The Ramsey Show - App - Can I Pull Equity Out of My House to Build a Pool? (Hour 2)

Episode Date: May 25, 2021

Debt, Investing, Savings Sign Up for a FREE trial of Ramsey+ TODAY: https://bit.ly/3rZTUAx Tools to get you started:  Debt Calculator: https://bit.ly/2Q64HME Insurance Coverage Checkup: https://bit.ly/3sXwUn5 Complete Guide to Budgeting: https://bit.ly/3utmVXi Check out more Ramsey Network podcasts: https://bit.ly/3fHhbVE

🎵 🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Ramsey Show, where debt is gone, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. Christy Wright, Ramsey personality, is my co-host this hour, this day.

Open phones at 888-825-5225. That's 888-825-5225. You can hear her on the Christi Wright Show, where faith meets personal development, so you can have a bigger faith and a better life. You get the encouragement you want with the tough love truth you need to connect with God, take control of your life, and enjoy your life. New episodes every Tuesday on YouTube and anywhere you listen to podcasts of The Christy Wright Show. Open phones, 888-825-5225.

Jeff's in Daytona Beach. Hi, Jeff. How are you? I'm doing well, sir. How are you doing? Real happy to be on the phone with you. You too, sir. How can we help?

So I have a question my wife and i are are looking to install a pool in our backyard and i uh i know your your your thoughts on on pools and and getting refinancing to use the money for that but just a little bit about my wife and i have lived very financially responsible. We have no debt. Cars are paid off. We have college funds for the kids. We maxed out both Roth IRAs. We're also both pension employees with the city here, so we have a pension to look forward to, and we have deferred comp. We currently owe $134 on our home.

Our interest rate is $4.125. What do you need? You're doing great, man. I'm sorry? You're doing wonderful. I know, yes. How can I help? So we are wanting to install a pool in our backyard.

We have two young kids. We are in what we consider our forever home, and we are wanting to refinance the house and pull $60,000 out of the house to install the pool. You want to put a $60,000 pool in a $130,000 house? So, no, we only owe $134. Oh, I'm sorry. What's the house worth?

I'm sorry, $330,000. That's an expensive pool. Yep, the new rate we could get would be $2.375,000. I said that's an expensive pool. Oh, yeah, $60,000 is an expensive pool. That's my wife's doing, and that's, it is, yeah. It's her doing, you're the one calling, Jeff. I know.

It would be a very nice pool, and I know it's expensive, but like I said, we are not planning on going anywhere at least until the kids are through high school. So that's about another 13 years, you know, for the youngest ones. Okay. Well, what you're very clearly describing over and over and over again, and you've said it six different ways, is that you know this is an irresponsible, bad idea. Yeah, absolutely. But you're trying to make me think it's okay.

So that you're going to think it's okay. So that they will say it's okay. that so that you're gonna think it's okay so that they will say it's okay you're you're on to me i mean it's just it it's um okay let's walk through it so number one i'm not against fun number two you have done a great job with your finances congratulations number three you have a clue where you are you know exactly what's going on you're not a wandering generality you're not out of control you're you're very systematized you've been very uh beautifully done you you've told me your numbers you're not you're not guessing you know exactly where you are so you have a lot of positive things going on and and then you have this uh your stomach is in your

throat because you're getting ready to pay too much for a pool for a $330,000 house. It doesn't make sense to put that nice a pool on a house that expense, meaning you would never recoup it, ever. You're overbuilding the neighborhood. You have to be, by definition. Even if there's pools all up and down your street, they're not $60,000 pools and $300,000 houses. People don't do that. That is true. Okay.

So number one, you know you're spending too much. Number two, you're borrowing money to buy a fun toy. Yes. And you know that that's unwise. And you called the guy that would tell you both of those things, right? I mean, what do you want? How can I help you? Could I run something by you?

You think it's going to change my mind? I don't know. I try that technique, Jeff, with my husband all the time. Well, let me just give you one more. All right, let's try it. You're a good sport, Jeff. Let's try it for fun here. So my wife and I, we purchased the home.

We've been in the home about six years. We purchased it for $160,000. Yes, sir. It has appraised quite a bit. I understand. So the new, if we were to refinance at a lower rate of 2.37, we would have the mathematic equation you give out. We would, with the closing cost, which is would have that, the, the mathematic equation you give out, we would, with the closing

cost, which is about $9,000, we would cover that in about three years. We're going to be in the home for at least, I'd say at least 10 to 15 years. And with the refinance, we're only refinancing at 210, uh, $210,000, which is still substantially less than what all the homes in the area. I don't think it's going to make you bankrupt. yeah i don't think you're going to go out of business because of this i don't think you're going to completely you know get a divorce because of financial stress that's not that's not what i'm saying i'm saying a you're borrowing money to buy a toy true even though you figured out some bass-ackward sophisticated way to make it sound okay. But you're still borrowing money to buy a toy, and you're overbuilding your neighborhood.

Both. So if you want to do one of those, overbuild the neighborhood. Okay. But don't borrow the money to do it. Gotcha. So if I woke up in your shoes, I would do one of two things. Do you have any money to put towards this project? We have $20,000 that we would put towards.

But the way pools are built, I mean, it's such a hot commodity here in the state of Florida right now that they would want to buy stuff. You're putting an $80,000 pool in? Oh, Jeff, you're in more trouble now. No, sir. No, sir. No. Oh, it's a $60,000 pool. Oh, okay. So you're borrowing, you're willing to borrow $40,000. Yes, sir. I'm sorry. Okay. No, I misunderstood. I misunderstood.

Okay, so you got $20,000. Yes, sir. And what's your household income? About $110,000. Phenomenal. Okay, so you got $20,000. And what's your household income? About $110,000. Phenomenal. Okay. I would project that based on the fact that you two actually have done so good until we got to this conversation with your finances,

that the two of you could add another $20,000 to this $20,000 very quickly and pay cash for a $40,000 to this $20,000 very quickly and pay cash for a $40,000 pool. If Dave and Sharon Ramsey were in your shoes, that's exactly what we would do. Yes, sir. I'm going to tell my wife we're going to have to eliminate Sushi Sunday. And that big. It's up to you. It's not eliminate.

It's trade. We're trading it for a pool. You eat a lot of sushi, apparently. I was waiting for that. You're going to eliminate some lifestyle to get the pool. That's what Dave and Sharon Ramsey would do. We've got some nice toys in our life, and I remember

the first time we bought a toy, we bought a little bitty dinky butt house on the lake for $100,000. We thought it was the, oh, God! We just bought a second house. We're like rich people or something. We have two houses. It was $103,000.

But we pay cash for it, and we've never regretted it. We've never regretted owning a lake house because we pay cash for our toys, and they don't come back to bite you in the butt later. This is The Ramsey Show. Your number one wealth-building tool is your income. For business owners, this comes as no surprise, as you're used to putting in extra hours and watching your bottom line. That's why Christian Healthcare Ministries or CHM is a great option for those who are faith-focused and budget-conscious.

CHM is not health insurance. Rather, it's a health cost-sharing program. It's not harder, but it is different. To learn if CHM is a fit for you or your business. Visit chministries.org slash budget. I'm proud of my state of Tennessee. And one of the greatest things about our state has been that we have had a great run of incredible governors. At least the last two, anyway. And Governor Bill Haslam was governor here for two terms. Currently, Governor Bill Lee is our governor in Tennessee, and Bill and I became

friends during that time, Christy, his wife as well, and he was an incredible, incredible governor and incredible, not politician, but statesman is a better word, and has written a brand new book. I went to Donald Miller's house the other night with a bunch of folks in our area here that were friends of both of ours, Bill's and mine, and got to hear a little bit of the reading from it and the background on it. It's called Faithful Presence, the Promise and the Peril of Faith in the Public Square. Bill and I are both Christians, and it is messy. Once you say you're a Christian, someone disagrees with you immediately. You're a fake Christian.

Immediately someone's got something to say about that. But how you can act out your faith in the public square. Bill comes from the Pollitt Oil family. His daddy started Pollitt Oil, and his brother owns the Cleveland Browns. And have I got that right? You got it right. Okay. And make sure I say the right thing.

Jimmy, Big Jim will get me. Jimmy will get me Jimmy for sure you get a quick call but yeah I'll get I'll get big Jim will get on me and I don't want big Jim after but big University of Tennessee fans as well and alumni like we are and generosity that in that direction so a little bit of background there so Bill you and I when you were running for governor the first time, with your background coming from a family of means, we're sitting, you and Chrissy and I and Sharon, we're sitting on our back deck. Remember. And kind of getting to know each other a little bit. And I asked you a question. I said, why would you take this job?

Because it doesn't pay that much in comparison to other things you could have done and have done in your life uh and you come from a family of means you didn't it's not something you needed financially and you didn't need the power you didn't need any of that why would you why would you want that job it's kind of what i said you remember that i do i remember the conversation well and it was an honest question because i just couldn't envision it yeah well first of all you talked about the success of Tennessee and Ramsey and Ramsey Solutions is part of that story. I got to stand here where we are now when it was a field and to see what you've done. That's right.

To see what you've done with the place, as we say, around Tennessee is impressive. So, first of all, let me just tip of the hat. It was with your help as well. Cool story. The state was a big help to us. So why did I run? You know, we all find different ways to serve, right? You've been able to change thousands, hundreds of thousands, millions of people's lives by giving them some insight into a better financial way to carry out their lives.

Government serves a lot of different people, and it makes a difference. Who governs matters. And for me, it just felt like a huge opportunity to serve and i know it sounds kind of corny but it felt like for me the way to to change more lives uh for the better than than anything else i could do well and i also remember you saying you felt like god told you to i did it well and it felt like it was a call a spiritual call as chrissy would would always remind me during the campaign campaigns aren't really fun aren't much fun and she'd say okay you you are called to run the election will decide if you're called to serve there was always a lot well we'll see us well thanks for all the

help from the wife there yeah but but she was right and so we really did feel that way and so if you do feel that way then then you do it differently you don't do it uh with you know your own your own ends in mind bill haslam former governor of the state of tennessee the book is faithful presence the promise and the peril of faith in the public square so this is your first book why write a book about this subject and why now you know uh it is my first book it might might be my only uh you know some people like you have enough to care cover lot of books. This might, you know, I only have enough for one probably. Yeah, right.

But here's why. You know, it's no secret the country's at each other's throats, and everybody talks about the polarization. And we're not just that, but we're mad. And we're not just mad, but we think the other side has bad motives. The question is, what are we going to do about it? Well, Jesus was pretty clear in Scripture when something was wrong. He always started with us, the religious types.

And he said, hey, if the meat's gone bad, it's not the meat's fault. It's the salt's fault. The salt's not doing its job. And so this is a call to all of us who say that we want to follow Jesus and then others who don't but want to know the role of faith in the public square to say, what role could we have in being light in the darkness and being salt to meat and changing the tone of the conversation politics uh i you know anytime you get up in the spotlight like i have been for many years you get the haters and you get the and you get the

people who believe you can do anything which both are wrong right and um but the uh uh you know you run for office and i immediately just about oh oh, no, I have a physical reaction. It sounds so exhausting. The budget would be balanced. We know that much. That's true. And there would be a lot of angry people. But, yeah, it's messy.

It's exhausting. It's sometimes ineffective. Why should we even care about politics? Well, you know, it says in Scripture that God causes the sun to fall on the just and the unjust, the rain on the righteous and the unrighteous. So he cares about the common good. And this is a way that government impacts what we do and how life works. And, again, think about your principles. So Tennessee has actually lived that way.

We've lived as a fiscally responsible state. Because of that, we can keep taxes low. We can attract businesses to come here. It matters the decisions you make. And that affects, again, millions of people because of that we can keep taxes low we can attract businesses to come here it matters the decisions you make and that affects again millions of people uh because of that so um one of the reasons i wrote the book is i don't want people to say oh pox on both your houses i'm tired of all the argument uh i'm not going to pay any attention because that's the wrong response to the current situation the the only way to fix it is engage i stand back and

throw grenades doesn't do it it's never it's never worked and by the way it's never changed anybody's mind either yeah that's true that's true so bill lee's been in office two years a little bit more about two and a half years so you know so you've been so the last 10 plus years right we've been having these conversations. It feels like to me that it's gotten a lot nastier during that 10 years nationally. Yeah, I don't think it just feels like it has. And all the data would show you that, that we've gone from disagreeing to think the other side has bad motives and even being contemptuous of the other side. Yeah.

How do we get in this mess? I think there's several things. Number one, we've always been a little, I mean, we've always been, you know, it's always been partisan. You know, the founders got literally gotten duels with each other. So we shouldn't kid ourselves and say, oh, this is new. But I think secondly, the world's different. And so with social media, you can hide behind the anonymity of the Internet, as you know,

and people can say whatever they want about you. Keyboard, keyboard courage. Keyboard. I love that. I'm stealing that. People can have keyboard courage. People can people can in politics can say, well, I can just go be a social media star. I don't really have to solve problems. So it's like I'm going to play a senator on TV. I'm not going to really be one in terms of solving problems.

And I think the fact that folks can choose their own news and how they get it, we just tend to dig further deeper into our own beliefs and not take any time at all to listen. Is there a better way to do this? Yeah. The ability to sit down and calmly listen to the other side is a lost art. It really is. And somehow we think that if we yell at the other side

we're going to change their mind and that's changed nobody's mind ever. It doesn't. I'm going to get mad and call you names on Twitter

and that's going to make you feel better. Yeah. And I'm going to vote your way now. Yeah. Exactly. Exactly.

Faithful Presence is the book The Promise and the Peril of Faith in the Public Square. Former governor of the state of Tennessee, two terms, Bill Haslam. What strengths and gifts, if people of faith come to the public square, should they be bringing? Well, you think about one of those that we should bring is people always decide,

am I going to be a person of truth or a person of love? And we're supposed to be both. We're supposed to understand that. It's, you know, speak the truth with love. We're supposed to understand that. It's speak the truth with love. We're supposed to, people think, well, you either have to choose mercy or choose justice, and we understand it's both. I mean, we actually have a God that lived out mercy and justice at the same time, and so we have a picture of that.

The other advantage we have is we know we're broken, imperfect people. That's part of the definition of being a follower of Jesus. Well, if we are that, then by definition we know we have the capacity to be wrong, too. That's not a bad place to start the discussion. Yeah, and that makes you a listener. I hope so. Love your spirit. Love your humility. Appreciate your friendship. You too. You and Sharon have become great friends. Thanks. Governor Bill Haslam, former governor of the state of Tennessee. Check this book out, guys. It's life-changing, and it's really needed in the marketplace right now.

Faithful Presence, the Promise and the Peril of Faith in the Public Square. This is The Ramsey Show. We'll be right back. Christy Wright Ramsey Personality is my co-host today. Open phones at 888-825-5225 in Las Vegas. Christy Wright, Ramsey Personality, is my co-host today. Open phones at 888-825-5225 in Las Vegas. Andrew and Shanae are with us. It says on my screen you guys are debt-free. Congratulations. Thank you.

How much did you pay off? $78,564. Good for you. Awesome. And how long did this take you? 364 days. Okay, there we go. The one year minus a day mark.

Okay. And your range of income during that time? Our range of income started about $97,410, and then we finished at $148,840 and forty wow what do you guys do for a living i'm a police officer and i'm the office manager of a dental office how'd you get your income up so far in one year um i worked over 901 hours of overtime wow wow great place to go when you're broke to work, huh? Way to go, Andrew. Man, I bet you're happy this is over. Yeah, the wife's pretty happy, too.

She has help with the kids now. Yeah, absolutely. She was a single mom for a year. So that's what my wife said, yeah. So what kind of debt was your $79,000? It ranged from we had a personal loan for $42,000. We had credit cards. We had cars.

And we had a $3,400 vacuum cleaner. Of course. Yeah. What? Well, it does everything. Yeah. Or not. But, yeah.

Right. So what was the $42,000 personal loan? What was that? So we have two children, and I was a stay-at-home mom for about almost three years. And during that time, we thought it was going to be a good idea to consolidate a car payment and credit cards into a consolidation loan. Gotcha. And we were kind of, you know, at that time,

we didn't know a whole lot about paying off debt and stuff, and we thought at that time that was going to be our best option. Yeah. And then when my daughter was born, she had a lot of medical problems, and so we got behind on a payment, and it kind of just downhill from there. Yeah, I got you. Okay. Yeah, that thing of trying to borrow your way out of debt,

lots of folks have tried that one. You're not the only one. Way to go. I'm so proud of you guys. What's guys went nuts. I mean, you were going after it, 901 hours of overtime. What started all this a year ago? So I had gone to a training with a coworker,

and during the training, finances had got brought up, and he was saying that he was getting ready to pay cash for a million dollar home. And I looked at him and I said, how is that possible? Like me and you have the same job, we're the same age, like how are you doing this? And he grew up in a Ramsey household. And so he started telling me about it and I spent a couple more days away from the family at the training just. And so when he came home and was talking about that, it was like, well, we either do this or we file bankrupt because we're not really sure what to do. And we were so young that bankruptcy didn't obviously sound too enticing. So this was the only other option we had. And it sounded like the best thing. And

we kind of just went full force. Yeah. You sure did. So how did you plug into us? When we were at the training, he told me your name. And then my mom had told me about you when I was in high school and stuff like that. But you don't listen to your mom when you're a teenager. Yeah. And so once I saw someone my own age living that way is when we started. I started listening to the podcast. Oh, the podcast. Okay. is when I started listening to the podcast. Oh, the podcast, okay.

Every single day, I have all of the books, the audio books, that I listen to at least once a month. It's just we went crazy on it. Okay, all right, cool. And so the budgeting and the whole process. So what do you tell people the key to getting out of debt is? Sticking to a budget. Yeah, inconsistency.

I mean, it gets hard, especially when you have people, you know, that you're friends with or family that are kind of like, oh, well, you know, and they live in like the debt lifestyle and they're okay with credit cards and they're okay. Well, I want the points and oh, I want this. And so, you know, you have those people that kind of tell you what you're doing is silly and stuff. And so my opinion is making sure that you're not listening to that because there is a lot of people that will try and tell you, you know, their other ways are better. And so just consistency and really knowing what your goals are and keeping your goals in focus because otherwise people really do try to talk you out of it.

Yeah, there's a lot of naysayers and it's just because they don't have hope a lot of times. Right. But who were your best cheerleaders? Oh, man, that's tough. I think each other, honestly. We had some friends outside, but me and her, one of us would start to feel a little discouraged or something like that, and the other one would be like, hey, hey, hey, knock that off.

Like, we got this this let's do this and so we just worked together as a team uh it was probably the best thing but we had some friends that stuck by yeah what kept you motivated i know a year's pretty fast for you guys to do this but there had to be some some of those times where you were getting discouraged would you would you guys tell each other what you keep in mind to be able to stick with it? I would say it was the saying that Dave has is live like no one else, so later you can live and give like no one else. So we figured if we took a year away from being able to do all the fun things and just really put our heads to it, we would have a lifetime of being able to do the fun things.

That's awesome. And we have a four- and a six-year-old, and so I think that was a lot of it too because I really want to be able to send them to school if that's what they choose to do and not have to have a lot of financial things. I know I grew up with a lot of hard financial situations, and I don't want that for my children.

We've taught our kids this kind of thing. And like even my six-year-old, he goes out and he gets a job cleaning up dog poop for friends and they pay him and we teach him how to like, you know, spend, save and give. So trying to show them a good way of living was a lot of motivation as well. Just trying to make sure that they can see, you know, that you have to work hard in order to live freely later. That's awesome. So your friend, Andrew, who paid cash at your age for a million-dollar house, you know that that's your son, right?

I really hope so. Yeah. He's growing up in a Ramsey house. That's right. He's growing up in a house where Mom and dad are living on less than they make. Mom and dad don't borrow money. Mom and dad know how to work their butts off, and you're teaching him how to work. You know?

I mean, it would do a lot of America good if at some point their kid had picked up poop for money. It could change this country. It really could. Yes. He makes 80 bucks a month going house to house yeah that's awesome wow that's awesome wow this kid's an entrepreneur uh no kid no pun intended but yeah wow you guys this is incredible i'm so so proud of you guys very very well done absolutely incredible uh so here's the deal we got a copy of The Legacy Journey for you.

That's the book about what happens now, the live like no one else part, now that you've done it. And the legacy that we're just talking about with your kids. And we've also got a copy of the Total Money Makeover for you to take and give to someone. Because now, Andrew, you're going to be that friend that runs into somebody and starts their journey. And that's how this works. So paying it forward. So, again, we're just so proud of you guys. Very, very well done.

All right. It's Andrew. 364 days with 901 hours of overtime, making 97 to 148. They are free. Count it down. Let's hear a debt-free scream three two one amazing you know it's not hard to work that hard when you can see the light at the end of the tunnel that's right when you can see that you're getting there yes i love that visual of how you said that's going to be your son.

Like, oh, you forecast into the future the ripple effect of this decision with that next generation and beyond that. That's incredible. Change your family tree, baby. You can do it. And I'm talking to you. Yeah, you. You thought you were just in the car listening to the radio. No, I'm talking to you.

You need to change your family tree. It's in your power to do it. Now do it! Christy Wright Ramsey personality is my co-host today. Open phones at 888-825-5225. Have you ever made a dumb decision with zeros on the end because you didn't do your research? Yeah, me too sometimes we all make choices dumb choices based on feelings or opinions and if you do something like that when you're buying a house yeah and this real estate market feelings are not your friend. Facts are your friend because everybody's gone bonkers out there. Check your facts. Find out what you can actually afford.

Research what's really trending in home prices. Talk to reputable real estate agents in your area. This is not amateur hour where houses are getting multiple offers. Do not let a monkey sell your house. And a monkey can get a real estate license. And they sell two houses. And then you've listed your highest, most expensive property asset with someone who doesn't know what the flip they're doing.

Get the facts. Know what you're getting into and get a pro in your corner. Go to RamseySolutions.com slash agent. You can plug in with one of our ELPs, our endorsed local providers that we have vetted. They're high octane, high protein, the top real estate agents in the nation. RamseySolutions.com slash agent. That's how this works. Open phones at 888-825-5225.

That's 888-825-5225 that's 888-825-5225 tina is in austin texas hi tina welcome to the ramsey show thank you for having me and listening i listen to your podcast a lot thank you and um i just it's kind of like jeff your earlier caller i feel like i'm pretty frugal i'm really good with my money. But I wanted to make sure I'm on the right track. And I feel very stressed when I'm spending my money or when I'm using my money for myself. When it's a gift or a donation, no problem. I'm going to write a check. But then when it comes to me, I get really nervous. Grocery store, I don't want to binge on a $5 chocolate or whatever, right?

I just want to make sure I'm on the right path of savings. So I'm on baby step number six, paying off my mortgage. I feel like I've done a really good job with everything else. I skipped number five. I don't have any kids. And thanks to the podcast, I got really good self-interest during the pandemic and I paid off my car. This is pre-Day Ramsey, right? I've heard about you for 10 years, but I never really read the book. How can I help today?

How can I help today? So I wanted to make sure that I was on the right path for when I pay off the mortgage. I have two different homes. One's a rental under an llc and then one's my home home and then you always talk about paying that off um as soon as possible so i wanted to see which one should i pay off first um do i go get sell intense and paying those off and or do i just kind of loosen up a little bit generally speaking what we do is if they're similar in payoff balance i'd pay off your home first.

But if you have a tiny little rental mortgage and you want to just reach over and knock it out and then come back to the home, that's okay, too. We're going to get both of them eventually. Agreed? Yes. Okay. So how much is owed on each? I owe $61,205 on the rental with five years left, and then $170,313 with 11 years left. And your income is what? Taxable income is $73,000.

Is how much again? Taxable income is $73,000. $73,000. Okay. All right. The W-2 is $97,000. Yeah. 73. $73,000. Okay. All right. The W-2 is a 97. Yeah. Okay.

So, you know, the rental is substantially smaller in balance. Yes. And if you wanted to push it up front, you can. That would be a reason to push it up front. I always want to cheat towards the residents because of risk management. And all that means is in an absolute horrible worst-case scenario, if you were going to lose one to foreclosure, you'd want to lose the rental, not your home. And so getting rid of the place where you lay your head down at night having no mortgage releases you in the spirit,

releases your spiritual self a lot. And then because, you know the rental property and whatever we can lose it or we can sell it and it's no big deal but where you live gives you an extra dose of peace when it is paid off and so i tend to cheat towards that uh so that's a reason to put it first but the rental is very small so you could knock it out pretty fast if you get after it right right so either one is okay in this case but But that's the way I look at it. That's the two things I look at. And so if you owed $150,000 on the rental and $170,000 on your house,

I'd say go do your house because of what I was describing earlier. But because your rental is so small, if you want to go over there first, you can do either one. Again, you're only $230,000 from being completely free. And that's pretty cool. she's done a great job yeah it's amazing it's always good when the question is either option is a good one when that's the answer yeah you know that's you're in a good spot because you've done really well yeah you've done real smart uh and uh when both answers are smart quite answers right yeah that's

a that that's a lot better rather than both answers are dumb answers. Yeah, I've been there, too. I've done both. Joey's in Hattiesburg. Hi, Joey. How are you? Hi, Dave. How are you doing today? Better than I deserve.

What's up? Well, I am 20 years old. I own two businesses. One is a startup. The other has been running for about three years. For the one that's been running, I owe $176,000 on the business. $104,000 of that is an owner finance loan. $63,000 of it is through a bank. And then $9,000 is minor debt. Well, I know the general rule is never to take out of an IRA. However, I'm hoping that you'll give me permission for an exception. I've got a CD for $64,000 and an inherited IRA for $79,000.

My bad. Okay, the inherited IRA is $79,000 and the CD is how much? $64,000. Okay. All right. And the owner finance loan, the one for $104,000, instead of I paid in full, they would take 10% off, meaning I would save $10,400 on principal and another $17,000 in interest.

And my idea is to use that CD, put that towards it, and take the other $30,000 out of the IRA. Yeah, an inherited IRA, I would do that. When did you get the inherited IRA? Oh, three years ago from my father. Okay. I'm sorry. Sorry for your loss there.

Not hurting anything. Yeah. And where did the CD come from? Same thing? Same thing. It was life insurance. Yeah. And where did the CD come from? Same thing? Same thing. It was life insurance. Okay. And what kind of business are you running at 20 years old that you want $170,000 in debt for?

It's a vending machine business. It started out at $260,000, and I've been able to get it down to there. You're making money? Yes. To be fair, during during corona it was barely paying for itself but nevertheless paying for itself how much do you make a month gross right now gross i mean it varies from month to month but on average 8k it's not good yeah okay so you're making like 30 grand a year profit as of right now yes um but i've had that's because a lot of my business

taken away i'm regaining it back um now that covid is coming to an end in mississippi absolutely okay yeah i would have thought it would be back mississippi's open it is but like schools which is more than half my business oh okay all right all right that does explain it okay and now you're out for the summer exactly that's the reason i average is so low yeah okay all right that's helpful because i'm just afraid for you these are these numbers scare the crap out of me and here's number here's the thing yes i would to answer your question yes i would do this i would take the cd and enough out of the inherited and pay the loan off i would also try

to negotiate down more than a 10 discount because they probably need the cash. Offer them 20 off and just see what they say. All they can do is say, no, all we'll do is 10, right? So just say, I'm having to cash out my dad's when he passed away, inherited IRA, and it's making me feel funny. I'll do this if you'll do 20%. Throw a little emotion in there. See what you can get them to do. And here's the thing I want you to walk away with.

Don't do this again you won't have another one of these shots to clean up this mess next time you get ready to grow a business or buy a business you pay cash for it don't do this again i'm scared for where you were you're getting a one-way ticket out don't't you go back. That wasn't unclear, was it? No, you covered it. Covered it well. This is The Ramsey Show. Hey, guys.

This is James, senior producer for The Ramsey Show. Did you know over 18 million people listen to The Ramsey Show every week? And a lot of those people listen on one of our 600-plus radio stations across the country. To find a station near you, head to theramseyshow.com.