The Ramsey Show - App - Build a Life You’re Not Exhausted By (Hour 2)

Episode Date: May 16, 2024

Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. I'm your host, Jade Warshaw, joined by George Camel. We're taking calls all hour long about your life and your money. So if you want to speak to us, if you want our advice, you can give us a call. The number is 888-825-5225. And we'll give you our best take. And listen, you're grown, so you can take it or leave it.

No one has to do what we say, George. Let's get that straight. I rarely think they actually do, Jade, but at least I sleep well at night knowing I told them exactly what I think. That is correct. Brutal honesty. We'll give you our honest opinion,

and then what you do with that is up to you and... It's between you and God. It's between you and God, really. Let's go straight to the phone lines. We've got Priscilla. She's in Pensacola, Florida. What's going on, Priscilla? Hi, Jade and George. Thanks for taking my call. I am two weeks in, rather, to this program,

and I'm a little bit older. I'm 48. My husband's 55, and so we're trying to figure out after we have the thousand dollars, we're on step two. We have a lot of assets, but obviously we have a lot of debt too. So I'm trying to figure out how to best do this. So we have three homes. One is out of state. There's nine years left on the mortgage. We owe about $450,000 on it.

It's worth about $900,000. It is fully rented. The rent covers the mortgage on it, so that's about $65,000 a year. And then we have another home that is worth about $450,000 to $500,000, and we owe $135,000 on it. We use that one as an Airbnb, and it brings in about $50,000 to $55,000 a year. We have another property, our lake house, that actually doesn't have a mortgage on it, but it sort of does because we took out $190,000 on 0% cards for 18 months. Yikes. Okay.

What's it worth? And, uh, it's probably worth four and a half, like four 50, something like that. Um, and what do you, is it rented or is that a vacation property? No, we're currently living in it because we, we renovate our homes. And so we, we got to that one 90 and we're like, we've done this before. Not that this is the right way to do it, but, um, we'll get to a certain point and then we take out 0% cards and then we take like two years and we just pay it off. So we were like, okay, I actually were at 175. I'm being corrected, but we get to a certain point where we're like, okay, that's too much. Let's just pay that off.

And then we have three cards. Only one has a note on it,, let's just pay that off. And then, um, we have, uh, we have three cars. Only one has a no on it, but it's like 50,000. And then we have a personal loan for 20 from a family member. Um, our income is like without the rental properties, it's 275, a little bit more during bonuses or whatever, but just say $275. Is that from both of you? Yeah. Plus the income that we receive from the Airbnb and the property that's out of state. So what I'm trying to do is, and when we pay all of this, we have, you know, extra money. It's not like when we did that every dollar budget, I mean, we have money left over, but, we have, you know, extra money. It's not like when we did that every dollar budget,

I mean, we have money left over, but I was just, I never paid a bill. I've been married a long time, but I never paid anything. So I had no idea. And our last kid just got married and I'm like, well, maybe I should look at the bills and see what we have. And I was like, wow, I spend a lot of money. So really I was just spending it. Um, just, you know, I never paid anything. I never, I just swiped my card and my husband paid it. So, um, but my question is, is do I just pay off the credit cards next or should I sell the house that's out of state? It would actually pay off everything that we own and start again. But my husband's concerned because we don't have a lot of, like in our 401k,

like investments, we have less than a hundred thousand. And he's like that house out of state, which will be paid off in nine years. I mean, we could make $7,000 a month. And so since it's paying for itself, so that's what he said, we're going to listen to you guys.

Just listening to you, you're all over the place. I mean, I'm exhausted. It was a lot. Priscilla, are you not exhausted? Playing the 0% games and this is all going to work out. And moving stuff on credit cards. You've got whole mortgages on credit cards.

So just let me understand the credit cards. So you've got the 190 from house number three on cards. Did I hear that right? Yeah, it's 175. 175. From the renovations of the house that doesn't have a mortgage on it. Okay. What else do you have on credit cards? That's it. That's it. So you've got the personal loan for $20,000, car loan for $50,000, $175,000 across

a bunch of cars, $135,000 on a rental and $450,000 on the other rental. Yes. Which house do you want to be living in? Like, of these three houses, are there any that you're like, you know, this is the house that we're retiring in? Or is the goal to ultimately buy someplace else and live there? Yes, that's it. So where we live, we want to be, we're on a lake right now, but we'd rather be on the ocean. So our ultimate plan was just to finish this, rent it, and then move to another property. So what would it look like if, so the out-of-state one, I'd love to get rid of the out-of-state one, but if eventually you guys are going to, you're going to stay in Florida,

you're just going to a different location in Florida? Yeah, probably in the same general area, just on the ocean as opposed to like on a lake. And the only other thing about that other house that's out of state is that the state that it's in, because we don't live there, charges, I think it's like 6% sales tax as like a penalty for living out of state and owning a property and selling in that state.

Well, if I'm you, I'm still getting rid of this out of state property. We never recommend out of state rentals because of the hassle factor. You don't have your eyes on them and you wouldn't choose this place in Florida where you are now. You're not going to go, hey, what if we bought this rental way over here in this part of the country? And you need the money. I mean, what are you going to get out of that? I just did the math here. $350? You guys would knock out both rentals, the car loan, and the personal loan, and the credit cards. you'd knock out everything and have money left over.

Yeah, I know. That's what I was trying to say, but my husband is just, I don't know. Here's what he's not thinking about. Now you have these cash-flowing properties, right? You have the cash-flowing property that's worth $450,000, the Airbnb. So you have $55,000 a year coming in from that. Is that after you pay the mortgage? Because would it increase if we got

rid of the mortgage on that? Yeah, but not by a lot because 135, the interest rate is so low, it's only like $500 a month. So it's not really anything to speak of. Okay, let's say we're up to 60. Then the lake house you're now going to rent out, right? That's paid off. Yeah, I would rent that out. So that's going to cash flow. You have no debt payments to make and you're making over $300,000. I think we can pick up a nice little nest egg fairly quickly if we didn't have debt in our life. Agree? I agree. Imagine being able to put away 50% of your income into investments. That's what you'll be able to do. That would be our next step. Like if we sold that house, you would just put 50% away. Is that what you're saying?

I'm saying you could. With your budget and your income, could you live off $150,000 and put another $150,000 into investments? I think the answer is yes. You could max out your retirement accounts, put money in a brokerage. Heck, you might be able to pay cash for more real estate later if you so choose. I'm just saying you're going to have way more options. And you said you're old. You're 48.

You might have another 50 years in the can here, Priscilla. And so you've got lots of time to build wealth with this income. And I want you put to good use instead of continuing to play games with debt. And that's going to be hard. Your husband needs to watch this call. I don't know that we can convince him, but this has to be a unified decision. 100%. Yeah, I think he's got to understand how you're feeling about this.

Because, again, it's not always just about the numbers. I mean, George laid out a really great numbers plan, but when you called in, it was exhausting. It was a lot going on, and you don't want to have that stress and that hassle, especially into your retirement years. So this is going to simplify your life and find you the money you need to get debt-free. Build a life you're not exhausted by. That's the new American dream. This is The Ramsey Show. You're listening to The Ramsey Show. I'm Jade Warshaw, your host. Next to me is George Camel, your other host. We're taking your calls all afternoon long. So that means you can give us a call. The number is 888-825-5225. Call in and we'll do our best to help you out with

your situation. Remember, let it be about life and money, career. Like you can throw some family stuff in there, but that helps. Don't go too far in the weeds. All right, let's go to the phone lines. We've got Tiffany in Denver, Colorado. What's going on, Tiffany? Hi, thank you so much for taking my call. So I started the Total Money Makeover about four months ago. About a year and a half ago, I had $70,000 in debt. I bring in about $120,000 a year, and I had approximately $20,000 in savings. I wasn't aggressively trying to pay down the debt. I was just paying what was due. And my aging dog, who I've had for a very long time, fell ill. And I spent more than that $20,000 that I had saved on his care. So since then, really grateful. He's been in quality health, but he is aging and he's aged out of being eligible for pet insurance. And so my question to you is over the last four months, I've managed to tackle about 12,000 of this debt. And, um, you know, I've took on a part-time job and a roommate and really just been very aggressively trying to pay down this debt. But as part of the total money makeover,

I reduced my savings to about a thousand dollars. My concern is some of these medical expenses for my dog are going to be upcoming and they're going to be big and so um we're talking probably over the course of the next couple years probably ten to twelve thousand dollars to get him the treatment that he needs and i know how old's the dog my life uh he. He's 11. But he's got good life in him. What's the breed? I'm not trying to. He's a Great Dane. Oh, wow. Listen, I get it. I have a Rottweiler. He's 12 years old. And I mean, they don't usually live that long. So I totally get it. Okay. Great Dane. Wow. He's doing good. He is. I'm very, very blessed blessed but I want to continue to be you know a good steward of this pet and I know that that's going to be costly so I'm curious what your advice is

do I scale back the you know vigor with which I'm paying down this debt I'm really hesitant to re-engage with those lines of credit in order to pay for his care. No, we're not doing that. Here's the thing. Let me just get a handle on the numbers because some of it was in the past and some of it's in the future. So you cleared out all the money you had saved. You're down to $1,000 and you now have $70,000. Is that where you're at in debt? I started at $70,000 and that's including all of my student loans, car, credit cards, and some of the debt that was incurred on his initial treatment.

Okay. And now I think I'm at like 52 or 53. 52 or 53. Can you tell me how much is on the credit card? It's spread across various credit cards. So I think there's 5K, approximately five and a half on one card. There's a care credit line, which I think I have three on. And then there's a separate revolving credit that has, I think, two on it. And how much do you owe on your car?

18. 18 on the car? And what's the student loan uh the remainder is the student loan what's the car worth probably approximately 18 i've been kind of impressed with the value that it's held here okay here listen okay we can attack this in a couple of different ways um as i mentioned before you know our advice is our advice. You can do what you want to do on this.

If you choose to put $10,000 or $12,000 or $15,000 aside to take care of this pet, that's your prerogative. It's really going to set you back time-wise. Now, you've got a nice income, $120,000. You really get to decide how extreme you're going to go on this. If you say, you know what, this pet means everything to me, I'm forfeiting the $15,000 for the pet's care, then that's just more. I'd try to make that up in side hustling. I'd try to make that up in any way possible. Sacrifice everything. The way I would look at this is,

I want to be debt-free as soon as possible so I'm able to cash flow all of the upcoming pet expenses. So let's say you have 52 left. You make 120. What if we could tackle this debt in a year or less? So in one year from now, you're debt-free and you're able to cash flow all the expenses. Until then, I would create a sinking fund if this is a priority for you and say, all right, I'm going to put 500 bucks away

every month for this dog. That will slow down my debt payoff by 500 bucks a month. And you just have to eat that and go, all right, I'm willing to make, you know, it's going to take a little longer. Or like Jade said, what if we could find a way to make an extra 500 that now goes toward the sinking fund so we don't slow down our debt snowball. That would excite me more about this process. But the thing is, we are not going into debt ever again to cover a medical expense for the dog or you for that matter. Okay. That makes total sense. And just to be clear, when I started the money makeover, I did take on a part-time job and a roommate. And so that is part of that $120. I

make an extra $2,500 a month. So I think a sinking fund sounds like a good idea in the short term. Had you projected your debt-free payoff? June of 25, if I keep paying at the rate that that i am i keep my living expenses as low as i possibly can so you're on track to do a year from now so this 10 to 15 000 now i do think and you know i might get canceled for this but i do think that you should set some sort of don't tell her to sell the dog no no i'm just saying that one before some sort of boundary or limit and say okay what am i willing to what more am i willing to invest into this because these things can go they can go crazy it can be unlimited i mean people have spent 30 40 000 to keep their animal alive and at some point you know people

have different feelings about this dave will go well it's sad but there's another dog out there and dave loves animals let me tell you that he's not an animal hater there may be no amount of money i would not be willing to spend to keep my two French bulldogs alive Tiffany and see I have a limit I get it I love my dog I you know I've had Bootsy since he was five weeks old but I do have a limit on what I would spend especially at his age and I think going into it it's good to have that so that if you do hit it hit that barrier it's like okay there's a little bit of I mean there's guardrails everybody needs guardrails so I think it's like, okay, there's a little bit of, I mean, there's guardrails. Everybody needs guardrails. So I think it's worth it to think through that. I hope it never comes

to that, but you know, that's what I would do if I were in your shoes. There's also that spot where you go, all right, this animal has had its best of its life and I have to do what's right for the animal. Yeah. And that might mean letting the animal, you know, continue on with its poor health and yeah and eventually it goes and it's sad but at some point it's selfish to keep an animal alive for our benefit when it's not doing well and it has a miserable quality of life now that's not this situation although a great dame did she say he was 11 11 that's he's he's on he's he's getting old he's gray i found the the the smaller you, French Bulldogs don't have a super long life,

but the small dogs can just keep going. Oh, man. Those guys, they hang in there for life. But the bigger the dog, you know, it's harder to sustain life with those big bones. My Rottweiler is 12 or 13, and he's showed no signs of slowing down. Although I recently, I'm thinking that his left eye is starting to cloud up a little bit. He's not seeing his treats as well. And so he's getting old.

Listen, I took my French Bulldog to the vet and they did x-rays and everything. And they're like, oh yeah, she's got a fused spinal bone. She's got the inverted tail. She's got hip dysplasia. Why? And I went, how did this all happen? She was like, oh, she was born like this. And I was like, oh, okay. okay french bulldogs they're just born broken and you're just that's why they're so expensive

jade it's just my dog's eyes don't make tears anymore that's how old he is just cries on the inside he has to have drops in his eyes and okay you guys can sound off on this we went to the vet uh two years ago for his eyes or maybe it was a year and a half and they said he's old his eyes don't make tears anymore so you have to have these drops for the rest of his life and i'm like okay that's great but every six months they want us to bring him back in so they can rewrite the prescription but he has to pay for a visit i'm like you already said this is gonna be it for the rest of his life that's a scam that's messed up i don't like that. I'll just tell you right now. Well, what do you feel about the pet insurance, George? Would you do it? You know, I rarely find that it's worth it, but you know, it's kind of

it's peace of mind insurance for some people, especially if you have a higher risk dog. So I'm not mad at people for it, but we would tell you, hey, get a sinking fund and put away that same amount of money. You'll usually end off, you know better better off financially so that's what i would do but most of them are overpriced for what you get well don't get caught up that's that's the moral of the story don't get caught up and don't go into debt for these pets this is the ramsey show you're listening to the ramsey show live Live from the debt-free stage, we have Will and Katie from Greenville, South Carolina. What's going on, guys? Good. Hey, how's it going?

We're doing pretty good. So what brings you in here? We are debt-free. Awesome. Good reason. Tell us how much you paid off. Well, I paid off $102,000 um i did it separate and will did it separate and we just got married a month ago so we made a promise to each other to start our marriage

debt-free that's this is a dual debt-free scream you guys did this individually became debt-free and then got married correct okay so yours was 102 yours was 102K, Katie. And Will, what was yours again? I was right at 45,000. 45,000. Okay. So what kind of debt, what kind of debt was it? Mine was all student loans. I knew it. I knew it. Will, what was yours? Same thing. Student loans. And I had a car payment for a little while. Wow. And how long did this take? Well, Katie, we'll start with you. How long did yours take? 30 months. 30 months 30 months well what about you it's 18 months was this a competition did you guys start at the same time like let's see who

gets there first obviously katie had the bigger number so i found the ramsey and the baby steps the ramsey show um and the baby steps first and we were dating and i brought it to his attention at dinner one time and um how. How long have you been dating? Five years. Oh, wow. Okay, so this was just, it wasn't in the beginning. No, we had been dating for probably a year or two. And I've, again, found the baby steps

and I was like, I can do this. And I've always been very budgeted and had an Excel spreadsheet, but this really made me fine tune it. And I was like, I can really get through my student loans and so I brought it to the table and I was like we really shouldn't get through our debt independent you know because we started and after two years we're like okay we're gonna make this a future thing and let's independently pay off our debt and start marriage um so was it a goal to do you have all your debt paid off before the wedding yes was it like a race to the finish here how close was it um we did it so i paid off mine first and then

he was a little dave-ish and um there were a lot of arguments um about you know really kicking his butt here it was some debates spirited conversation but he made me a promise um it was the start of 2023 and he was like by the end of the year i promise you i will have my debt paid off and he kept that promise i think it was the 23rd of december wow sweet just in the nick of time you swung in there exactly yeah well how do you feel when she brings us up at dinner you're like listen i'm trying to have my steak and and here you are how did that feel i mean it was it was interesting i was new to the the whole thing but uh it made sense once we got into it and then you start thinking about it in the future it's like okay like a lot of problems you hear in marriage derive from the finances right that's right the sp the saver, clashing heads.

I didn't want that stress. I wanted to go into this on the same page. That way, the worst thing we argue about, I forgot to take out recyclables. I love that. I mean, that's a smart way of thinking. You don't want these big problems. If you can tackle the big things, yeah, let it be about taking out the garbage.

I love that. What was the range of income during this time for each of you uh so mine was 63 to 87 and i started right around 50 ended up about 55 nice awesome what do you guys do for a living i'm an architect commercial architect cool i work inside sales at a distributor and then i work part time at a fedex package handler nice it'stime at FedEx package handler. Nice. It's awesome. So he picked up that job to pay off debt and I also talked him into selling his car. So I mean he's put a lot on the line. You're a persuasive woman. You should be in the sales role. You're crushing it. So what was the hardest part? I mean for each of you it had to have been a little bit different. I mean obviously Katie you of you it had to have been a little bit different

I mean obviously Katie you had more debt but you were earning a little bit more Will you had a little bit less like tell us how what was that dichotomy like I mean I I struggled like early on because I picked it up first so he was out there spending spending spending and I'm like I'm following this plan man and if you're gonna to be in my future, you better get on board. And I mean, he finally realized that he was like, he was like, I was going to lose you if I didn't get on board. I was like, yep, you were. Exactly.

Wow. That was a big fear for me. And just my background, you know, we didn't really have much growing up. So I finally get a job. I'm finally starting to see some income. And it's like, hey, by the way, we should use all of your money to pay off your debt right oh really it makes you feel some type of way exactly now you enter your marriage completely debt-free which changes everything yeah like the sky's the limit we just had our first joint

budget meeting which is very different for us because we've been so separate um so i mean that was like easy and fun and where's our money gonna go i love that we got to pick that out well some couple's first budget meeting is like oh shoot we got to pay off your hundred thousand in student loans like there's some resentment there's some frustration there's some anger some sadness and so i love that you guys entered this season with just joy and freedom that's beautiful you have the honeymoon already yes where'd you guys go we went to uh saint lucia oh nice paid in cash i have to hope exactly yeah that's one of the the beauties of this is you can do trips like that and you don't have to worry

about the repercussions when you come back no credit card payments to make after this trip exactly so look at the photos it's beautiful they had their little their fancy drinks how did you guys how'd you uh how'd you play in the the cost of the wedding did you have family help or was that part of the the debt payoff like how'd you do that so we cash floated um my parents paid for half of it um they were gonna put in all of it but i was like no we're grown up like we can do half of it come on now cash floated we cash flowed the honeymoon. He cash flowed my engagement ring. So everything has been cash flowed, cash flowed a new HVAC system. I mean, so everything,

once I got on board the steps, it was just, I mean, all in. That's something. So what do you say to the folks who are in your shoes, right? Maybe they're newlyweds. They haven't started on their debt yet. Maybe they're engaged and engaged and you know they're starting to have those preliminary money conversations what would you tell them for me bogo groceries you got to get the deals um and then take advantage of the free tools that are out there you guys have a great app that it's completely free what's it called it's that every dollar come on every dollar budget an app um the tools are free hustle on the other hand it's sold separate you got to put the work in hustle so yeah and and just don't let other people get in your head people will tell you all day their financial advice that's fine if it works for them it works for them do what's going to work for you and your future and once you get to this point it's so magical i can't explain it

to you i just hope that you can experience it one day too. See for yourself. And you can. I love that. That's beautiful. Oh, my goodness. What an exciting time, guys. Yeah.

So what's next for you guys? We are going to get a new car. Well, a new car to us. So we talked the other night that we're going to – his car is really old. So we're going to save up for a couple months and in the fall, purchase a used new to us car with cash.

Ooh, buying cars in cash. And you guys now have the muscle built of going, we know how to save up in cash flow things, vacations, HVACs, cars. Nothing scares you once you've done the hard work of paying off, you know, six figures in debt. Right. And we do have a mortgage. i got into a mortgage on my own um prior to the baby steps but um now it's our mortgage and we've got a goal of um december 2025 no way we are back in gazelle intensity wow y'all are going intense on the mortgage too i'd like to get it done that's also on our horizon well we're proud of you guys we're going to make sure you have two EveryDollar gift cards since EveryDollar worked so well for you.

We've got two that you can share with the people in your life, hopefully inspire them to get down the right track as well. But let's get ready to set up that scream. So we've got Will and Katie from Greenville, South Carolina paying off separately before marriage,

$102,000 and $45,000 in 18 to 30 months, making $55,000 to $87,000 dollars you guys are rock stars let's count it down three two one we're debt free let's go i love it man i'm proud of them he said the hustle is sold separately that's gonna be living in my head rent free for a while that's real like we'll give you the plan but here's the other life hack threaten your fiance into debt freedom that's a strategy it worked for katie i'm just saying she was like if you don't do this this deal is off it's like you want to get with this you're gonna have to

get rid of that debt first all right i love it and i love that they did it the right way they're like listen you do yours i'll do mine we come together. We'll cash flow this wedding. And then we'll go to St. Lucia to celebrate. Wonderful stuff. It doesn't get any better than this. Wow. This is The Ramsey Show. You're listening to The Ramsey Show.

I'm Jade Warshaw. This is George Camel. We're taking your calls. So give us a call. The number is 888-825-5225, and we'll get you on the board. Hey, we've got a great event that's coming up soon. It's called Dave Ramsey's Investing Essentials, of which, George, you're a big part of this. I am stoked for this event.

We are preparing. There's so much in the weeds in the best way possible. I'm like, Dave, you've never shared this stuff publicly. He's like, no, this has been in the recesses of my brain for 20 years. So it's going to be very interesting as we deep dive on, of course, the investing 101, the basics, but very quickly getting into some more nuanced pieces. How do you choose mutual funds? What's the formula that you use to buy real estate property? He's going to do some deep dives on that. I'll be covering a lot of the investment traps. We're taking questions live, pre-submitted questions

from the audience, and we've already got thousands signed up for this. So it's going to be a great two nights. I've been asking some questions from some of the folks who have helped put this together. And it sounds like the first night is mostly investing, like stock market investing, and night two is the real real estate real estate yeah i love this okay so at the event dave's gonna go into deep diving into investing and for the first time ever he's sharing his personal playbook on investing including exactly how he buys real estate this is a two-night virtual event again it's happening may 21 through may 22 and because it's online you can watch it in your Snuggie.

That's what I'm talking about. And here's the best part. If you can't make the exact time on those days, you have 48 hours after the event to catch the replay. And if you do VIP, I think you have 14 days. And so this is a great option for those that are going, hey, I can't make it. Still sign up because this information is well worth your time.

It's tickets are $1.99. Oh. And you can bring your spouse on board. You don't have to pay for an extra ticket for them. Still sign up because this information is well worth your time. It's tickets are $199. Oh. And you can bring your spouse on board. You don't have to pay for an extra ticket for them. $199, you'll have access to the stream. I love that. Investing is something that you guys have asked us about.

You've said, hey, we want to go deeper into this. We want to know more about it. And so this event is for you. We're starting with the basics, okay? But then we're diving into the specifics. Like George said, things like mutual funds, real estate. You'll learn specifically how to maximize your 401k and your mutual funds as it's related. You'll learn Dave's personal strategy again for his investing and which investing trends to follow and which ones to avoid.

So, again, tickets, they're $199. If you do, invite me to your house. I want to watch it. I will be taking notes and I'll be standing there the whole time. Like, okay, what was that, Dave? One more time. I'll watch the replay. I know, right? Visit ramseysolutions.com slash events to get your tickets today. Love that.

I can't wait for that. That is so, so valuable. All right, let's go to Birmingham. Let's see, Effingham, Illinois and go to Missy. What's going on, Missy? Hey guys, I'm so happy to talk to you. You as well. How can we help? Okay. So I want educated today. I want to know about my whole life insurance. I know that Dave doesn't like it. So I want to just cash it out and put that money onto our debt and get out of debt a few months faster. But Dave also says,

don't do things that you don't understand. So I want to understand these policies. And I just don't understand the, you know, what, what I would get or what my, my husband would get if I passed away. I know Dave says like some of it, the insurance company is just going to keep. That's right. with most policies yes the way it's set up so so first off i mean i would say i love that you're digging into this i love that you're getting the sense that whole life isn't the way to go however i wouldn't just up and cancel it cash out get your cash value and run we want to make sure that you're covered um that you have the right life insurance in place. And we kind of like to bridge that gap and get one in place before you cancel the other one.

So if you're thinking about term life, that's what we would suggest. It's a whole heck of a lot cheaper and you get the coverage for the term that you choose 15 or 20 years. And that frees up a lot of money that you could do your own investing with as opposed to a whole life situation.

That's part of my question though, because I have two policies, two whole life policies, and I only pay two hundred and seven dollars a year on one thirty nine dollars a year on the other one. So they're not breaking me by. But what are these policies worth um one of them the benefit amount is 20 000 the other benefit is 5400 and see that's that's why you're not paying much you ain't got no insurance okay we want we want your turn we want your insurance coverage the whole purpose of it let's go back the whole purpose of it is to cover your income for the people who depend on it. So if you were to pass away, you have a level of income, you know, your spouse is dependent on that and vice versa. And so we would usually say 10 to 12 times what you earn in a year is what you're looking for.

That's the coverage amount. Maybe if you're a stay-at-home mom, George, what is it? Three to four times or four to five times? We generally say at least, you know, a $500,000 policy, assuming that a stay-at-home spouse, it would cost at least a, you know, a $500,000 policy, assuming that a stay at home, you know, spouse, it would cost at least 50 grand just to cover some of the duties. That's right. Like childcare and some of the other things involved. So that's why this is so cheap. And I guess that's where me and my husband, we haven't talked fully about how much life insurance I

should have on me. Like he has a ton. So if something happens to him, I'm set all as well. And I guess like I guess we kind of feel like I don't need as much as he has on himself. If I were to pass away. Well, again, that rule of thumb, the rule of thumb to tell him is 10 to 12 times your income and 10 to 12 times his income. That's what we're looking at. And then at least half a million if it's a stay at home spouse. So that's the rule of thumb. And what we're here's here's the crux of this entire argument and you said it before you know in these whole life uh packages part of part of the money that you're paying is going to your premium and part of it is investing into your cash value right and when you die if something if something happens and you pass away, you don't get to keep the cash value.

That's what we always say. And so the insurance company, that's the part that they keep. OK, so we always say, well, that's not fair. If you've invested, been investing into this for all this time, shouldn't you get to keep it? And you don't. So that's thing one. And thing two is if you really think about it, a lot of those whole life situations, the rate of return is really, really bad, like two to four percent bad. Like it's really bad. So the idea is, hey, you could get a term life plan at a fraction of the cost. And with all that extra money, you could invest into good growth stock mutual funds and get a rate of return that's eight to 10%. And it's invested in what you want it in. You've got a lot more choice in the matter. And so that's why we say that. Plus, then there's the idea that if you work the baby steps and you keep on going, at some point,

you're going to be self-insured and you're not even going to need a policy like this unless you like one. You don't need insurance for your whole life you need it until you're self-insured and that's the problem is you pay this thing forever and it's so expensive here's the deal if i told you hey buy my auto insurance but i'm gonna make you pay an extra few hundred bucks and you can invest through your auto insurance you would you'd be like you're an idiot i'm not buying that and yet we do it with life insurance every day and so that's one more reason to go this don't mix your insurance with your investing let your insurance do what it's supposed to do so let's

say just hypothetically you know i drop dead tomorrow what like is the benefit amount or the death benefit is my husband actually going to get that or they would write him a check for the benefit you said it's 20 000 and one was 5400 so he'd get you know 25 400 okay but he may not get the cash value most policies are set up to where you don't get the cash value if you die you only get the benefit amount the face value of the policy and let's just pretend let's pretend you did get the death benefit let's pretend you did get the the cash value how much cash is in this thing oh it's not much of anything one of them one cash value is 1700 the other cash value is 972 i'll buy some flowers for the funeral i guess with that kind of money i'm like you could take that money like i said and invest at a far better i mean this like i said many of them are like two

to four percent so you could do better in a high yield savings account is my point. Here's the spark notes. Get term life in place. Make sure the policy is effective and running. Then cancel the whole life. There's going to be surrender, whatever fees, and you're going to eat crow on it. But you know what?

You're going to set yourself up for wealth building the future the right way. And I'm going to send you a copy of my book, Breaking Free from Broke. I want you to read the investing traps chapter with your husband because I cover permanent life in detail, explaining with the numbers and covering the different types. And I think it will give you some peace that you guys are doing the right thing.

Okay, great. That's awesome. Thank you so much. You're welcome. Hang on the line and Austin will make sure you get a copy of Breaking Free from Broke. What a great call. We get that all the time. I think there's a lot of confusion around that because people, for some reason, like to use their insurance as investing

tools. Well, and it's peddled so hard because people make so much money by selling it. There's a reason Gerber's got life insurance for the babies on there, and you think you're being a good parent. Your baby doesn't have income. There's nothing to replace your people. That's a very, very good point. Although my baby hopefully will with some modeling gigs. Your baby is very cute. Baby Mia is... Too precious. Yeah, she's front cover worthy.

Definitely. All right, that does it for this hour of the show. Thanks for hanging out with George and I. We'll see you next hour on The Ramsey Show. Thank you.