Chapter 1: What financial struggles does Tracy discuss?
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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 and the Fairwinds Credit Union Studio, this is The Ramsey Show. And I am Rachel Cruz hosting this hour with my good friend and co-host of Smart Money Happy Hour, George Camel. And we are taking your calls live at 888-825-5225. So give us a call.
All right, kicking us off this hour in Austin, Texas, we have Tracy on the line. Hi, Tracy. Hi, how are you? Hi, we're doing great. Thanks for calling in. Yeah, absolutely. How can we help today?
So long story short, we've had some financial losses that were out of our control.
Chapter 2: What are the consequences of embezzlement on income?
Our income has gone down. Our costs have gone up. We've blown through all of our savings trying to stay afloat, went to credit cards, to You know, for all of our business expenses, our household expenses, all of those things. And we're still behind borrowing from family, all of the things. Right now, we are running at about a $5,000 deficit a month, even, you know, all things considered.
I'm just trying to figure out, you know, do we... At what point do you give up and file bankruptcy? Do we keep trying to dig out of this? What is the smartest path forward with everything that's happened?
What do you guys make? What are you bringing in a month?
We, it's, it's variable. So it's about 12 to 17, but 250 a year on average.
Okay. And you're, and you are, so you guys make $250,000 a month, or I'm sorry, I'm sorry, a year. Yes. And you're still behind $5,000 a month. What are you guys spending your money on?
Well, a lot of it is going toward credit cards. So about $4,300 a month is credit cards and fees. Unfortunately, a bunch of our cards are 12% to 30% interest. So I've reached out to them for their hardship programs and tried to get the interest down so that we're able to tackle more of the debt. What part of this wasn't in your control?
You were saying something about how it wasn't in your control. Yeah, yeah, yeah. One of our companies that we run, someone had embezzled money from us, and it took away about 70 or 80% of our income. How much money are we talking? They embezzled about $1.6 million. Oh, my gosh. Total, yeah. Are they in jail? No, no. It happened in a big city, and they have bigger fish to fry. What do you mean?
You didn't press charges? It's all... I don't know how much I can say. They're working on it. So do you have an attorney? Yes, yes. We've got an attorney that's working on it for us. You acted like you're like, well, it's water under the bridge. We're moving on. Big city. What can you do? No, we had investors, and it was our investors' money. It was a whole situation.
So it wasn't your money to begin with. You didn't go into debt. No, no, no, no. But we managed that fund. And when the fund disappeared, our income disappeared. So we, you know, we've taken on additional jobs. We've cut business expenses that we didn't need, you know, sold assets that weren't performing. You know, so we're, you know, selling everything that, you know, like... Yeah.
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Chapter 3: How do Tracy and her husband plan to manage their debt?
Sure, yeah. Okay, and I would separate it out. Okay, so then you've got kids in college. Yes. Are they working?
No, have a good number. Speak directly on your phone, Tracy. We're having a hard time hearing you. Yeah, yeah, sorry. We've got scholarships and grants, so there's not a lot that's coming out. It's about $1,700 a month left over in tuitions and fees, but they are applying for scholarships like it is their full-time job. Okay.
And what's the total amount of debt you guys carry outside of your mortgage? So the total debt, we have some unpaid taxes. So it's hovering at about $270,000. Goodness gracious. Wait, does that include the business? Um, yeah, those are, uh, separate that out. What, what is just credit cards? Just credit card is 152. Um, we owe, we owe family 30. Um, and then we owe 88 in back taxes.
Um, we had an employee that said she was filing them and she did not. So we've had some, some things pile up. So, um, We're just trying to doggy paddle through and figure it out. Well, the key is going to be just debt snowballing, listing it all out, smallest to largest balance and attacking the smallest one with a vengeance and just keeping up with minimum payments on the rest.
But the income needs to go up and expenses need to continue to go down even just to work the snowball.
Yeah, I mean, Tracy, the way to do it, and it's going to be harsh, but you guys have to make a list of everything. And when the money runs out, the money runs out and we stop. We do not continue to borrow on credit cards. We don't continue to borrow from family. Whatever that $5,000 is below the line, food, shelter, utilities, transportation, you get your four walls, you pay your insurance.
Everything else below is a want. Like kids in college. Sorry, kids, mom and dad are broke.
That's a long story.
We're on the brink of bankruptcy. We can't keep paying your rent. Mathematically, we can't keep up our lifestyle. And I think you and your husband, you guys have to come to a really hard reality of that we can't keep doing this. And I know that's why you're calling us, but that has to seep so far down that the sacrifice is so deep.
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Chapter 4: What advice do the hosts give about budgeting and expenses?
If I told you, hey, John, when you retire, you could either have $9.85 million or $9.9 million, would you say, yeah, I'm willing to take the $9.85, that's fine? Yeah, I would probably be okay with that. Yeah, that's what we're talking about here.
You guys are going to be multi, multi, multimillionaires if you keep living this way, but you're going to have a miserable marriage if you keep living the way you're wanting to live. Which is, well, that money is an opportunity cost. And you're talking to the nerd of all nerds.
I was going to say, you got George Campbell to spend.
Yeah, if you guys seriously had some, hey, we got a lot of debt that we're walking into this marriage with. We got to clean this up. I'd understand. You went on the honeymoon. Let's take a pause on vacation until we got our mess cleaned up. But there's no mess here. You guys are doing everything by the book. You got plenty of money.
You're not going to stop investing to save up for the trip, right? No, no. I think I just get nervous because we've been really trying to save up for a down payment for a house, and everything is just so expensive, so it just makes me nervous. Or I get in my own head of what could happen or anything like that. Well, do the math.
The three grand in vacation is going to cost you maybe a half a month in your house down payment fund. Right? Yes. I mean, the next paycheck you could fund this vacation. Okay. Right? Okay. That makes me feel a little bit better. Yeah, it's not going to delay your home ownership goals.
So don't let the fear of, well, I'll never be a homeowner mean I'm not going to go on a trip for the next six years because we've got to get a house, we've got to get a house. You're so young. You're doing so great. You guys will own a home before you're 30, and you're going to do it the right way, and it's going to be super peaceful and be a blessing in your life.
But if you don't also learn how to let go and live, you are going to be miserable in that house. I was afraid you were going to say that.
Tell your wife she won the argument. Not that it's a competition, but... You know what? I think John... It's three on one, John. Me and George and your wife.
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Chapter 5: How can EveryDollar help with budgeting and financial planning?
If you're working the baby steps and the best and fastest way to do it is by using EveryDollar. So this is more than just a budgeting app. It really is a plan that is built right in. And so you can track your progress and you can get personalized recommendations and coaching for your situation that will help you free up money even faster.
So it's like you having one of us walking with you and, you know, telling you what we would do if you had called The Ramsey Show.
Chapter 6: What should I consider when evaluating deferred equity in a job?
That is the hope. So make sure to check out EveryDollar. You can start EveryDollar completely free by downloading it in the App Store or Google Play. All right, let's head to John in New York City. Hi, John. Welcome to the show.
Hi, Rachel. Hi, George. Thanks for having me.
Absolutely. How can we help today?
So I work for a very, very small family business, and we don't have a 401k retirement plan. So the owner is offering me something called deferred equity. So this would be a small percentage every year that I'm there, but I don't get paid unless the business is sold.
Chapter 7: How can I effectively manage a sudden inheritance of $2.5 million?
And if I leave, I get nothing. Is that too much risk for me to take on, or is it a wise retirement choice?
No, I would not bank on my retirement for that. I would be doing some other things with investing. But would that just be an added, I don't know, benefit, if you will?
Do you have to make contributions to it, or are they just going to give this to you regardless? They're going to give me one and a quarter percent retroactive to when I started. So when would you even get that payout? You'd have to be still employed there when they sell it in order to make anything. Correct.
And so I guess the idea is I would get first dibs on the business when that day comes, and I could use that deferred equity as a down payment on the business. Or if I choose not to do that and someone else buys it, then I would get paid out.
Are they planning on selling the business? Is that part of the long-term plan?
Eventually. Okay. Is that 30 years from now or three? Because there's a big difference.
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Chapter 8: What are the best practices for investing and building generational wealth?
Exactly. I have no idea. It could be, I think, realistically, maybe around 10 years, but who knows? Well, I mean, if it costs you nothing, take it. I still would prefer a retirement plan that's actually yours instead of basically a promise.
Yeah. Is there an option of he would give you like a traditional 401k situation or this? Or is it that this is the retirement package and that's it?
This is basically a way to keep... I'm essentially running the business right now. And by providing this... It's a retention plan. It's a retention plan. Okay. What do you make? I gross a little over 80, and I get health insurance in a company vehicle. Okay. And what kind of industry is this?
I'm not going to say exactly what it is, but it's very niche, and I can guarantee it will always be around. Do you want to take it over one day? I could. I think if the circumstances were right, I would like to. It's something my family's been involved in for nearly 100 years, so I could carry that on. I'm 35. Okay. You got any debt? Just the house. Awesome. Are you investing currently?
Very, very little. Just whatever fraction I have on my Roth IRA. Is it because money's too tight? It's too tight right now. Well, that worries me because you need to build wealth on your own. And if this equity doesn't happen, you're going to retire broke. Yeah. So that's where I go. We have another fish to fry, which is why can't I invest 15% of my income? Why can't I fully fund a Roth IRA?
I would at least be doing – that's the bare minimum is you funding a Roth IRA every single year without fail in order to set yourself up. In order to do that. I need to make more money, which is something that I plan on negotiating because I know that it's there. Can you make six figures doing this elsewhere? Yes, but I don't know. I would probably have to relocate to do it.
I might be willing to do that. Are you single? No, I'm married. Okay. What does your wife do? Is she working? She works part-time for college.
Okay. Do you guys have kids?
Not yet, but we're planning on it.
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