The Ramsey Show - App - Don’t Rationalize Your Way Into Bad Money Decisions (Hour 1)

Episode Date: February 23, 2022

Dave Ramsey & Rachel Cruze discuss: Why taxes suck, but you should still: Get as close to a $0 return/refund as you can, Know how to file your side gigs, Understand the Child Tax Credit changes. Also, why you shouldn't rationalize bad money decisions Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6

Live from the headquarters of Ramsey Solutions, it's the 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, Rachel Cruz, best-selling author, Ramsey personality, and my daughter is my co-host today. of choice. I'm Dave Ramsey, your host, Rachel Cruz, best-selling author, Ramsey personality, and my daughter is my co-host today as we answer your questions about your life, your relationships, your work, your career, even mental health stuff, and certainly money questions. The phone number is 888-825-5225. The call is free, and some say the advice is worth exactly what you pay for it. Thanks for calling in, 888-825-5225.

Margaret's going to start off this hour in Minneapolis. Hi, Margaret, how are you? I'm well, thank you. Good. How can we help? I have a question about Baby Step 4. I understand I'm supposed to save 15% of my income for retirement, but this is our situation. I work part-time, I make $80,000, and my husband is retired, and he needs to take RMD and Social Security, so he makes $50,000. Do I save 15% of our total income or just on my $80,000.

Margaret, that'll be on your total income. How old are you guys? I am 61 and my husband is 73. Okay. And you said you work part-time making $80,000? Yes. Nice part-time job, Margaret. Way to go. What do you do? I'm a physical therapist.

Good for you. Good for you. You built your career up fabulously to be able to monetize it that way. I'm proud of you. Excellent job. Here's the thing. All we're saying is, is it smarter to save more or save less? The answer is almost always save more. The only problem is I love to save money, and I could put in all my money with Ross and health savings accounts and the 403B and the 457. And I guess I'd like permission to start doing home repairs, replace my couch that we've had before we were married it's like i mean the reason to say the reason to save money is have a comfortable retirement

and so okay and you've already got one of you there yes so i mean if you want to save a little less and you think you're going to be comfortable that's okay but generally rachel's answer is we generally just go yeah your household, whatever the source is. But you're kind of like one foot on the boat and one foot on the retirement boat and one foot on the dock where we still work. And the boat's not left yet. So you can do either one. You know, you can go either direction. I think you're going to be okay is the way I think I'm hearing this.

How much money you got in your investments now? Depending on the day, but $800,000 plus in retirement accounts. So you're a millionaire. Way to go, kiddo. So I think you're going to be okay. I mean, you don't think you're going to mess this up either way, are you? No, because I don't know that I'll ever retire because I'm a farmer's daughter and farmers never retire well there's not many 90 year old pts so eventually you'll back off of it cool correct and i yes it

is labor intensive yeah it is it's hard work farmer's daughter so look at you you're amazing you're a rock star kiddo so yeah i you know, you're a millionaire. Do you have to save more? No, you don't have to save more. If you want to save more, you can. So you can figure it on either one, and we're going to call you having won, okay? Touchdown. Way to go. You just won.

But the floor is that 15%. That's the lowest at that point, though. In general, yes. But, I mean, at retirement, do you you say 15 when you're both retired sure you say 15 of your investment income off of the money you've saved your 15 no no no but she's 61 making 80 000 working part-time 15 of hers would be a minimum yes yes that's what i was saying i'm misunderstood yes but 15 of household in general that's fair 99 of the time we get this question i don't know if i've ever answered that question that way yeah 99 of the time it would be 15 of your household income just

shut up and do it yes you know because that's going to get you to where margaret is that's the whole idea baby steps millionaire right way to go man so cool david is in albuquerque david what's up how you doing everyone say thank you so much for everything you guys do at Ramsey, first of all. Thank you. How can we help? Yeah, I apologize a little bit to Callie because when she first called, I was so excited she picked up. I missed, David, my question, but it's pretty close. Okay.

I just finished Baby Step 2. I'm working on Baby Step 3 and I'm thinking I had the Baby Step 3B to save her house and I'm getting stuck because I got my credit card still open because I have a high credit score and I'm thinking I had the baby set 3B to save her house, and what I'm getting stuck is I got my credit card still open, but I have a high credit score, and I don't know am I supposed to close them or keep them open to keep the credit score up

until I buy a house. That's why I'm confused. Yeah, it's a great question, and I feel like it's a topic that we tackle a lot because there has been this mindset in our culture that the credit score is everything. And so in order to buy a house, you have to have a great credit score. If you want to have a great life, you have to have a great credit score. So if you remove debt from your life, if you close all your credit card accounts, which we do recommend, by the way,

and you say, okay, I'm done with debt completely, what happens? Well, over 12 to 18 months, your credit score is going to go down to undetermined. It's gonna basically go, you're gonna watch it just go down, down, down. But here's the deal. The only reason you need a credit score is to go into debt. And so we don't believe in going into debt anymore

because you're debt-free. But for a mortgage, it is the one type of debt we won't yell at you for, but you can get a mortgage actually without a credit score. So it's a process called manual underwriting. So you have to be current on your job for two years and you have to be current on all of your bills. So you have to have evidence of everything

from electricity or cell phone, just proof that you pay bills on time for two years. And a mortgage company, Churchill Mortgage is one that we recommend, but they will actually underwrite you the mortgage without a credit score. But the danger is danger is that if you're going into this, they will pull your credit score when you go to take out a mortgage. So you do have to make sure that it's to the point because if it is a bad credit score, right, not undetermined, but it is

lowering, they can pull that and that'll ding you. So you do have to get to a point where your credit score is undetermined, basically, and then they can start that process of manual underwriting. And the detail is you have to have every single account closed and a zero balance. A zero balance, and it has to be closed. Otherwise, it's still showing as activity, and so it's still plugging into the FICO score algorithm, and it's going to create a score. And so if you have one account open and all the rest are closed and it is zeroed,

you're going to show a low score. Your score is going to drop, and you don't want to do that. And so if you go, well, I'm just going to keep this one, well, you're going to screw up this whole idea. So it's kind of an all or nothing. You either need to keep them all open and keep playing the game the way the culture does and the culture is broke and stupid, or you can play the game where playing the game the way the culture does and the culture is broken stupid. Or you can play the game where you go all the way.

Game on. Scorched earth. No credit score. No borrowing money except for a house. And we're doing manual underwriting. And every single account has to be closed and a zero balance. And it will take at least six months after that for your credit score to be undeterminable or indeterminable. I just like saying zero.

I know because it's not zero. You do say that. I know, but I'm a zero. No, it's not zero. I'm a zero and you're a zero. You're undetermined. We're both zeros. No, it's not zero.

It's undetermined. We're horrible. We have no identity. We don't exist because we have zero. No, it is not a zero credit score. There's no such thing as a zero credit score. Undetermined. It means I don't exist.

That's what it means. I don't really exist. We can live off the grid. I'm a hollering ram. This is The Ramsey Show. For a lot of you, last year was another year of just trying to survive. But you don't have to live like that. You can have confidence in your money and your future. So if you're tired of being stressed out all the time, you can decide to make a change.

You can follow a plan that works. For almost 30 years, Financial Peace University has helped millions of people take control of their money. You'll learn our proven plan to save money, pay off debt, build wealth, and give generously. Watch FPU on demand or get plugged into a class for encouragement and support from other people. You don't have to face another year of stress and worry. You can have confidence in your money. FPU is only available with a Ramsey Plus membership. Start for free by visiting ramseysolutions.com slash FPU.

That's ramseysolutions.com slash FPU. Rachel Cruz, Ramsey Personality, is my co-host today. Open phones at 888-825-5225. Paying off debt is smart. Saving and investing is smart. But there's one key to winning with money that people overlook all the time, and that's the defense side, protecting your finances. And that's where insurance comes into play. It's one of the areas you can do for defense.

You've got to do offense and defense to win the game. Now, ten kinds of insurance coverage you might need based on what your life looks like, and we built a tool called the Coverage Checkup. It's completely free, and it'll show you which types you need to add, drop, or adjust. We'll even rank your coverage list by importance based on your situation, email it to you, and connect you with a Ramsey Trusted Insurance provider that'll shop and get you the best deal anywhere really fast on that type of insurance that you do need.

And you're going to see some insurances you probably need to drop that you're getting ripped off on. So, seriously, it could be really valuable five minutes you spend right now. Donald wrote in, and he says, and I do like how he put it, he said, for anyone who's not completed this checkup, do it right now. You never know when something will happen, and you never want to leave your family in a bad situation. That's exactly right.

So check it out ramsey solutions.com slash check up it is a free insurance checkup the coverage checkup at ramsey solutions.com emergencies aren't really emergencies we pretty much know they're coming we just don't know when they're not really unexpected an unexpected event is something you'd never expect to happen but uh things like that happen all the time and that's why we need to uh go that direction open phones at 888-825-5225 jared is with us in minneapolis hi jared welcome to the ramsey show hey dave how you doing better than i deserve's up? Well, we have completed most of the baby steps. We are now max funding 15% between our Roth 401k through work and our Roth IRA.

And we have some money. My wife needs a new car. Our household income is $160,000 a year. And we are ready to pay about $25,000 cash for a new car for her. However, that being said, the used car market is ridiculous right now. Agreed. And, for example, I just out of curiosity put in an order on a Ford pickup truck. It's like the little Ford Maverick.

I built that for 22 grand and it's going for 35 grand used on the used market right now. So I'm just wondering, are we in a situation where it might be acceptable to buy new if you've got the cash for it rather than buy used. Because I'm going to reap several benefits just from warranties, it never being driven by somebody else, and all that. Yeah. I mean, the reason for our no new car rule before you have a million dollar net worth is because you can't take the hit when you drive it off the lot, right? How much it loses in value. But now it's the only time I can remember. much it loses in value but now it's the only time

i can remember so i'll be so curious it's only time in history that no and you're right jared my husband and i we were looking for a new car and we even kelly blue booked our van we bought a new van in 2019 we can sell it today for two thousand dollars more than what we paid for it in 2019 like it's bizarre so in my opinion opinion, I mean, if it's cheaper, but can you get the truck, though? That's the thing. Yeah, you're not going to get that truck, dude. Well, it'll take four months.

It has a bill date of April 18th. Yeah, it has a bill date, but you haven't talked to the dealer yet about how much they're going to market up above MSRP because dealers are dumping on these MSRPs all over the place. Just make sure you get solid numbers, though. But here's the deal, though.

I don't think you're going to get that. You have it in writing. In writing, and then they're not going to do that. I'll contest that they do. Even if they do bump it up, it would still be worth less than what it would be used. So what's your net worth? Probably about $100,000 right now. We're both 24.

Mm-hmm. We are debt-free. So here's the thing. You know, you can do this. Here's the danger if you do it. All right? The danger is, number one, I don't think that this is going to fly. I don't think it's going to work because the the all the people i'm talking to

in the car business are marking up everything and so i don't know that you're going to take delivery on this like you think you're going to you might it might be you might pull it off um in which case you could sell it the next day for a ten thousand dollar profit and so that just sounds a little whack to me doesn doesn't it to you? You know, generally speaking in my life, if something sounds too good to be true, it's because it is. So that's a problem. It bothers me here. The second thing is this. I don't want you to get in the habit of asking the wrong question.

Right. And the wrong question is, how can I figure out a way to violate a proven system towards wealth and still be okay because I want a truck? You know? Okay. No, seriously. This is a problem. I don't know if I agree. I don't know. Hold on.

Jared needs a new car. Jared sees a used car. It's still the wrong question. No, if I need a new car, one costs me $26,000, and a new one costs me $22,000, and I have a letter, which that may be all not real, whatever. We'll see. But to me, it's math. Like, the reason the new car principle, it's math.

So what happens five years from today, what 30 years from today to jared if he keeps asking questions that he's trying to figure out a way to make everything okay that he wants to do this is this i know but this rationalization process that people use is what gets them in trouble and so here's a good idea just numbers cars go down in value don't buy expensive cars when you're broke and 24 years old. You know? Don't do it. You know? But expensive car, though, is by the number, though. I understand.

But there's a reason that for 30 years I've taught people not to buy new cars until they have a million dollar net worth. There's a reason. And the reason is? Because they go down in value like a rock. So do the used cars. Yes. And if you buy a 35, so my advice would be completely different. My advice would be don't buy a car right now. It's a horrible time to buy a car.

It's a horrible time to buy a car. Answer C. We didn't even go there. And I've got the money to absorb the blow, and my net worth is considerably more than a million dollars. But if I was getting ready to buy a car, it wouldn't be this year. I'm going to drive what I got and let this crap work its way out okay but what if for people listening though because i literally one of one of my friends who you know

her van dot like it they took it and they were like it's basically total if you don't have a car you gotta buy a car that's not what i'm talking about i'm saying if you're just sitting here and you're going i'd like to upgrade yeah it's a crummy year to do that that's fair totally it's a horrible it's a horrible time to build a house yes right now yes because the materials and the subs and the gcs are nuts totally i know but if jared had to buy a car though what would you say though if he was homeless i'd tell him build a house if he had to buy a car i'd tell him buy a car and buy a new car i really wouldn't you would get the the $26,000 used one?

I, because, well, number one, I am just, I'm not buying the premise that it's all going to work out. Okay. Because, I mean, I was with a guy the other day on the lot looking at $104,000 car. Wait, you said you weren't going to buy a new car? I did. I said, I didn't say I was buying it. I was with a guy. Oh, okay.

It's a $104,000 car that you can't find. Yeah. And they're brand new and you can't find them. They're short on inventory like all cars are. You know what they're selling it for? $140,000. Brand new. They marked it up $36,000 over MSRP.

The dealer did on a brand new vehicle. That was sitting in the lot right there. Yeah. And I don't care if it's a build order or not it's going to land on the dadgum lot yeah and that dealer can only get so many of each allocation of each vehicle and they can mark them up 30 000 or they can sell you want it what you built it on the web for i ain't buying it i know but what is that thing but what is it though when you can build it online and buy it how do they like i don't listen i'm just telling you the pressure is out there

right now and until the pressure subsides you're gonna have to be careful yes you have to be careful and don't get in the habit of trying to figure out a way to do things that that are perpendicular to what you know to be true yeah that's a bad habit to put yourself in. It's a bad question to ask in that sense. I'm not saying him asking the question was invalid. I appreciate the discussion. I like talking about it, arguing with you about it. So I'm here. God's sakes.

But that's the thing. It's a whacked world right now. Horrible time to buy a car. We'll be right back. Number one New York Times bestselling author, Ramsey personality, my daughter Rachel Cruz is my co-host today on the Ramsey Show. In the lobby of Ramsey Solutions on the debt-free stage, James and Ashley are with us. Hey guys, how are you? We're doing good, how are you? Better than we deserve. Where do y'all live? Las Vegas.

Cool. Welcome to Nashville. Good to have you. Thank you. So how much debt have you guys paid off? About $116,000. Wow. Good for you.

How long did that take? About 15 months. Good. And your range of income during that time? It was about $90,000 to $180,000. Whoa. Okay. So what in the world?

How do you double your income in 15 months? Well, you marry a physical therapist that works per diem at two hospitals, and she can pick up everything during COVID times. So working 80 hours. Basically. And huge rate, too, because of COVID, right? Exactly. They rated it up.

Yeah. Wow. Wow. Wow. That's incredible. That's amazing. And so now you can go back to a normal life? Is your income going to come back down? Yes.

But we're not going to bring it down too much. We're hoping to do about $120 per year. Okay. That's pretty good, though. That's pretty good. Well done, y'all. What kind of debt is this? What's this?

Student loans and a car. Oh, wow. And then some medical bills, too.all. What kind of debt is this? What's this? Student loans and a car. Oh, wow. And then some medical bills, too. Okay. How much of it was student loans? $110-ish. Oh, so most of it. Yeah.

Most of it. PT? That's right. Okay. My master's, I kept under $30,000 the whole time. Okay. All right. Very cool.

You get the badge. Good job. What do you do for a living? I'm an environmental health specialist, basically health inspector okay very cool good for you that's awesome you guys so what happened 15 months ago that starts this journey so um we got married september 2019 and um when we got married um he was all about taking care of debt i wasn't as much i was like i want to have some fun and um he was all about taking care of debt. I wasn't as much. I was like, I want to have some fun. And, um, he actually heard about your show, um, a little bit before we got married.

Basically, I had been picking away, finding somebody that had good advice because you don't tell this woman what to do. You don't even hint that she should do something. You give her the idea. You have to tell her not to do it, and then she'll go do it. That's basically it. Wow. So I started listening to your show pretty regularly,

having it on while I'm brushing my teeth, and just around the house from time to time. And then she's like, hey, who's that guy you're listening to? So it was her idea. Oh, yeah. I think he's a genius. It was my idea from then on. Well, she's also a bulldog. So you get her's a genius. It was my idea from then on. Well, she's also a bulldog.

So you get her on a Target. You work 80 hours a week, three different hospitals. Exactly. Exactly. That's amazing. So you guys were newlyweds. How long had you been married? You got married September.

September 2019. So how many months then? I'm trying to do the math. So we're married. We've been married for two and a half years. So basically a year in or so you start. So after we got married, we started around 2020. And then actually after that, I injured my knee because we were ready to do it beginning of 2020.

I actually got injured. And then after my injury, I just couldn't work. So I got surgery and it actually took a couple months. And so around June 2020, that's when that's where COVID was really all hell was breaking loose. And I was cleared to work again. And as soon as I was cleared to work, I was like, all right, it's game on. Let's do it. Wow. And that's when the income jumped, obviously. That's when it jumped.

Yeah. Good for you guys. So as newlyweds, I feel like, you know, it's like, oh, we're just so excited to be married. You know, you guys have had established careers even before you got married. You come together and you're like, I just want to live this awesome life. But you put everything on pause for 15 months to pay off debt. So what was the hardest part of that? Because I feel like people get so excited and they just want to just keep living life.

But you guys really pulled back. For us, it was eating out and going on vacation. We're adventurers, but of course, COVID helped. We started the debt-free. Nothing was open. Couldn't do anything. Exactly. So that really helped.

And there's plenty of work for you to do. There was. But that's at the height, the apex, of not only caseload or cases of COVID, but also it really wasn't the apex of the cases. But it was definitely at the height of the fear. Yes. Fear was so thick in the air in June of 20 that people were mistreating each other. They were mean to each other.

If you went to work, you were evil. If you didn were mean to each other uh if you went to work you were evil if you didn't go to work you were evil if you did whatever were you scared to go to work at that time from the standpoint of covid so at the beginning um it was a little bit scary because everybody was still trying to figure out um how to um how to deal with covid and how to better protect yourself especially in the hospital where we're um, especially in the hospital where COVID's going to be. Yeah, where COVID's going to be. And just learning like what type of protective equipment that you need. But over time, it just seems like it got easier.

Good for you guys. That's awesome. Did you have any cheerleaders during this time? People that were for you and supporting you? Both of our parents were really big cheerleaders for us. They were like, this is awesome. They were with us the whole time. And then I was talking to some of my co-workers, some of the nurses. They thought it was really awesome too. Yeah, I've had a co-worker at work also, Bobby Donald. He's an awesome inspector too, but he's stuck in ish because his wife wife isn't as easily you have to teach him

your technique to make it her idea yeah it's great very good way to go you guys i'm very proud of you what do you tell people the key to getting out of that ish um honestly from for us we both have a little different uh standpoint you got to be a team is my view because there's no way you're going to get through it alone and then for me is the motivation is just trying to find that motivation to go to work day after day like you said 80 hours it's like you get pretty run down so listening to your especially PT because that's like real work exactly and then but listening to your show before and after I go to work it really helped it's awesome you guys way to go you guys so um actually i'm curious uh he said teamwork and it's obvious you guys did do this together and you were very in sync but he also talked about how

tough it is to get you on board to do stuff and you think you have your independent thought and so forth, which is good, strong. And so did you see an unexpected benefit of you guys working together that you didn't see coming? We got really close during this with us being on different pages. I think once we're on the same page page it just made our relationship a lot closer and i feel like um from here um we're able to discuss it a lot more a lot better and um be on the same page really we're a lot more effective at making plans together and actually seeing a goal and an insight so yeah the weird byproduct is what I was observing is in a brand new marriage where one of you is super strong like that, learning to work. This forced you to learn to work together maybe where you might have gone years before you did that, before you learned that skill of working together.

Yeah. And that's what I thought I was observing. So way to go, y'all. Thank you. I'm so proud of you. You're neat. You're fun people. This is so fun well done

so we got a copy of baby steps millionaires for you number one bestseller and uh that is definitely the next chapter in your story you'll finish up uh your emergency fund now and get that retirement going and you'll be millionaires before you know it and uh i can tell that you're not afraid of hard work you're not afraid of a challenge you're not afraid of an adventure you're gonna have some fun and you're gonna get this done so very well done also a copy of total money makeover you can give it away to some friend that was a doubter and maybe uh maybe that guy's wife yeah we'll get it going right yeah you never know yeah i got a gift for you i brought it from nashville so good stuff all right james and ashley las vegas ne $116,000 paid off in 15 months, making $90,000 to $180,000.

Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! Yeah! Woo-hoo-hoo-hoo! Wow. Amazing.

Very, very powerful. You know, Rachel, when you and Dr. John Deloney do the money and marriage events, it is solid material that teaches couples about their marriage and about their money and about working together on that. And we see in the actual data how much the probability goes up of someone not only getting out of debt but becoming wealthy when they work together oh absolutely because i mean it's like you're putting two minds and even mathematically two incomes everything is is put together so it doubles in efficiency and then the intimacy and the fact that you're doing the impossible together gives you that much more fuel as well so yeah you yeah, you see it all the time, and it's awesome. It's amazing, and they're proof of it for sure.

They are real proof. I mean, that was neat. That was neat watching that happen right in front of us. Good stuff. This is The Ramsey Show. We'll be right back. Rachel Cruz, Ramsey Personality No. 1 bestselling author, is my co-host today as we answer your questions about your life and your money. A whole bunch of our social media interactions these days are all about taxes gag just pisses me off when i say the word taxes so oh it's awful but hey a lot of you got

questions about it well no kidding your job is the rs's job is to make life ridiculously hard, and they have the island of misfit toys called Congress to help. So we're here to help make it a little easier. And a couple of things that keep coming up. One that has always come up, and we've always talked about this, and really it is one of the four or five things you need to do as soon as you start Financial Peace University, as soon as you start the baby steps,

is to create a situation where you have a zero refund nothing coming back nothing coming back because a refund is not good yes because the reason is number one you are taking money out of your paycheck that's sitting in washington interest-free where it could have been in your paycheck, using to pay off debt, save it for emergency fund, all of it. The thing you need to remember, Santa Claus does not live in Washington. Yes. We're positive of that.

And there is that feeling people get when you get a refund in the mail. It's like, oh, gosh, it feels like free money. Like you did something. Well, you did work. It was your money. Yeah, you did do it because it's your money. But it's not a gift. But it's not a gift, yes.

And it's not smart because you basically have loaned your money to the government interest-free all year, and then you get your money back, and like, woo-hoo! Like, why are we celebrating this? I don't understand. But that's – so you want a zero refund. You don't want to owe money above what you have had withheld when you file your taxes, and you don't want to get a refund. You want to zero it out.

How can you do that? Well, a quick and dirty way to do it is if nothing has changed in your situation from the last year and the tax law has not impacted, changes have not impacted your situation, then you say, well, last year I got a $3,000 tax refund. The year before I got a $3,000 tax refund. The year before I got a $3,000 tax refund. Well, that's $250 a month. Too much is coming out of your check.

And so you can just march into payroll and HR and say, guys, would you please adjust my withholding by $250 a month? And if nothing has changed, then you're going to be right at zero or there. Now, it's never exactly that simple, so change it by not quite enough. So you get a tiny little refund instead of having to write a tiny little check. But that's if nothing has changed. Now, if you bought a house, you had a kid, you moved states, you run a business, it's not going to be that easy. The actual technical way you can do this is actually just do your taxes for this next year under current tax law, but don't file them. Obviously, you're not going to file them.

In other words, do your taxes for 2022. and do a tax return, a fake tax return, that shows exactly how much tax you owe and have that much taken out of your check in this year. Over 12 months, yeah. So you have predicted your actual tax bill and had that actual amount taken out, and that should be zero. Yeah. If you predict it accurately, what your tax bill will be. And so if you do your taxes in advance, you can zero it out

every time. I have not done that. I've done the quick and dirty and rounded down and all that in the past before the tax returns got so complicated at Ramsey. But if you want to be real nerdy, that's another way you can do it. The second thing that comes up is what do we do if we have a side hustle? Yes, because that's everywhere now whether it's yeah driving for uber or yeah picking up i mean it's just it's constant a lot of work from home is 10.99 now yes that's what i was going to say yes yes will be that 10.99 yeah so you know it basically you are self-employed for that portion of your income and self-employed people are required to file quarterly estimates of taxes and the way that's calculated is the income you produced with your business your side hustle your 1099 your freelance it's all a business it's going to be

filed on schedule c which is a little tiny little form on one page form on the back of your tax return that you add for your self-employed income and it's basically your gross revenues for your business what you made minus any business expenses that are deductible creates the actual profit of the business so that's three numbers one minus two or two minus one equals one you know three minus two equals one whatever so you're what you brought in minus your profit or minus your expenses equals your profit. Your profit times your tax rate is your tax bill on that money. And you're supposed to file that one little piece of paper that shows income minus expenses equals profit times tax rate with a payment for that tax bill each quarter, quarterly. They're called quarterly estimates.

And it is one page. There's not much to it. Yep. But if you get confused about that or zeroing your taxes out, you can always go to an ELP at Ramsey and figure it out, what you're doing. And they can help you do either one. Or even SmartTax. Yeah. We have now.

Okay, so I used Uber as an example, and I should know this. I don't. If you work, though, for a company, and it's not just yourself, when does it become freelance? Uber is all 1099. That will be 1099.

You're not an employee when you work for Uber. You're not an employee. You're for Uber. You're not an employee. You're not signing an employee agreement. Now, if you work delivering pizzas, you're an employee. Yeah. That's different. But Uber is all 1099. Real estate agents are all 1099.

I wonder like Airbnb when you make an income. That's all 1099. Yeah. Okay. It's all 1099. Well, that's investment income. That's managing a rental property with a rental income. So if you Airbnbbnb your house that's

considered oh if you airbnb your house i don't know that would probably fall under small business again you need to get tax advice the last one that's driving everyone crazy including us is the biden administration has completely lost their minds and changed the tax the child tax credit to the point that no human can understand it and um we were we were considering attempting to explain it but it's just not explainable on the radio so here's the thing the tax credit for a kid under 17 if you have children used to be two thousand dollars and now tax credit is different than a tax deduction. A tax credit comes off your tax bill. So if you had a $3,000 tax bill and you had one child,

you'd reduce it by $2,000 and you'd only have a $1,000 tax bill. That's how a credit works. It's an actual dollar for dollar. A deduction is not the same thing. Now, here's the thing the the credit used to work before the american rescue plan which is a stupid name when did that come in was that during covet though that was 2020 that was it's the that was trump the government's coming to rescue you plan oh help me lord and so before before the only option was to claim your tax credit when you

filed your income taxes now you file your tax credit it all changed in 2021 for and of course you're going to file it this this spring yes to get your tax credit and uh now it is thirty six hundred dollars for kids zero to five uh three thousand dollars for kids 0 to 5, $3,000 for kids 6 to 17, and $500 for kids age 18 to 24 who you claim is a dependent because they're enrolled in college. So if you've got a 21-year-old, you can claim them now $500 worth just because they are dependent on you. They're not filing their own tax returns for any reason in that case, which would be dumb on a whole lot of fronts. But anyway, they could do that. Yeah. This is unbelievably convoluted and complicated,

and I wish there was a way I could just be brilliant and make it simple for you, but it's impossible because they've just added another volume to the tax code to try to confuse the crap out of you. So what I would tell you to do on this is there's a blog at RamseySolutions.com, and if you want to nerd out and go into the details, there's a full blog on the child tax credit changes. And if you want to nerd out, you can through it and it is actually you will actually understand we wrote it in a way where you can actually understand it um but i just don't think it translates to me reading it over

the radio so i'm not going to do it so but the bottom line is the tax child tax credits are larger than they used to be they're broader than they used to be the way you receive them is even different the way you receive them is different um. The way you receive them is different. It's worth checking into because you're getting more money in most cases than you used to get. But you need to understand it. And so do the investigation. Don't just let this happen to you. And then you'll figure out how awful it is when the government comes to your rescue.

This is The Ramsey Show. Hey, it's Rachel Cruz, co-host on The Ramsey Show. If you want to do your debt-free scream live on the show, visit RamseySolutions.com slash debt-free scream. We'd love for you to come to Nashville and tell Dave your story. That's RamseySolutions.com slash Debt Free Scream.