The Ramsey Show - App - Dave's Thoughts on the Different Types of Home Loans (Hour 3)

Episode Date: January 15, 2020

Budgeting, Home Buying, Insurance Tools to get you started: Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR

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. Thanks for joining us. Open phones at 888-825-5225. That's 888-825-5225. That's 888-825-5225. Brandon starts us off this hour in Memphis, Tennessee.

Hi, Brandon. How are you? Hey, I'm good. Yourself? Better than I deserve. What's up? So I'm in my mid-20s, and I have this vision of creating a foundation for helping people buy their first home.

And I'm just wondering how, A, you would start maybe budgeting that or planning for that financially. Okay. Are you planning to fund it? Is that your dream or vision? Or are you planning to have donations funded? Well, I'd like to first make sure it would work as a program and then maybe seek outside funding if it was successful to maybe grow it throughout outside funds okay well very Well, I mean, ultimately the only way to fund a personal foundation is personally, and that means you've got to make the money, right? Yes, sir.

And so, like, a lot of multimillionaires and billionaires that I know have personal foundations. The Ramsey family has our own foundation, and we fund it. We do not take outside donations, And then we make the decisions. My oldest daughter is the director of the foundation, and that's her full-time job is to vet the ministries that we're giving to. We don't give to very many, but we give liberally to those that we do. And so she goes through and vets those. But it's funded from, well, from my income is where it's funded from and um and my assets and later on though it'll be generationally they will the kids will the

next generation will fund it with their income but it's not set up nor was the vision for it to be um uh funded with outside donations and again, I know several billionaires personally that actually my daughter's friends with their operators that direct their foundations. And, again, it's one of the ways they control their charitable giving and do it in a way that's wise rather than just willy-nilly out of their back pocket, so to speak. But all of that to say, at 20 years old, the way you fund it is you go make a lot of money. You put money in there, right? No kidding, duh.

But then the other possibility is to create something that has a proven track record with some amount of money or some process and then form the nonprofit or the foundation around that and have other people donate to it. You can go that direction. Is that logical? It's only two ways I know to do it anyway. I just wanted to make sure the program would work.

That's why I said, I guess, me start it off, you know, because I don't want anything to fail me. You know, definitely helping people. Well, I can assure you of one thing. It won't work the way you think it's going to. I've never started anything in business that the way I thought it was going to work is exactly the way it turned out. It always, you always turn the ship. You always course correct.

Oh, we're a little off to the right. Oh, now we're a little off the left. Oh, and sometimes you're like way off and we got to make a hard turn right so you'll get in there and you will learn stuff about what you think you're trying to do and about the way people react to it that cause you to change it so uh the only way that that happens is just experience and what my guys call proof texting meaning you put it in or social testing you put in the marketplace and actually observe how it behaves and then we adjust and then we adjust and then we adjust and then we adjust um even something as massively successful as financial peace university is on its um i don't know hundredth version uh all the different things we've changed over the years i don't know how many different prices we've had it

used to be you know it used to be 569 dollars and it's used to be 26 weeks. Now it's, now it's a one year membership with nine weeks of courses. So there's all these different things that change, but it's still the same core principle. It's how we go about what we're trying to accomplish. The change is not what we're trying to accomplish. And so in your case, you're trying to help people with housing and how you go about that. The program that you think is going to work won't work. It's just, you don't know what's not going to work. So you try it and then you get, oh, I got a bruise on that side of my leg. I'm not going to put my leg over there again. Oh, I got a bruise on the side of my face. I'm not putting my face over there again.

And, you know, you get these bumps and bruises along the way and you course correct and you find the right way. In other words, it's going to take you some time. And I don't know how to test that theory out unless you got someone to participate with you and they wanted to work with you financially in order to help test the theory out. And that might be an existing foundation that did that. Rebecca is with us in Austin, Texas. Hi, Rebecca. How are you? Oh, hi, Dave. I'm super excited to be speaking with you. How are you? Better than I deserve. What's up in your world? Well, my husband and I are set to finish up baby steps two and three in the next probably seven or eight months. And we're starting to

think about homeownership. Great. But the issue, yeah, I mean, it's exciting. But, you know, we're not sure how long we want to stay in Austin or where we're going to end up eventually. And so our kind of question is, does it make sense to keep renting and invest in good mutual funds with the idea that we'll eventually just pay for a house in cash once we figure out where we're going? Or should we buy something, you know, even though there's a possibility of us moving in probably two to three years. Well, I guess I would weigh out the probability, not the possibility. There's nothing wrong with just saying, I'm going to save up and pay cash for a house. It's very unusual, but so is being wealthy.

The 100% down plan is a very unusual plan. I love the plan. It's the only one I use, but it's hard to get everybody to do that. So you wouldn't be outside of the things I teach to do that, to say, we're just going to save up and pay. But that would just be because I don't want to be in debt, not because I'm afraid to buy a house. Now, then the other question is, you say, okay, we might be moving in three years. Why might you be moving?

Well, we know that we don't want to stay in Austin in the long term. We're here for my husband's new job, and it's a startup company, so the exit time is probably going to be three to four years, depending on how quickly they can scale the business. But we don't know. Exit meaning they're going to start it up and take it public or sell it. Yes, it's going to be sold most likely. And then he'll bail. Exactly. Okay.

And supposedly the timeline on that is three to four years. Yeah, I mean, give or take a little. Who knows what actually happens, but that's the rough estimate that we're working with. Okay. And at that point you would leave Austin? Potentially. We want to move to Florida, which is where my family's at. Okay, all right.

I probably would rent because I don't think you're going to even be there as long as you're staying. Yeah. I think if he came home today and said, I took a job in Florida, we're moving, you would jump for joy. Yes, we'd be gone for sure. Yeah, you're ready to leave. The only thing that's got you there is this one thing is the back end of this sellout

on this startup. That's the only thing. That's the only thing that's waving in the air. And as soon as that carrot gets a little gray and it's not a pretty shiny carrot, you're gone. Or as soon as it concludes its business and you take your liquidity event and you head out to Florida, one of the two. I don't think you're going to stay there three or four years, so I'd rent.

But if I thought there was a high probability you were going to be there four years, I'd probably tell you to buy it. But I don't think you're even going to be there two. That's my opinion just listening to you. This is The Dave Ramsey Show. Business leaders, right now you have the opportunity to take your business to the next level this new year. You can start by hiring the right people to help your business grow. At Ramsey Solutions, we post on LinkedIn Jobs because they are the best at matching the right person

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Katie is in Tennessee. Dave, if I have a $300,000 mortgage debt, should I still only get 10 to 12 times my income in life insurance, or should I get more to include that debt amount? 10 to 12 times should cover your mortgage payment if you're making your mortgage payment now. If your income now will pay your mortgage payment if you're making your mortgage payment now if your income now will pay your mortgage payment and you get 10 to 12 times that amount um you know let's say that you make a

hundred thousand dollars a year and you get 10 times that that's a million dollars and you die your spouse takes a million dollars and invest it if it makes 10 it creates a hundred thousand dollars so a hundred thousand dollars income is a hundred thousand dollars income and you were paying the rent you were paying the mortgage with a hundred thousand dollars before now you got your spouse has got a hundred thousand dollars off the investment alone and that's what 10 to 12 times will do roughly um it's it's a rule of thumb it's not an exact science but it's very close and it makes sure that you buy enough life insurance and that you buy term life insurance. You never buy cash value insurance.

That way you can afford to get enough, for one thing. The second reason is that cash value insurance, all the different versions of it, are a rip-off, and you're much better off doing your investing in good investments. Levi's with us in Houston. Hi, Levi. Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my Ramsey Show. Hey, Dave. Thanks for taking my call.

Sure. What's up? Hey, so I've been listening to your show for about 12 years now. I grew up watching you on Fox Business, and I just really appreciate what you do for everybody. It's really helped me out. My main question is, what is your stance on VA home loans and why you don't like them?

The only reason I don't like them is they're more expensive than FHA loans and conventional loans. That's the only reason. Now, they're not necessarily more expensive if you are a disabled veteran. Are you a disabled veteran? No. Okay. If you're a traditional veteran with no disability qualifications,

the interest rate is slightly higher, the funding fees are higher, and the behind-the-scenes fees are all gotcha fees. The only reason anybody ever buys a VA loan is because they don't have a down payment. Okay. And you can get in with no down payment. And, of course, we don't recommend that. It means you're too broke to buy a house is what that means. And so it really simply is because they're just more expensive.

Of the three, what are called conforming loans, FHA, VA, and conventional, conventional is typically a Fannie Mae loan, FNMA, Federal National Mortgage Association. Those three loans, an FHA, a VA, and conventional, VA is typically the most expensive. Now, there's exceptions, again, if you're disabled or there's a few other things here or there, but by and large, as a rule of thumb, you're going to want to go with a conventional loan. It's cheaper than an FHA.

And the FHA and VA loans are both government-insured loans, meaning the federal government is insuring the bank against default. And built into that is a bunch of gotcha fees is what it amounts to. And typically, again, higher interest rates. So, hey, good question. So let's do a little mortgage primer right quick. Government-insured means this. If you take out a VA loan for $150,000 and you get foreclosed on and the government takes the or the bank takes the house, Bank of America has a VA loan on you.

Countrywide has a VA loan on you and the countrywide forecloses on you and they sell the house that has 150,000 owed on it. And it only brings, well, a VA loan. They wouldn't sell it. A VA loan. What happens is as soon as they it only brings, well, a VA loan, they wouldn't sell it. A VA loan, what happens is as soon as they foreclose, they call the Veterans Administration, VA, and VA sends them a check for the loan balance plus all the late fees plus the interest rates. So Countrywide takes a loss on that foreclosure of exactly zero. They deed the house over to the Veterans Administration. You and I, the taxpayers, are now the owners of that zero. They deed the house over to the Veterans Administration.

You and I, the taxpayers, are now the owners of that house. And that house is then sold. If it sells for $140,000 and Countrywide got $152,432 to cover all their expenses, then the federal government takes a loss on the loan. And in that loss is the Veterans Administration's budget, and in that loss is the funding fee that funds the pool to cover the losses. So it's a federal government-insured loan, just like a student loan, a Sally Mae. It's a federally-insured loan, meaning the bank is taking no risk by making the loan. An FHA is issued through the Department of Housing and Urban Development, through HUD, and it's the same thing, basically.

HUD insures the loan for Countrywide or Bank of America or whoever the mortgage company is. If you do not pay and they foreclose on, the mortgage company loses $0. They get 100% of what was loaned plus all the fees, pay and they foreclose on the mortgage company loses zero dollars they get a hundred percent of what was loaned plus all the fees foreclosure fees lawyer fees title fees late fees interest rate fees bankruptcy fees any kind of fees that they paid out they get a hundred percent coverage they take zero risk and the federal government covers that loan 100 percent. And so the banks love making VA loans, and they love making FHA loans. However, VA and FHA have

figured out a long time ago they have to cover a lot of these costs, and they put fees in there to cover all those costs. Fannie Mae is much more of an open market traditional mortgage in that a bank is making a loan and they're taking a risk. And if you don't pay, they could lose money when they foreclose. They could lose money on the house. And so that's why they make you buy PMI, private mortgage insurance, that covers the first 20% of the sale price if you don't put down at least 20%. And because that covers them down to an 80% loan-to-value ratio, and so a $200,000 house, surely they can get $160,000 out of it, and surely they can get their money back.

And that's the way they look at it. But that's a bank making a loan with some private insurance, not federal. The federal government is not involved in that transaction. And it ends up being less expensive because guess what? Those loans fail less often. And FHA and VA loans, the VA loan was originally brought up as one of the benefits to our fine veterans. I just had the pleasure of meeting a World War II veteran a few minutes ago here in the lobby. And, you know, the original thing is the VA, the Veterans Administration was put in place to provide benefits to the veterans. Sometimes it does a good job of that. Most of the time it

doesn't. The VA benefits are not really that good. I mean, when your only benefit for buying a house as a veteran is the most expensive way to buy a house, that's not exactly a great benefit. Didn't do a good job with that, right? And so it should be cheaper for veterans. That would be the idea, and not more expensive. I mean, philosophically, it should be. Not necessarily mathematically, not necessarily government policy or any of that crap,

but just philosophically, if you want to be a blessing to the veterans, don't charge them more than they could get the house for without using the VA. You know, duh. It's kind of basic in my mind, but they do. So that's it. And the VA will chase you after foreclosure for the amount they lose on you if you're a veteran. That's just really oxymoronic. But they will.

They'll chase you harder than anybody else will. FHA completely forgives the deficit. They don't chase you. The veterans of penetration will chase their own people and chase them down and get the money out of their hide, man. It's brutal. We work with this stuff all the time after the fact of the foreclosures. So we get to see both ends of it, both sides of it,

and that's how you see it done. Conforming mortgage, while we're doing our little mortgage primer here, means in any one of those three cases, those loans conform to a set of underwriting standards. FHA loans all have exactly the same process for approval. If you violate one step of the process for approval, it cannot be an FHA loan, and you lose your government insurance. Same thing with the VA. It follows an exact process for approval, it cannot be an FHA loan, and you lose your government insurance. Same thing with the VA. It follows an exact process, different, but an exact process to be approved. Same thing with the Fannie Mae.

It's all conformed. All Fannie Mae loans are just alike. And so you could take a, you know, I don't know, for instance, it wouldn't work exactly this way, but you package them together, and they're sold as a security. Fannie Mae bonds. You may have heard of your grandmother buying a Fannie Mae bond. Well, all that is is four $250,000 mortgages put together that are all just alike because they are conforming,

and then they sell them as a $1 million bond. And so you package it together. So that's how they sell the mortgages on the secondary market, how your mortgage gets sold to a different bank all the time. You're always wondering how you end up with a different bank. They're packaging these loans together because they're all just alike. They're conforming to the same underwriting guidelines, so they're very marketable. This is The Dave Ramsey Show. Let's talk about low interest rates, baby.

I know right now that Churchill Mortgage can get qualified buyers into a 15-year conventional loan for well under 4% with no discount points or no hidden fees. Listen, if you're even thinking about buying a home or refinancing, do it right now. These rates are incredibly low. Here's what I'd like you to do. Take 10 minutes and call Churchill Mortgage and see what you can qualify for. So even if you have to get creative and buy something further out of the city to get something you can afford, now's the time to make the move. That's why I'm sending you to Churchill Mortgage. I trust them to look out for you and your budget. Don't miss this opportunity. You can secure these low rates now for up to 90 days through Churchill Mortgage. Go to churchillmortgage.com or call 888-LOAN-200. That's churchillmortgage.com. NMLSconsumeraccess.org. Equal housing lender.

1749 Mallory Lane, Suite 100. Brentwood, Tennessee 37027. In the lobby of Ramsey Solutions, Kyle and Jordan are with us. Hey, guys. How are you? Hey, Dave. Hey, we're good. How are you? Better than I deserve. Where are you guys from? We live in Woodstock, Georgia,

which is close to Atlanta. Absolutely. Know it well. I actually spoke at Woodstock Baptist Church not long ago with Pastor Johnny Hunt. Good guy. Very cool. Welcome you guys. And you're here to do a debt-free scream. Yes, sir. Yes. Love it. And how much have you paid off? $26,400. Good for you. And how long did that take? About 13 months.

Good for you. And your range of income during that time? Started at about $110,000 and we're up to about $119,000. Well done. Good. What do you guys do for a living? I work in IT for a managed service provider. And I am a high school English teacher and a competition cheerleading coach.

Great. Cool. Where do you teach high school? Harrison High School in Kennesaw, Georgia. Yeah, very fun. Good for you. What kind of debt was the $26,400? It was a little bit of everything.

It was a couple of cars. I had some student loans, credit cards, wedding, kid, all that stuff. You did it all? Mm-hmm. It's all your fault? No. You said I. I was just going with you, dude.

He at least had a used car. Mine was brand new. I made a... How long have you two been married? Over, a little over two years. I like your answer to that. Yeah. So about a year in, 13 months ago, something happened, and you guys go, game on.

We're getting out of debt. What happened? We signed up to take FPU at North Metro Church. Oh, okay. Yep, that's our church. Kyle has been listening to your show forever and read all your books and wanted me to get on board, and it just took me a little while. It really took me getting into the class to realize that, um, we needed to get gazelle intense. Um, and we were

actually pregnant at the time with our son. So we started the class in October. He was born in December. So we followed your plan. We, um, just stockpiled all of our cash and paid all of his medical bills, um, in cash, which was great. That was about $6,500 on top of our, and paid all of his medical bills in cash, which was great. That was about $6,500 on top of our debt. So then we brought him home at the end of December and then just threw it all at the debt. Got it. And then game on. Yep.

Okay. Perfect. Well, there's nothing like a little one coming along to make you get serious about life. Yes. Yeah. You get to do grown-up stuff on steroids then. Yeah. I love it. Well, well done done you guys very very cool so that happens a lot that when a couple goes into

financial peace university one or both of you see things differently than you did before because you get knowledge their knowledge always gives you a different set of eyes you know and you get uh wisdom which is knowledge that you get to apply in that case. So what happened in the class that caused you to go, okay, we're going to do this. Okay. I'll go first. I think for me, just seeing the value in doing a budget, he wanted, Kyle wanted us to do a budget together for our entire relationship, even before we got married. And I was just hesitant. I felt like I'm young. I work really hard. Life is never going to get easier for me than it is right now. So I should live it up, which sounds good. But for anybody listening, that is not what I would say now. So I think the written budget definitely got me on track and then we both saw the value

in tithing. So, um, our families have always tithed our entire lives, but we were hesitant when we started making our own income. But then, um, finally we saw that when we really were trusting God with our finances and saying that this is your money, not us, we're just stewards of it. Then that's when we really started seeing changes in our lives, in our motivation, as well as our income. Very good.

Well, Rachel says a budget is permission to spend. So a budget, you know, you can actually do the things you do with more joy because you don't have to, it doesn't have to be tight. You can choose for it to be tight because that one tends to get out of debt. But it's your choice. you're making the choice and so somehow folks sometimes view a budget as some outside force that invades their life and no you're in charge of it you get to tell it what to do but then once you do it it tells you what to do right right yeah so well done you guys so what do you tell people the key to getting out of debt is now that you've done it? I tell people that just to know

that doing this is a short-term fix to get out of debt. Just doing this doesn't mean you have to do it forever. It is painful and it does stink sometimes, but it's just a chapter in your life. It's not going to be like that forever. So live like no one else and later you can live like no one else. Yeah, Cool. What do you say on it, Jordan? I think the same thing. It took us about 10 years to get in this much debt. And so, you know, for me, I wanted just that immediate, okay, the problem is solved. Um, and it took us longer, of course, than we would like, but you know, it didn't take us the 10 years that took us to get into debt. So that's good. It was still faster.

And you did it in one year, basically 13 months. Yeah. Very good. Very cool. What was the hardest part for you? I think the hardest part for us was staying motivated, making these payments and stuff. It's easy to lose faith and want to give up and be done with it. And I think the most significant change that we made was one night we got together

and made a big poster chart with wheels and colors and milestones. And as we were making progress, we would update that and it would kind of give us an insight as to when all this mess would be over. And knowing that there was going to be an end date to that and kind of visualizing and seeing that progress, I feel like really helped us, uh, helped us out. Cheerleaders need a poster for the pepper alley. Yeah. That makes sense. Definitely.

It was so hard for me to say no to things. Um, and I just, I love to eat out. I love to go shopping. I love to, you know, just have a good time. Um, but we had that visual up in our bedroom, and every time we made a payment, I just filled it up with a different color marker because that's my thing. And, yeah, it just really kept me motivated, and it showed me that there are so many ways that we can have fun that don't involve spending money.

And there's always the light at the end of the tunnel. When this is done, we can spend some money. Exactly. We'll have some. Very cool, you guys. Very well done. Now had a uh you had a baby you said a little boy holding is that right that's it okay is he going to be in the picture or are we going to leave him over there with the keeper he's coming okay very cool and we've got a copy of chris hogan's book for you retire inspired great who's this bringing

him in this is my mom okay so was mom a cheerleader in the process for us yes yeah okay definitely very cool very cool well we've got a copy of chris hogan's book for you retire inspired and of course that's the next chapter for you guys to be millionaires and outrageously generous as you go along so very well done great story i appreciate you sharing it kyle jordan and holden 26 400 paid off in 13 months making 110 to 119 count it down let's hear a debt-free scream three two one we're debt free! Yay! Well done, well done.

I love it. Congratulations, you guys. Very well done. Man, that's fun. That's as good as it gets right there. Lots of young couples doing their debt-free screams right now we got old couples too and um we had some single ladies come on lately we had some 30 year old ladies this week coming in uh knocking it out as well and i mean this is uh had some guys coming in yeah it's everyone is doing this stuff and it's you know there's not a bad debt-free screen.

There's no such thing. The idea that somebody stops and says, I'm going to take control of my life. I'm going to make the choice and choices to win. See, the thing is, you're not stuck. You're not stuck. You may have a big mess. You may have a little mess. You may have a little mess. You may not have a mess. You may just have some debt, but you're not stuck. You get to decide when you're going to

change. When are you going to change? When? I'm talking to you. When are you going to do this? When are you going to get on a budget, get yourself out of debt so you can invest and you can give like never before? When are you going to do this? Broke people can't help other people. You're too broke. When are you going to do it? It's your turn. Ready?

Set. Go! gonna do it your turn ready set go One of my favorite parts of this show is hearing your debt-free screams. You guys are our heroes. You've kicked debt to the curb and you've saved for the future. Now we want to celebrate with you. If you have lived like no one else and are currently in baby steps four through seven, well, it's time to enjoy some money. And the perfect place to do that is on board our first ever Live Like No One else cruise in March.

That's right. Just a couple of months away. But get this. It's not too late to book your cabin. So don't miss your chance. This Caribbean cruise is going to be an incredible seven days at sea on a stunning new ship with amazing experiences. I'm talking all of our Ramsey personalities and other world-class entertainers. We're stopping in the Bahamas, Puerto Rico, St. Thomas, and Turks and Caicos.

It's going to be an amazing, debt-free celebration designed just for you. Don't miss the boat. Head over to RamseyCruise.com today to reserve your room. Our scripture of the day, Proverbs 22.6. Train up a child in the way he should go. And when he's old, he will not depart from it. You know, a lot of people don't realize, that's Proverbs 22.6. You know what Proverbs 22.7 is?

The rich rules over the poor, and the borrower is slave to the lender. What if we just took the numbers out and read it straight through? Train up a child in the way he should go, and when he's old, he'll not depart from it. The rich rules over the poor, and the borrower is slave to the lender. Interesting. Teach your kids not to borrow money? I don't know, maybe. Walt Whitman produced great men, and the rest follows. Yes, it does. Well, here's an interesting thing. I just saw this the other day. The National Association of Realtors reports that 80% of the people who do not own a home want to own a home.

Homeownership is still a big deal. It's still the American dream. But most people that don't own a home, out of those 80%, they don't think they can. Well, maybe they can't today. I always tell you not to buy a house when you're broke to get yourself out of debt, build your emergency fund, and then save your down payment, getting yourself ready to go, right?

We always tell you how to do that. But there's a way to step-by-, getting yourself ready to go, right? We always tell you how to do that, but there's a way to step-by-step getting yourself positioned to buy a home and to do it in a way that works, in a way that's fun, in a way that the home is a blessing to you. Check out one of our financial peace classes. Get with one of our endorsed local providers in the real estate business, and they'll show you how to get yourself ready to be a homeowner. Because it is a big part of your long-term wealth building plan to be a homeowner. Now, I tell you not to buy a home. It'll set your wealth building back if you buy a home when you're broke. It'll slow down your financial progress, not speed it up. When broke people buy houses, it makes them broker. That's why they call them mortgage brokers. Broker and broker and broker. But the truth is, is that

owning a home long term is an essential part of a good, strong financial plan. It's in all the millionaire data, as a matter of fact. When we study millionaires, we see paid off homes in there as part of their great net worth. Michelle is in Kansas City. Hi, Michelle. Welcome to the Dave Ramsey Show. Hi. Thank you for taking my call.

Sure. My husband and I are in Baby Step 7. We're debt-free. Our house is paid off. Our annual income is approximately $143,000. Prim most of that coming from my husband's income at $106,000. My question is in regard to life insurance, term life insurance. Our net worth at this point is approximately $1.2 million, and I'm feeling some insecurity about if he were to pass away, that the income stream would be significantly reduced, leaving me with two minor children ages 16 and 13.

Okay. Well, what we want to do is have his income to be replaced by investments that are already there or by investments that are put there from life insurance or some combination of that. Okay? Okay. And so if he's making $100,000, you know, we take 10 to 12 times that, so you need a million dollars in investments, making 10% to create 100 grand.

Does that make sense? Yeah, I mean, we have, right now we have about $850,000 in retirement, and about $184,000 in an investment account, and $170,000 in a savings account. Okay, all right. And $170,000 in a savings account, if it All right. And $170,000 in a savings account, if it were invested and $185,000 were invested. Retirement, you can't get to if something happened today. You're too young, right? Right.

I'm 49. He's 55. Yeah, but if he dies today, it's 10 years before you can get to that $800,000. Correct. Without penalties, okay? Now, you can get to that 800 grand without penalties. Okay. Now you could get to it, but I mean, you're not going to starve, obviously, but we're trying to create an income for you. You'd have, you'd have three or 400,000 to invest, but you, you're right.

You would be coming up short. So I might pick up five, 600 grand on him for 10 years, 10 year term or something like that. You see what I'm doing? I'm going to take your $170,000, your $180,000, plus $700,000 or $500,000 invested. We'll get you by easily with no pain at all until you turn 59 1⁄2, at which point you've now got access to the income off of that other $800,000. And, oh, by the way, by then the kids are grown and gone. Right.

And so it's just you then, and you're sitting on a couple million bucks right he currently has about two hundred thousand dollars in um in life insurance through his employer but i've challenged that that's not quite enough and he says well you know we seem to be doing okay, you know, why do we need more? And it's just my own insecurity about will I be protected. The math thing is all it is, okay? If your insecurity is a feeling that's illogical, then, you know, we can argue that away. But I think you have a point mathematically. And so it's just show, you know, just sit down and show him and go, what I've got to do is I've got $ got 170 in the savings, which really should be invested.

That's too much sitting in savings. And then 185 sitting over here that I can get to until I'm 59 1⁄2. By the way, during which time that 800 will become 2 million. It'll double if you leave it invested, okay? So if we get you to 59 1⁄2, the kids are grown and gone. You're going to be a wealthy widow. I gone, you're going to be a wealthy widow. I mean, you're going to be fine, okay, but not where we want you, but you're going to be in great shape financially.

So the point is you've got $200,000 from three different sources, $170,000, $185,000, and $200,000. That's $600,000. You follow me? So if you want to put another couple hundred thousand, maybe $500,000 with that, that it's not a bad thing and it doesn't cost that much as long as he's healthy is he is he healthy uh overweight and i think it's gonna be very costly to be very costly then obesity in your late 50s is tough he can get it but it's going to cost a lot of money and so you know you do have 600,000 to work with without touching the 800 to make it 10 years and so that's a 60,000 income

if all of that's invested without touching the 800 and your income okay so you're not going to be exactly where you are now but you know what we're talking about buying you can go price it and decide do you want another four or five hundred thousand there's a mathematical case to be made to what you're saying the question is is it worth what you're going to pay with him being overweight right and not you just price it out with xander go to xander insurance and look at it and you know put his his weight down and see when it comes back. And it's just expensive. I mean, when you're overweight or you smoke, you know, your life insurance doubles. Okay. And I think that's his concern. He doesn't smoke, but the weight could be an issue. He might not be able to get it depending on how overweight he is. But

anyway, price it out and then make the decision based on the numbers not based on a feeling okay your feeling is based in logic i will get i will back you up on that okay but let's just let's let's just take this all the way to ground now and get the facts in front of us and go okay i'd really like to have another 300 000 but i'm not gonna pay 30 000 a year for it screw that i'm not doing that okay uh and do you think that no i made that up okay i just i'm just saying but but but if it comes out as 300 a year well buy it shut up you know yeah so you know you just look at it and you make a value judgment and go how much risk uh because worst case we know you and the kids are okay. You've got a million four plus a paid four house.

Today. Yes. Today. Way to go, by the way. Excellent job. Thank you. What a great job you guys have done. What kind of careers?

He's in health care management, and I'm a social worker. Okay. So how long ago did he start his 401Ks? He has been a saver all of his life, probably from his early 20s. How much of this was inherited? About $80,000. Okay. So you guys are everyday millionaires.

You started with nothing. Yeah. Yeah. Way to go. I'm proud of you. Excellent job. And now you're doing what you've been doing all along, which is just being intentional and thoughtful and logical and careful. And these are the people that build wealth.

Because the reason you're asking this question is how you got here. That's very well done. You're a classic model for this. Thank you. Thanks for letting me ask you some questions. That puts this hour of the Dave Ramsey Show in the books. 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.

Hey, it's Blake Thompson, Senior Executive Producer for the show. You know, you can listen or watch Be Anywhere with the Dave Ramsey Show app on your smartphone. Catch the full show or watch the highlights and check out Dave's upcoming guests. Head to the App Store and download it today.