You Don't Win With Money By Accident

Dave Ramsey (0:00)

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Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the FAIRWINDS Credit Union Studio, this is The Ramsey Show. George Kamel, number one best selling author, Ramsey personality, co-host of Smart Money Happy Hour. He's my co-host today. Open phones at 888-825-5225. Helen is in Miami. Hi Helen, how are you?

SPEAKER_2 (0:48)

Hi, I'm good. Thank you so much, Dave, for having me on today.

Dave Ramsey (0:51)

Sure. What's up?

SPEAKER_2 (0:53)

So, I have a full-time job. I have a side hustle and I have a third business, which is a kids' play center. And it's currently losing me about $13,000 a month.

Dave Ramsey (1:07)

Ouch.

SPEAKER_2 (1:08)

And I know it's really painful. And had you spoken to me like five years ago, I would be on baby step five or six or seven. But unfortunately, this business has drained all of my 401k.

It's drained all of my kids' college savings. And it's also forced me to sell a rental property that I owned. So the question I'm asking myself is, do I sell my home, take some of the funds and try and rehabilitate this business? Do I ditch the business and possibly even downsize the home? Or do I borrow money against the house, which has got about $350,000 of equity in it, and try and figure things out that way?

Dave Ramsey (1:58)

How long have you been losing money on this?

SPEAKER_2 (2:01)

Yeah, I mean, since I set it up.

Dave Ramsey (2:05)

Which was how long ago?

SPEAKER_2 (2:07)

One year ago.

Dave Ramsey (2:09)

And so in one year, that's $150,000 in losses, if it's a $13,000 burn rate, right? So that was your whole 401k is $150,000 and a rental property too?

SPEAKER_2 (2:23)

No. So about six years ago, one of my little girls had to have a bone marrow transplant. And I had a full-time job, fully funded 529, fully funded 401k, my main home and a rental property. And I was working the whole time that she was in hospital and then subsequently recovering. And at the end of that, I kind of re-assessed my life and said, okay, do I want to be in the corporate grind?

Or do I want to do something in service to other moms that enables them to spend quality time with their children? So I took a payout, a redundancy payout from my previous employer. I paid my mortgage six months in advance, and I said I would live off the proceeds of my side hustle.

And unfortunately, Miami property market completely exploded after the pandemic, and it became much more difficult to find a rental location.

I then had some issues with the set up process.

Dave Ramsey (3:24)

But I'm sorry, but you started the thing one year ago, and you haven't had a time to lose all the money you're talking about you lost.

SPEAKER_2 (3:32)

No, I lost the money during the set up process, and in that time I returned to a corporate role.

Dave Ramsey (3:40)

I know, but that was one year ago.

George Kamel (3:42)

So, how much did you put into the business initially, before you started losing money?

SPEAKER_2 (3:46)

About 120,000 went into the business before I started losing money.

Dave Ramsey (3:50)

What makes you think, to answer your original question then, my friend Dr. Henry Cloud has a book called Necessary Endings.

We have a necessary ending to a relationship, a job, a business, when we see no hope that it's going to get better. So, why do I think, if you're going to sell me as your new investor, why would I invest, if I'm your investor, I'm not, but if I were that, if you're on Shark Tank, why would I want to put money in this? What makes you think it's going to turn around?

SPEAKER_2 (4:28)

I mean, I think I haven't had the time myself to invest in it. So, you know what, I'm also thinking maybe it won't turn around.

Dave Ramsey (4:37)

Yeah.

SPEAKER_2 (4:38)

So, it might be time to move forward.

Dave Ramsey (4:39)

I think your idea might be bad.

SPEAKER_2 (4:42)

It's a franchise business.

Dave Ramsey (4:43)

It's well founded, it's a noble cause. What you were trying to do was a nice thing, a good thing, but the business aspects of it apparently suck.

SPEAKER_2 (4:55)

Yeah, it's a franchise business.