The Ramsey Show - App - A Crisis Becomes an Inconvenience With an Emergency Fund (Hour 3)

Episode Date: December 30, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios. It's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. Hi, I'm Dave Ramsey, your host. This is your show, America. Thank you for joining us. It's all about you. The phone number is 888-825-5225.

That's 888-825-5225. Joy is with us in Denver, Colorado. Hey, Joy, how are you? Hi, great. Thanks, Dave. How are you? Thanks so much for taking my call. Sure.

How can I help? Hi. I've been listening to your podcast regularly for about five months and got serious about three months ago. My husband and I have paid off around $10,000 in debt, and we have decided to, well, we decided we wanted to take FPU, and there wasn't a course offered in our area. We're actually in a small mountain town.

So we decided to read a course course and our first course is tonight yay thank you yeah yeah we're so excited um i was wondering if you have any last minute words of wisdom for people like us that have never taken ftu and we're starting out by leading a course we have 11 families signed up wow yeah you Yeah. I'm really excited. So why did 11 people sign up? They knew you and trusted you? Most of them I know, and yes, I would say yes to that. And then there were a few random recruits I advertised in all of our local churches

and people in elementary school, stuff like that. Okay. local churches and people and elementary schools and stuff like that okay i'm gonna guess and say the ones that know you signed up because of who you are as a person and my best encouragement would just be be that person because they already trust you in other words don't try to be something you're not i don't think you're going to just in talking to you i don't think you're that person you don't need to act like you're a financial genius you don't need to act like you uh have all the answers um you know all you got to do is be able to turn on the dvd player play me yapping about whatever lesson i'm yapping about that night and then put chairs in a circle and

love people and be yourself the other thing is always just talk about the times that you failed or that you were unsure or that you goofed whether it was 10 years ago or 10 minutes ago because that gives other people permission to not be perfect and there seems to be this illusion with people that everyone else has got their money act together, but me, I'm the only doofus. And it turns out we are all doofuses. That make sense? Yeah, absolutely.

Two of the primary barriers to people receiving financial teaching is guilt and shame. Okay. And if you can remove those by just, that's i do tell my story all the time you hear me tell it if you've been listening to the podcast that much how many times i've screwed up and you know i went broke i lost everything had to start over and all that and that's where all this came from this passion for helping other people came from and this idea that i hate debt that's where it came from was i've got a phd in dumb and so what that does it makes me approachable right and uh i'm not some guy drops his glasses on the end of his nose and looks down in the southwest it looks down his nose at you you know

uh you know it's snobbish and i you know and and that kind of stuff it's just me i'm just a guy and i'm just really good at this stuff. But I've been doing it for 30 years. I ought to be good at it. But when I started, I didn't know beans. So just be that kind of a person and just care about the people there. If you look in their eyes and listen to them and you know you're you're going to be just fine but because that's why they came anyway because you're a person they trusted

and just be the be the person that caused them to come in the first place and you're going to be fine just don't try to know everything because you don't that's okay well i definitely don't well i don't i sit in front of 15 million people and sometimes i on this radio show i have to say i don't know because sometimes i don't know and that's the only answer because it's the only truthful one anyway and um you know you can google it like i can google it let's try it together i don't know you know but um that's why i don't take a lot of tax questions because i'm not very good at taxes um that kind of stuff so you So you don't have to be everything. You just got to be somebody that cares.

And if you're that, you're going to be a great Financial Peace University coordinator, world class. You already got 11 people come to the class. It's pretty cool. Hey, thank you. Thanks for leading it. We really appreciate it. Don is with us in Tampa, Florida.

Hey, Don, how are you? Hey, Dave. How are you doing, buddy? Better than I deserve. What's up? Hey, Dave, how you doing, buddy? Better than I deserve. What's up? Well, quick question for you. We're on baby step seven, paid off our house in July. Yay! And yeah, I'm really excited about that. However, just to give you a background, I make about $325,000, and I live down here in Tampa. My wife is from North Georgia, wants to move back up to Georgia next year. We've been looking at houses and found a few that we like.

The question is, being out of state, you've got to come up with, you know, a 20% down, can't homestead, and so forth. So I don't have the cash right now. So what we were thinking was, and I pretty much know the answer to this, but I'll just take it out of a home equity loan and then for a down payment, and then when we sell our house, just pay everything off next July when we move up there. What if interest rates went up and the real estate market froze and you couldn't sell your house? Well, I understand there's a lot of risk here, and that's kind of my hang-up here,

is, you know, rates go up, shoot up, can't sell our house or sell our house for what we, you know, we're looking to get right now. Yeah, then suddenly you become what's known as a motivated seller, and a guy making $325 is giving a house away. Right, and that's my problem. I'm trying to do this cash you know where we go up there with no mortgage whatever yeah well i you know it's difficult it's there's not a there's something's going to be difficult and i don't know you just have to choose which difficulty you want

do you want the difficulty of the risk of the debt or do you want the difficulty of a double move because you got to sell your house so you have the cash to buy the house in georgia um and so you end up renting somewhere for a little bit uh or something like that because you're caught in the middle there for a minute um that's a pain in the butt but it's also a pain in the butt to get stuck with a mortgage because the real estate market swings on you now you got a house in tampa you can't stand because you get you progressively hate it more every day when you can't sell it. You know what I mean? It just pisses you off.

I couldn't do it. I mean, I can't fathom emotionally going back into debt after I got out. Well, and that's the big, to be honest with you, that's one of the big hangups I have because right now we're in the process of piling up cash for the move. Yeah. And it's just hard for me to fathom trying to go back and get that. So what is your paid-for home in Tampa worth? Probably about $330,000.

Okay. And the house you're wanting to buy in Georgia is? Roughly, well, we're looking no more than $425,000. Okay. All right. And you see you'll have the money if you sold your house. In Georgia, is it? Roughly, well, we're looking no more than $425,000. Okay. And you see you'll have the money if you sold your house? It would be pretty goddamn close, yeah. Yeah.

So I'm not flying. I work in the airline. I'm going to fly my backside off right now trying to make extra money. Yeah. You got to do what you guys want to do. You called and asked me. Sharon and I would sell the house, pay cash for the house in Georgia,

and that might mean we had to move twice because it didn't line up perfectly. But we don't borrow money. And I couldn't go back into debt if I was you. After you got out, I couldn't do it. This is the Dave Ramsey Show. I love talking about companies that know how to do business right. You've heard of Grip6 belts, right? Well, if you haven't, it's the only belt you can get online with no holes, no flap, and no bulk. I'm talking weightless, and the buckles come in really cool designs and

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They have a 100% satisfaction guarantee. That means even if you screw up, if you mismeasure, you pick the wrong color, then they will remake your window blinds for free. That's a pretty good guarantee. You get free samples, free shipping, and with the new promos, you save even more. Use the promo code Ramsey. It's magic it'll make you money at blinds.com jonathan's in kentucky where's the best place to put my emergency fund my

bank offers many types of savings accounts i want to make sure the money's available when i need it well it needs to be fully liquid meaning that you can get to it with no penalties that's all that matters really it's not going to earn much no matter what you do with it. Your emergency fund is not an investment. Your emergency fund is insurance. Investments make you money. Insurance protects the things that make you money. So it's not an investment.

It's insurance. And so when you set $10,000, $15,000, $20,000 aside for your rainy day fund, and it's sitting in a stupid savings account making 1%, that costs you money because you could have been investing it in something good, right? That cost is called opportunity cost, missed opportunity. But that's okay. You do it anyway. You have a rainy day fund, but its purpose is not to build wealth.

Your other investments, your other money actually builds your wealth. This protects the things that build wealth. Here's an example. Let's say the transmission goes out on your car and you have no money, but you put all your money in your 401k because you're all about investing.

Now, how are you going to fix a car? Well, you're either going to put it on a credit card, which would be stupid, or even dumber than that, you're going to borrow on your 401k. That'd be stupid. Or you're going to cash out your 401k. That'd be really stupid because that's going to cost you a 10% penalty plus your tax rate of 35% or whatever it is. And so you've got a 35% or 40% hit on your money.

That's like borrowing money at 30% interest to fix your car, because you didn't have a rainy day fund, because you know what? It's going to rain. Dave, you need to be positive. I'm positive it's going to rain. You need to be ready. It's coming. And so that emergency fund is not making you money,

but it protects you from doing something stupid when bad things happen. I didn't say if bad things happen. I said when. You're going to lose a job. There's going to be a car wreck. There's going to be a surgery. There's going to be a dot, dot, dot, fill in the blank, right? That's just life.

I'm not being negative. I mean, it just happens. And when you have money, it turns a quote, unquote, emergency into an inconvenience. Thirty years ago, almost, Sharon and I were so broke we couldn't pay attention. We were on the verge of bankruptcy at that point. And a little baby and a toddler in the house and a woman stressed out of her mind because her husband was a doofus and had gotten so far in debt we couldn't see this was not a pretty picture it's august in tennessee now if you don't know about august in tennessee you can cut

the humidity here with a knife and stack it in blocks okay i mean it gets hot and humid you can't breathe little babies stressed out mommies and the air conditioner goes out right on cue. We had no money. None. I mean, we're on the verge of bankruptcy already, and the air conditioner goes out. What are we going to do? Well, I don't know what you're supposed to do i know what i did okay i got a guy from the church as a friend of mine that had a bunch of junk in his backyard one piece of which was a air compressor

for the compressor which is what had gone out and um you know we got some stuff from home depot went over there welded that thing in he so He sort of knew what he was doing. And then we had a heat and air guy who actually did know what he was doing come over and charge the thing up. I ended up, let me tell you, it was 30 years ago. And I remember what it cost. It was $322. Why do I remember that to the penny 30 years later? Because there was so much stress around that subject stress is a memory inducer you'll remember things when you're in high stress

in detail you notice how like when a car wreck everything slows down it's the same situation it's where your brain your brain works. $322, 30 years later, I know what I spent on that stupid air conditioner. Fast forward a decade after that, we're making money again. We've gotten the mess cleaned up. We're moving on with our lives. We have an emergency fund of $25,000. Same phone call to the office. Dave, that would be my wife.

The air conditioner's out again. Now, again means 10 years later, right? But the air conditioner's out at the house. I called a heating and air guy, sent him over there. He calls me back and goes, the whole thing's bad. It needs to be replaced. And I said, replace it. I have no idea what it costs.

I don't remember. You know why? Because a crisis becomes an inconvenience when you have an emergency fund. That's tweetable right there, okay? A crisis becomes an inconvenience when you have an emergency fund. So when you park your emergency fund,

you park it where you can get to it to fix the transmission or replace the heating and air and it becomes an inconvenience. You don't put it in a stupid CD, a certificate of depression, to try to get a quarter of a point more on your money and then end up having to pay a penalty to get your own money out. They take a portion of the very little interest that they were giving you in the first place

to get your money out. So just put it in a simple savings account slash money market account. Mine's in a money market account. I got a money market account with my mutual fund company. And it's paying nothing. I don't know what it pays. It's like one, one and a quarter maybe. It's not.

Dave, I got one that pays 1.35. Well, who gives a rip? You're not getting rich on this thing, dude. You're talking about 10 one-hundredths of a point here. I mean, it's not even 10 one-hundredths. It's just one one-hundredth of a point shift here. It's not that this is not going to, the number of basis points is not going to move the needle for you.

What moves the needle is the fact you're managing money properly. You're not having to touch the real investments that are making bank your good mutual funds inside your 401k inside your Roth IRA. So don't try to worry about the interest rate. The only thing you want is fully liquid, meaning no penalties to get to it. Do not hook it to the overdraft protection on your checking account because you might accidentally be buying a couch and think that this is an emergency. Buying a couch is not an emergency. I can help you with that. You might be thinking that, you know, we need to go on a trip and that's an emergency. That is not an

emergency. It does not need to be hooked to the overdraft protection on your checking account. Most of you have online banking and you can actually jump online and move the money over into your checking if you did have truly an emergency and you needed to cover something with a check. You've got time to do this. Everything's okay. There's very few things that you have one hour to collect the money or you die. I mean, that's just, this is not a movie. This is their life. It's real stuff here. So do not put it in overdraft protection. Do not have your emergency fund where there's a penalty to get it out. And don't spend like seven years of your life researching trying to get one-tenth of one percent better interest rate. Who gives a rip? Your emergency fund is not an investment. It is insurance. And when you have grandma's rainy day fund in place, the GOK fund,

the God only knows fund, when you have that in place, it turns a crisis into an inconvenience. That's why it's baby step three. And the first thousand of it is baby step one. Because it's foundational for you to be able to build out your house, your financial house. Think about it. What if you had no payments but a house payment? Think about that. No payments but a house payment and $15,000 cash in a savings account.

By the way, that would put you in the top 10% of all Americans. That one thing. Well, those two things. A fully funded emergency fund and no payments but a house payment. You know why you, just me saying that, a sense of peace comes over you. You know why that sense of peace comes over you? Because it's correct. It's foundational. It gives you a place to build. When you start trying to build wealth while you're still broke, you end up stumbling around in the dark, stubbing your toe on the chair.

Stop your 401k temporarily. Stop all investing temporarily. Work through the first three baby steps. $1,000. Debt-free, accept the house, finish your emergency fund at three to six months of expenses. It's foundational to building wealth and to getting control of your life. This is the Dave Ramsey Show. Business leaders, right now you have the opportunity to take your business to the next level this new year.

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That's linkedin.com slash Ramsey that's linkedin.com slash ramsey terms and conditions apply Thank you for joining us, America. We're glad you are here. Kevin and Lena are in Canada. Hey, guys, how are you? We're great, Dave. How are you? We're really excited to talk to you today. Well, you too. Welcome. I see on my screen you're debt-free. How much have you paid off?

We paid off $30,000 in 10 months. Very good. So we're a little nervous here. That's okay. Cool. $30,000 in 10 months, making what range of income during that 10 months? It was approximately $108,000 to $118,000 Canadian. Great. And what do you guys do for a living? So I'm a coach technician for a local transit company.

And I'm a consultant, a patient experience consultant for our local community hospital. Cool. Way to go. And you paid off $30,000 owed on what? What kind of debt? Well, Dave, we did stupid on steroids for the first 10 years of our marriage. But this last little bit, this last $30,000 was on we had to have the roof done in the house. We had a window in the front of the house that was leaking.

One of our cars let out, so we ended up having to buy what would later be known as our Dave car. And just lots of odds and ends. At one point, we decided that we deserved a trip to Disney, so all of this went on the line of credit. And we just decided it was time to pay it off. Wow. So what happened 10 months ago that flipped the switch? Well, actually, it's funny. So we were on that trip to Disney after spending all this money on the home equity line of credit, and we were traveling to and from, and Lena and I had got into listening to Josh and Ryan, the Minimalists. I've seen them a couple of times. And so they had mentioned this guy, Dave Ramsey.

I'd never heard of this Dave Ramsey guy before because it's not well known in Canada. But so when I came home, as soon as we got home, I started listening religiously. I listened to all three episodes of the podcast every day to and from work. And I came home and mentioned it to Lena. And we tried to get Financial Peace University, but unfortunately, we can't get it in Canada. So we ended up having to just go. We went and grabbed Total Money Makeover, and Lena and I sat down every night, and we had some tea, and we read it aloud to one another. And within about a week, we were done the book, and we started our budget, and it took about three months to dial in the budget, and we were well on our way.

Wow, just like that. Good for you. Well done, guys. So what do you tell people the key to getting out of debt is? So definitely sticking to the budget. So it took us actually about three months to figure out the budget and get it to the sweet spot for us, what worked for us, where we weren't, you know, dipping into extra or running short one month or something. So we were able to balance our budget. That took us about three months. But once we got to it, it was really about sticking to it and communicating with one

another on every purchase. Even if we had to look at our budget daily, we would sit down and say, okay, this is what needs to be bought. You know, what envelope is coming out of? How much is this going to cost? And ultimately, it came down to saying no. Sometimes we just absolutely had to say no. But we both took on extra jobs during that time,

and it turned out that every little bit does count. So even if it was $20 or $30 putting towards the debt, if there was $30 left over here or a little bit left over from grocery money, it all went towards the debt. Wow. was $30 left over here or a little bit left over from grocery money, it all went towards the debt. Wow. And that really helped paying it off. And I guess the bottom line is it comes down to being really intentional about where your money is going.

The other thing I wanted to mention was it was important to us that we got the kids on board. Our kids are 10 and 8, and explaining to them what debt is and why we're doing what we're doing and why Mommy and Daddy are working so many hours and explaining to them why their friends are able to go on these fancy, expensive vacations, but we're just working our butts off over here trying to get ourselves out of debt. That was a big thing for them, and we actually read Smart Money with Smart Kids as well,

and we put them on commission. You and Rachel mentioned it in your book, and they've been really receptive to it. Very cool. Way to go, man. Congratulations, you guys. Who was your biggest cheerleader? I guess definitely my parents were big supporters of ours. They really helped us out with daycare, you know, free

grandma and grandpa babysitting, which was a huge thing for us, especially during the summertime. Summer camps can be extremely expensive, and Kevin and I were, you know, needed to work, so they were so great. They loaned us some other chairs when our furniture broke, and we weren't ready to buy anything new at the time. You know, we were just so gazelle. So they've been a huge supporter. But I think overall we, you know, explained it to a few friends and some other family members, and we got a few odd looks.

And a few people asked us, well, why would you even do that? Or why not just use your home line of credit? And, like, well, that's what got us here in the first place. Yeah, why not just stay in debt forever, yeah. Yeah, exactly right. People ask some dumb questions, don't they? Oh, yeah, I know. I know, for sure.

Well, congratulations, you guys. We're very, very proud of you. Thank you. If I can mention one other thing, sorry. My little guy, Dylan, listens to your podcast with me all the time. He can recite your monologue that you open up with. And we really wanted to come down and see you guys, but unfortunately we're still trying to fill up our emergency fund.

So we will be down, and I promised him one day he would get to meet you. So we hope to be down there in the next year or so, and hopefully me in the lobby. Absolutely. I will look forward to that. That will be fun. You just remind me we talked about it, especially when you come down. So cool. Very cool. Look forward to that that'll be fun you just remind me we talked about it especially when you come down so cool very cool look forward look forward to meeting you sounds like you guys have had a complete transformation in 10 months oh dave it's incredible like it was funny when we first paid it

off uh elena says to me i don't really feel any different but when you start to notice as you start to build your emergency fund and it keeps building and building and building and you're not you're not paying money out to people. It was just a complete life transformation. Changes everything. Wow. Absolutely. Change your family tree, right? Amen. Well done, guys. Very, very well done. All right, Kevin and Lena in Canada, $30,000 paid off in 10 months.

We got a copy of Chris Hogan's Everyday Millionaires we'll send you, because that's your next story in next chapter in your story so count it down let's hear a debt-free scream you ready guys yeah three two one oh i love it man that's how it happens man. That's how it happens right there. That's how it happens. So when I'm talking about the debt snowball, and I'm talking with people getting out of debt, and they're doing their budgets, and they're living on a plan,

and they're in control, and they're being grown-ups, a large percentage of them have gone through Financial Peace University. Now, Financial Peace University is a nine-week class. It's taught locally in your area. You can sit in on the class. And right now, when you buy Financial Peace University, we give you a one-year membership to Financial Peace. Now, the one-year membership to Financial Peace is all of the online stuff. It's every dollar plus, which connects to your bank. That's about a $120 item.

It's the Legacy Journey class and all of Financial Peace University online. You can watch it, listen to it, however you want to do it. It's all available to you online. And that's about a $300, $350 item. The Smart Money, Smart Kids that they reference. Kevin andena said they read the book and taught that start teaching their kids well there's a course that goes with that book the smart money smart kids course teaching your kids how to handle money so that your family tree is changed taught by rachel cruz and a little bit by me that's all in the membership online the community community is huge, and the accountability

encouragement is fabulous online. We're going to be putting a bunch of the streaming of the live events in there online. The debt snowball tool is in there online. All part of your Financial Peace membership that is free for the first year when you go through the class Financial Peace University, the nine-week class. If you want to get signed up for one in your area and get all of that online stuff going on, just check DaveRamsey.com, click on Financial Peace University, look at your schedule, see when you can start. And, you know, if you've got a military family or one of you travels, you just want to go to the class, the other one, follow along online.

You watch all of it. All the videos are there. You can use that as your homeschool idea if you want for your home study, rather, not homeschool. It's not for kids. But, you know, there you go. It changes everything. Financial Peace University and Financial Peace, the membership, free for a year at DaveRamsey.com. How often can you get the best of both worlds? Not very often, right? Well, with the rate secured program at Churchill

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NMLS ID 1591. NMLS consumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Our scripture of the day, Proverbs 14, 23, All hard work brings a profit, but mere talk leads only to poverty. Franklin D. Roosevelt said, There are many ways of going forward, but only one way of standing still. Sharon is with us in Amarillo, Texas.

Hi, Sharon. How are you? Hi, Dave. I'm well, thank you. And thank you for taking my call. My situation is that I own a house in another state. And in order to sell that house and avoid the get the capital gains exemption, I would have to move back there and live in it for two years, which is not my preference because I've been gone from there working for eight years now. charitable remainder trust or a charitable gift annuity or whatever the terminology is for something like that to get a monthly income um while i still live and then obviously the rest

goes to the charity i called uh afa about it but they don't have anybody in the area where the house is that could deal with that. I would not do that. I would not do that. What is your net worth? Net worth? Yeah. How much money do you have and stuff do you have? Do I have to say? Well, I mean, are you worth $10 million or over a million dollars?

Oh, heavens no. No, no, no, no. Are you worth over a million dollars? Probably. Okay. Good. Good. Good. Are you worth over a million dollars? Probably. Okay, good. Good. And so what's this house worth? Zillow, which you mentioned a while ago, says $300,000. Okay, good. And how long have you had it? 25, 26 years.

Okay, so you paid $60,000 for it or $70,000? It was $80,000. $80,000, good guess. Okay, and have you depreciated it and written it off on your taxes while you were renting it? I haven't rented it. Oh, you haven't rented it. Okay, so your gain would be $300,000 minus $80,000. So let's just rough it out after expenses and say your gain is $200,000.

This is going to cost you $30,000 in taxes. That's what your tax bill is. And also, your AGI goes up that year that you sell it, so that makes your Medicare Part B go from $135,000 up to like $400,000 and something. Yeah. And that goes on for two years and then your social security is 85 taxed and there's just so many other financial are you sure it's going to pop over the agi you're positive well how could it not if you if you make two hundred thousand dollar profit on selling a house how could could it not affect your H.I.

You're probably right. Okay. All of that added up, though, doesn't add up to $40,000 total, including the $30,000 tax bill. It's just not a deal breaker. And what you're getting ready to enter into is going to be so cumbersome. And it's just not the right tool for what you're talking about. Now, would you consider owning real estate in your state and make an income off of that?

The state where I'm living now? Yeah. Would I consider it? Well, yes. Okay, what if we did a 1031 tax-deferred exchange and let's just sell the house and buy another piece of property and there's no gain on it at all and no AGI hit. Wow.

I knew I should call you. That's something I've never considered. Actually, I've never even heard of it. Okay. You know, in the old days, if you traded a rental property for another rental property, you roll your equity and your capital gain into the new property. You remember that? Does that ring a bell?

Well, I never had rental property. Okay, well, that's what's called a 1031. It's your trading property, and it's under Section 1031 in the IRS Code. And so you're trading this house for a house in Amarillo or two houses in Amarillo. You can trade the $300,000 house for $250,000 houses and have you two nice little rentals sitting there that are paid for that you just take the rental income off of those, and there's no capital gains at all because you roll your capital gain

into those deals. You roll your old basis into those deals. Now, you don't have to actually, in the old days, you used to have to select the property in Amarillo and get the guy selling that to take your property over in that other state as a trade, and that was impossible, right? So you don't have to do that now. Now the IRS has a guideline with some of the title companies,

and you just need to get with a good real estate agent that knows their stuff, and you sell the property into a title company escrow account that has a 1031 certification with the IRS. And then you're allowed to use that money to buy the other two properties. You have to select them and close on them within 180 days, okay, from selling that property into this escrow account. So you sell the property, you put the money in a savings account with the title company, and you use that money to close on the deal, on the next deal. That's called a 1031 and your tax person

will know what that is and a high quality real estate person will know what that is and so that that's what i would do in a heartbeat well so i need to have a couple places lined up that i would want to buy no you got six months to pick them out from the time your other property sells okay so but i'll be looking in neighborhoods and have a have a good idea where i'm going to land and what i would do and you know decide something that's what you want is something that's going to be easy to manage you don't you know so you want a good quality property because that way you get a good quality tenant uh but not so super expensive where it's hard to rent you know and 300 000 in amarillo

that's a pretty big house so you might do two 150s or something like that and that doesn't trigger um nope a tax bill none at all it's 100 tax free so long as you do an even trade meaning you you spend all the money you got now if you if you take the 300 put it in escrow and you only bought two hundred thousand dollars worth of property you'd trigger taxes on the other hundred right that kind of a thing but um but you've only got a two hundred thousand dollar gain you don't have a three hundred thousand dollar gain but you the house is paid for so you're gonna have three hundred thousand dollars in cash okay so i have to spend the gain i wouldn't have to necessarily exactly and you gotta roll you gotta roll your gain you gotta roll your gain into the next So I have to spend the gain. I wouldn't have to necessarily spend.

You've got to roll your gain. You've got to roll your gain into the next. So get with your tax person and get the guideline on it. It's called a 1031 tax-deferred exchange. You need to know about that, and you need to use an escrow company that has the IRS qualification because you can't just go do this up in thin air and make it up. It has to go through a certain process. And the closing is $1,500, probably more expensive than a traditional closing.

You're going to pay a little more to close a 1031. But it's worth it because you're saving $40,000 here or so, give or take, all the different things and all the bother and the hassle and all that. But the charitable remainder is not a good plan in this situation. You're not in a situation. The main thing a charitable remainder trust is used for is to avoid state taxes when you're up over your limits on estate taxes, and you're not over those limits. You know, you don't have an estate over $11 million,

and you've got to have an estate over $11 million to be having a tax problem right now on federal estate taxes. So good job. Way to go. That was fun to talk about. That was fun to talk about. That was a good day. Hey hey you people are smart out there she see how dialed in she was she pinned me the wall i almost had her paying that a popping that agi up she'd already figured that out she that was a smart

one right there she's good i like it i just about screwed that part up, but good for her. Well done. Well done. Good stuff. They were trying to follow the house payment less 25% guidance. Should that include taxes, insurance, and HOA? I just say PITI, principal interest taxes and insurance, 25% of your take-home pay. And that's a guideline because I meet people with 50% of their take-home pay, and I'm trying to keep you from being house poor. I want your house to be a blessing and not a curse.

We don't want the house eating your lunch, eating alive we don't want to do that so let's not go that way that's the point of the whole thing it's you know if you go at 25.2 you're not going to go broke i mean it's not this is not an exact dialed in thing the point is have a conservative house payment leaving margin and disposable income in your budget to build wealth with. That's the point. And so I don't have HOA calculated into that. No, just P-I-T-I. That's all. And I hate HOAs.

I'm in a bunch of them, but I hate them. I detest them. They're generally run by people who need to go get a life doing something else. Barney Fife is always in charge of the HOA. I had a dream the other night that I retired and I became that guy. That puts this hour of the Dave Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace,

and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, it's Blake Thompson, Senior Executive Producer for the show. You know, you can listen or watch anywhere with the Dave Ramsey Show app on your smartphone. Catch the full show or watch the highlights and check out Dave's upcoming guests. Head to the app store and download it today.