Chapter 1: What financial concerns does Kate share about her retirement?
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Normal is broken. 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. Excited to be with you today. I'm Ken Coleman alongside George Campbell. The phone number to jump in, 888-825-5225. 888-825-5225. Let's go to Kate here in Nashville, Tennessee. Kate, how can we help?
Hey guys, how are y'all doing? We're having a blast. What's going on in your world? Okay, so I am, I think I'll just throw stuff out and then y'all can ask questions. I'm 49. I'm divorced five years and I have been renting and I have nothing in savings. I am on baby step two and will be Debt-free, that's the end of this month. Awesome.
And I'll be going into, of course, Baby Step 3 and hopefully into Baby Step 3B really quickly. I believe what I'm looking for is some encouragement and or advice on, you know, if I need to make some changes, if I need to do more. So, yeah. Wow. So how long ago was this divorce? Is it finalized? It is. It was five years ago. Okay. In 2020. Did you walk away with anything? Any assets? Very little.
Okay. And no alimony or anything like that? No, unfortunately not. Okay. What do you make? Well, I hate it when people say this. It varies. I own a residential and commercial cleaning company that fluctuates. And so this year, I kind of took like a rest year. I had surgery in January and I was burnt out at the end of last year. But I'm still making and bringing in pretty good money.
I'm bringing in right now around... between $9,000 and $10,000 in my take-home. Fantastic. Good for you. So you've got a whole team that's running the show, and you took a break as far as you're not physically doing any of the work. Well, until May, and then I had to get back out there. I am one who needs to be moving. If not, I get depressed and eat. This is not a good situation.
So I am out there with my employees, yes. Hey, a real quick question. I don't want to spend a lot of time on this, but I just feel like I'm supposed to ask. What's going on in your personal life? Are you trying to date? Are you getting back out there? It's been five years. Are you experiencing loneliness, isolation? I just want to know where you stand on that. I am pretty peaceful at the moment.
I did do some dating and it was just trash. So I'm not in that scene right now. I think I'm focused more on getting my life back in order or getting it in order period. Great.
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Chapter 2: What steps should Kate take after becoming debt-free?
And what about friends though? What, what kind of friendships do you have? Um, I have, you know, I have some French, you know, I, I have great friends at church and Bible studies and things like that. Perfect. Okay. I just wanted to make sure you weren't trying to do this alone. You've done some great stuff.
But when I hear burnout, I just want to make sure that you've got community around you because the baby steps alone, George, are hard enough. And you've done so well. Now, you set us up, but what's your specific question? Where can we most equip you or encourage you today? I think my concern is my retirement plan.
You know, with me renting at the moment, no money in saving, I've got my emergency fund and that's it. How long has it been since you got the emergency fund funded? Um, it's not the fully, it's not the, I'm just a baby step two, but I. Okay. I apologize. I apologize. All right. So let's, let's, let's bring George in here because you're in the middle of baby step two.
Um, your mindset doesn't need to be focused on retirement, George. Yeah. So six months from now, will you have that fully funded emergency fund in place? You'll be debt free with that savings.
Yes.
Yes. I do have the every dollar app and it is phenomenal. Phenomenal by the way. I love it. Um, And it gives me really good hope for my future. But, you know, I just want to hear what you guys have to say about it. Well, yeah, I can show you the math because that's the best way to show the reality. And if you don't like it, you can make some changes.
So we recommend 15 percent of your household income going into retirement once you're debt free with the emergency fund. So let's say by summertime, will you be 50 by then? I will be 50 in February, yes. Perfect. Okay, so let's say you're starting at 50 with nothing in retirement. Mm-hmm. And your household income gross, like on your tax return, what is that going to show that you made?
$150,000, $170,000? No, I don't think it's going to be that. I don't know. I'd say probably around $100,000. Well, you told us your take-home pay is $9,000 or $10,000 a month. That's what I'm bringing in right now. It fluctuates, so I really don't, you know, and I wasn't working in the front of this year. That's okay. I like the conservative number. Let's call it $100,000.
$100,000, that's a good number for this exercise. So that's $15,000 a year you'd be investing. Are you tracking with me, 15%? Yes. So per month, that means $1,250 is going to be going into investment accounts of some sort. From age 50 to 67, if you did that, you would have three quarters of a million dollars by 67. That's not a terrible nest egg considering you're starting from scratch at 50.
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Chapter 3: How do Ken and George advise on managing investments for retirement?
So you're clearly bringing in a certain amount of income and revenue and taxes are due on that. And for some reason, you're unable to pay them. Now, in this situation, it sounds like you sold a house. You didn't set aside any taxes. on that capital gains, and you just gave it all to investor, and you didn't set some aside. So then the tax bill came back, and you're so low on cash.
Is that a proper representation of what I heard? No, I'm sure I paid the taxes on the sale of the house, although I don't remember the particulars right now. Well, forget the sale of the house. Let's talk about your business. So you're self-employed? Okay, no.
No.
Let me give you some details. I'm 70 years old, so I'm retired, and I'm living off of Social Security and a pension. My income is $52,000 a year. From those two things? Yeah. Okay. From those two things. And my tax man, quite a few years ago,
started to give me these slips of paper for the IRS and for the state that said I had to make four payments to cover the taxes for the following year so that I wouldn't be surprised when I handed in my tax bill that there's like a $5,000 amount that I have to pay. So I paid ahead of time. And four installments. Well, this year, when I got those, they're over $2,000, like $2,200 each time.
I went to see if I had that kind of a cash that I could pay it out of my own funds, and I didn't. So I borrowed from, I went to my broker and said, I need money. to pay these wills, and I was given money. And it wasn't until the fall that I realized, oh my goodness, because what I did when I borrowed the money... When you say borrow the money, I'm confused.
Are you just selling off a portion of your investments? Yeah. Because borrow means you're taking a loan against it, but that's not what you're doing. You're just withdrawing from the investment account. Yeah, I withdrew from the investment account. But then I realized, all of a sudden I realized, okay, I made all these withdrawals this year to pay 2025 taxes. And those withdrawals will come due.
I'll have to pay taxes on them in 2020. Yeah, every time you take money out of that investment account, know that you should set aside 30% of that in a savings account. That's going to be the easiest way to do this, is if you take $10,000 out of your investments, put $3,000 of that in a savings account.
And then when tax time comes around, you transfer it from savings to checking and you pay the tax man. That's the easiest way to do it, is just set aside, just call it 30%. If you overestimate, I'd rather that than underestimate. Okay. Well, anyway, what happened was I found out... I asked how much was taken out this year, and my broker had said he wanted to...
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Chapter 4: What encouragement do they offer to Kate about her financial future?
Tell him George three and a half million dollars at 62. That's if you never put another diamond. Aiden, did you hear that? I heard it loud and clear. So it's not two boomers, you know, hating on college. Like we're trying to make the most of that money for you. And that's why it's very important to go, how little of this money can I use to cashflow college?
And how much can I get from scholarships, part-time work, busting my tail so that I can have this kind of wealth on the other side. Love it. So if you just make a plan, I'm taking debt off the table, no debt. I'm going to use as little of this money as possible. And then once I graduate and have my income, now we can make some more adult decisions because the future is a little more clear.
And right now there's just too many variables for me to tell you, just go park it in the market, Aiden, you'll be fine. Let me see here. Where do you live? Right now I'm in St. Joseph, Michigan, small town. Give me an idea how far away from Detroit, greater Detroit that is. That's probably going to be like three hours. Okay, great. I just did a quick search.
Oakland University, my cousin, very successful marketing executive, went to Oakland University. It's right in the suburbs of Detroit. They offer free tuition for qualifying residents. So look into that. It's financial and residency requirements. I don't know. I'm not saying you're going to get free tuition, but this is just a quick search.
It's doing all the research instead of going, well, this is the school I want, so who cares? Well, here's what your answer was. And by the way, no judgment, Aiden. I appreciate it, but I want to encourage you. Your answer to George is, why Michigan State? You went, well, honestly, because, well, they've got a good business program. Someone told you that. Who really cares? Nobody.
And then you said, ultimately, it's a high percentage, the acceptance rate. And you're in this stage, and you've been conditioned by this country. Parents... principals, teachers, you've been conditioned that college is the best way to success, and it's no longer true. By the way, never was true, but we were told it was true. And so at this point, I'm just really driving this home.
My homework assignment for you is to look at the most affordable colleges in Michigan, look up their business programs, how are they rated, do some research on that as well, and let's see how much money we can knock off a tuition so that we keep Gordo's investment for you. I like this plan. This is like the prodigal son.
You don't want to just spend all the money, the inheritance, instantly and then come back and go, well, it's gone. I'm eating with the pigs now. I want to see you really live, man. Live with some freedom. And that means using this money very wisely to protect the legacy that your grandfather just handed down to you. Hey guys, it's open enrollment time for health insurance.
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Chapter 5: What advice is given for someone starting a business while in debt?
Is it going to be as much as he was making? Maybe, maybe not. But I would go get a job while he's looking for the next right job. That's super important. I would encourage him. You can tell him I said that. But let's get some more money coming in. We don't want to go to unemployment.
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Savings based on regional analysis of Aldi versus select competitors. Prices may vary by location, product availability, and the market. Ashley, joining us now in San Francisco, California. Ashley, how can we help? Hi, thank you for having me. You bet. What's going on? I am a small business owner. I've been in business for about five years.
And I've been doing pretty well financially for the last four years until January hit. And now a lot of the current administration's policies have hit about every single section of my job. What business are you? Tell me about your business. So I'm a consulting firm that helps to support humanitarian initiatives with corporations, colleges, and school districts.
So essentially, they bring me in as a consultant to repurpose their furniture and fixed assets with charities around the world. Okay. And I'm just curious, not trying to get into a political rabbit hole, but how are the current policies affecting your income? So first off, we're a women-owned certified small business. So the DEI initiative, we took a pretty hard hit with that in January.
The grants for the universities being revoked, that caused some cash crunches for some of the programs and some of the projects that they do traditionally over the summer. Gotcha. Funding for the public schools. Obviously, if programs are being let go or You know, Department of Education is, you know, being restructured, all of those things.
School districts are downsizing themselves and kind of wondering how they're going to have the programs that they need to take care of their students. Right. And then obviously the tariffs, which we all know that's a subject in and of itself. How are the tariffs? All those factors combined. Okay. All right. So bottom line is, is that money has dried up.
What was coming in freely to pay for your consulting services have dried up. Yeah, and where I'm at right now is like I've done, you know, I knew that this was coming. So, you know, as each hit kept coming into play, you know, I kept restructuring, kept trying to shift things. You know, I started laying people off. I, you know, I changed insurance plans for benefits for the employees I still had.
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Chapter 6: How can one manage medical debt effectively?
$250,000. Where's the rest of this debt? So I've got... Right now I have... So $60,000 for that. I have a couple of vehicles on the company which are about... Which equal to about $90,000. I've got credit card debt for... About $80,000. I have an office lease here for about $5,000. Goodness gracious. And insurance and all that other stuff. Okay. This is a highly leveraged business. This is crazy.
Just a practical question. How much money do you – have you laid it out how much money you've got to bring in to cover the basics?
Yes.
Yeah, I mean, I have that figured out. I mean, up until this year, I was I was bringing in over. I was I was grossing. Last year, I grossed two point five million. And this year I'll be lucky to. No, no, I get it. I'm just saying, do you are you going to be able to take care of you and your husband? Can you make all of your payments and cover all your bills right now as it stands?
And that's why I'm calling you guys is because right now I'm trying – I'm at a point right now where I am realizing that – So there's zero income coming in this month? Yes or no? We're not getting a straight answer from you. There is income coming in, yes.
But what I'm looking for is I'm at a point right now where I'm just realizing that – I'm not realizing, but there's expenses or there's bills – that I know that I'm going to need to pay, that I need to cover between now and April of next year. So, and you don't have any contracts coming in. So how are you... We get contracts when we get a different job. And is your husband working now?
Is he back to... My husband is back. I do have contracts, but as a small business owner, the contracts that are confirmed that are over $100,000... Don't hit until next spring. I understand that. I understand that. I'm not talking about next April. I'm talking to a lady who's absolutely drowning in debt, and I'm wondering how you and your husband are going to pay your bills.
I haven't heard anything on this call about how you make money between now and April. And that's why I'm calling you guys is to say what are my potential options. I know, but I've got to get it straight. I can start with this. We can sell the $90,000 worth of cars we have. Sell the cars. I'm guessing you're underwater on both of them. Go get a job. What are the cars worth?
The cars are under lease right now. They're a lease? Yes, they're leased. Then where's the $90,000 in car loan debt? Because when the leases run out, that's how much the leases are for right now for the contract. Goodness gracious. Why do you need luxury cars to run a humanitarian consulting firm? They're not luxury cars. They're used for transportation. Like vans? Yes, they're for business use.
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Chapter 7: What steps should be taken when considering a home addition?
That's not the right question. The question that we've got to answer and you keep saying, well, that's why I called you guys. And I got bad news for you. We don't make money for people. I'm not looking to make money. What I'm saying is I don't want to go out right now and get a loan and end up with something like the gentleman who had mentioned that he had a ridiculous interest rate.
Yeah, we're never going to suggest you get a loan. What I'm saying is maybe this business needs to pause right now if you can't get contracts, and both of you need to get full-time jobs doing other things or four side jobs each in order to cover the bills during this storm. Sell everything. Which would be great, except that my husband is in rehab right now. You just told me he was back to work.
He's back to work part-time, yes, but he's in a rehabilitation facility. Okay, so then it's on you. Yes, it's on me. That's what we're trying to say. We're not mad at you, but we're sort of frustrated for you to go, Ashley, the fix here is you got to bring in some income now in the short term or this whole thing falls.
And it may not be from your business if that's not a viable solution, which means- Which it isn't. Use your skills to go do something else right now to float you until those contracts come in. Then we can write this shit. But right now you built a house of cards with all of this debt that's mounted. So there's pressure-
And while we're at it, while we're throwing a lot of advice at you, but you got to get on the phone with this vendor and go, let me tell you my story. Here's what I had to do. Your story is the best policy, the truth. And I owe you and I'm going to pay you. And I got this much coming in in April. But you have got to batten down the hatches.
It's an old phrase to get ready for the storm because you were in the middle of it. The winds are howling. And what we're telling you is you got to go get some income in for you and your husband, first and foremost. It's just you as the employee now. So we're not worried about that. And I'd go to the vendor and I'd explain what's going on and come up with a plan.
But, I mean, we're talking about urgency here. And that's all we got for you. You might need to pivot this business. If the grant money's all dried up and nobody's coming for you for the contracts, we're going to have to figure out another way to make this work long term.
Finally, mortgage rates have dropped, and you know what that means. People who have been sitting on the sidelines are about to jump back in to the housing market. So if you've been waiting to buy, this could be your window, but you've got to be prepared and do it the Ramsey way. You need to contact Churchill Mortgage, their Home Buyer Edge program. gives you peace of mind in a wild market.
You can cap your rate for 90 days, so if rates go up, you're protected. If rates go down, Churchill will drop yours automatically. And get this, Churchill will even back your offer with a $10,000 seller guarantee. So if your loan falls... Through, due to financing, the seller still gets paid. That's how confident Churchill is.
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Chapter 8: How can savings be invested wisely for future goals?
Feel confident in your health coverage choices by going to RamseySolutions.com slash health dash coverage. Now, I'm going to say that again because between the hash and the dash, I'd want somebody to say it again for me. And so I'm a man of the people. So I'm going to say it. It's RamseySolutions.com slash health dash coverage. The dash symbol. That's important.
Or honestly, if you're like me and you never will remember that, go to the show notes because it's just a link in the show notes. Don't make Ken type things out. He will fat finger it. And I have narrow fingers, by the way. 404, user error. That's what Ken gets. Well played, George. Tom is up in Dallas, Texas. Tom, how can we help? Yes, sir. Good afternoon. I'm nervous about retiring.
I don't know what to do. I'm of the age and my situation would allow it. I'm just too used to getting up at 3 a.m. and going to work and working 10, 12 hours a day. Wow. I think this is actually a really fun problem. I don't even think you have a problem, and I'm really excited to walk you through this. Let's get some of the details. You are how old, Tom? I'll be 70 here right quick. Fantastic.
And how much money do you have in retirement accounts? About 500,000. Okay. And because you said, I'm of the age and of the means where I can walk away. So is it just you? Are you married? Yes, I'm married. Okay. And does your wife have any retirement accounts? No. There's a 19-year spread between us. She's still working, still enjoying what she's doing. All right.
Way to go, Tom, with the younger lady. Very impressive, sir. So your Social Security, if you walked away today, what would that be? My fiduciary has talked me into collecting now instead of waiting to get the extra $300. So right now, after the taxes I'm having them pull out now, it's $3,400 a month. And you have any other source of income, pensions, anything else, rental income?
Yeah, there's a very small pension. Okay, so it's basically your $3,400 a month of Social Security plus your $500,000 that you could withdraw from, correct? Yeah, an $800 pension. What's your wife's income? About $30,000 a year. Okay.
So do I understand you to say that if, and I'm not saying you want to, but if you were to retire today and walk away, do you feel financially like you'd be very comfortable? That's the question. I've never had a budget. I've only started listening to you guys lately. Everything I have, motorcycle, bass boats, house, everything is paid for. Good. I owe no one nothing.
So your monthly expenses, between her $30,000 and your $4,000, if you didn't even touch the retirement accounts, you could live off of that just fine? Oh, yeah. Okay. And so really now it becomes a, I'm just used to working for the last 40-plus years and getting up early. You can still get up early. Nobody's going to stop you from doing that. And you can still work.
It just doesn't have to be, obviously, in the job you've been at for 40 years. So now you go, okay, I've got a lot of skill here. that I have accumulated over all these years working, I've got a lot of experience. So it's not just skill, but it's just know how to use the skill. You know what you enjoy doing after all these years. So if it were me, Tom, and I actually preach this all the time,
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