One Decision Can Change Everything

The Ramsey Show

The Ramsey Show episode 'One Decision Can Change Everything' tackles pivotal money choices through real listener calls, emphasizing emotional and psychological freedom over pure mathematical returns. Hosts Rachel Cruz an

Key takeaways

• May (45) was advised by a financial advisor to invest extra funds instead of paying off her 2.9% mortgage, but the hosts argued that eliminating debt brings psychological freedom and autonomy.

Transcript preview

Speaker 1 (0:04) Brought to you by the Every Dollar app. Start budgeting for free today. 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. And I am Rachel Cruz hosting this hour with my good friends and co-hosts the Smart Money Happy Hour, George Camel. And so we're here to answer your questions about life and money. So give us a call at AAA 825-5-225. Up first we have May in Oklahoma City. Hi, May. Welcome to the show. Hello. Thanks. Yes, absolutely. How can we help today? So I'm getting a little bit of conflicting in Bryce. A couple years ago, me and my husband set up like a set up budget plan, and our goal was to pay down our mortgage, you know, as quick as we can as part of that. We don't have any other debt. And we've been paying basically double payments on our mortgage, instead of 1,500 a month, $3,000 a month for the last two years. Awesome. And I have $195,000 left on my mortgage with no other debt. But last year, when I went back to work full-time, we met with a financial advisor because with both of our combined incomes, we didn't qualify for a Ross. And I finally had a 401K to contribute to. And he was looking at my savings and the amount of retirement we had already saved up at age 45, now that we're 45. And he was like, your interest rate is 2.9%. You shouldn't be making payments on your mortgage extra. You should be putting that towards your retirement because in the long term, you're going to make an average return of 8% or more by the time you retire. And that's more important at this time in life. So I was just wondering which is correct. Like, should I be putting money towards my mortgage extra? or should I be focusing on retirement and, like, more savings for my kids, like, their 529s and stuff like that? Says every financial, most financial advisors out there. That's the hard part is there's... In math? Yeah, they're not terrible people. This person sounds like a level-headed person who's just doing math. And as you know, money is way more than math. It's about your peace, your options, your margin, and paying off your house leads you towards freedom. Now, investing can lead you toward a different kind of freedom. That's also true, but they have a vested interest in you giving them more money because that's how they make money. Do you understand? Right. Yeah, they are the investment. Yeah, so their judgment is clouded. This might be a little sucks. Yeah, and I mean, and I'll say this too. From a mathematical perspective, yes, you're going to make more in the market if the returns are 11, 12%, right, then paying off a 2% debt. Like, the math of it makes sense. Just like when you have debts, a lot of people want to pay. pay off the highest interest rate first because mathematically, that's all correct. But what George was saying is so true. I'm like, well, we have found is that money is so much more than math. I mean, we say personal finances, 80% behavior. It's only 20% head knowledge. So your behavior is not factored into his financial calculator, if you will, your peace of mind, your sleep at night, your autonomy when you own everything, including your home, which is unheard of these days, Like when these things start to play in and you have no debt, you have complete say over everything in your life, there's just something we have found from a psychological, emotional, spiritual perspective. It just changes. And what I tell people all the time, A, is listen, because I get the math argument. I understand it. So I would tell you, pay off your house. And if you hate it, go get a second mortgage and you can invest. It'll be at a higher rate, unfortunately. And that's what you. But, like, hanging on to this mortgage. I don't think I'll get that 2.9%. Sure. Yes. But to me, it's golden handcuffs. I'll tell you what my mortgage rate is. It's 0% for the rest of my life with no payments. And so I'm optimizing for something different. I'm going to be okay in retirement. And the truth is, May, you guys are going to be just fine in retirement. You'll be multi-millionaires. Am I wrong? I have no idea. Because, I mean, my husband's military, we were not very good at doing. We did the bare minimum for retirement a long time. And I just started working a few years. ago. Well, how old are you guys? I'm really 45. Okay. How much do you currently have in our investments? $70,000 contributed. Okay, great. And how much are you contributing per month right now across everything? Retirement, anything else? Just this year was the first time I maxed out my 401K. I tried to do that like up front at the beginning of the year. Before that, we were like only doing 3%, 6% of our income at the most. So you guys are easily investing two, three, four, four, grand a month at this point. Yeah. Okay. We tried to basically play a little catch-up because we just, I don't know, for some reason, we must have missed the memo on like retirement. Welcome to the club. Everybody feels like, man, I wish I knew this sooner. So here's the math. You got 70 grand. If you contribute three grand for the next 20 years, 45 to 65, at an average 10% rate of return, you'd have $2.8 million. Oh, okay. So I'm just saying if you did nothing else, you just kept doing that. And by the way, once you pay off the mortgage, you can invest $4,000 a month, $5,000. And don't get a wrong money. We still want... Well, that's what I was telling the advisor. I was like, I could play ketchup after my mortgage is caught up, you know, because I feel like I've been hitting a really good pace with paying it. Yes, but I will tell you, May, when you're looking at the overall baby steps, baby steps four, five, and six, which is funding 15% of your income into retirement, saving for kids college and paying the home off early. Those are all done at the same time. So we're not saying stop everything and just pay off the house. Like you need to be contributing 15% of your income. Right. Yes. Into retirement. Yeah. You need to be putting some away for your kids' college. And then anything extra goes on the house, right? So you don't have to be intense and all this crazy. But the idea of putting nothing extra towards your home and just keeping a 30-year mortgage for 30 years is wild. And so people that do the baby steps, we find they pay off their homes. It's the average of what, nine years? It was actually seven. Oh, seven years. Yeah, seven. I'll say seven to nine. Pretty crazy. I think I'm on. track at my rate right now to be done at nine years. Yes, and that's great. So for a financial advisor to be like, oh my, you know, he's just looking at math at that point, completely just focused in on those numbers. They're not listening to your values and your goals. And what you're wanting to. That's a good point. Financial advisors work for you. That makes sense. So a lot of people get it twisted and go, well, I just need to do what they say because they're smarter than me. No, they work for you. If you tell them, hey, a value of mine is being completely debt-free. This is a goal of ours to get the house paid off. We also want to make sure that we're okay for retirement, they should be developing a plan that gets you to that goal. Yeah, and I would encourage you, May, to go to Ramsey Solutions.com and check out smart vester pros, because I know there's some there in Oklahoma City that follow, you know, they're amazing. These people have the heart of a teacher, not the heart of a salesman, trying to get more money. So if you wanted just to spread your wings and have some options, smart vester pros, and they're all over the country, they're amazing, amazing when it comes to financial planning. Yeah. But it is hard because you can crunch your friends. numbers all day long, but unfortunately, numbers, and I'm a numbers guy, I love crunching the numbers, but it doesn't reflect the reality. So when a job loss happens, a health scare, somebody wants to stay home, you want to move. Well, now you've got these golden handcuffs because you have to make these payments. And you don't want to lose this 2.9% rate, so you stay there regardless of what you want to do with your life. That's the part that makes me sad. Yeah, what your guts telling you is something else, right? And then you're having someone, especially when it comes to financial planning, you know, pushing you another direction, which, yeah, I want them to, I want them to listen to you, May. But this is a question we get all the time, all the time. But the truth is freedom is freedom and building wealth and having autonomy over your money. There's nothing like it. Business owners know it costs money to make the phone ring. 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Try Quo for free, plus get 20% off your first six months when you go to Quo.com slash Ramsey. That's QUO.com slash Ramsey. Up next, we have Sarah in San Diego. Hi, Sarah. Welcome. to the show. Hi, thank you for having me. Yes, absolutely. How can we help? I'm calling because my side hustle has turned into kind of a long-term situation, and I'm now wondering if I need to include it into my retirement investments. Oh, very cool. What is it? What kind of side hustle? So I'm a speech pathologist, and my full-time is speech therapy, and then I picked up a side dig as speech therapy for a different company. Okay. Nice. How many hours a week are you working? It varies, because I can I'm in home health so I can choose my own schedule, anywhere between 30 to 40. Okay, that's great. So how much income are you bringing in a year if you include the side hustle? Including the side of, for me and my wife or just me? Both. Household income? Household income is around 350,000. Oh, my gosh. Well done, y'all. Well done. I mean, at this point, yeah, I probably would. I mean, we kind of say any income coming in. but with your main sources of income, you guys are going to be fine if you just invest 15% of just that. That's 52 grand right there. Yeah. So you guys will be fine either way, but because this has become more significant and you're like it's going to be probably long term, I would count that as my income towards that 15%. Would you, George? Yeah. I mean, it sounds like it's consistent. You're going to continue doing this and you're debt free with an emergency fund. There's no other sort of goals right in front of you. Yeah, that's correct. Okay. If you were like trying to save up for a house or something, I'd say, hey, it's okay to allocate that. If the side hustle exists for this purpose to save up for this goal, it's okay to allocate it there. But if this is just a part of your regular rhythm, you guys are in babysaps 4, 5, 6, then I would just invest 15% of whatever else comes into your world. I don't think you're going to regret it later. If you're too rich later on, you can call me and yell at it. I'm okay with that. No one's taking me up on it. You can blame us. People yell me for worse things, so. Way to go. I know. I have someone to blame. So great. Well, well done, Sarah. That's awesome. The work ethic is there. Those are the questions we want. Well, in the fact she's working 30 to 40 hours. Usually the side hustle comes into play for a lot of people on that baby steps one through three. They're building up that first emergency fund. They're trying to get out of consumer debt or build up a fully funded emergency fund. So we usually see that. But it sounds like the way her life is structured. It's sustainable. It's not going to like burn her out to do this. I was going to ask if she was working like 60 hours a week. I'd be like. And if it went away, they're still okay. Yeah, it's not a big deal. So that's a great place to be. Well done, Sarah. All right, let's go to Elle in Cleveland, Ohio. Hi, Elle. Welcome to the show. Hi, thanks for having me. Absolutely. How can we help? Well, I wanted to get your advice on where to allocate my funds. I am taking a new licensing or taking on a new licensing in my career. It doesn't necessarily guarantee an increase in my salary, however, career growth. There are six four modules I need to take, and they're about $850 each, and it's monthly, and then there's a review after that that's $1,500. I currently have $18,000 to pay off in credit card debt and a mortgage, about $180,000 due on the house. Okay. So as a single mother, a few kids, you know, just wanted to know what do I do? Do I slow it down? Do I hold off on this until I'm in a better position? How soon will this advance your career? Like how, when do you have to, because you said it's not an immediate raise financially. Well, financially, no, but at the same time, it is, it is part of a part of the deal of this. position that I took about a, you know, a couple years ago. So it's required. So it's one of the goals for me to obtain this. Yes. Okay. And they're not going to pay for it? Well, I get reimbursed after I pass the final exam up to $5,000, which doesn't be, I will still be short a couple thousand dollars. Yeah. I mean, you said it's $8.50. You got six more plus $1,500 for the exam, right? Yep. Okay. So that's $5,100 for the classes and an extra $1,500. So basically you're just paying for the exam. when you think about it that way. So in that regard, it's not necessarily, it's slowing down your debt-free journey, but then you get that five grand reimbursed. You can slap that on the debt, right? Yeah. Yeah. And it's somewhat required for your position, too, right? So I see this as like a, it's a non-negotiable. I have to do this. Yeah, for your career. So I would, I would go ahead and make sure, number one, can you cash flow it? How much do you make a year? About 115. Oh, good. Fantastic. Oh, well, you could probably do both of this. Yeah, do you have enough margin to cover the school plus throw money at the debt? Yeah, I think in some months it might be short, but most months I might be okay. I guess I just am like, you know, should I get this debt paid off fast, like faster so that I'm free of it, you know, and just slow down how, because I can push back the exam. It's offered a couple times a year. Okay. So the exam portion could be, because one. Once you go through the classes, you can get reimbursed? Or is it only once you pass the exam? Once I passed the exam. Got it. So that money's sort of locked up. You sort of already paid that. How long would it take it? Let's say you didn't do the courses and you just went full throttle on the credit card debt. How quickly could you pay that off making $1.15? I think I could pay it off rather quick and I'm fortunate. Well, kind of. I had rolled it into 0% about a year ago. And I know I had that transaction fee. but I think long term I knew it was going to save me money based on what I could do. So I think at this point I could knock it out within, I don't know, maybe 15 months. One is the 0% period over? One of them, there's 7,000 that I have seven more months on. And then, oh, I'm sorry, 7,000 that I have 13 more months on. and 10,800 that I have seven months on. So we need to get this done real fast. Yeah, I was going to say 15 months. Because you already paid 5% for the balance transfer, and now you're going to pay the 25% interest once it pops back out. I did look out. They were 3%. But, yes, there was a fee. 3% for the transfer out of your 18 grand. Then in that case, I would, if you're saying, hey, I can push this off. It sounds like you're not dying to get these courses done. Yeah. But I would use this as fuel to get out of this so much faster and make it, can you do this in seven months? I was going to say seven or eight months, yeah. Well, I don't know with what I currently have. Are you bringing home nine grand a month? No. Eight grand, seven grand? What is it? About, I think it's about a little under seven. Okay. Yeah. So $2,500 would get you done in seven months on the credit cards. So out of your seven, can you find $25? That's your goal when you make your every dollar budget tonight is go, what can I shave? Do I need to sell stuff, make more, liquidate some savings over here? Do you have anything like that? Any liquid cash you could use? I have my emergency of about $1,500 right now. Okay. We'll leave that there and just use your future income then if there's nothing to sell. But that would be my goal now. You kind of have it set for you by the credit card companies. Seven months, $2,500 a month. It'd feel good, you know, spring of $27 that you're completely devastating. You save throughout the summer and you can retake, you know, or take this test. And then time it. The courses in the fall. The courses kick back up, right? Yeah, absolutely. Yeah. And I think where I can cut would be some food. I mean, I try to keep that minimal, but it's been crazy with family coming in and out. But also, do I, I mean, type would be the other area going by my budget. So I am trying to do 10% for type. Yeah, I would keep generosity in there. I think there's something. Yeah. I didn't want to give that up. Yeah, no, I wouldn't. I wouldn't. I wouldn't. No, well, other than what goes out of my paycheck into my 401K. I would pause that for those seven months. And even until you have an emergency fund, because that's going to give even more margin. How much are you investing right now? What percentage? Five. Five percent. Okay, so here's the math on that. Out of your 115 income, you're talking about freeing up $5,700. Okay. So that's almost $500 a month that you could be putting towards this credit card debt. this, yeah. So now you need to find 2,000, because you just freed up 500 bucks right there. But if you can find the 25, add this, that's 3,000, you're out of debt even faster. So it's a, yeah, it's kind of just that math game. And I'll remember during this period, it is beans and rice, rice and beans. We talk about, but it is that scorched earth mentality where even like all these, a great grocery store, super inexpensive food, right? So you can do that. I mean, like, you find your ways just to push through, yes, to get creative. And it's just for a couple of months. It's not forever. may look a little different this year for you. And that's okay. Everyone's going to survive. But being debt-free, that's going to be your key. Health insurance is confusing on purpose. 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When it comes to buying or selling your home, it is high stakes because a bad deal could cost you tens of thousands of dollars. And listen, you do not want to overpay for your next house or you don't want to sell your current house for less than what it's worth. And that's why Ramsey's, Trusted connects you with vetted real estate agents who have experience to guide you step by step to make smart decisions when it comes to buying or selling your home so you don't make expensive mistakes. Now listen, connecting with an agent is very easy. And what's great is every agent has a profile. So you can compare profiles. You can interview your top choice and pick the one that's right for you. So to find a local Ramsey trusted agent who has your best interest at heart for free, go to ramsysolutions.com slash agent or click the link in the description if you're listening on podcast or watching on YouTube. All right. Up next, we have Caitlin in Indianapolis. Hi, Caitlin. Welcome to the show. Hi. My name is, oh, you already said my name. I'm so sorry. No, you're great. You're great. Yes, absolutely. Thanks for calling in. Yeah, we purchased our home in May of 2025. We are up to date on all payments. We don't do badly at all. However, we discovered there are about $100,000 in structural damages to our house, foundation-wise. And it's also resulting in our electric bills being around $1,600 a month. It's not really feasible for us anymore to keep living here with how it is. However, we did find out that through my hairdresser, she was actually apparently under contract by our house before us, and her inspector found all the structural damages and reported it to the seller. So the seller never disclosed it to us on the seller's disclosure. which is fraud. So we have an attorney set up and everything. We already paid the retainer and sent demand letters. However, our attorney is wanting about $30,000 to receive with this case. So our options kind of right now, as it stands, are spend the $30,000 to sue the people who sold us the house. And if we win, then we would profit about $250,000 to $300,000. If we lose, though, then we're $30,000 in debt, and we still have the $100,000 in structural damages that would be unfixed completely. And we can't sell our house because of how much is wrong with it. We would end up losing about $30,000 on it right now as it stands as well. So we don't really know what to do. Like, is this an okay situation that put ourselves into debt? What's your financial situation? How much debt do you guys have outside of the mortgage? $3,000. I mean, nothing. I know it's not. It is debt, but it's nothing absolutely astronomical. And how much do you have in savings? About a thousand, not much. Have you contacted other lawyers? We have looked around everywhere in our area, and everybody's running about the same exact price. It's about the 400, 450 an hour. They all want a $7,000 retainer, and they're saying that it's going to cost anywhere from $20,000 to $30,000 to get it done, start to finish. Man. Yeah. I'm trying to think if there's any lawyers, that would do it sort of knowing that they'll collect on the back end. Yeah. My uncle's a lawyer in the area. He doesn't practice this type of law, but he said that's not really a common thing in this area. Because it sounds like if you guys pursued this, you would win. I'm confused how it happens. You can prove the sellers new because you have the previous inspection report. And so at that point, I don't know how they go, yeah, we're not going to pay this. Right, exactly. What worries me is that they're saying that they're not going to pay it. They may not have it either. Right. That's my guess is they don't have the money to pay it either. Yeah. So my fear would be... They aren't poor either. These are people who are flipping houses for a living. I mean, they live in a massive home. I don't think that they're poor. I just don't think that they have the $100,000 straight up front to pay it. Yeah, probably not. They're probably leveraged in all areas. So that would be the thing. They would be forced, I guess, from a lawsuit perspective, either to come up with the money an amount of time or they would sell an asset, you know, their primary home to pay. I don't know. it does feel like it still feels like a gamble to me that you're going to get that much money out of the situation. So I would hate for you to go $30,000 risk that. So the next option is if you were to sell it, you said you would lose probably $30,000 on the home sale. Is that with the structural damages like being up front with those? Yes. Since we would have to legally disclose all of the structural issues, to the house that we know about our house. We bought it for the $200,000. Our home wouldn't be worth anything more than $120,000. We'd maybe get $150,000 out of it is what a couple of realtors have spoke to us about. And have you had any contractors out to look to see if you were to rehab it, what that would be, what that would cost? $100,000. $100,000. How many bids did you get? How many people did you talk to? We have spoke to probably 10 to 15 different companies. And they're all around there? Yes, $100,000 was actually the cheapest we could find. Wow. Well, I wouldn't give up on the search because right now your best case is still finding a lawyer who can do it on contingency. And so I would ask around, call more real estate attorneys and say, hey, do you take concealment, non-disclosure cases on contingency? The other thing I would do is check if your title insurance or a home warranty would cover a portion of that and dig into the fine print. They said that they wouldn't. Nothing would cover it. And your inspector, Caitlin, didn't find all this? Sorry. What was that? I'm so sorry. No, you're fine. Did you have an inspection? Yes, we did, and our inspector missed it. And missed it. But the previous one caught it somehow. Yeah. So it's documented somewhere. Yeah, can you get a copy of that inspection report? Yeah, we have it. My attorney already has it. Okay. So they've seen this all. They know there's a case here, but they're going, hey, based on my hourly right, this is going to cost you this much? Yes. Oh, man, Ken. I'm so sorry. It's a brutal place. It's not your fault. It's just a bad situation. It is a bad situation all around. Yeah. My husband makes about 100,000 a year. So, I mean, I don't even think that we could financially budget for $30,000 over the course of a year with three kids as well. I just don't think that it's feasible for us. So we would 100% have to take out a loan. Right. And I wouldn't advise you in good faith to do that. So I would either continue calling attorneys and maybe some that aren't even local, right? I mean, like maybe you. you hop over to another city or something, you know, still in the Indiana state. Somewhere in the area. But what I, I mean, I think I would slowly start trying to probably fix it because selling it then puts you a negative 30,000 with no equity, nothing starting over versus like what stages over the next three years are we going to fix this house, right? And it's a slow process and you fix it little by little. And then you might get in there and do maybe half of what you feel like you need to do. And it actually ends up fixing a lot of the problem. And you know what I mean? Like you could get in there. But I would, that's where I tend to lean. And on the other side, if you want to save up and pay the retainer and go, hey, we're going to pay you the rest once the case is closed, they might be willing to do sort of a partial contingency there if you cover the retainer. So that might mean, we are selling stuff. Hey, once the kids are down, you're going to get a side job. He's working an extra 20 hours a week so that you can come up with that money. Because that's still your best case scenario as far as the financial damage. Absolutely. Oh, yeah. The joys of home ownership. Man. As all the parents go, kids, you're throwing away money on rent. Go buy a house. And then you see situations like this. Yeah. But that's the other frustrating thing, just immoral people that they know that there's an issue, the homeowners, and they don't disclose it. I mean, complete fraud, completely illegal. You cannot do that. And every part of me wants that justice, but also I can't tell, I mean, I couldn't advise you to go $30,000 in debt for still a little bit of a gamble of if you win or not or what that looks like. Because then it's just insult to injury. Now you're just in a way worse place. So there's not a lot of good options here. Where I would rather you be putting your money towards something you knows healing the situation rather than a guess, right? It's more in your control. Yeah, unless they can take the retainer, ask for the 7,000 up front and say, hey, would you be. Yeah, that feels like enough to where I would go. All right, I'm willing to at least lose the seven grand. And maybe a thousand bucks a month, you know, over time to get the rest. I don't know what kind of deal you could work with an attorney to figure that out. Just find an attorney with a heart. There's got to be at least one out there. And Indianapolis. Help Caitlin. Help them. Good people of the Midwest. Where are they? If you're waiting for the perfect interest rate before you buy a home or refinance, that moment may never come. That's why people should talk to Churchill mortgage, because