Chapter 1: What financial challenges does Joe face after a fire?
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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 alongside the lovely Rachel Cruz. I'm Ken Coleman. The phone number to jump in is 888-825-5225. 888-825-5225. You ready to go? Let's do this, Ken. She's ready, folks. Joe starts us off in Newark, New Jersey.
Joe, how can we help today?
I got a small distribution business plus honey packing facility. We recently had a fire. I lost all my merchandise and goods. I owe SBA and credit card bills, 70,000 on the card and SBA about 60,000. I don't want to file bankruptcy, but I want to know what is the best way to move forward.
So you've lost everything in a fire? Is that what you said?
Yeah, there was a fire in the warehouse. Burned all my merchandise and my machinery.
Will insurance pick up some of that?
Unfortunately, I did not have insurance.
Oh, no. Okay. How long ago did this happen, Joe?
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Chapter 2: How does Joe plan to recover from his financial loss?
Yeah. So, yeah, on the income side, Joe, that's what Ken's talking about, which is what you're going to have to start doing and or getting another job where you can be making an income ASAP. Right. That you may not have the leeway like this is to working. But then the debt side of it. Yeah. With the credit cards, especially if you are late and it goes into default, it'll go into collections.
And and in this case, I'm like. You know, some people want to do that way, Joe, and they have the money to pay it. They just don't want to pay it. So they take that easy way out. You don't have money to pay it. So you legitimately probably if you stop paying them, like they will go to collections and you're going to have to tell them like, yeah, I don't have money.
And then that's where the settlement can come in. That if you save some money and a lot of the times, I mean, it's it's a nickel on the dollar pennies on the dollar that they'll settle for. So there's a good chance that this 70,000, if you get some money saved, you may be able to. to settle some of this for $10,000, $15,000, right? But that's one side of it. Is the SBA, Lynn, who's it with?
Is it bank or credit union, local bank, big bank?
Well, I applied SBA to Chase.
Okay. Yeah, I mean, you could go down the same route and talk to them. I think that's a little bit of a harder game to play than the... Although, here's the deal. There is a shot at the humanness of your situation. And by the way, they're going to be very suspicious. But to the extent that you can show them you're not making this up, this isn't some fraud in and around, your world got rocked.
And you hope you can get a real human on the phone and you just tell them what's going on. And to the best of your ability, say, here's what the next three months looks like for me. I've got just enough. Excuse me. I don't know what's going on with my voice all of a sudden. But I would be casting vision. Now, they may not care.
But Rachel, I think it's important to at least go, here's where I'm at. I don't want to file bankruptcy. Yes. Because they know what happens if you file for bankruptcy. They don't get anything. Yeah, that's right. So I do think there is a humanness to this. And I think, again, I'm such a... take the bull by the horns kind of guy.
And my advice is always going to come down to, it may not matter, but I certainly would cast a vision with them for three, here's what's going to happen the next three months. In six months, I think I'm going to be able to start making payments again. I would do this with the credit card company as well, because you have an extraordinary circumstance.
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Chapter 3: What financial advice is given to Joe regarding his debts?
And I said, this is ridiculous. I said, we've never even talked about finances. And when we were dating, he was throwing money around like he had all this money, but I didn't know what he had or didn't have. Anyway, so anyway, fast forward, I didn't sign it. I'm like, I'm not signing a blank piece of paper. That's ridiculous. And so anyway...
So fast forward six years, finances have always been kept a secret. He gives me a small allowance. He puts in a joint checking account to cover, you know, whatever, small things on the side. He pays the main bills. You know, I pay the groceries and other small things.
But anyway, so now he, fast forward, he wants a divorce because I've finally put my foot down and said, I'm not going to live in secrecy anymore. You either become transparent because... As far as I can tell from how he's acting, he's put his one business, I think it's like going in the hole because he's an accountant. And he went from having a dozen employees to having two.
And anyway, I think he's just lost a lot of money. So he started another driving business on the side. And he started that a year and a half ago. And he went into a ton of debt for that.
So, Susan, this is really bad, and I am so sorry you're going through this. What specifically would you like us to weigh in on today?
Well, I'm just wondering, with all this debt, I'm like, what am I responsible for? And is he really in debt or is he not? I mean, I don't really know.
What's his reasoning when you when you push him to the point that he said, I'm going to divorce you when you push him on. I want transparency. I want to see everything. What's his response? Is it it's none of your business? Is it? Yes. Like, yes.
OK, I just said I need to know what's going on. Like, where are we and how can I help him? What's going on? And he just says, I'm not telling you. It's none of your business.
Yeah. This is an overlord, not a husband. He's acting like some crazy, maniacal overlord. I think let's answer your question as technically as we can, Rachel. If your name's not on it. Yeah, the debt. You're not going to be responsible for it. Then you're not responsible for it. But that doesn't really help you with your problem is that you don't know what he's done.
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Chapter 4: What lessons can small business owners learn from Joe's situation?
I'm not your friend. I'm not Steve's friend. The point stands. I appreciate the respect that you called us, but we're completely objective. And I'm telling you, it's a screaming bad decision. I would rather see you say, yes, I have three homes I've been looking at. And out of the three, this is probably the best deal. Maybe more work and all of it, but I have multiple options.
Or I have an apartment that I... You know what I'm saying? Whenever there's only a one solution to a problem, that's usually when people make bad financial decisions. I'm not saying specifically this is a bad decision, but all the circumstances around it give us some red flags from what we've seen.
And again, you said it's not urgent, but you're like, I need to leave this relationship, but I can't live in an apartment. So it does feel like... You say it's not, but it does feel like it's become the only solution right now for you. Is that true?
Absolutely.
Yeah. So that's what we don't like. I'd rather you, again, have option A, B and C. And you may hate B and C, but at least there's other ways out that you can figure out that, you know, it's not just the one. So I would run the numbers. Usually homes like this, as you probably know, Steve, you're a smart guy, like it's You know, it's always more expensive than what you think.
There's always more issues than what you think. And if you choose to walk into that, which a lot of people do because they just they'll have the fixer upper and that's what they know when they're comfortable with it. That's fine. Right. And if you have the money for it and that's what you want to do, it's just all the data points around it give us hesitation and pause. Yeah.
Yeah, so I would call on a few more apartments, Steve, honestly. Like, we did that a few years ago. I mean, it's here in Nashville. It's not in Hartford, Connecticut. And there were like, I don't know, 15 apartment complexes that were called. And I think, I don't know, maybe five of them said no, but more than half said yes, that you don't have to have credit.
So if you have first month's rent, last month's rent, all of it, like... You're going to be able to find a place. This house is not the only option. Those policies are designed, obviously, to be a filter for people that have made bad financial decisions because they don't want to rent a place to somebody who's not going to pay.
But you have a very different narrative, I'm sure, and you can prove it. So you've got to go sit down and prove it to somebody and go, let me tell you why I've got this score, which flagged me. I think that's far more doable than you think. But again, if I was coming out of a toxic relationship, Rachel, and I loved your advice, I just want to go land somewhere for a bit.
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Chapter 5: Should I loan my cousin $75,000?
Okay. I mean, my short answer is no, I wouldn't be loaning money to family regardless. If you have the $75,000 in cash and you want to give it as a gift to help the old cousin out, you're welcome to do that. I probably wouldn't. So I wouldn't because it's a loan and I wouldn't because of the assumption that just because it's family, you're supposed to help all the time.
Chapter 6: Why is loaning money to family discouraged?
No. But if you guys are really close and you're like, hey, I don't know, this is Steve. What do you think Steve's cousin's name is? What would you guess? Steve from Minnesota.
Chapter 7: What are the risks of loaning money to family?
So I feel like I need to go with a strong Minnesota Midwest name. I'm going to go Owen. Oh, wow. Okay. So Owen.
Chapter 8: How can I manage my finances effectively?
Maybe. Yeah. So if you love Owen. Or a Ben. And you and Owen are, oh my gosh, my friend Ben is from Minnesota. Oh, that's right. But yeah, if you and Owen are like brothers, but you're really cousins and you're like, and he's, listen, I'm giving you a situation. Steve's a millionaire and Steve's like poor Owen and Betsy, his wife, they need help. Steve is not a millionaire.
And we're going to help them. Then you can, you can give. And if that's what you choose to do. Sure. But that's probably not the situation. There's a reason why he's asking for $150,000 from you and his brother. I know. And goodness gracious, you've got to trust your gut on these things. Yeah. If somebody presents like that every time, he answered his own question.
Just a little object lesson, really quick. I'll go right back to the phone call. But you need to hear this, folks. If you ask somebody this question or you say, I'm concerned he is over leveraged and won't be able to pay it back. Should I do it because he's family? He's probably over leveraged. No, the leading sentence. I'm concerned he's over leveraged and won't be able to pay it back.
Ding, ding, ding. There's your answer. I think sometimes people just need someone else to say no. We really should say, would you like to hate this guy in the future? Because you're going to hate him when he doesn't pay you back. The whole loaning money to family, y'all, don't do it. It ruins the relationship. Do not do it. Oh, such a hard pass. So Steve, no, unless you're a multimillionaire.
I don't care what his name is. Christina is up next in West Palm Beach, Florida. Christina, how can we help?
Hi, thank you for taking my call. I really appreciate it. I'm going to try to be straight to the point. I'm 56 and my husband is 57. We make about $200,000 to $250,000 a year, and we have a net worth of $2 million. That $3 million net worth is made up of our primary residence, which is worth about $2.2 million, and we have no mortgage on it.
We also own an investment property that's a townhouse in the same area where we live. That's worth about $350,000, and we have a $200,000 mortgage on it. So of our $3 million in net worth, $2,350,000 is equity and property. That is unrealized because it's sitting there as it is. In our retirement account, we have about $500,000. We have well over six months of living expenses, so about $150,000.
And that makes up where we get to the $3 million net worth. So here's my question. My question is in about seven to eight years, we're going to probably want to retire. We'll be around 65. If we sell our primary house right now, it's worth 2.2 million. As I said, we have no debt on it. So we would get the 2.2 minus real estate commission minus taxes, capital gains, and all of that.
And then in seven to eight years, that The money that's left over, about $1.9 million, based on investing it conservatively, like you guys have talked about, and putting into a good, solid mutual fund, That 1.9 can be really worth close to like 3.8, somewhere in that range. So then when we're retiring, now we're upwards of 3.8.
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