The Ramsey Show - App - Consistency Over Time Is How You Get Out of Debt (Hour 3)

Episode Date: June 12, 2020

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studio, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I am Dave Ramsey, your host. This is Common Sense for your dollars and cents, God's and Grandma's ways of handling money. But it turns out common sense is so rare, it's like having a superpower. So it's marketable today in the U.S., and we have proven that. Thank you for joining us.

Open phones at 888-825-5225. That's 888-825-5225. Karen starts this hour in Los Angeles. Hi, Karen. Welcome to the Dave Ramsey Show. Hello, Mr. Ramsey. How are you today? Better than I deserve.

What's up in your world? Well, I recently got a new job that pays pretty well, so we're moving my husband and I and two dogs to Texas. But we do have about $36,000 in debt that we want to get rid of in the next 12 months. So we're trying to figure out whether we should rent out a one-bedroom for about $1,000 or try to find a room and a house for about $600. Yeah, we're just not sure which way to go.

Cool. Well, a room and a house with dogs sounds interesting. Getting rid of the dogs? We can. We've had them for a long time. I'm not getting rid of my dog. I was just asking if you're going to move in somebody's house with a room. You know.

Yes. Have you got that option? Well, it looks like we do. There's some roommate situations where they would allow dogs. Okay, cool. And so what's your new job pay? About $60,000 a year. And what's your husband going to be making?

About 20-plus commissions. How much commissions? Well, I'm not sure yet. Depends on how well he does, I guess. But, I mean, what's he thinking? Surely he's not thinking he's going to make $20,000. No, I'm thinking it's going to be in the range of $30,000 to $40,000. It's his first year there.

Okay, cool. So roughly we're going to bump up towards $100,000 then. And you're going to pay off $36,000 in one year doing that. And you can either rent something for $1,000 or you can rent something for $600,000, the difference being $400,000, which is $4,800 a year. So this is a five thousand dollar swing right it's up to you i mean if you can pay off 36 and be on the other rental it's fine with me be a better quality of life it's it's not it's not a deal breaker okay but now if you told me

600 or or 2000 i'd tell you you know 600 but it's close enough that it's not you know the 400 bucks a month is not going to keep you from paying off the 36 if something keeps you from doing it'll be because your husband didn't get any commissions or y'all didn't watch your budget or something else is going to come up it's not going to be rent that breaks your back on this with the numbers you gave me does that make sense yes it does i think i'm just worrying a little too much about the whole move, I suppose. Well, I don't know if it's worrying. You're just being very intense and very intentional because the reason for the move is to get your freaking life back and get this debt paid off, right? And so you don't want to screw that up.

That's not worrying. That's being smart. You're thinking through every little thing. You're squeezing every little thing. And it would be okay if you want to call in an adventure and say, year we're going to do the roommate thing and after that we're going to be free and then we'll go do something else either one's okay with me because the deal is this it's not a big enough spread in your question to affect your goal you can still hit your goal either way and then you've just got to look at it and go you know what's this mean to us at our stage of life

i'm old and grumpy and the chances of me working out something in a roommate situation is zero so uh i would be renting something to get human beings away from me you know that kind of thing so that's just different though i mean i'm you know where when if i was young and for you know an adventurous it might be fun you know but that doesn't sound fun to me, but it could be fun to you. Brittany is with us in Kansas City. Hey, Brittany, welcome to the Dave Ramsey Show. Hi, thank you for taking my call.

Sure, what's up? I have a quick question. So I currently left my old job. I just started a new job about a week ago. And I'm debating on if I should withdraw my profit sharing in 401K to pay off some loans. Right now, my profit, no. No.

Are you bankrupt if you don't? No. Okay. How much debt have you got? I have a car payment, well, not the payment, but about $13 on my car. $13,000? Yes, $13,000. Okay, and what else?

Student loan debt is about $37,000, and credit card about $4,000. Okay, so you got $54,000. All right. And what are you making now at the new job? My new salary is $65,000. Good for you. What are you doing? IT, quality assurance.

How old are you? 27. Oh, you're killing it. Good job, Brittany. Excellent. Thank you. Okay. And how much is in your retirement account?

I don't have anything. No, the one you're wanting to cash out. Oh, $16,000. Okay. All right. If you cash it out. It'll actually be more next month. How much are we talking about cashing out?

I was hoping to cash out all of it so I can just completely pay off my car. Which is how much, darling? $13,000. You're going to cash out $13,000? No, not your car. I'm talking about the profit sharing. $16,000. You're going to cash out $13,000. No, not your car. I'm talking about the profit sharing. $16,000. The whole thing next month is $16,000? Next month, it'll – I'm not 100% sure. Let's call it $16,000 because I'm tired of this.

Okay. $16,000. All right, $16,000. And here's what happens. If you cash out the $16,000, you're going to get a 10% penalty plus your tax rate, which is 22%. Okay? Mm-hmm. Now, and that means you're going to be hit for 32%.

So mathematically, it's like saying, hey, Dave, I want to get out of debt so bad I'm willing to borrow money at 32% interest. And you and I would both instantly say, that's a bad idea. Okay. So no, we're not going to cash it out. We're going to work our way through this debt, and you got a great new job. You're making more money. You're going to completely focus on this, and beans and rice, rice and beans, you have $54,000 in debt.

You're single, 27. You make 65. You should be debt-free in two years okay all right and you can do this i'll show you how but i want you to take that money don't give the government a third of it kiddo yeah it ain't worth it you know because that's what you're doing that's what you're doing i mean you're giving up a third of your money just to make a little bit of progress and it doesn't even solve your problem what What solves your problem is that you're now paying attention and you're making good money.

So congratulations. Good stuff. I'm going to send you a copy of the book, The Total Money Makeover, to show you exactly step-by-step how to attack this. Jump on DaveRamsey.com, click SmartVestor, and those guys will help you. A lot of brokers won't help with a little small account like you got, but our guys will help because they have to take small accounts or I won't endorse them.

And so I won't let them be SmartVestor pros. And so click SmartVestor, get a SmartVestor pro in your area. They'll help you do a direct transfer rollover into good mutual funds with your old retirement. And that money, you're 27. When you're 37, you'll look up and that $16,000 will be $100,000. And you'll be glad it's in there. And it'll be one of the things that causes you

to be a millionaire someday is this conversation. So I'm proud of you. You're doing good stuff. Hold on. Kelly will pick up. We'll get you a copy of the book, The Total Money Makeover. And we'll get you going. You call me if you need some more help as you're continuing to win.

Good job, Brittany. This is the Dave Ramsey Show. Business leaders, now more than ever, we need people with the right skills to support our communities, especially the frontline workers who provide resources and care for those most in need. To help, LinkedIn is offering free job posts for healthcare and essential service organizations that need to quickly fill critical roles with the people who help us all. If you are hiring for one of these organizations, free job posts on LinkedIn can help you quickly find the right people for your frontline. LinkedIn jobs can help by screening candidates for skills and experience you're looking for and putting your

job post in front of qualified people who have what you're looking for so you can find the right person to quickly fill critical roles. To post a health care or essential service job for free or if you're in another industry and have hiring needs, visit linkedin.com slash ramsey. linkedin.com slash ramsey. Terms and conditions apply. Thank you for joining us. This is the Dave Ramsey Show. Open phones at 888-825-5225. Amy is with us in Dallas, Texas.

Hi, Amy. How are you? Hi, Dave. Thanks for taking my call. Sure. What's up? I inherited a leased vehicle and an unexpected divorce. So at what point does it make sense for me to finish out the lease payments and then purchase the vehicle at the end of the lease? Wow, what a mess. It is a mess.

How much is left on the lease? How much length length how many months 26 885 to buy it out today um i have 32 months at 477 a month and if i turn it in today i'm upside down 98 55 um you're upside down by the dealer's equation? Yes. Okay, so that's a wholesale. Because I went to CarMax and got a bid, and they'll only give me $17,000. So if I turn it in by Friday. Okay, but the CarMax bid is obviously a wholesale bid,

and so that means you're probably in the hole more like $6,000, okay? Maybe $7,000, something like that. Okay, and you inherited this. Is it in your name? It is now. It was ordered that I had to pay it off, and I didn't have the money to pay it off when the divorce went through, so they put it into my name. Who put it into your name?

The leasing agency. It's a third- The leasing agency. Oh, they... It's a third-party leasing agency. It's not directly with the lease. Right. And so they took your ex-husband off the lease and put you on it? Yes. To release him per the divorce decree.

Okay. Highly unusual, but interesting. All right. So what is your income? My income with child support is only at the moment 1900 a month i live with my parents with my two girls good lord yeah okay how do you end up with this car you must have a really bad lawyer um yeah it's it yeah so okay all right Yeah. Okay. All right. So bottom line is $1,900 from now, which is 477 times 32.

I didn't do that right. No, that's $15,000. I'm sorry. $15,000 if you keep the car. What condition is your credit in? Fantastic. I have an 800 score. Okay.

And how much other debt? What the leasing agency said to me was we could roll some of that into a new car. As soon as they said, how much can you afford per month, I was like, they're rancid, but don't do that. Yeah, that doesn't help you. Let's pretend that you sold the car today, not for $17,000 to CarMax, but to an individual for $19,000. Okay?

Okay. And you borrowed the difference from your local credit union. Okay. Okay, there's two options, okay there's two options or there's three options here option number one is you pay 477 times 32 which is 15 000 bucks to keep the to keep the car till the end of the lease and then buy the car at the end of the lease you can't afford this car i know at any point in this so keeping the car doesn't make sense on a monthly basis. $477,000 as a percentage of your income is nuts.

And keeping the car long-term doesn't make sense. Why does it not make sense long-term? Because you can't afford it. Right, yes, okay. It's a ridiculous amount of money given your income. And so what I would rather you have is a very, very inexpensive car, a hoopty, $2,000 or $3,000 car, and a small loan of $6,000 or $7,000 to cover the difference on this. Okay.

That's going to put you way ahead of where you are now or way ahead of where you would now or way ahead of where you would be if you kept the car till the end of the lease and tried to buy it out so what i would start working on is a local bank or local credit union loan unsecured loan for the difference of what the car will actually sell for not to a dealer. We're not in desperation mode yet. You drive it and pay the payments for a little while, and let's just try to get it sold for more than CarMax will give you for it. And it's not that CarMax is evil.

They're not doing anything wrong. They're just in the business of selling cars for a profit, which means they have to buy them in wholesale and sell them for retail. I want you instead to sell it to go on go on kelly blue book kbb.com and look at private sale price and i think you'll see that i'm right that this is a it's a couple grand more than carmax is offering you probably what kind of car is this it's a lexus three um es 300 hybrid okay good it'll sell then okay okay so uh you just put it on like craigslist or something like that and start an auto trade or that kind of thing and start selling it to an

individual and let an individual buy it um cheaper than they can buy it from a dealer but a whole lot more than a dealer will give you for it okay and then you have to have a loan for the difference to get out of this but instead of 26 885 debt then you got a have a loan for the difference to get out of this. But instead of $26,885 debt, then you've got a $6,000 debt. That just sounds a lot better in your situation to me. Yes, and my tax return will actually cover, if it's only $6,000 or $7,000, then my tax return can cover that, and I won't have to take out a loan. Okay. Cool. So you're getting a tax return of $6,000?

Yeah. I thought you said you made $1,900 a month. I did. The tax credits. Tax credits, okay. Yeah, wow. How many kids have you got? Two.

Okay. How old are you? Forty-five. Okay. wow how many kids have you got two okay how old are you 45 okay i'm gonna stay at home mom forever and so i'm trying to get out and um restart life yeah yeah you gotta reset for sure you have a new normal i'm so sorry god is good he's in the details oh he is in the details you're fighting through it you're a warrior kiddo well you're you're you're gonna be fine uh you're gonna be fine yeah that's what i would do i would dump this car and uh or sell it i wouldn't dump it but i would sell it and i'd rather you have that you know use your tax return for that and then let's get you a little get around car and then when you get yourself reinvented and your income comes on up, because it's going to, one year from today, life looks completely different than it does today.

You know that. Yeah. And so once you get this career path going and you get plugged back in, your income is going to double pretty quick probably. And as it does, then you can move up in car for cash as you go along. Is this the only debt you inherited in this mess? I have a house in another state and it's got a renter in it so it's paying for itself right now.

And the extra money that comes from that rent is going. I have six months set aside in case the renter is not there. You have six months. So you've got the cash there, too. Yes, I technically could. Yeah, you technically could buy a car. I did your financial peace university, so I didn't want to touch that because I wanted to have the six months

towards if the renter's not there so I don't lose that house. I completely agree with that, and then I completely agree with selling that house as soon as that lease is up uh but in the interim if you need two thousand dollars of that money to buy you a car or something then rather than you know some of these other things we're talking about that gets you out of this and and gets you going in the other direction yeah if you're unless you're moving into that house you need to sell it at the end of that lease and so good well that's some extra cash laying there too so you got two ways to get out of this money wise and i don't want you to drain that dry and leave yourself vulnerable permanently but right now you're pretty vulnerable with a 26 885 dollar card debt

so we got to clear that by getting it sold covering the difference let's sell it for as much as we can possibly sell it for get you a little paid for car and we'll reset restart life hey thanks for the call i'm sorry you're going through this wow what a mess this is the dave ramsey show Hey, folks. Father's Day is just around the corner. If you're looking for the perfect, unique gift to give dad, I've got it. Grip 6 belts. If dad's like me, he's not a fan of traditional belts.

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And where do you live? I live in Tilo, Texas. Oh, cool. Well, welcome. Good to have you. All the way to Nashville to do a debt-free scream. Yes, sir. And how much have you paid off? $95,000 in eight and a half years. Good for you. Very good. And your range of,000 in eight and a half years. Good for you. Very good.

And your range of income during that eight and a half years? Full-time, made $31,000 when I started. Picked up bookkeeping jobs and roommates. So any given year, made an additional about $3,000 to $7,000. And then ending, when I paid off my student loans, was $42,000 when I paid off my house. Oh, you paid off your house and everything? Yes, sir. Student loans and house. It was $35,000 on my student loans and $60,000 when I paid off my house. Oh, you paid off your house and everything? Yes, sir. Student loans and house.

It was $35,000 on my student loans and $60,000 on my house. So I'm fully debt free. I called in when I paid off my student loans and I wanted to come in person now that I paid off my house. Man, that feels great. It does. How old are you? I am 35.

And you have a paid for house? I do. In Tyler, Texas. What's it worth? It's worth about $120,000. Wow. Very cool. And you don't have a's worth about $120. Wow. Very cool. And you don't have a house payment.

I do. I'm done. Look at you. And man, not even 40 years old. That's absolutely impressive. Very, very well done. It was a long journey. So you worked the debt snowball first.

And got out of debt. How long ago was that? Just at the end of September. That was my birthday present to myself as I paid off my house, made my last payment. Okay, but before the house, you paid off the student loan. Yes, sir.

And how long did that take? I first found you in spring of 2010. One of my coworkers listened to you on the radio, and he'd always come in ranting, whatever was going on on the radio that day. And at that time, I had just graduated college. And so my student loans were coming due, and I had this massive debt of $35,000

and another payment of about $300 to figure out how to pay and not really having much of a budget and on top of that still having my house. And so life was very much overwhelming at 26 years old. And so you had a conference in Dallas and so went to that and actually bought my kit, Financial Peace University on a credit card. So that's where I started. Definitely had a conference in Dallas. And so I went to that and actually bought my kit, Financial Peace University, on a credit card.

So that's where I started. Definitely had a lot to learn. And so thankful for the principles that you taught there at Total Money Makeover. And then through the FPU that I took the class twice and now have actually been teaching it and co-teaching it, coordinating it at my church. So this is actually my 19th class. Wow. Teaching FPU. Thank you. Yes,U. Thank you.

Yes, sir. Thank you. It's a privilege to be able to share my journey with other people. Very cool. So how long did it take from the time you started at 26 to pay off your student loan? It took me two and a half years. Okay. And then you had six years to pay off your house.

Yes, sir. Okay. Wow. Well, you're way ahead of schedule then. Yes, sir. So you paid off student loan in about a normal amount of time, but you paid off the house super fast. Yes, sir. Wow. I just continued in about a normal amount of time, but she paid off the house super fast. Yes, sir.

Wow. I just continued that debt snowball into my house. I wanted it gone. I wanted that freedom and that being a single person, not having anybody to support me financially, that I wanted that security of being able to fully use my finances for whatever God wants me to do with them. And so I wanted that burden gone, that I wanted to be fully debt-free and that life now moves at the speed of cash, that there's nothing I want bad enough to go back into that overwhelmed,

desperation feeling that I remember what it felt like to have $95,000 in debt and there is nothing in this world that I want even a fraction to go back to that. Yeah, wow. So what big thing are you going to do to celebrate? This is one of it. Trip to Nashville. Trip to Nashville. Went on a road trip.

I love a good road trip. And so nine hours in the car. What else are you going to do? I don't know. Spend time with family. It was nice to just on a whim buy a plane ticket to go visit my grandpa. So exciting just to be, hey, let's go. I'll go. And where does he live? I'm to be, hey, let's go. I'll go.

And where does he live? I'm from Minnesota. So my grandpa's 93, and I'm blessed to be able to go visit him. And my grandma actually is taking FPU right now up in Minnesota. So it's exciting to walk that journey with her. Very cool. So you've taught the class 19 times. Yes, sir.

Oh, my gosh. You're like a super coordinator. I drink the Kool-Aid, yes, very much so. It's a blessing just to be able to share my story with others and to give people hope to say, I've been there. I did stupid. I kind of love the home lesson because I go, I did everything wrong. Don't do what I did. So it's great just to be able to share my story and to give the people that come to our class at

Green Acres Baptist Church that the hope that you can do it I get where you're at this first couple of budgets it isn't going to go right but you'll gain traction and you'll be able to make progress and this is what I did and you can do it too and you know you know 31 to 42,000 dollar a year range of income and so what do you tell people the, the top three things they need to do if they're going to get out of debt? It's consistency over time, that you need to have a plan and that you need to backtrack that plan to what you need to do. That, okay, I wanted to get out of debt and what did I need to do in my tangible monthly,

weekly budget? What do I need to do today to get here tomorrow and keep making that plan? And so life happened along the way. Eight and a half years, my cars have been totaled. Life's happened along the way. Certainly it wasn't a straight line journey, but you just make adjustments and you keep going. This is where I want to go. And I'm going to keep making traction towards it. You have to adjust as life happens, certainly, but you continually make progress and you remind yourself, this is how far I've come. And this is where I need to go. And for me spreadsheets have spreadsheets and so you just keep knocking at those lines to get it

to come down and ultimately then you're done and you're like I just got here and certainly it doesn't feel like eight and a half years but it's exciting to now be on the other side and to go okay I now have this legacy this responsibility to now walk forward, to become that everyday millionaire and to do everything that the Lord has for me with my finances. Amen. Way to go, kiddo. You're a rock star. Thank you. If I'm going to be off, we can just let you fill in.

Yes, sir. You got this dialed in. I'm available. Let me know. Very, very, very well done. Who was your biggest cheerleader? I've been blessed. I have a lot of cheerleaders in my life, certainly. First and foremost, my best friend, Francis, friend and mentor, Michelle, and my mom and everybody at Green Acres and the singles ministry.

And certainly my co-coordinators, the Grimes, Jeanine and Robert. It's been neat to be able to walk this journey with them from them seeing me. That first class I previewed but then couldn't really come to. And then the couple of classes I took with them, they're like, how about you just do this with us? And so it's been neat to walk this journey with them and then celebrating me to being able to celebrate them when they paid off their house and then them being able to celebrate me when I paid off mine. And so it's been really neat to walk this journey with a multitude of people and my friends are all watching live and excited for me well i'm proud of you very very well done very well done and thank you for leading so many classes you've helped a lot

of people you really have that's pretty pretty impressive stuff well of course we have a copy of chris hogan's uh everyday millionaires number one bestseller for you because that will be your next chapter absolutely without a doubt you are on the way and you're going to prove it can be done without making 240 000 you can do it making 40 000 yes and you're on your way to proving that so very very well done proud of you all right skyla from tyler texas 95 000 paid off that includes her house and everything. I'm looking at weird people. Did it in eight and a half years making $31 to $42. Count it down. Let's hear a

debt-free scream. 3, 2, 1. I'm debt-free! I'm debt-free! Woo-hoo! Boom! That is how it's done, ladies and gentlemen. That's how it's done.

Wow. Absolutely fabulous. Congratulations. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee. That means if you're like me, and sometimes you mess up, you mismeasure, you pick the wrong color. I could pick the wrong color. I can't even pick out my clothes.

Yeah, if you do that, they'll remake your window blinds for free. That's their satisfaction guarantee. You get free samples, free shipping, new promos they run every month. You'll save even more. Use the promo code Ramsey to get the best deal. Caitlin is in north carolina uh dave i paid off my credit card and i'd like to close it out completely so i'm not being charged 95 annual fee i've heard that canceling your cards is quote bad for your credit unquote what do you suggest keep the card in the 95 annual fee or cancel it completely

always cancel it completely we don't want to set out to do something to destroy or harm your credit on purpose, but we also are not going to play their game. And their game is to keep you in debt and paying them fees in order to keep your credit bureau score, your credit report score high, your FICO score high. And the FICO score is just a measure of how much you play kissy face with the bank. It's not a measure of whether you're winning with money. It does not say you're winning with money.

It does not say you're winning with money. It says you've been in debt, are in debt, and have paid it back. That's all it says. So we don't want to worship at the altar of the great FICO. Oh, great FICO, you are our provider. Not. So I'm sorry, but your credit score is going to go down because you're going to cancel this stupid card.

This is the Dave Ramsey Show. Let's talk about preventing the unexpected. Imagine your refrigerator goes out. You can fix your major appliances yourself with parts and expert advice from my friends at Appliance Parts Pros. They carry over 2 million appliance parts and offer easy returns. And anyone can do the job themselves with 3,500 repair and how-to videos, plus live chat on their website. Save money and get your parts today at AppliancePartsPros.com. Our scripture of the day, Romans 12, 18. If it is possible, as far as it depends on you, live at peace with everyone. Harry Selfridge said, the boss says go, the leader says let's go.

Allison is in Springfield, Illinois. Hi, Allison. Welcome to the Dave Ramsey Show. Thank you. So glad to be here. I appreciate it. Awesome. Good to have you.

How can I help? My question is, in the beginning, my husband and I have always agreed that divorce is not an option. And I wish that we would have said that debt was never an option, but we never set off on that foot. We've been working really hard over the last recent few years here to be gazelle intense, making that our new motto in our relationship and our family, thanks to you all and your entire team. So I've recently launched an agency, which has become successful very quickly. I wasn't ready emotionally, maybe, for that. So I got a little apprehensive. That's not an option. Our business is, well, my business is debt-free, and we want to keep it that way. My questions are about saving and making sure that we're on the right track,

like about how much, if it coincides with the personal baby steps, and if we start investing at all with the business. I feel like I should know this, if you could bear with me. No, that's okay. Here's the thing. How much are you making now in the business um currently five a month but it could easily increase to 10 or more and that's why where i'm nervous what does your husband make um i believe 55 you believe yeah i it went up recently, so I can't remember.

Oh, $65,000. Yeah, I apologize. $65,000. So your household income now is about $120,000, $130,000. Okay. All right, good. And the $5,000 a month is net profit or gross? Gross, unfortunately.

Okay, and so what are you netting on $5,000? If it only remains at one client a month, then, which I don't believe it will, but, you know, I'm being very conservative. So, you know, after I take out for everything, it's $500. On $5,000, what do you net? $500. Oh. That's just to make sure that I'm saving. That's after I've saved. No, no, that's not, honey, savings is not an item. It's not an expense, okay? When you run a business, you have your gross revenue minus your expenses of operating the business gives you net profit.

What is your net profit on $5,000? If I were to take out what i owe every month on the business it would be about four what do you owe on the business what do i owe you said when i take out what i owe on the business you mean expenses expenses yes expenses okay so you have how much in expenses a month on a $5,000 income? $1,000. Okay, so you're net $4,000, net profit. Right. And then I assumed I would take out 50% for taxes, leaving me with $2,000.

Yeah, that's different than profit. Okay, I'm dealing with just profit right now. Right now we have a $4,000 profit. And then you'd like to save some money, and when you bring your profit home, you need to set aside a fourth of it for, at this stage of the game, about a fourth of it for your taxes. That's if you were going to bring it all home. And basically that's all profit. So, yeah, you need to set aside about $1,000 out of $4,000 for that.

The other thing then, what are you having to spend on the business? Why do you need money to grow the business? You said investing. I didn't know if you can have your business do investing, if that is even a thing. No. I'm just trying to navigate. No, I would not. What I would do is reinvest back into the business,

meaning you might want to set some money aside in the business to grow the business itself, but I wouldn't use the business to do outside investing. And so if you said a percentage of your net profits, you could set aside for what we call retained earnings, which is savings in business. And the savings would be used for emergencies in the business and for growing the business. Okay. I see. And in your situation, I would not recommend more than about 15% or 20%

because you've grown this with no savings. Mm-hmm. And it's already growing. Yes. Okay. So if you want to set aside 15% to 20% of your net profit for retained earnings out of your formula, you take your income minus the actual expenses times 15% or 20%, whatever you want to do. Make up a number. I don't care.

It could be 10%. I don't care. Something like that where you've got some little bit of business savings account building up to cover bumps in the road and to cover new investments inside the business. Then when you take money out of the business and bring it home, you need to set aside one-fourth of that in a separate savings account just for taxes, and you're supposed to be doing quarterly estimates on your taxes filing with the IRS once a quarter. Oh, I see. Okay. So, oh, once a quarter.

Okay. Yes. See, I did not do that. Yes. It came upon me this year already. I do have a business savings for the site, so I would just put the savings for the taxes inside of there. I would keep it separate from the business savings. I'd have just a little separate savings account just for taxes, just so I would just put the savings for the taxes inside of there. I would keep it separate from the business savings.

I'd have just a little separate savings account just for taxes, just so you don't accidentally use your tax money to do something inside the business. Exactly. I'm treating this like a new-born baby. Like you're withholding on yourself. Yeah, you're withholding on yourself is what you're doing. I have not paid myself either.

Well, and what we're going to do is when you take that money home is when you set aside a fourth of it. As long as you leave the money in the checking account, you're not going to be taxed on it until year end. Okay? Oh. But, you know, you can sit down with CPA. It won't take but a few minutes to work out how to do these quarterly estimates, and that's what you need to do. But then, you know, in your case, I think I'm bringing most of this money home, the profits.

Pay your expenses, set aside your taxes, set aside a little bit for retained earnings, and I'd bring the rest of it home, and it doesn't have to be a set salary, but it can just be the balance comes home after taxes, and we're going to use that to pay household bills and get out of debt and keep moving. And, you know, it's part of our income. And if your income shoots way up, then you're going to get out of debt. And, you know, you bring it on home and build wealth with it. I bring it on home. That's what I do.

And I don't even do giving out of our company. We do a tiny, tiny, tiny little bit of giving out of our company. Ninety-nine percent of the Ramsey Family Giving goes to the ramsey family foundation that is funded by my personal account meaning i took business money took the profits out of the business home and some of that i allocated in addition to my tithe as a christian i allocate over into a fan into a family foundation and we do all of our giving there and so i cannot say I gave at the office because I almost never do. I mean, like literally less than 1%. Occasionally we do a tiny little thing out of the office,

but it's more of a PR thing than it is a generosity thing. It's more just working with a client somewhere. And we'll do a little bit of that, but it's less than one-four fourth of one percent of our revenues and so almost all of our big time generosity all of our generosity period happens at home and home lately has been called the ramsey family foundation and so we just allocate that so you just keep all this stuff real square and real separated emotionally and it keeps it clean and that way you you you feel permission to use your own money to do the right things with it to pay your taxes to have money set aside for the

business to bring it home to prosper at home all of those things start to happen and you certainly you've already got separate accounts that's one of the first steps for a small business startup you have separate accounts for everything um and then treat your business like it's someone else's well you know and you're not going to embezzle out of it you don't buy groceries out of the business account you know you don't do other stuff out of the business account that'd be embezzlement if you did that with somebody else's company they put you in jail be stealing and so um you know you just you don't pay you don't buy groceries with that money it comes home you take a fourth out for taxes.

You take the percentage out for your retained earnings, and then it comes home. And when it gets home, then we buy groceries out of the home account. And you've got to keep everything real clean, and that helps then as the business grows with the emotional parts of it. So, good question. Thanks to James Childs, our producer, Kelly Daniel, our associate producer and phone screener. I am Dave Ramsey, your host. We'll be back with you before you know it.

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