The Ramsey Show - App - Be Content With What You Have to Get Out of Debt (Hour 2)

Episode Date: November 5, 2020

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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. Rachel Cruz, Ramsey personality, number one best-selling author several times over, my daughter as well, is my co-host today here on the air. Open phones at 888-825-5225. That's 888-825-5225.

Rachel has a new book coming out in January. We're on pre-sale right now of it. It's called Know Yourself, Know Your Money. And what we've discovered around Ramsey over the years is that personal finance is really 80% behavior. It's only 20% head knowledge. And what causes our behaviors, understanding those causes us to be able to have a better chance of winning with money, right? That's right. Yeah, that bulk of the behavior change is interesting because I feel like we talk about

the how-to a lot around here and needed, how to budget, how to get out of debt, how to give, how to invest, I mean, all of it. But then starting to ask the question, okay, so I know how to handle money, but why do I handle money the way I do? And when you start to really have some self-awareness around your habits around money, your behaviors, it kind of opens up this whole new lane for you to see yourself in a different way. And then on top of that, being able to change some habits, change some behaviors to help you win with money faster. And there's a lot of elements of this that come into play. It comes, you know, your personality, your money tendencies, tendencies your money fears a lot of this drives

why you handle money the way you do and one of the big reasons why you do is from your childhood how you grew up the home you grew up in yeah you have to face that probably about a lot of issues yeah you know different things why is it i you know if you ever spoken to your child and you opened your mouth and your parent came out of your mouth um they you know that's obviously family of origin the way you grew up the way your mom spoke to your dad spoke to you you turn around do that with your child exactly whether it's positive or negative yes and what's interesting is when i was writing the book i interviewed a couple of psychologists and a lot of things that you read in that world even like psych 101 in college i heard

over and over again and read you know people did research that said 50 of you is nature 50 of you is nurture so 50 of you is just your genetic makeup 50 is nurtured but i was talking to john deloney dr john deloney this morning and we were talking about this whole concept and he said he just read a study that came out um i think of berkeley or i'm not sure where but talking about the relationships in your life and how they shape you so much greater than just that 50 percent like that, that researchers are coming out now and the behaviors that you have and the way you function in life has just so much to do with who you're around and how you grew up. So it could be that when you do something stupid with money, we're not going to blame it on your parents. But it could be that it was dialed into you to do that because that's how they handled money that's right that's what you saw so it's either that you mirrored what your parents did or talking to people they do the

complete opposite and their parents do something and they say mom and dad were tightwads they never had any fun so all i'm going to do is have fun yes or my parents all they did was have fun and they were totally irresponsible so now i will be a saver no matter what i'm not going to be broke like they are i mean yeah you hear you hear both or you just end up subconsciously just doing what your parents are doing if you don't really have a conscious thought about it so if you didn't think about it on purpose yes so the way money is communicated in a household it's really two ways it's verbal communication and it's emotional communication so the verbal communication can be open or closed and the emotional communication is stressed or calm.

So what ends up happening is it creates this like beautiful little quadrant of the way of communication. So the first quadrant is the anxious classroom and this is where it is verbally closed and emotionally stressed. So if you grew up in a home that your parents never talked about money, but anything around that subject, just there was a lot of tension, a lot of stress. You couldn't pinpoint why because no one talked about it, but you felt that. The second quadrant is the unstable money classroom. And this is when it's verbally open and emotionally stressed. And so you are hearing

conflict. You're probably hearing fights. You may hear your parents had the same fight about money over and over again. Maybe they fought with extended family about money, but you just heard it. It was there. Well, their light bill wasn't paid, and the house was about to be evicted, and those kinds of things happen, and it's said out loud in front of the kids. That's right. You hear it.

That's right. Or it's a well-off family, but they just bicker about money all the time. There's no plan. There's stress there, and it's just like, oh, we can't get on theoff family, but they just bicker about money all the time. There's no plan. There's stress there. And it's just like, oh, we can't get on the same page. And you just hear it. I have a third money classroom is the unaware money classroom. And this is where it's verbally closed, but emotionally calm. So this is kind of the money classroom. Maybe your head was in the sand as a kid. Like you just didn't even think about money because it wasn't an issue. It was never talked about. There was never tension around it. It was kind of this, oh, you just had no clue. And then the fourth money

classroom, which is the healthiest, is the stable, secure classroom. And this is where it's verbally open and emotionally calm. And in this money classroom, you don't have to have a ton of money to be in this classroom, but it means that the household is managed well. There's control. There's a plan over money and it's talked about. There's control. There's a plan over money. And it's talked about. It's open. It's not a shameful topic. It's not a taboo subject.

It's not in the budget. But it's not. That's right. It's not screeched. It's not in the budget. Yes. You know, it's like instead it's just we just don't have the money, honey. I'm sorry.

That's right. That's right. So these four kind of money classrooms you can place yourself in. And it's so and it's so interesting because you can look back and say oh wow i grew up in that environment and now this is a lot of the reason why i do x y and z but with money yeah and it helps you once you address that then you don't have to once it helps you once you're self-aware that you're the classroom you grew up in is affecting your decisions you can go okay that's either good or bad i can just decide not to do that that. Just like you did about not doing something else your parents did or doing something else your parents did. Yes. Yes. But it's an intentional act then to say, I'm going to align myself with

that classroom or I'm going to realize it was there and it affected me, but not anymore. Yeah. And in every classroom, there's some weaknesses that come. So that anxious classroom where money was never talked about, but it was very stressful. A lot of people that grew up in this classroom, they don't even know how to communicate about money. It's not that they're scared to, they almost just feel like, I don't even know where to begin. Nothing was modeled. And so you really have to watch for that. The unstable classroom, you may know how to communicate, but you don't want to communicate about money because that in your head-

Anytime you talk about money, you get anxious. Yeah. And it's just fights. It's conflict. If I talk about money, it's your head you talk about money you get anxious yeah it's and it's just fights it's conflict if i talk about money it's just gonna be conflict so i just want to avoid that third money classroom the unaware is i find a lot of these are the spouses that say oh yeah well my husband just takes care of the money and i'm good like i don't even want to know ignorance is bliss because it was taken care of my whole life and it felt good so i'm gonna just let that happen or my my wife just takes care of it. I'm not that worried about it. It's this ignorance. It's this blessing. You're like, you have to engage it. You have to engage it. And then that fourth money classroom, really the weakness there is that there can be a level of not realizing the sacrifices that your parents made. In order to have a healthy, secure

money classroom, it takes a lot of work, a lot of intentionality, a lot of boundaries, a lot of communicating on purpose with your kids. There's a lot of work, a lot of intentionality, a lot of boundaries, a lot of, you know, being communicating on purpose with your kids. There's a lot of work involved to create this. And if you grew up in that classroom, you may not have entitlement, but a little bit of like, oh, yeah, if my parents were money smart, I will be, too. And that's not always the case. You have to learn how to do it yourself. Very good. Very good.

The book is Know Yourself, Know Your Money. It's on presale right, and you can get it. It'll come out January the 6th. We'll ship it to you. If you buy it ahead of time, like today at DaveRamsey.com or RachelCruz.com, either one, you'll get $150 worth of add-ons, including the audio book, which you just finished recording, the e-book, and, of course, a coaching session, all kinds of things. You need to check it all out at DaveRamsey.com. This book is gold.

It is gold. It's going to be huge. This is The Dave Ramsey Show. I get asked all the time about what people need to do to improve their family's money situation. Two of the most overlooked things are term life insurance and disability insurance. Both plans make sure that you have income to pay bills and take care of yourself and your family if something were to happen. For term life, you need to carry 10 to 12 times your income, and I recommend 15 or 20-year plans for most families. Stay away from cash value or return of premium plans. They're just a ripoff. Disability insurance is just as critical.

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Jonathan's in Tulsa, Oklahoma. Hi, Jonathan. How are you? Hi, Dave. Hi, Rachel. How are you guys doing today? Great. How can we help?

So I'm trying to convince this. I got notified of a sheriff's sale in 2016, December. So, in order to save the house, I filed for Chapter 13 in January 2017. Since then, early this year, my wife and I, we discovered the Ramsey plan, and we've really turned everything around. We've almost doubled our annual income this year. Wow. And over the last three months, have been able to save a little bit of money.

Now, my question is, I'm four years at the end of the fourth year of my 59-month plan in my Chapter 13. So my monthly payment to the trustee is $4,000. But currently, we have an ample income take-home. And I'm also cash rolling my daughter's, my youngest daughter's college. So that's not an issue. And we still have money left over. And I'm wondering, should I, should I take that money and give it to the trustees to try to get the discharge on the chapter 13 sooner, or because they rolled the mortgage payment into the Chapter 13 to the tune of $224,000. At the end of the bankruptcy next December in 2021, I should have a balance of about $60,000 on the mortgage. And I would bet with the lifestyle changes that my wife and I have made, the income increase through promotions.

My wife has two side hustles. I have one side hustle. I mean, we've really done a lot of work. Nice recovery, brother. Well done. Yeah, we've done a lot. I think I can actually make that payment. So how much cash do you have?

Currently, I have $4,000 because... Oh, you don't have a big pile dollars because oh you don't you don't have a big pile of cash you don't have a big pile of cash you've just got the extra it feels like a big pile to me i know but it wasn't like you've got enough to pay off the bankruptcy through the end of the year no no i don't no i don't uh but so i'm gonna have to continue making those payments i thought you said you had piled up a bunch of savings well that to me three thousand dollars oh okay well it is after it is after being in bankruptcy so yeah i get it i'm sorry i just because i was visualizing we're almost in the bankruptcy maybe we pay it through

but well i got 12 months left yeah um and so what is your household income today? Right now it's at 157. Okay. What I would do is just write it for right now and pile up cash. Pile up cash. And then at the end of the bankruptcy, I should have paid the mortgage off. Yeah, if you get down and there's four months left and you want to go ahead and send them the final four months, just call the trustee's office and arrange that because it will confuse them. Okay. There are so many things to do.

Yeah, 78% of the Chapter 13s fail and turn into Chapter 7s. Most people don't make it the 59 months, the 60 months, okay? And so it does confuse them. The trustees, the Chapter 13 trustees in general are fairly competent some of them are excellent uh they're one of the few bright spots in the entire bankruptcy community and so uh if you call you may have to work to get you know past the first uh secretary or paralegal but if you can get to somebody that has a decent decision makingmaking or analytical skills, you can convince them that they can accept your final four payments in bulk and be done with this and go ahead and advance the discharge.

Because I don't think you're going to get there much faster than that, are you? No, I don't think so. I mean, I may be able to shave six months off. Yeah, four to six months you could just do in one lump, and that's not super confusing, and then they could just discharge you early. And it's really not rocket science. You just got to – but I wouldn't just send the check and hope they figured it out.

Right, right. And because my plan was just to get out of the bankruptcy and pay off the mortgage same same time frame um well you don't have you're not going to have 60 000 plus six months of the bankruptcy by december no that's why i'd have to go to the end of the bankruptcy to pile up that cash yeah we'll wait on that yeah finish the bankruptcy get the discharge and get the discharge in your hand before you write the check for the balance on the mortgage okay because i don't want somebody rolling back up something out of that 13, and again, the mortgage company now is confused because they think you're still in a 13, which, by the way, they're not even supposed to talk to you while you're in the 13.

Right, right. So you're going to have trouble getting information out of them. Yeah, no, they won't talk. They go through the attorney. Yeah, so let's just get the discharge, and if it takes three more months to pay off the house, to get all the smoke out of the air from the bankruptcy and get everything solidified, I think that's going to be safer for you.

And so, yeah, six months out, go ahead and do an advance payment, having arranged that with the 13, and then once you get the discharge in your hand wait a couple of months talk to your mortgage company and then write them a check and pay them off way to go it's awesome that's amazing okay walk through chapter 13 chapter 11 chapter 7 all the the the main major bankruptcies there's only one other chapter 12 which is for farms for for farmers, and there's not, almost none of those are that. So Chapter 13 is where you pay payments for five years. And you can pay a reduced amount on unsecured debt, like for, not student loans, but like a credit card, if you owe $10,000, you could do 20% of that.

And so those payments would knock off $2,000 over that five years. And then there's, but you're in there for five years. Anything that is a secured debt, like a car payment, you have to pay the full payment. Plus, if you're behind, you got to pay something on the back. The car, a secured debt gets 100% of their money sometime during that five years or you have to give up the item so you don't get out of car payments by going into bankruptcy you don't get out of house payments by going into bankruptcy student loans are not student loans are not bankruptable anywhere you can control them and the irs is not bankruptable and child support

and alimony is not bankruptable yep you can control it though but in the 13 it's your five years yeah so if the irs is coming at you for 100 grand and they're putting liens on everything Alimony is not bankruptable. Yep. You can control it, though. But in the 13, it's your five years. Yeah. So if the IRS is coming at you for 100 grand and they're putting liens on everything, sometimes people step into a 13 to put that on payments because they weren't able to negotiate with the KGB. Gotcha. Okay. So they use that tool sometimes to do that.

Now, the chapter seven is the atom bomb. It's the scorched earth. After you drop that, nothing's left. No debt is left anywhere except again those that we just said that aren't bankruptable student loans alimony child support irs they're not bankruptable but everything else gets zero now again if it is a secured item like a car a boat a house whatever you do not get to keep that in a chapter seven unless you agree to make the payments so did you know good to file chapter seven and keep your stupid car payment yep and keep your you know but uh and you have to catch up if you're behind in order to reaffirm re-sign for that debt

in a chapter seven a chapter 11 is for a super large personal bankruptcy, mainly used in business, though. And the plan in a Chapter 11 is you make up the plan. It's just drawn. You just get creative, and you go, this is what we want to do. And we get the judge to approve it. Interesting. And if the judge approves it, then it's done. So, for instance, if a big retailer goes bankrupt because they've got a bunch of underperforming stores they may take

out of their 500 stores that they've got out there they may take 350 of the bad stores and say all those leases we just want rid of them we're going to give those landlords the keys back we're going to shut all those stores down and uh these creditors over here we're going to pay them pennies on the dollar and they just make up a plan interesting and then they get to survive with what's left and try to run the business. Yep. And that's the Chapter 11. You can do that with a very large personal bankruptcy, but very few personal. What did you file?

Seven. You did seven. Yeah. Not 13. Scorched earth. Scorched earth. 13 does you no good most of the time. With real estate.

Yeah. Interesting. You can't keep, because if you keep all the crap, you keep all the payments. There was no point in 13. Yeah. And that's why most of the time. With real estate. Yeah. Interesting. You can't keep, because if you keep all the crap, you keep all the payments, there was no point in 13. Yeah. And that's why most of them fail. Plus, you keep all the bad habits that put you there in the first place. Right. The beauty of Jonathan's story was he changed his habits. Yes, and came out of it. And he got on top of it.

He got the Ramsey stuff. He got to use common sense, and he got on top of it. And he got his income way up. And so he started jacking on the thing, turned his whole life around. What a stud. It's stud. What a great story. This is the Dave Ramsey Show. Rachel Cruz, Ramsey personality, is my co-host on the air today. Open phones at 888-825-

5225. Manny is with us on the debt-free stage right here at Ramsey Solutions. Hi, Manny. How are you? How are you doing, Dave? Dave, Rachel. I'm sorry. That's a good combo right there. That works for me. You did good. It's all good.

It's like Angelina and Brad had their thing. We're brave. That's it. That's a good combo right there. That works for me. You did good. It's all good. It's like Angelina and Brad had their thing. Oh, yeah. Yeah, right. We're brave. That's it. That's us. Congrats, Manny. Congrats.

Thank you. Hey, man. Where do you live? I live in Fort Walton Beach, Florida. Cool. Good to have you. Thanks for being here. How much debt did you pay off?

Well, Dave, I've paid off $296,614. Holy man. Holy. How long did this take? It took six years and 11 months. Wow. And your range of income during that time? Well, Dave, when I got on your program, I was at $65,000.

And I just recently got a promotion in the Air Force, and I'm at $140,000. My goodness gracious. Amazing. Thanks for your service. Well, thank you for your service. Thank you. What kind of debt was the $297,000? Well, Dave, it was a little bit that I had left on my car, a Honda Civic 2008, still driving it.

And then I had $17,000 in student loans. And then the rest was on my house. You paid off your house? Yes, sir, I did. Looking at weird people. Woo! I love it. How old are you? 31 years old.

And you have a paid-for house in Fort Walton Beach. Yes, sir, I do. Oh, my gosh. That's amazing. Unbelievable. What's the house worth? I actually checked it shortly before I came up here, and it's at 280 right now. Ha, ha, ha!

I love it! Woo! Man, that is so cool. Yes, sir. So tell us a story. What happened six years and 11 months ago, man? Well, sir, so I graduated from the University of Alabama, roll tide. I commissioned in the Air Force.

And I came out of there with $8,000 left to pay on my car. And I had $17,000 in student loans. And as a brand-new officer in the Air Force, I was doing like most people and eating out all the time and just living paycheck to paycheck. It was right about 2013, my best friend, Kenny, who's here to support me, he mentioned your name. And actually on my first deployment, I bought your Total Guide to Money. And ever since I read that book, I was on fire coming out of that deployment. And I got on the ball pretty quick.

I paid off that $25,000 total there. On December the 31st, 2014, I sent in the final payment. Boom. I bought my house. Go ahead. And six years later, the house is gone. Yes, sir. I bought the house in May of 2014.

And, you know, I was paying a little bit in principal here and there, extra. But it just, when I looked at the amortization table, because I'm a nerd, I just saw how little was going towards the principal and how much was going towards interest. And, you know, I was chipping away at it. But it wasn't until I heard, it was a young lady about my age, about my income. In 2018, she called in to pay off and she, you know, announced that she paid off her house. And I'm like, I can totally do that too. Um, so the beginning of last year was one of my 2019 goals that I was going to have

my house paid off before I turned 32. And so I, I threw, I threw the kitchen sink at it and I paid off $111,000 last year and the rest this year. Absolutely amazing. Wow. You got it, baby. I love it. That is so fun. That's a lot of sacrifice. I mean, what that last year you did. So was it worth it?

Absolutely. So I don't owe a single dime to anyone whatsoever. Every single day I go in, I already love what I do. I mean, I plan on doing the full 20 years in the Air Force and maybe then some we'll see, but I don't have to worry about a single thing in the world. I mean, anything I want to go do, travel, I can do it. Wow. It's amazing. You are in great shape, man, and you got yourself there. Well done.

Thank you both for your teaching. Seriously, I've taught three FPU classes myself. I'm a coordinator down at Destiny Worship Center in Miramar, Florida. Oh, thank you. Yes, sir. And I've just gotten taking my family through it. They're watching right now. All right.

So it's been amazing. Both of you and the rest of the Ramsey team truly is impacting so many people right now. And I can't thank you both enough for that. Wow. Very well done. You did it, Manny. You were the one, I mean, in six years doing it. Absolutely.

You're the hero. And it's just phenomenal. Okay, so what, because we're around the same age. And so, honestly, I'm like, you know, the amount of sacrifice, because it's so weird, right? Like, people don't live like this. And so, it had to have been hard, elements of it, for sure. So, what would you say was probably the hardest thing in this process? I would really say, so, you know, I'm single.

I'm not married. And, you know, I've told my FPU class this, that when you're married and you have that accountability, it's amazing because accountability piece is so huge. But going at this as someone who is single, I really had to be very intentional with where my money was going. I celebrated the milestones along the way because it's a huge chunk and you can get burnt out depending on, you know, your level of just motivation. So I set milestones and then I wrote down the goals. I mean, that was one of the largest piece of it to help keep me accountable. And then of course I had an amazing support team and my girlfriend, my best friend, his lovely wife, my family back home. So it's been amazing. A lot of people cheering you on when you're tired. I was like, there's a beautiful blonde with you earlier with a cute hat i was like who is she

but yeah okay i love a girlfriend alex that's awesome oh well that's amazing manny absolutely absolutely incredible thank you so much very fun very fun all right you're leading the fpu class and they go my coordinator's 31 and his house is paid for. And they look at you and go, how did you do that? What have I got to do if I want to be like Manny? What's the key to getting out of debt? Well, in addition to writing down the goals, celebrating the milestones, Rachel, you touch on it all the time, contentment is one of the biggest things. Being content with what you have, really questioning anything that comes into your mind in terms of,

I want to purchase this or that. Is that a need or is that a want? In addition to that, sticking with the budget. I mean, really having a plan for every single dollar. I mean, every dollar app has been amazing in my personal budget. And then just being intentional. I mean, it comes down to really being intentional. I mean, I had people left and right, you know, buying brand new cars, you know, living the fancy, rich lifestyle. But really and truly that, you know, I had friends come to me and say, hey, I want to get on the plane that you've been on. I've been living paycheck to paycheck. I'm like, you were the one that bought the brand new vehicle like, you know, two months ago. Where did that money come from?

Yeah. So those are some of the biggest items that I would say to someone, you know, my age or just anyone doing the journey right now. And I love it because it was, it's a mix of the emotional side, right? The contentment and asking like, why do I need this thing? I'm wanting to buy it. What, what am I really wanting it for? Right. Asking those kinds of questions. But then the tactical side of actually budgeting, writing down goals, having that, I i mean like it's a perfect mix of everything absolutely you have to go with it with both the head and the heart and i feel like you just did that so well absolutely very well done great job young man so proud of you hero thank

you sir i love it i love it this is so well done so awesome all right it's official manny has paid off everything his house and everything and he's 31 shut up this is amazing 297 000 paid off in six months or six years 11 months making 65 to 140 count it down let's hear a debt-free scream all right glory, two, one. I'm dead free. Yeah. Don't you want that guy as the coordinator of your class? Yes. Woo. Man, that's amazing. Incredible. Incredible. What a sharp young guy. Very cool. And it's so fun because I'm like, you know, this, that free scream. Incredible. Incredible. What a sharp young guy. Very cool. It's so fun because I'm like, you know, this, that free scream, the one last hour. I'm like, these people, they're not superheroes.

They're people that just decide. They're just heroes. I'm going to just make a plan. They're just heroes. And I'm going to do it. And I'm going to do it. No, they're not superheroes. They're just heroes.

No, but you know, like it's, anyone can do this. So anyone listening that thinks, oh, there's something, you know, there's something about those people that I don't have. No, they just decided to. That was it. They decided to. And so it's, it's a lot of work. It's hard work, a lot of sacrifice, but anyone out there listening can be that because 31

and no mortgage. He comes out of college and went straight into it. This is awesome. So cool. And so great that the, somebody in our military is doing the things. Yeah. And we've got the classes all through the military all over the world and pretty cool stuff.

Very, very well done. Man, oh man. House is paid for. $300,000 house in Fort Walton Beach. No slouch. That's awesome. Love it, love it, love it. This is the Dave Ramsey Show. Thank you. this is the dave ramsey show common sense for your dollars and cents rachel cruz ramsey

personality number one best-selling author is my co-host today well we get it 2020 has left a lot of people feeling off balance stressed out discouraged but it's time to take a deep breath and hit the reset button do not wait to until January to do your reset you need to do it right now Halloween's over the election's over sorta and the and and the, you know, COVID is whatever it is, it's time for you to hit your reset button. Time to say never again, time to get your money under control, time to get your life under control. And all you've got to do is make a decision to begin a journey to a smarter life.

And we've got some help. The Smart Conference, when you watch the Smart Conference we've got some help. The Smart Conference. When you watch the Smart Conference, when you're involved in the Smart Conference, you get smarter for your marriage, your money, your parenting, your career, your goal setting, anything about it. We're going to be doing the Smart Conference. Usually we do it for 8,000 to 10,000 people in an arena. There will be 200 people here on Saturday,

and there will be tens of thousands of you watching it as a live stream. Live. Dave Ramsey, Chris Hogan, Rachel Cruz, Christy Wright, Anthony O'Neill, Ken Coleman, Dr. John Deloney, Dr. Les Parrott, Dr. Meg Meeker. No matter what your goals are in life, it's all day long. This thing's incredible. Yeah, it's such a fun event. I love this event because it's an all-day commitment, but your whole day you're getting content about every part of your life.

And it's such a great lineup. It's so fun. It's just incredible stuff. Yeah. And the neat thing about it being a live stream is we don't have to rent a venue because you're sitting on your couch. And it's 29 and if you are a ramsey plus member thousands of ramsey plus members have already signed up because it's free and so you can jump in join ramsey plus or you can just pay 29 watch the thing watch the smart conference all day this

coming saturday november the 7th it is live this is not something we pre-taped and then we're popping up a lot of these things are you're seeing right now that are quote live streams are no more live than fly to the moon this is live i'll be live on the stage rachel will be live on the stage we're going to be talking to you live if we mess up it'll be live so uh it is this coming saturday nove the 7th, all day long. Check it out at DaveRamsey.com slash events. Again, it's only $29. Open phones at 888-825-5225. Carl is with us. Carl is in Chattanooga.

Hi, Carl. Welcome to the Dave Ramsey Show. Hey, Dave. My wife's here with me. We're both longtime listeners. Thanks. I'm 67 and just retired. We don't have any debt.

And my wife retired at 62 a few years back. And she put her 401k into a self-directed IRA, and we now have several rental properties. But she has 300k in that self-directed IRA that we need to do something with. We need to roll it somewhere. And I have 180 in a 403b. And I don't know anything about annuities. I don't, somebody suggests, put it that way. I'm going to be talking with a financial advisor but i'd like to hear your thoughts too okay well i um not far behind you guys on age and uh the the variable annuities that are out there uh the vast majority of them that now are in a in out there are okay um the main thing that people do them for is for three reasons. One is they'll

give you a guarantee on the principal. They'll give you a guarantee on the interest if you leave it alone so many years. In other words, they'll promise you you're going to make at least a 5% rate of return, and if the market dives, they're going to give you principal protection if you leave it alone like five to seven years, depending on the product. The other thing you can do is you can name a beneficiary so it goes straight to someone instead of through your will or through probate. So much like a life insurance policy, it transfers outside of the estate. So those are the benefits. The downside is to get all that, you pay an extra fee.

I consequently have not done any variable annuities i just invest in mutual funds and i buy real estate and so um i'd put the 300 to k to work in the um in the self-directed and another piece of real estate if i were in your shoes but it's also okay if you want to roll that into a traditional ira uh it's okay to move portions of it out of that self-directed. There's no harm in that. And you could roll your 403B into a traditional IRA as well with a good SmartVestor Pro. Pick some good mutual funds and you'll do just fine with that money. That's what I would do. I wouldn't use an annuity. I don't see any reason for you to. The only time an annuity might work is if you have maxed out all your retirement, but this is all already in retirement. If you've maxed it all out and you can't keep the government's hands off the growth, the annuity is a tax-deferred growth like a 401K or something is, like a tradition.

But you've already got tax deferral on this, so it's redundant. Right. Well, we've got seven pieces of rental property now. In fact, we're living in one, and that's the other problem. We want to buy a house. We've got $150,000 cash for the house, but that's not quite buying a house in our area right now. So I didn't know whether to use some of that, or my wife feels like we're bringing in enough a month that we could put a mortgage on a house. But I'm dreading another mortgage.

We paid that off. I'm done with it. I wouldn't do that. I would cash out enough of either the 403B or the IRA and pay taxes on it and pay cash for the house if I were you. You're in good shape. You've done a great job with your money. Would you sell a rental property versus cashing it out? I'm asking Dave a question on your behalf, Carl.

I'm just asking what caused you, why go into the investments versus selling one of the properties, real estate? The rental properties are inside of the self-directed IRA. So you can't do anything with them without paying taxes on it as well. If you cash anything out of that, the IRA owns them, he doesn't, in a sense. I got you. And so if you cash them out, the profits or the proceeds, either one, would be taxable. And that's just like if you cash out the mutual funds, either one. Okay, I missed that.

If they were real estate that was outside that, that would be a valid question because you could do that without taxes, or largely without taxes. You might have a little bit of capital gains or something. But, yeah, that's a good idea. But the fact that you've trapped it in that self-directed. So you have to operate the rental properties. You don't get any of the money. You don't get the rents. The rents are all inside the IRA.

And anything you pull out of that, out of that self-directed, the benefits of the real estate in any way, once you pull them out of that self-directed IRA, since the IRA owns it, you pay taxes on whatever you take out. And so it's not tax-free in that regard, but you had a lot of money that you got to buy debt-free real estate with. And so that's why people use a self-directed IRA to buy real estate sometimes, and that's not a bad plan at all. So very, very well done.

Very cool. Good job, man. Good job. It sounds like they've done a great job. Incredible. Yep. Melissa's on Instagram. I'm in Financial Peace University.

I saved up my first thousand dollars for Baby Step One. Where do I keep this money? Baby Step One, that thousand dollars. I mean, just a traditional savings account, a money market account is fine. The idea behind the emergency fund is you kind of look at it as insurance, if you will. It's not an investment. So you're not looking to make money off that thousand dollars or even once you get to three to six months of expenses. So putting it somewhere where you can get to it is really important. I mean, you could stick it in your stock drawer if

you really wanted to, but just putting it in a traditional money market account is where we keep our three to six months of expenses, our emergency fund. The $1,000 doesn't matter much. The main thing is put it where you can't get to it too easy so you don't buy pizza with it, and put it to where it's easy enough to get to that you can cover an emergency with it. And so, like, one lady was kind of funny.

She went to Walmart and got a picture frame and put it in the picture frame and wrote across the bottom of it, in case of emergency, break glass. And so, you know, that way you have to think about getting the money out. But if you keep it in your sock drawer, the pizza man can get it. I know, but now there's just apps for pizza and it's amazing there's that too you are not going to be without pizza we know this about i'm not kidding the papa john's app is like it pizza just shows up it just shows up just like that you just push buttons it's just like amazon technology 20 amazon a pizza 2020 i love it i love it very I love it. Very cool.

That puts us out of the Dave Ramsey show in the books. James Childs is our producer. Kelly Daniels, our associate producer and phone screener. I am Dave Ramsey, your host. And we'll be back. Hey, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. This episode is over, but if you heard about an event, product, or service and didn't have a chance to write it down, don't worry. We list everything you've heard about during this episode in the podcast show notes or head to DaveRamsey.com. Thanks for listening.