Your Goals Need Numbers, Not Wishes

The Ramsey Show

Dave Ramsey and Rachel Cruze tackle listener questions on debt management, financial priorities, and emotional well-being, emphasizing the importance of concrete

Key takeaways

• Debt resolution requires specific numbers and actionable plans, not just hope or vague intentions.
• Selling high-cost assets like an expensive car can free up significant cash flow for debt repayment.

Main topics

• Debt management strategies
• Asset liquidation for debt repayment

Notable quotes

If you sell the car and get a beater, $2,000 extra a month just going to this debt—you're out in a year.

Conclusion

The episode underscores that achieving financial peace requires clear, numerical goals,

Transcript preview

Speaker 1 (0:04) Brought to you by the EveryDollar 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. Send the credit. Fairwinds Credit Union Studio, this is The Ramsey Show. I'm Dave Ramsey, Rachel Cruz, Ramsey personality, number one best-selling author, co-host of Smart Money Happy Hour on the Ramsey Network, and my daughter is my co-host today. Ryan is with us in Chicago. So my question is, can I save more than $1,000 before baby step two? Speaker 1 (0:51) What's the purpose? Is something happening? Is there going to be a job change? Are you guys expecting a baby? What's the reason? No problem. So I'm 34 years old, no mortgage, no kids, no personal loans. I did just transfer to another location, same job, to move towards my family. So I have about... I'm just thinking about do I pay off debt before, you know, saving or try to do a little here and there? I'm misunderstood. You said you had no personal loans. No, I meant, I'm sorry, like actually from a lender, but I do have two personal loans, a student and car. My apologies. Okay. How much in student loans? Those are personal loans. Okay. How much in student loan debt is it? $23,000. Okay. And the car? $23,000. Both. Speaker 1 (1:45) Yes, each. $23,000 each. Okay. And what do you make? Take-home is $2,800 a month. Okay. And you already made the move? So you're settled? Or you're about to? I'm about to in about two weeks. Okay, gotcha. And how much do you have in savings? I have $90,000 in 401k and $3,000 in investments, nothing in savings. What's the investments? What's the $3,000? Is that retirement, like a Roth, or is it just a brokerage account? No, just a brokerage account. Okay. How are you planning on cash flowing the move? Well, fortunately, it actually won't cost me any money to move. My family's going to help me. So the moving is actually not going to be difficult. And I'm actually going to get paid the same. And I'm going to start there, just like kind of a lateral move. Okay, so they're jumping in, helping with the physical move. And you're moving from where to where? Speaker 1 (2:53) Northern Wisconsin to Illinois. Okay, gotcha. I mean, if I were you, Ryan, I'm okay if you don't do anything for two weeks when it comes to the baby steps. Get moved. Start the new job. Settle in. And then once everything is there, then yeah, I would start with taking $2,000 out of that investment account and throwing it at this debt. And you're making $2,800 a month. Is that what you said? Yes. Yeah. So it'll be your income is going to be a major factor in you. Speaker 1 (3:22) getting out of this debt. I mean, it's, yeah, I mean, $46,000. And so you finding any margin, because you probably are not, you're not going to have a ton of margin. I'm assuming after rent and food and everything. Is the trajectory on this job going to take this income up pretty quickly? Because you're not making much. I understand. The trajectory is actually a lateral move. No, I mean, after you make the move, are you going to be making double this in two years or something? That is my goal. I am planning to kind of do some studying internally with my company and hopefully move up into another position. What kind of job is that, Ryan? Ironically, low-level finance position. Okay. Okay. Yeah. Well, there's another thing coming into play, too, here, is you have a car you can't afford. I mean, you make $40,000 a year. You have a $23,000 car. That's just ridiculous. Speaker 1 (4:22) So unless your income is going to come up pretty dramatically, pretty quickly over the next two or three years, this car is going to really hold you back. And if I'm you, I'm going to look at selling that car. Not this week and not anything like that, but, I mean, six months from now, you're settling in. You're going to see that what Rachel said is true. There's not a lot of wiggle room in this math to be able to aggressively attack this debt. And I don't want you hanging out in this debt for, like, three years or five years or something. So I'm going to take extra jobs. I'm going to move up through the company. We're going to get this income up to double pretty quick with side hustles or whatever. Speaker 1 (4:59) whatever, and start really chunking on this because then the $1,000 doesn't become a thing because we're not suggesting people keep $1,000 as a permanent plan. This is just while you're getting rid of your debt and totally focusing on your debt. And honestly, the difference in $3,000 and $1,000 is nothing. So it's not even symbolic. So, I mean, if you have a problem and it's $8,000 problem, of some kind, some kind of an $8,000 emergency, you're just as screwed with three as you are with one. So the purpose of the one is not because it's enough. It's just we're going to take it down and we're going to completely focus on getting out of debt. And that would include getting your income way up and very possibly selling this car to get this stuff cleaned up. Because you are not making any money. Because if you sell the car, Ryan. Speaker 1 (5:51) and get a beater, $2,000 extra a month just going to this debt, you're out in a year. So, I mean, if you can do this quickly, that's the point of the intensity. It's going to cost you another year living on the edge if you keep the car. Yep. At least. And living on the edge meaning you're not doing anything but working all the time. with your extra jobs and everything else. And that's what it's going to take. So I personally wouldn't do that for a car. Melissa's in San Antonio. Hey, Melissa, how are you? Dave and Rachel, how are y'all? Better than we deserve. What's up? Go ahead. I just have a question. Is there ever a time on Baby Steps 4, 5, and 6 that you would be okay with not investing the full 15% into retirement? Why do we not want to be wealthy? We do want to be wealthy. My husband and I have been listening for about a year. We paid off $100,000 in debt, and we are... Speaker 1 (6:53) We've built our emergency fund, and I have a kid. We have four children. One is in college, and we did not plan well for college, and so we're trying to get him through without student loan debt, and it's just a little tight. So I didn't know if there was, like, for a short time, if you would ever suggest. I don't suggest it. Instead, I'm probably going to think about where he's going to school and how much that costs. Yeah. He's going to an in-state school, small school. It is commercial aviation. And so, unfortunately, that's a little expensive. He has a college fund, but it's just not going to cover it. And so we were going to try to save... Yeah. And what's your household income? $300,000. Okay. And this kid's looking for $100,000, right? Yeah. Speaker 1 (7:47) Yeah, and he's already used his college fund. He's on year two, but the college fund is about gone. How many years is that? He needs another 50 grand. Yeah, yes. I think you can cash flow the 50 grand and put 15% in. You just got to decide that him going to school is a priority over your lifestyle. Yeah. Cutting lifestyle before cutting retirement. I would. I mean, you can do it if you want. It's your life. But the math on it is not good. And they make 300. So, yeah, I'm just saying the math on cutting it. Oh, yeah. Cutting back on retirement is not it's not appealing. Yeah. Speaker 1 (8:54) If you're already enrolled in a Medicare plan, you might think there's nothing else to do. You're good to go. Wrong. The fact is, Medicare premiums, networks, prescription coverage, and benefits can all change, even if your health doesn't. So doing nothing could cost you hundreds or even thousands of dollars a year. 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Helps you track your progress against the baby steps, plus get personalized recommendations and coaching for your situation. It's like having one of us walking with you every day. Start EveryDollar for free by downloading it in the App Store or... Google Play. Michelle is in Toronto. Hi, Michelle. How are you? Hi, good. Absolutely. How can we help? Thanks for taking the time. Speaker 1 (10:57) currently working in a job that I don't like, but I make good money and I'm looking into switching into like the trades. I have an opportunity for an apprenticeship, but it would be free. Um, but I wouldn't be working for three months. I'm in baby step two and I just don't know if I should take the opportunity and invest in my future that way. No. You don't quit your job and make no money when you're deep in debt. You keep working and you get the debt cleared so that you can quit your job. So what are you doing now? Bus driving. Okay. And what would you be doing when you take the new position? An apprenticeship program. I would be working part-time. It would be free. It would be for construction and then an apprenticeship, a paid apprenticeship after the three months. I'm sorry. What in construction requires an apprenticeship? Speaker 1 (11:52) So in Canada, you do construction for carpentry, electrician, all of that. So you learn a little bit of everything, and then they place you with the union for an apprenticeship with them in an area that you excel in. Okay. And how much would you be making after the three months? They usually start at $33 an hour, but it goes up because you would continually grow. What are you making now an hour as a bus driver? With overtime last year, I made $80,000. I take $1,900 biweekly. Biweekly, okay. So this is after the apprenticeship is a break-even, right? Yeah, but I don't like what I'm doing right now. So that's what's really pushing me to try to maneuver that way. How much debt do you have? I'm $15,000 right now. I have a car and a credit card. Okay. How much is the car debt? Speaker 1 (12:52) I owe $6,000 on it. Okay, and $9,000 on a credit card. Okay. Yeah, I'm just going to roll up my sleeves and knock those two things out and then save up a good down payment. How were you planning on living while you made no money? I would work part-time where I will currently work as a casual, and I currently live with my parents. So I would just... Yeah, how old are you? I'm 33. Okay. All right. The other thing I want you to think about while you're doing this, but first, yes, I would clear off the debt before I went into an apprenticeship and cut my pay dramatically. You need the money to clear the debt, but you should be able to clear it really fast. You've got no overhead. You're making $80,000 and you only need 15. So you should do this in just a matter of months, not a matter of years. Okay. Mathematically, you should. Speaker 1 (13:47) And then the other thing I want you to investigate is the only thing you've looked at is the union track. And I am sure that they're not positive, but I feel relatively sure that it's somewhat like the states and that you can go the union route or you can go the non-union route, which, by the way, will put you to work a lot faster. And so I would investigate, you know, going to work on a construction site and start making $30 an hour and just like that. And then start to learn while you're there. Yeah, do some investigation. Yeah, investigating in that field, Michelle, before you make that decision. But honestly, yeah, if you're bringing around probably $6,000 home a month-ish, if you can throw $4,000 at this, you're done in, I mean, four months. Speaker 1 (14:35) Then we can pick up the internship and look to see, you know, in the future. Because I would want you to change jobs. I understand if you just, if you hate it and that's not a way to do life. But for four months, I would do that in overtime, like what you're doing, and just get this debt knocked out. Yeah. Because if you don't have the debt hanging over you while you're trying to make the transition, you're more likely to pull it off. And I want you to pull it off. I agree with the move. I just, I'm not going to hop. you know, immediately on that. So, well, let's clear the debt and then move in that direction. Ashley's in Peoria. Hey, Ashley, what's up? Hey, good to talk to you guys. You too. How can we help? So, we were lucky enough during COVID to refinance for a 15-year loan at a 1.75%. Speaker 1 (15:21) So we have eight years left and we owe $86,000 on our house. We used to homeschool, but now my girls are going to private school like 15 to 20 miles away. And because of that, I am going into town two to three times a day. The last two days, it was 80 miles per day. You just never know, no miles per miles per day or whatnot. So my question would be for both of you, would it make sense for us to just get rid of our 1.75 that we only have eight more years left and move into town where we would be closer to the girls' school? We would not be able to, you know, be in the car so much. My youngest is not even in kindergarten year yet. My oldest is a freshman. Speaker 1 (16:18) I do have, I shouldn't say a lot more years to do this, but. 12, you know, if you stay at that school and stay in that house, it's 12 years from kindergarten to senior year. Yeah, exactly. Do you work, Ashley, or your husband? Yeah, so I currently stay home. Obviously, next year when she's in kindergarten might be a little different. But yes, my husband does work full time. And he brings in like $2,300 bi-monthly. Why are you making five trips a day? Well, I'm not making five trips. I'm making at least three. Why? Driving there and then picking them up. And then in the evening, I might be having piano or one of the girls might have golf or we might have something at church. So we're... Speaker 1 (17:16) Yeah, back and forth. I agree with you where you're like, why are you even doing this? Piano is at the school? Piano is at a local college. Oh, so this has nothing to do with the school decision. No, no, no. Golf is at the school? Golf is through school, but at a golf course. Yeah, but I mean it's through the school. And church obviously is separate. So the piano and the church was already there. Yes. Basically your life is 20 miles from where you guys live. Yeah. we want to be more involved in the school. We want to be more involved in church. There's just things that we want there. Sure. So have you guys looked at houses? Are you able to afford the move? Well, that was the question. Our mortgage would go up $1,000. Okay. Why? Not based on interest rate. $80,000 at 4% change in interest rate is not $1,000. Well, you have... You're moving up in price. Speaker 1 (18:26) Well, yeah, because we bought this house for $150,000. You're moving up in price. Yeah, because they bought their house at the... No, no, no, no, no. They sell this house, and they have an $80,000 mortgage. If they go get an $80,000 mortgage in downtown at 6%, it is not a $1,000 swing. You're trying to move up in house while you're doing all these other things. You can't afford to do that. Well, we don't know yet. What's... You guys... What hits your bank account every month? $4,600? Yes, and then he does have the aid disability of $760. Okay, okay. So, and then the new mortgage would be what? Well, they're, you know, an estimate of $2,100, but that's with insurance and property taxes. Yeah. And at a rate of... Not on $80,000, it's not. No, but what the... They're moving up in price. Speaker 1 (19:22) Yes, probably because it's a nicer area. Is that right, Ashley? And you can't afford to do that and the private schools. You cannot take a mortgage at 50% of your income because you chose to move your children into a school that you can't afford in a place where you can't afford to live. No, you can't just keep doing, I can't afford, I can't afford, but I want to. No, I would not do that. Because of the... I'm not going to double, I'm not going to have a mortgage that's 50% of your take home pay. Yeah, I agree. That's what I was trying to get to the bottom of. So Ashley, no, you can't, yeah. No. No. If you can find another house that you can move into and have an $80,000 mortgage at 6%, yes, I would do that. Speaker 1 (20:09) If you're behind on your bills, doing more of the same isn't going to fix it. You need a different plan. And that's why I tell people about Guardian Litigation Group. If you've missed payments, if collectors are calling non-stop, or if you're getting letters about legal action, that's your signal. And it's where a lot of people wait too long. Because the longer you wait, the fewer options you usually have. And once it turns into a lawsuit, things can get more expensive and more complicated. fast. Guardian Litigation is a law firm, not a call center. From day one, you are assigned an attorney who represents you. Speaker 1 (20:47) So if a creditor moves forward, you're not caught off guard and you're not hit with surprise legal fees. Guardian litigation only gets paid when the debt is negotiated and the client accepts the settlement offer. This is about stepping in early while you still have leverage. Don't ignore the problem. Take control of it. Go to guardianlit.com slash Ramsey right now. That's guardianlit.com slash Ramsey. Attorney advertising. Results may vary and no specific outcome is guaranteed. Speaker 1 (21:33) Caroline is in Dallas, Texas. Hi, Caroline. How are you? Hey, I'm well. Thank you so much for answering my question today. We'll try. Thanks. I want to buy a horse, and my financial advisor told me I need to grow my investment portfolio a little bit more before I can afford it. And I feel like I can afford it. So I wanted to just get a second opinion from you all. Okay. What's the size of your investment portfolio? The size of the horse. I don't know why. Yeah, okay. Big horse, small horse, Caroline. It's a quarter horse. It's going to be a show horse, a reigning show horse. That's big here in Texas. And so reigning is a thing here, is a type of horseback riding. But anyway, it'll be a show horse. And my investment portfolio, to answer your question, is $7 million. My net worth is $8 million. Speaker 1 (22:27) And your screener asked me how much I've been earning on that, and I actually went and I told them about 14%. But I went and looked it up, and it's 16.47% that I've earned year over year. That would be bright. Okay, and how much is this reigning quarter horse? Yeah, so it's going to be somewhere around $75,000. It might be more, it might be less. Okay. I don't know why your financial advisor even gets a vote. You're a lady that has seven, eight million dollars and she wants to spend 75,000. Well, thank you for that. But here's the thing, the ongoing upkeep. And the reason he gets a vote is I trust him and I ask him the question. So, I mean, I rang his bell and asked him. How much is the upkeep yearly? The answer is he wouldn't do it if it was him. But the answer is not you can't afford it. You can afford it. Speaker 1 (23:30) If you're not a horse person, you might not view this as wise, but you're a horse person and it's where you want to burn some money. You're getting ready to put $150,000 in the middle of the floor and burn it. That's right. That's exactly right. But if you've got $7 million, you can do that. It doesn't matter. Yeah. How much is it a year, Caroline, with everything? Boarding, grooming? Yeah, it's at least $45,000 a year if everything goes right, which when does ever anything go right? Yeah. $45,000 a year. Are you working? Are you retired? No, I'm not working. I am a young retiree. I'm 54 years old, and so I need my investment portfolio to last. Speaker 1 (24:10) For the rest of my life. Don't have kids. Don't have a husband. If your investment portfolio makes 10% a year, you make $700,000 a year. Okay. Right? So I should be able to afford a horse, right? Yeah. Yeah. But just remember, just remember, though, when it comes to horses, it's like a lot of things. It's like my cars and my guns and some other things. The first one is the gateway drug. Oh, yes. I've had horses. This is going to be a problem. It's going to get worse. Yeah, they're like potato chips. I'm a recent widow, and so my husband always worked and had a big job, and so we were able to afford horses, and it was fine because he had an income. But now I don't have an income other than that. You have a $700,000 annual income. Right, other than that, I don't have a job. What's your house situation, Caroline? Do you own your house? Are you still paying on the mortgage? Speaker 1 (25:06) I still have a $140,000 mortgage. Why? And I need, it takes me about, because that's what my husband did, my recently departed husband, we had a very low, less than 2% interest rate. So he was just like, let's just pay it off, you know, over 15 years, that kind of thing. So I might pay off my house. I would pay off your house, and because you want the horse. You should buy the horse. You can afford it. I just want you to, I buy some things that are absolutely, everyone buys some things that are absolutely ridiculous, meaning that we just take the money and burn it in the middle of the floor. It's just a, it's ridiculous consumption, right? We all do. And the only question is, does it harm your life when you do that? Okay. That's the question. And this does not harm. Speaker 1 (26:00) Your life, $150,000, 75 for the horse, and the next two years of upkeep gets you to $150,000 real quick, right? Burning $150,000 in your fireplace tonight, your life would not change one ounce. Okay. And $45,000 a year for the upkeep ongoing doesn't change. $700,000 a year coming in. I think in the future I would want my financial advisor to phrase differently so I don't fire him. He should say you can afford to do this, but you need to understand that you are completely burning this money in the middle of the floor. If you understand that and you feel like you're going to be okay, mathematically you're going to be okay. But you can't do this ten times. You can do it once. Speaker 1 (26:52) We don't go to $1.5 million. We're not going to $1.5 million on this. Yeah, I want to keep it going a year over. You know what I mean? I want to keep it. No, I'm saying. Probably four to six years, I'm going to buy another horse and retire the other one. Well, if you live on considerably less than $700,000 and you end up with $14 million and you want to buy another horse then, I think you'll be fine. Okay. Because some of my portfolio is in. you know, IRAs, like about half of it's in an IRA that I can't really touch. Yeah, but it's growing at that rate is my point. You are not going backward. You're going forward. Yeah, and that's seven years so you can get to it. Yeah, and seven years from now it will have doubled if it's continuing at 10% or greater. And so your seven will be 14 seven years from now if you're earning 10 or greater. Speaker 1 (27:45) And you have been. So you've got a good portfolio. And so the question is, if you booked a $200,000 Four Seasons or Ritz private jet around the world, which is actually available for about that, it would be the same thing. I'm going to travel around the world for the next six months by private jet, and I'm going to book it through Four Seasons or Ritz. They both have it, okay? And it'd be the same exact thing. You're just burning the money. Yeah, but that's triple what she's paying for the trip. No, she's $200,000, I said, and she's paying $150,000. But that's over, yeah. I mean, she's going to pay $75,000, and then she's got two years of upkeep. She's going to have $150,000, $200,000 in this horse in a heartbeat. Speaker 1 (28:31) Yeah. And ongoing. The upkeep is $45,000. Yeah, yeah, yeah. All that's safe. But if you have $7 million and you want to go on a $200,000 trip, you can do it. You can do that. Yes, yes. That's my point. Yep. Now, would your financial advisor agree with that? Obviously, he wouldn't. You know, but he doesn't get hers. I mean, he her financial. Yeah. He doesn't get a vote on that stuff. You know, he just is there to help me understand the math. And, you know, you know, let's couch this decision looking at what it does to the arithmetic. Does this harm my life? I wonder why he would tell her. Speaker 1 (29:09) Well, I'll give you, let's give him the benefit of the doubt for a second. Yeah. Okay, I'll be nice. He might be, her husband just passed away. He's been coaching both of them for years. He might be afraid she's buying this out of grief and he might be trying to protect her as a widow. For a large purchase. From making a large purchase. Well, you know, and because maybe she if her husband was here, maybe they wouldn't have done this purchase or whatever. He may be kind of standing in there trying to love her. Well, right. That may be what it is. Yeah. But but that's a different thing than to say you can't afford it and you need your portfolio to grow. That sounds parental. And you're not my parent. You're my financial advisor. Yeah. Yeah. And so you don't folks, the relationship you always want with your financial advisor is not parental. Speaker 1 (30:01) It's teacher. So it's like, I worry about you if you're going to spend $2 million and you've got seven. I think that's unwise. I think you're going to make some, I think you're going to regret that. And here's why. Here's how that destroys your nest egg and messes with it. But you also could say to her, instead of saying you can't afford it, you know, hey, you just lost so-and-so. you know, a year and a half, two years ago, and make sure you're not doing this from a place of grief. You're not medicating the grief somehow. And I'm worried about you and I care about you. That would be an okay position. Right. That's a brotherly position rather than a parental position. Well, glad Caroline called when George Campbell wasn't on because he'd be like, sell that horse. Yeah, because George is just no horse guy. Speaker 1 (30:48) I think he would even tell Caroline she can buy the horse. He would, but he would be under the hate list of all the horse people websites. Speaker 1 (31:20) Hey, George Camel here. A few years ago, someone stole my identity. 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Speaker 1 (32:34) Heather's in Chicago. Hi, Heather. How are you? I'm doing okay. How are you guys doing? Better than we deserve. What's up?