The Ramsey Show - App - Don't Live the American Nightmare (Hour 3)

Episode Date: November 7, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Nicole is with us in Atlanta. Hi, Nicole.

Welcome to the Dave Ramsey Show. Hi, Dave. How are you today? Better than I deserve. What's up? I have roughly $64,000 in debt, income before taxes around $53,000. I work at a company right now that currently I have stock vesting over the next two years, and I'm trying to find out if it's best to go ahead and sell that stock as it's vesting

or if I should just sit on it and try and pay it off. Well, no, I would cash out anything that is not retirement, down to a $1,000 starter emergency fund, while your own baby's step two, paying off your debts, and pay it on your debt as fast and as early as you possibly can. Now, that's assuming, of course, you're going to be on your every dollar budget. You're going to actually do this stuff. You're going to play all the way through.

Now, if you're kind of going to ish this plan, then our advice is probably bad advice. But if you're really going to do it, if you're really going to punch this debt in the nose, then yeah, definitely cash out everything that is not retirement. Okay, so let me ask you a follow-up question. The company does sell a portion of the stock to cover the taxes, so if I sell whatever is left of that, am I going to be taxed again? You would only be taxed if it has gone up in value since you received it on the amount that it's gone up in value.

Okay, perfect. All right, thank you. So they're selling off enough to cover the fact that this is a benefit. This is income to you, and so they pay the taxes or they withhold the taxes and turn them in, like they're withholding taxes on your paycheck, right? And that's what they're doing here in terms of your income. This is part of your income. But then, in addition to that, let's say you got that stock vested after they took the

taxes out three years ago, and it doubled, well, that amount that it went up would be taxable in addition to what you've already paid. Does that make sense? It does. Thank you so much. Hey, good job. Keep it up, kiddo. All right, Caitlin's with us in Denver.

Hi, Caitlin. Welcome to the Dave Ramsey Show. Hello, Mr. Ramsey. Thank you so much for taking my call. Sure. What's up? So my husband and I have been kind of going back and forth on what our next step should be. We're completely debt-free. We have our emergency fund and all of that set up. And our question is, should we

focus our intensity on paying our mortgage off or save for land so that we have cash available when an opportunity becomes available for us to purchase a small, like, 5 to 10-acre piece of land and kind of start the little hobby farm that we want to do in the long run. Okay. Is the hobby farm something you're going to build a home on? Yes. We would build a home from scratch, which is why we want to buy a piece of land and not buy a home that already has acreage around it. Yes, I would.

I would go ahead and save for the land, pay cash for the land, then pay cash for the building as you go sell your home rent finish the building that kind of stuff whatever you've got to do whatever your process is there but you're going to end up living on this property the answer would be no if the hobby farm was not going to be lived on because at that point the hobby farm is a toy right it's a second home a second investment it's not your primary residence but this is a transition piece for your primary residence. So it does make sense to go ahead and save up and pay cash for the land. Do you see how I'm doing that?

Yes, and that's part of the conversation that we've had on that one side. And then the other side is we don't know when this would become available, if it's in the next five years or ten years. Yeah, there's no rush, but the point is you're going to, instead of paying extra on your mortgage for your baby step six, you're going to end up paying extra on your mortgage because you're getting ready to buy some land for cash that you're building up that fund to do that. And it has the same net effect five years later right when you move into the house right

and so your long-term plan is you effectively are paying down on the mortgage that's why i said do it okay awesome thank you so much thank you for the call paul's with us in washington dc hey paul welcome to the dave ramsey show thank you how are you? Better than I deserve. What's up? So my wife and I are living in Washington, D.C. We make $70,000 a year, but then our job provides us living expenses, so rent and utilities and all that as well. Should we take our 15% based off of our $70,000 and throw everything else at saving for what will eventually be our house? Or should we take our 15% based off of what we make calculating living expenses in?

Yeah. It's an interesting idea. The concept behind all this is once you're out of debt except your home and you've got your emergency fund in place, maybe step four then is 15% of your income saved for retirement, which is what you're out of debt except your home and you've got your emergency fund in place, maybe step four then is 15% of your income saved for retirement, which is what you're talking about. The idea there is it's not 25%. It's not 2%. It's a good, solid chunk of money going towards retirement while you reach over,

start saving for kids' college, and reach over and start paying off your house early. So the idea being we're going to get a really good, strong start on retirement. And so there's no magic to 15%. You're not going to fail if you do 14%. It's just meaning a good, solid start. Now, oddly enough, when you run the calculations out at almost any income range, it works out beautifully at 15%. That's where we came up with it was doing case studies.

But so all of that to say it doesn't matter because the concept is punch retirement really hard before you move on in the baby steps. So if you want to only do 15% of your actual income, I mean your actual cash income, or if you want to do 15% of the overall benefit package, which includes housing, both are logical. There's a logical argument for either. It's just whichever direction you guys want to go. But I wouldn't do it. If you're going to do it on the 70%, I wouldn't do a dime less than 15. Right, right. You know, round up, you know, when you're doing your calculations and all that. If it's, you know, $15,450, round it up to $16,000, you know, you're doing your calculations and all that if it's you know fifteen thousand

four hundred fifty dollars round it up to sixteen thousand you know that kind of thing uh or whatever the number is i don't know your income but overall but that's the thing look at that and try to calculate that through and you know run some numbers out each way and and you know out into the future with some future value calculations and say if i do it this way this is how much i'm going to end up 10 years from now if i do it that way there's so much i'm going to end up with 10 years from now and in this direction i'll have some money for a house this direction i won't and so you know what are you going to how long you're going to be doing this job with the housing furnished and you know what's your time horizons and just kind of reach out there and kind of build you a business plan,

so to speak, for this money or for these different ideas. And if you'll look into the future instead of at Friday, it gives you, look out there 5, 10, 20 years, that gives you a good, wise answer. Friday always gives you an immature answer because people that live, thank God it's Friday, to, oh God, it's Monday, always struggle. This is the Dave Ramsey Show. Are high health care costs getting you down?

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It's not insurance. It's Christians financially and spiritually supporting each other. It's what Christian Healthcare Ministries has done for over 35 years, and our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. Nathan is with us in Moab, Utah. Hey, Nathan, how are you? Doing fine, thank you.

Good. How can I help? Pleasure to speak with you. I have a car loan that we're about $3,000 upside down on. My wife is apprehensive about selling the car because then we won't have a car to show for it and have a $3,000 loan. I told her we could buy a beater temporarily, but because of our location,

we do want slash need something reliable because it helps in our location. We live very far from a lot of places, and traveling is sort of a necessity. Yeah, you have one vehicle? We do have one vehicle, yes. Okay, and what do you owe on your car? $12,000. Okay, and what's your household income

household income is about 75 000 yeah do you have any debt other than your house and this car uh credit card debt at about 16 000 okay all right no i don't think you need to sell your car okay i don't think it's i don't think it's the problem. Cutting up your credit cards tonight would be a good idea. I did that two weeks ago. Yay! We're on track. Yeah, I think the two of you get on a budget and say we have $18,000 in debt, and you said you make $75,000? $75,000, yeah.

Yeah, you make $75,000. We have $18,000. If I look at $18,000 out of $75,000, I think that sounds like a one-year deal to me. All right. Beans and rice, rice and beans, no life. And all that traveling you've been doing probably isn't going to happen. Well, the traveling is a necessity for food. I know, just to eat. You're in a very, very remote situation, I understand.

I'm joking with you. But my point is, you know, we're going to spend as little as we can possibly spend so that 18 out of 75 becomes very doable. By the way, that's $1,500 a month. You can do that. Perfect. Like one year, you're 100% debt-free. You keep the car. You don't keep the credit cards.

Perfect. Good. Good job, man. You got this. Open phones at 888-825-5225 sarah's in los angeles hi sarah how are you hi dave thanks for taking my call sure what's up um i'm a 36 year old professional touring and recording musician meaning that i don't make a lot of money um but i fortunately found myself a teaching position as an adjunct professor at a major private university. Nice.

So while my position is not tenured and it's not guaranteed year to year, I've been teaching there long enough to qualify for retirement benefits with a 10% match rate. Cool. What do you make? What's your income? There, it's not a lot. I think it's about $30,000 a year. Okay. And in addition to that, you do, what are you doing? Performance or are you behind the scenes? Performing and touring and recording. Okay. All right. And do you make any money yet?

I mean, it looks like it, but because of all my 1099, not really. 1099 represents your income. Right, but I mean because I have to pay out 1099s to all my band members. Oh, the outgoing 1099s, your expenses associated with the touring and the recording and so forth. Okay. Yeah, because you're running a business. Your income minus your expenses is your net profit. Correct.

And that's what we're looking for here. Okay, I got you. I got the picture. How can I help? Okay. So currently I have zero debt, but like a lot of people, I found a man who I love dearly, and he has about $60,000 in student loans and credit card debt. And we are engaged to be married for nine days.

Yay. Yeah. And currently are enrolled in your FPU online course, which I feel like is the best premarital counseling we could have ever asked for. So thank you for that. Awesome. But my question is that we're going through the baby steps, and because my position at the university isn't guaranteed,

I'm curious if I should pay into my retirement while I can or hold off and help him pay off his debt. Once you're married, we have debt, and we have an income. Now, right now, you're not married. Right now, there's you. And so for today... Right, for nine days, yeah. Oh, you said nine.

I thought you said 90. Okay. Yeah, so... No, no, nine days, yeah. And when you come back from the honeymoon, it's we. It's now French, we, we. So, you know, and you just, everything's us, and we have debt we need to clean up. And no, I would not, either one of you are starting retirement until we are debt-free as a couple.

And, you know, so we're going to use all of your assets and income. You're going to use all of his assets and income to accomplish our combined financial goals the old the old marriage vows in the old-fashioned days and still some people use them which i love them they're beautiful they're poetic for better for worse in sickness and unhealthy you've heard that but here's what the book of common prayer actually says unto thee all my good worldly goods i. And that represents the combining of our worlds. And the preacher, and then he says, and now you are one. Remember, you've heard all that probably, maybe in a movie or something. But, you know, there's a beautiful way of thinking about that from a relational aspect.

And here's the interesting thing. From an empirical standpoint, from a research standpoint, the data all indicates that people who build wealth work with their spouse to do it, not against them. And they don't have a roommate. They have a spouse, meaning that we are not running two separate lives under one roof. We're going to run this as one unit of income, one unit of assets, one unit of debt that we're going to clean up. So all of that to say one more time, no. After you're married, it's our debt. We're going to clean that up before we start retirement.

You'll be fine. That's the shortest path to wealth anyway. Thanks for the call. Open phones at 888-825-5225. Katie's in Baton Rouge. Hi, Katie. How are you? Hi, Dave. I'm so happy to talk with you-5225. Katie's in Baton Rouge. Hi, Katie. How are you? Hi, Dave.

I'm so happy to talk with you. You too. What's up? So my husband and I have about a $25,000 emergency fund, but we also have about $10,000 in debt. So we could, as you like to say, we could write a check tonight and be done with it. But I am so scared to pull the trigger. I just, I sleep so much better at night knowing that that money is there in that emergency fund. But I am really contemplating going ahead and pulling the trigger. I just wondered if you could help push me over the edge. Yeah, it's hard, isn't it?

I get you. I love it. Well, you're a classic saver, and you get from money security. And there's nothing wrong with that. You've identified that, and you know yourself well, and it's beautiful that you know yourself. Okay? that and you know yourself well, and it's beautiful that you know yourself, okay? So the key is once you understand who you are with money, then what you want to do is design a plan that causes your natural strengths and fears to cause you to win.

So let me tell you what that looks like in this situation. What's your household income? About $248,000. And you have $25,000 to your name? Well, that's just our emergency cash. Do you have money other than retirement? Yes, we have about $500,000 in retirement. You have money other than retirement, and there's $. Just our checking account, some savings set aside for a big expansion on our house that we're about to do.

Well, how much is that? About $40,000. Okay. Delay the expansion on the house a little bit and pay off your debt. Keep your emergency fund in place. That's not scary at all. That's a good solution. That's not scary at all. But if we wanted to use it, and you don't need to. I think that's what scary at all good that's a good solution that's not scary at all but if if we wanted to use and you don't need to i think that's what you ought to do but if we wanted to go back

to the part of our conversation where i knew less about you i would use the 25 even if you had no other money and i would use your fear like other people use their intensity to get out of that in your case i'm going to use your intensity to rebuild your emergency fund. Let your fear be a motivator to shut everything in this overspending household down. You make a quarter of a million dollars. You don't have anything to your name but 65 grand plus your retirement. I don't know how long you've been making a quarter million, but it's really, I hope, not long. You see what I'm saying?

No, not, yes, I do. Not very long. Good. It could happen in baby step two. Although, frankly, we haven't been as aggressive about it as we've been. There we go. So your fear can give you the aggression you wanted if we needed to use that to motivate you to rebuild your emergency fund. But we don't need to in your situation.

We're going to use your aggression to rebuild your, expand the house fund, not fear. And so, yeah, pay off your debt today. Write the check tonight. Woohoo! You did it! This is The Dave Ramsey Solutions. Hey, guys, how are you? Hey, Dave. How are you, Dave? Welcome, welcome. Where, guys. How are you? Hey, Dave. How are you, Dave? Welcome, welcome. Where do you live?

We live in Katy, Texas. Houston area. Yes. All right. Well, welcome to Nashville. And here to do a debt-free scream. That's right. Yes.

Love it. How much have you guys paid off? We paid off $174,000 in three and a half years. Wow. And your range of income during that time? Started at about $115,000 and went up to $230,000. Wow. And your range of income during that time? Started at about $115,000 and went up to $230,000. Wow. Doubled it. Cool. What do y'all do for a living? I'm a fire protection engineer. I'm in supply chain management. Okay. So what caused your income to double during three

years? We worked hard, took promotions when they were available. We moved from Seattle to Houston for a promotion and lower cost of living. Okay, so you just slammed all opportunities around both great careers. Yeah. And also, Dave, one of our biggest bumps was when I decided just to go into my boss and ask for a raise. I just went in and I laid it out, said, I feel like I've made my mark here, basically. I've worked hard. In your field, it's easy to show your worth. That's true. It is.

When you save your... Yeah, we've got some supply chain people around here, and they show me all the time how they're worth a lot more than their pay. That's right. So when I asked, they gave it to me. Good. Good for him, and good for you. Yeah.

Very good. So serious money. What kind of debt was the $174,000? We had a lot of student loan debt and then two cars, some medical bills, a personal loan, some credit cards. Y'all were normal. Yeah, real normal. Normal plus a little because you had a lot of debt.

Wow. A little bit of everything. Live in the American nightmare. And three and a half years ago, some kind of a switch flipped. What happened? Well, it goes further back than that, which is pretty normal for people you talk to. But I wanted you to know how much of a change you're making in our legacy. My parents were really bad with money. As a matter of fact, they declared bankruptcy twice before I left the

house. And at the age of 24, I declared bankruptcy because that's what I knew. And so really when I hit rock bottom, there was a switch and I started studying budgeting and things like that. I hadn't heard of you yet. A couple years later, we got married. And a few years later, we had some friends sell a truck. It was fairly brand new. And so it was shocking to us and we asked them why. And that's when we heard about you.

Around the same time, we also found out that it was going to be very difficult for us to have kids. And so we learned that we were probably going to be very difficult for us to have kids. And so we learned that we were probably going to have to do in vitro. And we also learned that we had all this debt that we wanted to pay off. And so we had to balance cash flowing several rounds of in vitro along with paying off this debt. Oh, so in addition to 174, you've done some of that. Yeah. I've been in the hospital a lot and lots of doctors. Yeah. Wow.

Wow. What a process. Unbelievable. So three and a half years ago, exactly there, what happened that kicked you into this high gear? Because that's when it took off, right? Right. I think when we had kids, we didn't know how long she'd still be working

we wanted to make sure we were in a place where we'd be comfortable on just my income and so that was a lot of it for me at least you just decided you started listening to the show or what happened yeah we went through Financial Peace University we bought the DVDs and listened

to your podcast a lot got fired up about it. Well, you did. You paid off a ton of debt. I mean, you were fired up. The numbers show it. Yeah. We just decided it was time. Thank you.

Very proud of you. Well done. You've got to feel great, do you? Yeah, it's awesome. It's a neat place to be. I mean, like a relief, huh? Yeah, it's a weight off our shoulders. It's very emotional.

Yeah, I feel like I stopped a chain that was going in a really bad way for my kids. You did. You broke a family curse. Yeah, I did. You really did. And that can be done. Yes, it can. We have the right to choose, and we can choose.

Yep. Well, we're not doing that anymore. Right. Just like that. And here we go. Good for you. Well done. So what do you tell people the key to getting out of debt is?

$174,000 paid off in three and a half years. You're an expert. Yeah, just sticking with it. I think continually reminding yourself of your goals. We re-listened to the CDs several times throughout the process. We kept listening to your podcast to keep that goal in mind. That was a big part for us. I think also paying your tithing for us that when you're

showing the Lord that you're willing to sacrifice, he will open up avenues for you that you don't even have any idea can open. Well, I mean, you take $115,000 income to $230,000. I think this tithing idea is a good idea. Right. Yeah, he does bless you. He does bless you once you can show that you can handle the blessings. Absolutely. So very well done. When you're faithful in the little things, you'll be given more to manage. Good for you guys. Who were your biggest cheerleaders?

Our kids. I think our kids were very involved. Yeah. We had a couple people tell us that they couldn they couldn't do it but good for us but mostly we had people around us who his parents were really supportive his brothers everyone was pretty supportive of us cool so how many kids we have four four wow yeah so it worked yeah some of the time yeah yeah we had a couple that didn't, but yeah. Yeah. Wow. Well, they're beautiful. They're just showing a picture of them up on the YouTube feed.

They're fantastic. Very fun. So what are their ages? We have nine-year-old twins, boy and a girl. Carter and Vienna, and then Ivy's five. Just started kindergarten, and Camden is two. He thinks his name is Bubba, but his name is Camden. I love it.

Very good. Well, congratulations, you guys. Thank you. Very proud of you. We got a copy of Chris Hogan's book for you, Retire Inspired, and that is the next chapter in your story. That chapter's closed permanently on this family. You broke it.

And now we're going to open another chapter and say millionaire status. You'll be there in no time with his income and no debt and be outrageously generous along the way. I suspect you might end up paying in vitro for somebody someday. That would be fantastic. That could happen. Good idea. That could happen. You'll have some extra money laying around.

You go, I'm just going to do that. That's pretty cool. You guys are special. I'm proud of you. Congratulations. Thank you. Evan and Kara, Houston, Texas, $174,000 paid off. Three and a half years, $215,000 to $230,000 in income.

Count it down. Let's hear a debt-free scream. All right. Three, two, one. We're debt-free! Yay! Boom! I love it!

Well done, well done. Man, that's awesome. Our question of the day comes from Blinds.com. They're the number one online retailer of custom window coverings. You get free samples, free shipping, new promos every month. Use the promo code RAMSY to get the best deal. Freddy's in South Carolina. Dave, I've been offered a payment plan to get one of my loans cut in half,

but I don't have Baby Step 1 done yet. Should I continue doing Baby Step 1 or pay this loan over the next year and work on one when I have extra money? Baby Step 1, Freddy's is $1,000. It should not take you that long. You need to have a garage sale. You need to put some stuff on Craigslist. You need to work an extra job.

Baby step one is a one-month affair, dude. And so you can take this deal and start paying payments on your regular payments. You're supposed to pay payments on everything anyway, and then start your baby steps. So pay minimum payments on everything then start your baby steps so pay minimum payments on everything start your baby steps and then you put this loan with the payment deal in your debt snowball and you knock it out as quickly as you possibly can you work your way right through that and that's how you do it so hey good question if you're thinking about selling a home one of the biggest challenges is finding a real estate agent that's an expert.

A lot of people with real estate licenses that sell a house a year or two houses a year. You do not need to list your most expensive asset with somebody who does not have any more experience than that, who is not getting it done. So that's how you do this, folks. This is why we started our Endorsed Local Provider Program, our ELPs. We endorse people locally that provide help, in this case, with real estate. And these are the top 10% of agents in your area. They are awesome.

They're high-octane, high-protein. They know what they're doing. They're going to get your house sold and get it sold for the most money. They're going to help you find a house in this crazy market and get the best possible deal representing you. Check out DaveRamsey.com. Click ELP for real estate. This is the Dave Ramsey Show. We'll be right back. our scripture of the day colossians 4 6 let your conversation be always full of grace

seasoned with salt so that you may know how to answer everyone. Simon Sinek said, two ways to influence human behavior. You can manipulate it or you can inspire it. Woo, that's good, Simon. He's got some good ones. Love that guy. Michael's with us in Cleveland, Ohio. Hey, Michael, welcome to the Dave Ramsey Show.

Hey, Dave. Hey, what's up? I think I have an easy question for you. Is it wise to save for Christmas and supplement an HSA while in Baby Step 2? Or should I cut everything? You should not do an HSA savings while you're in Baby Step 2. You should not do an HSA savings until you finish Baby Step 3. Okay.

Because you're going to cover that with an emergency fund to start with, and later on you'll use the power of the HSA savings and so on. Christmas, however, is right on your doorstep, and you're going to have to put that in your budget. Okay. Yeah, you're going to have to put that in your budget. Okay. Yeah, you're going to have to budget for that right now because it's right here in front of you. And, you know, how else are you going to do it if you don't save for it? Right.

I was going to just scrape together a little bit kind of what I do every year. And then next year, my work has a credit union. So next year I was going to put weekly money in there to not do that again next year. That's fine. Yeah. But, I mean, you know, you need to pile up some money right now because you're scraping it together. That's what you're going to be doing anyway for this Christmas. It's right in front of you.

It's here. Right. And so, you know, you've just got to pile up money as fast as you can and then go ahead and start a weekly thing. That's a fun thing, the-fashioned christmas club at the credit union you know and just weekly and then uh then christmas is taken care of it's in your budget you're already setting it up then and that's fine um and then just didn't attack your debt snowball from there is how i would do it so hey good question thanks for joining us mary's with us in tacoma washington, also talking about HSAs.

Hi, Mary. How are you? I'm well. Thank you. How are you doing? Better than I deserve. What's up? I also have an HSA question.

I'm not sure if I should max it out because we're just considering open enrollment right now in one, or if I should be putting that extra money on my house. Okay. You're debt-free except your house? Yes. You have your emergency fund? Well, we have $6,000. Okay.

You need to have your emergency fund in place. And then, yes, I would max out an HSA after that or put something in there. What is your family's health like? How much are you dipping into your deductible? You know, that's the other thing I would really have to go look at. But we're trying to get more healthy. But two years ago, I had a heart attack. Whoa.

Yeah, you know know there's concerns there i'm right now i'm on a ppo and i could and i want to change the hsa maybe that's not smart what do you think no i think it's okay unless you have unless you have a pending health thing that you know you've got to do because you're going to jam the deductible whatever that deductible is on that hsa um you know you're going to you know the hsa is a cheap high deductible cheaper health insurance policy and the high deductible gives you the right to but not the mandatory saving your uh saving into a savings account called a health savings account but you don't have to put anything in the health savings account. You can just take the insurance.

But then, obviously, if you have an event and your deductible is $5,000, you're going to have to cover that. Right, right. And that's the issue. So if I have a concern that there is a medical problem. I'd probably stay with PPO for one more year. For one more year? Yeah, because you do not have enough money to cover the deductible right now.

Okay. Right? All right. PPO one more year, put the money on the house. No, don't put it on the house. Put it in savings. Your emergency fund is too short. Okay. You need to get your emergency fund is too short. Okay.

You need to get your emergency fund up to three to six months of expenses. And then you move on and start your retirement savings in your kid's college. That's baby steps four and five. No, the kids are all gone. I can move right into the house. Okay, once you're putting 15% of your income into retirement. But you don't start that until you have your emergency fund in place, and it's shy right now at only $6,000.

Agreed? Yeah. So let's get that thing built up to where it should be, three to six months of expenses. Then we start the 401K, and then next year you could flip over to the HSA. And, you know, because you'll have a nice emergency fund to cover the deductible, you can start funding the actual health savings account and take advantage of the cheaper health insurance premiums as well. And that's what you're doing.

It's kind of like, you know, you can raise the deductibles on your car and your homeowners and save a ton of money on your insurance in most cases, but you can't do that until you've got a proper emergency fund to cover those higher deductibles. So a lot of people run around $250 deductibles on these things and, you know, you run them up to a thousand. I carry 5,000 on my cars as a deductible and that keeps my health, my car insurance premiums way, way down, and that's how you take care of this. So, hey, good question. Thank you for joining us.

Open phones at 888-825-5225. Steven is in the Ramsey Baby Steps community on Facebook, and that's our private Facebook group. You can join it, though. We'll let you in. The Ramsey Baby Steps community. I understand that you pay taxes on the Roth IRA up front so it grows tax-free and that a traditional 401K, you wait to pay taxes until you retire,

and you pull it out. My question is, is there that much of a difference really? Maybe I don't fully understand it. Yeah, because 90-something, depending on how old you are, 80% to 90% of what is in your retirement account is not money you put in. It's the growth on money you put in. And so if you put $100 a month in for 30 years or 40 years and you've got $1 million in there, you've only put in, you know, almost none of that,

like $100,000 of it is what you put in. And then the rest of that is growth at $900,000. You're going to pay taxes on $900,000 in a traditional. You're not going to pay taxes on $900,000 in Roth IRA. So in that one example, for every million dollars, it's a $300,000 swing in taxes. And so, yeah, there's a lot of difference. The Roth IRA is a slam dunk.

The Roth 401k is a slam dunk. There's no question that that's the route you go. Good question. Michael's in Lubbock, Texas. Hey, Michael, how are you? Greetings from Red Raider country. How are you, sir? Better than I deserve.

How can I help? Well, we will finish Baby Step 4 Friday. Excuse me, Baby Step 3. I'm sorry, I don't know. Baby Step 3 Friday. Great. And so I have a question. I have a really smart wife, like ridiculously smart, and she's really hot, but really smart.

How do I save for Christmas for her, for a gift for her, when she's in charge of the budget and sees everything that I spend and use cash for? It sounds like there's a budget line item for gifts. But I don't want her to know how much the gift is and where I'm getting it from. Well, I didn't tell you how to get it from, but she's going to know how much it is because you're agreeing on your budget. You're not helping me. I'm sorry. I'm trying to figure out how to save for Christmas without her knowing what I'm getting, and only, well, we don't have to use cash because we don't have credit cards.

So does that make sense? Yeah, but we're all grown-ups here. This is not a child you're dealing with. It's your wife. Yeah, I know. If she doesn't have to know what you're buying or even where you're going to shop, she can just allocate, you know, when you two do your budget together, both of you know what we are spending on gifts. And if she's going to do all the Christmas shopping except the portion that you do,

we're going to agree that this is how much we're spending, and she's going to give you that. And if you want it in cash, that's fine. And that way you can just go spend it. But, yeah, we're just all going to be grownupsups and we're going to know what's going on here i mean you don't get to go spend like just rob the money out of the budget just to go buy your wife something i mean sorry that would be sweet but it's just not it's not good medicine it's not going to work for you especially since she's kind of the budget queen she's not going to like that

that puts this hour of the day ramsay show 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, associate producer and phone screener for the Dave Ramsey show. If you would like to do

your debt-free scream live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you to come to Nashville and tell Dave your story.