The Ramsey Show - App - DAVE RANT: Middle Class Used to Mean Living Within Your Means (Hour 1)

Episode Date: August 29, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. So, I have made a decision in the past few minutes. I think that they are not teaching critical thinking skills in journalism school anymore. And I also think that journalism students should not be allowed to write stories on economics because it makes them look like fools. Wall Street Journal has a five-page article today that starts off this way.

Families go deeply into debt to stay in the middle class. In order to maintain the middle class, the American middle class is falling deeper into debt to maintain a middle class lifestyle. Cars, college, houses, medical care become steadily more costly, but incomes have been largely stagnant for two decades. Now, and then they go on for the next five pages of this article explaining how car debt is at a record, credit card debt is at a record, student loan debt is at a record, all things we knew,

and that middle-class wages are stagnant. And so the wealth gap, the wealthier getting wealthier the poor middle class is being eaten alive and you all are all a victim of evil capitalism and the socialists are going to come and rescue you with a plan that has never worked in any country in the history of the world and that's the premise of this bull crap. And I can't believe this is in the freaking Wall Street Journal. Okay? Yes, middle class wages, by and large, are stagnant. But let me tell you what's happened to the middle class while I've been alive.

I grew up in middle class. Suburbian Nashville. Middle class. In 1960, I grew up in a house that was 1,000 square feet, and we finished out part of the basement, made it 1,300 feet, which is actually the median square footage of a house in 1960 in the United States. You know what the median square footage of the middle class house right now is in the United States? 2,600.

Middle class ain't what it used to be. The house has doubled. Our cars? We had one car. We had 240 air conditioning. You rolled down about two windows and drove 40 miles an hour. We didn't have DVD players, and only rich people had cars with electric windows. We cranked ours down by our own little butt used our little muscles to do that they weren't that reliable they weren't that great they wouldn't park themselves and none of the doors opened automatically and there were no holes in

the roof except ones we didn't want if you had a convertible or an electric window in 1960 on your car you were a rich person not not a middle-class person. Now, if you don't have a moonroof, an automatic door, a GPS, and an auto parking, and the freaking thing drives for you, because, God forbid, your two children should have to sit together in a seat, and you call that middle class oh if you went to college in the 1960s you went to an in-state school or community school you lived at home and you worked your little butt off to pay for it and if you graduated in four years and got a four-year degree you were a big deal nowadays you have to go to a school that's prestigious, and you have to stay 18 years and get a graduate degree to call yourself middle class, and pay 16 times more for it to call yourself middle class.

When we went on vacation when I was a kid, we got in a 13-foot boat with a 35-horse Johnson on it, drove over to the island with a lawnmower, mowed out a place, and went tent camping. And water skiing consisted of a lot of dragging and a little bit of skiing. Now, if you want to go out on the lake, it takes a $110,000 wakeboard boat because you have to surf behind the boat. And there ain't no camping involved, unless it's in an RV that costs $100,000 in the middle-class America of today.

Sharon and I got married in 1982. We put our little butts in the car. We drove from Tennessee to Key Largo and stayed in the Holiday Inn, and we thought we were big time because all of our friends, when they got married, went to Gatlinburg, and we thought we were big time because all of our friends, when they got married, went to Gatlinburg and we went to Florida. When I was a kid growing up, I never saw the ocean until I was 14 years old.

I must have been abused as a child. I don't know how we middle class people made it. The things that you people all call middle class today we called rich when we were in the middle class of the 1960s and 1970s if you wanted to make a phone call you put your finger in a thing and turned it around

a rotary phone and it was connected to the wall and you never called long distance because it costs more now if you can't facetime someone in china you're pissed off in your hand and you call that middle class if you want to turn on the television it was free and you spun the rabbit ears around and the channel changer was my dad telling me to get up and change the channel

and there were three channels it wasn't a 200 a month with the nfl package the golf channel package the sec package oh and you got to have Netflix for another $10 or $20. Oh, and you've got to have Apple TV. This is middle class. You know when we went to a restaurant on special occasions? You freaking middle class people today eat out every night, and if you can't, you whine like a 13-year-old girl at the lunch table in middle school. And you call that middle class.

Your wages might be stagnant, but let me tell you what's not stagnant. Your freaking consumption. You are consuming your butts off, America. And don't blame it on capitalism. Blame it on your immaturity and your impulsiveness. And don't you dare say that the wealthy are getting wealthier on your backs. You're living like you're rich, and you're not. It's your fault.

Oh, you're shaming. Yes, I'm shaming. That's what you call that. It's calling stupid stupid. This is critical thinking skills. It's not a stagnant income that's a problem. It's an exponential increase in consumption instead of production. Get up, leave the cave, and make more than you spend,

and try not calling all of these luxury items that were reserved for the richest of the rich only two decades ago please don't call those middle class and that you are somehow entitled to them because you woke up and breathed american air this morning absolutely asinine you cannot eat out every night have cable tv packages have a phone that does what your phone does, fly to the Dominican Republic on your honeymoon, and have an all-inclusive adventure at the beach. You cannot vacation instead of a tent in Europe and all over cruising all over the world. You cannot have a private school with a graduate degree, two cars that will dance a jig, and live in a house twice the size as I grew up in, and call yourself middle class, and somehow

you've been messed over by America. What a bunch of crap! This is the Dave Ramsey Show. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable affordable biblical solution to your health care costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major health care costs. Christian Health Care Ministries is the original health cost-sharing ministry. A Better Business Bureau-accred accredited organization CHM members share to pay each other's medical bills. It's not insurance. It's Christians financially and spiritually supporting each other.

It's what Christian Healthcare Ministries has done for over 35 years. And our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org learn more visit ch ministries.org that's ch ministries.org christian health care ministries is a proud sponsor of dave ramsey live events ch ministries.org i'm not sure you want to wander in here after that rant. Rachel Cruz, Ramsey personality, joins me this segment. Rachel Cruz Show has a new segment, has launched, a new version has launched.

What do you call them? Episodes. Episodes. Episode has launched. Yes. And it does fit into the rant because you guys are talking a lot about credit card debt and how to get out of credit card debt. Yes.

One of the things that article I was just going off on was talking about how much credit card debt there is to maintain the middle class lifestyle. That's really my point was no longer a middle class lifestyle. Right. Well, and sitting in the back booth listening to the rant. I probably should listen to what I'm about to walk into. You know, it's so interesting because, yes, you were comparing it to like the 60s and 70s when you grew up. But I'm thinking even like in my 30 years here on earth, where it's just, and it's a simple thought, but I was like, man, it's just the standard of living is different, right? The standard of living in the 60s,

1960s, 1970s was X. And now that it's Y and it's here the expectation of normal and even my generation you know we have two little kids like we're a growing family and so even people within my generation what you just expect which is the problem that's what i was talking about yes but what you just expect life to be like is so hard to completely it's like you have to rewire your brain and start looking at the logic of it. Now, you grew up in an upper middle class or really lower middle class setting when you were like 10 years old. Yeah. Okay. I mean, our county is a wealthy county.

We were at the bottom end of that county at the time, or not now. So you grew up in that. So you got to do stuff like go on a cruise that i never got to do growing up and so that was middle class and it was very standard for you and your friends did though did a lot more things i mean you had friends that did a lot more vacations than we did yes uh you had friends that did a lot more restaurants than we did you remember not going to restaurants right oh sure yeah i mean there were definitely things that other people did or other people got or even comparing Christmas gifts.

Like, I remember coming back from Christmas break and everyone was, you know, talking about what they got and thinking, you know, oh, wow, we didn't get that much or like that nice of stuff. So, like, you guys for sure had boundaries on and limitations within us. So, like, in our world... Yeah, like living within our means. That's right. That's right.

So, as I'm listening, I'm, like of the of the listeners, you know, that are listening via podcast or in their car or wherever they are. And is what it is. And if it's not, because everyone else around you is, right? The Joneses. It's like everyone else is normal. It's like your last book. It's about comparison. Yes. Oh, my gosh. And you're sitting there thinking, okay, well, what's wrong with us?

We're missing out on this. We shouldn't be missing out. So how do we not miss out? And it's just this vicious cycle. We make a middle class income. Why are we not living like these other rich people? And what's difficult is with the baby steps you know doing the plan and sacrificing your lifestyle to get out of debt and then saving up

even baby step three we have an episode coming out we just filmed for baby step three specifically and how that's like it's more of a marathon of that of just saving saving saving and then you get to the place where you're funding retirement and kids college and you're paying on the house like there's a lot of places your cash is going through the baby steps to set you up for success and so in the present it's not always going to feel good and that's what's difficult and especially i can say for my season of life where we are with ages of kids and people growing and income and changing houses and all of that it's like it didn't always feel good to put money away for retirement like that's not fun but what you're doing is you're setting yourself up to win later down the road and so it's just like this mixed feeling of the expectation america

set for what it should be like and when you work a plan with your money and you're wise about it it doesn't always feel good and that's okay though it doesn't feel good right then but it feels good long term i mean you're gonna sacrifice feeling good today adults devise a plan and follow it children do what feels good that's right and there's nothing wrong with having a nicer house there's nothing wrong with having a nicer car there's nothing wrong with going on a nicer vacation having a nicer phone or a nicer boat or all those things i listed off there's nothing wrong with that i'm not shaming anyone for having those i am shaming a political agenda or an economic discussion on the macro that says you have a right to those things and the current economic system has says you have a right to those things

and the current economic system has robbed you of your right to have these things that are middle class when they're legitimately not middle class. Right, right. The middle class has double, tripled, and quadrupled while the income has stayed in terms of its consumption of these items and while their income has stayed relatively stagnant, instead of living within their means. Yep, that's right.

And those that live within their means are no longer in the middle class. Because they're getting ahead financially. Yeah, 93% of the millionaires that we found were first-generation rich, did not become millionaires because of an inheritance, became millionaires because of their consumption patterns were within their means allowing them to invest which takes to piggyback off of that a really mature person to sit there in the moment and say gosh we want to be able to go on the nice vacation we want that

we want this we you know what i mean like we expect this and to be able to say no to yourself like i was going back to it doesn't feel right it feels wrong right. It feels wrong because it's not supposed to be like this. I'm supposed to be looking like everyone else. And when you don't... I'm supposed to hit a button and the door opens on the side of my van. Instead of, God forbid, we reaching up and grabbing the thing and opening it. I mean, or wave your foot under the bumper so that the back hatch comes up. Your sister's car, right?

Yes. Oh, my God. I don't have that. I open my own car doors. God forbid we have to reach over and touch the automobile. Unbelievable. You know, and all of that's okay. Your sister can afford that car.

You know, it's not a problem. But this thing, like you say, it becomes normalized to where if I can't eat out every night at a restaurant, then it's unfair to me. Right. I'm entitled to do that. Yep. And then the economic play or the political play on this, and people fall into this discussion without critical thinking skills, and they start saying, well, all of this debt comes from the fact that wages are stagnant.

No, it doesn't. It comes from the fact that consumption is on an exponential curve when you graph it. And so I think, too, realizing if you're one of these people to ask or anyone really to ask yourself that, OK, this is the expectation that the culture is set. But then the why, like what's the motivation behind getting all of these things? And then it falls into the trap of contentment of thinking, well, all this going to make me happy because you know if i have the nice car if i have this that my life's just going to be better and the thing is is when you can't afford it you create more pain on the back end not just financially but emotionally and we see and we see those families that come in and it's like man the mess that that they've created to keep up that has not

been worth it you look three years later car the phone the clothes the purse the shoes the house that were going to make me happy and that's been told the paradox is over and over and over again and has made you miserable yep it's stressed you out it's put strain on your marriage it's stolen your future and the the actual opposite of what you thought was going to happen has happened that's really good insight that. That's a good point. That's powerful. And it does. The comparison is not just we're such children that we have to keep up with the Joneses, but the comparison just normalizes it to where you say, gosh, I'm entitled.

That's it. This is the standard of living I should have because of my age, my season of life, where we're at. This is what it should be. And so whatever I have to do to get there. And so that's why, even just talking about the credit card, we did a two-series episode part on credit cards specifically, just the credit card debt in America. And then this past episode is all about getting out.

But it's so much, even just looking at the percentage of store credit cards that people sign up for, because, again, in the vein of being normal and just thinking, oh, sure, why not? A store credit card. The items that you can purchase with a store credit card, 0% fall under the heading of necessity. 100% fall under the heading of luxury. You know, like you need another pair of shoes.

I mean, how many pairs? Shoes. I'm a guy that doesn't even like shoes, I mean, how many pairs? Shoes. I'm a guy that doesn't even like shoes, and I've got shoes coming out my ears. I know, but you're speaking about shoes. I know, but I've got shoes coming out my ears, and that doesn't even make sense. I don't even like shoes. And I've got to wear, okay, I get another pair of shoes. That means I've got to throw two pairs away.

I'm just not going to have a whole pile. And all this, it's just consumption. It's just stuff. It's just stuff. It wasn't like I had holes in my shoes. Right, right. You know, I didn't this it's just consumption stuff it's just it wasn't like i had holes in my shoes right right you know i didn't it's just consumption it's just straight up that's you know if i get that i'm going to be happy then oh and that is that is the lie that's the deep why behind it that's a spiritual problem yes an emotional problem and it's not fulfilled with the stuff

and that's the hard lesson that a lot of people have to learn. The Rachel Cruz Show is on YouTube. You can subscribe on there, and it will send you an email when the new one comes out. You sit and watch it. A new episode comes out every two weeks. The proven plan to get out of credit card debt, how to truly tell if you're being gazelle intense, and ten ways to stay motivated while paying off debt.

Thanks for stopping in and joining in on the discussion. Yes, thanks for having me. Rachel Cruz, number one bestselling author, Ramsey personality, and happens to be my daughter. Proud of you. Thank you. Thanks for coming by. Thanks for having me on. Thank you. Bianca is in Georgia. Hey, Bianca.

Welcome to the Dave Ramsey Show. Hi, how are you? Better than I deserve. How are you doing? I'm doing okay. Doing okay. Cool. How can I help?

Thanks so much for doing everything that you do for others. Thank you. You're just a great guy. Thank you. I worked for AT&T for 24 years, and recently they decided to close their office, which was okay. I went ahead and took a package. I was okay financially. And it just caused me to speed things up.

And from that, I mean get out of debt. I went ahead and sped up getting my house almost paid off. I only owe $87,000 on it and got everything taken care of. Wow. Yeah, I've always been a saver. I drive a 13-year-old car. It's been paid off. I don't spend anything.

I went ahead and paid off all my credit cards, but I made a mistake. I closed them all up, but I made the mistake in sharing with friends and family that I paid off all my credit cards, and I closed them up. Thinking that everyone would celebrate with me, you could hear a pin drop. And when I told them I closed up my credit cards, they all said, you should have kept them open just in case. And I kind of went, just in case what? Well, just in case there's an emergency. And I'm thinking, what emergency? I've got $21,000, $31,000 sitting in savings. I've got my 401K.

Well, still, just in case, they're still heavy shoppers. They spend like the world's about to end. They shop, you know what I mean. You know the type, shop every time there's a sale. I don't spend anything. I've got five dresses. I don't spend more than $7 on a pair of shoes. What's the point?

And I've lost them as friends. I've lost my family members. They make me feel like I've done something wrong. They've got me living in fear because I've closed my credit cards. What did I do wrong? You didn't do anything wrong. You exposed their stupidity. And when you do something, when you clean up,

let's say that everyone you ran around with was overweight and you decided you were going to get in shape and lose weight. Okay. Did you do anything wrong? No. But you exposed the fact that they're all overweight my wife is in perfect physical condition which is simultaneously sickening and shaming it's a wonderful blessing to have a wife that is that beautiful uh but you

know that is a mirror that shines against my pudgy little self. And she didn't do anything wrong. All she's got to do is walk in the room and I go, well, I don't like this comparison. Right? And that's what happened with you. All you did was just do smart stuff. And when you walk in the room, dumb stuff is glaring. Okay. And so, you know, I have lots of friends that do not do the things I teach

and do not believe about money the way that I believe. I have a few friends that don't agree with politically the way I look at things, and I'm still good friends with them. I just don't sit around talking about those things. Ah, okay. So, I mean, I got a friend of mine pulled up in front of my house not long ago he just leased a car oh god he brought it over to show me his new lease car and it was a nice car and we've been friends a long time and he knows i think leasing a car is just dumber than a rock

he just he knows i think that but um you know so i got two choices when he pulls up, right? I can go into, you know, Dave mode and tell him how stupid he is, which he is. But he's my friend. Or I can just go celebrate his nice new car. He's excited about his car. I mean, he's not going to do what I do. That's okay. I'm just going to meet him where he is and love him where he is. And, you know, that's just my friend that's stupid about cars.

I've got friends that are stupid about politics, and I've got friends that are stupid about their marriage, and I've got friends that are stupid about their kids, and all that kind of stuff. I love them where they are, and they're still my friends, but I don't have big, long discussions with family members that don't know how to vote properly. It ruins Thanksgiving dinner. I just love them where they are, and they're just Democrats. You know, I mean, it's just the way it is. And they think that the same way about their crazy Republican uncle.

You know, it's okay. They love me, too, and they just don't agree with me. It's all right. It's all right. We can still be friends. We don't all have to be mad at each other all the time, you know? Gotcha. Okay. And everybody's just mad all the time and if they can't if they can't do that and if they have to shun you because you embarrass them so badly by your smartness

then they're but you know if you're a person that quits drinking and all your friends do is go out drinking you're probably gonna end up with new Okay. Because it's not fun to go out drinking with people when you don't drink. Mm-hmm. Okay. You know, I'll have water. That doesn't work, you know. And you can do it a little bit occasionally, but it's not like your normal group you run with all the time

because their whole social thing is revolving around something you don't do. In your case, it's shopping, right? Right. If the only way these people all get together and are friendly with each other is on a shopping spree and you hate shopping sprees, then that's going to limit the amount of time you end up spending with them. It's painful, though. You're right. The very people that you love should be the and they're closest to you should be the ones that cheer you on when you're winning at something. You know, I got a lady that worked here for a long time and uh she lost like 60 pounds and i'm her biggest cheerleader i i i still eat chocolate chip cookies so but uh but i'm i think

i'm i would never say oh you're dumb because you did that no she's in great shape she's done a wonderful job and i'm i mean i want good things for her because i'm her friend i can cheer her on even though she's on a different thing a different path than i'm on regarding this stuff so it's okay it's okay i can you know just be happy where you are and if they can't allow you to do that and they're going to be confrontive all the time about this you know then they're just being divisive and too sensitive you know so i i can i can eat dinner with you and have fun with you regardless of who you voted for but if you say well because you vote for someone so you can't be my friend then that just makes you strange you're just really too caught up in politics at that point, you know.

So I can just meet you where you are. If you lease a car, I can still be your friend. It's okay. We can do that. You know, it's all right. I think it's dumb, but that doesn't matter. It doesn't mean I think you're dumb. I just think you made a dumb decision about that.

And I may think you're smart about other things. So it's okay. Yeah, it is a hard process though to because something about the money discussion that you have with family and friends is it's more visceral and it gets mean and it gets jealous and it gets envious and all kinds of other wounds and stuff are opened up with people and so it's just a real sensitive. And I appreciate you calling in to talk about it because a lot of people, a lot of us have faced the same kind of stuff. Timothy is with us.

If I can make that button go down. Why can't I do that? Timothy, there it is. Timothy is in Missouri. Hey, Timothy, how are you? Hello, Mr. Ramsey. I am wondering how much should I save for my first house given that I'm going to be paying cash for it? Love it. I'm wondering how much should I save for my first house given that I'm going to be paying cash for it?

Love it. I know that you've mentioned before that getting a condo can be a stepping stone between renting and owning. Yeah. So I was just kind of wondering about that. So how much can you save? How fast? Well, right now my income is too low to actually save anything. I only make $25,000 a year. My expenses are $1,700 a month.

I'm working on getting a new job, though, so I'm not sure. Okay. All right. Well, I think that that's going to determine it, okay? I mean, if I'm talking to somebody that can save $200,000 in four years, then I think we kind of have our price, right? But if I'm talking to somebody that can save $100,000 in four years, I think we got our price.

So it's probably got to do more with your capacity with your new job and what you can actually mathematically pull off for your first stepping stone. How old are you? 28. And your goal is pay cash for your first property? Yes, sir. I listen to you like you listen to old rich guys when you were my age. It happened.

I became the old rich guy. Touchdown. I love you, man. That's awesome. You're going to do great, brother. You're going to be a hero. I can tell. This is the Dave Ramsey Show. Thank you for joining us, America. We're glad you're here. Zach is with us in Utah. Hey, Zach, welcome to the Dave Ramsey Show.

Hi, Dave. How are you? Better than I deserve. What's up? Hey, so I recently started a new job with a home warranty company. I'm servicing their HVAC claims, HVAC claims for them as a third-party contractor. And I've gone through setting up my own business. With that being said, I recently set up a business account. My tax advisor told me that I should be able to take a yearly income. So I set up a yearly income that we thought was fair and applied to my expenses each month.

And then I set up this business account. And this business account, I've been hacking away at money and just stacking it in there. But my question to you is, is that he told me not to touch that money until the end of the year. And I think the word he used was a dividend, that it would come out of the dividend at the end of the year at 15%. And that if I had the taxable income that I get each month, so like my monthly paycheck from myself, that that would be taxed at like a rate of 30%. And he said, yeah, don't touch that until the end of the year. And then basically I'd be able to take it out and lump sum and apply it best where I think is appropriate. But with that being said, I'm

trying to work the debt snowball and that money is awfully tempting to touch. I'm just curious what your opinion is. Does that sound right? Should I take it out like each time I get enough money to pay off the next debt, or how should I do that? You're going to pay your income taxes on it, whether it's a dividend or whether it is a – you're going to pay a full ordinary income on it at the end of the day when you're done. Okay. Whether you pay it out as a dividend and then pay income taxes on it is irrelevant.

You do not escape paying that your personal income as ordinary income i've got the same situation uh ramsey solutions is the lampo group llc and um so i i moved some of it out as a dividend but at the end of the day when all the smoke clears you're going to still pay i wish i could move everything out of here at 15 and i had to pay 40 on it but i can't i can't believe me it's uh you're going to get the 40 if you're making the money you're just not going to avoid that so the way he's explained this left you with a false conclusion or he doesn't even understand taxes which scares me even more um because you're in an llc i assume correct okay um what i would do instead is in your situation especially it's a startup business you've got some personal debt you're trying to

clear the cash flow into your personal account from the profits is more important than some kind of minor tax gyration and this is a minor tax gyration. It is not the difference in 15 and 40. Okay? Okay. That's simply wrong. Okay. So then just simply take that and what would you do?

So what I would do, you're going to pay anything, any profits that you have in the business, you have to pay quarterly estimates. You don't have to this year. You have to next year or you'll pay penalties. And so you have to pay your estimated taxes quarterly. And so if you have an LLC, it's 100% passed through to your personal account or to your personal return. And what that means is whatever profits are in your account are taxable.

And if you don't pay quarterly estimates on them in the second year of the business, you'll be taxed and penalized. I would go ahead and recommend you start now doing your quarterly estimates. How much money have you made, profit? So, so far, profit has been about $20,000 sitting in that account. In what period of time? And that's after all of the smoke's cleared. Yeah, in what period of time? It's over a three-month period.

Okay. All right, cool. Well, you're doing good, man. Congratulations. Thank you. That's an $80,000 a year-month period. Okay. All right. Cool. Well, you're doing good, man. Congratulations. Thank you. That's an $80,000 a year gig. Okay. So if you can make $80,000 to $100,000, you know, if you set aside about a fourth of your profit for taxes,

as you pull it out, you'll be able to cover your quarter lease. Your quarter lease consists of 15.3% self-employment tax, which is both sides of payroll tax. When you're self-employed, you get to pay both sides because Washington loves small business, so they double up on us. And so I get to pay both sides of the FICO or FICA. And so then you're going to pay your income tax. Now, your income tax, you're going to be in a 30% bracket, but that does not mean you pay 30% of your income in taxes. It's a marginal tax process, and so your net effect of your taxes is probably going to be closer to about 10%.

So your tax bill is probably going to be about 10%, 12%, and you've got the 15%. So if you hold about 25% out, you're going to be very, very close. Now, if you get to making much more money than this, you may want to ratchet that up a little bit to 30. But 25% will probably cover you perfectly right now or very, very close. Okay? So the way that looks is you put all the money into the account. That's business income.

You pay all the business expenses out, which is what you've been doing. Whatever's left in there on cash basis accounting, by definition, is profit. Like you said, all the smoke clears, right? All the different things that can happen happen, and that all becomes profit. So any money that you move from that account out to your personal account, I always just say, hey, write two checks. Write one for a fourth of it and one for three-fourths of it out to your personal account, I always just say, hey, write two checks. Write one for a fourth of it and one for a three-fourths of it.

And if it's $10,000, I'm going to put $7,500 in my personal account. I'm going to set $2,500 in a savings account for my quarterly estimated taxes. Perfect. That answers that question. Yeah, if you want to be a little bit more conservative, you can make it $3,000 and make it 30%, something like that. So that's what I would do. And, yeah, then go ahead and get that money home. And when the smoke clears, using your phrase at the end of the year, you're going to find that you have paid your ordinary income tax rate on all of your profits.

All right, let's hour more if he keeps screwing around with it. Don is in Michigan. Hey, Don, welcome to Dave Ramsey Show. Hey, Dave, how's it going? Better than I deserve. What's up? So we are currently on BS6 and I'm looking to go do an

inverted 3B. So let me explain. Baby step, back flips. Okay. That's right. So instead of... I know you say you can put off a baby step four

if you're saving 3B for a house. Yeah, but you've already got a house. Yeah, and I want to stop everything and go gazelle crazy on the house. And then it'll pay off in in 33 payments fifty five hundred dollars a month okay and how you're putting 15 into baby step four into your retirement correct so currently we are yes okay and how much money is that what does that amount to a year um well right now we have uh 19 going into the Roth 401k at work. We're doing $6,000 in our HSA

work. And then her and I, my wife and I are doing about $3,000 each in our Roth IRA. So $31,000 a year? Yep. Okay. And what's the loan balance on your home? $176,000. Okay. And if you did this in three years, roughly, it would give you an extra $100,000 to pay the house off about three years earlier than if you don't do this. Correct. Yeah. I would keep doing baby step four and pay off my house in six years rather than three. Okay. Thank you. Yeah, I would keep doing baby step four and pay off my house in six years rather than three. Okay, thank you. Yeah, I wouldn't stop putting my money into retirement in order to accelerate the house that much.

It's really close, and the reason is real simple. Paying off your house in six years, you're still on track to be a multimillionaire. You're still doing the right stuff, okay? It's not like you're wussing or something here you're killing it the other thing is you're probably not going to take six years because you care deeply about this subject and you're making killer money you got to be making 200 200 and a quarter for that 31 per thousand to be um uh your your uh 15 of your income going into retirement. And so you're making killer money,

and there's a high likelihood that's going to continue to rise during the three years, and all of the increases in income, except for 15%, will go towards this project of getting the house paid off. So I'm going to say instead of 33 months being double at you know uh you know 66 months five years six months i think you're probably going to do it in about four years and six months maybe four years i'm going to give you a prediction i'm just i have no idea what i'm talking about i'm just making this up i've just done this a long time i think you're going to have the house paid off in four years anyway instead of two and a half years.

Now, 33 months is two years and almost three years. Two and three quarter years. So I think that's what's going to end up happening. And you're going to be just fine. You've done a wonderful job, by the way. And you're being very intentional, and you're going to continue to be very successful. This is The Dave Ramsey Show. Hey, guys, it's Blake Thompson, senior executive producer for The Dave Ramsey Show.

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