Chapter 1: What financial challenges does Derek face?
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Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network in the Fairwinds Credit Union Studio. This is the Ramsey Show. 888-825-5225 is the number to jump in. I'm Ken Coleman alongside the fabulous, the incomparable Jade Warshaw. And we're going to team up. So she'll take lead on the money question. So obviously all the money questions.
But how about... I'm burned out. I don't have any life balance. We just did a recent survey and found out that those are the two number one issues among professionals, and those have financial ramifications. So we'll dive into some of those as well. Come one, come all. Derek in Montana is going to start us off today. Derek, how can we help?
Ken, Jade, it's great to be with you guys. Thank you so much for taking my call.
Sure. What's going on today?
Well, basically the gist of it is I'm trying to find out or figure out, if you will, if maybe I should just file bankruptcy and start all over. Kind of got myself into some pickles here.
Okay. Give us a picture. What are you facing?
So we started a business, my wife and I started a business here local where we're at was going okay. And then we decided to try to enact or start up a something for the community. like an arcade, and brought in some people to help us out. They had the games, we had the space, and so we were putting that together.
We encountered some issues with the way things were operating, so we thought we would branch out and get our own equipment, and things just have not turned out to come to fruition.
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Chapter 2: How can Derek manage his arcade business debt?
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Let's go to Megan, who's joining us now in Pittsburgh. Megan, how can we help today?
Hi, thanks for having me. Sure. So I have a 401k loan, and I'm not sure how to proceed, just given some different options. I just learned that I do have a cash out option. So for example, the 401k is about $30,000. The loan is $15,000, like after all the math and everything. If I were to walk away from it and cash out my 401k, I would walk away with that loan being paid.
they would cut me a check for eleven thousand dollars you don't want to do that jade i want to make a smart decision well that's i'll start there yeah i literally cut you off because we're i'll let jade explain why but you do not want to take this option well number one you've you've made you've made a mistake which is okay we all make mistakes especially when we don't know better when you took that loan pre-retirement obviously you were hit with a 10 penalty
and it's gonna affect your income taxes, and you unplugged the investment, right? You unplugged the growth that has been accumulating. Knowing that, let's not turn around and do the same thing again and unplug the rest of the investment just to get $11,000 back, okay? Let's solve the problem that we made on accident and let's solve it on purpose.
So if I were you, the $15,000 loan, I'd just pay it back. I'd pay it back because the thing with 401k loans is obviously they're tied to your employer. And if for some reason you are fired, that loan becomes due and it's got a time period on at that point. Sometimes it's a year, sometimes it's more. So that's why I don't like these hanging around.
And if you knew that, that might be why you're considering this. But I would not unplug the rest of my growth to... get out of this faster. I'm sure there's some other fees around that. So let's look at your income and let's look at what we can actually do to get this thing knocked out. So what is your income? 140 household. Okay. And is this 401k loan? I'm guessing it's not your only debt.
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Chapter 3: What should Derek do about his 401(k) loan?
And you've got a lot of equity in this home. So you got options. Jade, what else would you be thinking?
My biggest thing was the concentration of development and how many units per block. Is it going to be a thing where there's just a couple of single family homes or is it really going to be a high concentration? Obviously, a higher concentration could soften the market for you over time. So that's... That's the thing that I was worried about. So I'm with Ken.
I would get with somebody that's a professional specifically in your area that can give you more concrete information on what they believe the timeline, the best timeline would be.
Yeah, absolutely. Sorry that's happening to you. Let's go to Vince now in Denver, Colorado. Vince, how can we help today?
Hey, Ken and Jada, thanks for taking my call. So I was wondering if it's okay for me to make a career move now. I'm married, have three kids. Currently in law enforcement making about $97,000 a year, and I want to become a journeyman lineman. Their starting pay is probably going to be about $50,000 to $60,000 per year. But after the four-year apprenticeship program, it's like $230,000 plus.
Man, I love that. So you're locked in for four years at $50,000 to $60,000.
It's ā so there's different steps within that four years. So there's step one, step two, all the way up to seven. Once you get seven, then you top out. And there's a 5% increment starting from 60% pay, 70% pay of the ā Okay, so I got confused somehow.
So for four years, give me your pay, year one. If you make this move, you're making $97,000 now in law enforcement. Year one, you're making what as a journeyman?
Well, it'll be an apprentice. I'm sorry. Year one apprentice, I'm making about $50,000 to $60,000.
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Chapter 4: What are the implications of moving due to Section 8 housing?
And I'm with Jay. You can get out of this car, but I want you to understand what she suggested here. You literally are going to be upside down, and you're still going to have to pay off that loan, whatever's left. And then you've got to figure out how to get around out of town and all that kind of stuff.
So the best thing you can do right now is just buckle down and realize that you can pay this debt off by making a lot more money. And I've got to believe a guy who's willing, there's a way to make money in L.A., true or false?
A hundred percent.
Well, let's go.
Might I add something about schooling? So I, um, I currently work like 40 hours a week, but I'm taking all my classes online. So I'm, Like I started the semester on Monday and I'm already two months ahead on all my assignments because I just sat down.
All right, that's fine. I'm not going to die on that hill. But I'm making a bigger point that right now with a guy who doesn't have a professional plan and we're just taking six hours, you know, I'm all for, again, extreme momentum to start something. But you can stay in the online class. That's costing you money.
How much does it cost you?
I'm doing financial aid, so I literally paid $40 for six classes.
Okay, fine. Listen, the advice remains the same. Ken is right. You need money. Money is the magical elixir for this problem. And then, yeah, in my opinion, it would behoove you to go ahead and move this car and drive something. Spend $5,000. $3,000 is to get from upside down. The other $2,000 is to get a beater. And then from there, that frees you up to think, okay, what am I doing?
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Chapter 5: What real-world help can Guardian Litigation Group provide for debt issues?
You need real-world help, and that's why I recommend Guardian Litigation Group. Guardian's not a call center. They're actual attorneys who can step into the courtroom and fight back when creditors try to sue you. Now look, debt settlement isn't pretty. I'd still rather have you get out of debt the old-fashioned way.
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Chapter 6: What are the implications of government intervention in housing affordability?
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All right, Jade, I know you're paying attention to this stuff. We talk about this stuff from time to time. Affordability, probably the issue in America today, right? Whether you're on TikTok, Instagram, CNN, Fox News, whichever side of the ideological aisle or political aisle, everybody's talking about affordability. And so I'm holding in my hands here a Yahoo article.
Trump is weighing in on all this stuff as well. as the president. And the latest headline, President Trump instructs government to buy $200 billion in mortgage bonds in a bid to make homes more affordable. And so here's the idea. If the government purchases $200 billion in mortgage bonds, Trump is vowing that this will drive rates down and make the cost of owning a home more affordable.
That's his quote. And he's saying it's one of the many steps in restoring affordability, something that the Biden administration refused to do, whatever, whatever, whatever. I bring that up to say, you know, Dave and I were on the air, I believe, last week.
We were talking about one move that we did like is Trump somehow pushing or help influencing legislation or if through an executive order can be done, not allowing. to come in and buy houses.
Yeah, I think that would be wonderful.
We love that. This one, whether I agree with it or not, is a very interesting thing and explain at least the math behind it, whether or not it's true, whether or not he can do it.
It is interesting that people understand because what we want to do as Ramsey Solutions, we want to come when we can alongside potential public policy or existing public policy or new public policy and go, here's how this affects you. So if, in fact, what he's saying, if the federal government's $200 billion. Boom. Explain why he thinks that that will work, what the math is on that.
Yeah. So obviously, this is not the first time something like this has happened. We saw it in COVID, too, to an extent. But basically, think about it.
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Chapter 7: How should I approach career changes and financial decisions?
When you buy a mortgage bond, mortgage bonds are simply a bunch of mortgages rolled into one investment vehicle. So if I buy a house, can you buy a house? Technically, the lender doesn't own it and investors have bought that off. And the reason that that happens is because when investors buy these mortgage bonds, then it frees up the lenders to have more money to lend out again.
So it creates a cycle there. So when these bonds are bought up, obviously, if you infuse that market with $200 billion and you're buying up $200 billion of bonds, you're creating a very, very high demand for bonds. Obviously, the higher the demand, the higher the price bracket goes for those.
And as the price goes down, then because this is an in-demand item, people are willing to receive less in order to get it. When I say receive less, I'm talking about interest. So when those interest rates go down, housing interest rates go down. So that's how it's connected.
So the thought is, hey, if we can go in here and kind of, whether you believe this is artificial or not, artificially buy up all of these bonds, that's gonna create the ability for the interest rates to go down. So that's kind of the idea around it, whether you agree with it or not, whether you do it quickly or slowly,
That's part of this is, hey, if we do this too quickly, could it really mess with rates? And could we see things plummet too quickly and it cause a whole set of other problems? It looks like whether they continue it or not, I think they've already started, Ken, and they've done like two or three billion of the 200 billion.
And so maybe if they do this kind of slower and over time, we might see interest rates tick down. So whether you agree with it or not, that's up to you. But just understanding it, I think, is the first part of it. I think a lot of times... headlines like this can they see the president's name and they see a big number and they go, oh, that's good. Or or I hate it or I hate it.
And but really understanding it is a great place to start.
And let me just add briefly to this. Understand that even if this were to work the way that the president wants it to work and we see interest rates come down, when interest rates come down, you watch interest rates on homes, mortgages drop dramatically. Let's just call it significantly, Jade. What happens next? People who've been on the sidelines get in, demand goes up.
What happens when demand goes up, Jade?
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Chapter 8: What should I consider when buying a home as a first-time buyer?
So while the cost of borrowing might go down, the cost of a house goes up. So I say all of that not to say you're doomed, no, but to say that what we say here at Ramsey is there's never, you know, it's always a good time to buy if you can afford it. Right.
That's the best time to buy when you can afford it.
There's no waiting for the circumstances to be right because we're sitting in a situation now where everybody's griping about housing. Well, I got news for you. Housing's going up if rates go down because of the demand. We just explained that. So here's the point. Even with the 15-year, we saw it dip last week. All these trends, again... Just pay attention to this.
Only buy if you're financially ready. And that means to make sure that your mortgage payment is no more than 25% of your take-home pay on a 15-year fixed-rate conventional loan. And you need to know that buying a house in your budget is possible if you have the right real estate, Ramsey-trusted real estate agent. So find yours at ramseysolutions.com slash agents, ramseysolutions.com slash agents.
Don't get stuck just trying to ride the roller coaster of trends. It never works that simply. Linwood is up next in Montgomery, Alabama. Linwood, how can we help?
Hi, Ken. Hi, Jade. Thank you so much for taking my call. Well, that Yahoo article is a perfect segue into my question. So super simple. I'm active duty. About to buy a house in March. My wife and I, this is our first home. Just kind of on the fence if I should use a conventional loan or a VA loan. Yeah, that article came out, and I called my loan officer.
And basically the difference I'm looking at is conventional, what I'm quoted as about $1,204 per month. And with the VA loan at the APY and APR, it would be about $1,160 per month. So $44 per month difference, about $528 per year. And I'll tell you why I'm on the fence. Once again, first time owning a home. I'm not too fond of the escrow. I'm new to all this real estate stuff.
And when I actually understood what escrow was... I was a little bit confused on I'm going to give the bank more of my money to pay my bills for me when I feel I'm competent enough to pay my bills myself. I already do it with my car insurance, my phone, my membership, whatever. I can pay all my own bills. So with the VA loan, I won't be able to bypass escrow.
My loan officer is telling me I can bypass the escrow with the conventional loan. So I'm wanting the conventional for the liberty of not having escrow, but I'm on the fence because I have a better rate with the VA, but I will have the escrow.
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