The Ramsey Show - App - Don't Be So Smart That You're Unwise (Hour 2)

Episode Date: November 6, 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. Thanks for joining us. Open phones at 888-825-5225. Starting off this hour is Lauren in Germany. Hi, Lauren. How are you? Hi. Thanks for taking my call. Sure. What's up? Well, so my husband and I are now past baby step number five, so the kids are out of college, but we don't currently own a home, so we can't really

move to step six. We currently live overseas, but expect to move back to the States in the next year or two, and at that time, we'll buy a home. So here's my question. When we have additional income or money to sock away, would you suggest that we stick it in a savings, trying to have enough money on hand for a good down payment for that next home so we can pay it off sooner? Or we also have a couple hundred thousand dollars in retirement that are in a mixture of traditional IRAs, 403Bs, and 401Ks that we want to convert to Roth accounts. So would we look at one over the other or a combination? I wouldn't convert them to Roth until I had enough to buy a house.

How old are you? Fifty. Okay. And what's your household income? About $175,000. Excellent. Excellent. Okay.

Yeah, what I would do is just stick with your Baby Step 4. Five doesn't apply. Kids are grown and gone, you said, right? Yes, sir. Okay. Baby Step 4 is 15% of your income going into retirement. Every dollar above 15% of your income going into retirement that you can save, I would put in good mutual funds, probably just like a no-load S&P, something simple,

and just see how big a pile of money we can get there, with the idea that you might even be able to pay cash for a house when you got back. Okay. Or put just a huge monster down payment on it where you pay it off in just a few years. But let's just focus all the extra energy as if that's your baby step six in other words okay yeah pretend you got a house over there at baby step six a mortgage and we're just going to throw all that money in there to keep from getting there you know to keep from getting a mortgage or to keep from getting a very big mortgage when you get

back and then you turn around pay it off whatever, if you do take one out there. So good question. Way to go, Lauren. Very, very well done. Alex is with us in Portland, Maine. Hi, Alex. How are you? Hey, Dave.

I'm good. Thanks for taking my call. How are you? Better than I deserve. What's up? Good. My wife and I are currently working your baby steps. So we have two loans left, and I wanted to get your advice on which one to attack next. So loan number one is our house. We owe about $200,000 on it. We have a

30-year loan, unfortunately, on it at 3.5%. The house is worth about $250,000, so not a lot of equity there. Loan number two is a commercial property that we own. We owe about $185,000 on it. That one, we have a 20-year loan. It's at 5.75%, and that property is worth about $200,000. So, again, pretty much no equity there. Is you running your business out of that commercial property? We are not, no.

So it's just a rental. Okay. But it's not got a lot of spread on property? We are not, no. So it's just a rental. Okay. But it's not got a lot of spread on it. Yeah, no, it doesn't. It's a family property that I bought for my grandparents. It grosses about $36,000 a year. We probably profit $10,000 of that if we're lucky, so more of a loss than anything. But it's been in my family, so we made the decision to keep it.

Gotcha. Okay. All right. Well uh and what's your household income about 85 000 okay i'm gonna pay off your home first the home okay and here's where i came up with that okay let's say that all kinds of nightmare broke loose in your life and things got really bad financially speaking and um in scenario number one you were completely debt free your house and the only debt you had was the old family building and god forbid you lost the building okay that's scenario number one scenario number two is the family building is paid for, same nightmare unleashes, and you lose your home. Right. That's called risk tolerance, risk management.

And so when I look at it through a risk management lens, I say, you know, in a horrible worst-case scenario, which we don't think is going to happen, I doubt it's going to happen. I'm not predicting it's going to happen. But that's the only real way to help break the tie between these two. Interest rate might break it, but the interest rate is not that different. And you're not selling either one of them. You're staying there. You've got a good, solid income. I'm just going to chunk away on the house.

When the house is paid off, I'm going to chunk away on the building. You're probably going to get them both paid off in less than a decade. That's what it sounds like to me. I think about five years on each you'll be done, or less. You might do it in eight, but somewhere in there, depending on what your income does from here. But you're going to be in great shape, and none of that's going to happen. But when your home is paid for and the only thing left over here and debt wise

is that building you're going to feel different something happens when we get our homes paid for something a switch flips inside of us we relax in a place we didn't even know was tight and so that's all i almost always put the house ahead of others other real estate to be paid off or other business debt or whatever we're dealing with there. Nick is with us in Irvine, California. Hi, Nick. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call.

Sure. What's up? I would like to know if we should be using our extra money on converting traditional to Roth or using our extra money for early financial independence. Okay. Okay, so you're at baby step seven? Correct. Good.

Very good. You're 100% debt-free house and everything. Mm-hmm. Very good. What's your household income? $115,000. Okay. And how old are you?

31. Okay. So you're saying should we invest some money in mutual funds for retirement prior to 59 1⁄2, bridge retirement, so to speak, bridging you up to 59 1⁄2, or should we knock out the Roth? Correct. Yeah, we have like $200,000 in traditional that we would consider converting. So that'll cost you about $50,000. So if you started going the other way and you said,

we're going to build up some money in mutual funds, at what point would you go ahead and pay, let's say you had $300,000 in mutual funds. Let's just pick out a number. You built up $300,000. Would you have converted this before you got that far? I don't know. That's what I'm calling. I'm not quite sure.

Yeah. So there's two ways to look at it, okay? One is $50,000 is not that much in your world. You'll be able to do that very, very quickly, okay? Mm-hmm. much in your world you'll be able to do that very very quickly okay and so it's not going to hold back your bridge outside financial independence mutual fund investing to use your phrase okay it's not going to hold it back so i probably would go ahead and do it but if you don't say okay i'm going to build my financial independence fund up to x and then i'm going to convert it in other

words 300 is probably enough. I mean, you've probably got a really good start at that point. 200 might be enough. You say, then once I get it to 200, I'm going to knock that 50 out. Then I'm going to go back to my financial independence fund. And you start maxing out everything at that point. And so great job, man. You're killing it.

Well done. Well done. And 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,

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Welcome to the Dave Ramsey Show. Hi. Can you hear me? Absolutely. How can I help? Great. Thanks. It's great to be speaking with you.

So I'm going to be entering into an MD-PhD program in the fall or summer, I guess, of 2019. Way to go! Thank you. I very much appreciate that. So my question is, with the stipend being around like $30,000 to $35,000 a year, and with living expenses being, you know, what I've calculated around like $18,000 to $20,000 a year, I was wondering if it was appropriate to take out a little bit of debt to pay, to compensate a little bit for my living expenses that are going to be left over with the assumption that I'll be able to pay it off when I'm done. I'm sorry, I'm

confused. I thought you said your stipend was $35,000. Yeah, it is $35,000, but I mean, to eat and, you know, live at all whatsoever in New York City, it's expensive. I mean, I'll only have, you know, what I calculate, maybe like $15,000 to $13,000 a year to live off of. Okay, so the stipend covers the tuition and living expenses? No, no, no. The tuition is paid for. I thought so.

I thought that's how that worked. Okay. It's paid for. We're stipended. It's for your living expenses, right? Yeah. You can't make it on $35,000 a year while you're a med school student? I mean, it's in New York City.

I know. It's about $20,000 a year for rent alone, pretty much. So I figured, I don't know, it's kind of tough to live on maybe like $1,000 with all included expenses. I just didn't know if it was appropriate for me to start thinking about taking out some debt or to just get in the mindset of absolutely not. Listen, you have hit the lottery. I mean, the MD-PhD program is the dream come true where you go to med school and have zero debt.

And they give you money to live. For God's sakes, man, figure out a way to make that work and don't go into debt. You did it. You did it. If anybody doesn't need to go into debt, it's you. Now, I understand New York City is expensive. I'm there all the time. I understand.

So get six roommates, man. I mean, live on nothing. Figure this out. But you can make it on $35,000 a year. That's $3,000 a month to make it on. Now, you're not going to live and buy yourself in a rental property doing that i get that so get some roommates get some other guys and gals that are in the program find a way to get in some super cheap housing associated with the university in

some way um you know shop around find out what you can do to clean out some old lady's gutters and live in her basement garage or something. You know, I mean, there's something to do here. But you got what everybody going to med school wished they had. And don't, no, no, no, I'm not going to tell you to go into debt. No, I'm not going to tell you to go into debt. No, you get to go to med school and be a story. You get to come out of med school 100% debt-free,

and it's because of your academic acumen. And don't be so smart that you're unwise. You ever meet smart people that are unwise? I meet them all the time. Don't be that guy. You've pulled this off, man. No, no, no. Do it. Do it,, no. Do it.

Do it, do it, do it. And between now and the time you start med school, go work six jobs and put another $30,000 in the bank and then let that supplement you as you go through. You did it. This is a killer program. Hey, thanks for calling in. Open phones at 888-825-5225. We'll try to help, and we appreciate you calling. Open phones again.

Jump in here. Now, what the MD-PhD program is, for those of you who don't know, why I'm so excited for him is you become an employee of the university, and so your tuition is free, and so there's a stipend. And so he's – and to qualify for that, you have to have academic prowess beyond belief. So that guy's a very, very smart guy, academically speaking. And there's not a lot of those available. If you can get one of them, it is your ticket to med school for free.

Yes, you do that. Oh, my gosh, that's wonderful. Jeremy is in Raleigh, North Carolina. Hi, Jeremy. Welcome to the Dave Ramsey Show. Dave, thank you for the time. I appreciate it. Sure.

How can I help? Well, I have $100,000 in student loans, not something I'm proud of, but no whining. I want it paid. I've made some bad decisions since I graduated in 2011, and I've since paid off credit card debt. I actually finished it this week. Good. Finished paying it off with wedding money, with my wife's approval, of course. Good.

You're heading the right way now. Yes. My wife finished the school in May. She's not working at this time, but we expect that she'll have a job in May. The plan is to live off of the lower of our two incomes and to use the higher source of income to pay the debt. So we want it paid in three to four years. She has no debt.

She'll graduate debt-free. She definitely does not bring back into the relationship like I did. I'm so proud of her. So what do you make? I make just that $48,000 gross per year. What do you think she'll be making when she graduates in May? It looks like her average salary will be right at the mid-$50,000 range. I'm going to say $55,000.

Okay. All right. So I'm going to correct you. You do not separate these two incomes and use one for debt. You put them together and you live on the minimum amount that you can live on and everything above that minimal living, that beans and rice living, scorched earth on the lifestyle living goes towards debt. And so you ought to be able to live on less than 50 grand. Yeah. Okay. And so you ought to be able to live on less than $50,000. Yeah, okay, good. And so you're going to put more than one of these incomes towards it,

and you'll be debt-free two years from May. Great. Well, and I got one added, I guess you could say a gift in the last week. Someone that passed away left me 400 shares of stock. It's all in one company okay what's it worth it's valued right as of five minutes ago at uh just over 28 000 28 168 to be exact great you just reduced your debt by 28 168 sell it you read my mind perfect i don't know what the intricacies of the tax penalties and whatnot. There will be none. You'll have no taxes.

And when you inherit stock, your basis for tax purposes to calculate your gain is market value at the time you inherited it. And if you sell it within six months of inheriting it, it is assumed that you sold it for what you inherited it at so you have no gain. Okay, perfect. You're reading my mind. I appreciate that. Zero taxes on this at all. You'll do need to report the sale and report the inheritance as a part of your next tax return. So have your tax provider do that.

But you'll have no taxes on this. You don't need to hold anything back. And I suspect that whoever did well enough to leave you an inheritance would be in heaven smiling, looking at you, being responsible. What do you think? I certainly hope so. And I know that I appreciate your help with that as well. Thank you so much. Hey, Jeremy, thank you for calling.

You're on the right track, dude. Keep it up. Well done. Ding, ding. This is how it's done. Ben is on Twitter. Dave, I hear you say credit scores go to zero within a year of no accounts open. It's been three years.

My score is still there. Any idea why? There's some kind of activity on your account. That's the only thing I can tell you. I don't know. I mean, there's no perfect formula because FICO will not reveal what it takes to do this, but our experience has been that when people have no accounts with no activity, no outstanding bad debt, nothing going on. But if you still own a house with a mortgage, you've got activity every month.

If you've got an account open anywhere, double-check the bureau. Make sure the credit bureau is not one of these accounts has said they closed it. Maybe they didn't close it. I don't know. If you've got an old bad debt hanging out there, pull a copy of it and see what's showing up. There's an item entering that's showing up that's creating activity. And I'm guessing, anyway.

Again, I don't own FICO. I can't be sure. But this is what our experience has been with people, that if you quit borrowing money and close all the accounts and pay all your old bad debts and there's zero anything showing up on your credit bureau report, that you have a zero credit score within about five to six months. This is the Dave Ramsey Show. Did you know, statistically, when it comes to life insurance and protecting your family, that women are more likely to be uninsured or underinsured than men? This doesn't make any sense.

Women make up half the workforce, contribute mightily to family incomes, and in many cases are the breadwinners and take care of their families 24 hours a day. This is one of the most overlooked areas when it comes to financial planning. Maybe it's a relic of the past, but a loss of income or the need to replace family care is equally important for women as it is for men. Single moms, working moms, and stay-at-home moms all need term life insurance. Rates are actually lower for women, which is why I send you to Zander Insurance. They shop the top term life companies to find the lowest rates available.

You can compare rates online at zander.com or call 800-356-4282. This is something every family has to deal with. That's zander.com or 800-356-4282. In the lobby of Ramsey Solutions, Brian and Jennifer are here. Hey, guys. How are you? Hey, great. Doing good.

Welcome, welcome. And where are you guys from? We're from Asheboro, North Carolina. Where's Asheboro? It's like in the middle. The middle of North Carolina, yes? Yeah. If you've ever been to the zoo, that's where we are.

Do I know? If you've ever been to the zoo in North Carolina, that's where we're from. Okay. Not in the zoo, but you know. Okay, cool. How much debt you guys paid off? If you've ever been to the zoo in North Carolina, that's where we're from. Okay. All right. Not in the zoo, but you know. Okay. Cool. How much debt you guys paid off? We paid off $27,000. How long did this take?

About seven and a half months. Good for you. Very cool. And your range of income during that time? Gross was about $83,500-ish. Got it. What do you guys do for a living? I'm a labor and delivery nurse.

I work in the emergency room. Very cool. Doing what? Nurse's aid. Ah, very good. Yeah. Okay. So what kind of debt was the $27,000?

Everything. So we had student loans, credit cards, medical bills, and two car payments. Wow. What was the big one? The student loans were the largest. It was like $12,000 of ours. Got payments. Wow. What was the big one? The student loans were the largest. It was like $12,000 of ours. Got it. Okay.

How long have you two been married? Six years, a little over six years. So what happened seven and a half months ago? So last July, my father-in-law, who is an accountant, by the way, was staying at our house. We were about to go to the beach. And I did something that I didn't normally do, which was check our bank account balance just because we were about to leave. And I saw that we had $637 in our account, which wasn't that bad at the time

until I realized that there was a negative sign in front of that. And our mortgage had come out on that day early. Yeah. When I didn't expect it to, but we were living so close to zero that, you know, that made a big difference. So, um, my mom and my aunt Jane told me about the total money makeover. So I borrowed the book, read it in three days. Um, and then from there, we just started seeing all of our debt go down and down and down. And a few months after we got started, in one of the moms groups I'm a part of, a mom had posted anonymously asking how she could take out a personal loan to pay off her electric bill. And you know, of course, there's people on there saying, oh, just go down to the bank and talk to Sally. And so I said, listen, I love to budget. It's the thing that I love to do

now. Please message me and I'll help you. And she didn't message me. But also on the end of that, I said, you know, if anybody needs any help budgeting, please send me a friend request. Well, in two hours, I had 300. And so everyone's sending me, you know, these messages about their terrible stories. Please help me. And I realized I couldn't help all of them. So I took those 300 people, put them in a Facebook group, called it Money Master Mama.

And then from there, in two days, it had 1,000 people in it and just grown from there. Goodness. She's got 2,000 people. So now I get to go around in North Carolina to different moms groups and introduce them to you and your program. Wow. She does everything for free. There's lots of people at Messenger. She does budgets, and there's probably more people that she can handle at Messenger.

Unbelievable. Way to go. So you changed our life, and I love to introduce people to you. How fun. Yeah. Well, I'm honored, and way to go. You've helped a lot of people that's a great deal dave speaking of helping a lot of people i just wanted to say to you thank you for

um all your hard work and in the past and continued that uh it really it's a testament of one life can change so many um that that christ did also so i appreciate your work well you're very kind i appreciate that but what i get to do is i get to talk to people like you guys man you're incredible very very well done 27 000 paid off so you got this whole facebook tribe cheering you on right this second while you're doing this they're all tuned in watching this yeah well very cool congratulations she's pretty good with the stuff everything like she'll her show, and before the question's done, she'll like, this is what Dave's going to say.

This is the answer. Rapid fire. I'm sure there's a lot of people who could do that, yeah. I love it. Good for you. Well, well done, you guys. Very, very well done. So how's it feel now that you're debt-free?

It's amazing. It feels great. Yeah. I mean, just our whole future just feels cleared up. And I never even anticipated this happening because I thought debt was normal. It's something you don't really focus on until you're, like, woken up and it's like, oh, this is something we should work towards getting rid of. Yeah, that pit in your stomach, that tightness in your throat when you look down and see negative $600 changed your life. Because you said, I'm never going to be here again.

I'm going to figure this out. I'm not living like this anymore. That's what changed everything. What do you tell people the key to getting out of debt is? And you tell a lot of them. Yeah. So I think it's just being willing to be uncomfortable because your comfortableness in debt is not a comfortableness that you want to live in. So just being willing to cut out all the stuff because we lived on nothing for seven months.

For us, it was like figuring out how much we spent on eating out. So we tried to work. We tried to eat out only once a week. And then we found how fast the debt was getting paid off. And then we cut eating out completely. And so it went even faster. You really don't realize how much you spend. It's just those little swipes.

Yep. They kill you. Yeah. They kill you. The proverb says the little foxes spoil the vine. Yeah. So very good, you guys. Well done. What was So very good, you guys. Well done.

What was the hardest part for you? I think was saying no, because there's a lot of people that don't understand. You know, like you'll tell them what you're doing, but when it comes time to say, no, we're not going out to eat with you,

or no, we're not going to this concert with you, people don't like that. So we had to say no a lot. You're no fun. I know. Now we're lots of fun. Yeah, now you can be all the fun you want to be. You live like no one else now.

You can live like no one else. That's good. So very cool. Well, congratulations, you guys. We've got a copy of Chris Hogan's number one bestseller, Retire Inspired, for you. And that for sure is your next chapter to be millionaires. So chapter one closed chapter two open here we go game on yeah well done you guys so proud of you who was your biggest

cheerleaders i'll let you talk about that um well it was our uh immediate family they were you know if we were working overtime, they were watching our kids. And we both came into the marriage with not any student loan debt. We actually accrued that after we got married. And so, I mean, my parents worked tremendously and sacrificed a whole lot. We want to thank them for that. Yeah, for us to be able to come in with, you know, only $27,000 was just us, you know, just trying to live normal. So our parents were huge in helping us to be able to be where we are right now. Cool.

How old are you two? I'm 28. 31. And completely debt free. Good job. And so we're going to cash flow. I'm going to nursing school in two months, and we're going to cash flow that. I bet you are.

Well done. Woo! I love it. Good job, you guys. Well done. I love it. Good job, you guys. All right. Brian and Jennifer, Asheboro, North Carolina, $27,000 paid off in seven and a half months, making $83,500. Count it down. Let's hear a debt-free scream. Three, two, one. hear a debt-free scream. Three, two, one.

We're debt-free! Wow. Wow. Wow. I love it! Very, very cool. Life is good. That's how it's done.

It's amazing. Y'all ever had that feeling? I still remember that. It has been 30 years since I've had that feeling, and I can still feel it. I can see myself right now sitting at this little desk I had in our little house and doing the old-fashioned checkbook register. And in the old days, you would take a written checkbook register. You'd write down your checks every time you wrote a check. And then you would compare the actual physical checks used to come in an envelope after they cleared the bank, and you'd go through step by step by step,

and realizing that I had added something wrong, or I had not posted a check, and I had forgotten it was there, and so the account is in overdraft. And it hasn't bounced yet, but it's getting ready to, and there's nothing I can do to stop it. The sweat on the upper lip, the sweat in the palm of your hands, your heart rate increasing,

and there's just this sense of terror that I'm out of control. And then you reach the point, you say, I'm not living like this anymore. This is The Dave Ramsey Show. Our question of the day comes from Blinds.com. Find out for yourself why Blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and with the two new promos that they run every month, you will save even more. Use the promo code Ramsey to get the best deal. Rules and restrictions apply.

Questions from Nicole in California. Dave, we finished with Baby Step 3 and wondering if there are times to flip-flop the baby steps for a given situation. If we focused on paying off our mortgage, we'd be paid off in 7 to 8 years. I'm 33, husband's 38, have a meager IRA of $1,000 in each of our accounts. Any thoughts on putting Baby Step 4 on hold until we finish the mortgage? I would not. I would not put Baby step four on hold until we finish the mortgage i would not i would not put baby step four on hold until you finish the mortgage and i want you out of debt mortgage and everything as fat as bad as anybody on this planet except you i mean you want out of debt but i want you out of debt too i want you to do this what i do but the thing is this, the 15% of your income that we're telling you to put into retirement at baby step four,

if you can pay off your mortgage not doing that in seven to eight years, you can pay off your mortgage doing that in nine to ten years. So we're adding probably about two years. I don't know your exact numbers, but 99% of the time I do the numbers on this is how it works out. It really doesn't help that much. And so, um, besides that you're running numbers probably without increasing your income. And during the next decade, your income should increase. In many cases, it should increase a lot, especially in the decade you are in.

Because your career is still on an upward trajectory. So that's what you're looking for. The 15% of your income in Baby Step 4 that goes into retirement does not, if you use it on your mortgage, does not accelerate your mortgage prepayment that much. The math just isn't there. And so go ahead and do your 15%. You'll be glad you got that compound interest working for you. Bill is with us in Tulsa, Oklahoma. Hi, Bill. Welcome to the Dave Ramsey Show.

Thanks for taking my call, Dave. I feel kind of selfish after that last testimony. Those young people have been so exponential in their financial maturity it's incredible. My question comes from my father. We were the financial planner today that I just didn't feel like had the real heart of a teacher like you promote. He has an IRA that over the last 12 months, with a spread 20% in stock mutual funds, 80% in bond mutual funds, and only netted about 6.2%.

They threw at us the opportunity to switch that into a fixed index annuity, where at his age, at almost 80, you know, you want a little more security, but Steele was only going to be somewhere in the, you know, 3.8% range. Just wondering if you had any thoughts on that, whether he should stay where he is, maybe switch it up to get a little more aggressive, but still stay, you know, less moderate in the stock side of it. He depends on some of this money for his R&D every year, you know, just to make the year a little better for him, but doesn't have to have the R&D out of it to survive. I just want to know your thoughts.

How much money is in his nest egg? About $120,000 in this particular one that didn't do so well. Yeah. How much is his total net worth? About $3.5 million. Okay. So this is irrelevant. Kind of irrelevant, but just... If we just put this money in a pile and burned it, it wouldn't mess up his life. Probably not.

No, I mean, $120,000 out of $3.5 million, it shouldn't. Yeah. Well, $3.5 million, it shouldn't. Yeah. Well, $3.5 million is tied up in a lot of, he's not very liquid at his age. A lot of it is real estate. Does it not create an income? Yeah, most of it creates an income, but about $1.5 million is just vacant land that was invested in years ago. That's all paid for. And so what does his income stream look like? What's he make a year off his investments? of vacant land that was invested in years ago that's all paid for. Okay.

And so what does his income stream look like? What's he make a year off his investments? About $10,000 to $12,000 a month. Okay. All right. And so, again, the amount of money you're going to make on $120,000 doesn't affect his life. It really doesn't.

Right. So this is more theory discussion than anything else is my point. So the first thing I would do is obviously we want him at 80 years old. He's pretty sophisticated. He's done a great job. What does he want to do? Is his mind still sharp? Somewhat.

It's not to where he's going to go out and start a new venture or anything like that he's just kind of but is he afraid excuse me is he afraid he's afraid of losing any money yes because he's a tight one though yeah okay yeah well the problem with his portfolio as it sits now is he's so heavy in bonds, and bonds are taking a butt whipping because we're in an increasing interest rate environment, which always causes bond values to drop. And so that's where he's getting killed. You know, this guy is not somebody that this $120,000, again, is going to mess up his whole life.

And so, you know, I'm probably going to get more aggressive rather than less aggressive. If he's up for that, I don't want him to lose sleep over it. But I probably would just move it into a mutual fund mix, just growth stock mutual fund mix. Heavy balanced, maybe. That's going to have a lot of bonds in it still. But balanced and growth and growth and income and that kind of stuff and and just you know have a mix in there like that and um but to go you know i'm not going to be heavy in bonds for sure in this environment

i don't like them anyway but i'm for sure not going to be heavy in them in this environment for anybody because i think he's gonna he's to wake up every morning and look at that statement. It's going to be down as long as these interest rates continue to tick up. And those bond mutual funds are getting bathed in blood right now. And so, again, as long as he's comfortable with that, I'm going to ride the stock market is what I'm going to ride. And I'm not going to go the other direction and go into an indexed annuity for sure. Now, if he wants to get a little bit of safety, you could do a variable annuity product with mutual funds, good mutual funds like I'm talking about inside of it.

And they'll give you a principal guarantee and an interest rate guarantee, a rate of return guarantee. They'll probably set it at about five on the floor on the interest rate guarantee, and the principal guarantee is if you leave it alone a certain period of time, they'll guarantee the principal. And at death, they'll guarantee the principal. And so if the 120 turns into 110, you know, they'll cover it principal. And so if the $120,000 turns into $110,000, you know, they'll cover it as long as you leave the loan a period of time

because they know with market fluctuations, if you're invested that way, that their principal's not at risk. So it's not much of a guarantee statistically, but it makes him feel better. You pay an extra annuity fee for that, and the commissions are higher to the investment advisor for that. But it gives him those two benefits. Well, it actually can give you three benefits on the variable annuity. One is the floor on the rate of return.

Two is the guaranteed principal process. And then three is it's not an FDIC guarantee, but it's a company guarantee, and it's solid. You don't have to worry about it with a good company. And the third one is he can assign a beneficiary to it, and it will pass outside of his estate for probate. It will go directly to the person he assigns as the beneficiary or persons, depending on how his estate plan is set up. And so that's another thing to do. So check if you don't like this guy and you want to talk to a smart investor pro. I mean, if he's worked for this guy for years, you may be stuck with him because your dad may not want to change.

But if you want to sit down with a smart investor pro, this is an instance where I would say a variable annuity might give him that peace of mind that he's looking for in that index fund, but give him a whole lot better rates of return. And let's get him out of those bonds. So but the problem is, you know't like the spirit of the guy. You just left, and so that's what tells me you need to move on from him, is what you told me. If you can get your dad out of that office, that's the question. So hopefully he's only got 120 over there with that one guy. But just check for SmartVestor Pro in your area on the website.

It's not hard to do, and if you want to hook up with him, they'll help you with that. Yeah, that's probably what I would do. It's an interesting thing to kind of think through here on the air in front of everybody. But that's how I would view it. And appreciate you being there for your dad and walking with him through this. He needs you in his corner right now watching with him. Good question. Thanks for calling in.

And that puts us out of the Dave Ramsey Show and the books. Our thanks to James Childs, our producer, and Kelly Daniels, our associate producer and phone screener. I am Dave Ramsey, your host, and we'll be back. Hey guys,

this is Blake Thompson, Chief Production Officer for the Dave Ramsey Show. This hour's up, but you'll find more on our YouTube channel where we have over six million YouTube views each month. You can find debt-free screams, millionaire hour clips, Dave rants, and so much

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