The Ramsey Show - App - Discover the Truth About Who Millionaires Really Are (Hour 3)

Episode Date: October 5, 2018

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🎵 Live from the headquarters of Ramsey Solutions, 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'm Dave Ramsey, your host. This is your show, America, where we are glad you are with us. Thanks for being here. Open phones at 888-825-5225. That's 888-825-5225. Brad starts off the hour in Phoenix, Arizona. Welcome to the Dave Ramsey Show, Brad. What's up? Hi, thanks for taking my call, Dave. Sure. How can I help? I have a question.

My wife and I are just getting started in Baby Step 2. We've got about $90,000 in debt, and we currently have three vehicles. Two of them are mine that I use for work. They're both paid off. I use a truck, and then I also have a commuter car that I use regularly on most days of the week, but the truck I have to use once per week to pull a trailer. Her car, she owes about $11,000 on and it's 0% interest. We could probably get by just sharing my two vehicles. But we just didn't know since the car loan is a 0% interest, should we just sell it to get rid of some of the debt, or should we keep it because it's 0%?

0% wouldn't enter into my decision. It would just be whether or not I wanted to work hard enough to pay off the $11,000 in debt and how fast you can pay it off. What are all three of these cars worth? The truck is probably worth about $15,000. My car is probably also worth about $15,000. Her car, we think we can probably sell it for about $10,000. Okay.

Because one rule of thumb is you don't want vehicles, things with motors in them, totaled up being more than about half your annual income, because then you've got too much stuff going down in value. Okay. Okay. You're not violating that, though, so we're good. The second rule of thumb I use is can you be out of debt everything but your house in two years? So what's your household income?

About $140,000. Good. And how much debt other than the eleven thousand dollar car do you have not counting your mortgage uh we have about 90 000 okay that that that includes the car without the car and what is the 90 000 on mostly student loans uh we have some tax stuff, medical bills. Okay. So can you pay off $45 a year, making $140 and be debt-free in two years? My answer would be yes. Yes.

And that would mean that if you want to keep her car, there's nothing out of line with keeping it. But just pay it off. I mean, we're not going to keep the debt uh regardless of the interest rate we're just going to get rid of it but you know so but if you told me you owed thirty thousand dollars on her car i would sell it in a heartbeat okay because because it wouldn't it wouldn't fit in either one it wouldn't fit it wouldn't fit in either one of these equations i mean you wouldn't be debt free in two years probably and on top that, of course, you'd have too much tied up in vehicles.

And so that would change my equation. That's how I use it. It's just a decision-making paradigm. That's all it is. It gives you a critical thinking filter to look at this and say, what are you doing there? What are you doing? Really good question. Thanks for joining us.

Lauren's in Dallas, Texas. Hi, Lauren. How are you? Hi, Dave. Thank you so much for taking my call. My pleasure. How can I help? So back in 2015, I graduated from college,

and my aunt purchased me a car as a gift under her name. She told me that... Why is it a gift under her name? How's that a gift? Exactly. Okay. She told me once I got a full-time job, because I was working a small restaurant job, didn't really make any money, that she would pass over the payments to me.

And I said, okay, not knowing what I was getting myself into. Oh, payments. So the gift included you paying payments. Oh, nice. Okay. Right. So far, this story sucks. Okay.

So now, two years later, last year, I got my job, and she gave me the payments. And I'm realizing now that even though I'm just now starting off in the corporate world, I don't make enough to pay for this car. So my story is kind of like a lady that called last week, and so I know by your guidelines that I need to get rid of this car, but I don't know how to go about doing that since it's not under my name. Yeah, it's not your car. My aunt is also sick.

Yes, my aunt is also sick. Is she mentally unable to make legal decisions? No, she's not mentally able. She's mentally able. She has, by her standards, good credit. So that's why she was able to get the car and, you know, get payments that she did. Okay, so here's the thing. She tried to do a nice thing for you, and she did it in a really stupid way,

and so now you're both stuck, right? Right. Because she owes more she owes more it's not gonna hurt your credit at all your credit's not involved it's her credit that we're worried about we want to do a nice thing for her because she's sick and not able to deal with this so uh she probably owes more on this car than it is worth i'm guessing yes she can't afford it is our ding kelly blue book said it was uh worth around close to 20 000 it's a nissan ultima it's worth close to 20 000 what is owed against it uh i want to say was like on that 27 000 now okay uh does your aunt have any money? She's retired, but not really.

She told me she couldn't afford it. Okay. All right. Well, you guys are in a pinch. This is very uncomfortable because here's what needs to happen. She needs to sell this car because her niece can't pay the payments. And when she sells the car, she's going to lose seven thousand dollars on it what are we going to do with that

do you feel obligated to pay that you're not legally obligated i do because i mean in a way i do just because i accepted it i know i'm at fault too for not thinking this through. How old are you? I'm 27. What do you make? I make $23,000 a year. Jeez. Okay.

Well, someone's going to find $7,000 to put with the $20,000 that she gets from her buyer to pay the car off so that the buyer can get the title, and that's going to leave you and her $7,000 in the hole. If you want to help with that, you can. Were I mediating this, I would say you both did something stupid, and I would ask you to split it, that she eats $3,500 and you eat $3,500, and let's get the car sold. If she's too sick to handle the transaction, have her sign a power of attorney over to you for this title. And then you get the car sold and have her come up with $3,500 and you go borrow $3,500.

And that's your penalty for being engaged in this and her penalty for being engaged in this. Because the other option is you stop paying the payments and she gets repoed. and that's your penalty for being engaged in this and her penalty for being engaged in this. Because the other option is you stop paying the payments and she gets repoed, which doesn't sound good. Right, she's really scared of beating up her credit. Yeah, that doesn't sound like a good plan to me because she's going to end up, we've got a sick old lady who's going to get sued here for trying to do something nice, but she did it in a stupid way. So I think you both split this. That's just a fairness thing. It's not a legal thing.

But it's what I call stupid tax. When I do something stupid and it costs me money, I call it stupid tax. And Auntie and you are both going to pay some stupid tax. I'm sorry. This is the Dave Ramsey Show. It's time to take another look at your budget. That means scouring every expense and making sure you're not leaving any money on the table. One of the biggest expenses is your mortgage payment.

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or visit ChurchillMortgage.com for your Churchill checkup. That's 888-LOAN-200, or ChurchillMortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Thanks for joining us, America. Open phones at 888-825-5225. You jump in, we'll talk about your life and your money. Taylor is with us in Hartford, Connecticut. Hi, Taylor. How are you?

Good. How are you? Better than I deserve. What's up? Just, you know, first of all, thanks so much for taking my call. I've been listening to you for like eight years now. And I just had a question regarding retirement and college planning for my one-year-old. Mm-hmm.

So I'm 30 years old. I'm on baby step four. I have about $70,000 in cash. Mm-hmm. I have no debts other than my house, which has about $120,000 left on it on a 30-year mortgage. And when I bought it, I put $90,000 down on it. So I have some equity in it. And I have about $14,000 coming in as a gift for my one-year-old's college fund.

So I'm going to be putting that into a CHET 529, I think, for him and kind of picking out some growth stock mutual funds to kind of see where it goes from there. Okay. So my question is, what are kind of my, what do I do with this kind of pile of cash that I have? You know, ideally, I want to keep my living expenses for, you know, having any given month is about $2,700. My wife stays at home with her child, so I'm pretty much the only income right now. So I wanted to keep, you know, a good portion of that set aside and just cash, and then kind of wanted to know what to do with the rest.

Should I throw it towards my house a little bit every year, or should I put it someplace else? What we teach, Taylor, is a process we call the baby steps, and it tells you what to do at different phases of your financial plan. And as you lay the foundation, then as you build the house and you put the roof on your financial plan, it tells you each time what to do and what to do first, what to do second, and so forth. So baby steps one is $1,000.

You've done that. Two is debt-free, but the home, you've done that. Three is an emergency fund of three to six months of expenses. That's going to be $9,000 to $18,000 in your case. And so a $20,000 emergency fund is adequate as just an emergency fund in cash. Okay. Then that brings us to baby steps four, five, and six, and we do those simultaneously. Four is putting 15% of your income into your retirement plans.

Now, what do you make? So about $70 a year. Is the household income? Yeah. Okay. All right. And do you have a 401k at work? No.

I have a pension that I put about $130 every two weeks into it. So I didn't know how that kind of played into the cards as well. Okay. Is that mandatory? Yes. Okay. All right. I probably would not count that. It's a fairly small amount of money, and I probably still would put 15% aside. 15% of $70,000 is $10,500. Okay. Okay.

Okay. And that would be around $850 a month going into something. Do you have a 401k available at work? You don't? No, I have a, I currently have, I just opened up a Roth IRA with Betterment, which is one of kind of the robo-advisors. I'm familiar with them. What I would do instead is I would use a person that is an advisor today.

Robos are coming. They're doing pretty good, but none of them are strong enough yet that I'm willing to go there. I've not got any of my money in robos at this stage of the game. There will be a time and a place that those things evolve to the point that they're probably going to be a good thing to do with some or you know in certain situations and so forth but what i would do is just go to smartvestor at daveramsey.com click on the smartvestor pro link and it'll drop down a list of people in your area that are that we recommend i'm not in the business, so I don't care what you do. Okay?

It doesn't affect my income at all. But people have always asked me, who do you recommend? And I recommend people that have the heart of a teacher that will sit down with you. You and your, are you, you're married? Yep, married and have a 13-month-old. Okay. So you and your wife can do $5,500 each, unless you're over 50 years old, but that gets you there. $5,500 is $11,000, and that would be fully funded Roth IRAs, and I would have those in growth stock mutual funds.

I spread my end personal investments across four types of growth stock mutual funds. It's also what I recommend. And I put a fourth in growth and income, a fourth in growth, a fourth in aggressive growth, and a fourth in international. Now, once you're doing that and you have the monthly draft coming out of your checking account, you shouldn't need any of the $70,000 to do that with. You've already dumped a ton in your kids' 529, and you've got it in mutual funds that you're watching, which is just fine. Okay, just be watching that. You could review that with a SmartVestor Pro and see if, you know, if they teach you anything that makes you want to move it, but you may want to just leave it where it is. That's fine.

There's no issue there. And then everything above that, that's baby step three is, or baby step four is 15% of your income into retirement. Five is address kids' college, and it's different depending on how many kids, how old they are, and that kind of thing. So we don't have amounts on that, but you're addressing it. And then once you're putting your two Roth IRAs in, you're doing your 15%. Above that, everything I can find in my budget, any extra money I come into,

I throw it at the house because I'm going to get the house paid off. That's baby step six. When the house is paid off, that leads you to the last baby step, and that's max out all retirement and invest, invest, invest, give, give, give, and become very wealthy, which you will do, especially when you get rid of your house payment. So all of that to say I'm probably throwing about 50 grand out of your 70 at your house, and then'm gonna set up those two roth iras and any other money i find in my budget i'm gonna just keep chunking it on that house you're probably gonna have that house paid off in three or four years at this rate that's what it sounds like to me and that's the direction i would go josh is with us in arlington virginia hi josh how are you hi dave i'm great how are you doing, sir? Better than I deserve. What's up? All righty. So I have currently $223,000 in debt. $193,000 is pretty abnormal.

It's currently with the U.S. Department of Treasury. It's as a result of having been disenrolled from a service academy three years ago. And the remaining $30K is like a pretty normal debt, obviously much smaller. So my question is, I'm familiar with the baby steps. I'm a huge fan of yours, and I've followed you for a while. Should I continue paying off the smallest debt first, or should I just kind of start to save rapidly for $193,000? The reason I ask is I believe it's going to go to, actually, I know for a fact,

it will eventually end up in a collections account if I'm not able to pay the amount in full. Um, yeah. Um, and what is your income now? So it varies. Um, last year, uh, I made 190,000. Um, and I, I got married this year year so combined income between me and my wife should be this year at least about $150,000 it's gone down a little bit this year Wow, so you guys are

killing it on the income side and so I'm going to just put this $193,000 in the debt snowball and knock it out as fast as I can because you've got wonderful income, you'll be debt free in two years it's not going to collections and knock it out as fast as I can because you've got a wonderful income. You'll be debt-free in two years. It's not going into collections. Okay. When you start throwing $20,000, $30,000 at this thing,

it's going to go away really, really fast. You make a lot of money. You're going to have to get on a real tight budget and clean up the mess. So I have never heard of this. I'm curious. I'm about to learn something. You went to a service academy, one of the military academies, got disenrolled, and they back charge you for all the tuition?

Yes, sir. So, yeah, a little known fact. If you are disenrolled pretty much under any circumstance following junior year, you're either asked to serve through enlisted service, or you're assigned the recruitment and debt. And it goes to the Defense Finance and Accounting Service initially, and if it's not paid, it goes over to the U.S. Treasury Department. So you have the option of serving as an enlisted person if you get disenrolled for a period of time and it's forgiven?

Yes, sir. However, in my case, I was not afforded that option. I was given an honorable discharge and asked to pay back. Wow. So like West Point, as an example, you can get hammered with this. I did not know that. I just learned something. Wow. Well, the only good news in this story is you make a lot of money, so you can clean up the mess quickly. Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has dead and has struggled to make ends meet, but they're starting to make headway with their budgets and smarter decisions with money. They have dreams and plans, and the only real difference is that one family has the right amount of term life insurance, and the other doesn't.

Big difference. If one of the parents die, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is. Be the family that takes those deliberate steps to be different and responsible. It really does make you the hero of your story, and it puts you on course for better things

ahead. Thank you for joining us, America. We're glad you are here. Open phones at 888-825-5225. Jill is with us in Phoenix. Hi, Jill. How are you? Hi, Dave.

Thanks for taking my call. Sure. I've listened to you for a while. I have a problem that I'm hoping you can help me with. My daughter, who is bipolar, just had a baby two weeks ago, and she was living with a man who had a family. His wife had died, and he had three small boys. To make it short, she signed away a lot of things that she shouldn't have. One is taking out a couple of title loans on her car, wrote rubber checks, has credit card decks.

So to make a long story short, she's got quite a few collection agencies after her. She can't be clear with me right now about how much she really owes. I don't know. I believe, I'm guessing it's over $4,000 and less than $8,000. I'm not sure, but she's racked up a lot of debt since last year. She is almost 34. She will be next month. My question to you is, she has no money.

I do not want to pay her debts. What does she say to these collection agencies? I mean, literally, she has nothing. Is she still living with collection agencies? I mean, literally, she has nothing. And right now, I am having her live with... Is she still living with this guy? No. He is in a halfway house. He was on drugs.

Where's his kids? His kids are now with one of his sisters and his mother. So she now is a single mom with a new baby on her own. Right. DCS in Arizona gave myself and my husband the responsibility of taking care of the baby. Now, Leah can go wherever she wants, but baby stays with me. So has she now moved in with you? Yes.

She is living with me. The baby and the mother. The baby and the mother. Correct. Okay, good. Good. That's good news. Okay, good.

So here's the thing, good. Good. That's good news. Okay, good. So here's the thing, then. What you tell the collection agencies is that she has nothing, and so for now, they will get nothing, and that she's dealing with bipolar. And, you know, she is what we in the business call judgment proof. Oh, absolutely. They can sue your pants off, but they can't if you don't have any pants. That's what it amounts to. Okay. Well, that's what I was thinking. She wasn't, you know, her boyfriend has said to me, well, I didn't make Leah sign anything that she wasn't aware of.

I go, but she can't make those decisions is what I've told them. Well, we'll come back to that in a second. But let's assume the debt is valid for a second. It's not that much, and it'll probably be good for her to work her way through it when she gets back on her feet. Well, she's not even got a job right now. I know, I know, I know. But I said when she gets back on her feet, mentally, emotionally is working, yeah, we're going to let her probably reap the rewards of her stupidness in the middle of bipolar.

Okay? Now, having said that, I work with, we have worked with bipolar for years. People who have bipolar always end up in financial counseling. Okay? It goes with the territory. She was off her meds for the past year, and I realized she probably had her biological clock ticking going, well, Mom and Dad have always told me I shouldn't get pregnant on these meds because she's on two different meds every day. So she's been off it for a long time.

The bottom line is that with good counseling and with the proper balance of medication, not over medication but not over medication, but not under medication, that she can live a very normal life and make good decisions about everything, child rearing, financially, and everything in a bipolar. Never has. But it can happen. It can. So what happens is that she's got to stay plugged into a properly balanced medication regime and plugged into counseling,

she has to want to be well. Yeah. And if she does that, then she can form a very good life. And we have folks do that. But to the extent that a bipolar person doesn't do those two things, you are never going to have a financial situation that's solid. Yeah. Because when they go manic, they just go bananas.

Oh, I know. I know that. I was in control of her checking account for most of her life. And because of that, I was able to gather enough money when she was working, and she was able to buy a car a couple of years ago. But that never allows her to be anything except dependent upon you. Right. I actually, last January, took myself off of her checking in because her creditors...

Well, your boyfriend got involved, and your boyfriend's obviously not a bright boy, so... Well, he was doing drugs. Yeah. And so he wasn't in his right mind either. I rest my case. Yeah. So bottom line is what I would do if I'm her mom is I want to participate in her healing financially, emotionally, getting back on track so that she can be a good mom to this baby and have a good life and make good decisions independent from drug addicts and independent from mom eventually. But if you can get her back, I don't want you to set up a checking account and you manage everything and that be perpetual.

But to do that, to get her back up and running again with the idea that, you know, we're going to hold the back of the seat until you learn to ride the bike, and then we're going to let go of the seat again. But you let go of the seat last time, not because she was healthy, but because she was unhealthy. Yeah. And I'd like to get her up and running and healthy. You know, we got the meds worked out. We got the counseling.

For the rest of her life, she's got to balance that stuff. I agree. If she doesn't, she's going to hit the bridge every time, man, and be back in my office or in your home trashed again financially. Here we are again, broke, you know. But the good news is I hear a lot of hopelessness around bipolar because it's so frustrating for the people that have it and those that love them. But the good news is I have seen an innumerable number of people that with a quality spiritual walk, quality counseling, and the proper amount of medication. Some people over-medicate it. Some people say you don't need medication. I don't believe in either amount of medication. Some people over-medicate it. Some people say you don't need medication. I don't believe in either one of those.

No, no, she needs to be medicated because she does. She's the type of person, she goes nuts if she's not medicated. Well, you don't want them just in a fog the rest of their life. No, no, no. I mean, they had controlled her. She actually is a ward of the state, and we got her diagnosed when she was 16 as SMI, which is really mentally ill. And she hears voices if she's not on a couple of different meds.

She does. Well, her only shot then is what we're talking about. But our goal is for this girl to be 44 and all this to be a memory. It can happen. Yeah. And it happens to people all the time. So what does she say right now when they call her? I got nothing, so you get nothing.

So she does pick up the phone. You might as well, but I wouldn't have long conversations with them because they're going to just back them. Well, I don't think I should be talking. She should be telling them that. Either one of you. I'm not going to have a long conversation. It's I got nothing, you get nothing.

Because all they're going to do is badger her, and that's not helping the situation. Now, once you've got a little money and some jobs going, then we start negotiating and trying to work our way through the debt, right? Well, my husband thinks that if this goes on a year or two, that they will eventually come back and want to negotiate. They're going to negotiate after two months. Oh, really? Yeah. Okay. I think going to negotiate after two months. Oh, really? Yeah. Okay. I think it's been longer than that. I think it's been at least

six months. Oh, they're pliable today, but she's got no money and you're not giving her any. No. So they get nothing. They get nothing. Today. Now, six months from now, she's balanced, on her meds, taking care of the baby, working, still living under your roof.

You can give her the emotional support. You can put your arm around her and walk with her as she fights through dealing with these nasty people called collectors. And so let's say, I mean, she'll show them little bits here, $1,300 there, $800 there. Does she say, look, can we work out a deal? Yeah, yeah. Or are they going to come back? Well, owe you $1,300. But we work out a deal? Yeah. Yeah. Or are they going to come back? Oh, you $1,300, but you haven't seen any money in two years. I'm now back up and working again. I got $500. If you'll take that in settlement in full, we'll

do it. And get it in writing and no electronic access to your checking account, because whatever these collectors say, you can tell they're lying if their mouth is moving. It's a filthy industry. And so you've got to treat them like rattlesnakes because they are. You've got a really tender, covering person here who's going into a rattlesnake den after she starts making some money. You've got to walk with her emotionally on this. But you can give her the cheerleading support that she needs without giving her money. And I think you're right to do all of that. But there's good news, Jill.

She can make it out of this if she makes good choices. Our scripture today, the heart of a man plans his ways, but the Lord directs his steps. Proverbs 16, John Lennon said, life is what happens while you're busy making plans. Brad's with us in Wichita, Kansas. Hey, Brad, welcome to the Dave Ramsey Show. Well, glad to be here. Glad to have you. How can we help?

Well, first of all, I'm the second person out of our FPU class that has gotten to talk to you in the last two weeks, so everybody's envious. Wow, I'm glad you're able to get through. Cool. Yeah, we just started. We're on fourthvious. Wow. I'm glad you're able to get through. Cool. Yeah, we just started. We're on fourth week. Good. I have a question about whole life.

I'm coming up on a review for my life insurance. My agent called the other day, and I thought it was rather timingly um is there a step-by-step process that is best for getting out of whole life or can i just call the insurance agent and say cancel it uh you don't get my term life set up and then just call them and say cancel it and send me whatever check is to come my way yeah that's pretty well that's pretty well and you don't even have to call the agents you just call the company um the agents you're going to have to try they're going to want to argue with you right and i don't want to have an argument and if he wants to argue you can just go look i'm not arguing with you i've already made my decision and honestly if he sells whole life you can buy your term insurance cheaper. Whole life companies don't sell cheap term insurance.

Right. I contacted Zander last week. Yeah. When you get your term insurance in place, you can just cancel with the company directly. If you want to call the agent, you can call them. I don't care. But, you know, their job is to save the sale. Their job is to run in and rescue you from yourself.

And so there's no reason to have the insurance review. It doesn't serve any purpose because you already... I wasn't going to have it. I was just going to go ahead and cancel no matter what. But I didn't know if there was a certain step that if I didn't take, I would lose out on getting the most out of the cash value, whatever's there. No, there's no difference at all. All you do is you just call them and call their 800 number, whatever the name of the company is,

and get customer care on the line, customer service on the line, and ask them if there's something they need you to sign or if there's anything we need to expedite this, but we need you quickly to get me my cash value. What's the fastest way I can do that? But no, you really can't mess it up. The only thing that can happen is they may try to slow walk or ignore your request, and you may have to push on them.

It's kind of like canceling a credit card. You've got to argue with them to get it done. But no, there's not a way you can mess it up. You just need to be persistent is all and make sure that they follow through and send you your check. And if you need to sign a piece of paper, forget them to do that. That's fine. Not a big deal. Don't cancel any life insurance until you have your new life insurance in place.

Always remember that. Denise is with us in Washington, D.C. Hi, Denise. How are you? Hi, Dave. I'm great. How are you? Hi, Dave. I'm great. How are you? Better than I deserve.

What's up? So I've been laid off about probably seven months ago. Came at a really challenging time because we have a child that's in college second year that we need to pay for. And as well, I have parent care expenses where I need to pay caregiving expenses of about $1,800 a month for a parent. We're trying to figure out when the, for the tuition, should we consider paying cash or taking out a student loan for that. I just want to make sure that we're doing the right thing since I don't know when I'm going to be going back to work,

and it was really pretty devastating to have lost my job at this time. I'm sorry you did that, that you lost your job. That's scary. I don't want to make it worse by going into debt. Making your financial situation worse is what we've got to do. So what I'm asking is you're in the middle of a storm. We've got to batten down the hatches. And so how much is the tuition?

Coming up, well, total, we're going to have to pay $23,000. But coming up this year, we're going to have to pay about $8,000. Okay. And do you have $8,000? We do. Okay. Well, I mean, if you don't feel like you can spare the $8,000. Okay. And do you have $8,000? We do. Okay. Well, I mean, if you don't feel like you can spare the $8,000, then the kid needs to pull out of school or he needs to get a job and pay his $8,000. But I'm not going to tell you to go into debt and make this situation worse. Okay. You have the

money. The only question is you're making a decision. Do you want the safety net more than you want to pay tuition? I'm guessing you're probably going to pay the money. The only question is you're making a decision. Do you want the safety net more than you want to pay tuition? I'm guessing you're probably going to pay the tuition. So how much did you used to make? About 95. And what does, are you married? Yes. And what does your husband make? About 70. Okay. And what did you used to do? In software support. And how long have you been laid off? About seven months.

Wow. Not been able to land software support? Yeah, definitely actively working. I'm shocked you hadn't found something in that period of time in that field. That makes two of us. Okay. But I'm working on it. Working on it.

Okay. In other words, the good news is you're in an active technology-type position. There ought to be some positions available. Maybe not 95, maybe 105, maybe not 105, maybe 75. I don't know. But I don't think you're going to be unemployed indefinitely. You're in an active market, a metro market, and you're in an active space. So I'm not going to panic.

Okay. And I'm sure not going to panic. Okay. And I'm sure not going to make it worse by borrowing money. If you're going to panic, tell Junior to come home for a semester or tell him to get a job and pay his $8,000, one of the two. But you guys are paying your basic necessities of life out of your husband's income, and that's what you push through. But with but, you know, this eight thousand is another thing. And it depends on how much you have in savings, too, that you got to work with.

But no, I'm not borrowing the money. I don't teach people to borrow money. I don't borrow monies and emergencies. I don't borrow money when things are good and I'm greedy. I don't borrow money when things are bad and I'm afraid. And greed and fear are a good way to lose your butt with money for sure so don't let either one of those be your driving driving force ever christy's with us in wichita kansas hi christy how are you hi dave thank you for taking my call sure what's up my husband and i are brand new to wichita. I just moved in August 15th from Northern California.

And in our move, I had a job incoming here as a paraeducator in a public school district. My husband did not. So our goal was to use our cash that we had saved up and paid six months' rent. And so that's up in January, the end of January, along with six months of utilities. We now have this 401k loan. We took a loan against it about four years ago and have $8,000 remaining, which he retired. So they are giving him the option of making a payment, but it has to be $700 for the next year to finish paying off the $8,000. He retired from there?

Well, he left the company. How old is he? After 28 years, he's 51. And so they listed him as retired. Yeah, that doesn't matter on this. A 401K loan, if not paid within 60 days, has to be considered due on full. It's IRS regulations. That's interesting that you say that because they're telling us that the remainder, that he can continue to make payments

at $700 a month, right? I don't care what they say. You need to check with your tax preparer, and if your tax preparer can find a regulation that aligns with what the company is saying, that's fine, but I don't think that's so. I don't have anybody that's helping us with this. We call it the 401k people. Yeah, you need to call a tax professional, not the company that he worked for, because my understanding of the regulation is a 401k loan, if not paid within 60 days of leaving the job, is considered an early withdrawal and you are taxed and penalized.

And that's my understanding of the reg. Okay. So what I was under the impression was originally when we left was that we weren't going to be able to pay it back. That's what we thought based on what they told us. So we were going to take that penalty and owe the taxes on it. Wow. But when we got settled in Kansas, we received a letter saying that they categorized him as retired.

I don't care. They don't get to decide what IRS tax regulations are. They don't get to make them up. So what their letter says doesn't matter. You need to get some professional tax advice. Go to DaveRamsey.com, click on ELP for taxes, and sit down with somebody to help you with your taxes, kiddo. I think you're getting bad advice. 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 Kelly Daniel, associate producer and phone screener for the Dave Ramsey Show. Did you know that in 2017, Dave Ramsey Show listeners paid off $50 million of debt? That's pretty impressive. And it could be you this year. Keep listening for more inspiration.