The Ramsey Show - App - Always Do These Three Things With Money (Hour 1)

Episode Date: September 14, 2018

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🎵 Live from the headquarters of Ramsey Solutions, 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. You want to talk about your life and your money? This is your place to do that. The phone number is 888-825-5225. That's 888-825-5225. That's 888-825-5225.

Sam starts off this hour in Atlanta, Georgia. Hi, Sam. How are you? Very well, Dave. Thank you. How are you? Better than I deserve. What's up?

So how can you tell whether or not a charity is properly run and or corrupt. So, for example, is there any way to tell how much of the donations or receipts actually go towards the cause it supports? Depending on the size of the charity, they will have detailed financial statements that will reveal that. And if they're unwilling to make their financials public, I don't give to them. Okay, so would that generally be on their website yeah or you can just you know you can you can poke around on it a little bit and find it but for instance

several years ago there was a big controversy that the guy running the united way was making a million a year right that's why i'm asking that kind of thing and so what we look for with the ramsey family foundation my daughter runs that, Denise, and we always do investigations in detail into how the ministry or how the charity is run, what it does. Obviously, we don't give to ministries or charities that borrow money. Since we don't borrow money, that would be kind of stupid. And so we don't do that as an example. We look at that.

We talk to them. We interview them and we don't spend an inordinate amount of time uh if we're giving ten dollars to somebody but if you're if we're giving 50 or 100 000 bucks to somebody then we really need to look at that that's a big investment of god's money into something and so we we look at it just like we were buying a company or like we were investing in a company if you're going to put you know money into one, then the more you're going to put in it, the more you'd look into it, the more due diligence you would do. But financials are pretty readily available, and they also oftentimes will print a ratio of what percentage goes to expenses and how much actually goes to the cause in question. And if it is in the ministry world, there's some certifications of the financial statements and so forth that you can look for, too. And just look at that, and that'll help you as well. So, again, the smaller and more primitive that the charity is, the more in question you got to look at that stuff.

But somebody like the United Way or Red Cross or a big ministry organization like Samaritan's Purse or something, it's a no-brainer. You can look at it, and you can find it all in about five minutes, and you can see what the ratios are. It is very reasonable for a charity to have some administrative expenses, but you don't want 90% of the money given to go to administrative expenses and only 10% going to the starving children. If you want to do that, we just give some money to the starving children directly. It would be a lot more efficient because they're not very efficient with that but some administrative expense is very reasonable and very normal and um you know that that's because they're on the ground their boots on the ground

doing whatever it is that that particular group does but yeah uh and i'll just tell you again the ratio is the more money you're going to give to that particular charity or ministry, the more time you spend investigating. So a small gift we don't spend any time on, you know, to give somebody 500 bucks or something. We wouldn't we wouldn't spend, you know, spend two thousand dollars worth of your time trying to figure out where to get five hundred dollars. That just gets weird. So, but you would do that. You know, again, the larger the gift, the more in-depth we research the people that are involved, the process that they use for the ministry, the ratio of administrative costs versus actual lift or gift or to the, you know, the people we're trying to help with the thing. And, you know, business practices, how well they operate, how operationally efficient they are and clean they are and that kind of thing.

We're looking at all of that in this process because we look at it as we are investing God's money. And we need to be able to look at him and go, hey, we checked it out. We made a good investment. Just, you know, we'll spend a whole bunch of time doing due diligence on your own investments, but not on God's investments. That would be weird, too. So sometimes we get sloppy with charitable giving, and your question's a very, very good one that none of us need to be. Kyle is with us in College Station.

Hey, Kyle, how are you? I'm doing great, Dave. How are you? Better than I deserve. What's up? Dave, my wife and I have diligently pressed through and made it through your financial piece, Step 7. So we're completely debt-free. We don't have a mortgage. And that happened several years ago.

Where I'm at right now is that I've got a young and growing family, and I'm at a point where I feel great at my career, but I'm looking for some direction, where to invest, how is real estate worth it, that kind of thing. Do I need to go talk to a financial advisor and how to grow my money better? Because right now it's not doing any work for me. Okay. Yeah, on all of the above. The thing I have found is this, where people get in trouble at this stage

is if you make the mistake of thinking that rich people do ultra-sophisticated things that nobody can really understand. And my experience of working with people with net worths of under 100 million dollars is they don't do ultra sophisticated things they do things they understand with money and so don't put money in anything you don't understand and that you develop a comfort level with but you're managing more and more money and so you need to be growing your knowledge base so that you understand things tomorrow that you didn't understand today. And so that wouldn't, you know, with me, I keep all of my investments in basically two things.

I mean, not basically in two things in real estate that I pay cash for, but I understand and love real estate. I grew up in that business. I got my real estate license when I turned 18. So I've been fooling around with real estate a long time. And I buy good growth stock mutual funds, as you know, with long track records. So, yeah, you can click on SmartVestor at DaveRamsey.com. Find a SmartVestor pro in your area.

Sit down with them. Let them begin to teach you. You learn about your mutual funds and kick up what you're doing there. And if you want to buy some real estate, start investigating, you know, that process and what I can save up and pay cash for and then save up and pay cash for another one and save up and pay cash for another one. Ultimately, when you get to baby step seven, there's only three things you can do with money. You can invest it, you can give it, and you can enjoy it.

And you ought to do all three. I don't want you only investing and giving and living like a poor as a church mouse. That's just weird. But if you consume all of it and you spend all of it on you and the family and you don't invest any of it and don't give any of it, that's weird too. So you need to be doing some balance of all three regularly. You ought to always enjoy your money. You ought to always give some money.

And you ought to always invest some money and keep that balance going. And then you'll start to deal with some of the other things where you're dealing with wealth and not dealing with money. And wealth is different than money. It presents different spiritual problems. It presents different spiritual opportunities. It presents different relational problems with family and so forth, extended family in particular. And so, you know, it just changes things. So I'm going to send you a copy of our book, The Legacy Journey,

which is the book I wrote about wealth. All my other books are about money. And The Legacy Journey is all about what to do when you're at this stage and what to do to get to this stage. So hold on, I'll give you a copy of it. This is The Dave Ramsey Show. Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has debt and a struggled to make ends meet, but they're starting to make headway with their budgets and

smarter decisions with money. They have dreams and plans, and the only real difference is that one family has the right amount of term life insurance and the other doesn't. Big difference. If one of the parents die, and that does happen. Their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is.

Be the family that takes those deliberate steps to be different and responsible. It really does make you the hero of your story, and it puts you on course for better things ahead. Thank you for joining us, America. Our question of the day comes from Blinds.com. You do not need a second mortgage to make your home over. You can get brand-new custom window blinds without paying custom prices at Blinds.com. Always put in the promo code Ramsey, and you'll see the best possible deal out there. That's the magic word, Ramsey, at blinds.com. Melinda is in Arizona.

We're expecting to have both of our vehicles paid off by December. When is it financially safe to take on a higher deductible and or remove full coverage? Well, two different answers. You can take a higher deductible when you have an emergency fund to cover the deductible. And the way you calculate whether or not it makes sense to take on a higher deductible is you calculate the extra risk that you are taking versus the premiums saved. And so if you have a $250 deductible and you raise it to a $1,000 deductible, your extra risk is $750. If that saves you $75 a year, it will take you 10 years to break even on that, and that's probably not wise on a car deductible.

Go 10 years without any kind of an event. If it saves you $400 a year by taking the $1,000 deductible instead of the $250, which which is more likely actually then it would only take you two years to be in the red to be in the black on the risk that you're taking meaning in two years of 400 savings is 800 bucks in your pocket you took an extra 750 in risk it's worth doing removing full coverage is only something that you would do if you can buy the replacement car and not notice. Financially, you have enough to write a check and buy the car and not notice. And so let's say you're driving a $20,000 car and it's paid for and you're in really good shape financially and you got $100,000 in the bank. Can you afford to buy a $20,000 car out of that $100,000 that's laying there in the bank?

Yeah, you could. You probably would notice, though. You've got a half a million in the bank, half a million in mutual funds, and you want to replace a $20,000 car, you wouldn't think anything about it, right? And so you could take that risk. You could do away with full coverage if you want to.

Once again, though, all insurance is about is transferring risk. And so you start asking yourself, even though I can insure through it, based on what it's costing me, how does that feel? Does that feel right? I tell people not to buy a brand new car, for instance, until you have at least a million dollar net worth. The stuff I teach works over the last 30 years, and we've become multi-millionaires. So if I'm driving a brand new expensive car,

even though I easily could write the check for a whatever, I don't know, whatever, make up a number, a $50,000 or an $80,000 car or whatever, right? I can easily write that check for a whatever, I don't know, whatever, make up a number, a $50,000 or an $80,000 car or whatever, right? I can easily write that check. I look at the cost of the insurance for that $80,000 and I'm going, eh, even though I can do that and not notice, still don't want to do it. So I'll still carry coverage.

And I do still carry coverage on mine personally, even though I'm in a position to financially self-insure through it. So I kept full coverage because I've looked at what the coverage costs me for the transfer of risk, and I'm pretty comfortable with that. I even did it on a little cheap. I mean, we bought a little Jeep when the kids were teenagers for down at the lake house, a lake house Jeep. You know, and I paid like, I don't know, like $3,000 or something. It was a hoopty Jeep, right? And it was just a lake jeep and the teenagers are going to be driving it up to the market to get gas and stuff and so you know even in that case i'm thinking i'm not you know there's

no way i'm buying coverage on a three thousand dollar jeep it's not happening you know we'll just get the liability on it's all and uh but then i got the bill or I got the estimate, and it was $14 to put the coverage. You know, to put the coverage. Yeah, for $14, I'll put coverage on it, you know, for $3,000, especially with teenagers driving a lake Jeep. You know, so, yeah, I'm definitely going to do that. And I actually covered the little hooptie Jeep even. So that's the full coverage answer.

That's a different answer than the deductible answer. But good question. Brittany's with us in Dallas, Texas. Hi, Brittany. How are you? I'm doing well, Dave. How are you? Better than I deserve.

What's up? All right. Well, I have switched jobs from a state job to the private sector. And I was putting a mandatory 9% into the state retirement. And then also there's a 401K there as well. So I know you tell everybody not to let them send you the check. The state retirement, if I leave the money in there, it's only about $4,000. It's only going to grow about 2%.

I would roll down. By send me the check, I mean send it directly to you i would not do that but i would take both accounts and roll them to iras now the 401k right now it's about 16 percent and i can leave it in there i don't care you can roll it you can roll it to the mutual the exact same mutual funds that you're in. Okay. Okay. I didn't know that. Yeah, you can just pick out mutual funds that you want it to be in and roll it into an IRA and those mutual funds. And the same thing with your state retirement. I assume you're allowed to take your state retirement with you is what you think anyway, right? Half of it. I'm not vested.

Okay. But the part that's vested, I'm going to go ahead and roll it to an IRA as well. Both of those, I always tell people to take their IRAs, their 401Ks, their pension lump sums, anything you can get that you're vested in from work, always take it with you when you leave the job by rolling it with a direct transfer rollover into an IRA. And, of course, you guys that listen to me all the time know I put my personal 401ks and IRAs across four types of mutual funds, one-fourth in growth, a fourth in growth and income, a fourth in aggressive growth, and a fourth in international. And I'm always looking for mutual funds that have a decade or longer track record and that

outperform the S&P 500. And there are plenty of them that do. If you have a decent broker that can help you look for that. Don't buy a mutual fund that underperforms the S&P 500 as a track record of doing that. Otherwise, you just buy the S&P. It's easier. But there's plenty of them out there. My personal 401K has kicked the S&P's butt for years, like 2% a year average. It just destroys it, and it's really not rocket science to find these.

So anyway, back to Brittany's situation. Brittany, you would get in touch with a SmartVestor Pro by clicking SmartVestor at DaveRamsey.com. Entering your information, a list of the SmartVestor pros in your area will drop down. You select who you'd like to talk to, or you can talk to more than one, and then pick one, someone to help you do your investing, and they need to have the heart of a teacher. You need to feel comfortable with them, not be intimidated, be learning with them, and then you do your direct transfer rollover of all the stuff from your old workplace,

and that would be by far the best thing to do. Good question. Dennis is with us in Madison, Wisconsin. Hi, Dennis. How are you? I'm very well, Dave. Thank you for taking my call. Certainly, sir.

How can I help? Well, I just turned 62, and I've been for the last several months trying to decide when I should start drawing social security. Everything I read and hear says you should wait as long as you possibly can before you start drawing. But when I put the numbers together in my situation, my financial situation, I just can't make sense of that. So I'm hoping maybe you can give me some advice. In what way you can't make sense of that. So I'm hoping maybe you can give me some advice. In what way you can't make sense of it? Well, I retired five years ago, and I am drawing on my IRA.

My wife works part-time, and between the two of us, we earn about $60,000 a year. If I were to start drawing now, by the time I reach full retirement age, which for me is 66 years and two months, I would have earned just over $90,000. And at full retirement age, I would get an extra $615 a month if I waited until then, and I wouldn't break even until age 79. My thought was to use this extra money, if I were to start drawing now, put it on our mortgage and have our mortgage paid off in about a year. Your thought is correct. I agree with your math. You've done a good job. The presupposition on waiting to take Social Security presupposes, A,

that you don't have debt that you need to clean up, and, B, that you're going to consume Social Security, three supposes, A, that you don't have debt that you need to clean up, and B, that you're going to consume the money, and C, that you are going to live a long, long time, like up into your 90s. That's the only way those numbers work. And so I'm a fan in your case. I think you've done the numbers well. I'd take it now. We need to talk about something you've been hiding.

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We're talking about saving you thousands. Order today at smilelove.com and use the promo code Dave to receive $100 off. SmileLove.com promo code Dave. Thanks for joining us, America. Brendan is with us in Fresno, California. Hi, Brendan. How are you? Hi, Dave. Thanks for taking my call. Sure. What's up?

Well, a few years ago, as per your advice, I bought term life insurance through Zander to cover my wife if anything ever happened to me. But I'm now divorced, and I just got the invoice to pay for this next year. And I'm just wondering, what do you think? Is it worth the $400 to continue it, or should I just let it go at this point now that I'm single? Okay. How old are you? 30.

Okay. What kind of health are you in? I'm 30. What kind of health are you in? Oh, I'm sorry. I'm in good health, good health. Okay. Do you have children?

No. Okay. Do you have any debt? No debt, debt-free. Okay. Do you have any debt? No debt. Debt-free. Okay. Do you have any savings? Well, I own a home, but other than that, I have no debt.

Do you have any savings? Yeah, I'm working on building up the six months, so I've got about five grand now. Okay. All right. Well, the only need that you would have for life insurance is enough to bury you, and you're pretty close on that. Okay. So if I woke up in your shoes, I probably would not renew the policy.

You don't need life insurance to provide money to someone you leave behind that counts on your income to eat. There's no wife and no kids that do that. There's no obligation I'm hearing anywhere. Is there anything I'm missing where there's an obligation? No, not that I can think of. Okay. And so if something happened to you, your parents could take your savings account

and the money from the sale of your house and clean up whatever bills you had, including burying you, and you would not be a financial strain on them. That's correct. Yeah, there's a ton of equity in the home, so everything, yeah, I'd be good. And your emergency fund is enough to bury you, usually, so, plus some, right? So, you know, no, I wouldn't buy life insurance in that situation, and therefore, I wouldn't keep life insurance in that situation, because you don't have anyone counting on your loss of income that creates a problem. But if you were in the exact same situation, you had a two-year-old and a four-year-old,

or you were married, then yeah, I definitely would keep it. Or let's say you were sick. You'd gotten sick. You'd had a cancer scare since you bought the policy. I'd probably renew it just to keep it because you're not insurable at that point. Your insurability would be in question. But, you know, you're healthy. Me, I'm dropping it if I'm you.

I don't see any reason to keep it. Life insurance is not an investment. It's to transfer risk, and in this case, the risk of you dying and someone counting on your income, and your income's not there. And that's not a problem in your situation. John is with us in Austin, Texas.

Hey, John, how are you? I'm doing well, Dave. How are you, sir? Better than I deserve. What's up? Good deal. Thank you. I received about $11,000 in bonus from my work recently.

Yay! Yeah, that's always a plus um and i've been wanting to take my family on a road trip to the northeast um but i wanted to um get your take you think to see if that's a good idea or not or if i should put that on hold okay are you out of debt? I'm currently on baby step six, and we expect to have that wrapped up by November of next year. Wow. Good for you. How old are you? 36. Good for you. And what's your household income? Combined, we're about $320,000.

Wow. Excellent. Good job. What do you do for a living? I'm a manager at a consulting firm, and my wife is a manager at a software company. Wow. Both of you are doing very well. Good, good. Oh, definitely I would take the trip. Definitely would take the trip. There's only three things you can do with money.

You can give it, you can invest it, and you can enjoy it. And you should always do all three. The difference is if you were in debt, I would, you know, like you had a bunch of consumer debt, no, I'm not sending you up there to vacate while you're getting out of debt. You'd get out of debt. Or if you got an $11,000 bonus and your household income was $22,000, well, we probably wouldn't spend half your dadgum annual income on a trip. No. But it's a small percentage of your income.

You're in great shape financially. And, you know, it's not going to – financially, it's not going to affect your life at all because you've done such a good job with money, and you make so much money. And so I would definitely do that trip. That's good to hear. They'll be pleased. Do you follow the logic of how I made that decision?

I do. I was worried that you might tell me to either try to finish paying off the mortgage or to invest it in more mutual funds. No. Now, again, if you're making $100,000 and you're getting ready to spend $50,000 on a trip, I might stop and think about the mortgage then because of the ratio to your income

and how much longer it's going to take you to, you know, that kind of thing. This is such a small percentage of your income. This is like, what, 3% of your income. And so, I mean, for most most people it's like buying a biscuit you know and so that's really where it's a lot of money but ratios are what i look at because can you ratios tell us can you still accomplish the goals that matter and that includes knocking out the house so no i definitely would go on this trip hey thanks for joining us we appreciate you being here. Amy's with us in Fort Worth, Texas.

Hi, Amy. How are you? I'm good, Dave. How are you? Better than I deserve. What's up? My question is I bought a house about a month before I met my now husband, and he had bought a house about three months before we met, got married,

and we're now renting my house out and moved in with him. He received a little over $100,000 in an Edward Jones account when his dad passed away last year. We're wondering if it's better to... We pay the mortgage out of our paychecks for the rental, and we use all the money we make off of it to put towards the principal. Is it better to keep doing that or to use the money in the Edward Jones, take that out to pay it off?

How much do you owe on the home? About $72,000. And so you could write a check and pay it off? Yes. Okay. You became a landlord by default. Yes. You didn't set out to be a landlord.

It happened because of the way the house purchases and the marriage, the timeline of all of that coming down. And so, you know, that's part of the issue. But that makes you just step back and ask this question. If you didn't own this house, would you go buy it as a rental property today? I think the answer is yes. Oh. Because, I mean, do you not like a rental property? It seems like it's a decent property.

Oh, no, we love it. It's paying its own way, and, you know, you're in good shape financially, it sounds like. You're debt-free except for this and your other home, right? Yes. No other debt, right? None. We had no debt going into the marriage, and we paid off our vehicles earlier this year, so all we have is the two mortgages. And you've got your emergency

fund. Correct. Yeah. And so if I was going to have a rental property, I would pay it off, and I'd pay cash for it if I was buying it, and that would be the case. And so I'm writing a check today and paying the thing off. And even with the tax implications, that would count as additional income. What tax implications? From taking money out of Edward Jones. There's not any tax implications. It's inherited money. Okay.

Inherited money is worth, that your basis in it is what it's worth at the time that you inherit it. And so if you sell it within six months of his death there's zero tax implications oh there's no gain no gain whatsoever he you did not inherit his basis you you're you get what's called a stepped up basis see your tax man tax person tax person can tell you all about that but shouldn't be any tax implications on that okay yeah i'll just write a check and pay it off what i would do in a heartbeat even if i paid some taxes i, I would do that, but I don't think you're going to have any taxes. It doesn't change the answer either way. I would not have the rental property with cash sitting in the bank to pay it off and a debt on it.

I would either sell the rental property and keep my cash, if you like your cash better, invested at Edward Jones or whatever, or I would take the money out of there and pay it off, one of the two. I wouldn't do either. I wouldn't keep it and keep the debt under no circumstances in this situation. Thanks for the call. This is the Dave Ramsey Show. Thank you. Mandy is with us in Kansas City. Welcome to the Dave Ramsey Show. Mandy, how are you?

I'm great. How are you? Better than I deserve. What's up? So I have a question. My husband and I have been kind of on your plan since May. So we read your Total Money Makeover book, got super excited, got ready, paid off. You know, within the first 90 days are like $6,000. But the problem is every time we pay

off a debt, we do a huge victory lap and take a while to come back to it. What do you suggest on how to avoid that? We don't have a good support system. In fact, my dad thinks we're absolutely nuts and makes fun of us about it, but we just need some guidance and some help. How much debt have you got, not counting your house? $57,000. Okay. And by a huge victory lap, you mean you just kind of stopped doing your budget and you don't go into debt again, but you just stopped making progress?

Correct. Okay. And what's your household income? We make about $100,000. Okay. All right. Why are you getting out of debt? Because after paying child support and daycare, we find ourselves just completely maxed out, and we want to be able to eventually get me home with the kids because it's drowning us. Okay. Well, you should be debt-free in two years. Would that get you home with the kids? Yes.

Okay. Do you need to put pictures of your kids on your budget? That's a good idea. I mean, you need to do something to remind you of your why, don't you? Yes. Because what's happening is your short-term pleasures are taking away your long-term soul-enriching activity, which is being home with your kids. In other words, you're giving up the best thing out there for some stupid little stuff on the short term

because your why is not in front of you in your emotions. Am I right? Yes. Even though we see them every day we still don't yeah somehow you gotta somehow you gotta relate sticking to the budget and living on beans and rice to how fast i get to be home with the kids okay over and over and over and over again that's a really noble big why and if you got a why, you can do all kinds of stuff. Whys will make you run through a wall.

And what's happening is you're disconnecting why you're doing this, and so you're unwilling to pay the short-term price to get the long-term gain. Is that logical? And that's where the disconnect is so if you can fix that disconnect then um i think you're going to see a huge movement in this and you that'll keep you back on track back on track in other words here's an extreme okay let's say that uh your child had a rare disease they don't okay But I'm just making up a bizarre thing to illustrate my point. Okay. And you had to be debt free in order to buy the vaccine to save their life within two years.

And we'd be doing it. That would be like the largest possible why on the planet, right? Yes. You would not get off track, would you? No, we wouldn't. Yeah. And see, I'm illustrating the point with a bizarre hyperbole, but just the same. It still makes the point.

If you get a big enough why going, then it doesn't matter what anybody else thinks. It doesn't matter whether you've got a support group. It doesn't matter if you dot, dot, dot. It doesn't matter if you dot, dot, dot. It doesn't matter if dot, dot, dot. We're going to get it done anyway. It doesn't matter if we lose our job. It doesn't matter if the car breaks down. It doesn't matter if the kid gets a flu.

It doesn't matter if Johnny breaks his arm. We're stinking getting out of debt. You know, we're going to do it anyway. Nothing is going to knock us off track. We may get knocked off track, but we're going to get right back up because we've got to do it because our why is so big and so worth it. And that's living like no one else so that later you can live and give like no one else. So somehow, you know, you and your husband almost need to record a message to yourself that starts playing, you know, on your phone every so often just to remind you that the reason you're doing this, the reason you're doing this, the reason you're doing this, it's worth

the sacrifice. The Bible says no discipline seems pleasant at the time, but it yields a harvest of righteousness. No one enjoys the process you're going through. We just do it because the result is worth it. Right? And that's what you're after. So I think that's what the two of you need to sit down. And somehow I would need visual reminders around me, audio reminders around me.

You know, put pictures of the kids on the refrigerator like they're on the milk carton. I don't know. You know, I don't know. We've got to do something here because I think, for me, you wanting to be there full-time with them is a big motivator. If you'll keep it in front of you, it'll keep you on track. Did I miss something? No, you did not.

Okay. That's how I would go about it. You've got to identify the why. The what will come to you. The how will come to you if the why is important enough. Travis is in Dayton, Ohio. Hi, Travis. How are you?

Dave, how are you doing? Good. How can I help? Good. I'm a big fan. Thank you, sir. It's an honor to talk to you. You too. I got a question about Baby Step 6.

Okay. College education. Me and my wife, we... Baby Step 5 is college education. I'm sorry. Baby Step 5. Okay. Baby Step 5, me and my wife didn't go to college. We had a great...

We still have a great employment. We say we're doing good with 15% and our 401K, everything. What's your household income? It is right around $50,000 to $55,000. Good. Good for you. How old are you two? I am 30, and she is 32.

Okay. Excellent. And we just want to instill our daughter to have the same values as you don't have to go to college. If you put forth the same effort that we did, you're going to be just fine, be successful. And I just wanted to know what you thought about that. I won't say about skipping baby step six, but baby step five. You can if you want to. That's your choice, your decision, your values.

The question I would ask you is this. You're not against school. You're just not sure it's worth it. Is that right? Exactly. Okay. And then the question I would come back to is, is that always true? My answer is I don't think it's always true.

I agree with the fact that you can win without going to school. I have no issue with that at all. But if you take the right classes and learn something that you don't know, it does make you more valuable in the marketplace, and knowledge always will keep you from bumping your head. Right. And so the right curriculum is valuable, and there is an ROI on the right curriculum in the marketplace,

assuming they have the other values. But you're kind of pushing back, and I agree with, if I think I hear, I'm reading between the lines, but I think you're saying a lot of these people think just because they get a degree they're guaranteed success. Well, that's a bunch of crap. You and I know that's not true. And we don't want our kids believing that. But I didn't let my kids believe that.

I told them success was up to them. And all that we looked at college as is putting more tools in their belt to do their job. Right. That's all we saw it as. And in that case, I would say that all three of mine have gotten an ROI, a return on investment, on sending them to school. But it's not necessary to go to school to be successful. It's not 100% necessary. But, I mean, you know, I mean, I liken it to other things.

I've taken classes on, you know, I take a private lesson snow skiing. Does it make me a better snow skier? Yeah. Yeah. You know, I get a guy teaching me that. Does it make me a better snow skier? Yeah. Yeah. I get a guy teaching me that actually knows something I don't know. I get a better result. And that's true in accounting. That's true in marketing.

That's true in a lot of things out there. So knowledge is powerful. Is a degree a guarantee of success? No. Is a degree not having a degree a guarantee of failure? Absolutely not. Success is more resulted to the character of the kid. And so I agree with what I'm reading between the lines with you.

But I probably would save for college just because I personally believe knowledge is valuable. The right kinds of knowledge. And that's how we did it. That's why we did it. But if you don't want to do that, I'm not mad at you. If you just say, we're not going to save for college, we don't care about college, then skip maybe step five. Yeah, that'd be what you would do.

Hey, good question, man. Thanks for the call. This is the Dave Ramsey Show. Hey, it's Blake, Chief Production Officer for the show. And here's a little tip for 2018. Go download our revamped Dave Ramsey Show app from the App Store. We're always listening to your feedback and adding new features to make it even better. Check it out.