Wisdom Starts Where Debt Ends

George Kamel (0:07)

I'm George Kamel, joined by Rachel Cruze this hour.

George Kamel (0:15)

We're taking your calls at 888-825-4255. We're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studio, this is The Ramsey Show. I'm George Kamel, joined by Rachel Cruze this hour. We're taking your calls at 888-825-4255. From the Ramsey Network Call us at 888-825-5225.

Isabella kicks us off in Washington, DC. Isabella, welcome to the show.

SPEAKER_3 (0:38)

Hi, thank you so much.

George Kamel (0:40)

Absolutely.

SPEAKER_3 (0:42)

We are currently paying over $5,000 a month in bills right now.

And in a few months, we're going to be moving and then paying less than $1,000 in bills. And we're hoping that you guys have some advice on maybe budgeting better. We're worried we're going to see a significant drop in our bills, which leads to an increase in, I guess, our bank account. And I'm worried we're going to see that money and be like, wow, now we can buy all these things that we want and go out to dinner. And this is great. And we're 27, you know? So that's crazy. We're going to want to spend it.

George Kamel (1:20)

What life hack did you find to cut your expenses down by 80%?

SPEAKER_3 (1:26)

In 2020, I bought a property, a two bed, two bath condo. And the mortgage, I put over 60% down on it. And the mortgage is $300 a month.

So we're moving into it.

Rachel Cruze (1:40)

So it's the mortgage that you're basically giving up, that $4,000?

SPEAKER_3 (1:46)

Yes, yep. The rent in Washington, DC is insane.

SPEAKER_6 (1:50)

What's your household income?

SPEAKER_3 (1:53)

It's about 10 grand a month.

George Kamel (1:55)

Great. So you have five grand in expenses. So you should already have five grand left over, life as it is.

SPEAKER_3 (2:02)

Yes, but then of course, Washington, DC is expensive and it's groceries and just life in general.

Rachel Cruze (2:10)

So that doesn't count groceries.

Rachel Cruze (2:11)

Are you guys moving out of DC then?

SPEAKER_3 (2:15)

We are. Yeah, we're moving to Hilton Head Island, which is where the property is.

Rachel Cruze (2:18)

Oh, gotcha.

Rachel Cruze (2:19)

Well, that's wonderful.

Rachel Cruze (2:20)

That sounds nice.

George Kamel (2:21)

Rachel's jealous.

Rachel Cruze (2:22)

That sounds nice.

George Kamel (2:24)

OK, so your income stays the same at 10K, but your bare bones expenses go down to a thousand.

SPEAKER_3 (2:31)

Yeah.

George Kamel (2:31)

And you're worried you're just going to spend the difference instead of do something smart with it.

SPEAKER_3 (2:36)

I am very worried. And then I'm questioning, do we try to pay off the rest of the house? I mean, we have 40,000 left on it, but if it's only $300 a month mortgage, is it smart to pay that off? I think at 3% interest, it's making more.

George Kamel (2:54)

Making more where?

SPEAKER_3 (2:55)

I think so. If we put it in the stock market, I think it would make more there, wouldn't it?

George Kamel (3:01)

Well, there's a lot of ifs here. Number one, you're not investing right now. Number two, we're hoping the market is up consistently, which over time, it's going to go up and to the right, but there's going to be years where it could be down 20%. And so there's a guaranteed rate of return, which is paying down your mortgage systematically. And then there's the variable of we could make money in the market. So I want to make that part clear.

Okay. So the second part here, do you guys have any other debt outside of this mortgage?

SPEAKER_3 (3:30)

Nope, nothing.

George Kamel (3:31)

Amazing. And you guys have savings?

SPEAKER_3 (3:34)

Oh, yeah, we have over 100 savings.

George Kamel (3:36)

Oh, wow.

SPEAKER_3 (3:37)

100 grand, sorry, not $100, 100 grand.

George Kamel (3:40)

100,000 savings and no debt. So you could pay off the house today and still have 60 left over.

SPEAKER_3 (3:45)

Oh, absolutely.

George Kamel (3:46)

What's stopping you?

SPEAKER_3 (3:47)

It's just a question of is that smart?

George Kamel (3:50)

Where is that 100 grand?

SPEAKER_3 (3:51)

We're trying to go back and forth.

Rachel Cruze (3:52)

Where is the 100 grand right now? Just in, okay, so your point about making more is not really a point because that $100, if it's just in a regular savings account, it's making like a little over 1%, even less than 1%.

George Kamel (4:07)

Is it in a high-yield savings?

SPEAKER_3 (4:08)

Yeah, I'd have to ask him.

Rachel Cruze (4:12)

I bet it's just in a traditional savings.