The Ramsey Show - App - Don't Run From Your Debt - Run at It! (Hour 1)

Episode Date: May 6, 2020

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

Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. Joining me this hour, my co-host, Ramsey personality, Chris Hogan, number one bestselling author. A couple times over, be answering your questions with me, the voice of the everyday millionaire. Dave, I'm always excited to be on with you. I can't wait to talk to the people. Let's help them.

Let's do it. Madison is on the line. Madison is in Wisconsin. That's weird. Hey, Madison, how are you? We knew Madison was in Wisconsin, but this is a different Madison. What's up, Madison? Hi, thanks for taking my call.

So my boyfriend and I are discussing marriage, and the only thing we disagree on is finances. Neither of us have any debt whatsoever, so I see no problem in combining our finances. However, he prefers we keep our accounts separate to allow each of us to have a little freedom. And Dave, in listening to your past conversations, everyone around this topic has included a partner that had previously been untrustworthy or had a ton of debt. That doesn't apply to us.

So what can I say to him to change his mind? Madison, I'm going to tell you something. This is one of those areas where you've got to have a real conversation with him because this can't just be about each of you having freedom. Because when you work together on a budget, guess what? You can still have some freedom, but at the same time, moving forward with goals that you all are united in. And so I would definitely this is a big this is like one of those red flag areas for me. But I would encourage you all to continue to talk about this and find out what else is behind his hang up behind it. Yeah, the the truth is, is that the study we did for the everyday millionaires, for Chris's book, when we studied 10,000 millionaires, without a doubt, north of 80% of them, the spouses handled their money together.

They were not roommates. And what he's proposing is a roommate situation. And listen, when you can combine and become unified on your financial goals, you're really becoming unified on your life goals. Jesus said your treasure is where your heart is. And when you both agree on that. Now, I can guarantee you this. The hillbilly woman I am married to has plenty of freedom. And we do a budget.

I can guarantee you this. Rachel Cruz, who has a spending habit that she has curbed in maturity uh and her husband winston is is hardcore nerd uh as far as this they work together and rachel says that the budget is permission to spend then you can spend without feeling like you're uh like you're tearing down the goals of the household, or you can spend and not feel like you wonder if when your spouse finds out that they're going to be okay with it, you know? And, you know, all of this, it's really bad communication

to try to live two separate financial lives. So I think if you talk to most quality marriage counselors, and certainly you talk to any of us that have been training and working with people, and oftentimes we're dealing with marriage problems in here that are caused by the mishandling of money, you're going to find that it's just very, very important relationally to handle the money together. It is. Madison, just sit down and talk with him. Again, you guys, guys you know not having debt it's going to set you up to really move forward strongly in the baby steps I'm going to tell you if you're not locked in unison with this it's only going to lead to headache and heartache later down the road so I love that you all have been talking continue to talk and dig deeper

yeah I just I I just don't see in 30 years doing this, I don't see any data points of really the typical marriage that the marriage and the wealth are both winning are combined. Right. That's the typical. There's exceptions, but they're rare. Yeah, and if she's dealing, if it's someone, Dave, now I've coached, and I know you have too, some control freaks. Oh, yeah. And crazy people. Yeah.

And if that's on the front end, you need to get that worked out in marriage counseling. She said they're both healthy financially. That's right. I think they've got a good, healthy plan. He's just got this idea of you don't want to lose your identity. Yes. That kind of a thing. And you don't lose your identity as long as you both have a vote.

That's exactly right. And he's not getting married to have another mom. He's having a teammate. Yeah. And so you've got to be on another mom. He's having a teammate. Yeah. And so you've got to be on equal ground. Amen. Good stuff. All right.

Heather's with us in Indiana. Hi, Heather. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call. My husband and I have about $40,000 in debt. We are interested in starting a baby step. We currently have about $7 7 000 in our savings now my question for you is do

we wipe out that savings or do we do we completely do we start over i guess i'm kind of well it's scary to it's scary to bring it all the way down to the one thousand dollar baby step one and uh here's the hint though um when you use the savings the six thousand dollars of the seven to go towards your 40 you're not wiping out your savings you're just admitting that you already wiped it out when you took on that debt right and so you know all it is and it's temporary we're not going to stay there you're going to get the other 33 000 knocked off what's your household income how quick you're going to do that um well my husband's actually the only one working um i was working full-time as well last year but due to some unforeseen circumstances i had to stay home

with our last born child um and he brings in roughly between 40 to 50 000 a year on his own um i babysit on the side which which gives me a little extra cash. So how quick do you think you're going to knock the $33,000 out? Two years? That I honestly don't know. Like we've started and then we've stopped. It's about $1,200 a month to do it in two years. You can do that.

Yeah, and Dave, did you hear what she said? She said they started and they've stopped. Heather, one of the things I want to encourage you guys to do is don't be interested in the baby steps. I want you to be committed to it. Right? Because you look at that $40,000, like what type of debt is the $40,000 you have? We have a car loan that's about $24,000, which we've rolled over an existing car loan into that to upgrade to a bigger vehicle. And then the other one is a $16,000 personal loan, which we have refinanced a couple of times due to our own stupidity to buy a boat

and buy other dumb things. Yeah. And see, you all have been running from the debt. What I want you to do is run at it, right? Like run at it. Hit it head on. And don't be interested. Be committed. And I'm going to tell you, do is run at it, right? Like, run at it. Hit it head on. And don't be interested. Be committed.

And I'm going to tell you, once you start doing that, your psyche will change. It really will. What's the interest rate on the personal loan? I want to say it's 4% or 5%. It's not anything extremely high. So, Heather, here's the thing. If you're going to sort of do this like you've been doing it then you probably ought to keep the 7 000 in there because it's not going

to work and you're going to need the money but if you're going to do what chris is saying and you're going to go all in and be submitted and say okay we refinanced our last stupidity into a personal loan we refinanced our last stupidity of a car into another car. At some point, we've got to stop this habit pattern, and today's the day. And I think you can do it. So here's what we're going to do. We're going to put you guys into Financial Peace University. We have a 14-day free trial.

Get on there tonight with your husband. You guys watch the first lesson, and then sit down and go, Okay, are we in or are we not? Because ish is just a wish. Don't do it. And hold on. Kelly will pick up and we'll get you signed up for that 14-day free trial. For most of us, health care costs seem to increase every year, and saving money on health insurance feels more and more out of reach.

For example, take the Olcheski family from LaGrange, Texas. Jeff and Cherise had just celebrated the birth of a new baby boy. Shortly after, they had a health scare involving one of their kids that was completely unexpected. With today's health care climate, this could have bankrupted them. But thanks to Christian Health Care Ministries, the Olcheskis were spared from a ton of medical bills. As members of Christian Health Care Ministries, they're part of a group of believers who financially and spiritually support each other. CHM is the original health cost sharing ministry and is a Better Business Bureau accredited charity.

It's biblical, affordable, and it's shared nearly $97,000 to help the Olcheskis. To be a part of Christian Healthcare Ministries, visit chministries.org. That's chministries.org. CHM is a proud sponsor of Dave Ramsey Live Events. chministries.org. so the stock market's been up the stock market's been down, the stock market's been down. Some of you have found that your emergency fund is handy when there's an emergency. It could be getting low, but hear me loud and clear. Unless you're on the edge of bankruptcy or foreclosure, do not cash out your 401k. This is not a good time to cash out a 401k.

I know the government passed a stimulus bill, and I know they did away with the 401k withdrawal penalties, but do not cash out your 401k. If you have done it, you need to get yourself on the right track for retirement, and maybe you can get it back in there before this thing's screwed up and you won't have the taxes on it, I hope. But, hey, you need a good financial advisor in your corner. You need a good pro in your corner, and we recommend a series of pros. We call them SmartVestor Pros because you're a SmartVestor, and they're going to be the pro that helps you. Just click SmartVestor at DaveRamsey.com, and it'll drop down a list of when you put in your stuff.

It'll drop down a list of the SmartVestor Pros in your area. You select the one you want, sit down with them with the heart of a teacher. And, you know, Chris, the studies tell us, and I've seen many of them over the years, that people with a high-quality financial advisor, not an insurance agent that's trying to sell them stuff, but, I mean, a real financial advisor, have a tendency to get much better rates of return in their mutual fund investing. And it really is not because the financial advisor is some kind of a genius on fund picks. It's because they talk them off the ledge and bailing out at exactly the wrong time. That's exactly right, Dave.

See, it boils down to more than just filling out some paperwork and filling out what you're going to invest in. You're actually, with the Smart Investor Pro, you get somebody to have a conversation with. You can talk about the things that are on your mind. And that's why, you know, you can't do that with a computer. You need a person that you can reach out and connect with. And the Smart Investors, they're going to be there for you. Yeah.

And, you know, part of the process of being an investor is being steady. Yep. Holding the line. Hold. Hold. Hold the line. Don't jump off the roller coaster in the middle of the ride. And you need somebody to do that.

I talked to some friends of mine that are smart investor pros the other day, and they said right now they're spending a lot of their phone calls talking people off the ledge. That's right. Don't jump. Don't jump. Don't jump. All right. Sterling is with us in Texas.

Hi, Sterling. What's up? Hey, how you be, Mr. Ramsey? Going to make it, my friend. How can I help? Yes, sir. Look, I'm a new listener, and you really got me motivated. You lit a fire in my house, so I thank you for that.

So every time I say your name around, the missus, oh, man, her toes get the curl. So I appreciate you. So you got me ready to invest. So I did something. I went, and I took out a payday loan, bought a new car, and bought a timeshare. I'm joking. I'm joking. I wish I could see your face when I said that.

It was Hogan's face you should have seen, yeah. He was coming after you through the phone. Don't do it, Sterling. Don't you do it. Hey, I'm not going to do it, Sterling. I'm not going to do it. That's why we call Chris in the house. So check it out. I work for the post office, and I haven't worked postal yet, but here lately i've been coming awfully close and a lot of people have been saying that the post office should go away or something's going to happen to it so i've been looking for ways to transition another thing that's slightly scary is i see the state of the people after they retire from there and while they are there and i don't want to be a part of that broken down bunch when i I retire, I want to be up, moving, and happy. And I'm already tired right now, so I don't want to retire again.

I've been tired working there. So I'm just trying to find out what's the proper way to transition. What should I do? Should I go back to school and start studying computer programming? Or what should I look into? Because the market is wide open here. I just need some rough ideas. How old are you?

Yes, sir. I'm 32 okay so when you're 42 what do you want to be doing oh um i thought about a couple things i got kids so that changed um i wasn't there that day but the missus said they're mine so whatever but um what i want to do uh i do a lot on youtubing and things like that and i like to go around and do public lot of YouTubing and things like that, and I like to go around and do public speaking, but I don't know how I could transition that into money, so I'm trying to find something a little more realistic right now. Okay.

So our friend King Coleman, who does the King Coleman Show here, one of the Ramsey personalities, talks about that. What we've got to do is you don't want to just go back to school blindly, not knowing where you're going. You only want to go back to school is if it is giving you the degree or the knowledge in the area that you want to be your career for the next 10 years, especially as an adult college student going back. And so, you know, you want to head into a training program that takes you where you

want to go. And Stephen Covey talks about in the book, The Seven Habits of Highly Effective People, the number one habit is to begin with the end in mind. Begin with the end in mind. So rather than just going, I want to run from something, instead let's run to something. That's exactly right, Dave. And Sterling, if I'm you, I'm going to begin to think about what are the things that get you excited? I can tell you got a great personality and you love people. And you may not like being at the

post office right now, but is there an opportunity for you to move over to UPS or some other company and use your skills that you have there? Or how do you begin an entry-level thing? You want to be smart. Ken, in his book, Proximity Principle, talks about you want to be around the people doing the things that you're interested in. And so you and your wife sit down. She knows you better than anyone else. You guys can brainstorm some options. What could you do? I think the biggest thing, Sterling, for you is like for me in the banking world is to realize you're not stuck.

You're not going to have to stay there for the rest of your life you may have to tolerate it for the next few months while you find something else but be proactive finding this next thing needs to be your second job right now not watching tv and so get intentional yeah and um yeah i think it's real important that you do something towards it in the next few months. Getting around some people, even if it's just, you know, you join the local Toastmasters where every week somebody gets up and does a speech, and you start learning about, you know, the communication styles that are out there as a public speaker and what are some ways to make money doing that.

It's certainly different than it was a few years ago. Uh, there are YouTubers making serious money that never get in front of a live crowd. And so you've got the, uh, the ability to do that, uh,

if you go that direction and there's nothing to keep you from doing that right now as a side hustle and start developing some of those skills. So, uh, hold on. I'll have Kelly, uh, send you a copy of Ken's book that Chris mentioned, The Proximity Principle, and I think that'll help you get to the next step in your process.

Thanks for calling in, man. Yeah, keep us posted. All right, Ryan is in Alabama. Hey, Ryan, how are you? I'm doing well, Dave. So I'm a seminary graduate with an MDiv. My wife's a doctor, and our dream is to have a sailing ministry where we would be helping people in remote places off of a boat. I'd be preaching,

bringing Bibles, and she'd be bringing medical supplies and her expertise. The question, basically, is that the loan for the boat is about $600,000 for the type of vessel that we need to get where we're trying to go. We have about half of that in cash. We have no debt other than the house, and we're about $100,000 equity in the house, and we've worked so hard to save this money. I'm wondering if we should invest this money that we've saved in work and do the sailing ministry after 10 years of investing, or should we take the financial leap with the boat? The financial leap with the boat. Well, a couple things come to mind.

I mean, we are evangelical Christians here, which, as you know, means that I believe the Bible very literally. And so I don't find a single time in Scripture that God used debt to cause a ministry to happen. Or a single time in Scripture that there is a positive reference to debt. Now, it's not a sin. It's not a salvation issue. But 100% of the mentions are negative. And so that tells me that we're probably not going to do a ministry with debt.

That's what I would get out of that. So that means I'm going to buy a $300,000 boat or I'm going to invest in weight. Absolutely. And take that time to really have a detailed plan on what this looks like. Taking that debt on is not going to be anything that's helpful. It sounds like a very large boat investment for a ministry that has not yet been launched. Yeah. I'd try to find a way to baby step into this.

Smaller boat. Cash. Yeah. Much've tried to find a way to baby step into this. Smaller boat. Cash. Yeah. Much smaller boat for the start. This is the Dave Ramsey Show. Please hear me loud and clear. The government is not going to bail you out of your student loans, at least not completely and not without a catch. What they're talking about only impacts federal, not private loans,

and you need to take responsibility for what you owe and pay your debt down quicker. Right now, Splash Financial is offering their lowest rates ever. With lower rates and extra payments, you could just find yourself debt-free in the next five years. Visit splashfinancial.com slash Ramsey to see if you qualify. Qualify. Chris Hogan joins me this hour. Ramsey personality, number one best-selling author, answering your questions all hour long, all day long. Keith is with us. Keith's in Arizona. Hi, Keith.

How are you? Hey, Dave. I'm doing fine. Thanks for taking my call. Really do appreciate it. Certainly. How can I help? Well, so it's a big day for my wife and I.

Two hours from now, we've got an appointment to go down to the credit union and pay off our house. Yay! But it's pretty scary right now because, you know, with everything going on with the coronavirus, you know, the economy the way it is, all the uncertainties and stuff, I just really wanted your opinion and advice, you know, when we go down in a couple hours. Do you have your emergency fund in place? Yes, sir. $23,000. Okay. How much do you have in your 401ks and retirement plans? $160,000. Okay. And how stable is your job? I work at a very big retailer. I would say it's probably very stable. My wife is actually

on disability right now, though, due to an auto accident. But she is getting the long-term disability at this point. So that's a factor in it also. Okay. So what is it you're afraid of? Paying off the house? I guess, honestly, having the money in the bank as a security blanket versus paying off the house is just so scary. What's the size of this check, Keith? $70,000. Have you ever written a $70,000 check before?

No, sir, I have not. There it is. There it is. This is new. It's got numbers and digits on that check you haven't seen before. Your hand's scared. Yeah. Well, how much is that mortgage payment?

Our mortgage payment is $760 a month. And how much have you all been paying in the last several months per month? Well, yeah, so I just make the minimum payment of $760 per month. When we purchased the house, we had $76,000 to put down on it. It's valued at $230 right now. The payoff is $70,000. I just want to be done with it be debt free yeah no other debt and move forward in life and my friend you are a couple hours away from doing just that and 780 is staying with you now instead of going to that mortgage holder so it's just new

but it's going to be okay it's going to be okay yeah i think the thing is you what you've got to work through and it's a good mental exercise yeah i think the thing is you what you've got to work through and it's a good mental exercise to do because what you're experiencing are real emotions there's nothing wrong with that at all but i mean you have a you have to say okay facts are our friends dr john deloney always says that facts are our friends so what are the facts the facts are you have 160 000 you have a steady job your wife has a steady income from disability right now you got 23 000 in the bank and you have payment in the world so even if even if the economy really struggles for say a year which i really don't

think it's going to but let's just say it struggled for a year. It's really not going to affect you much. Right. I wanted to hear you say that. Well, I mean, it's not just me, but I mean, the point is that the reality is that by having money saved and having zero debt, you've insulated yourself quite a bit from the outside variables that you've controlled the controllables. And so that, you know, and it's not being pompous or anything to say

that folks that are in your situation are experiencing this COVID crisis and economic shutdown differently than folks who are deeply in debt and have no savings. Yeah, correct. economic shutdown differently than folks who are deeply in debt and have no savings. Yeah, correct. Yeah, and so you pay it off for the same reasons that you intended to pay it off. Absolutely. Hey, and then you do a little dance in the backyard tonight,

wave your mortgage around so that all your social distancing neighbors can see you dancing out there. So that's fun. Keith, I'm proud of you, man. You and your wife. The focus that you all have had over the last few years looking at this, you're about to do something really, really special. That's a big deal. And that's a very, very big deal.

So congratulations. You guys need to celebrate in the right way. Touchdown, baby! Touchdown! That is big. Isamar is with us in California. Hi, Isamar. How are you?

Hi, Dave. I'm doing good. I'm 25, and I'm a first-generation college grad, first to go to law school. I've managed to be debt-free up until now, and I'm preparing to pay for law school in the fall. So I've received about half of tuition and scholarships. Wow. And so the rest, yeah, the rest I have to pay. It's in LA. So I live in Orange County. So I'm going to have to move out if classes are going to be in person. But obviously, if they're online, then better for me. I see a 20 grand of housing, you know, for one year at least. But basically,

I'm just, you know, nervous about taking at least but basically i'm just you know nervous about taking out federal loans and just trying to figure out if i take a combination of federal or private or whatnot so where did you get where'd you get the scholarships uh through from the school from the law school the acceptance came with it oh. So they lowered their tuition because of your grades? Yeah. Okay. What about other scholarships? The only other scholarship that they're giving me is once I start school, if I am above like the class rank, if I stay in the 1%, the 5%, 10%, stuff like that, they'll give me a more percentage of tuition and um right now i'm like at 50 so if i do like worse than that for whatever reason they'll still keep me at my 50 scholarship as long as i'm meeting like the minimum gpa so obviously that's definitely a goal like once i start to just go for you know my point my point was not that my point is what

about other scholarships outside of the school that would pay for yeah i'm i'm applying for the little thousands and five hundred dollar scholarships here and there on random um it's hard because a lot of them are for undergraduate uh students so but definitely definitely, I've signed up for all those. Like, Scholarly is an app that I'm using. So I'm definitely trying that. That's good. Jump on Anthony O'Neill's website. There's a scholarship tool there that'll help you as well.

And it is more difficult in graduate work. Right. And certainly law school is more difficult. But here's the thing. It's also more difficult to have the stinking loan hanging around your neck. And so I'm going to figure out a way to do this without debt. Yeah, Dave, you know, I have talked to, I've got a lot of friends that are attorneys. And, you know, one of the things that I never asked them and they say never comes up is where

they went to law school. And so it's really about passing the bar. It's about completing the education, passing the bar. And so, Isamar, I would always also encourage you, 50% is good, but take it a look to find out if there are other law schools that you can get into. That are cheaper than the 50% remaining. That's exactly right. Much cheaper because ultimately passing the bar is what's going to allow you to be able to start to practice that's the big deal and i know that trust me they sell the schools and everyone thinks it matters where you graduate from no it matters that you pass the bar and

you're eligible to practice law yeah i mean i've we have a in-house counsel and i happen to know where he went to law school because we hired him you know he's on staff right uh and uh our last in-house counsel before that we knew because he was on staff but i've hired a whole bunch of lawyers over the years out in the open market so to speak for different deals or things we're working on no idea where they went you didn't ask them i didn't ask them i should have probably but i didn't it didn't matter they got the job done that's exactly right yeah yeah yeah and so um yeah right before i go under the knife i always ask the doctor you know where'd you graduate from i'm kidding not been under the knife so what do i know but yeah so i i'm gonna encourage you to continue the scholarship search and avoid the loans is what we're saying. And if that also means that you go to a different law school, at Chris's suggestion, that's not a bad thing either.

Check out anthonyoneal.com, and he's got some great scholarship tools there that will really help you as well. This is The Dave Ramsey Show. You may feel like there's not a lot you can control these days, but I'm here to tell you, you can control your budget and you can control what you feed your family. My longtime friends at eMeals are here to help. They have simplified meal plans and created new recipe collections such as easy pantry meals and freezer meals utilizing basic ingredients. It has never been easier to shop smarter and stay on a budget. Try it free for two full weeks at emails.com. Thanks for joining us, America. We're glad you're here.

Darlene is on the line in New York. Hey, Darlene, how are you? I'm good. How are you? Better than I deserve. How can Chris and I help? So I am getting married in August. Yay!

Thank you. And I am completely debt-free. I graduated last May and paid off $45,000 in about 10 months. And my fiancé is graduating from his doctorate in physical therapy degree in about a month. And he is graduating with about $85,000 in debt. So we were looking into renting a small cheap apartment and living off of my income while he tackles his income and we were hoping we could do it in about a year and a half is tackle his debt now he is debating whether or not he would rather buy a really small house no put it towards no no yeah there's no

reason for a debate, Darlene. You need to clean up the debt. Okay. Clean up the debt. Clean up the debt. Here's the problem. When you buy a house and you have $80,000 in Sallie Mae, you have to get an extra bedroom for the ugly woman. Because you've taken on all this risk.

I want the home to be a blessing to you, not a curse. There's no hurry. You both have wonderful careers, wonderful degrees. You're going to make a lot of money in your life. You're going to be in control of that money, and you're going to own a home. But there's no rush. A little bit of patience will allow you to do this with wisdom. Right.

Now, that was my thought just because I paid off my loans. I was more like I would rather tackle the loans. But he was saying if we do the math, the house would only be about $95,000. It would be the same price as renting per month. Yeah, that's bull. That's absolute bull. Because when you own a home, you have to do all the repairs. The insurance goes up, you pay for it.

The taxes go up, you pay for it. The shingles go off. When the wind blows by, you pay for it. When you're renting, you don't have any of that. That's exactly right. And you're going to be trying to buy furniture. Then you guys are going to be talking about renovating. And then you're going to want to add stuff.

Darlene, trust me. Don't kick the can. Do not. Get an apartment, like you said, for about a year. Focus solely on attacking that debt, being very, very intentional. Then build up your fully funded emergency fund. And you guys, then you save for the down payment on the house. I promise you, the recipe's not broke.

Don't adjust it. Yeah, you're right, Darlene. He's wrong. That's right. You win the argument, the pre-marriage argument. She's the winner. Ding, ding. Blow the whistle.

He's out of bounds. Throw a flag on him. Yeah, he's thinking like normal people think, and normal people are broke. Dave, you know what? Here's the thing. Coming out of college, if you're not prepared, there's so much stupid out there financially. There's so much stuff where you've got family members chirping in your ear, you need to buy, you need to buy, and they don't pay. Yeah, that's

it and it's um the the thing is there's a lot of broke people with opinions yes yes and when you come out of school what normally happens there's several emotions going on that drive you into making some dumb decisions uh emotion number one is finally i'm not a student so i'm an adult and adulting looks like a better car not my old high school car i'm still driving yes adulting looks like a couch and actual real bookshelves not not fake ones with concrete blocks and boards right yes uh you know in our day it was getting rid of the beanbag chair right that kind of stuff adulting looks like buying a house yeah so i want to be doing all of these adult things now that I'm not a student right now. And that's a normal motion. And then the culture comes along besides you and says, oh, renting, renting, renting,

renting is evil. Yeah. Renting is throwing your money down a rat hole. And it is if you look at it throughout the scope of your life. Right. But for a year or two to get a solid foundation under you it's not you're buying patience and wisdom with that money yep absolutely and it changes everything that's why that's why darling that's why we're telling you to do that the great news is you guys

are both very smart people and you can sit down you can get him on the right page here you're going to get a house i just don't want your house to get you that's exactly right lauren is in washington hey lauren your question for chris and i yes hi dave hi chris um my question hopefully is an easy one for you guys um so i listened to you guys a few days ago was it yesterday i'm not. But you had a caller asking about starting an LLC and you said, yes, go ahead and start it. However, my husband and I have umbrella coverage for $2 million. Do you think we should still start an LLC for investment properties or should we just keep what we have? Yeah, I would do an LLC for investment properties and have an umbrella policy, both,

because we live in a litigious culture where somebody's going to sue you for anything and everything. And when the LLC owns the rental property and you operate the entire rental property, all the transactions in the name of the LLC, the checking account, the deposits go into that account, the expenses are paid out of that account, You don't buy groceries out of that account. That is an LLC, a standalone entity operating properly. Then if someone falls off the front porch and breaks their little face because they were drinking too much and they decide they're going to sue the landlord, the landlord is called an LLC, and they don't get at your personal assets then. And I actually had that exact thing happen, by the way, on one of my rental properties.

Yeah, I can totally see that happening. If we already have rental properties right now, if we start an LLC, can we transfer the ones that we already have into the LLC? Yes, you can do what's called a quit claim deed in most states. And in most states, it's very inexpensive to file and isn't taxed. In Tennessee, it's $6 per property to move a quit claim deed in most states and it's uh in most states it's very inexpensive to file and isn't taxed in tennessee it's six dollars per property to move a quick claim deed and zero tax on it because you've already paid the tax on the house when you filed the warranty deed at the original closing now i don't know what it is in your state but that's how it's done in most states

and you just move it into there i did that now what i do the rule i use and you can make up your own rule on this, but I don't put more than $5 million worth of property in one LLC. Once I get $5 million worth of properties in one LLC, I open another one. Why is that? Because I want the target to be small when the guy falls off the front porch and breaks his face. Okay. And I don't want a $50 million target in one LLC.

I want to keep the target as small as possible. Now, I own some properties that are worth more than $5 million that are a single LLC. Our old office building that we moved out of is worth about $16 million, and it's its own LLC. That one building is. So I violate the $5 million rule. But like houses and stuff, we pile them up in one LLC until they get to $5 million, and then we quit doing it after that. But you're spreading that out, and do pick up a $2 million,

a couple million-dollar umbrella policy. Depending on your net worth, I mean, you know, a million is a minimum when you're starting to do these kinds of things. When you're at the point you need to do risk management like that, you need to pick up an umbrella policy. Only a couple hundred bucks, maybe $200, hundred bucks a year, depending on your state. You're right, Dave. It's just protecting yourself. Now, does she need to get with a real estate attorney to move those?

No. Well, a title company probably helps you do it cheaper than an attorney. But, yeah, just check your title company in the area and ask them how you can move the title over in your state and how hard it is to do. Because you may have to pay a few dollars to have the deed prepped. I actually paid more to have the deeds prepped when I did it than the actual transfer. It was like $25 a page or something to get that done, and then I paid $6 and did it years ago. But after that, then, of course, we constantly are titling them directly to LLCs now, so we don't think anything about it.

But a quit claim deed in most states will help you move the property over, and it's a good idea to just keep your targets small from a risk management standpoint because we want to do everything we can to dissuade someone from filing a lawsuit of convenience. Then you have a temptation to settle and all this kind of stuff. And I don't settle. I either win or I lose. But I don't settle. And so I'm going to fight you all the way down into the dirt because I'm a hillbilly and that's what hillbillies do.

So I'm going to fight. And maybe generationally. I may pass the fight on to my kids for your kids to fight. You know, Hatfields and McCoys, right? You are so feisty, Dave. Boy, I tell you. It's worked out for me. It served you well.

Oh, I love it. One guy said, hey, everybody settles these. And I said, see, now you can't say that anymore because now you met somebody that's no longer an everybody. That's exactly right. This is The Dave Ramsey Show. In the middle of these uncertain times, Ramsey Solutions wants to give you some hope. For the very first time ever, we're giving you Financial Peace University free for 14 days. Go to DaveRamsey.com slash hope so you can watch

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