The Ramsey Show - App - Cashing Out Investments To Pay Off Debt (Hour 3)

Episode Date: November 1, 2022

Dave Ramsey & Kristina Ellis discuss: Using mutual funds to pay off student loans, How company stocks are taxed, Renting post-high school, Paying on a parent-plus loan, Baby step 3B when building a house. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's The Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. We help people build wealth, do work that they love, and create actual amazing relationships. Christina Ellis, number one best-selling author, Ramsey Personality,

is my co-host today as we answer your questions about your life and your money. Open phones at 888-825-5225. That's 888-825-8255. Jordan is in Rochester, New York to start us off this hour. Hi, Jordan. How are you? Good. How are you, Dave? Better than we deserve, sir.

How can we help? All right. So I'm 21, and I just graduated from college this May. Yay. What's your degree in? Yeah. Information systems. Oh, I love it. You got the big job yeah so i uh actually was fortunate enough to get a job straight out of the gate so

fortunate enough for that yeah what are you making um a little bit over um i'm making 115 000 good more bonuses yeah straight out of college's awesome. I'm so proud of you. Great job. Yeah, so my question is, though, I have $14,000 left in federal student loans, and I also have a brokerage account with mutual funds that I've been contributing to since I was in high school, and there's $15,000 in those accounts. And I was wondering, is it smarter for me to leave that money in the accounts and set up a payment plan to pay out those federal student loans, or should I just pull out all the money from those mutual

funds and pay them off now? Three years from now, the answer mathematically will be almost equivalent okay okay but if i woke up in your shoes and you are an impressive young man uh thank you i i would write a check today and be debt free and along with that the more important part of the conversation is this commitment to get out of debt stay out of debt and avoid debt permanently that process that promise to yourself will make you wealthy gotcha because if you don't have any payments and you make 100 grand at 21 years old you can you can become wealthy dude and you're gonna be a millionaire you're gonna be a millionaire by the time you're 30 i'm hoping no you will be if you do the stuff i teach you to do on this show and and then have you got a copy of Baby Steps Millionaires?

I do. I've read it. Okay. Then you know exactly what I'm talking about. You follow those baby steps, making $115 today, with a four-year degree in information systems in a hot tech market like we're in. You're going to be making $200 by the time you're 25, and you're going to be consistently investing and being generous

and living on a plan and being intentional and enjoying your money but consistently investing you're going to have serious bank dude i'm hoping i'm no it's not a hope it's a mathematical fact jordan i just feel so much joy talking to you to hear that you're 21 years old you've got such a great income and you're reading baby steps millionaires you're in the middle of this process this is just so exciting yeah just don't get stupid i'm not i'm uh you know living below my means yeah yeah so if along with this promise to follow the baby steps from the and say i'm going to avoid debt so i can keep control of my largest wealth building tool, which is my fabulous income, and not commit it to freaking Lexus motor credit, right?

Not commit it to somebody else, not go be normal or arrogant and think you're the exception of the rule and you can beat this or something like that. Just be boring as crap on your money stuff and just socking it away and being generous with it and enjoying it systematically with detailed intentionality like you would if you were working a flow chart for one of your information system situations then you're gonna you're gonna be there dude you're going to be there, dude. You're going to be there. If you can just avoid the new car panic, if you can just avoid the whatever stupid things your friends get involved in,

like Bitcoin, if you'll just go do basic smart stuff, you're going to be unbelievably wealthy. Because you've got such a freaking head start. Such a good head start. I love seeing those charts when it compares, you know, if somebody starts investing for retirement at 21 versus like 45. And I mean, it's just sad that a lot of kids miss out on the opportunity for all that compound interest. I mean, you know, everybody looks back and wishes that they would have done some certain things sooner, but it's like so cool to see that this generation is starting to jump on these principles early.

And like Dave said, if you can stay focused, there's going to be so much temptation, the flashy car, the big house, the opportunity for a credit card. Like all these temptations are going to come up. But if you can stay focused starting at 21 and push all the way through. Yeah. You're on your way, man. You're on your way.

Just don't, yeah, just avoid the temptation to look successful. Nobody gives a crap how you look, okay? What you drive, you know, let's just be successful. And, you know, we'll worry about how you look later. In an Instagram world, you know, let's try to actually be something instead of just look like something. You know, the shallowness of our current culture. You know, we have influencers who are influencing who have never done anything except have a big Instagram account.

And that's, you know, how do you get to be famous? You're famous for being famous, you know, in that case. Shoot me. Oh, God. But the, you know, that case shoot me oh god but the uh you know now i got a reality show but no instead actually just go be do the stuff and be successful not look right and it's like it's like what you say like the paid off house has taken the place of the bmw as a status symbol of choice it's like man if you're 30 years old and you have a paid-off house

and you're a baby steps millionaire, that's going to look so much cooler than if you're driving around in a flashy car that you can't really afford with a big old loan payment. Like, that's not really cool in the grand scheme of things. Like, building true wealth that lasts, that is, that's cool. Yeah, well done, well done.

Hunter's in El Paso, Texas. Hey, Hunter, what's up? Christina, my question is surrounding an incentive we receive at work. We get X amount of stock over a three-year vesting period for employee retention. And my question basically is how that's going to be taxed. As I read about it, several sources say either capital gains or income tax rates, but I'm trying to figure out how to decide that, and my confusion comes with there not being an initial investment by me,

how the capital gains would work. I was wondering if you could give me some insight. In either case, your basis is zero, so it's compensation. And if you haven't held the stock vested for at least one year, for sure it's not going to qualify for capital gains. So if it's under 12 months, it's going to be ordinary income, 100%. 100% of what you sell it for is going to be taxable in either case. Now, if you've held it three years, is it going to qualify because it's compensatory?

Because it's compensation, is it going to qualify for capital gains? I don't know that for sure. You would need to check your tax advisor to be sure on that. I am not really great at details on taxes. I know some of the basic stuff, but something like that, I personally call my tax guy and find out so that I don't screw it up. And so I'm not going to lie to you and tell you I know the answer to that. But it will be one or the other, and it won't be, it'll 100% be ordinary income if it's under a year, for sure. No question about that. And for sure, your basis is zero. So 100% of the amount is taxable.

Just not sure which rate applies after one year. One of the most common pieces of advice I give folks trying to get out of debt is to sell the car. And I get it. That's easier said than done. Selling a car takes a lot of time and hassle unless you use CarWiser. CarWiser is a free service that gets you the best offers instantly from dealers around the country. And it couldn't be simpler. Just enter your vehicle's information and boom, you've got offers to choose from. So go to CarWiser.com slash Ramsey so go to carwiser.com slash ramsey

that's carwiser.com slash ramsey Christina Ellis, Ramsey Personality, number one bestselling author, is my co-host today. Open phones at 888-825-5225. Have you noticed that the stock market is down? Well, if you looked at it, you noticed. And some people are more than just noticing. They're like stressed out, freaked out, going, oh, my gosh, I'm in freak out mode. A little drama queen action going, right? Yeah, well, you need somebody in your corner when this stuff's going on that can talk you off the ledge, so to speak.

You need someone to walk with you talk with you teach you and that way you don't jump into the market and out of the market at exactly the wrong times which is what your emotion will cause you to do the data shows that the people who work with an investing with an investing professional actually end up making more money mainly because they stay invested you know if the investing professional doesn't do anything except keep you from cashing in at exactly the wrong times, they will make you more money than they cost if that's all they do. And, of course, they do a lot more than that.

They teach you about it. You make different decisions on taxes, all kinds of things. We recommend you work with what we call a smart investor pro. Smart investor pros are people that are investing professionals that we have vetted that will work with you one-on-one with the heart of a teacher. Go to ramseysolutions.com slash smart vestor. You can find a list of these people that we endorse, that we recommend the Ramsey Solutions way. Smart Vestor Pros are everywhere. ramseysolutions.com slash smart vestor. Our question of the day comes from Blinds.com.

Find out for yourself why Blinds.com is the number one online retailer of custom window coverings. Free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code Ramsey to get the best deal. Today's question comes from Noah in Arizona. I'm about to graduate from high school. I have no credit card, and I was wondering how I can prove that I can pay my bills on time to an apartment owner to get a lease if I haven't started any major bills yet. The only bills I pay so far is car insurance. Do you have any guidance?

Well, hey, Noah, good on you for thinking about that now. You sound like one of our foundation students who are getting that stuff in order early on, which is awesome. One of the biggest things they're going to want to see is your income. So I would really focus on that early on. You know, they're going to want to see a steady income history, which I know that can be hard straight out of high school. If you start working early on, maybe live somewhere with your parents for a bit and have that income history, that's great. But also look into options like having roommates I mean you may not qualify for an apartment straight away if you don't have that steady job and proof that you can pay but you could always get a roommate who's got a lease and you can sign on and get a room with them

so Noah what's interesting is is this is one of the most pervasive myths out there. It's an absolute lie. You have to have a credit score to rent an apartment. You just don't. It's a lie. You know how we know? We took one of our Ramsey personalities, got them on the phone, put it on YouTube, and they called 27 apartment complexes and said, Hey, I'm movingashville for my first job i don't have anything

except a job i have never borrowed any money i don't have any credit score is that okay can i rent an apartment there and they're like yeah sure do i have to do anything special some of them said you need to put up a little larger deposit um some of them said we need to see your w2 we need to see a you know when you see a pay stub from the new job uh well i haven't ever borrowed any money i don't have a credit score no problem no problem out of 27 three of them had a problem three it's good odds and these were like regular apartment complexes corporate management corporate ownership all this stuff so this idea that you have to have a credit score to rent an apartment is absolute bullcrap now some yeah that's true it is harder to rent a car with a debit card than it is to rent an apartment with no credit score much harder much harder so this is just one of those things that people this this mythology that people tell

we used to call it in the legal world they call it street law everybody thinks they know what the law is because they heard something one time on matlock you know and they don't know anything about the law but everybody then starts to believe this myth this lie and it's spread around you here's the thing no call 20 apartment complexes and prove me wrong. You're going to find three of them won't let you in, and 17 of them will. Some of them want a higher deposit. They all want what Christina said.

They want proof of income. They just want to know you can pay the bill. If apartment complexes never rented to young people doing their first job, they'd have no customers. Old people that have been on the job 25 years are not in apartment complexes, people, most of of the time they're not the primary customer anyway okay so i just i kind of believed it and then anthony o'neill that used to be one of our personalities sat down dialed the phone and the youtube of him dialing that phone nope nope nope nope nope it's humorous it's so

ridiculous and because it's one of these things that's just widely believed to be true that is an Nope, nope, nope, nope, nope. It's humorous. It's so ridiculous. Because it's one of these things that's just widely believed to be true that is an absolute lie. That's humorous to me. It's the emperor has no clothes thing. We all believe that it's this way, and we're afraid to say out loud that it's not until you prove them with actual data. And so just amazing.

So let that myth be busted. There we go. Pop that puppy. All right. Brittany's with us. Brittany's in Cincinnati. How are you, Brittany? I am better than I deserve, Dave.

Good. How can we help? I am calling to ask if we should pull from the emergency fund to help pay off our house. Is it an emergency? No. Why is it called an emergency fund then? Exactly. So we were a little bit hesitant because we received an inheritance check and with that check and what we have in our checking and our savings, including the emergency, we could pay off our house in full. Okay, so how much do you owe on your house? After August, we will owe $61,000.

And how much was the inheritance check? $25,000. Okay, and how much do you have in your emergency fund? We have in that account $20,000, but only $12,000 earmarked for emergency. Okay. So you have a $12,000 emergency fund. Yes. And in our checking accounts, we have $20,000. Okay. Well, the $ the twenty thousand from your checking

and the eight thousand that is not earmarked as an emergency fund are not in this discussion that's all going towards the house right that gets you there though doesn't it almost almost yeah and then what's your household income um some a little over seventy over 76 000 yeah well we do not recommend you go below the 12 which is your emergency fund so the answer is no we don't use your emergency fund to pay off your house now if you had an emergency fund there was three to six months of expenses and you were on the six month side and you wanted to cheat back to the three month side for a little bit and that would do it but that won't do it here, number one. Number two, your emergency fund's not huge.

$12,000 is not huge. Yeah, we're very frugal. Yeah, so $12,000 is good. I'm happy with that, but I wouldn't go below that. Okay. What do you think, Christina? Yeah, I agree. I love that you want to pay off the house, and I below that. Okay. What do you think, Christina? Yeah, I agree. I think I love that you want to pay off the house,

and I think that's awesome to be in Baby Step 7, but I think I would just take it a little bit slower to stay safe. I wouldn't jeopardize the emergency fund because, again, you could have a roof problem or a leak, and then all of a sudden you're in a whole other different issue. So I love keep the gas on the pedal and keep going forward but just maybe slow it down just a tad bit so you can how much was the inheritance again um well we've had several portions but this time was 25 000 okay all right so you have 53 000 if you don't touch the 12 and you need 61.

Mm-hmm. Yeah, so you're within $8,000 and you make $70,000. So you're going to pay off the house by the first of the year anyway, give or take. Yes. Yeah. So, no, we're not going below the emergency fund. Because all it does is take about six months off this process and you're within reach. If you you got something else you can sell that you want to pay off the house i'm okay with that but i'm not going in i'm not going into the emergency fund let me tell you what when you mess with your

emergency fund for something that's not an emergency it's sending an engraved invitation to murphy saying murphy come screw with my life because he will he's standing there ready to come and you just open the mur Murphy gate and let him in. Don't do that. This is The Ramsey Show. Thank you for joining us, America. Open phones at 888-825-5225. Christina Ellis, number one bestselling author, Ramsey Personalities, my co-host. Kristen is with us in St. Louis.

Hi, Kristen. What's up? Hey, Dave. Thanks for taking my call. Sure. So my question is about Baby Steps 3B. Okay. So my husband and I are looking at starting this step soon. I'm due to graduate with my nurse practitioner degree in May and since we cash flowed this program we'll be getting done debt-free. Ding ding go thank you how'd you do that um well i've uh worked full-time until clinicals and then my husband got turned in a side hustle to pay for

the rest of the program so wow there you go okay good well done okay so what's your question so um we own some farmland that we're planning on building on, and so I've heard you talk about Step 3B with buying a home, but my question is what is your recommendation for Step 3B with building a home, like with how much to save before starting or just your recommendations of that? Is the land paid for? So the farm is kind of like the farm pays for itself. We kind of use that as a business.

Is it debt-free? It is not. Okay. So how much do you owe on it? Oh, we just got it two years ago, and so we just started paying for it. It's about 55 acres. What do you owe on it 200 some odd okay and what's it worth it now it land in our area skyrocketed so it

worked much more than what's it worth i honestly don't know give me a guess give me a guess um honestly probably about 400 000 i was gonna guess 400 yeah okay that's good yeah all right and your household income is what um right now roughly 80 and since i'm not working but once i get done it we're looking at doubling that okay so you're gonna be making 190 $190,000 a year, $160,000 a year, something like that, right? And you have $200,000 worth of equity, and that will form as your down payment if you go apply for a construction loan. Because when you apply for a construction loan, what they're going to do is they're going to probably not take a second position to your existing mortgage. They're probably going to pay off your existing mortgage in the construction loan so that they are the mortgage on the property. And then they're going to let you draw down against the rest of the construction loan

to build the house. Okay? Okay. And then when it's all over, if you spend $300,000 on the house, you had a $200,000 mortgage to start with, then you're going to have a $500,000 permanent mortgage that pays off the construction loan. Okay. When it's all done.

But the fact that you have $200,000 worth of equity makes this deal happen today with zero cash down payment. Okay. Because you've got this equity that rolls into the deal. And it's going to be as if you put down two hundred thousand dollars because if like if we use my numbers if you built a three hundred thousand dollar house on it you've got uh you've got 500 in debt but the property's going to be worth 700 okay and so that gives them the equity position that you need for the permanent mortgage for a traditional mortgage.

Because if you put $200,000 down on a $700,000 deal, that'd be great, right? Right. And that's the same math situation you find yourself in then. So what's going to happen is you're going to have to have a certified contractor in your state you're going to have to have a set of plans that are not on a brown paper bag that an appraiser can actually use to appraise the plan as if the house was completed and the bank is going to require these things in order for you to get to build the house okay you can't just make this crap up and they're going to give you a half million dollar or they're going to give you you know to do this thing with. And so the certified contractor, the fact, the appraisal

on the plans tells them that when it's done by the certified contractor, when it's completed on schedule and on budget, then they're not going to be at risk. The bank's not going to have too much in the thing. The third thing they're going to do, make you do is go ahead and get your permanent mortgage and the permanent mortgage that get it get it qualified for it all the paperwork done they will issue then what the permanent mortgage will issue what's called a takeout letter and the letter states that you have the mortgage in place to take out the construction loan because construction loan is temporary lending right so you take it out you remove it with the permanent mortgage when you're done

now some banks will do the permanent mortgage in-house and the construction loan in-house churchill mortgage can do that for you too okay and so then you don't have to go to two different places to get it but in every case you know oh my husband's really good he's going to do the building himself that's not going to work. Right. Or here's our plan. We sketched it out on a brown paper sack. That's not going to work.

They're not going to give you the money. Right. Very professional button-down process here, just like you learned when you went to med school, but it's applied to the building industry. Okay, perfect. You can do this, though. You don't have to have a whole bunch of 3B to pull it off.

Y'all can start working on it. You're going to have to have your job in place because you're going to have to have the income. You don't have enough income now to support this program. But when your job's there, you're going to be able to do it. That's pretty cool. They've done a great job. Yeah, that's outstanding.

That's exciting to start visioning that up, too. That's very exciting that you can sit there on 55 acres and start dreaming up what that's going to be like. Yeah, that's going to be a nice place. Nice place. Especially with a nice bump in income too. You guys are going to be able to get to that spot where you're working through the baby steps and paying it off pretty quickly once you're all- You know what? That's true. Before they know it, they'll be making a couple of hundred, and they'll be able to plow through that thing pretty quick. Noah's in Sacramento. Hi, Noah. How can we help? Hey, Dave.

I've got a question. I've got a considerable amount of student debt in a Parent PLUS loan, and I'm trying to figure out how to make affordable payments on a loan that's in my parent's name that feels a little bit unaffordable at the moment. What's the total amount of debt? It is $175,000. Good Lord. Are you a doctor or a lawyer?

Neither one. What did you get your degree in? Christian Ministries. I'm a pastor. For $175,000? Yeah. Okay. Bad choice.

And that was not, you may be called to the ministry. You weren't called to this mess. I agree. What is your household income? $60,000. Oh, son. I'm so sorry. So mom and dad took out these loans their parent plus loans correct and they can't pay them they they i mean they can pay part our agreement was that

we would split it half before i went to school that was the that was the agreement. Are they struggling to pay them right now? They've been in deferment and forbearance and whatnot, so nobody's made any payments on them at this point. And, I mean, my parents' household income is considerably more than ours. We're just trying to figure out. Again, I don't know how a lot of this works, but I've been told by the lender and whatnot that we can't, like, consolidate them into my name or anything like that. And so we're just trying to figure out what to do.

They're going to be in their name. You're just going to assist in the payment of it. And so they're going to give you, like, their password and the website, and you're going to jump on there and pay payments on their loan. It's their loan. It's going to be their loan until it's over but you're just your your moral agreement your handshake is that you're picking up half of it and so um what what does your wife make uh she's not working at the moment we have a young daughter and she's pregnant literally nine days past her due date today. Oh, wow. That's great. With our second kid. Good.

Congratulations. So I assume she's planning on going back to work, though. Yeah, when we don't have very young children, yes. That's the plan. Okay. All right. Well, I mean, you're just going to be paying payments on this, Noah. And the math is telling me that this is a highly stressful situation. It is.

I think you're going to be running, you're going to be what we call a bivocational pastor. You're going to be running side hustles of some kind. There's nothing wrong with that. It doesn't, most pastors statistically, one number I saw was 80% of them are bivocational in America right now and there's no shame in that. It doesn't diminish your call. It doesn't do any of that but it's not unusual at all for a young pastor to be bivocational and you're gonna have to have some more money. It's a mathematical problem you got our scripture of the day gal Galatians 5.13,

For you were called to freedom, brothers. Only do not use your freedom as an opportunity for the flesh, but through love serve one another. Audrey Hepburn said, As you grow older, you will discover that you have two hands, one for helping yourself and the other for helping others. Very good. Christina Ellis, Ramsey Personality,

number one bestselling author, is my co-host today. John is with us. John is in San Antonio, Texas. Hey, John, what's up? Hey, Dave and Christina, just had a quick question for y'all. I'm a master financial coach on Baby Step 4. I've been following you and your program for, gosh, over five years. I switched careers about almost two years ago to become an insurance agent, and that job went full-time remote. Got engaged to a girl who lives in Mexico and had been spending a lot of time between Texas and working in Mexico. And I just wanted to see your thoughts. I've been seeing this opportunity and, you know, moving away from California after being there for so many years because of the

expense. I've been seeing that, you know, you can have a pretty good life, like in the safe part of Mexico and even the beach life and things like that. And I've been thinking about, you know, maybe doing that in the, you know, going forward here one day as kind of like a more permanent move. And just wondering your thoughts on that. Your reason for doing this is that your girlfriend is there no well um we're going to be we're going through the immigration process and she's going to be

having to live in the u.s under greek card before she can become a u.s citizen but then once she does that my real motivation is because of the the u.s dollars of income and spending pesos which you know pretty much takes you you know takes you a lot further right it takes your money a lot further no i mean it converts and then it's a bazillion pesos you know pesos about a nickel right now and um so it just takes a lot of pesos to get you know 20 of them to get to a dollar right still yeah exactly and in my my my well it's still a 200 hotel room and it's still the equivalent of 200 in pesos it's not like because the peso is less that the hotel room is 120th. It's still there.

Right. Like, for example, my fiancé has a two-bedroom apartment for $500 a month, you know, in a great area. You know, that's considered, like, you know, the rich part of town here. Yeah, well, I mean mean the cost of living in general in mexico is there but it's not because of the conversion of pesos it's just the cost of living is lower um and in many cases the standard of living is considerably lower but not every case um i love mexico i um uh and and honestly i love mexican people They're some of the sweetest people on the planet. I just, I thoroughly enjoy traveling there.

So I'm a fan in that regard. I, you know, and if you're a young guy getting married and you want to call that, would I expatriate to Mexico? No, I would not. But would I live there for a while as an adventure with your new bride and say, we're going to live here for four or five years and just have that part of our adventure. And then we might move back to Texas, but you don't have to take the U S off the table.

And it's certainly not a statement that the U S is going down the toilet. Cause you want to do that. It's just like, Hey man, I could go down and live on the beach and it doesn't cost a lot. And we're young and married. And this sounds like a fun portion of our life let's go do that it's like some kid backpacking europe for two years after they get out of college or something that's cool go do it that's great you know that's fine but um but i wouldn't say that this is like a permanent thing or a policy decision or everyone ought to do it or something like that it's just like you're just kind of on an adventure. You're going to go surf a little.

I'm assuming you can run your business from there, right? I'm working for an employer in my small agency, and they don't have a problem with me doing this. I mean, I've been doing it for about seven, eight months now off and on, and the Internet's great, and, you know, it's safe where I'm at. And, you know, and, you know, it's safe where I am. So which means which is an indication that you do understand the truth. It's not all safe.

So, yeah, law and order is a problem. Yeah, I'm with Dave. I think if this is something that you want to do because it's fun it's something that you want to do to be near your future wife's family if this is something you want to do because it's a joy and an adventure that sounds awesome but if it's out of fear that you're you know not going to have enough money here in the U.S. if it's something that's kind of just a negative thing where it's like you're going to Mexico to try to save money but you know there's fear around money here and does the like that that kind of sounds like a bummer. I think that in the career that you're in, you can make enough money to have a great

life here in the States. But again, if it's exciting, then more power to you. Living on the beach, I think that's awesome. Yeah. Have some fun with it. All right. Mike is with us. Mike is in Phoenix, Arizona.

Hey, Mike, what's up? Hey, thanks for taking my call. Sure. How can we help? I started watching your show and listening to your show about five years ago, and it was then I decided to get serious about paying debt. So thank you very much for that. Thank you. Since then, I've paid about $382,000 in debt, and all I have left is the mortgage. Yay! Good job. Yeah. So after paying about $150,000 towards the mortgage and then refinancing at a lower rate, I kind of fell off the bandwagon of the 15% investing and tackling the mortgage

and then instead opted to save approximately 60% of my income for the last two years. So I stopped heavily going after the mortgage. So on short notice, I got moved for a job and in two weeks, I'm going to close on a new house for 415,000. And because of such short notice, I didn't have enough cash for down payment. So I took a brokerage loan of 80,000 for the down payment. I plan to keep my previous primary residence as a rental. So all of this has gotten me focused on paying back debt, and I'm planning to be 100% debt-free in six years. The question I have is, I know you recommend the smallest balance first because of behavior modification reasons.

But does that same principle apply to mortgage debt too? No. But if I'm in your shoes, I'm not going to have that problem. I wouldn't keep that other house. You're in debt up to your eyeballs, man. You just fell completely off the wagon and rolled down the road. Yeah, I did. Yeah.

And you went to a brokerage account for a down payment.'re curling with two hairs i have left unbelievable man you are really playing it so now i'm sell the other house and get this mess cleaned up you made would it change anything if you know my mortgage payment on that house is 350 a month but it rents for $3,000? Nope. And it could be additional income? Nope. Because you know how you bought that rental property that has this great cash flow? Because you borrowed against your current residence. You didn't actually, but on your balance sheet, you did. Because since you didn't put down all of that equity on this current house, you're up to your eyeballs in debt on this current house. So it has the same effect of, hey, I had a house almost paid off,

and I just went and borrowed on it to buy a rental, and now I'm smiling because the rental cash flows. Nope. No sale. Hey, you can do whatever you want to do, but I'm telling you, the shortest distance between where you are and wealthy is not leveraging your personal residence up to your eyeballs to own a rental property the cash flows it's not you've added

so much risk to your life um well the renter is going to pay it renters don't always pay well you know you know you know what happened during the pandemic it's called a moratorium on eviction and so they sat there on their butts and didn't pay you a dime because you couldn't legally do anything about it. And they're just sitting over there grinning, living in your house for free. There went your cash flow. No, no way, dude. Don't need the risk. Don't need the risk.

You can do whatever you want to do, but I think 10 years from today, you're going to regret this move versus if you get completely clear house and everything and then start investing on the side and save up and pay cash for your rental that's what i would do it's gonna feel so much better that way like this this way sounds very stressful and i know that deep down it feels that way yeah mike the problem with our stuff is you can't go through it like it's a buffet and just pick some of the stuff off the buffet you kind of got to do the whole thing or it doesn't work. That puts this hour of the Ramsey Show in the books. Good job, Christina. Good job, Austin and Will and Zach and Andrew and James. I am Dave Ramsey, your host. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.

Dave here. You can find all of our shows with the Ramsey Network app on your smartphone. It's the only place to listen to the entire back catalog of episodes. Download the Ramsey Network app in your favorite app store today.