choice because the truth is there are a lot of unknowns. I mean, gosh, God willing, we hope that you go in, have the baby, there's no problems, no NICU stays, no extra expenses, but you never know what's around the bend and just have the money for that. I always like, Ethan, for people to have a good uh bead on what their out-of-pocket max is what their deductible is and i really feel like that's a fair amount to kind of have the goal of stacking up getting ready for a baby and then after the baby comes and everything's all good yeah you can push play on the baby steps
yeah how much money could you put away each month between now and then
So between me and my wife, we make about $90,000 to $100,000 a year take home. And right now, we don't have to pay rent or anything. And we will start having to pay rent in either October or November. So realistically, we could put away $4,000 or $5,000 a month.
Is that with rent?
That is with ring, yes.
What advice do Rachel and Jade give to Ethan about emergency funds and Baby Steps before his baby arrives?
I don't know. Okay, Jade, tell me this, because we do talk about stork mode. But you already have $20,000, Ethan, in the bank. You got an $8,000 truck, and then you have this piece of property. There's a part of me that I would keep the 20 grand if you want to bump it up next month to 25. And
then
I may work on selling the truck
just
because it's eight grand and you guys have, I don't know, $4,000 coming in for the next eight months. So there's a part of me that I'm like, you're going to have gosh, 70,000 sitting
in
like, you'll have a lot in there. So part of me just says, get the eight grand, take that, take care of that. Once you have your fully, your emergency fund funded where you want it to be before the baby. Yeah. Because normally people don't have this amount sitting there in baby step two, Ethan, you know, like when we talk about the baby steps, baby step one is a thousand dollars. Yeah, for sure. And then you throw everything else at the debt. So usually if people get pregnant, baby step two, they only have a thousand dollars. So we're like, pause everything and,
you
know save up an emergency fund between now and then but because you guys have that 20 grand sitting there I don't know there's a part of me that say cash flow paying off the car at by the end of the year I
think you should like I said as long as you are covering uh what really could just be your out-of-pocket max I think that you're good for the year um I think that's a lot and that's usually like 10 or 12 like I guess if you're insurance depending on the the quality of your insurance but just check that and then I love Rachel's plan I think that's excellent you can do a little bit of both and be covered both ways
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:03–3:02
2
What advice do Rachel and Jade give to Ethan about emergency funds and Baby Steps before his baby arrives?
3:02–16:16
3
How should Elizabeth evaluate her mortgage, expenses, and debt to determine if buying a home is affordable?
16:16–1:02:47
4
How might AI impact my career choices and job stability?
1:02:47–1:06:16
5
What is the EveryDollar app and how can it help me track my budget in real‑time?
1:06:16–1:32:04
6
Should I roll over my old 401(k) into a Roth or traditional IRA after a career break?
1:32:04–2:07:15