Podcast Summary
Discussing New vs Used Car Purchase: Consider net worth and financial situation before deciding between a new or used car. Depreciation in the first few years of owning a new car can offset potential savings.
During the Ramsey Show, George Campbell and Jade Warshaw discussed the debate between buying a new car versus a used car. The segment, called "Change My Mind," featured a listener who argued that owning a new car with the initial cost paid upfront and sold later could result in lower yearly costs compared to buying a used car with potential maintenance costs. However, the Ramsey Solutions team pointed out that the significant depreciation in the first few years of owning a new car could offset any potential savings. They emphasized that individuals should consider their net worth and financial situation before making a decision. The team also shared statistics on the percentage of depreciation that occurs in the first year and subsequent years of owning a car. Ultimately, the discussion highlighted the importance of careful consideration and financial planning when making a car purchase.
Cars aren't a good investment, especially during unusual market conditions: Cars depreciate quickly and aren't worth keeping for long-term value. Protect personal info, especially during tax season to avoid identity theft.
Cars, unlike real estate, are not a good investment due to their depreciating value and the current unusual market conditions. Brad, who is almost a net worth millionaire, is having a debate over spending a few hundred dollars more on a new car instead of a used one. Although it may seem insignificant to him, cars are not worth keeping for long-term value. Instead, he prefers saving money for vacations. It's important to note that cars can also be a significant financial burden, and owning one should be a considered decision. Furthermore, the discussion touched on ID theft and the importance of protecting personal information, especially during tax season when refund fraud is common. Zander's ID theft plan was recommended as an affordable and comprehensive solution to safeguard against various types of identity theft. In summary, cars are not a wise investment, and it's crucial to be cautious of identity theft, particularly during tax season.
Debating the Use of Credit Cards vs. Living Debt-Free: Personal financial goals and values determine whether to use credit cards for building credit or live debt-free.
Some people advocate for living debt-free and using only the money they earn to make purchases, while others believe in using credit cards to build credit. The debate revolves around the feeling of satisfaction in using earned money versus the convenience and potential benefits of building credit. It's important to note that it's possible to buy cars, apartments, and even homes without a credit score. Ultimately, the decision comes down to personal financial goals and values. If you're considering getting a credit card, it's essential to understand the potential risks and benefits and make an informed decision.
Understanding the dangers of relying too much on credit: Relying on credit can lead to financial instability and overspending, consider using your own money for better financial habits and wealth building.
Relying too heavily on credit and debt can lead to a cycle of financial instability and debt accumulation. Credit scores, while useful for accessing credit, can also encourage overspending and a detachment from the true cost of purchases. Using one's own money, such as through a debit card, can help individuals better understand their spending habits and build wealth by adding healthy financial guardrails. The speaker, George, encourages listeners to consider living outside of the credit card and credit score system and provides resources to help them do so in his book, "Breaking Free from Broke." It's important to be aware of the potential financial pitfalls of using credit and to prioritize using one's own money whenever possible.
Hidden Costs of Material Possessions: Consider financial, emotional, and time costs before purchasing, ensuring value received aligns with costs incurred.
Material possessions, even high-end items, can come with hidden costs beyond their initial price tag. The speaker shared her experience of buying a designer handbag for $3,800 and later selling it for $350, a loss of 90%. She discovered that she didn't enjoy the constant worry and paranoia of damaging or losing the bag. This experience taught her that the emotional and mental costs of owning such an item were not worth it for her. The conversation also touched on the idea that possessions have various costs, including financial, emotional, and time, and that everyone values different things. The takeaway is to consider these hidden costs before making a purchase and to ensure that the value received aligns with the costs incurred.
Avoiding the 'Stupid Tax' of Unnecessary Purchases: Be mindful of impulsive purchases and consider long-term financial implications to avoid unnecessary debt and financial stress.
People, regardless of gender, can fall into the trap of making unnecessary purchases, leading to financial stress and debt. These purchases, often justified by aspirations or desires, can be considered a "stupid tax." The speakers shared personal stories of buying expensive items like GoPros, kitchen equipment, and even cars, only to realize they hardly used them. Some even fell victim to scams. Crystal financed a Botox treatment and ended up paying for it before the treatment wore off. Amanda used her home equity to buy a new Jeep Wrangler, despite earning less than its value. The speakers emphasized the importance of being mindful of these impulsive purchases and the potential financial consequences. As Pamela shared her story of getting scammed on Facebook, she reminded listeners to be cautious and double-check any deals that seem too good to be true. In essence, it's crucial to avoid the "stupid tax" by thinking carefully before making purchases and considering the long-term financial implications.
Hasty financial decisions during uncertain times can lead to unnecessary debt: Be cautious when considering taking on debt, especially during uncertain times. Instead, focus on building an emergency fund and seeking professional help to make informed decisions.
In times of uncertainty and fear, it's easy to make hasty financial decisions that can lead to unnecessary debt and financial hardship. Jenny's story illustrates this perfectly. During the early days of the COVID-19 pandemic, she and her husband, both self-employed, received an unexpected offer for a $50,000 loan with favorable terms. In a moment of panic, they took the loan, even though they didn't really need it. The interest and payments ended up costing them around $3,000. This experience served as a valuable lesson for Jenny, who now regrets using debt as an emergency fund. Another example of hasty financial decisions comes from the student loan scene during the same period. With rumors of student loan forgiveness, some borrowers made payments and then received refunds, only to find themselves back in debt when the forgiveness didn't materialize. These stories highlight the importance of careful consideration and planning when it comes to managing your finances, especially during uncertain times. It's crucial to remember that taking on unnecessary debt can have long-term consequences and may not provide the intended solution. Instead, focus on building an emergency fund and seeking professional help, such as therapy, to manage stress and make informed decisions.
Avoiding the 'stupid tax' during irrational decision making: Making informed decisions, setting realistic goals, and holding ourselves and loved ones accountable can prevent unnecessary financial burdens caused by fear and panic.
Fear and panic can lead people to make irrational decisions, resulting in unnecessary financial burdens, often referred to as the "stupid tax." This was evident during the pandemic when people spent excessively on items like chicken coops or college tuition without fully considering the long-term consequences. In the case of education, some parents, like Olivia's mom, enabled their children's prolonged education by paying for it without requiring accountability or responsibility from them. This not only drains the parents' resources but also hinders the children's development of essential life skills. To avoid the stupid tax, it's crucial to make informed decisions, set realistic goals, and hold ourselves and our loved ones accountable for our actions.
The Consequences of Impulsive Debt Decisions: Consider long-term consequences before taking on debt, explore alternatives to avoid financial hardship.
People often make hasty decisions when it comes to taking on debt for education or other desires, leading to a "stupid tax" that can result in significant financial hardship. A caller on the Ramsey Show shared their story of accumulating over $287,000 in debt, including student loans, car loans, and home equity lines of credit. They were struggling to make payments and keep up with their expenses, despite earning a high income. The hosts emphasized the importance of considering all options and avoiding impulsive decisions. The takeaway is to think critically about the long-term consequences of debt and explore alternative solutions before making a commitment.
Budgeting and debt repayment: Creating a budget helps prioritize debt repayment and understand income/expenses. Selling assets like property can accelerate debt repayment but requires careful consideration of consequences.
Creating and sticking to a budget is crucial for getting out of debt and achieving financial stability. The budget serves as the foundation for understanding your income and expenses, allowing you to prioritize paying off debts using the debt snowball method. However, selling an asset like a property could provide a significant boost to debt repayment efforts. It's essential to consider the potential consequences, such as finding a new place to live and the ongoing costs of alimony and child support. Ultimately, taking drastic measures like selling a property and following the debt snowball method can help individuals make substantial progress in eliminating their debt and getting back on track to investing for retirement.
Weighing Financial and Emotional Factors in Major Life Decisions: Consider career growth, travel, long-term consequences, and thoroughly research before making major life decisions based on financial or emotional reasons.
When considering a major life decision like moving due to financial reasons versus emotional ties, it's essential to weigh all factors carefully. The speakers discussed a listener's situation of owning a house worth more than expected but struggling financially. They suggested exploring potential career growth, traveling to consider new locations, and thoroughly researching the pros and cons before making a decision. It's crucial to understand the emotional and financial implications and consider the long-term consequences. The speakers emphasized the importance of detailed information when asking questions and encouraged listeners to think philosophically about their choices.
Considering Homeownership with Debt: When considering buying a house, carefully evaluate financial situation, affordability, and additional costs before making a decision. Avoid getting into a mortgage that exceeds 25% of take-home pay and ensure an emergency fund and enough for a down payment.
A young couple, who are renting and have a car debt to pay off, should carefully consider their financial situation before deciding to buy a house. They should ensure they have enough money for a down payment, emergency fund, and can afford the mortgage payments without stretching their budget. The couple in question has a car debt of $9,000 that they are paying off, and they are deciding whether to buy a house or continue renting. The financial expert advises them to use a mortgage calculator to determine their affordability and avoid getting into a mortgage that is more than 25% of their take-home pay. They should also consider the additional costs of homeownership, such as property taxes, insurance, maintenance, and repairs. The expert encourages them to take their time and avoid buying a house before they are financially ready, as the stress of an unwieldy mortgage can outweigh the benefits of homeownership. Ultimately, the decision to buy a house should be based on financial readiness and affordability, rather than societal pressure or the belief that renting is a waste of money.
Learn to manage every dollar in your budget with the Ramsey Show on YouTube: During the event, learn real-time budgeting tactics, focus on eliminating debt with the debt snowball method, be cautious of debt settlement offers, and consider increasing income to get out of debt faster.
During a live YouTube event on February 27, 2023, from 9 to 10 a.m. Central Time (10 to 11 a.m. Eastern Time), the Ramsey Show will demonstrate how to manage every dollar in your budget using the EveryDollar app. This is a unique opportunity to learn and apply budgeting tactics in real-time. Additionally, paying off debt and improving your credit score go hand in hand. To effectively manage debt, focus on eliminating it by paying off the smallest balance first using the debt snowball method. If you have a credit card with a large balance but a small minimum payment, be cautious if the company offers to settle for less than the total balance. Always get any settlement offers in writing and do not give them access to your checking account. Lastly, if your income is $1,400 a month, consider seeking employment opportunities that can increase your income to help you get out of debt faster.
Struggling to Increase Income: To improve financial situation, prioritize finding a full-time job and increasing income, downsize expenses, and utilize budgeting apps like 'Every Dollar'.
Increasing income is crucial for this individual to get out of debt and improve their financial situation. They currently make $16,000 a year and need to work full-time to make headway. Their car loan is more than the car's worth, suggesting they may need to downsize. The eviction was due to a decrease in income. Living with family for support is a good start, but they need to prioritize finding a full-time job and increasing their income to make a significant impact on their debt. The speaker encourages them to take action and not let circumstances hinder their progress towards financial freedom. The budgeting app "Every Dollar" can help them get started on creating a budget and building financial habits.
Should the couple pause their gift fund or continue?: Consider using side hustle money or budget shopping during sales for children's gifts instead of pausing a monthly fund to help manage debt while still providing for family
The couple, Christine and her husband, are trying to pay off their debts while also providing gifts for their five children during the holiday season. They have been setting aside $100 a month for gifts throughout the year. Although they are making progress on their debt, they are unsure if they should pause the gift fund or continue with it. The financial expert on the show suggested they could use side hustle money instead of pausing the gift fund, and they could also budget shop for the kids' gifts during sales. The expert also pointed out that the cost of holidays and birthdays for five children can add up, making the $100 a month reasonable. Ultimately, the decision is up to the couple, but the expert encouraged them to prioritize their debt while still providing for their children.
Focus on debt repayment before savings or investments: Couple should prioritize paying off debts, consider pausing retirement contributions, and use inheritance to pay off smallest debt first to save on interest and get out of debt faster.
The couple in this discussion needs to prioritize paying off their debts before focusing on savings or investments. They currently have an emergency fund, but it's not enough to cover their debts. The wife is planning to go back to school, which will increase their income but also result in significant student loan debt. The couple has been borrowing money to cover expenses and has been living comfortably but uncomfortably due to their debt. To get out of this cycle, they should consider pausing retirement contributions and using an inheritance to pay off debts, starting with the smallest one first. By doing this, they can save money on interest and free up more funds to attack their debt more aggressively. It's important for them to think about their future selves and make decisions that will help them get out of debt faster.
Save for a rainy day during income valleys: Create a 'peaks and valleys fund' by living below means during high income months and saving for emergencies during low income months. Pay off high-interest debt to free up more savings for a down payment.
The individual, despite earning a high income, found himself in a predicament due to fluctuating income and high debt. To become a homeowner, he was advised to create a "peaks and valleys fund" by living below his means during his higher earning months and saving for a rainy day during his lower earning months. Additionally, paying off his debt, specifically his truck loan and credit cards, would free up extra funds to save for a down payment more quickly. This approach may require some sacrifices in the short term but would lead to long-term financial stability and peace of mind.
Stay focused on the present and find happiness in your current financial situation: Embrace the present, take advantage of opportunities to learn, and improve your financial situation
It's important to focus on your current financial situation and find solutions rather than constantly comparing it to the past or worrying about the future. The speaker emphasized the importance of being content with where you are financially and finding happiness in the present. Additionally, the speaker encouraged taking advantage of opportunities, such as the upcoming virtual investing event, to learn and improve your financial knowledge. The speaker also mentioned the upcoming tax filing deadline and the options for filing taxes, including the new IRS direct file pilot program. Overall, the message was to stay focused on the present and take action to better your financial situation.
IRS Direct File System Delays and Hidden Costs with Free Tax Software: Be cautious of free tax software like TurboTax, which may require payment for filing services and lead to unexpected costs. Consider simpler and more trustworthy options like Ramsey Smart Tax for low upfront pricing and no hidden fees or agendas.
The rollout of the IRS direct file system may face delays, and it's important to be aware of potential hidden costs and agendas when using free tax filing software like TurboTax. The New York Times criticized TurboTax for deceiving customers with promises of free tax prep while requiring payment for filing services, leading to a $141 million settlement with state attorneys general in 2022. TurboTax's business model relies on funneling users into debt products, and its partnership with Credit Karma further reinforces this strategy. To avoid these traps, consider using a simpler and more trustworthy option like Ramsey Smart Tax, which offers low upfront pricing, no hidden fees, and no hidden agendas. If you're expecting a baby and anticipate your spouse not working for a few months, it may be wise to save up expenses during that time and resume debt payments afterward.
Preparing Financially for a Newborn: Jade and her husband should save enough money to cover expenses during her absence from work and after her return. Focus on paying off student loan debt as quickly as possible.
Jade and her husband should focus on saving as much money as possible before the birth of their child, as there is no maternity leave or pay during that time. They should aim to save enough to cover expenses during her absence from work and after her return. This may involve finding ways to increase their income and cutting expenses. The goal is to pay off their student loan debt as quickly as possible, ideally within four years, with the hope that the husband's income will increase in the meantime. The conversation also touched on the importance of having a good real estate agent to help navigate buying and selling properties.
Managing Debt with a Shared Expense and Limited Income: Valerie's journey highlights the importance of having a plan for managing debt, especially when dealing with shared expenses and limited income. The Every Dollar app and live Q&A session offer valuable insights and resources to help improve financial situations.
Valerie, a listener with significant debt from unexpected expenses and a shared mortgage with her sister, is learning to manage her finances through the Every Dollar app and seeking advice during a live Q&A session. Valerie's situation highlights the importance of having a plan for managing debt, especially when it comes to shared expenses and limited income. Despite facing financial challenges, she's determined to improve her situation and is taking steps to do so with the help of the Every Dollar app and the upcoming live Q&A session. The session will provide valuable insights into using the app to build wealth and gain control of money, and Valerie encourages others in similar situations to join and learn together.
Struggling with Debt: Valerie's Story: Valerie, burdened by $34k debt, must sell both cars, have tough conversations, and reduce expenses to eliminate debt and start fresh.
Valerie is struggling with significant debt, primarily from credit cards, totaling around $34,000. This debt includes two cars, one of which is in her name and the other in her sister's name. Valerie expressed difficulty affording the minimum payments and revealed there is additional debt outside of this renovation project. To improve her financial situation, Valerie needs to have tough conversations with her family, sell both cars, and focus on reducing expenses. The ultimate goal is to eliminate debt and start fresh. The conversation also touched on the importance of persevering through financial hardships and the need to prioritize savings.
Exploring Investment Opportunities for Upcoming Retirement: Focus on saving and investing, prioritize a fully funded emergency fund and maxing out a Roth IRA, consider employer retirement plans, and aim for a 15% annual investment goal.
This individual, a state trooper from Kentucky, is looking to secure his financial future by exploring investment opportunities, specifically rental properties and retirement accounts, due to upcoming retirement and reduced pension benefits. He currently has a mortgage and a modest income, and aims to be debt-free by the time he retires. The financial advisors suggested prioritizing saving and investing, starting with a fully funded emergency fund and maxing out a Roth IRA before considering real estate investments. They also recommended considering his employer's 401K and deferred comp plans, but advised against sacrificing the 15% investment goal for mortgage payments. The individual's income of $70,000 annually would allow for $10,000 in annual investments, which could be split between a Roth IRA and 401K.
Long-term growth and market recovery: Invest in mutual funds and index funds for long-term growth, have multiple retirement accounts, invest 15% of income, avoid high-risk investments, and focus on financial planning.
Despite the fear of a market crash, the US economy and the stock market have shown consistent growth over the long term. The speaker encourages investing in mutual funds and index funds, as historical data shows that even after crashes, the market recovers quickly and significantly. The speaker also suggests having multiple retirement accounts and investing 15% of income into them, while ensuring access to liquid money for living expenses. The speaker also mentions the importance of not overextending oneself with high-risk investments like real estate, especially during retirement. The speaker encourages listeners to focus on long-term growth and financial planning, rather than short-term market fluctuations.
