The Ramsey Show - App - Adjustable Rate Mortgages (ARMs) Are a Ticket to Foreclosure (Hour 2)

Episode Date: July 19, 2023

Dave Ramsey & George Kamel answer your questions and discuss: "Should I get universal life insurance?" Adjustable rate mortgages are making a comeback, from the blog: What Is an Adjustable-Rate Mortgage (ARM) and How Does It Work? "How do I find a good financial planner?" "What should we do with our house?" Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Here's an EveryDollar deal just for our listeners: get a 14-day free trial PLUS $15 off your first year of premium. Click the link below and start budgeting today! www.everydollar.com/george Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the pods, moving, and storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. George Camel, host, co-host of the Smart Money Happy Hour, massively successful podcast, and the ever-popular, brand-new, exploding George Camel YouTube station. I don't really call that a show. Yeah, I mean, you could call it a show.

It's all squishy in the YouTube world now, but now we're on Spotify, too. You can watch us on Spotify with their new Spotify video platform. Well, there you go. So we're no longer just a YouTube channel. Is this show on Spotify video, too? Yeah. Oh, hi, guys. I think so.

Oh, just mine is. Not yet. Not yet. We're working on it with Randy's show. Hello in the future. I got there first, Dave, as I tend to do. You're cutting edge. Setting the trends.

Cutting edge. Just like a razor. Just right on the edge. We're going to get you in skinny jeans next. More of a gu You're a cutting edge. Setting the trends. Cutting edge. Just like a razor. Just right on the edge. We're going to get you in skinny jeans next. More of a guinea pig than cutting edge. If you were to put me a guinea pig. Hashtag hurtful. Hurt people hurt people, James.

His third grade teacher was mean to him. But yeah, the, wow. He was homeschooled, so it'd be his mom. Mrs. Childs, she watches the show, so I know she just saw that burn happen live. Oh, ouch. All right, Julia's with us in Dallas. Hi, Julia, how are you? Hi, thank you for taking my call.

Sure, what's up? Well, I'm retired, and I do not have a long-term care plan, and everyone says you've got to have one. So I've been talking to several people and trying to find what's the best and i present it with a couple of them and the one that sounds good but it may be too good to be true is um what they're calling asset flex it's a fixed premium universal life insurance yeah it's not good no it's horrible horrible i'm sorry I'm sorry.

I'm sorry. I just cut to the chase here. Yeah. No, all you're doing is prepaying everything. That's all you're doing. How old are you? I'm almost 70. Okay.

I'm really late into the game. Okay. And are you in good health? Are you in good health? I'm in good health. What is your, what's your nest egg look like? About 700,000. Okay and uh are you married no okay no children okay uh the likelihood of you if you were to self-insure at this stage of you burning through your 700,000 is almost zero the average nursing

home stay is two and a half years in America. Okay. And the older you are, the more that average drops for obvious reasons. Okay. So that includes from 60 years old on. So 70-year-old is probably less than two and a half. Average on average. Now, average nursing home is about anywhere from $50,000 to $100,000 a year. So let's call this $250,000 is the average nursing home stay.

If you buy a long-term care policy, it won't cover but three or four years. Right. Okay. And so, you know, the three or four years it's covering is $250,000. I don't want you to lose $250,000, but you worked your whole life. You got $700,000. Way to go. You got a paid250,000, but you worked your whole life. You got $700,000. Way to go. You got paid for a house too? Yes. So you're in a millionaire then, I bet, right? Am I? I don't know. What's your house worth? About $200,000. Okay. And you got $700,000 in the

nest egg, so that's $900,000. So you're pretty close. If you're not a millionaire, you're very close to being one. All right. Okay. A million dollar net worth. And so if I were in your shoes and I'm talking to you, you're telling me you're healthy. I'm going to self-insure through this. I'm not buying one of these products. I like long-term care insurance. If you told me you had $300,000 in total nest egg, I'd tell you to let's talk about how to get long-term care

insurance but at your age it's going to be expensive and that's what you're running into you're running into seven eight thousand dollar a year premiums aren't you well the the universal no no not that one a year that one's got a bunch of other costs built into it okay well the other one that i was presented with was an indemnity, which had a home care plan, which was running at like $2,000 a year, and a nursing home and assisted living for about $1,300. And I could do one or both of them. Yeah, okay. That's still, that's a bare-bones policy.

That's the other end of the spectrum. So here's the thing. What you'll probably find, and I don't know how you'll pull this off in your exact situation, but I'm getting ready to turn 63. Sharon and I will self-insure through our nursing home type needs, because if something happens to Sharon with the amount of money that we have, 100% chance I'm going to do in-home care and hire somebody full-time to live in our house I can afford it and it's actually cheaper probably than a nursing home anyway and a higher quality care and if I have to hire two and a butler I

will it's still gonna I'm still gonna I still got the money right I'm still okay it's one of the reasons I work is for quality of life. And so I'm going to take care of Sharon. She's going to take care of me. And I don't have to be there personally doing every little thing. Like, like if, you know, if someone's got advanced dementia or something and you need, you know, serious care, I can bring in serious care into my home. It's not that big a deal.

I mean, we can buy a bed that elevates. I mean. It's not that big a deal. I mean, we can buy a bed that elevates. I mean, it's not that big a thing. When you start talking about writing checks that are $100,000 a year, quickly you can start hiring a bunch of people, right? Yes. So this is our plan. We're self-insuring through it. Now, I will tell you, again, I'm a huge believer once you're 60 years old

in spending $3,000 or $4,000 a year for someone that has a nest egg of under a half million dollars. And just buying a straight long-term care policy. We believe in long-term care insurance. But once you've got a million-dollar net worth or greater and enough of its liquid to do in-home care, the Ramseys will be doing in-home care. And my net worth is certainly larger than that but um not to brag but the point is it's not a thing i mean i spend more than that on a dadgum car you know so i mean it's just the point is what it bankrupt you to have to cover the side of your own pocket well what happens in a typical scenario is let's say mom and dad have three

hundred thousand dollars saved okay and uh typically the normal scenario statistically is papa goes into the nursing home and it stays there two and a half years and burns the cracks and scrambles the nest egg burns the 300 grand up and dies mama's left no money and probably retired unable to work and mad at the nursing home but they didn't do anything wrong all they did was provide a service and you paid them for it they didn't do anything wrong nursing nursing homes aren't crooks they do a fine most of them do a fine job uh so but in that case 75 of you ladies will outlive your husbands statistically i don't know exactly what all that means but that's the actual number maybe we could have a lot of fun jokes with that but anyway

sharon has our full estate plan uh based on me pre-deleasing her i'll just tell you that sharon's gonna outlive me at this point i'm thinking i have to sleep with one eye open with this woman but yeah the um because she could off me and have a really good life but the uh uh so but the uh uh if you if ladies if your husband outlives you and he burns through the nest egg in the nursing home bill because you only had 300 grand saved and you use all that, then you definitely, that's where you need long-term care insurance big time. You can't handle that risk. If you're in poverty level, you get welfare, Medicaid nursing home.

Okay. If you're in poverty and if you're wealthy, you can provide it for yourself with self-insured-insured but that middle ground baby you need long-term care insurance once you're 60 years old and statistically it's less than one quarter of one percent of the people under 60 go into a nursing home that's nobody so don't buy this stuff until you're 60 you don't need it it's not there the chances aren't there so we love long-term care insurance in that particular window. This is The Ramsey Show. George Campbell Ramsey personality, host of The George Campbell YouTube Show and co-host of the Smart Money Happy Hour with Rachel Cruz,

both very popular Ramsey Network productions. Be sure and check them out on YouTube, Spotify, or wherever else you view or listen to great podcasts and shows. We're pretty much everywhere. We're medium agnostic. We go with everybody. Wherever they'll take us, we'll show up. You can find us there.

Yep, wherever they'll take us you can show up you can find us there yep wherever they'll take us that's about right so adjustable rate mortgages making a comeback according to experian.com yeah so i did this video on my youtube channel about a week ago and for some reason it just blew up and people are very interested in this idea with mortgage interest rates being super high right now and uh we showed a stat there in the very beginning at January of 2022, it was like 3%. By May of 2022, it was 10%. So we've been seeing the spike in adjustable rate mortgages, and I wanted to get your take on it. 10%? There's not any mortgage rates that are 10%.

Well, no, the actual, the amount of people doing them. Oh, the amount of people doing adjustable rate mortgages has gone way up. Yes. I got you, okay. Yeah, not the interest rate itself. Okay. So I wanted to cover this, and I just watched your real estate lesson, Financial Peace University, where you cover a lot of these mortgage traps. But a lot of people are going, this might be my ticket to home ownership, Dave. And this article unpacks what's going on here. It's your ticket to foreclosure. Yeah. Arms have started to recover more from more than a decade of disinterest from both consumers and lenders.

They're returning to the fold amid a sharp increase in home prices and fixed mortgage rates that began in early 2022. As the housing market begins to thaw from a year of depressed demand, more potential sellers begin to list their homes. Could arms help more prospective buyers get a foot in the door of their first home? Understand, this passive-aggressive question statement here is on Experian.com. This would be the credit bureau. Yeah. What is their vested interest in this? Getting you in debt and keeping you in debt because you're all worried about their FICO score.

Hello. They'll make money if you get a mortgage and they have to run the score. This is a money-making scheme for them. Yeah, we love debt. And so we're experiencing. We're going to passively, aggressively ask, is this a way for people to get their foot in the door? It sounded very soft. Sounded like a suggestion to me.

Sounded like a conspiracy to me. They have a new stat in here, Dave. The share increased from 3%. It was for much of the decade, to as high as 13% by October of the mortgages. Of the mortgage originations. That are going out there. 3% used to be adjusted. So 97% were not doing adjustables, and now 87% are not doing it.

And it's down as of April 2023, they say it's now 8% of all new mortgages. Yeah, thank God. So it's taking a dip. So do we need to talk about this? Well, I want you to just share why they're a bad idea, because people don't understand, and there's a funny clip from The Office with Michael Scott falling for one of these.

And he's like, well, no, it's a 30. And she's like, no, it's 10 over. And so I wanted you just to run the analysis on who is this for, why are people doing this, why should they stay away? Okay, we'll get real technical to help you. But before we do that, let's just say this, all right? If you buy a mortgage that adjusts in an increasing interest rate environment, what are you expecting it to adjust to?

Up. Well, that's dumber than a rock on the surface interest rates are moving up and you're buying a mortgage that allows them to end and gives you the probability of a higher interest rate later let's just start with that stupid okay the second thing is this let's say interest rates stay the same or go down slightly. Here's what you're going to discover. Your mortgage interest on your adjustable rate mortgage is going to go up even if rates go down a little or stay the same.

Here's why. Your mortgage is adjusted based on an index and a spread over the index let's just do a simplified version okay let's say you took out a four percent adjustable rate mortgage and it's supposed to be two percent over the index that would mean the index would be two two plus two is four okay and if the but the index, when you start your brand-new mortgage, they move you in on a bait-and-switch because the index is already higher, would give you the spread, would already give you a higher interest rate today than you're getting today.

So instead of the more, okay, let's say we're getting a 4% adjustable rate, the index is two, your spread is two, so that two plus two equals four. Okay. But it's not two. The index today in that case would be more like 2.6. So the interest rates would have to go down 0.6 for your rate to remain the same. The next time it adjusts y'all follow I'm doing this. Okay. Because the index plus your spread equals your interest rate. And the index is already cheated up when you go in,

so rates would have to go down in order for you to do this. So it's a big gamble. It's not a big gamble. You're 100% dead on going to have an increase. There's no gamble about it. And you bought the house on short-term thinking.

Thank God it's Friday. Oh, God, it's money. I can pay this payment like this payment's even going to be around. On the first adjust, you're going to see an increase. It's not a gamble. Almost 100% of the time. Because, again, rates would have to go down to get your spread, to keep your spread on the

index far enough down okay it just doesn't work so this all came from mortgage companies protecting themselves in 1982 i was selling real estate the first adjustable rates came out then okay because interest rates had gone to 17 percent remember that? And money market rates, back then we had these things called savings and loans. Money market rates on your savings were 12%. Wow. You could get 12% on your savings account. Well, let me help you with this. The local savings and loan makes a loan in the 70s on a mortgage four percent they are receiving four percent on a hundred thousand dollars interest rates shoot up that's a four percent fixed rate loan now in order to get a hundred thousand dollars into the savings and loan or into the bank they got to pay out 12 but they're only receiving four that's a problem problem. In the banking world, they call that disintermediation.

Your butt's upside down, mathematically. And so that's one of the things called the savings and loan industry to crash. That's why I brought up savings and loans. One of the things that crashed them was disintermediation. It wasn't fraud. It was that. Because they had millions of dollars of mortgages on the books at a fixed rate, and all of a sudden they're having to pay more than they're receiving to get new savings deposits.

So they said to themselves, self, I don't like this. Next time these rates go up, we're going to have a portion of our portfolio that adjusts up as interest rates go up. And so the adjustable rate mortgage was born to protect the banks against an increasing interest rate environment so they don't get stuck with a bunch of low interest mortgages on the books ta-da the first and the first adjustable rate mortgage i sold was the fixed rates were 14 1982 1983 the fixed rates were 14%, our adjustables were 12%. And I said, man, nobody will ever buy these things. And that was 1982, and they're still buying them.

Still around today. So just transferring the risk from the lender onto you. It's 100% what it does. It transfers the risk of higher interest rates from the lender. It ensures that the lender is always going to freaking make money. This is a bank play it ain't got anything to do with being a blessing to you and allowing according to experience help prospective buyers get their foot in the door bull crap hadn't got anything to do with prospective buyers it's got to do with banks and one thing you can count on

banks is banks protecting banks it It's what they do. And they've been good at it for a long time. That's why their furniture is nicer than yours. That's why their building is bigger than yours. It's not an accident. Santa Claus didn't build those freaking towers in the skyline. It was you. You built them with this kind of crap where you give these banks your money.

You fall for the trap of this stuff. So adjustable rate mortgages is one of the biggest ripoffs ever to come along, especially because of the motivation of it. Yeah. To come along in everything. So if you have to do an adjustable rate mortgage, it means you can't afford the house. That's what it means. Don't buy that house. Listen, if you don't want your feelings hurt, go watch the YouTube version that I did called The Sneaky Mortgage Trap People Keep Falling For. I'm nicer than Dave in the video. I will say that

much. George, that's 100% true always. And James Childs, producer, he plays the guitar in the video. So that's one more reason to go check it out. Well, there's just a lot of entertainment value. That's all I can bring. Nice people with guitars. Okay. Leave the grouch alone. This is the Ramsey Show. if higher costs aren't enough, the wait times to see your doctor are longer, and it's harder than ever to get anything approved through the bureaucracy. So if you feel like the system is working against you, try a biblically-based alternative to health insurance, Christian Healthcare Ministries. CHM is a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of over $11 billion in medical

bills since 1981. And CHM has also helped them stay true to their values and avoid miles of red tape. And CHM support goes far beyond meeting financial needs. They'll also help meet spiritual needs. Members become part of a family who will pray with them and for them when they experience a medical event. So listen, y'all, there's no better way to take care of health care costs. CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget. That's chministries.org budgets in the lobby of ramsey solutions on the debt free stage alec is with us hey alec how are you hey guys how's it going better than we deserve where do you live uh well i live in los angeles right now but i will be moving over here to franklin next

week oh wow getting ready to be neighbors then yes sir, sir. Right next to you. Very cool. Love it. So how much debt have you paid off, Alec? I'd be $73,636. Love it. And how long did that take? About two and a half years. All right. Very good. And your range of income during that time?

So I started out at 89 and closed out at about 130. Cool. Good for you. Love it. So what kind of debt was the 74,000? Well, it was a combination of a few things. I had student loans, which was probably about 53. And then I had a car loan, which was about 19. And then the rest was phones. So I had a couple of phones, but all right. Cool. Good deal. I love it. So so um good stuff now what got you started on this two and a

half years ago um well it actually started a little bit earlier than that my mom had got me uh the total money makeover book for Christmas and uh she goes hey you know I think you should get on this and you know start working on it so I said uh you know right, I'll get around to it. And then COVID kind of hit. Kind of? Yeah, yeah. And COVID hit, and I started doing Postmates. And then I kept doing that, kept doing that, and I'd racked up probably like about $6,000.

And I was looking at my car one day, and I knew that I had the car note, and I basically told myself that either I could put this in some investments or I could just really start on this. And I took that 6,000 that day, put it towards my car loan and just kept on going. So I got it started. Yes, it did. Saw the number go down. You were like, this works. I can do this. I can, I can own this. Wow. And this was in LA. Yes. During COVID. During COVID. What a brave soul you were. I know. Out on the I Am Legend streets delivering food to people. Oh, my gosh. I did some things I'm not proud of driving through those streets, but it was done.

Wow. I do miss the lack of traffic. Oh, my gosh. Yeah. Yeah. I don't miss the reason for it, but I miss the lack of traffic. What caused your income to jump? What do you do for work?

Well, I work in construction, and I started out with a contractor out in LA and then I, you know, wanted to switch it up, wanted to go on a different path for my career, took a job with another contractor. And obviously, you know, that jumped my income. But the big thing I did want to say was, you know, I decided to leave that company and come out here because, you know, I was just getting tired of L.A. And for all the people that are listening, you know, if you think, you know, I come out here to Tennessee, you know, I'm going to take a pay jump because of taxes. Number one, that's true. But my salary actually didn't change. Wow.

I'm still making the same I made in LA out here with no taxes, with no taxes. So I got to pay jump. So that's incredible. Just like that. Just like that. Well done. So it can be done. Yeah. Good for you. All right. So what do you tell people the key to getting out of debt is? Well, I jotted a couple of things down, but, you know, I wanted to keep it short and simple, but, you know, I was young when I got started, you know, I jotted a couple things down, but I wanted to keep it short and simple. But I was young when I got started. I'm 27 now, so I got started probably around when I was 25, 24. But start when you're young.

If you get on this plan that Dave has got out there, we got the baby steps and everything. It's laid out right there for you. But, uh, I'll say, you know, if you start when you're young, you can get ahead of yourself and you can continue on that path to hopefully build more wealth as time goes on. Um, but the big thing is, is, you know, you gotta want it when you're going out with your friends, you're out at the bar, you know, and everybody's like, Hey, you're going to lay your card down so we can get some shots? Nope, I'm not. But, you know, that came up a couple times for me. That was not a metaphor. Oddly specific.

It was a real story. That's a tough one because people feel like, well, I'm going to miss out on my social life and my prime years and my 20s. And you went, hey, I could sacrifice for two years and then have a way better life. Apparently the bunch he's running with is not going to remember it anyway. Yeah, they have no recollection of this experience oh yeah i again it's i won't go into it but you know you can you can definitely still have fun i will say that my uh my roommate told me you know you got to live your life um you know you just have to live within your means um i definitely live below

your means like you mentioned dave but now you're really living with no payments i know it i mean how do you feel to be free oh my gosh it's just so uh freeing you know but um relieving at the same time you know now i can go in i got you know my lovely fiancee over here all right yeah good news on the horizon there's one reason to get your act together i know yeah her parents were looking at me like man you, you better get this stuff going. So they're proud. Your mom's proud. Everybody's proud. You've got to feel good.

I feel great. I feel really privileged to be here with you guys. Well, we're honored to have you. You're a hero, man. You took control of your life, and you did it at 24 years old. That's pretty impressive. That's very cool. Good for you.

Good for you because you've got the rest of your life now to live with common sense as your side mate there. Well done. And a great fiance to go. That's awesome. Very cool. When are you getting married? Have you decided? Well, like that last caller, you know, it's still, well, obviously we're, you know, engaged.

But I think probably about two years is what we're thinking. There's a lot of weddings next year. She just agreed with that. Okay. Well, she told me that. Oh, okay. Well, you already got that part figured out. Okay, good. Good. That's a lot of uh weddings next year so she just agreed with that okay well she told me that oh okay well you're already got that part figured out okay good good that's a good start right there that's good stuff so well done sir very very well done what did you do did you work on any extra i mean did you do anything other than just the construction or well as i said yeah just the the postmates is what i did that got me started in the beginning. Oh, okay. You kept doing that.

Yeah, but it was really just saving money where I could with my income working in construction. Okay. There's two ways to get that margin. Spend less and make more. You did a little bit of both, and you went, oh, my gosh, I got some money left over to throw out the debt now. Oh, yeah. There's no life hacks there. No, none at all, George.

Yeah. Well done, sir. Proud of you. Good, good at all, George. Yeah. Well done, sir. Proud of you. Good, good work. Very cool. Very cool. Hey, we've got the live and give box for you. It includes the Baby Steps Millionaires book.

It includes the Total Money Makeover book and a Financial Peace University membership. Any of those that you haven't read or done, do them and give the rest of it away. It's a live and give bundle. So thanks for coming all the way out here and welcome to the community as a new neighbor. Very cool stuff. All right. It's Alec temporarily from Los Angeles. $74,000 paid off in two and a half years, making $89,000 to $130,000.

Count it down. Let's hear a debt-free scream. All right. Here we go. Three, two, one. hear a debt-free scream. All right, here we go. Three, two, one. I'm debt-free! Yeah! That's how that's done.

Boom! Wow. Gotta love it. You gotta love it. You know, it is always interesting to me, George, that I don't know what the percentage is. I don't know if we've ever actually done the number, but I'll anecdotally say it's in the 90% plus range of the debt-free screams. During the time they're getting out of debt, have an increase in income. Sometimes it's a temporary increase because they pick up extra jobs.

Sometimes it's just they're looking around and going, if I lived over there, I wouldn't have any taxes. You know, if I lived over there, I wouldn't have any taxes. You know, if I live over there, I have that, you know, and so they get an increase in income because they're paying attention. Too many times, if one part of our life is on coast mode, you know, we're just sliding along, then another part of our life. So, in other words, if we're half but paying attention to our money, we may be half but paying attention to our career and when you start looking at i need to get out of this debt well how do i do that i ought to have some more money then you start looking at your career going i don't make enough this is crazy i got to change something yeah well they change jobs they change careers they add extra jobs and we see income go up when people start paying attention well a lot of people in their 20, they just feel like they're kind of a victim to the career culture.

And they're a passenger in this car that they have no effect on their income. But once they believe they can pay off debt, they also believe I can go make more money. And that's the most inspiring thing is, you know, people like Alec realize, oh, hope is a choice just as much as cynicism is a choice. I can wait on the government. I can complain. Inflation, the housing market and wages, they haven't gone up as fast as inflation, and it's everyone else's fault. And Alec just went, yep, and I'm going to do something about it.

And that is the key indicator I found between the YouTube commenters and the Alex of the world. And so that's a great reminder for everyone out there. Cynicism is a choice. Hope is a choice. You get to choose. Oh, you mean the negative commenter yes some of them are kind but those are the generic youtube comments gone this guy's out of touch nobody can do this alec did it he's just like you yeah and we're so weird we talk to people

every day that do it and if we don't we talk somebody into doing it that That's right. This is The Ramsey Show. George Camel Ramsey personality is my co-host today. Thank you for joining us, America. Matt is with us in Detroit. Hey, Matt, welcome to The Ramsey Show. Hey, everyone. How's it going? Better than we deserve. What's up? Excellent. So I called the show, I think, maybe a week or two ago, and I spoke with George and Jade, and I gave my situation, and the recommendation was to pay off my house and pay off my car with the remaining balance so that we had our savings. And my wife and I decided to do that, and honestly, there's a gigantic weight lifted off our shoulders.

We're completely debt-free. Wow. Way to go. I don't know if you remember that call, George. It's coming back to me. We were thinking about upgrading our house, but we didn't really need to right now. We're kind of in that sweet spot. It feels like it's getting a little bit smaller on us, but I think we still have some time. So we decided to just pay off our house, pay off our car. We're completely debt free right now. Incredible. I know it's amazing. It feels so great. Honestly, everyone that I've listened to, especially from you guys, you always say it's just, you'll be able to sleep. And I have never slept better. Well, as best as I can with two boys at home. But my next question is, or my question is now, where do I go from here? So we're thinking

about looking into financial planners. And I guess my question is, what my question is now, where do I go from here? So we're thinking about looking into financial planners. And I guess my question is, what are some good questions to ask them? And how do I find one that's going to work for me and not, you know, just work for a paycheck, basically, and, you know, someone who has my best interest in mind? Good for you. Well, the one you can count on always having your best interest in mind is you. So never acquiesce your decision-making to someone else. So your financial planners, a percentage of them, I don't know, maybe 80% are salespeople. That is not what you want. The other percentage are teachers.

They have the heart of a teacher. The teacher gives you the information and assumes you're a grown-up and you get to make your own decisions with your own money. They're going to teach you something. You're going to learn. You're going to feel equipped to make your own decision. Not, I did this because my guy said to do it and I have no freaking idea what I just did, which is how athletes lose all their money, right? Absolutely. So the main thing you want is someone with the heart of a teacher.

The second thing you want is someone whose values align with what you believe to be true about the world. For instance, you have just discovered that debt-free is awesome. If you walked in and sat down with a financial planner and they say, oh, no, you should go take out a $ hundred thousand dollar mortgage and use that money to invest with me if that doesn't make you run out of there with your hair on fire something's wrong with you absolutely and that we have something scheduled so that's kind of what i had in mind we my wife and i have specific goals and plans, especially with saving for the kids. So that's exactly what I was hoping to hear.

They need to execute your plan, not give you theirs. Absolutely. That's really good advice. And if you want people that do this stuff the way we teach, we call them SmartVestor Pros. There are thousands of them around the nation that we have vetted, and they have the heart of a teacher, and they believe and have the same values that we teach here on the air. You can find one of those, a SmartVestor Pro, by clicking SmartVestor at ramseysolutions.com. It'll drop down a drop-down box, and you can pick from one or all

of the ones on the drop-down box and go and interview them and find one that fits you and your personality best. Yeah. And the other thing to think about here, it's not just about a lot of people go, well, if it's just choosing funds, then I can go figure that out on my own and do DIY. But when you think about the value of financial advisor and Vanguard's even done studies on this to show that the average investor doing it on their own, they don't make as much as those working with a pro. The ones working with a pro are making 3% more over the lifetime. And so you want to think about tax planning, estate planning, kind of that big high-level financial plan, not just the 529 plan. Yeah. Hey, congratulations, Matt.

We're so happy for you. Good job, George. That's a great place to be. You never know if people actually take the advice we give, and so it's just good to know. That true sometimes well sometimes we know they're not going to yeah but matt i could tell he was like okay i'm listening and so i appreciate that matt and he went he went and did it and you know back to that vanguard study one of the other reasons we find that um people make more with a financial advisor is simply because they don't jump in and out of

the market based on emotion because they try to time the market. I'm going to get in because it's going up. I'm going to get out because it's going down. No, you just stay in. And part of a good advisor's job is talk you off the ledge and keep you invested. Don't stop investing and don't cash in and try to jump in, jump out, and I'm going to time the market. There's tons of research that shows that market timing doesn't work. It doesn't keep up with simply staying invested those on a roller coaster ride that don't jump

off in the middle of the ride do not get hurt ride the sucker ride it down we and then ride it up click click click click click click click click click enjoy the whole thing it's part of the deal so that's what you want to do in this thing. And, you know, getting an advisor in your corner is a big deal. Elijah's in Connecticut. Hey, Elijah, what's up? Hey, guys. Thanks for taking my call.

Sure. What's up? How can we help? So I got a little bit of good news, a little bit of bad news. So good news is my wife and I are expecting baby number three. Yay. And, yeah, pretty exciting. And bad news is we're outgrowing our house.

So we're kind of thinking of what the next step is for us. So we're looking at a couple options. One is obviously selling and buying a new house. The second one is probably renting this house and buying a new one. No. And the third one we're really taking a close look at is remodeling.

This would allow us to basically convert our renovated attic into a full floor. That would add two bedrooms and a bathroom. So, yeah, I just wanted to get some input in terms of that. I can give you some background in terms of our finances, too. Are you out of debt? Yeah, everything besides our mortgage. I would move. I would sell your house and move.

Okay. A lot of reasons for that. Quality of life during a remodel is horrible, and you've got a pregnant wife or a brand new baby you're talking about doing this with no thank you i don't want to do a remodel in that second thing is is you're probably i didn't even ask you the numbers yet but you're probably getting ready to overbuild the neighborhood you're gonna have a house that's too expensive for that neighborhood you'll never get your money out and so uh you're trying to you're

trying to force a square peg into a round hole how big is how many square feet's the house you're in uh it's about 1700 yeah okay and the average square footage of the house on your street is what uh all about that size question yeah i mean a little bigger i'd say yeah i don't think it would be out of place if we added a second floor okay you don't think you would overbuild the neighborhood no no no actually like there's a lot of new construction and what's new construction doesn't count what's that call unless your house is like three years old right right so um the cost of renovating would probably be close to $200,000. Oh, move. For God's sakes, move. It's easier to build a house than do a $200,000 renovation.

Yeah. What's your house worth? The only thing kind of keeping us back. Net worth? What's the house worth? Oh, the house. About $450,000. We owe about $180,000 on it. So you're saying houses in that neighborhood go from 450 to 650. Bull crap. No, they don't.

Yeah, I mean, further down the street, they're like, you know. You're stretching, man. We're close to the beach. People don't drive on your street looking for $650,000 houses. You're stretching. Yeah. You're overbuilding the neighborhood. I promise you you i've been doing this my whole life real estate's my thing man no you're getting ready to screw this up and i gotta tell you you have no idea the hell you're getting ready to embrace with a 200 000

rehab it's gonna take more time and even more money than you thought with more problems it's an easier to push the whole dad blame thing down and start over. My God, it really is. It's just a whole lot easier to build a house than to a rehab that size. Oh, man, no. And little babies already, and this is the third one coming in? No, thank you. Have a quality of life. You know how much emotional bandwidth you're going to invest in this crap by the time you're done in the middle of having a baby?

No, no, no, no, no. You shouldn't build a house this year either, by the way you're done in the middle of having a baby no no no no no you know you you shouldn't build a house this year either by the way same thing emotional bandwidth now just go buy you a nice house for 650 000 or less where the payment is no more than a fourth of your take-home pay on a 15-year fixed and make your move up please roll all the equity and sell that one you're in don't try to stay in don't become a landlord by default with a bunch of debt. Just keep it real simple and real clean. Man, your life is just going to be so much better. Oh, you don't have to hassle.

Oh, man. No, thank you. This is The Ramsey Show. Dave here. You can find all of our shows with the Ramsey Network app on your smartphone. It's the only place to listen to the entire back catalog of episodes. Download the Ramsey Network app in your favorite app store today.