The Ramsey Show - App - "Buy. Now, Pay" Later Is Exploding (Hour 1)

Episode Date: June 28, 2023

Ken Coleman & George Kamel answer your questions and discuss:  How to budget on an irregular income, from the blog: How to Budget With an Irregular Income The best accounts to use when saving for college tuition and home purchases,  from the blog: How to Start a College Fund How "Buy Now, Pay Later" is exploding and users are struggling, from the blog: Buy Now, Pay Later? Why Installment Payment Plans Are Hurting Your Wallet How to know if you can afford to purchase a vacation home, from the blog: How Can I Afford a Vacation Home? Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Here's an EveryDollar deal just for our listeners: get a 14-day free trial PLUS $15 off your first year of premium. Click the link below and start budgeting today! www.everydollar.com/george Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, this is the Ramsey Show where we help you win in your life, specifically your money, your work, and your relationships. It's a toll-free number to jump in, America. 888-825-5225. 888-825-5225. I'm Ken Coleman, joined by my colleague, the incomparable George Camel with a K.

This is why I love hosting with you, Ken. You know how to butter me up. Well, you know, you're a great joy to be together. Some of the people out there in the social media land where you live, I stay away from the comments. You like to dance among the comments, have referred to us and our combination as a root beer float. That's right. And we still don't know who the root beer is and who the vanilla ice cream is. Well, you self-proclaimed that you were the root beer and that I was the vanilla ice cream.

I'll take it as a positive. Well, you're so smooth. Well, I don't. And I got a little zip and zang to me. Zip and zang. Yeah. Making words up. I like it. George and I are here. We have a lot of fun together, so we're going to have some fun, but we're here to help you. So let's go. Jolie. Oh, I just want you to start singing, George. I want you to just bring out the guitar. I want to stay on the air. I mean you're in nashville and you you see the word jolie on the screen you know you start thinking about dolly it's close to great songs it is i know but you think jolie and jolie you know you see where i was going there i could get there come on i could get there you don't you didn't think jolene no not at all no jolie all. She probably hates it now. Fort Worth, Texas is where she is.

Jolie, how can we help? Hi there. I actually get that a lot. Yes. Okay. Ken's right. Thank you. Because George was being snarky there with my Jolene reference. I know your name is Jolie, but thank you. How can we help? Well, I'm used to it. So I am an 18 year old photographer. Um, I started my business when I was 14 and I just graduated high school in May. Um, I'm looking into being full time, but I'm also willing to be going to community college on a full ride here in the Fort Worth area. So I won't have any student loan debt. Basically, my question is, how in the world do I budget and set myself up for future success when I don't have a consistent income? Great question. And I'm so proud of you for, first of all, at your age, doing what you're doing, going to school debt-free and wanting to be on a budget with this, I'm just so impressed with you from the get-go. Thank you. What kind of money are you making?

Last year, my business made about $20,000. That wasn't necessarily my take-home. I think I took home about $13,000. Okay. I took home about 13. So that was the very early stages of everything, and I couldn't do a lot of the legal stuff until I turned 18, so there were a lot of fees that I've run into trying to get everything legal and set up. What do you expect to make this year, knowing that you're going to go into community college,

so you're going to be doing that? Do you think you're going to make the same, a little bit more? I'm just curious what your projections are. Probably a little bit more. I've raised my prices a little bit and I have quite a few weddings on the books. So it should, I'm kind of assuming around 30. Okay. Awesome. Okay. So when it comes to budgeting, are you using a certain tool right now to budget? I just downloaded the EveryDollar app. Yes. And paid for the premium. You paid for it?

Yes. Oh, I was going to give it to you. George was going to give it to you. Well, how about this? I'll give you another year. That way when this one runs out, you'll have another year ready to go. Look at that. So hang on the line after we're done. We'll get that going. But because you have the premium

version, here's an awesome tool in there that helps with those that have a regular income. It's called paycheck planning. And so you enter in each paycheck and it will show you exactly when you would run out of money based on that paycheck, based on when your bills fall. And so what you want to set up is a prioritized spending plan. So what you would do is you'd list out your income for the month, you'd list out your expenses, but you're going to order the expenses in the priority. So obviously food, utilities, housing, transportation, giving, those things would come first. And as long as you have money to cover those, we move on to the next priority and the next priority. And at the very bottom of that list is going to be life's little luxuries. Maybe your subscriptions, your self-care, whatever those things are for you, those come last. And if you have the money to cover them,

great. And if you've got a leaner month, we got to make sure we at least can cover those four walls, food, utility, shelter, transportation. So you know what a bad month would be for you, right? Right. What would that be? I'd be about two to three sessions, so probably about $500 total. Okay. And what are your expenses, your bare bones expenses to get by, cover all the bills? I would say, I mean, for a month, I'd say about $300 just because I still live with my parents and I don't have a car note or anything. Awesome. Man, this makes life so much simpler, doesn't it? When you don't have debt payments to think about and giant mortgages. So right now,

you know, life is simple right now and the numbers are nice and low. And even with that income, you're able to cover those bills. So you're going to cover that stuff first. And that extra 200 bucks is going to go down the list until you run out of that money for the month. So it's that simple. And for those of you listening out there, we're talking about Every Dollar. We're talking about this paycheck planning feature. I want to let you know that right now, we've got a really cool deal. If you go to everydollar.com slash George, this is a limited time. I got the team to make my own little website on there and you will get 15 bucks off the annual subscription and you'll get a two week free trial. So you can check out those features I talked about like paycheck planning. We have a new financial

roadmap tool, goal planning. There's all kinds of cool stuff our team is putting in there. And paying attention to your money is the foundation. Whether you make $30,000 or $300,000, you don't want to wonder where it's going. You want to know exactly where EveryDollar is going. So go check that out, EveryDollar.com slash George. Tell him I sent you. There you go. I like this. Julie, he's talking about where your money's going. I think you know where you're going. What's that long-term dream? I'm curious. My long-term goal is to just be a full-time wedding and senior portrait photographer. I actually just visited Tennessee last week and I was in Franklin and I am just absolutely in love with that state. And so long-term, I would love to be full-time out there.

Oh, yeah. But really, you know, no matter where I live, I would just love to continue to do this. Good for you. Well, let me tell you something. George gave you the basics, and you're really in a good situation being young, but this business is off and running,

and you're only going to grow it. And socking money away at this point, at this point in your journey, just save, save, save, be more disciplined, have some fun. You're 18, but the more you save, the more freedom you're going to have long-term. And I think you're going to crush it. You're going to be great. And if you ever get to Tennessee or move to Tennessee, this area we're in, Williamson County, George, if you get out some of these back roads, it is a wedding portrait or an engagement portrait waiting to happen.

And I would let Jolie take senior portraits of you and I, Ken. What do you think? Oh, I see. I never had a good one. I'd love a redo. You know, I'm willing I'm on a couple days. I'm willing to bring my senior picture the next time I'm on with George. Wow.

And I'll tell you why. It'll give him unlimited fodder. You should see it. 1992 the year was, George. I'm going to have a whole stand-up special dedicated to your senior portrait. I'll let you see it because I don't mind. It was a pretty good picture for back then. Back then the operating phrase.

Hey, George and I, well, we got to pay some bills with these commercials, but we're not leaving. Don't move. Helping you win in your life, in your money, in your work, and in your relationships. This is The Ramsey Show. I'm Ken Coleman, joined by George Camel. We have people that are tuning in every day to an episode of the Ramsey Show, and you're starting to learn the language, or you know what we talk about when it comes to money and working relationships, but you're feeling stressed because you're stuck financially. And there's a difference, George, you know this, between knowing what to do with your money and actually doing it. As Dave has said for decades, personal finance is 80% behavior, only 20% head knowledge. And that's why we believe in our

Financial Peace University classes. This class is different in that it is the difference between trying to get in shape on your own, which never works for me, and hiring a personal trainer. You have a coordinator holding you accountable and other people in the class pushing you and cheering you on. And that's why this class has worked for millions of people. After nine weeks, you'll never handle money the same way again. Don't just listen to the show. Dive in. Commit to doing what it takes to win.

Join an FPU class at ramsaysolutions.com slash FPU. That's ramsaysolutions.com slash FPU. I've got a class tonight. In fact, I just met a nice lady that's in the class that I'm coordinating. So it's a virtual class. You get to see her in person. That's exactly right. Pretty wild.

See her here. And then tonight, she better be there. She'll see me on the Zoom, right? So that's pretty wild. Your class is going well. Yeah, we're cooking with gas. We got a lot of credit cards cut up. We're a little earlier

in the journey, but it's been an awesome time. I mean, the fact that people are committing, they're showing up week after week, following the steps, watching the lessons. It's very encouraging. Love it. Hey, if you're new to the show, I am the Ramsey personality that focuses on work, all things related to work. As Dave has said for decades, your income is your greatest wealth building tool. I want to help you make more money. And a part of that, George, is doing work that you really, really love. The largest study of net worth millionaires said that 96% of those millionaires enjoy their work. And that's what I specialize in. So I'm throwing that out there. If you're feeling stuck or you're feeling confused, wanting to get a promotion, want to make a pivot,

we'll take some of those calls today because those play in big time to your money. So I just want to throw that out there. And George, I love taking those calls with him. So we'll take your work calls, your money calls. Let's go. Athens, Georgia, the home of the University of Georgia two-time national championship winners in college football, George. That's a sport where people wear helmets and pads. I've seen that one. It has a face mask on it. There you go. Casey is joining us in Athens. Casey, how can we help? Hey, thank y'all for taking my call. How are y'all? Good. How are you? I'm doing well. Thank you. How can we help? I just have some general questions about how I'm saving currently.

I am 31. I make about $3,600 a month. I have no debt. I currently have $14,000 in an emergency fund at my local bank. I have $6,300 in a high-yield savings account that's for things such as like my future house, car insurance, and Christmas. I have about $100,000 in my retirement account, and I'm trying to figure out what's the next step. I really need to be saving for college for my son. He's two. But I don't really have anything started for that,

and I don't really know where to put it. I don't know, you know, what if he chose not to go to college? I don't know if I want to put it in like, you know, a mutual fund, you know, to something that I start myself that I can pull out or, um, what I need to do from there. But also I have, my husband and I had started him a, his own mutual fund. It's just an S&P 500. And I think it has about 3,000 in it, but it has a rule on it, like we said, where he can't touch it until he's 21. And I didn't know if that was best or not. So kind of trying to figure out which direction to go in right now. Yeah. You guys have a lot going on and you have a goal of buying a house. Are you guys renting right now? Yes. And you said 33,600 is your take-home pay. Is that household or is that just you?

That is just me. Okay, what about your husband? Is he working? Yes, he works. And he kind of has variables. So, like, it might be, I would say at minimum it's an extra $3,000 on top of mine. Okay. I mean, you guys have combined finances, right?

Yes. Okay. I mean, you guys have combined finances, right? Yes. Okay. It sounded like it was my money, his money, but I wasn't sure there. No, sorry. I said it separately because of my retirement, obviously, is separate. Got it. Okay. So you guys are at baby step 456, which means you should be investing 15% into retirement. You want to put a little bit away for college and then whatever's left, obviously you don't have the house yet. And so that's a goal for you guys. Once you get the house, we'll start paying on that mortgage and get that knocked out. And so are you investing 15% of the household income right now? Yeah. Currently the way mine is set up specifically, I don't have his exact numbers, but mine is 9% at my Roth 401k at work, and they do a 6% match.

And then I have a Roth outside of here that's mine that I do about $500 a month. Okay, and that would add up to about 15% of your income, if you do the math on that? Cool. Okay, so beyond that, you also have this goal to save for this house. How urgent is the house purchase? Not urgent. We have like a five-year plan, maybe. Okay. So beyond that, you also have this goal to save for this house. How urgent is the house purchase? Not urgent. We have like a five-year plan, maybe. Okay. So I would set that goal for that house purchase. Let's say the down payment, you want, I don't know, $100,000. I don't know what that number is for you guys. So five years, a hundred grand, that's 20 grand a year. And let's set up a separate high yield savings account. so Christmas and insurance doesn't get all mixed up with house down payment.

You have a very clear target there. And as you set that five-year plan, I would open a state-specific 529 plan. It doesn't have to be Georgia's. You can search around. You can get with one of our SmartVestor pros on our website. They can help you find the best one for you. But a 529 plan is tax advantage for all of those future schooling needs. And the question you said, and this is a good one, Ken, people always go, I just don't know if junior is going

to go to college. So I don't think we should save because what if they don't? But what if they do? And what if you don't have the money? And what if they're burdened with $100,000 in student loan debt? And that is my bigger fear. And so the great thing about a 529 plan is that there's some new legislation with the Secure 2.0 Act that allow you to enroll a portion of that over to a Roth IRA if they don't end up using it. And let's also remember that, George, it's not just limited to a four-year degree. So for instance, there are tech boot camps. There are all types of certifications. Two-year programs. I was just touring a two-year program in the film industry with our teenager yesterday.

So all of that, Casey, that 529 can be used for all that. It does not have to be a traditional college, because I'll be honest with you, your little one at two years of age, we're seeing college enrollment drop precipitously. I think it's going to continue to do so by the time that he's making a decision. I think higher ed is going to look very, very different, but you'll still have options there. It's not like you're going to invest it and then be stuck, not know what to do with it, as George mentioned. Okay. That sounds good. Yeah. But you're doing great. Good mama there.

Absolutely. I love that. I like keeping it separate. The 529 plan for college, let's get the retirement going in the 401k, and then for the house savings and the short-term goals, let's say less than five years, a high-yield savings account is a great place to park that money. Right now, the interest rates are great. It may not be.

Back when I was saving for a house, the interest rates were about 2%, and I was freaking out, Ken. I was like, we're going to make hundreds of dollars. It's not life-changing money right now. Interest rates are at, you know, but over 4% for a savings account. So right now is really one of the best times to save up for a house. Obviously house prices are crazy. So it's kind of a wash, but you know, when you're making 4% of your money guaranteed and it's safe and FDIC insured, you sleep easy at night. That's right. I want to stay here for a second because I think there's some questions that people have. We see it certainly in our FPU classes. We hear them from time to time. So for new folks or for people that are in this situation

right now, they're going, okay, I'm not at baby step five yet. Four, five, six is four is 15% of your income towards retirement. Baby step five is the funding college. There is a point of no return where we say, all right, and I want you to walk through the nuances of that because I think that that's important. If you've only got four years, you understand what I'm saying? So you're late to this? Well, the point of investing is for that money to make money. And if you don't have time for the compound growth to happen and the stock market could go down in two years with that short of a timeframe, you may just want to park it in a savings account because junior is going to go to college in a year or two. We got to be prepared and make a plan with them.

So our window there is less than five years. Is that about right? Less than five years. You know, you could see that money take a dip. Over five years, chances are you've made at least some. That's right. So less than five years before kiddos going to college. You just want to park that in a cash account and not invest that

because you just have too much risk. I just wanted to point that out. That's a good call. Because that is important for a lot of parents. And junior can work, by the way, and they can apply for scholarships and grants, but the key is to have a conversation and make a plan and don't just assume. Yep. Good stuff there.

Thank you so much for the call, Casey. And, George, good stuff there. All right, don't move. More of your calls coming up. He's George Camel. I'm Ken Coleman. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman, joined by George Camel. This hour, the phone number to jump in is 888-825-5225. We're talking about your life through the lens of your money, your work, and your relationships. All three of those areas of your life are connected. If you want to be winning in one of them, you need to be winning in all of them. And we are

taking your questions, 888-825-5225. You got a work question, an income question. I specialize in that area. And if you've got your money question, George is the Mac daddy over here on that. Do you even know that phrase? I've heard it. I've never been described as a Mac daddy in any shape or form. Well, you're about to be a daddy, so I think it applies. I appreciate that. How's your nerves? How are your nerves doing with being a dad for the first time? We're about two months out, and so it's starting to feel real. You're going to be a girl dad. Yeah. That's your nerves? How are your nerves doing with being a dad for the first time? We're about two months out, and so it's starting to feel real. You're going to be a girl, dad. Yeah.

That's exciting. I'm very excited, but I'm going to be honest. My lack of sleep is already kind of- Yeah, I can't wait. I can't wait for you to walk in and sit down next to me and try to put a sentence together. I'm going to be a zombie. Yeah, you are. You're going to be fine, though. Thank you. You're going to be a great zombie. All right, so George, I've got another trend that just feels like the trends are everywhere.

You are a trendy guy. No, I'm not. But you have a line about the trends. Oh, that's right. Let's deliver your signature line, and then I'm going to tee you up to comment on one of these trends. Go, George. If you follow the trends, you'll fall for the traps.

Folks, that's why he is who he is. And you love alliteration, Ken. I do. I knew you'd appreciate that. The whole thing makes me happy because you're right and it sounds good. Well, and it summed up what this entire generation, what they're doing. They're looking for the latest trend because they want to build wealth way too fast or have a shortcut to avoid pain. And it ends up being a trap.

Well, I want to throw a trend at you that you're already aware of, but I think it has now reached ridiculous proportions. A friend of ours, a mutual friend of ours, Andy Barton, the OG, was out shopping recently and saw this picture. I will describe it for our listening audience. Guys, let's throw this picture up for our YouTube and viewing audience. They will see this picture on the screen. There it is. It's in a Walmart. That's in a Walmart.

And you've got several cases of Coca-Cola. In fact, those are 24 packs. Good heavens, that's a lot of Coke. And you can see there the rollback price. It was $12.58 for this. It is now rolled back there to $11.28. But can you zoom in there, guys? I don't know if we can zoom in.

I have it here. You've got it. Right next to it, it says, easy monthly payments with Affirm. You can pay over three, six, or 12 months. No hidden fees. Now, I want to hit this. Three, six, or 12 months,

you can finance your Coke. Or is it payments can't it's all blurry but there may be payments it doesn't matter 12 payments of a dollar each to cover of a dollar each a pack of coke to cover something that's going to be gone in a week oh my gosh george the mentality of the walmart shopper going like hey put it on my tab because Because I'm assuming, tell me if I'm incorrect, I'm assuming that the reason Walmart's offering this is because people are taking them up on it. Oh, 100%. Please tell me you're buying more than one case, though.

You never know. As absurd as that is. I've been to Walmart. I think most people buying a pack of Coke, they're buying a few packs of Coke. They're going to run through that thing pretty quickly. Are you taking shots at the Walmart shop? I'm just saying the soda lovers out there they love them you don't just get 124 24 cans is a lot you need 48 i mean that's too much sugar for a little guy you need 64 i'd

be comatose oh man but here's the fun fact for you ken i. I dug into this on my podcast, The Fine Print. Turns out on Klarna's website, they brag that, hey, companies, businesses, if you use our buy now, pay later service on your website, the average store order will shoot up by 45%. Right. Because people are buying in bulk now. So people go, well, Ken, there's no fees. There's no interest. How am I getting screwed here? It's yourself. That's what's happening here. You're way overspending because you don't feel the payment when you get to pay 25% of it today and another 25% next month and next month and next month. It's just ridiculous. Well, this is nothing new. In 2022, folks, listen to this. The share of online purchases using

Buy Now, Pay Later grew by 14% compared to 2021. This is from Adobe Analytics. But now, George, as you said, the piper has come calling. Rent is the piper. The rents always do. Buy Now, Pay Later orders growing 40% in the first two months of this year compared with a year earlier. And now these users, which accounted for some 70% of consumer borrowers between the first quarter of 2021 and the first quarter of 2022,

were 11 percentage points more likely to have a delinquency of at least 30 days on their credit records compared to non-buy-now-pay-l later borrowers. So these are, I don't know how else to say it. These are the most egregious borrowers. They're getting in more trouble than your regular borrower. Of course, they're just going, whatever, throw it in the buggy. Well, what at one point sounded like a good idea to just put those things on payments is now becoming, oh, I actually can't afford this. I thought I could afford that payment next month. And it turns out I can't. And now I'm

delinquent and it's affecting your credit. And you know that we are, we're not fans of the credit score here, but a bad score can hurt you. Yeah. And that's a huge problem for so many Americans. And I called this out, Ken, in our January building wealth event, I said, mark my words, the biggest trend of 2023 is going to be buy now, pay later exploding. Yeah. As more and more people are broke, inflation and the cost of living is so high, Ken, what else are we supposed to do? Put those purchases on payments. And can I just say, this is not people's rent and food. We're talking about some frivolous purchases here,

some consumer spending. This is the only thing that would make this more frivolous is that was beer agreed yeah you know i mean the coke i mean come on you're you're gonna buy now you're gonna buy your buzz now and pay later yeah you see what i did there that was pretty good yeah i like that you're giving them taglines yeah don't don't help yeah yeah some marketer out there went did you hear what the guy on the ramsay shows then we're gonna borrow that you know but, here's the deal. These folks are going to be in delinquency, and then it just creates more and more and more stress. And the thing is, these companies aren't going to quit this.

No. And we're only seeing the share increase, and Apple just launched their own Apple Pay Later, which is their version of this buy now, pay later scheme. And I'm telling you, America, please do not use these under the guise of, well, it's better than a credit card because there's no interest. There's no fees. Well, a lot of them do have some real sneaky fine print. And let me remind you, the biggest issue I have with this is not the fees and interest. It is the fact that

you're spending 45% more statistically by doing this. And because you see that you don't see $100, you see, oh, it's just $25 now, Ken. What a deal. I'll add some more to the cart. I'll have flexibility in my budget. Financial breathing room. That's what these companies are marketing. Well, let's talk about the game. I mean, these companies are in it because they're winning the game. Billions of dollars. Okay. So how's it play out? Why are they in this? Why is Apple jumping in this? Why is Walmart doing this? Apple is becoming a fintech company. They're becoming a financial company first, then technology. I mean, they're worth $2.6 trillion. And so they're following the money, and they can't innovate on products fast enough. So they're going, where else can we make money?

Oh, we'll have a high yield savings account if you have our credit card. You can have access to this amazing 4% interest rate. Then they have Apple Pay Later as part of their ecosystem to keep you in their ecosystem. And then all these companies, Klarna, Affirm, you've heard of these companies. They're making fistfuls of cash because the companies that use them, the businesses, the clothing websites, Walmart, they're paying Affirm and Klarna to use that service. Right. Because Walmart knows it's going to increase the store order by 45%. Are you seeing who's winning here? Everyone but you, American.

Right. You're feeling the stress. This is the craziest part. And they're coming after you, by the way. They will come after you. Yeah. If you don't pay, they're going to come after you. And I think that that's what people need to understand.

I don't know what the psychology is there to where you go, again, you go up there and you go, well, my grocery budget- Imagine you went to Walmart and it said 75% off everything in the store. That's the marketing. That's the number you end up seeing is it's 75% off. I only make one payment today and I'll make three more later. And I'll have the money later, but then life happens and you realize you had 17 different purchases that you couldn't keep track of. Now you overdrafted, getting hit with overdraft fees on top of living paycheck to paycheck. Why does someone want that many things of Coke that they'll pay later? Are they thinking they're getting a deal? I don't get it.

I don't know, Ken. At this point, you know, trying to understand the American consumer and how out of control they are is beyond me. Wow. But don't fall for this stuff, guys. Pay for it with cash. How's that for a concept? Yeah. You'll never be broke if you do that.

Yeah. I mean, enjoy that Coke with no guilt, you know? Buzz-free. Buzz-free. Debt-free, buzz-free. Debt-free, buzz-free. That's our mantra today. He's George Campbell.

I'm Ken Coleman. Don't move. More of your calls coming up. This is The Ramsey Show. Welcome back, America. You've joined the conversation about your life, your money, your work, your relationships here on The Ramsey Show. If you're new, welcome aboard. We have a lot of people joining us all the time.

And so if you're new to the show, I want you to go to ramseysolutions.com and click get started. That'll allow you to kind of plug into what we talk about here and get an idea of where you are in the landscape, understand some of the things we say so that as you're listening along, you feel like you have caught up. Again, that is ramseysolutions.com and click on get started. Also, if you're enjoying the show, please consider subscribing, writing us a kind review, and sharing the show with a friend. Doria is up in Reno, Nevada. Doria, how can we help? Hi there.

Hi, how are you? I'm well, thank you. Great. What's going on? Well, I'd like some advice on buying a coastal vacation home and then renting it out part of the year. I'm single, so I need somebody to bounce it off of and let me know if I could do it or not. All right. Well, you're a wingman today. That's exactly right.

So do you have any debt at all? I don't, and I have no credit because I have no debt. Well, George is very happy right now. It's funny how that works. So do you have a home right now in Reno? I do, yes. Okay, and is that paid for? Yes, it is.

Awesome. Way to go. You've done so well. What's the home worth? Probably around $330,000. Okay, and what's your income? I get 46, 46 a month from my pension. 4,600? Yes. Okay. So you're no longer working. You're retired and you're going, hey, I want a vacation home. I want to enjoy it, but why not rent it out and make some extra money? Is that the idea?

Correct. Okay. Where's the vacation home going I want to enjoy it, but why not rent it out and make some extra money? Is that the idea? Correct. Okay. Where's the vacation home going to be? I'm thinking along the Gulf Coast to Texas. Okay. And what would that cost? Have you started doing some research? I have, gosh, anywhere from $300,000 upwards to $7,000, which I can't afford. Okay. And how much money do you have saved? That's non-retirement, non-pension. I've got about $500,000 in investments, cash.

Wow. How'd you do that? I have a really good financial advisor. That's awesome. Well, you've done really, really well. So are you willing to put all 500 of that towards this investment property? Well, if it's worth it, yes, I think. And I can always build it up again. It's more about your goals, because truthfully, those investments, if they're making on average, you know, say 8 or 10 10%, I mean, you could pull in $30,000, $40,000, $50,000 a year just from that investment. Yes. Which may do better than your vacation rental business that you're trying to start.

And so I wouldn't look at it apples to apples. I would go, hey, I really want a vacation home, and I'm willing to take the risk on what if there's vacancy? What if it doesn't make that much money? Would you be okay with that? I got lost. I'm sorry. to take the risk on what if there's vacancy? What if it doesn't make that much money? Would you be okay with that? I got lost. I'm sorry. It doesn't make that much money. Yeah. You have to just think about the risk when it comes to real estate, just like there is with the stock market. And the risk is what if there's vacancies? What if people don't book it? What if I can't get what I thought I could get for it? Got it. Yeah, I'd be okay with that because I'm doing fine now off my pension.

Okay. And that's another reason why I want you to pay cash for this investment property, because truthfully, this thing's a toy. It's a luxury, and I don't want you to go in debt for a toy and set back what could be a great retirement. And now all of a sudden, you're wondering how I'm going to pay this mortgage because I thought I could rent it for this much. And oh my gosh, there's another pandemic. Nobody's renting. And I'll tell you right now, Ken and I were just looking at a really scary article about Airbnb revenue collapse happening. Revenues are down about 50% in big major cities. And that's worrisome for a lot of folks out there who have big mortgages on these Airbnbs they got because they thought it was a money-making scheme because they saw a TikTok and they saw some

real estate guru on Instagram tell them how great of an idea it was. So you're doing it the right way so far. I just don't want you to get starry-eyed by going, I'm going to have someone else pay this thing off for me. It's going to be a scheme. Versus you saying, hey, I really want a vacation home. And if I can make a little bit of money doing saying, hey, I really want a vacation home, and if I can make a little bit of money doing the rental stuff, that's great too. I would approach it with that mentality. Okay, that surprises me, the answer. Yeah, well, what did you think we were going to say? I wasn't sure. That's why I wasn't sure at all. But to drain my investment and pay cash, I love that idea because I know I can get a much better deal. Well, here's the other version of this.

You could just rent a vacation home anywhere in the world whenever you want and you just pay for it. And if that's two weeks out of the year versus sinking all this money into it. And we love real estate around here. Don't get me wrong. I just want you to do it for the right reasons. And if some people just don't want to have the hassle of it, because either you have to manage it long distance, or you have to hire a property management company and hope they have a good head on their shoulders and hope no one destroys the place and HVACs out. Now we got to, you know, out of pocket six grand for that. And when I'm in retirement,

I just don't want to have to deal with all that stuff. What, and that's the question, Doria. I think George has framed this beautifully. So do you want to do this so that you have a place to retreat to and if I can rent it out and it pays for itself, blah, blah, blah, blah, blah? Or is it, I just think this is a better investment of my money than keeping it in my current investments with this financial advisor who you really like and you guys have done a good job. What is it, A or B? Oh, good point. Yes. Well, what is it? Oh, you're asking. Yeah, it's multiple choice. There's no wrong answer, but which, what are you most motivated? This may change five minutes from now, but I think it's an important exercise. Why do you want the

home? Is it for you and then we'll rent it a little bit? Or is it just, I thought this was a good investment idea? I think it's because I want it for me. Then I got to tell you, I would consider George's idea. You're winning financially, like big time. You should just pick a new fun place to go for two weeks every year and pay cash, and then you leave all the problems behind. Thank you. That's what I would do if I were you. Based on that answer, based on your answer. And run the numbers out with your financial advisor. Sit down with them and say, hey, what could this investment do? Give me a low end, give me a high end over the next five years, and then let's play out the scenario where I buy this investment property with cash. What could that do

low end and high end? And that will start to give you a picture and talk to people who actually own vacation property, who rent it out. Because that's another thing is this is my personal vacation home and now strangers are in there day in and day out messing with it. Some people aren't comfortable with that. Yeah. No, that's good. You gave me the idea on that to ask that question because it really does come down to what are we driving at and if it's just i want a place down on texas gulf coast to stay well guess what you can try a new place all the time one of the things we love about 38 for our family is we go down all the time and we stay in a different house it's kind of fun it's like oh we we get to try this house this year and then this house and And again, you have no problems. It's

not your problem. You go in, you have a great relaxing week or if it's two weeks and then you leave and it's like, I'm not worried about it. It's not my issue. Well, and when you have, number one, the risk of a mortgage on that property with that toy, you also run the risk of what if there is vacancy and what if we can't book it for those three weeks? Now we're stressing out about a problem that we wouldn't have had if we did it the right way. So if you're going to do this, do it with cash. Well, you talked about this and I want to bring it back up. I mean, we saw an article, we'll talk more about it probably later this week, but there is a big, big foreclosure risk wave coming with people who they've watched an Instagram, they watched a TikTok,

they did no money down or very little money down. And we are seeing the VRBO or the Airbnb rates, this particular article, they are contracting that there's too much. There's too many houses. And so now people are going to get stuck and they couldn't afford it without renters. And when renters don't show up, guess what happens? You get foreclosed on and now you're really in big trouble. So it's going to be great for people who want to go get a really good rate on an Airbnb right now. I was looking at fall break in a certain place in America and I was like, I couldn't believe the rates. Now I understand it.

Rates are dropping because, again, the demand is so little compared to the supply. Which is a reminder, don't believe this myth that, well, the renter is just going to pay the mortgage, so why wouldn't I do this? This is a no-brainer, Ken. Life doesn't work out like that. And on paper, it may look good in a perfect scenario, but we live in a fallen world, and we just can't rely on that. And so I want you to do all of these moves with a whole lot of peace and less risk. He is George Camel. I'm Ken Coleman. Good hour, George. Thank you so much, my friend.

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