Quit Spending Like You’re in Congress!

[0] from the headquarters of Ramsey Solutions, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships.

[1] I'm Dave Ramsey, your host, Jay Warshaw, number one, best -selling author.

[2] Ramsey personality is my co -host today as we answer your questions.

[3] The phone number is AAA 825 -5 -225.

[4] Ryan's in Seattle.

[5] Hey, Ryan, what's up?

[6] Hi, long -time listener.

[7] I just got an offer for my parents.

[8] They'd help me buy a house.

[9] I'd enter into a contract with them where basically they would be the bank.

[10] They would fund the entirety of the purchase price, and I'd pay them back, including interest.

[11] They gave me a little bit better of a deal with the interest at about 6 .5 % instead of...

[12] It's around seven, seven and a half around where I'm at.

[13] And I was just curious on if it was going to be something I should do.

[14] I know we've talked about, or you've talked about not buying a home with somebody you're not married to, but it is family kind of thing.

[15] The difference in interest, what does that amount to?

[16] I'm going somewhere with this.

[17] Because that's the break you're getting, right?

[18] that's what they're offering you as a break on interest that as well as they'd be purchasing 25 % of the home and i'd pay off 75 % of the home and then when i sell it they get their so the purchase price is 400 grand yeah um they they would be given back their 100 000 and then 25 % of any profit that was made so this gets very complex yes have you already done this um it's in the process of getting done right now can you can you and are you willing to stop it i i think it's a great idea it's not a great idea it sucks beyond belief it's a horrible idea it's going to end in ashes please don't do it please don't do How old are you?

[19] 27.

[20] Okay.

[21] When you're 30 and you're married and you want to refinance the house and you have to buy out the 25 percent, your wife is going to be so pissed at your parents.

[22] Don't do this.

[23] The value would be going up.

[24] Don't do this.

[25] You can't afford to buy a house, sounds like.

[26] If you can't afford to buy a house, go buy you a house, son.

[27] Do not do this.

[28] You guys are putting this all together like there's only one thing that can happen, and it's everything works out perfect.

[29] And 100 % of the time, everything does not work out perfect.

[30] Everything that comes at this, if you want to refinance, you want to sell, they don't want to sell, you are now in partnership with people for no apparent reason except a half a percent.

[31] No, no, no, no, no, no, no, no, no, no, no, no, no. And to go back to the first thing, it sounded like at first your parents were just trying to offer you not and it's, it wasn't a good method, but it sounded like they were trying to offer you a break in interest.

[32] And my thought would have been like, well, calculate how much it is and just ask for it as a gift.

[33] And then you go buy the house.

[34] But they're really trying to make a profit.

[35] And so it's two things going on.

[36] It's you trying to get a house before you can afford it and them trying to invest in real estate.

[37] And they don't really have the money to do that either.

[38] So it's two things that are gone awry.

[39] This is really bad, Ryan.

[40] I really wish I could.

[41] could talk you into not doing it.

[42] I don't think I can, though.

[43] I think you're too far into it.

[44] I, I, yeah, you're done.

[45] Okay.

[46] Good luck, son.

[47] Please don't do it.

[48] I'm going to tell you one more time.

[49] There's 47 ways this can go wrong and only one way it can go right and you're going to experience one of the 47.

[50] I'm, you called and asked our opinion.

[51] I've got 30 years on this microphone, 40 years of doing one -on -one coaching.

[52] I have never seen a deal like this workout.

[53] They always go sideways.

[54] You're asking to have a strain in a relationship with your parents over a stupid house.

[55] And you guys have these rainbows and unicorns and skittles in your head that this is all going to work out a certain way.

[56] And honey, it's not.

[57] So you're going to do it anyway and you're going to learn the lesson the hard way.

[58] But you can remember the time you called and we told you not to do it.

[59] When you're sitting neck deep in the poop, you just remember that Dave and Jade told you not to do it.

[60] Yeah, because he's going to be neck deep Oh, he's going in the pool.

[61] Katie's in Pensacola.

[62] Hey, Katie, what's up?

[63] Hi, Dave and Jade.

[64] Thank you for taking my call.

[65] Sure.

[66] So I just want to ask, what type of savings account should we keep the $110 ,000 that we have for a down payment on a home in the future?

[67] My husband is eligible to retire from the Air Force in three years, but we'll probably wait another two years, so five years total, so maybe buy a home.

[68] Yeah.

[69] Wow, nice.

[70] Well, if you're going to play close to a five -year window, you can talk about putting some or all of it towards something like a standard and poor, an S &P 500 mutual fund, and you'll make some really good money on it.

[71] That's what I do, okay?

[72] But it could go down in value.

[73] You know, you could put 110 and it might be worth 100, but that would be a highly unusual five -year.

[74] 97 % of the five -year periods in stock market's history have made money.

[75] So I'm very comfortable with the risk if you put it in and leave it alone five years if you're going to leave it alone three years probably not I'm probably going to go high yield if you want to do a blend I'd do some in the like half of it in a mutual fund and an S &P 500 fund and half of it in a high yield but at least get some of this money working for you because we're talking about you know we're talking about the difference of about $10 ,000 a year and what you would earn on the money so we're talking about 50 ,000 bucks of versus high yield versus is a mutual fund over a five -year period of time.

[76] I also like the idea of investing it or doing the blend because once you put it, you know, you put it in an index funder, you put it where you put it, you're less likely to touch it.

[77] You're less likely to have something pop up like your friend's, you know, wedding in the Caribbean that you think would be a good idea to spend some of that money on, right?

[78] Whereas if it's in a high yield, it's easy to grab some of it, you invest it.

[79] It's kind of locked away.

[80] It's kind of locked away.

[81] own reach.

[82] I like to trick myself into becoming wealthy.

[83] Yeah, that's good.

[84] You know, and trick myself into actually accomplishing my goals.

[85] And yeah, that's a good point.

[86] You know, it's a very good point.

[87] It's always a wedding in the Caribbean.

[88] I don't know.

[89] What is it with you in the wedding?

[90] I don't know.

[91] That comes up a lot.

[92] Is this a scar in your life?

[93] It might be.

[94] It might be a friend out there somewhere that's, but you know how it is.

[95] Now suddenly you need a new car.

[96] Oh, yeah.

[97] Well, you know, for rednecks, it's we need a bass boat.

[98] Oh.

[99] Need a bass boat.

[100] boat.

[101] I need a side -by -side to go deer hunting in.

[102] Oh, gosh.

[103] And they're only, they're only 20 grand.

[104] I mean, you got that sitting in the high yield.

[105] You know, it's all, yeah, got that money sitting over there.

[106] Why would, why would we, why would we pay a bank interest for the side -by -side?

[107] Your brain starts fogging up and it stops, stops working.

[108] You can't see through the windshield anymore.

[109] Yeah, you're exactly right.

[110] That's, that's a very good point.

[111] So I, I personally, I'm comfortable knowledge -wise with the history of the stock market.

[112] So I'm, I'm, I'm plunking all of it if it's me into an S &P 500, if you've got a four or five -year window.

[113] If you're a little less comfortable, do some there and some otherwise.

[114] If you're completely, that freaks you out, just put it in a high yield.

[115] But you've got the downside of it's too accessible.

[116] You know, it becomes a bass boat funder.

[117] I need to redecorate the kitchen fund or whatever the crap comes up.

[118] This is the Ramsey Show.

[119] One of the questions I get all the time is, which life insurance company should I use for my term life policy?

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[127] We're going cruising, boys and girls.

[128] Girls, we'd love to have you go with us.

[129] We're doing the Ramsey Live Like No One Else Cruise.

[130] For those of you that are baby steps for and beyond, it's your opportunity to celebrate the milestone of getting into wealth -building mode.

[131] All the Ramsey personalities, including Jade, and I and my wife Sharon will be with us the entire seven days on a high -end, very nice Holland America, almost brand -new ship.

[132] We're going to Turks and Caicos, St. Thomas, Puerto Rico, the Bahamas, and, man, this thing is packed full.

[133] We've got lots of fun, cool friends coming like Stephen Curtis Chapman's going to hang out with us.

[134] Manit Shohan from the Food Channel will be with us.

[135] We've got a lot of other celebs hanging, and you guys come out.

[136] It's all Ramsey people on the boat, all celebrating, all saying we lived like no one else now.

[137] By God, we're cruising like nobody else.

[138] There you go.

[139] It's March, March, March, March, 22nd through the 29th this coming spring.

[140] And if you don't want to pay the whole thing up front, you can save your cabin for only $600 and that'll get you going, but you need to do it because the cabins are going really fast.

[141] So get a cabin while you can.

[142] Ramsey Solutions .com slash cruise.

[143] Paul's in Buffalo, New York.

[144] Hey, Paul.

[145] What's up?

[146] Hey, how's it going, man?

[147] Better than I deserve.

[148] How can we help?

[149] So kind of a crazy life event happens lately.

[150] I have kind of a strange uncle.

[151] I know him, but probably haven't talked to him in 15, 20 years, and he passed away.

[152] And my mother, his sister, is an executive of the estate.

[153] And she calls me and says, he left you about a half a million dollars.

[154] You're the guy.

[155] I've always heard about a guy with a rich uncle.

[156] It was you.

[157] It happens.

[158] It happens.

[159] I always, I never, I didn't know where you were.

[160] I've always heard about you, though.

[161] It's Paul and Buffalo.

[162] The guy is, he's Paul in Buffalo.

[163] He's the guy with the rich uncle.

[164] uncle.

[165] Wow.

[166] That's so cool, Paul.

[167] That's so cool.

[168] I hate it when I get a half a million dollars out of the blue.

[169] So, it's a good problem to have, but I just don't really know what to do.

[170] I've been married for 21 years, well, not married, but with my wife for 21 years.

[171] I'm 37.

[172] We have a house, and we have two beautiful kids, and I listen to your show for a while, and I know it's very centered around getting rid of debt.

[173] But I just want to be smart.

[174] I've never had this type of, like, influx of cash flow before, and I just don't want to make any mistakes and, you know, set my kids up and obviously take care of us in the immediate.

[175] Yeah, that's very wise because this kind of a hit really could change your family tree if you're careful with it.

[176] So that's very wise.

[177] And so how long before you actually receive the money, do you think?

[178] I mean, they said it's, well, that's another question, too.

[179] So a lot of it is an investment, and just from things I was reading online, I've seen people where, like, the attorney will liquidate all the investments, and then they get taxed really heavily on it.

[180] And I don't know.

[181] No, there's...

[182] Other things I was reading would, like, move it to a Roth and then inherit the Roth or something.

[183] I don't know.

[184] No, you can't move dead people stuff into a Roth.

[185] It doesn't work.

[186] So, that's, that's Internet garbage.

[187] So the investments...

[188] So within six months...

[189] The investments should not have any tax, honey.

[190] So the deal is this.

[191] Now, the attorney does, if the attorney liquidates them or you liquidate them, it doesn't matter.

[192] You now become the owner, even if he liquidates them, okay?

[193] You can ask him not to liquidate them, and you can do it.

[194] But here's the, here's the tax law on that part.

[195] And then we'll move on to the rest of it, okay?

[196] So let's say that part of the $500 ,000 is, I'll just make up something, Home Depot stock, okay?

[197] And Uncle paid 50 grand for the Home Depot stock, but the Home Depot stock's worth 150 now.

[198] Your basis as the inheritance, in an inheritance, is current market value.

[199] And so your tax is based on how much above current market value it is.

[200] It's called a stepped up basis.

[201] Okay.

[202] Okay.

[203] You do not get taxed on what he paid for it.

[204] you get taxed only on what it's worth at the time of his death, and if you sell it within six months of his death, it is presumed to have been at market value by the IRS, okay?

[205] So you got no taxes.

[206] So you take all this stuff if you want to just sell, if you want to liquidate all of it and have a half million dollar pile of cash in the middle of the table, zero tax.

[207] There's no income tax, there's no inheritance tax.

[208] Cool.

[209] Now, okay, so that answers that question.

[210] So we don't that we can move on past that now then the reason i ask how long before you get it is i want you to start pretending like you were hired suddenly to manage someone's half a million dollars and you've never done that before which is exactly what's happened right god just gave you a half a million of his money and god says how you're going to manage you son and you're going this scares me a little bit i want to be careful and that's wise so what you would do if you were hired by someone and you didn't know what you were doing, you would get some other people on your team that knew what they were doing.

[211] And so I want you to begin to gather up your own little personal committee, your own little personal board of directors, so to speak.

[212] So we're going to get a mutual fund broker, a SmartVestor pro off our website in your corner.

[213] We're going to get an estate planning attorney in your corner.

[214] We're going to get some tax advice from an ELP and back up and make sure that Dave Ramsey actually gave you the right advice a while ago and check that with a pro.

[215] Okay.

[216] And you can get an ELP, a tax ELP off our site.

[217] We don't have estate planning attorneys on our site, but we've got people we recommend for tax in Buffalo and for, if you're going to do any real estate deals, you can go get a real estate person in your corner.

[218] If you need insurance, you need a good insurance broker in your corner.

[219] Every one of these people do not qualify to be on your committee unless they have the heart of a teacher, meaning your job is to manage their money.

[220] Their job is to teach you enough about their specialty to help you manage the money.

[221] You don't turn it over to them and go, well, I just gave it to this guy to manage and he lost it.

[222] No, your job is to manage it.

[223] You're taking advice from these other people, and therefore their job is to teach you.

[224] They have to have the heart of a teacher.

[225] Does that make sense.

[226] It does.

[227] And that will keep you out of trouble.

[228] Do not do anything with this money that you do not understand because it is your responsibility.

[229] Yeah.

[230] Because sometimes these people start talking.

[231] It sounds like Charlie Brown's teacher.

[232] Wah, wah, wah, wah, right?

[233] You remember that.

[234] And so yeah, long time ago on that cartoon.

[235] But yeah, anyway, so all that to say, then we're going to have you work the baby steps, right, Jade?

[236] Yeah, Paul, what's your current financial situation?

[237] Tell us about your financial life before this money.

[238] Yeah, well, that's another, like, interesting thing.

[239] I just had a business of 13 years, and I sold it in January.

[240] So I have about $100 ,000 in assets that I still need to kind of get rid of.

[241] Okay.

[242] And I have about $20 ,000 in cryptocurrency.

[243] As far as debt goes, I have none, and my wife has none.

[244] Wow, good.

[245] We don't have a loan debt.

[246] We don't have anything.

[247] Yep.

[248] Mortgage?

[249] Yeah.

[250] We own our house.

[251] I think we owe about 130 ,000 and it's worth about 300.

[252] Okay.

[253] So first thing I'd probably do after you have those people in place is I definitely want to pay off my mortgage and just be scot -free.

[254] And then from there on, I think Dave set you up to have the right folks in your corner to decide what you're going to do about this money, how you're going to invest it if it's going to be in the stock market, if it's going to be in real estate.

[255] And my recommendation is take $620 ,000 from Bitcoin and, sale of business and inheritance and put at the top of the page and spend it.

[256] We just spend 130 of it paying off the mortgage.

[257] What are we going to do with the rest of it?

[258] Okay, I'll give you, and then I'll tell you one last thing on that.

[259] A lump sum invested in a good mutual fund or series of mutual funds, if it averages 10 % or more, will double every seven years.

[260] You're 37, you said?

[261] Yep.

[262] Okay.

[263] So let's pretend we put 400, in investments.

[264] When you're 44, you'll have 700.

[265] When you're 51, you'll have 1 .4.

[266] When you're 58, you'll have 2 .8.

[267] Yep.

[268] See how this changes your family tree?

[269] Exactly.

[270] Well, that's the thing.

[271] Like I said, it's such, it's a good problem, but it's kind of, it's intimidating.

[272] It's kind of scary all it once.

[273] And the other two things you can do with money is have fun with it and be generous with it, and you should do some of that with some of this money, too.

[274] Notice I didn't invest.

[275] at all.

[276] You're debt -free, you're generous, you have some fun, and you invest, and you keep your stinking hands off of it and let it double.

[277] This is the Ramsey Show.

[278] You've worked, saved, sacrificed, and been gazelle intense with your financial game plan.

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[290] HealthTrustfinancial .com.

[291] Thanks for joining us, America.

[292] Jade Warshall, Ramsey, Personality is my co -host.

[293] John's in St. Louis.

[294] Hey, John, how are you?

[295] Not too bad by yourself.

[296] Better than I deserve.

[297] What's up?

[298] I just call them to try to get a little bit of advice from you, Dave, on the way that my wife and I can tackle our monster debt that we have.

[299] Currently, without our house, we are at $240 ,500.

[300] Good Lord.

[301] Yes.

[302] It is a monster.

[303] What is the monster?

[304] Unfortunately, it's a lot of credit cards, student loans.

[305] It's a HELOC and a 401k loan as well as two as well as two car payments.

[306] You never met a debt you didn't like.

[307] No, and unfortunately not.

[308] What's the income?

[309] Our salary -wise is 151 -6.

[310] I broke it down to what our yearly is.

[311] It should be roughly 99 ,840.

[312] Okay.

[313] Okay.

[314] Okay.

[315] So it sounds like you guys, I'm just trying to get my head around how this happened.

[316] It sounded like you felt like you were making a good income and it was time to just go crazy.

[317] Is that right?

[318] The credit cards is the biggest issue.

[319] How much is that?

[320] Unfortunately, of the credit cards, $46 ,962 as of last month.

[321] Okay.

[322] We got the - How much on the car?

[323] the cars itself my car is 287 my wife's is 21 ,700 and mine's due to be paid off in four years hers is due to be paid off in three years well one of them's probably got to go the 28 ,000 one what's it worth uh I was not entirely sure it's a 21 Kia Sorrento it's more of the family car she has the more gas -efficient car.

[324] What does she have?

[325] Aniselaan Ultima.

[326] Well, whatever one of these is the least upside down and of the most value, I'd probably try to liquidate one and get into a cash car.

[327] So, John, yeah, I don't really care if it's the family car.

[328] You people are broke.

[329] You're starving to death, making $150 ,000 a year.

[330] You don't get to say it's the family car.

[331] You get to say everything's on the table.

[332] We're selling so much stuff the kids think they're next we're not doing anything until we get this mess cleaned up because you guys have been spending like you're in congress for what 10 years how long you've been married 10 years uh four years oh my gosh you guys did this in four years or did you get started early uh well i mean the student loans is all my stuff how much is that but how much student loan unfortunately 80 000 okay well that is the biggest portion and not the credit cards.

[333] And then the HELOC.

[334] He locked is how much?

[335] The HELOC is, where we go?

[336] 46 ,000.

[337] Okay.

[338] And that was just this past year.

[339] Okay.

[340] What did you do with that?

[341] Which unfortunately helped us pay off a bunch of credit cards.

[342] No, you didn't.

[343] No, you didn't.

[344] You moved them.

[345] It helped us consolidate them, I should say.

[346] Yeah, you moved them onto your house.

[347] And it didn't help you consolidate them.

[348] It put your home at risk.

[349] Yeah.

[350] So it's not a help.

[351] And you didn't stop spending.

[352] you're still spending more than you make right I would say yes yeah have you cut up the credit cards nope no unfortunately not okay I on myself I'll use mine primarily for work related which I know Dave you I've heard you talk about before I've expressed my work they should get us all credit cards so we don't have to use ours hopefully we can get that approved so I can stop using mine when I travel.

[353] Apparently, that's not working for you.

[354] You're $46 ,000 in credit card debt and a HELOC that's $46 ,000.

[355] So it's basically $90 ,000 in credit card debt.

[356] So something's broken with that system.

[357] Would you agree?

[358] Yes.

[359] You don't end up $90 ,000 in credit card debt when something's working.

[360] So no use of plastic is going to be okay in your house.

[361] You guys have to go cold turkey.

[362] You don't walk around with a flash in your back pocket if you're trying to quit drinking.

[363] And so, man. How much, just curious, for the work part, because I want to know how much of that is an excuse, how much are you putting on your credit card every month for work?

[364] I mean, it's not that much.

[365] The one of the, the card that's got the biggest amount, I take the full blame for it, of putting miscellaneous stuff.

[366] But that's - That had nothing to do with work, yeah.

[367] My point is, if you're spending a little bit here, there for work and they're reimbursing you who care you don't need a credit card for that you shouldn't be doing that but um let's let's let's reset here for a second are you does this scare you uh yes because it's uh i mean it's continual and i would love for as a family wise we would be better off with you know financially and the credit cards i look at is it's one of the scariest things okay um it's scary it's not the math is not scary what's scary is the pattern of being out of control and staying out of control that's what scares me it's not sustainable you know this is heading towards the wall and you're going to tee bone the wall and just blow the whole thing up right you know that's what's coming because you guys just continue the same pattern that's you you know we're in it you can't get out of a hole by digging out the bottom right i mean so um now how's your wife feeling uh we're both distressed with it okay are you all you're all just distressed with it okay are you fighting about this stuff?

[368] We try to talk about it, and she gets stressed and doesn't want to talk about it.

[369] Y 'all are fighting about this.

[370] Yeah, you would be weird if you're not having a bunch of fights, because this stuff is, it's the number one cause of divorce in North America.

[371] It's the number one cause of disagreement in marriage.

[372] This is money problems and money fights, and you've got them all up and around your ears.

[373] So here's what we're going to do.

[374] We're going to help you.

[375] I want to give you an overarching plan.

[376] I've been where you are except worse.

[377] and I remember being terrified, and I remember my wife being terrified, and I remember us trying to kill each other, and I don't want that for you, okay?

[378] But the plan I'm going to give you does not have a middle ground.

[379] It is not an easy process.

[380] The result is 100%.

[381] You're going to win, and you're going to become a millionaire.

[382] But the path to get there is painful because you guys have a series of back.

[383] behaviors, habits, and even language that you use in your own heads and at each other that has got to completely change.

[384] Because your behaviors, your habits, and the language you use around this stuff, as soon as I start talking about the car, you start talking, it's a family car.

[385] As if it's a non -starter.

[386] It's not a non -starter.

[387] It's a stupid car, and your family's almost bankrupt.

[388] It's the enemy.

[389] It's not the family car.

[390] Okay?

[391] Okay.

[392] So you change your vernacular around this and you go, anything that is between me and freedom is the enemy.

[393] We are going to freaking war with our lifestyle and our former patterns of doing things.

[394] We are not going to do this anymore.

[395] If you're ready to enter into that, I can show you how to do it.

[396] If you want to play around and think there's a math trick to hack you out of this, you got the wrong guy.

[397] I can't help you.

[398] But I can show you.

[399] I've shown millions of people how to get out of debt.

[400] we'll put you into financial peace university i'll pay for it free and we'll pay for you to be on every dollar of the premium side of the app and get you in the every dollar app and you and your wife sit down together crap i'm even going to put a coach in your corner we got one of our ramsie coaches in your area i'm going to pay for a personal coach to coach you but only if you're willing to say i'll do whatever i have to do to win okay all right we can get rid of this fear man and here's the weird thing before the debt leave the fear will be gone that you'll still have the debt but you want to have the fear anymore because you'll see your way out you'll see a light at the end of the tunnel that's not an oncoming train the only thing you know right now is you're stuck and you're not stuck what's stuck is the stupid crap that brought you to here it's the same stupid crap that made me go broke and they got jade 200 what to it 460000 in debt the lady to my right and paid it off her and her husband so you can do this when they weren't make anywhere near a hundred and a half so you hang on this place is about hope, but it's not about false hope.

[401] You're going to live like no one else, man. Your friends are going to think you joined a cult.

[402] You're going to be going cray craye, man, completely different than anything you've ever done in your life, but you'll be free in 36 months.

[403] Hang on, I'll pay for it.

[404] Christian will pick up and get you taken care of, brother.

[405] So here's a quick math refresher.

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[409] NetSuite helps you improve efficiency by bringing all your major business processes into one platform.

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[411] And right now you can download NetSuite's KPI checklist absolutely free at NetSuite .com slash Ramsey.

[412] That's NetSuite .com slash Ramsey.

[413] Jade Walshaw, Ramsey personality is my co -host, Open Phones at AAA 825 -5 -225.

[414] We appreciate all the help you guys have been giving us and encourage you to continue to give us that help, and the help is you subscribe to the shows.

[415] So if you're watching or listening on YouTube or Spotify, Apple, Google, Google, play whatever just click the follow or the subscribe button it makes a big difference in the way those algorithms are handled with those platforms to whether they put the show out or not how they push it forward to other people to see it thank you for doing that share the show let people know we're here click a link and send it to somebody i sent a funny instagram to all my buddies this morning that happens all the time right and uh you know you can do all that share stuff that makes somebody laugh or make some think or inspires them and this show does all of those things and of course leave a nice five -star review we appreciate all of that we know you're doing it because our numbers are way up tim's in rono kai tim how are you hi dave thanks taking my call sure what's up uh so my wife and i uh about halfway through baby step three and so we're looking toward investing something that's outside of our uh my work tsp and her uh work 401k good and we've reached out to a financial planner and I'm just one I don't want to make another mistake with money because I've done a lot of them so I'm just wondering you know how much should I be paying this guy as a financial planning fee and then did you go to a smart vester pro we did okay we did um they have a smart vester pro that particular one has a as a financial planning fee uh yeah they have they have a they call it a retirement planning fee.

[416] It's an annual fee.

[417] And then there's, then as I was reading in there, depending on what investment vehicle you're using, if it's like above 50 ,000, then it's a percentage.

[418] And then below that, it's the brokerage fees.

[419] Okay.

[420] It was the way I was reading it.

[421] But I don't, I don't understand that.

[422] And we're meeting with the guy tomorrow.

[423] And I just, most of the smart vester pros run on just managed accounts.

[424] And managed accounts is simple.

[425] There's no commissions, and they charge 1 % of the balance.

[426] Now, some of them do have a minimum, you know, 50 ,000 in balance or whatever until they get there.

[427] And you don't need to pay an annual fee.

[428] I don't know what that's for just for planning because you're not going to be doing that much planning annually.

[429] Now, you may want to pay an upfront fee to help you get your will started if you don't have one, help you do some other financial planning things.

[430] How much was that fee?

[431] $600.

[432] Okay, that's not unreasonable.

[433] No, okay.

[434] Okay.

[435] Because, I mean, a lot of people, in the financial planning world, there are people that do not sell anything.

[436] They do not sell insurance.

[437] They don't sell mutual funds.

[438] They don't sell wills.

[439] They don't sell anything.

[440] And they just charge for their hours.

[441] That's called fee -based planning.

[442] Okay.

[443] I don't generally recommend those because then you're also going to pay.

[444] commissions on top of that and you can get the same advice basically for 600 instead of 4 ,000 uh or for uh you know if you move a couple hundred thousand bucks over there you're not going to pay anything but 1 % and they're just going to take care of your plan your annual planning and your other stuff too there's not that much to this and so different uh smart vestor pros run different things but as to my knowledge we don't have any fee only all of them are managing mutual funds for your Roth IRA, your kids' college, your rollover from your old job or whatever, and they're helping you do that and 1 % on the managed accounts is what almost all of them are doing.

[445] I mean, my only question would be at this point in your investing, you haven't even begun yet, how much financial planning do you need each year?

[446] That would be my question.

[447] We didn't know, right?

[448] You know?

[449] Not a ton, but 600 bucks is not, you know, it's not 6 ,000.

[450] That's true.

[451] The other thing you can do is this, meet with that guy and just get a sense of the spirit.

[452] And as you're driving away, ask your wife, do not ask her what she thinks.

[453] Ask her how she feels about that reading.

[454] The reason I'm calling is based on how she feels.

[455] Okay.

[456] What's her feeling?

[457] Well, they sent us their disclosure agreement and the contract.

[458] She started reading the contract.

[459] and she's like, well, wait a minute.

[460] Now we're getting tied into a contract, and there's all these different fees and whatnot and getting nickel and dime to death, and I don't want to get involved in that.

[461] Okay.

[462] Go meet with them and see if that spirit changes.

[463] We have.

[464] We've met with them twice already.

[465] Oh, okay.

[466] Okay.

[467] Then don't do it.

[468] Okay.

[469] You're interviewing them.

[470] Yeah, click on SmartVestor Pro and go talk to another one.

[471] Okay.

[472] There's more than one in your area, and, you know, there's probably one just doing a 1 % management fee.

[473] And so that really wouldn't be, that unusual so yeah listen do a hundred percent of the time my wife does not feel good about a business relationship i'm entering into we don't do it period period and i will ask her i'll challenge her you sure that's god's spirit not last night's pizza right i'm going to double check but she will say no it just doesn't feel right and every time that one wins proverbs 31 who can find a virtuous wife the heart of her husband safely trusts her and he will have no lack of gain huh look at that so yeah don't don't do it i don't care if it's our the guy might not be a bad guy sure but he's not your guy and that's it that's exactly it dave i like that you said it that way because somebody else might call the guy work with him and be like this guy's great how many there's been many times where somebody has recommended somebody to me they love them and then i go and i'm like this not my guy yeah so it happens Hey, Christian, I do want to learn a little bit more about this guy.

[474] I don't think he's doing anything wrong, but I want to learn a little bit about him.

[475] So find out who it was, okay?

[476] I'm going to put him on hold.

[477] All right, open phones at AAA -8 -25 -5 -2 -25.

[478] Tom is with us in San Diego.

[479] Hey, Tom, how are you?

[480] Hey, Dave, I'm good.

[481] How are you guys?

[482] Better than we deserve.

[483] What's up?

[484] Wonderful, glad to hear it.

[485] I am out here, and I'm trying to figure out what the right move is to do with my house.

[486] So I went through FPU at the beginning of the year, and I'm upside down on a car payment.

[487] Like, I make good money, but I'm at a very high debt to income threshold on my house payment.

[488] What do you, how much is your house payment?

[489] 4 ,500.

[490] And what do you bring home?

[491] Gross is about 140, 145.

[492] What do you bring it home a month?

[493] Every month.

[494] just over 11 yeah it's pretty high okay and how much is your car payment 860 holy well there is a bigger problem yep and that's so this is the problem I'm all about the dump the Tahoe plan but because I'm too upside down on it there's no way what do you owe I got hit really hard 30 it's the number 30 30 30 39.

[495] Okay.

[496] And what do you think it's worth?

[497] Well, according to the like KB estimates, it books at like 24.

[498] Private sale?

[499] And so trade would be like 20, yeah.

[500] What'd you do, tear it up?

[501] No, it's...

[502] No. Negative equity from the other deal in it?

[503] Negative.

[504] No, I didn't.

[505] It was a, it's a high interest.

[506] Oh, wait a minute.

[507] Wait a minute.

[508] Wait a minute.

[509] What's your interest rate?

[510] 12.

[511] Okay.

[512] The $40 or the 39 is probably not your payoff.

[513] That's probably, when you do a subprime loan, they generally put it on the books on TOP, total of all payments.

[514] That's different than an early payoff number.

[515] You're asking for you, did you ask what your account balance is and you got 39?

[516] No, I asked them what their pay of the 10 -day payoff, and they get me a 20 -day payoff, which I've never heard of, but.

[517] Okay.

[518] So that's an actual payoff.

[519] number.

[520] That was an actual payoff number.

[521] What car is this?

[522] There's a Jeep.

[523] Man, you got so screwed.

[524] Okay.

[525] So I'm really close to a breakthrough on being able to refinance this house and it would cut my payment down significantly.

[526] But the trouble is because I have this, like I'm trying to go back and forth between baby steps one and two.

[527] And so I had my step one.

[528] I'm crushing step two.

[529] and then I got hit with like $20 ,000 of home repairs in June.

[530] And so I just got nothing.

[531] So it's starting all over.

[532] And so I just keep getting overwhelmed with it and trying to figure out how I should do it.

[533] Because if I give up everything, I'll do it.

[534] Yeah, I mean, something's got to go.

[535] And you need to decide what it is because nothing you're describing is fun.

[536] We've got to get rid of the cheap and maybe the house.

[537] You decide, but you can get more of both.

[538] So I wouldn't hang on to them for dear life.

[539] I just say, okay, God, get me out of this.

[540] Hey, folks, Dave here.

[541] And I know some of you listen to the show waiting for a call that answers your specific question.

[542] Maybe you need help with budgeting or investing or saving your emergency fund.

[543] But wouldn't it be great if you could get the answers you need right when you need them?

[544] Well, I got great news for you because you can.

[545] When you download the Ramsey Network app, you get our advanced AI search that lets you easily find the calls that matter to you.

[546] You can also browse by topic to find answers for the exact things you need help with.

[547] That means you don't have to simply hope the next call will be the one you've been waiting for because the Ramsey Network app lets you have control.

[548] And with over 7 ,000 hours of life -changing content, the Ramsey Network app is the best place to find the answers you're listening for.

[549] To get access to personalized content, For free, just search Ramsey Network in the App Store today.

[550] Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships.

[551] I'm Dave Ramsey, your host, number one bestselling author, Jade Washaw.

[552] Ramsey Personality is my co -host today.

[553] Open phones at AAA 8255 -225.

[554] Craig is with us in Minneapolis.

[555] Hi, Craig.

[556] How are you?

[557] Great.

[558] How are you?

[559] Better than I deserve.

[560] What's up?

[561] So just start off with, we have no debt outside of what we all in the home.

[562] But my question is, is investing money into solar panels to save money on utilities better or worse than investing in the market?

[563] So after the tax credit that you'd get the 30 % that just comes right off, you know, I'd get it back.

[564] on next year's taxes, that equates to about a 7 .8 % return on what I would save.

[565] So obviously, I don't have to pay tax on money that I saved, but if I invested it, I end up having to pay tax eventually on money that's invested.

[566] Man, you really want some solar panels, don't you?

[567] No. You got the bug.

[568] You got the salesman's pitch down, man. So, well, what you're saying is actually.

[569] not true because if you put it into a Roth there's no taxes on it and a tax rebate is just a cost savings it's not a return on investment right I'm not I'm not factoring in the tax rebate on anything as far as you said a 7 % rate of return was the tax credit oh no no no no I'm saying so like the system is like 57 I'd get the 17 or whatever back on the tax credit so I'm looking at it that tax credit is just a tax it's just a cost savings that's all it is big it's not a return and I'm not and I'm not factoring that into any of my figure what was your 7 .6 % uh me and me eventually putting in 40 ,000 dollars and saving about 3 ,400 a year oh okay all right so that that's that's your 7 % okay that is an actual that's okay all right so if you and if you invest 40 ,000 dollars you have a 10 -year break -even about yeah yeah that's because you're not in the you're not in the solar panel zone in Minneapolis you ought to have about a five -year break -even on solar panels for them to make sense and the reason is is the technology is moving so quickly the solar panels today are excellent compared to five years ago and the solar panels five years from now will be excellent compared to that junk you're getting ready to buy So you need to break even on it really quick.

[570] It's like buying a computer.

[571] It's, you know, think about a five -year -old computer.

[572] It's a joke.

[573] It's a doorstop.

[574] And so nothing as clunky as old solar panels.

[575] But I'm a believer in solar, but solar, the numbers we've run on it, you need to try to break even on it.

[576] Net net, net cost, not the 57, but the 40.

[577] I'll go with your tax credit being a cost savings.

[578] So we're running the numbers on 40.

[579] but if you're only making 3 ,400 on 40, you've got a 10 -year break -even, 11, 12 -year break -even, that's not good enough.

[580] You need to make your money back faster than that on that kind of thing.

[581] So I endorse solar companies in some of the markets that we're in, some of the talk radio stations and so forth, but they're running five, maybe seven -year break -evens, but not 10 -12.

[582] So, and by the way, 7 % rate of return on technology that's deteriorating daily is not a great rate of return.

[583] So 7 % rate of return on a high -yield savings account would be great, but it's not great on technology.

[584] So that's going down.

[585] So these guys, and you've obviously run into a world -class salesman because you're regurgitating his stuff really well.

[586] And but it's, no, I personally would not do that.

[587] I just want to make sure, because your break -even is too long.

[588] I just want to make sure he wasn't thinking about this as an all -term.

[589] alternative to he was and that's the other problem it's not even on the same spectrum of investing just do your investing and then say am i going to buy something else that gives me a break even okay am i going to buy a i don't know a car that saves me on gas mileage there are two separate discussions okay if i got i got a gas guzzler and i'm going to save x number of dollars on my car by buying it but it's a little bit more expensive what's the break even on your gas mileage savings but that has nothing to do with whether or not you're going to invest yeah you don't get to not do a raw because you bought a car that doesn't eat gas.

[590] That's right.

[591] Or you put solar panels up and don't eat electricity.

[592] But what that tells us is he can't afford to do this because he's considering doing one over the other.

[593] That's what I'm getting to.

[594] I got my magnifying glass out.

[595] Yeah, good, good, good job.

[596] They're investigative.

[597] I like it.

[598] Cody's in Orlando.

[599] Hey, Cody, what's up?

[600] Hey, Dave.

[601] So I am in over my head in a situation with a car that I find.

[602] man I took the car over and now I'm in a position where it my mechanic told me that the motors are in recall it's destined to blow up at any point of course it is and I owe $14 ,000 on this car and there is about a two year waiting list for a new motor due to the recall on all of them what vehicle is it and what is it's a 2018 Hyundai sonata and sonatas all the engines are blowing it's burning oil causing the engines to blow up it's internally burning oil and it's a recall this is not just you it is but it is not covered i'm not under warranty due to the mileage on the car and so the car is at almost 160 ,000 miles i took it over in a bad situation going through a divorce didn't want the credit to get ruined took over the car okay so what do you all want it I owe 14 ,000 And what can you sell this piece of crap for?

[603] Trade in probably 2000 And I don't have anything in savings But I have another car My mom just passed away And I inherited her car No payment made off About 3 ,000 trade in It's a little older It's a 2000s well With about 80 ,000 miles on it What do you make?

[604] About 54 ,000 a year Okay.

[605] So if you trade in or whatever, you need $11 ,000, right?

[606] Yes.

[607] So where are you going to get $11 ,000?

[608] You need $11 ,000 where you're going to get it?

[609] Yeah, I don't have it.

[610] I know.

[611] Where are you going to get it?

[612] I would have to work and save it.

[613] That's right.

[614] Like a lot of work, more than you're doing now.

[615] Yeah.

[616] Like extra jobs.

[617] Okay.

[618] Like you can make, you know, $1 ,500.

[619] $2 ,000 a month delivering pizza five nights a week and you're doing that in your mom's old car or you could run this sonata all the way into the ground until it blows i don't care because it's not going to be any more you might as well get something out of it and um just run the crap out of it and you know door dash and pizza and anything else what do you do for living right now i'm a i'm a cook at longhorn okay all right so anything you could do to get more and more hours at the best possible pay doing anything.

[620] I want you working like a maniac and, you know, like have like a, I don't know, five, six month plan to be done with this.

[621] Five months would be $2 ,000 a month, right?

[622] Yes, sir.

[623] Find $2 ,000 a month for five months and then get rid of this piece of crap.

[624] And then you go, okay, that one's in my rearview mirror, no pun intended.

[625] I think he thought there was a. Oh, there's not a hack.

[626] Yeah, there was a hack.

[627] No, there's not a hack.

[628] Got to work your way out.

[629] It is.

[630] It's called work.

[631] Lots of work.

[632] It's a hack.

[633] Magic trick.

[634] Work all the time.

[635] It's a hack.

[636] This is a Ramsey show.

[637] Hey, when you go against what society thinks is, quote, normal, like avoiding debt, for example, it might seem weird at first, and that is totally okay.

[638] We want you to be weird if that means doing things intentionally, including how you spend your health care dollars.

[639] And one way to be intentional is with Christian health care ministries.

[640] CHM isn't health insurance.

[641] They're a health cost -sharing ministry that's helped hundreds of thousands of families like yours take care of health care costs without sacrificing their freedom.

[642] Find out more and join at cHministries.

[643] dot org slash budget that's c h ministries dot org slash budget thanks for joining us america we're glad you're here jade warshall ramsay personality is my co -host today's question of the day comes from lauren in missouri yeah she says i listen daily and hear the phrase don't listen to broke people quite often what is the ramsie definition of broke so we know who in our circles not to listen to i love this question um well broke people for me a broke person is somebody who is not financially responsible and you see that as the fruit in their lives right they may have the cars in their driveway they may have the house that's next to yours and they're your neighbor but you get the sense that they're not managing their money properly and sometimes i will say dav it's hard to know because unless you know this person you know on that financial level you may not know how they handle their money But if you see them pull out a credit card when it's time to pay for dinner, you know, if you see that their houses, if you have an idea of where they work and where they earn and you're taking a look at their houses and their cars, there's certain little indicators that you're going, I wonder what type of, I wonder how they're managing their money.

[644] Now, on a personal level, when I think about broke, I think about paycheck to paycheck.

[645] And it's that person where your money's coming in and it's going out.

[646] You don't know what you're spending it on.

[647] You're not on a budget.

[648] And at the end of the the day, because of that, you're not able to do the things that cause you to be a financially responsible person.

[649] You're not savings.

[650] You don't have savings.

[651] You're not investing for retirement.

[652] You are carrying debt.

[653] You're still getting into debt, right?

[654] All of those things that we teach you to do, you're not setting your family up and your children up long term for college and things like that.

[655] So that's kind of what I would place it in as far as what I would consider a person being broke or trying to gauge if a person is somebody that you don't want to take advice from.

[656] Wealth is not income.

[657] Wealth is not a parent.

[658] So if you're bling, bling, you've got a purse that costs more than most people's kids.

[659] You are driving cars that don't fit the neighborhood, meaning they're too nice.

[660] You know, you've got two $60 ,000 cars sitting in.

[661] front of a four hundred thousand dollar house you're broke you're you know and if I and if all your vacations are so nice they're on your Facebook page you know you're living you're trying to put on the dog as we say in Tennessee you're trying to look like you're something you're not that is not the definition of wealth Tom Stanley who wrote the book millionaire next door before he passed away he wrote another book called stop acting rich broke people act rich and aren't.

[662] Yeah, they're trying too hard.

[663] I hesitate to do this because I got a sweet young man sitting here in the lobby with a great cowboy hat on.

[664] But in Texas, they say, big hat, no cattle.

[665] That's broke, okay?

[666] A lot of talk, no money.

[667] A lot of putting on the airs, no money.

[668] So wealth, by definition, is net worth.

[669] What you own minus what you owe is your net worth.

[670] And so if you make $2 million a year and you have nothing in net worth, you're broke.

[671] You spend all of it.

[672] That's what amounts to.

[673] And so it's not income and it's not what people, it's not stuff that you show on Instagram.

[674] And here's the thing.

[675] Most people that aren't broke don't give a crap what you think.

[676] Broke people care deeply about what you think.

[677] And so that comes into, because that's why broke people are always giving you advice because they're afraid that you're going to outpace them because you're doing smart things.

[678] That's a big indicator right there, the people who are constantly, yep, yep, yep.

[679] They got a lot of opinions about other people's stuff and they got no stuff.

[680] That's a big indicator.

[681] Yeah.

[682] And so, you know, your typical millionaire, we interview them on the millionaire, babysat's millionaires, what's the most expensive pair of blue jeans you ever bought 50 bucks?

[683] 100 bucks and you know nobody nobody excited about that in the blue gene world that's big blue jeans money can I challenge the blue jeans okay I don't know I'm just I'm not saying that's an indication of broke I'm just saying the typical millionaire when we interview them they and then we say what did your wife spend maybe a hundred bucks okay but still they just don't they're not majoring in appearances and broke people generally major in appearances.

[684] They try to look like they are something they aren't.

[685] And then they have opinions about your money that are unsolicited.

[686] You didn't even ask, but they got a lot to say about it.

[687] And it's sometimes in your family.

[688] And here's the other thing.

[689] Here's what broke people are.

[690] Most people.

[691] That's broke people.

[692] 78 % of Americans live paycheck to paycheck.

[693] That's eight out of ten houses on your street are spending everything they make to stay afloat.

[694] Wow.

[695] So what's a broke person?

[696] Most people.

[697] That's broke people.

[698] Most people.

[699] When you pull up a stoplight and five nice cars sitting around you, you're looking at five car payments.

[700] You're not looking at a millionaire that rolled up there.

[701] You know, he's sitting in a $56 ,000 pickup truck.

[702] Yeah.

[703] With a dadgum $854 payment on it.

[704] But by God, I got me a truck.

[705] You know, I work hard.

[706] I deserve what.

[707] You deserve what?

[708] A payment.

[709] a payment give me a break dude seriously and so that's that's you know our so our definition of broke people would be of wealthy people would be net worth and you don't get net worth by only earning an income and you don't typically get net worth by giving a rip what other people think and so putting on putting your vacations on Facebook putting your purse your bling your I don't know whatever it is whatever it is that you think other people might think they're and be impressed with you.

[710] Yeah.

[711] Your car, for sure, your stupid car.

[712] This is the country where cars, the United States of America, cars are a status symbol.

[713] 100%.

[714] When I walk through my neighborhood, when I see cars, I just see the payment amount.

[715] That's all I see.

[716] Have you seen the thing that the guy did?

[717] It's old, but you are your car and he goes like, okay, this person is a Subaru.

[718] And this person is a, oh, it's hilarious.

[719] hilarious because you're like making a statement about who you are.

[720] I mean.

[721] That is true.

[722] So I'm not sure what I am.

[723] I'm an old Corvette, I guess, but there you go.

[724] But the, or I might be a raptor, but somewhere in there.

[725] But I think you're a Raptor.

[726] But two of my cars, but anyway.

[727] So, yeah, but it's, you know, the cars, cars are.

[728] You used to be a Jaguar.

[729] I used to be a Jaguar.

[730] I'm not going to do it.

[731] That's it.

[732] Is that like a, is that like a. broke cougar.

[733] Is that one of the drag war?

[734] I think so.

[735] A male broke cougar.

[736] Listen, when I go by apartment complexes and I see.

[737] Yeah, they're sitting in a stinking apartment complex and there's a $40 ,000 car sitting out there.

[738] I'm like, this is a sense.

[739] That is definitely broke people.

[740] Yeah.

[741] It doesn't make sense.

[742] A hundred percent that's broke people.

[743] Okay.

[744] So yeah, that's what you're talking about.

[745] And I can't tell if this question's a little bit facetious or not, but we're giving you a serious answer anyway.

[746] So, yeah, so the answer is don't listen to me. most people yeah because most people are broke and don't listen to people who are putting on images of wealth because they probably don't have any and really you get to know someone well enough you actually know what their net worth is you go this guy's 35 years old he's got a two million dollar net worth okay that's a guy you can listen to yeah and he's when you when you line that up that person is not spending the way you think that a quote rich person should spend they're just not they don't there's a reality to it where it's like, hey, this money is in investments.

[747] You're just living in a normal life.

[748] Yep.

[749] Yep.

[750] Very weird.

[751] That's okay.

[752] It's an interesting discussion, though.

[753] If broke people are making fun of your financial plan, you are on track.

[754] That's one of the things we always say is a great joke line.

[755] Yeah.

[756] And it's like if fat people are making fun of your diet, then you're right on track.

[757] You know, it's the same deal, right?

[758] And so if you've been divorced 62 times, I hope this next marriage works for you, but I don't want to read your book on marriage.

[759] um you ain't got this figured out bubba and so that that's the deal and that's that's what we're looking at is it's a proof text in the marketplace as in business we would call it best practices right i want to follow someone that has a series of habits that has caused them to win in this particular area of my life i'm concerned about so if you want to if you want to be married and have a great marriage find somebody been married 67 years and find out why she didn't kill him it's a good thing man And you need to know these things.

[760] It's smart.

[761] It's smart.

[762] This is the Ramsey show.

[763] Mark Twain said the best way to double your money is folded over once and put it in your pocket.

[764] It'll come to you later, folks.

[765] Some of you haven't seen real money like actual cash in so long.

[766] You don't even know what that means.

[767] So there we go.

[768] Hey, speaking of making your money behave, you have to do that if you want to have some.

[769] anything that you want to win at you have to intentionally address the subject the power of intentionality a budget is what we do in the wealth building world if you want to become wealthy you have to make the money that you have your most powerful wealth building tool your income behave it has to go where you want it to go to accomplish fun to accomplish generosity and to accomplish wealth building so we say to give every dollar of your money before the month begins an assignment.

[770] That's why we named the world's best budgeting app every dollar.

[771] And now, years later, tens of millions of people in America use every dollar, the app, for budgeting, every month, to manage their money.

[772] Oh, you're not yet?

[773] Well, you should be.

[774] You should have FOMO.

[775] You should go get this done.

[776] Download every dollar for free in the app store or Google Play today, and you and your spouse can sit down, put each of it on your phone, and boom, we're off to the races.

[777] We're going to make this behave.

[778] Mike's in Chicago.

[779] Hey, Mike, what's up?

[780] Not much, sir, not much.

[781] How can we help?

[782] Okay, so years ago, my mother -in -law was living with me and my wife.

[783] We bought the family house that she was living in.

[784] At that time, she only owned 50 % of the house.

[785] Okay.

[786] The other half was owned by the sister -in -law at that time.

[787] Her husband died, so I made my wife bought the house.

[788] 50 % went to the sister -in -law, my father -in -law's sister.

[789] Okay?

[790] And her mom was like, hey, can I live with you guys?

[791] If that's okay, I'm saying, sure, fine.

[792] after a couple years later I seen me went for a car ride and I asked her you know I was just curious I said like mom how much do you have like retirement and stuff like that and she's like no I really don't and she's like I only have maybe like $80 ,000 and I was like wait a second and I was like you're 72 years old you only have $80 ,000 with something naturally like happens and she said, well, I figured you guys would help me out.

[793] And I was like, what?

[794] And she's like, well, I figured all the money goes gone.

[795] I figured you and my daughter would help me out.

[796] And after that conversation, I saw, I asked, you know, talk to my wife about it and she, and my wife was a call to it.

[797] And then her mom moved out and was living on her own house because it was putting string on to my marriage.

[798] Why was she living with you in the first place?

[799] Because my wife felt kind of, well, when we bought the house, 50 % of that house, so the house was worth of.

[800] Do you own the whole thing now?

[801] Yes, I do, sir.

[802] I couldn't understand the story.

[803] okay okay so that part so now mom has moved on and what's your question how to I bring up like she's already like that's one saying like if she has only 80 ,000 hours to like live off and that was like three years ago so she's 75 now she's yeah she's up there she 75 does she does she have uh social security coming in she lives on that yes okay so she's probably not using the AD except when there's an emergency right I mean yeah we don't know I mean we don't know we don't know because I yeah she's not working I didn't bring it up again because my wife's like that's not your business but at the same time like if mom's living under my house I want to know she's not how much to do yeah she's not now she's not now but at the same time if something did go along let's say she's out of money let's say So you feel like she's not just using Social Security Survive.

[804] She's pulling actively off of that nest egg, and you're worried that that's going to run out.

[805] That's going to run out, and then I'll be the escape, though.

[806] Me and my wife will be the escape goal.

[807] And my wife does have another sister.

[808] What's your household income?

[809] I make over $95 ,000.

[810] What does your wife make?

[811] My wife makes over, maybe let's say, 30.

[812] Okay.

[813] So you got $120 ,000 household income.

[814] in Chicago, Illinois, and you're, we just don't know about mom.

[815] So here's the thing.

[816] You can decide to do one or two things.

[817] You can just lay this down and not worry about it, which is probably what you need to do.

[818] Okay.

[819] You're not obligated morally or ethically to step in and make her life perfect if she has not managed her life well, regardless of what her expectations are.

[820] and your wife has been trained by this woman that she's supposed to take care of her mother and her mother has told everybody you all are all going to take care of me and there may be a little bit of a surprise when you stand up and say no we're not so that's one possibility and you and your wife need to get on the same page and say okay when mom comes begging we're not going to be her backstop okay that that's what that's one option and you've got to decide if you're going to do that you've got to decide that as a unified front the two of you the two of you okay the other option is to go and completely invade her life because if you're expected to take care of her if she fails then you have the right to keep her from failing I agree if she if your wife and her mother are expecting you to take care of this woman then you should go over there and sit down and open up all of her books and put that one lady on a freaking budget and be in control and be looking over her shoulder.

[821] Otherwise, I'm not your backstop.

[822] I'm not going to be responsible for you unless I get full say.

[823] Yeah, because is she healthy?

[824] I mean, she's healthy.

[825] My point is if the time comes.

[826] She could make it a decade.

[827] I mean, she could.

[828] Yeah.

[829] Right.

[830] But if the time comes where she needs home health care, she needs, do you know what I'm saying?

[831] That is you on the hook for that.

[832] So for that reason, not him.

[833] But if you go option two, you got to go over there, you got to go over there and put her on a budget where she lives on Social Security and she takes her hands off the 80 and you put it in an account where she can't touch it without your help.

[834] You have to take over her.

[835] If you're responsible for her finances, you should take over her finances.

[836] Otherwise, I'm not going to be responsible for her.

[837] I'm not going to allow you to drive your car in the ditch and then bitch because you don't have a car.

[838] That's not an option.

[839] I'm with it.

[840] Yeah.

[841] So the problem is is that your mother -in -law and your wife are both passive -aggressive.

[842] And you're getting ready to get aggressive aggressive.

[843] And this is going to stink up the whole thing.

[844] So, but, you know, there's not, you guys have been trying to walk down the middle of it.

[845] It's none of your business, but we have to take care of her.

[846] No, it is by God my business if I have to take care of her.

[847] that makes it my business.

[848] That's how that works.

[849] So, but I'm not going to, you know, you can't have it both ways.

[850] You can't go, well, you have to take care of her, but she's allowed to do whatever she wants.

[851] No, it's not okay.

[852] Because that, that's his fear and it's a valid fear.

[853] The hard part about that, and what you're saying is exactly right.

[854] The hard part about it, though, is if number, if the two option doesn't help and the, in the, the parent -in -law says, I'm not giving you access, I'm a grown person, you know, Da -da -da -da -da.

[855] Right.

[856] And I'm not giving you help.

[857] Then you have to take your hands off of it.

[858] But then the time will inevitably come as the child where you will see, Dad, they need my help.

[859] And you, but you've already chosen to do this.

[860] So either way, the sucky part of this and the teaching part of this is do not put your children in this situation.

[861] Amen.

[862] Because at the end of the day, they're screwed no. You're danged if you do, danged if you don't.

[863] Either way, because it is hard to sit back and watch somebody struggle, even though you tried to help.

[864] Do you see what I'm saying?

[865] So there's no, and then it sucks when you have to financially help somebody who should have helped themselves.

[866] So there's no good side of it.

[867] Just do right and handle your money the way we're teaching.

[868] And don't wait until...

[869] Don't do this to your kids.

[870] Yeah.

[871] For real.

[872] That's the point.

[873] I like that point.

[874] This is the Ramsey show.

[875] Jade Walshaw, Ramsey Personality is my co -host.

[876] Kurt is in Philadelphia.

[877] Hi, Kurt.

[878] How are you?

[879] I'm good.

[880] How are you?

[881] Better than I deserve.

[882] What's up?

[883] I'm wondering if you have advice for me. I have about $7 .8 million in financial assets, with the bulk of it, $6 million in tax -avered, IRAs, $401Ks, and $403Bs.

[884] I'm a 66 -year -old guy, and I'm taking Social Security amounts of about $3 ,600 a month, and I have a pension of about $1 ,000 a month.

[885] My problem, and I think you can see it, is that in seven years, I'm going to go off a cliff with required minimum distributions on my tax -deferred accounts.

[886] Yep.

[887] And I can't solve this.

[888] This is going to boost me into the highest tax bracket, I think, and trigger Irma and other kind of penalties.

[889] Is there any answer for me?

[890] God, I hate it when you've got $7 million worth of money.

[891] Way to go, man. You did great.

[892] I just wish it wasn't all in tax -deferred.

[893] Oh, my gosh.

[894] I didn't realize that until too late.

[895] Yeah.

[896] So, okay, so is it all 401K or what is, most of it is?

[897] It's IRAs.

[898] The bulk of it is in 401K and 403D, but some of it's in IRAs.

[899] Did you say some of it was taxed, was like a 457, just deferred income?

[900] Yes, yes, yes, yes, 457B.

[901] That's what it is.

[902] Yeah.

[903] How much of it is that?

[904] Oh, jeez, you would ask me that.

[905] I think it's about half, half of it.

[906] Half of the $6 million is in that.

[907] Wow.

[908] I'm trying to think through the math.

[909] So the extreme answer that's probably, that is not the answer, but this is helping me run the math while I'm live here on the air with you, is if you just moved it all to Roth, you would pay taxes on all of it now.

[910] In one fell swoop.

[911] If you did.

[912] I'm not suggesting that.

[913] I'm just trying to work that through in my head because that's basically going to cost you about 30 cents on the dollar.

[914] And so that's going to cost you like two, two and a half million dollars.

[915] And that leaves you $5 million, $100 % tax -free and 100 % tax -free growth from now on.

[916] And when you leave that money in the estate, there won't be any tax to your heirs because it's in a Roth.

[917] inherited traditional becomes taxable of course to the next generation because you hadn't yet paid taxes on it and of course Roth has no RMD right so that's the extreme that makes me want to shoot somebody when I think about two and a half million dollars going to the stupid government so that's not my answer but I'm trying to think through that solves all of the problems except the one except the two and a half million dollar problem right yeah yeah so is there some iteration off of that where we get the enough of it out of and we take enough pain that we get the rmds down or do we want to just bite the bullet and be done and rip the band -aid oh that's so harsh that's the cliff and that's that's the problem i'm facing i can't do enough over the next seven years to really make a dent.

[918] Oh, you can do it all.

[919] You could roll it all to a Roth.

[920] Unless I, yes, unless I do it all at once.

[921] Well, you can do half of it.

[922] You mean, you can do, you can do enough.

[923] You're just going to pay taxes on it.

[924] Yeah, yeah, yeah.

[925] That's no, no penalties, just taxes.

[926] And, of course, you have to manage, if you're trying to manage tax brackets, like you said, you move 100, you start bumping brackets.

[927] You move 200, you're in another bracket, you know, and so you're starting, you get into bracket creep.

[928] And that's why it's pretty.

[929] much going to be 30 % because that's what you're saying you can't do enough at a low tax bracket to get to do any good no you can't that's the other one end of the spectrum is you get slaughtered the other in the spectrum is you bleed to death a drop at a time you know and that that's that's god that is an interesting I'm not disagreeing with your guy you are hitting for a cliff you can stop it but the the the antidote is very very painful.

[930] Oh, I don't know what to do.

[931] If he did half and took, you know.

[932] It's still going to, still going to have RMDs that are going to be, so you got three and a half million, the RMDs that start at 72 and a half.

[933] That's, yeah.

[934] So here's the formula you could run.

[935] Here's another formula that's not a full, full bleed out, okay?

[936] You could run and say how much what's the most I can leave in and the RMD doesn't trigger Irma and the RMD doesn't put me in the top tax bracket okay so what's the most I can leave in and then take the head on the rest of it and go ahead and move it to Roth that's a that's a somewhat of a middle ground there's nothing in this equation that's not painful though there's pain somewhere in this equation oh that's what I was afraid of I thought maybe there's a magic bullet somewhere.

[937] I don't, I don't, I don't, if there is, I don't know it.

[938] I have systematically, I'm 63, and I've systematically moved 100 % of my stuff to Roth over the past decade for that reason, because I knew I was going to have RMD coming down my throat, and I knew from an estate planning standpoint, I'm likely to never touch any of it.

[939] You probably will never touch the vast majority of this.

[940] It's going to your heirs.

[941] And so you've got another problem if you go the RMD route.

[942] is your heirs are going to get this tax problem.

[943] Oh, shoot.

[944] Because the inherited IRAs and under the new stinking Biden rules, they're going to make them take that money in like five years.

[945] It's either five or ten years.

[946] They've got to pull it all.

[947] Yeah.

[948] You can't leave it.

[949] It's worse than RMDs.

[950] Inherited IRAs have required distributions on them now.

[951] Wow.

[952] That's more, they're more than the RMDs, a lot more.

[953] The Secure Act.

[954] That's what that Biden crap was called.

[955] and so because what happened was people were rolling it to the inherited IRAs and never touching it and so the government was never getting their money and so they figured out they want their money out of there and so they're requiring these inherited IRAs to be liquidated I believe it's 10 years I believe it might it might have moved it even to 7 but it's really fast huh Kurt I don't know I don't have good advice for you on the air live right this second I will think about it and um um but there's a way i can circle back the knowledge that i have yeah you're welcome call back in we'll put you back on we'll do this again but the knowledge that i have is um might not have the bullet if there is it doesn't have the bullet if there is a silver bullet out there and i'm kind of thinking now the more i sit in this if i'm in your shoes i might just and I'm thinking more about your kids, I might just move it all.

[956] I might watch the election and see what happens with tax rates after the election because Trump had lower tax rates in than Biden does on people like you and me because we're evil and we must be punished, we've built wealth.

[957] And so, and you're feeling that right now.

[958] You know, this is what tax policy does to people right here.

[959] Work your whole freaking life and then you get screwed by the government again.

[960] So as soon as I can anticipate the lowest possible tax bracket for this money, I might move at all.

[961] And then I'm done with it.

[962] I got rid of Irma.

[963] I got rid of RMDs.

[964] I got rid of inheritance problem.

[965] But I also got rid of $2 million.

[966] Yeah.

[967] And you're 66 and you know what's going to happen to that $5 million is that when you are 73, it's going to be $10 million.

[968] and when you're 81 it's going to be 20 million and if you're healthy that's a high probability actuarially speaking and so 20 million dollars is going to be taxable instead of 7 .6 that's another reason I might go ahead and do it so do it now yeah I'm not advising you to do that but at this moment that's starting to feel better than the other crap that we're all sitting here talking about None of this feels good.

[969] It's a shame that a man works his whole life and starts from nothing.

[970] It ends up with $7 .6 million by saving, and he's 66 years old, and he has to sit and decide which way the government's going to screw him.

[971] That's a shame.

[972] You people that vote wrong, you should be ashamed of yourself.

[973] This is the Ramsey Show.

[974] Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where we help people build.

[975] wealth do work that they love and create actual amazing relationships.

[976] Jade Washaal -Remsey Personality, number one bestselling author of the book, Money's Not a Map Problem.

[977] She's my co -host today.

[978] Open phones here at AAA 825 -5 -225.

[979] Lynn is in Madison, Wisconsin.

[980] Hi, Lynn.

[981] How are you?

[982] Hi, thanks for taking my call.

[983] I appreciate it.

[984] Sure.

[985] What's up?

[986] So we have a science who is 22, putting himself through flight school.

[987] He's been living with us.

[988] There was agreement made last year because he's doing it debt -free, which is what we're trying to help him do because flight school's not very cheap.

[989] He met a girl last year who is actually an orphan.

[990] Her parents passed away when she was 11.

[991] Not a good upbringing.

[992] She's currently 20.

[993] She essentially moved in to our house in January.

[994] So she's never had that basis, that base knowledge or education of anything, essentially.

[995] So we're really trying to help her out.

[996] And we've purchased the SPU for them to work on, which she's a little bit hesitant to do.

[997] But she lives paycheck to paycheck, obviously.

[998] She's not paying rent for us because we're trying to help her out, but we're trying to get her to save.

[999] She's a child care worker, so she doesn't make much much.

[1000] I'm just, how much is too much to help out, I guess?

[1001] And are there any other resources out there for people who would be in her same situation where she's basically had nothing, has been made to be dependent on a lot of people and trying to break that cycle to kind of get them out into the world as functioning adults?

[1002] Well, what Dr. John Deloney would say would be that she needs to be reparented.

[1003] Yes, very much.

[1004] Because she never had parents.

[1005] I mean, she's been busted through the foster system or whatever, and now when you attempt to do that, she's resisting you.

[1006] Right.

[1007] Okay.

[1008] Well, so since she's been living with us, there's also the sense of entitlement, because we are, you know, we've worked all the baby steps.

[1009] You know, we're currently trying to pee off our house early.

[1010] Who has a sense of entitlement?

[1011] You or her?

[1012] She has gotten more of a sense of entitlement.

[1013] She feels like she's entitled to what?

[1014] A lot of our stuff.

[1015] And I don't know if that's because I've been trying to help her out and been giving, you know, her stuff like I'll pay for some clothes here and there or whatever.

[1016] You don't really want me to tell you this, do you?

[1017] You know what the real problem is, don't you?

[1018] I feel, yeah, I think I do.

[1019] She shouldn't be living there.

[1020] Yes, I do.

[1021] I'm not, she has nowhere else to go.

[1022] When did she move in?

[1023] Yes, she does.

[1024] She had a place to go for she came there.

[1025] Yeah, that's what I'm trying to find out.

[1026] What was she doing before she moved in?

[1027] So she was living with a sister at an apartment.

[1028] She was paying very minimal rent.

[1029] What was wrong with that?

[1030] They moved and kicked her out because she wanted to start a family.

[1031] So that is no longer an option for her to live with them.

[1032] You know what normal 20 -year -olds do?

[1033] They get a roommate and four jobs.

[1034] Or three roommates and two jobs.

[1035] Yeah.

[1036] Yeah.

[1037] And they don't have the option to make.

[1038] move in with her boyfriend while his mother looks over their shoulder which is just really weird I know it is it's an uncomfortable situation and I'm trying to I'm not sure you're doing her any favors I'm trying to be gentle but I don't think you're doing no I don't think you're really helping her I don't think you're helping her because you know she's she under she's been playing um survival for so long that she smells on you that what she can get away with, which is anything.

[1039] Yes.

[1040] Yes.

[1041] I agree.

[1042] Listen, in any other scenario, if you took the foster care and the hard, you know, the fact that she lost her parents, if you kind of just remove that for a moment and just look at it for what it is, she's 20 years old, she doesn't make much money, she's just getting started into adult land, then that's kind of how you have to take it, take it at this moment.

[1043] Otherwise, I do think that you're going to place too much into the emotional side of it, which is what you've done.

[1044] And to Dave's point, yeah, what would she do?

[1045] She'd earn more money over time.

[1046] She'd find an apartment with roommates.

[1047] She'd be dating your son in a more normal environment, not her living there.

[1048] And I think that that's what it is.

[1049] And I think that sooner that you cut this cord, the better it's going to be for everybody long term.

[1050] If this was, my daughter Denise runs our family foundation okay and occasionally the um some of the local law enforcement folks will call us and there's a crisis with someone and my daughter will come around that person and will help get them up get them set up with some money get them set up in an apartment get them set up with their utilities um get them started right but we always want to create a situation there for that person that is sustainable that the math work that the the math works three months from now once we get it started, not that is constantly dependent back on us because that person is, it's not good for that person to be 100 % dependent on a foundation for the rest of their life.

[1051] We've got to, we can help them get started.

[1052] And then what we always do is we walk the person over to their local church and put some folks around them to mentor them and disciple them.

[1053] So if it's a young lady like this, we'd put some older ladies around her and say this is how you're a woman this is how you're a woman of confidence and of composure and strength and this is how you behave and this is a spiritual walk and this is a proper emotional walk and they talk them they reparent them disciple them mentor them into more of a normal functioning person because they've come out of this a horrible background and experience and that's their only hope to be a 40 -year -old that functions right from this 20 -year -old point and so we're trying to play long ball here and but we don't have the complication of none of us are sleeping with her right right which is the other issue yeah absolutely yeah i just i don't i just don't know where to look for the resources i think if i think if i were in your all shoes, I would, I would set her up in an apartment and help her get started.

[1054] If you want to spend a few thousand dollars, you've got it, it sounds like, and get her out of your son's bed, put her in an apartment, put her, put, get her, put, get her, put, get her some roommates, pay her first three months, pay her utilities, help her understand about getting some jobs, walk her into the local church, get some women around her that are not her potential future mother -in -law.

[1055] Right.

[1056] And then if their relationship survives, it has a chance of being somewhat of a good marriage.

[1057] It's starting on such a toxic level with so many different interplays that it's not starting in a good place.

[1058] It's not good for him or her because this is got 10 years from now, this weirdness is just going to be more weirdness if y 'all don't work on that.

[1059] That's probably what Sharon and I would do if we found ourselves in your shoes.

[1060] I don't think we would find ourselves in your shoes.

[1061] But if we did find that, that's what we would.

[1062] That's what I would do if I woke up there suddenly.

[1063] Ouch.

[1064] You're a sweet person.

[1065] You're trying to help.

[1066] That's a good thing.

[1067] Make sure you're really helping.

[1068] This is the Ramsey show.

[1069] Buying a house in this weird real estate market is weird.

[1070] Selling a house in this weird real estate market is weird.

[1071] If you want to do it right, you really need a pro in your corner.

[1072] Somebody that does a lot of transactions, not your Aunt Sally who got a license three weeks ago.

[1073] Sorry, Aunt Sally.

[1074] You don't qualify.

[1075] be a Ramsey endorsed local provider that's Ramsey trusted.

[1076] We love you.

[1077] We hope you do good in the real estate business, but we don't want you to sell a half a million dollar house for somebody we love, and you've never sold a house.

[1078] You need to be doing 30 to 50 to 100 transactions, 200 transactions a year.

[1079] And then you can become the possible, possibly become Ramsey trusted.

[1080] So if you want to know who's Ramsey trusted and is an high octane, high protein producer in your area, you can do that for free at Ramsey Solutions .com.

[1081] slash agent.

[1082] Teddy is in Traverse City, Michigan.

[1083] Hi, Teddy.

[1084] How are you?

[1085] I'm doing great, Dave.

[1086] What a pleasure to speak to you today.

[1087] You too, man. What's up?

[1088] Well, I've been in most of my whole life between cars and my wife and I bought a house.

[1089] I am self -employed.

[1090] My wife is retired after 32 years.

[1091] I make about $70 ,000 a year in salary.

[1092] I have $1 ,400 a month in rental income from a home that we had purchased and paid off.

[1093] My wife makes about $400 a week and a side hustle, and she draws $1 ,500 a month from her 401K.

[1094] Last year, we got a HELOC loan for a home edition.

[1095] So I still owe about $100 ,000 on that.

[1096] I owe $20 ,000 on the mortgage on the house we're living in now that we put the addition on, as well as $20 ,000 on a car.

[1097] We got about $1 .1 million in retirement, and of that $210 ,000 is liquid investments.

[1098] So my question is, we've been working in debt snowball, but do I sell some of my investments and pay off this debt and just get it over with?

[1099] Yep.

[1100] Yep.

[1101] How old are you?

[1102] I'm 62, and my wife is 65.

[1103] Yes.

[1104] If you take, you said 1 .2, and we turn it into 1.

[1105] And you're 100 % debt -free.

[1106] I'll take it.

[1107] I mean, you said you had 2 .000.

[1108] $210 ,000 that was liquid.

[1109] I do.

[1110] You can do it with...

[1111] It's not tied up in retirement.

[1112] That's liquid.

[1113] Oh, it's no retirement at all.

[1114] So you're not even going to have taxes on it.

[1115] Yeah, I know.

[1116] Well, it may be a little gain on it.

[1117] It may have been sitting there gaining, but it's not, might have a low capital gain.

[1118] So it's not even going to be a $200 hit.

[1119] It's, uh, be $100, 150 hit.

[1120] Whatever.

[1121] But either way, um, you're a hundred percent debt free.

[1122] Now that only works, Teddy.

[1123] If you stop borrowing money.

[1124] Oh, yeah.

[1125] I'm sorry, America, I've been in, you know, borrowed the car, bought to buy cars.

[1126] I know, I'm real frugal.

[1127] You know, you're not.

[1128] You're 66 with a stupid car payment.

[1129] Isn't that the truth?

[1130] You're a millionaire with a car payment.

[1131] Yeah.

[1132] Don't do that.

[1133] No, sir.

[1134] All right, brother.

[1135] Hey, seriously, if you go pay all this off and then run up another debt, you're just going to eat your nest egg up.

[1136] I can't wait to come and stand on the stage.

[1137] You've inspired me. I love it, brother.

[1138] I love it.

[1139] You're a good man. Congratulations on being a millionaire.

[1140] Very cool.

[1141] Very cool.

[1142] Isn't it funny how hard it is to get the culture out of our veins?

[1143] It's very, I mean, it's yapping at us around every corner, you know, everywhere you look.

[1144] Every corner.

[1145] That's why when someone's debt, freehouse and everything, we say you're weird.

[1146] Yeah.

[1147] Because you're, you are.

[1148] Your weird just means unusual.

[1149] It doesn't mean bad.

[1150] Well, the weird, what makes you weird is you've decided to become independent in a culture that teaches you to constantly be dependent.

[1151] That's what the weird is.

[1152] Wow.

[1153] Let it roll around in the brain for a while.

[1154] That's strong.

[1155] That's strong.

[1156] Well done.

[1157] All right.

[1158] Let's do it.

[1159] Charlotte's in Cincinnati.

[1160] Hey, Charlotte.

[1161] How are you?

[1162] Hey, good afternoon, Dave and crew.

[1163] Thank you so much for taking my call.

[1164] Sure.

[1165] I really enjoyed listening to your program.

[1166] My question is, just a tiny bit of my backstores, my husband passed away in 2012, and as a result of insurance money coming in, we were able to get debt free, my daughter and I, and we have stayed debt free, thank God, and she just finished her freshman year in college.

[1167] We have a cafeteria 529 plan, projected.

[1168] You have a what 529?

[1169] it's what's called a cafeteria 529 plan oh a cafeteria i didn't hear i didn't hear the word okay cafeteria okay i got you yeah that's a good that's a good plan so um so yeah so we've got our college paid for as far as that's concerned um but um unfortunately the way that it's grown there's a trajectory of being like an $80 ,000 surplus at the at the end um it's and i found out that I could only put $35 ,000 in a Roth IRA in her name.

[1170] That's true.

[1171] After she's 30.

[1172] Okay.

[1173] Yeah.

[1174] So I'm a little bit concerned about, like, can I take any of that overage?

[1175] I mean.

[1176] So how much is in the 529 total?

[1177] There's probably right now $189 ,000.

[1178] Okay.

[1179] And how much did you put in and how much is growth?

[1180] well that's just it like it i only i think at the time i only put in like i don't know 85 000 okay she got a hundred growth you got 100 growth yeah and of that 80's going to be if he keeps growing there's even going to be more and so you'll have an 80 over which is that what we're saying yes is she getting any scholarships she is okay you know you can pull that much out of the equivalent of the scholarship can be pulled out each year No tax.

[1181] Equivalent to the scholarship.

[1182] So she gets a $10 ,000 scholarship, pull $10 ,000 out.

[1183] That's actually an incentive to get more scholarships.

[1184] Yeah.

[1185] Okay, because I guess my tax preparer, he doesn't know about that.

[1186] Is there any place that you could direct me as to where I could find good, solid information about this kind of stuff?

[1187] A different tax preparer, because that's pretty standard information.

[1188] I'm not even good at taxes, and I know it.

[1189] so yeah um you know if that's if that's one of our ELPs i'm sorry but if it's not check one of our endorsed local providers for taxes in your area and get a second opinion on it but you're allowed to pull the equivalent of scholarships out athletic academic whatever the basis for the scholarship is um every year and there's zero tax on it so she gets a scholarship pulled that much out do you know how much she got in scholarships like last year i mean it was i don't know It was around $10 ,000, I think.

[1190] Yeah, okay.

[1191] All right.

[1192] That's not going to alleviate the problem completely, because if it's times four, it's only $40 ,000, right?

[1193] And she's 80 over, so you're going to have another $40.

[1194] And I really wouldn't screw around with the Roth IRA at age 30.

[1195] I'd just go ahead and cash it out.

[1196] You don't get, it's not 100 % tax.

[1197] You're just taxed and penalized on that amount of growth only.

[1198] That's why I was asking you what you had in it.

[1199] And so the calculations.

[1200] It's not as severe as it sounds.

[1201] So let's say you end up pulling $40 ,000 bucks out because we just got rid of $40 with the scholarship idea.

[1202] You know, you might have $5 ,000 in taxes.

[1203] It's 10 %, yeah?

[1204] Is that the rate?

[1205] Yeah, on the growth.

[1206] So I could, in essence, take that money out and use it, say, like, for home improvements.

[1207] Use it for anything if you pay the taxes on it.

[1208] And there'll be the taxes and the penalty.

[1209] There's a tax and a penalty both.

[1210] but it's maybe a 10 or a 15 ,000 out of that 40 you're going to lose, but it's not 100%.

[1211] So they don't take the whole thing.

[1212] And rather than try to screw around with something for a 22 -year -old, wait until they're 30, and these idiots in Washington change the law six times between now and then, no, I just cash it out, take my hit and go on and go, hey, we paid for college and we had a little leftover.

[1213] Life's good.

[1214] Yeah, I agree.

[1215] There you go.

[1216] Hey, good question.

[1217] Thanks for calling.

[1218] You know, that's a very unusual problem.

[1219] Yeah, it's a good, I think it's a good problem to have.

[1220] I mean, the only other thing is if they left it, I mean, it can pass, like, her as a beneficiary, she can pass it to her kids when the time, you know, when the time comes.

[1221] That's way out there, but.

[1222] Yeah, now we got 800 grand.

[1223] That's true.

[1224] Yeah.

[1225] At that point, if you take the penalty, it might hurt a little bit more.

[1226] Yeah.

[1227] I think I'm going to go ahead and just be done with it and just say, hey, we did a great job.

[1228] We might have even done too good a job, but just so slightly.

[1229] Just so slightly.

[1230] When I hit a golf ball a little bit too long, I just say I hit it too well.

[1231] That's all it is.

[1232] This is the Ramsey Show.

[1233] Jade Warshall, Ramsey Personality, is our co -host today.

[1234] I am Dave Ramsey, your host.

[1235] Aaron is with us in Lexington.

[1236] Hi, Aaron.

[1237] What's up?

[1238] Hi, thank you for taking my call.

[1239] My husband and I are wanting information on how to gift.

[1240] a home to his sister.

[1241] We had bought the house for his mom in 2002, and she has since passed, and his sister moved in and helped take care of his mom when she had Alzheimer's.

[1242] So now we would like to be able to give her the house without too much tax implications.

[1243] You're going to do it with no taxes, potentially.

[1244] What's owed on it?

[1245] nothing okay what'd you pay for it we paid 120 for it what's it worth we haven't had it appraise but villa says 226 to 263 okay and what's your all's net worth a little over 2 million okay good all right um well basically you have a 20 million dollar it changes every year a little bit but it's in that range A federal tax exemption.

[1246] So all of your assets up to $20 million can pass to anyone else at your death with no federal income tax or no federal estate tax.

[1247] Okay.

[1248] So your estate is not taxable, nor is it likely to be.

[1249] Okay.

[1250] That's important because you can gift using part of your estate tax exemption, part of that $20 million.

[1251] exemption you can gift prior to your death using the unified right this down unified estate tax credit okay unified estate tax credit and basically if you had we'll use an example if you had a 20 million dollar exemption and you use up 250 ,000 of that well now you have a 19 million 750 ,000 dollar exemption you're using up some of your exemption before you die right okay and it doesn't matter because you're not going to use it all so it's okay no great okay now what so if you don't do that you are going to be liable for a gift tax of approximately 55 % of the value of the house okay so you're going to get hit with over a hundred thousand bucks in taxes if you don't do that so you need to go get an estate an estate planning attorney and or a tax attorney in your corner that can help you do this the right way because you need to write this up and you probably would I probably would spring for an appraisal just to be super careful to prove to the IRS the value that you transferred under the unified estate it's not going to be even close but even even the same I'd want some kind of documentation in the file as to the value okay in case you're ever audited.

[1252] And then with your income tax return, the following year, after you do the gift, or the year you do the gift, if you do it in 24, when you file your 24 return, you'll have a statement with that that goes, that you did this, and then you've got the documentation in your file for the rest of your life.

[1253] So if it ever comes up, but basically, if you do that, it should be zero tax.

[1254] Okay, great.

[1255] So, but you're going to pay a little bit to an attorney to make sure you're doing it right, and it's worth every penny.

[1256] Perfect.

[1257] Make sense?

[1258] Thank you so much.

[1259] Yep, it does.

[1260] Hey, thanks for the call.

[1261] It's great.

[1262] Open phones at AAA 825 -5 -2 -2 -25.

[1263] I'm trying to find on a little cheat sheet.

[1264] It's 27 .2 million.

[1265] Wow.

[1266] Is your, for a couple.

[1267] That's for two people, okay?

[1268] And you can transfer, not using that, up to 18 ,000.

[1269] That's the gift tax exemption.

[1270] per individual so another trick jay that we tell people all the time is if um in this case it's not so but like if you're out there listening and you want to give money to your grown kids who are married and you're married so you could give each of the kids 18 ,000 that's 36 your spouse could give each of the kids 18 ,000 that's another 36 so in a calendar year you know you can transfer 72000 yeah that's a lot with zero tax and not even touch the estate tax exemption and so if you were dealing with, if you wanted to say, for instance, put a note on this house for 220 or 210 at $72 ,000, you could be done in three years and never use up any of your estate tax exemption.

[1271] Is there any line between what can be considered an estate tax exemption or whatever you choose?

[1272] Anything you're gifting, you're avoiding gift tax by using this.

[1273] Okay, but I'm saying it doesn't have to be something like a home or something.

[1274] It could be anything of value that you're afraid you're going to get gift taxed.

[1275] I mean, if you're leaving your, you know, your grandfather's pocket knife, you don't have to worry about it.

[1276] But, you know, but I'm saying if you start talking about something that's north of 10 grand, you start to worry about whether the IRS is going to look in over your shoulder and try to hit you with a gift tax.

[1277] And you don't want to get hit with the gift tax because, as I told you, it approaches 55 % in most cases.

[1278] So you want to stay away from that.

[1279] That one.

[1280] Dalton is with us.

[1281] Dalton is in Nashville.

[1282] Hi, Dalton.

[1283] How are you?

[1284] Hey, Dave.

[1285] It's nice to talk to you again.

[1286] I talked to you back in 2018.

[1287] Was I nice?

[1288] Yes, you were.

[1289] I believe you set me up for success.

[1290] Good.

[1291] Well, you're back, so there's that.

[1292] That's a good sign.

[1293] Where is it?

[1294] Another load of questions.

[1295] I'm 27 years old now, and I got out of the Army since then.

[1296] was an army when I called you last, and I'm a federal agent with the government now.

[1297] Wow.

[1298] I just bought a house.

[1299] Cool.

[1300] And I'm in Tennessee.

[1301] I'm moving south of Nashville, and I was wondering, I have a sum of savings that I've saved up thanks to you or largely to you.

[1302] And then I'm looking at getting married in the next six months.

[1303] Fairly, yeah.

[1304] Your life is good.

[1305] Some of savings.

[1306] Yeah, the Lord can get to me. I'm really blessed.

[1307] but um i'm just my question is where do i put that sum of savings and in that i have and in anticipation of getting married within the next six months and she has a sum of savings where do we need to put that do we throw it on my house how much is it it's not super significant i have about 60 um just liquid and i have another 50 something in my tsp and then And she has around 100.

[1308] And what is that?

[1309] Where's her 100?

[1310] It's in a high -yield savings account.

[1311] Oh, okay.

[1312] How much you owe in the house?

[1313] 400 grand.

[1314] Okay.

[1315] And you have any debt other than the house?

[1316] No debt.

[1317] Neither one of you.

[1318] Neither of us.

[1319] Excellent.

[1320] And she owns a business, like a boutique type, well, children's clothing business.

[1321] And she makes around.

[1322] 50 a year, but again, I'm not married to her yet, so I don't quite factor that in.

[1323] So, okay, that's good to know.

[1324] So the 60K, that's yours.

[1325] Are you calling that three to six months of expenses?

[1326] Or is that separate from?

[1327] I would say part of that, yes, that is incorporated into that savings.

[1328] What part?

[1329] Where does the, okay, where does the emergency fund end and the fund money begin?

[1330] So how much of it is emergency fund?

[1331] 15 to 20.

[1332] Okay.

[1333] Well, that work, when you're married?

[1334] I'd probably bump it up to 30.

[1335] Okay.

[1336] So we've got 30K that's kind of disposable at this point, right?

[1337] That 30K that you're going to, after you're married, that would be your emergency fund, and you've got 160 to work with.

[1338] She got 130 to throw at the mortgage.

[1339] What about the wedding?

[1340] She's pretty, she's more frugal than I am.

[1341] I'm pretty frugal.

[1342] So we're looking at doing a very small wedding, and I think her dad is willing to pay for most of it.

[1343] Most of it.

[1344] So maybe you guys spend just a couple thousand.

[1345] Right.

[1346] Right.

[1347] And she doesn't want me to buy a huge ring either.

[1348] So other than you're planning for whatever your honeymoon is going to be, I would probably, when the time comes after you guys get married, this $100 ,000, it might be somebody that you want to put towards the mortgage and start working on paying the mortgage off because you've got the three to six months of expenses.

[1349] Whatever is left is going to go to beef that up a little bit more and pay for the wedding.

[1350] And that's what I would do if I were in your shoes.

[1351] This is The Ramsey Show.

[1352] Our scripture of the day, Proverbs 28, 19, whoever works, his land will have plenty of bread, but he who follows worthless pursuits will have plenty of poverty.

[1353] Ann Landers said opportunities are usually disguised as hard work, so most people don't recognize them.

[1354] John's with us.

[1355] John is in Charleston, West Virginia.

[1356] Hi, John, how are you?

[1357] I'm good, Dave.

[1358] How are you?

[1359] Better than I deserve.

[1360] How can we help?

[1361] well I recently had a car turtled out and I guess my question is how much should I be spending on a new vehicle or what would be reasonable to spend on a new vehicle and the reason I asked that is because I originally spent about $36 ,000 on this vehicle insurance is looking to pay out about $10 ,000 more than that and that's about what it's looking like I'd be able to purchase another one of those.

[1362] I'm sorry, your car went up in value?

[1363] I guess so.

[1364] I purchased it about three months ago.

[1365] You're going to get a $46 ,000 check for a car you bought for $36K.

[1366] Yeah, Alpador, I went and paid cash for it, and, yeah, I'm getting about, it's closer to $47 ,000.

[1367] Wow.

[1368] I was a check from insurance.

[1369] Congratulations.

[1370] You hit the jackpot.

[1371] Yeah, I got pretty lucky.

[1372] I guess lucky and unlucky.

[1373] I don't.

[1374] Yeah, is everybody okay?

[1375] But yeah, I was only being in the vehicle and the person that hit me ran off.

[1376] So I have no idea if they were okay.

[1377] They totaled a car and ran off.

[1378] Wow.

[1379] Sheesh.

[1380] All right.

[1381] So what vehicle do you want to get?

[1382] What are you wanting to do?

[1383] The vehicle I had was a Toyota Ravpur Prime.

[1384] It's a plug -in hybrid vehicle.

[1385] I loved it because I could drive on electric range and it costs like $30.

[1386] a month to drive like a thousand miles.

[1387] So what do you want now?

[1388] I'd love to have the same thing, but I can't really justify spending $10 ,000 more for something that I bought three months ago for $10 ,000 less.

[1389] So what would you get instead?

[1390] I was looking at several different cars.

[1391] Maybe there's a cheap plug -in hybrid that's a bit closer to me, and it's a little bit cheaper, but still more than what I spent on my original.

[1392] vehicle.

[1393] So you have $10 ,000 more to spend than you had before.

[1394] It sounds like you don't necessarily want to spend that on replacing a vehicle.

[1395] What would you spend the other $10 ,000 on?

[1396] What's more important to you is what I'm trying to get at?

[1397] Do you have debt that you're trying to pay off?

[1398] Is there something else you want to do with it?

[1399] No, I don't have any debt.

[1400] Well, I have a mortgage that I got several years ago.

[1401] I have like a 3 % interest rate on it.

[1402] What's your household income?

[1403] I make about, it's just myself, but I make about $90 ,000 a year.

[1404] Okay.

[1405] I mean, if you don't want to spend all of it on a new car, you don't have to.

[1406] But for a lot of people, this is a moment to maybe upgrade if they want to.

[1407] It just sounds like you kind of have your eye on what you want to spend and you want to stick in that price range.

[1408] And that's fine.

[1409] I don't think anybody's going to convince you to spend more than you want to spend.

[1410] It's not a hard and fast rule, but a rule of thumb that we use all the time is don't own things with wheels or motors that, equal total more than half your annual income so if you make 90 47 is slightly above that so that's right on the bubble 37 is not on the bubble you can afford it you're paying cash for it you have no debt you've been frugal so anywhere in there is fine I wouldn't go to 60 in this case if I were in your shoes I would probably say the insurance check is the most I would spend and anything less is certainly fine.

[1411] Okay.

[1412] Thanks for the call, brother.

[1413] Eugene's in Dallas.

[1414] Hi, Eugene.

[1415] How are you?

[1416] I'm doing good.

[1417] How are you?

[1418] Better than I deserve.

[1419] What's up?

[1420] So, I just have questions and, you know, like the best way to pay our student own, currently married, and we're making a little bit, but, you know, we're kind of confused on how to go about it.

[1421] How much are they?

[1422] 117.

[1423] how many is it is it busted into lots of little loans yeah it's like three of them only three yeah okay um is it your only debt um i also have a car that i'm paying as well okay so the best way to go about is it just the car or do you have other debt other than a house okay just the car in the house okay and what do you owe in the car a 15k okay and what's the smallest student loan debt?

[1424] It's 18.

[1425] Okay.

[1426] So technically your cars first, if we're listing our debt's smallest to largest to do a debt snowball, technically you do your car first, which in your case might be a great thing because what's the payment on the car?

[1427] I'm paying to my host family.

[1428] So essentially I pay $500, but I chose that amount because I wanted to get it done first.

[1429] Okay.

[1430] I can always decrease Well, either way.

[1431] Yeah.

[1432] The point of me saying that is once the car is paid off, it's freeing up $500.

[1433] to start throwing at these student loans.

[1434] So are these federal student loans?

[1435] They are.

[1436] Okay.

[1437] So the good thing about a federal student loan right now is you can kind of take advantage of some of the IDRs that will allow you to temporarily have a lower minimum payment so you can pay off this car quickly and then take all of that money and throw it at the smallest student loan debt, which in this case I think you said was 18 ,000.

[1438] But I want you to still check and see if that's busted up any smaller because sometimes they are even by semester when you took it.

[1439] And when you do that, you satisfy the minimum payment and then whatever your extra payment, which is going to be as much as you can scrounge up, you can literally throw it at that smallest increment of the debt so that you can knock it out quickly.

[1440] It all goes towards the principal.

[1441] So I challenge you to take a look at that because they might be even smaller with smaller account numbers.

[1442] What's your household income?

[1443] Got it, got it.

[1444] Um, finally between the two of us, it's 207.

[1445] 207.

[1446] Okay.

[1447] And you have 117 and 16.

[1448] I would challenge you to live on beans and rice, do nothing, don't go on vacation, don't go out to eat and be debt -free in a year.

[1449] Radical.

[1450] $10, $12 ,000 a month throwing at this.

[1451] Okay.

[1452] Like scorched earth, man. Go hard.

[1453] Yeah.

[1454] Why not?

[1455] You can live on $100 ,000 and knock this out or a little less.

[1456] We can.

[1457] We can, definitely.

[1458] But currently, we don't live in the same state.

[1459] So she lives in Alabama.

[1460] As I said, she's in school.

[1461] And we have a house over there and like we have like about $82 ,000 equity on the house.

[1462] So she's going to move here soon.

[1463] So, you know, my thought was to take in the next few months, like in the next three to four months.

[1464] Okay.

[1465] Let's get the house up for sale.

[1466] Yeah.

[1467] So I wanted to like, you know, ask whether like it would be a good idea to put the equity.

[1468] Absolutely.

[1469] Yes.

[1470] Use everything you can get your hands on to clear this debt up.

[1471] Because when you're 100 % debt free, then you can save like a main.

[1472] for your emergency fund and then save like a maniac for your next for your down payment on your next house.

[1473] But the great news is you're getting ready to be completely debt free fairly quick and then you'll build that emergency fund at the speed of light like we were talking about and then go ahead and start doing the house.

[1474] You're going to be in really good shape to do all that.

[1475] Yeah, with a $207 ,000 income, that's pretty impressive.

[1476] We can go a lot of places with that.

[1477] Absolutely.

[1478] Jay, there is a all the years of teaching people to get out of debt so that they have their income freed up to bill wealth with, which is what happens.

[1479] This is how you become wealthy.

[1480] We have learned that the faster you can get out of debt, the higher the chances are that you actually do, that you actually get out.

[1481] Absolutely.

[1482] I mean, you guys went forever.

[1483] You're like seven years.

[1484] Yeah.

[1485] That's very unusual.

[1486] That's rare.

[1487] It's very unusual.

[1488] I mean, but most of the people we talk to running their total money makeover with gazelle intensity, no eating out, no vacations, beans and rice, rice and beans.

[1489] They're debt -free in 18 to 24 months.

[1490] Yeah.

[1491] Most people.

[1492] In his case, he's going to sell the house.

[1493] He's going to be there in just a few months.

[1494] Yeah, that's lucky for him that he had that asset to sell.

[1495] But there is that correlation between, I almost feel like it's a combination of you've got to feel a level of uncomfortableness.

[1496] Yeah, your depth of sacrifice.

[1497] Yeah.

[1498] That allows you to go faster.

[1499] It increases the speed, and the increased speed increases the probability of ever doing it.

[1500] That's right.

[1501] but that uncomfortability factor is a big part of it.

[1502] It's a big one, yeah, that that ouchy, that period of time where you go through hell, but just as the country songs, it just keep on going.

[1503] Well, yeah, you put yourself in the hot pot, and that way you're like, hey, I got to get out of this pot.

[1504] Like, that's...

[1505] I am not going to stick around here.

[1506] Yeah.

[1507] Life is not fun like this, yeah.

[1508] It's not.

[1509] I want to be free.

[1510] Yes, that puts this hour of the Ramsey Show and the books.

[1511] We'll be back with you before you know it.

[1512] In the meantime, remember, there's ultimately only one way.

[1513] financial peace, and that's to walk daily with the Prince of Peace.

[1514] Christ Jesus.

[1515] Dr. John Deloney here.

[1516] Mental and emotional health challenges, broken relationships, it's all just part of life, but they don't have to define you.

[1517] The Dr. John Deloney's show is here to help.

[1518] It's a collar -driven podcast where you can get practical advice on dealing with anxiety, loneliness, depression, relationship challenges, your kids, and so much more.

[1519] Listen to questions from our callers, or if you're walking through a tough situation and need some help, give me a call.

[1520] You are never meant to do life alone, and that's what this podcast is all about.

[1521] Follow along on Apple, Spotify, YouTube, or the Ramsey Network app.

[1522] Remember, your worth being well.