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Chapter 1: What is discussed at the start of this section?
Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm Ramsey personality George Campbell, joined by the one and only Rachel Cruz. And we are here for you, America, taking your calls at 888-825-5225.
It is Smart Money Happy Hour Ramsey Show edition, so we're going to try to have fun if the booth folk will let us. We'll see how it goes.
If we're allowed.
Renee kicks us off in Charlotte, North Carolina. Renee, welcome to the show.
Hi, thank you for taking my call.
Absolutely. How can we help?
I just first want to say that you both are brilliant educators, so I'm so glad that I can ask you my question. Oh, thank you. So I have a PhD. I tried the professorship world and have left and now am consulting. This is my first full year in consulting and it looks like I'm going to bring in after taxes about $100,000. So I'm pretty excited about that. Good for you. Thank you.
My boyfriend and I have been together for four years. He finished a master's last year, and we're talking about getting married. But I do not have good feelings about taking on his debt, and I was hoping that we could talk about that a little bit.
Yeah. How much debt does he have?
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Chapter 2: How should I approach my spouse's debt before marriage?
I guess, you know, the last couple weeks have been his first... foray into it um he's he's seen the books on my bookshelf but he's not is he a reader or does he prefer to watch things He's a reader, yeah.
Okay. Well, I'm going to send you a copy of Breaking Free from Broke. I think that's going to put a pep in his step to go, oh my gosh, this debt is disgusting me. I want to get out now. And another step that you guys should take for premarital counseling is going through Financial Peace University.
So I'm going to gift you both of those things, my book as well as FPU, if you tell me he's going to go through it. Because I think sometimes it just takes a little bit of knowledge and kind of dipping your foot in the water to go, oh, I get what she's talking about now. And Dave will turn from a cuss word in the house to an exciting plan that you guys can go on together.
Yeah, I think he would like that. He likes things explained to him clearly.
Well, I make it fun as well. So hang on the line, Renee. We're going to send you a copy of Breaking Free from Broke and FPU. Watch all nine lessons with him. Have him read the book. Go through it together. And I think that will, you know, squelch some of the fears that you have.
And congratulations.
Yes. Exciting. Consider this an early wedding gift. I hope it all works out. And call us back when you're debt-free. And this is just a memory. More of your calls coming up, 888-825-5225. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Rachel Cruz. We get a lot of questions about taxes, and we get it. Taxes can be very confusing.
And to help you get a better handle on it, let's unpack a question from one of our listeners. And this is a common one. What is the difference between a tax deduction and a tax credit? Rachel, I recently asked people on the streets of Nashville about this on Broadway if they knew the difference, and it was hilarious. Credit is like, that's money you owe. That's a debt.
And I was like, no, okay, buddy. Let's break it down. Here's the spark notes for you guys. A tax credit cuts your tax bill dollar for dollar. So if you owe $1,000 in taxes, a $500 credit will slash your bill down to $500. A tax deduction, on the other hand, lowers your tax bill by lowering your taxable income.
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Chapter 3: What are the implications of pausing investments to pay off debt?
I think private party was maybe 15 on the high side. Okay.
Do you have anything in savings?
I did, but I kind of don't anymore.
Okay. Spend it on bills?
Yep.
Are you living on your own?
Yeah, I moved out in September. My rent isn't really bad, so it's good.
Okay, is it a one-bedroom?
It's actually two bedrooms. I have a roommate.
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Chapter 4: How can I effectively budget on an irregular income?
That's not going to give you a great retirement anyways. And so our plan is to pause contributions to retirement so that when you get back to investing, you're investing 15% consistently without fail. For the next decade or two until you get your house paid off and then you can invest even more. And so that's the purpose of us telling people to pause the 401k is twofold.
Number one, it actually frees up the 600 bucks a month that can now go toward the credit card, right? Right. And number two, it lights a fire under your butt to get out of debt faster because you desperately want to get back to investing, don't you? Yes. And the problem right now is you're a little bit comfortable.
Like, yeah, you want to get out of debt, but you also want to invest and, you know, nothing's on fire. And I like the fire that is created when you pause investing. It tells your own body, this is serious. We need to get out of this debt ASAP because I want to build wealth and stop paying for the past. What is the debt of the interest rate on these credit cards?
Well, I actually was able to consolidate my debt into a 0% card. So I had some high interest debt that I've already paid off. And the debt that remains is one single amount on a 0% card, and that 0% goes until March next year.
Okay. So how quickly can you pay off if you pause investing, you've got the extra $600 back, you have $6,000 left on the credit card, you're making $81,000. How quickly can you pay this off if you do all of that?
Probably seven to eight months.
Let's call it six months. Okay.
Okay.
How would you like to be debt-free in six months? Do you have any money in savings?
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Chapter 5: How can I prepare for increased living expenses after moving?
We were sharing a place together. So my rent was half of what it would be anywhere, maybe even less than half. So I'm about to move into my own place with my son and my rent's going to be doubled.
Okay. Have you looked into other places for a lower rent?
Chapter 6: What financial challenges do single parents face while pursuing education?
Yes. A studio apartment would cost me about $700 for me and my son. Right now I pay about $460. Okay. Okay.
So it would go up to $700 if you do the studio? Yes. Okay.
And when are you done with school, Danielle?
I'm hoping to graduate in December with my undergrad. Okay. And then I just have to take my GRE and I go to PA school. That's a whole other situation with finding support for my son. Yeah, yeah. And will you be working during that whole time?
Chapter 7: How can I effectively manage irregular income in budgeting?
I'm not supposed to. I Instacart on the side now, so I'll still do that on the weekend.
How will you pay for PA school?
Probably loans. How much student loan debt do you have now, Danielle? How much will you have when you graduate in December?
On top of the 18 that you listed out?
Right. Okay. So Danielle, I want to help you because I feel like the path you're starting to walk towards financially is going to be a path of destruction.
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Chapter 8: What strategies can help in paying off student loans while managing family finances?
This stress that you feel with money is going to continue on. If you can hold on the line, I would love to bring you on in the next segments if we can just to kind of talk through this a little bit more because I really do want to help you. I mean, I think single moms out there, you're doing such good work. I mean, you're trying to navigate how do I... Child care is expensive.
You're trying to do something from home with your son. You're Instagramming outside. You're doing a lot of really great things, Danielle. But just some red flags came up there at the end of the call, George. So I really I want to walk this through with you, Danielle, and hopefully give you a better path for more peace for you and your son. Not just for this year, but for decades to come.
OK, so hold on the line, Danielle. We're going to come back to you if that's OK.
Don't go anywhere, Danielle. And America, you don't go anywhere, too. We'll be right back. Welcome back to The Ramsey Show. I'm George Campbell joined by Rachel Cruz. Before the break, we were chatting with Danielle in Birmingham. So let me catch you up because we're going to go back to her. She has about $70,000 in student loans, $18,000 across some other debts like car loans and smaller debts.
She's making about $25,000 to $26,000 right now between child support and working. She's trying to finish her undergrad, go to PA school, and we're trying to help her figure out her life. And so, Danielle, are you still with us?
I'm still here.
Good. Was that a fair summary?
Yes.
Okay. So we're back. We want to dig back into your situation because you said you're going to finish undergrad in December, you're going to take the GRE, you're going to go to PA school, and all of that with already having close to six figures in debt while being a single mom. Yes. How old is your kid?
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