The Numbers Don't Lie

The Ramsey Show

This episode tackles personal finance challenges including budgeting conflicts, high-interest debt, and lease pitfalls. Experts emphasize communication, accountability, and long-term financial discipline.

Key takeaways

• Shared budgeting requires trust and open communication, not control.

Transcript preview

Speaker 1 (0:00) 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. I'm George Camel here with Dr. John Deloney, taking your calls at AAA. 825-5-2-2-25. Eric is in San Jose to kick us off. What's going on? Eric, how can we help? Hi, yeah, thanks for taking my call. I just had a question about how to build this idea of kind of a shared ownership of budget building and overspending. Just to give a little bit of context, my wife comes from a family that's got kind of poor financial education and behaviors, and she acknowledges this and recognizes this. but we kind of go through a cyclical process over the years of marriage where we'll do really well one month and then the next month it just kind of goes off the rails. And, you know, generally we're doing okay, but I kind of want to find a way to help encourage her in the moments when she's doing well, but also try to keep us on track for the long term so we don't have to keep having the same conversations over and over again. What are the cause? Why does she choose to get off track? So I hear a guy who's trying to be really respectful of his wife, and I honor that. That's good. But it sounds like y'all have these heartfelt conversations. You'll join allegiance. You get on the same plan. And then a month later, she just is like, I don't care. Yeah. I mean, I don't want to say it's the I don't care part. It's more of just not knowing and keeping being mindful of where we're at. But that's a fancier way. Not being mindful is a fancy way of saying, I don't care. Yeah, that's fair. Right. And so it's, it's, it's, it's, it's the conversation you have to have. Because, because we're past the point of we're not on the same page. We're past the point of you, you clearly have talked to her about what freedom means and what safety means and your dream for your family. And she's actually agreed with you. And she's also agreed on like, she knows her story. She knows why these things are wired into her. she's come from bad like unwise money money habits right yeah the only thing left is i got to go do the thing i can google what workout to do all day long it doesn't i got to go to the gym right and so my question for you is what do you have any idea because i don't think it's a matter of you not encouraging her enough or whatever it it's just frankly it's a maturity it's it's integrity it's her keeping her word when she says oh i don't know or i did like what does she communicate to you is the root problem here? I think the problem is that she feels like there's a need, right, that's not being fulfilled. And whether that's, you know, we needed this grocery item or we needed this household thing to take care of the family. And she, so she fulfills that need without really considering the budget. And I've oftentimes said, you know, that's a, that's an, important need and we can talk about that, but it has to fit within our budget constraints. And if it's not fitting in the month currently, you know, maybe that's something we have to wait for. And that's kind of just always been a hard thing for her to hear. Can you label this in the budget if it actually is a need for the family? It sounds like she's not buying frivolous things. It's, hey, we needed paper towels and we didn't factor that into the budget. Right. What's some examples of things where you guys, she goes off rails, doesn't talk to you about it, and now you're frustrated. Yeah, because I don't think you'd be calling us if it was just, oh, we didn't have any milk or we didn't have any paper towels. No, true, true. I mean, examples are, you know, like we'll go to the, we have, we do have a budget line on them for like home needs, right? Whether it's toilet paper, paper towels, you know, a new broom, whatever. So it'll be, it'll be things like that that she'll feel like we need and we've already used that budgeted money for something else. and that doesn't have that conversation and goes out and spends that additional money without having those conversations about, hey, we're over budget, but this is a need we need. So she's not checking back in with the budget to see if this actually fits, and that's the part that's frustrating you. Or more important, she's not sitting down with you saying, hey, we made this budget, and I realize we're short. Right. Right. Right. Neither is happening, really, in the moment, you know. And so the question, the only question you can ask yourself is, are you a reasonable, and I don't mean this in a dramatic way, I mean this in an honest way. Are you a safe person that she can come back to and be like, hey, we made this budget, and I'm realizing two weeks into this month, we're going to need these other things, or I want these other things. Are you a person that she can sit down, you're like, oh, sweet, well, let's get this thing out and see if we can just not go out to eat then or we can do this other thing. or are you the guy that throws the budget down and says, this is what it's going to be this month, this is my militant household, we're going to follow this. And she has that natural, like that I have, which is kind of wired in like, you tell me I can't, oh man, I'm probably gonna, right? So that's the only question you can ask yourself. And if you're a safe person to sit down and you're an open and curious person that she can come back to, then the next thing is, man, you've got to dig into the truer conversation, which is you've got a wife that kind of doesn't care. and that's a scarier conversation to have quite honestly yeah i mean to be it could be a little both i've come on strong in the past sometimes when you know she's made expenses and and didn't necessarily consult me and they're small um so i think it to your point it could definitely be a little bit of and set a dollar amount say anything over 50 dollars we need to talk about beforehand so set some boundaries and if there's areas where she is buying things that are are frivolous, let's shut that down. Because I know in my house, if I buy ice cream, I'm going to eat some ice cream that week. And if I don't have ice cream, I'm not eating ice cream. And so there's a piece of this where you can set your own boundaries and make sure that we're sort of removing things that we know will harm us and adding friction to those areas. And also, when you all have that conversation, you go first and you be honest, I recognize I've made this an exercise in militancy. And I say things like, you didn't consult with me like you know what I mean which is what weak overbearing bosses often say to their employees you got to loop me into it man yeah yeah yeah you didn't see see me on this like it's you coming and being honest and saying hey I realize I'm not I'm not a fun person to do life with when it comes to the budget and I come on too strong and this is a thing we're doing together and so I'm going to work on being more flexible and more honest about oh we do need a broom actually and that means I'm have to take 30 bucks from my fund line because our house needs a broom more than I need another video game or whatever you're thinking. And bring her into that, bring her into the every dollar budget where we go, hey, we got to find somewhere this money needs to come from because there's a finite amount of income. Do you actually show her the budget? Do you have it? Is it on paper? Is it in your head? Is it in every dollar? How do you do this? Yeah, so we have a similar budget tracking program app that we both have access to. It's not every dollar. But that's hurtful, but I'll Continue. I'm sorry. I'm sorry. It's just what we got used to when we started with. Sure. But, yeah, so we both have access to it. And every month, you know, we'll kind of, I'll try to sit down and we have that conversation. She doesn't necessarily like those conversations. Okay. So I want to paint you a picture of a future where your wife loves sitting down with you to plan the upcoming week. Like where you're a person, y'all are planning laughter together, you're planning fun. together, you're putting intimacy on the calendar, you're building a life together. Get her favorite drink ready before the meeting. Yeah, and part of that is we're going to talk about what expenses we have coming up. And by the way, if you're teeter tottering one month it's good and the one month you fall off, that usually means you're not giving it the full 90 days to fully like create a budget that actually works in reality. Yeah, your budget should reflect your real life and it's okay if you need to adjust to get there. Hey, I want to talk to you for a second about love and not love like in Titanic or something. I mean responsible love. The kind of love that moves you to take care of the people closest to you. And one of the most important ways to show that kind of love is by having term life insurance. If you have anyone depending on you, a spouse, kids, anyone, you need term life insurance. Term life insurance gives your family real protection if the unthinkable happens so they can spend their time grieving and not worrying about how the bills are going to get paid. Zander is a broker who works for you, shopping the top companies to find the right coverage options for your needs and your budget. In many cases, there are options available with no medical exam and instant approval. My wife and I had term life insurance through Zander for years long before I worked at Ramsey because we trust them. Getting term life insurance is a way of saying, I love you when you can no longer say it yourself. Go to zander.com or call 1-800-356-4282 to find the coverage that fits your family. Nicholas is in Scranton, Pennsylvania up next. What's going on, Nicholas? Speaker 2 (10:24) Hey, thank you so much for taking my call. Speaker 1 (10:27) Sure. How can we help? So I have a truck I just bought for my business. It's my third truck. I currently owe $55,000 on it, and I have a pretty high interest rate. So I was wondering if I could let you guys know where all my assets are at and what would be the best way to just pay this off as soon as possible. What's the interest rate? It's a 13.7%. Man. Why is your credit so bad? Oh, I have a 750 credit score. I'm 23 years old, so I guess it couldn't really do any better than that. Interesting. Okay, are the other trucks paid off? Yes, sir. They are. Okay, do you have any other consumer debt? I have a zero-turn mower, but my payments on that are about 180 a month. zero percent interest. So that's not very much for me at all. Okay. What's left on the balance? Of the mower or the truck? The mower. 7,000. Okay. All right. What's your income from this business? What do you actually take home? Well, right? It all depends on the project. Some weeks I could come home with 10,000 profit. Some weeks I could only come home with 1,000 profits. It all depends on the week. What did you file in your taxes last year? Last year was a lot less than what it is this year. Last year was about $68,000 total. I'm probably, I'm well past that now, and it's only July. Okay, so you might clear $100,000? I think so this year, yes, absolutely. And what assets do you have? So currently I have $32,000 in my business checking. I have quite a large amount of cash. And another thing I want to bring up is I have an index fund with about $100,000. And I wanted to see if it was possible to maybe, what would be like the best way to pay it off? Because I can't, it's not like to deposit $30,000 into the bank all at once. Well, how much do you have in cash? You said you have a large amount in cash. Yes, sir. I have $55,000 in cash. Which is as much as that's owed on the truck. Correct. So why don't we just use that? I can't deposit all that much in the bank or else I'll get flagged by the IRS, they said. Well, I was about to ask you, like, how much are you holding away for quarterly taxes? you're running your own long business. Yes, sir. So that gets all deducted automatically with the accounting service I have. So they have all those numbers and stuff. I'm not worried about the numbers. Where's your retained earnings account? In my business checking. That's the 32? Yes, sir. So you've got that 32 is basically if you clear 100 grand, you're holding your 30, whatever, 5%, that you're going to have to pay in taxes. that's what that money is for? It's not to repair the mower, repair the trucks, pay your guys, get gasoline? It's for, it is for everything. It is for everything. So whatever our own taxes will also get taken out of that account. Okay, well, George and I can't sit up here and tell you to continue to run an illegal business where you want to like hide cash from the government and not pay off your gas. No, no, no, it's not an illegal business. I have a legitimate corporation. Okay. But you said you couldn't use the 55 cash because you have to report it, which means you're not reporting. it as income is what we're saying, so we can't use that in the equation. Oh, okay, I understand. So I was able to deposit around $10,000, the bank that told me. Okay. You're, because you don't want to report it to the IRS. Correct. Because you can deposit more than that. But the bank says, hey, we have to file a report if it's over $10,000. Correct. Yes. Sorry for confusion. Okay. Now, I understand now. Well, it's a hard question to answer, because I would just deposit the money, report the income. and pay my cheeser with a caesar and then pay the truck off. Problem solved. The other route is to sell off, you know, enough from your index fund to cover it, knowing that you also have to cover the taxes from the capital gains. It's either short-term or long-term capital gains, long-term, obviously more favorable on the tax side. But this is like, we're solving surface-level problems right now. There's some deeper issues. Like, why did we go into debt for all these things? Why is the mower not a big deal? Because here's the Ramsey principle. We believe that running your business. completely debt-free and growing at the speed of cash is the wisest way to actually sustain the business. And the hard part for me is you literally have the cash on hand by 4 o'clock this afternoon to owe no man a dime. It's not like you're paying a million dollars in taxes to the government. I mean, at your income, it's not that big of a deal. Yeah, I understand. Okay. I think I just have to, I don't know what I was so worried about. I would work with a CPA. Do you have one that you have for the business? I do. I do. I would get in touch with them and figure out what are all the taxes owed. I want to do this right. I want to be completely debt-free and report all the income and just start clean. Real quick, George, you're better with a calculator than me. Will you figure something up for me? I can try. The $55,000 loan over seven years at 13.9%. Oh, boy, now I've got to pull up an interest calculator. I would love to know. Because here's what I'm... It was going to pull up 95 grand. It was going to be what? 95 grand is what you'll end up paying if you just make minimum payments. Correct. And that car is, that truck's going to be worth what? 15 or 20 by then? I mean, it'll hold a little more value. It's a dump truck. Okay, but let's do. The math you're avoiding, you're going to pay 13.9% interest. You're going to pay $40,000 extra dollars to not pay $10,000 in taxes. Gotcha. That's just bad math. Like you're sitting on 55 grand cash, you're worried about the 30% or the 28% or whatever the government's going to take out of that. And so to avoid that, you're going to pay $45,000 on a depreciating asset or $40,000 on a depreciating asset over. And it's going to sit around your neck like a rock over the next seven years. Yeah, I understand. And do you have a personal emergency fund for your own life? Yes. Is that separate from all of this, or is that part of the 55 cash? That's what my index fund is. That's one of my... Okay. What I keep saving into eventually when I get to retirement. I did just open up a Roth last year, so I'm starting with that as well. Okay, cool. You're doing a lot of good things. I'll give you another tip. For your emergency fund, it is wise to keep it liquid. Three to six months of expenses liquid, which means not in a brokerage account invested in the stock market. because as soon as you have an emergency, the market's going to take a dip 15% and it's going to gut you to try to take that money out. So just keep it in a high yield savings account, making 3.5% and then you can leave the rest invested. But I would take enough out to pay off all of your debts, get you the emergency fund liquid, and then move on from there to actually invest for the future running a completely debt-free business. If you hate that life, call us back and you can yell at me. I'm fine with that. But I promise you you're going to have so much more peace in your life. if you simplify and focus on one thing at a time. Yeah, if you hate this, here's the deal. In four months, you can go take out a personal loan for $55,000 at 13.9% and put that money right back in your checking account. You'll be right in the same spot. Yeah. But I want you to try running a business, running your life, and not owing another man a dime. And like George said, give the government their money and move on with your life. Gotcha. If you had a trillion-dollar business and you were moving stuff around, or you had a $300 million business. And there was some true tax savings you could make with moving stuff around and moving it to this state. Fine. That's great, good and awesome. You're just not there yet. I'm not there yet. George isn't there yet. We pay our taxes and we get on about our life. And I'll tell you, last year I paid so much in taxes, I had to call a buddy. I called a friend and said, I just need to tell one other human how much I wrote in taxes. And I told him, and he got silent. And he was like, oh, man. And then he was like, oh, that means you had a good year, though. And I was like, yeah. And he goes, well, okay, then get only your, like, get over your, like, I shared it with somebody and then I got on about my life. You know what I mean? Yeah. Like, there's, there's so much Instagram-y stuff about how to save on taxes and slap up and flip it and reverse it. Buy a G-wagon and depreciate 100%. I'm just, it's exhausting. So, Nicholas, at the beginning of the call, you told me, hey, yeah, I got a moor, but it's 0%. I want you to start thinking bigger about your life. So instead of thinking how much down, how much per month, which is. is broke person mentality, think wealthy person mentality. How much? Let the sentence stop there. Not how much in interest and not how much down, not how much in payments. How much total and can I afford it in full? And if the answer is no, then we need to pause. A little bit of delayed gratification, a little bit of patience. That's how you're going to build this business the right way. Because there's going to be a temptation around every corner to scale and grow way too fast. And I don't want you calling back saying, dude, I'm way over leveraged in my business. You know, I'm all about practical ways to save time and mental energy, especially during the summer when life gets busy. 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He doesn't really show why the... Like, here it is. This is the opening of the book. Dave gets so nerdy that we're like, you're sure you want to share the formulas for this, Dave? This is pretty in-depth. And he's like, this is what I do. Well, and I think, I think, and it's, it's, I'll be generous. It's nobody's fault. They just assume Dave is this old guy ripping from the hip. And I remember one time he was explaining something about the way bond rates interact with interest rates that affects the, And he said something along the lines of, and I kind of, my brain had melted by this point, but he said, all right, so algebra normally goes this way. I'm going to take it into, we're going another dimension. We're going to go this way. And I was like, you know what? I'm just going to say, I trust you. 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And a lot of people ask, hey, what if I can't watch it live? There is a replay as well. So check it out, Ramsey Solutions.com slash events. Amberly is in Salt Lake City. What's going on, Amberley? How can we help today? Hi. I'm just calling for some advice on my situation. I'm 21 years old. I'm headed to college in the fall, and I'm trying to do it the right way. Back when I was in high school, I was able to get 55 college credits and a technical degree in automotive studies. Wow. I then served a mission for my church and used my savings from my technician job as a cushion when I got back. So I paid for another semester of college and bought a car in cash. I now have my associates and about $2,000 in savings and now I've transferred to a new college to get my bachelor's in experience design and management. My question today is how do I avoid debt in college and stick to a budget while feeling like I don't have that much money to work with while in the first place but not wanting to burn out. Super simple. Yeah, you asked you asked 50 questions there in one, Amberley. I was supposed to say, hey, I'm really proud of you. The fact that you've made it this far, dead free, it sounds like, is incredible. But not only dead free, but you've also done something that was important to your faith. You've also kept your character about you. You've also got a vision for what you want to do. And like all that, I'm proud of you. Just as an old man talking to a 21-year-old. Well done, dude. You're on the path. So let's look at the math of this. What is this school going to cost you each year and in total? Yeah, like it sounds like you went to a Lexus dealership. You got in the car and you're about to turn out of the parking lot. And then you're looking out the window going, how do I do this debt free? Like, you've already enrolled in a thing. And now you're asking about the price. George and I would suggest you're doing that backwards. Like instead of saying, okay, here's what I got. Here's how much money I have. Like we save up for the car first. Then we go car shopping. But we've already went shopping. We picked the car. We signed it. And now we're like, oh, we got to pay for that. How do I do this debt free without any stress and without burning out? Right? You get what I'm saying? Yeah. Okay. So is this a local in-state school? It is an in-state school, and tuition is going to be $3,500 a semester. Nice. That's very reasonable. That's beyond reasonable. Okay, so seven grand a year. Are you living at home? No, I am renting. Renting. Okay, and are you working part-time, full-time right now? I do have a job. It'll pay about 18 an hour with room to improve. about 33 hours a week. Fantastic. Dude. Okay, and you can still do school while working those 33 hours a week? Yes. I'm doing all night classes so that I can still work during the day. Amberley, you're... Wow. I hope everyone listening, everyone who's over the age of 40, who thinks it's all going away because this young generation, there's a Jillian Amberley's out there who are... Amberly, you're giving me hope for my kids. So well done, dude. You're on it. Thank you. How much is your rent? $500 a month. Wow. This is incredible. Okay, so your gross income for the month, let's call it $2,400, you take home $2,000. Is that fair? Yeah, roughly. Okay, great. So $2K a month, your rent is $500. That leaves us with $1,500. Now we still have to cover other bills, so you've got to eat, right? Mm-hmm. And you have $2,000 to your name. We're going to call that your starter emergency fund, and you have no debt. So right now we could sock away a little bit of money each month, right? Yes. How much do you think you could put away into a savings account if you worked really hard? Um, I feel like I could put at least 500. Okay. So that's six grand a year right there. That's a good start. But we need to cover seven grand a year just to cover the tuition. Okay. Right? Then I feel like I could make, I could probably do more. Or then you've got summer too. There's other levers. Yeah, you can work more in the summer. You could apply for scholarships and grants like a madwoman, make that another part-time job every weekend. I'm going to apply for five or six different scholarships. And even if you get a couple out of that, that was still a pretty good hourly rate. And so that's the way to do it, is go to affordable school, check. You did that part. Work part-time. Check. Get scholarships and grants. Check. Now you've got an actual system here to cover the gap. So turn it into a little math equation. Know that my income will cover this portion. And And then get ahead of it. So you know, when is the next bill due and how much is that going to be? Do you know? Is it like September it's going to be due? Yes. I believe so, September. So $3,500 by September. Well, I don't even mind you getting on a semester payment plan with your college. I'm going to pay you this much per month for this semester. I'm going to pay you this much per month. Usually they'll do it for $50 or $75. They put you on a semester payment plan. and just make that pay. If it's $600 a month, yeah, and for a couple of years, and you can factor that into your monthly budget, that makes it simpler for you. Okay. And Amberly, let's, I want to get to the question beneath the question that you asked, okay? Can we be honest and say, you're 21 years old? You've been working hard since you graduated high school, and you've largely been working. Somebody else has been telling you what to do. And now you're entering into a phase where quote unquote you're free and now you got two other knuckleheads saying well actually you got to keep living like this pretty pretty low we're not out of the woods yet right like just like burnout is not being honest with the reality that you're in and you're very honest so if you are able to metabolize i got two more hard years of scratching and clawing ahead of me and I'm going to choose joy at work when I'm doing whatever I'm doing 33 hours a week and I'm going to find not drudgery but I'm studying a thing that I actually want to go do in the world and I'm going to choose to walk into those classes with a smile on my face. Not every day because not every day is like that, but I'm going to choose gratitude walking into that thing and I'm going to keep a calendar. I know this ends in two years. Man, that's going to keep you from that bitterness, that resentment that I just want to break free, do whatever I want, whenever I want. It's just going to keep you on that path for two more years. I'd rather you do this now than the back end where you're trying to make student loan payments while trying to live your new adult life. That's right. So set up a sinking fund. 600 bucks a month in that thing covers me no matter what. You're crushing Amber. We're proud of you. Automate that and you're going to graduate completely debt free, making good money. So proudy. This is a success story in my book. I've met plenty of people over the years who had a product that they wanted to start or a business idea they couldn't stop thinking about. But they never took the first stage. because getting started felt complicated. Shopify makes it much easier. You can build a professional-looking online store in no time flat with everything you need already built in. Then when customers are ready to buy, Shopify checkout helps more of them actually complete the purchase. That's important because abandoned carts don't make you money. 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