The Ramsey Show - App - Don’t Try To Game the System! (Hour 1)

Episode Date: June 30, 2022

Dave Ramsey & Rachel Cruze discuss: Paying off an expensive car loan, Getting gold as a wedding gift, Can I give my kids a W-2 for doing chores. 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. We help people build wealth, do work that they really love, and create actual amazing relationships. Rachel Cruz, number one best-selling author, Ramsey Personality. My daughter is my co-host today.

Open phones at 888-825-5225. That's 888-825-5225. We're going to start this hour with Marie in Detroit. Hi, Marie. Welcome to the Ramsey Show. Hi, how are you? Thank you for taking my call. Here's my question. I am trying to figure out what the process is for paying the principal, the extra payments, and all of that so that I can pay my car off early. I have a 75-month loan. My interest rate is 13.74.

Yes, I know that's a horrible interest rate. I literally, when I bought the car, the car I drove into the dealership with would not have made it out the dealership. So I literally had to take what i could get in that emergency moment um and i've accessed like the i did like an amortization calculator if i'm saying it right and i i if i pay everything as is right now i'm gonna pay like eleven thousand dollars in interest on a $20,000 car, which is stupid, crazy. And I've been trying to piece together by watching YouTube videos and asking questions. What is the exact process that I can take to pay extra on my car towards my principal, towards my interest, or that, that whole process that allows you to pay your car off

before time. And I, and i can't figure out how to piece everything together to get a straight answer so i feel it's a blessing that i was even able to get through to you um so i just want to i'm going to shut up and listen and listen to tell me how to do it way to go marie way to go you're doing so good you're thinking outside the box what's the total balance of the car if you paid it off today? $18,100 and some odd dollars. I've only had the car a couple years. Okay.

And what do you make a year? A little over $100,000, and that's only recently. I was not making that much money over a year ago, and I buttoned down and got another job. And my debt, I bring home about $4,900 a month and my debt is about $3,500 a month. You're getting a big tax refund? No, because I have tax debt that I'm actually tackling as well. I'm trying to get all my finances in order and trying to become debt free. Okay. How much is your money going into your 401k? Yes, I do. I don't have the max. I have, um, I think about 5%. Gotcha. Okay. All right. Well, um, you're, you're new to all of our stuff. I do want to answer your question, but I want to answer it in context of what we teach, okay? So we teach a whole process for becoming wealthy, and the shortest

distance between where you are in wealth is getting rid of this debt, as you said, the IRS and the car debt and whatever other debt you've got. We teach you to list all of that debt, smallest to largest, pay minimum payments on everything but the little one, and attack the little one with a vengeance. So let's put that in context of that. What do you owe the KGB, I mean the IRS? I just actually did it, and I'm at about $20,000. Okay, so very similar to your car.

Okay, what other debts have you got? Besides my car, I think I have a few medical bills. I don't have, I guess in context, an enormous amount of debt, but the debt that I have. You've got plenty. If I was to lose one of my jobs, I could literally drown. You've got enough to be nervous. Well, she just said if she lost one of her jobs, she drowned. Yeah.

So, yeah, you feel it. Good. Do you know what the other medical debt is? Do you have credit cards, too, Marie, at all? Credit card debt? No, I don't have credit card debt. No student loan? No.

Good. Okay, great. Okay, we've got a good picture then. Okay, so what we would do is tell you to do this. Temporarily stop investing because we want to completely focus on clearing all this debt as fast as possible and i want to squeeze as much out of your check and get it home as much as i can to throw it at the debts first thing we're going to do is knock out those two little medical bills right quick because they're just like mosquitoes buzzing around okay okay once

they're done then i agree with you we'll pay the minimum pay are you paying a payment plan on your old tax debt um i haven't gotten to that point yet i'm actually working with a financial counselor who's going to do an offer and compromise for me once the irs sends me my official bill you won't get it have you paid him to do that um i paid i paid them to file all of my back-year taxes. That's what I paid them to do. Yeah, do not pay for an offering compromise. You won't get one. Okay.

The OIC is based on the only way the IRS forgives IRS debt. An offering compromise is when the IRS waives your debt. They give it up. They're not going to collect it. The only way they do that is if you are have no income and no assets and you have both so there's not a chance you're going to get an oic and some of these companies i don't know who you're dealing with will charge as much as ten thousand dollars like you hear them on cable tv and stuff like if you got irs debt we can help yeah give me ten thousand dollars to file an oic and you don't stand a snowball's chance in hell of that

thing going through. So, no, don't do it. You're not going to get approved for it. That's it. So, now, back to your car that you called out. Okay? All the way back there. We're going to stop your 401K.

We're going to pay minimums on everything. We're going to attack the debt as fast and as harshly as we can if you can change your w-2 and bring more home and not create more tax problems but instead just not get a tax refund because the tax refund is going to go straight to them okay but if you could get no tax refund but oh no more and i think you've got too much coming out of your check and i would have your tax person look at that but anyway as much as we can do anything we can do to get money through with the car now then there's two types of car loans most car loans are what are called simple interest loans and you would just simply pay big chunks of extra checks once a month on

that debt so if you send them a thousand dollars the next month that 13.74 is not charged on that thousand dollars okay and you went from 18 to 17 and then you send them a thousand dollars the next it goes from 17 to 16 i want you to pay off this car in 12 months 1500 a month or less 12 or less 1500 including my my the the actual payment no on top of your actual on top of your actual payment okay and you'll be done actually you'll be done in about 11 months if you do that okay okay now that's if it's simple interest and most car loans 90 some odd percent of them are simple interest There is another type of interest that is a rip-off car loan, a subprime lender, and it's a high interest rate. You might have one of those, and they will charge you the interest whether you pay it off early or not. They give you some savings, but they calculate it on total of payments, the TOP.

When you call them up and ask for the balance, what do they give you? They give you the $18,000 balance, or do they give you the $30,000 balance? Honestly, I keep getting the runaround. I can't get anybody to answer my question. Who's the loan with? It's Ally. Oh, crap. Yeah, you may have a subprime loan here.

Ally, it's crappy stuff. So, 13.74. But you still just throw more money at it, too. Yeah, you may have a subprime loan here. I'll add some crappy stuff. So 13.74. So you still just throw more money at it. Either way, just throw as much as you can at it as fast as you can. And you just send them an extra check once a month, a big one, and tell them principal only, and they'll throw it on there. It is that simple after all that discussion. You've got a lot on your plate, a job, your home, your marriage, and your growing family.

While you're enjoying the present, you can't help but think about your future and your finances. As you explore your options, consider Christian Healthcare Ministries, or CHM, for your health care. Their generous maternity program and budget-friendly monthly programs have been a blessing to members welcoming children into their families. Visit chministries.org slash budget to see if it's right for you. Christian Healthcare Ministries is a Ramsey personality is my co-host today. She and George Camel will join me on July the 14th. We are hosting a free live stream event called the Real Estate Reality Check. And we're going to walk you through what's going on out here in the housing market

and how it all works and how to navigate it and spoiler alert the housing market is not going to crash and we're going to show you why we'll teach you where real estate prices come from and so then we can show you how that works and you can understand the facts with actual data and charts and graphs and economics and stuff instead of feelings. Yeah. If you want some feelings, read the comments on my Instagram. You'll find some feelings. People have a lot of feelings on Instagram.

I did this morning. I don't know. You posted the, it's a great synopsis. You liked the article? Yes, I was great of it. And then underneath. Here it goes. It's a great synopsis you liked the article yes that was great of it and then underneath here it goes it's a lot i know i hate to even go you fit we ought to read dave reads mean tweets right i mean we ought to do some of that but anyway but if that's what that's what

you're reading though and that's where you're getting your information though it is it is scary of what people are saying of like the the belief of what is really happening in the world the number of people that think that the sky is falling is disturbing it's a lot i mean it's a lot and they're angry about it and they try to be intellectual about their anger and it's really hilarious it's kind of sad but let me help you with something. But it is scary. If you are posting negative comments on someone else's Instagram that you don't even know, by definition, you're not an intellectual. Okay? By definition. That's like more than half the population.

Well, I mean. People feel the need. No. I guess I don't qualify because I've never posted a comment on someone's Instagram that I don't know. Good or bad. Well, of course not you i don't need to go around and bitch about what someone else has to say oh my gosh you've said

two cuss words in two segments of this show already unbelievable okay no but really but people are they are they're afraid they are and in their fear they come off angry that is true and we're going to help the question the statement is that you don't need to be afraid and here are the facts and this is what we're going to talk about which i really am excited about we're going to help dive in we're going to show you that yeah yeah we're going to help and you can call me names and everything else i'm still going to help you that's right yeah you're so sweet that's me uh sweet that's what i'm known for but we can all acknowledge though this is i mean if you were to paint where we are as a country today from inflation to i mean

everything that's going on right yeah i try i put filled up my raptor and i almost passed out it i'm a hyperventilated i had a jondaloni anxiety attack you did it's good to know he's human it's not because i it's not because i don't have money it just pissed me off it just made me mad i know but it is pretty wild where we're at though as a country would you agree of everything or do you just don't think it's like it is it is um with how there is more negativity right now in the economic news than there has been in a decade yes okay yeah and so if this is your first grown-up decade to have a grown-up economic trouble this is your first time to see this i've lived through like six of these so i've got a bit of a yawn but it's not because i'm detached or don't understand i just

have perspective i'm old and so i've just not i've seen that we didn't die from this the other six times it happened in my life and so it's not the end of the world the sky's not falling i mean biden's incompetent but he doesn't have the power to completely destroy the nation he's just screwing it up you know i mean it's not it's not he just doesn't and neither does the fed and neither do i if i'm wrong about this you Woo-hoo! You know, and so, you know, it's just the point is it's that we're going to be okay, and we're going to give you perspective over time, and it's not because we're out of touch. It's actually because we're in touch with this thing called history and data and perspective, and all of that leads to a word called wisdom, and we're going to walk you through all of that. And it's going to be, we're not going to talk down to people. It's and we're going to walk you through all of that

and it's going to be we're going to talk down to people it's just we're going to show you what's going on and it's just but it is a little bit of a psychologically fascinating thing in the world of social media how out of control people's emotions are i mean they're four years old in their emotions just completely bonkers yes you would not i would not anymore allow you to behave like that in my presence and you wouldn't either you wouldn't either i mean if i want you that lady sitting out there wouldn't allow someone to act like that in front of her because she would be going you're four years old you know grow up and because people don't act like that in person but on digital media they lose their minds totally but with the event though we are going to address the real

estate prices that and the in the fear and the like the yeah yeah the mindset that's so easy to go into right when you and if you've already got your mind made up and you've decided the world's coming to an end don't watch it it's just going to make you mad because I'm right and you're wrong. It's going to piss you off. So don't even watch it. What percentage do you know you are right that the real estate market is not so pressed? Versus the commenters on Instagram? 100.

But in general? In general? In general. Hey, listen. Okay. Did I call inflation a year ago? You did. Dead on.

Yeah, you did. You did. Did I call the recession properly in 2008? I. Dead on. Yeah, you did. You did. Did I call the recession properly in 2008? I have no idea. No, I did not. Okay. I declared there was not going to be a recession in 2008, and I was wrong. It went down.

Okay. All right. All right. Now we're getting to the good stuff. But I was using different data to analyze that than I was this situation. That was more... Did I catch everyone off guard, though? Or am I...

I mean, I was was that was the first time that type of economy movement had occurred and that none of that is involved in this one yes okay it was the mortgage-backed securities the mbss and the uh the mortgages being made to broke people because of horrible lending practices bought by hedge funds and securitized and it crashed not only the stock market it crashed the housing market so uh didn't crash it brought it down dramatically and it all came back in 24 months by the way yeah even in 2008 yeah when i was wrong yeah and so if i'm really wrong on this one we got two years this idea that this idea that your world is coming to an end is still not correct.

I'm more right than that, no matter what. So we are, it's not just me. I mean, you and me and George, all of us have gone through all this. You've done this since you were 18, Dave. I have. RamseySolutions.com slash reality check if you want to sign up for the free live stream called Real Estate Reality Check. And as you can tell, the discussion between George and Rachel and I will be fun and entertaining. It always is.

All right, Zach is with us in Chicago. Hey, Zach, welcome to the Ramsey Show. Thank you, Dave. Thank you, Rachel, for taking my call. Sure, what's up? So I've been on your program for about three years now, and I am debt-free except for my mortgage. Good for you. I am.

Thank you. I am. No, thank you for providing this knowledge and Rachel. The next step here in my life is I'm getting married in November. Yay! Congratulations, Zach. Thank you. Thank you. And I have a new problem that I never thought about before this.

So it kind of took me off off guard and I don't know how to handle it. The wedding is a traditional Indian wedding and we're cash flowing all of it, mainly her parents and my parents. So that's not the issue. The issue is they're insisting on gifting us a bunch of gold, both of us, from both sides. My side to hers, her side to us, because that's what they do. It's tradition. What the hell am I going to do with a bunch of gold sitting in a safe for the next 30 years? Because I asked my dad, Dad, where's your gold that you got from your wedding? It's been sitting in a safe deposit box

for 40 years. What am I supposed to do? What am I supposed to do? It's tradition. That's my thing, Zach. A little bit. How fun. Yeah, it's exciting. So how much do you think all this gold will be worth?

If I was to put a number on it, I mean, we probably, I'm going to end up with like $50,000. Wow. Okay. So how long before you sell it? Exactly. I mean, the problem I'm having with it also is my family's going spending and paying 10% to 13% on tax for buying this gold. That's money that I don't get. That's not your problem.

That's their problem. I would take the gold and I would hold it long enough to hurt as few feelings as possible, like a year, and then I would sell it, turn it into cash. That's simple. It's a nice tradition. It's a nice tradition. A $50,000 gift of any kind that I can sell later for $50,000 is a wonderful gift. Not hurt people's feelings. Holding off to hurt as least... Something's happening.

I feel it. I feel it in the air. Change them before our eyes, Dave. Change them before our eyes. Oh, yeah, that's it. This is The Ramsey personality, is my co-host today. Open phones at 888-825-5225. We're live on the stage, the debt-free stage.

Brandon and Blair are with us right here in the lobby. Hey, guys guys how are you hey subtle shirts we just wanted to make sure the point got across make sure it's right you need like lit up debt free i like it i like your shirts a lot i'm kidding with you i love them so how much debt did you pay off we paid paid off $230,000 in 38 months. Good for you. And your range of income during that time? We started off with $126,000 and ended with $170,000.

Excellent. What do you all do for a living? I'm a teacher. What grade do you teach? Second grade. Oh, I love it. Sweet time. Sweet kids.

Yes. And I'm an implementation manager for I love it. Sweet time. Sweet kids. Yes. And I'm an implementation manager for a financial institution. Very cool. Very cool. We got some second graders running around among the grand baby show. We got one going on. We love second grade teachers right now. We know how patient they must be.

Good stuff, guys. So where do y'all live? Greensboro, North Carolina. Greensboro, North Carolina. Very fun. What kind of debt was the $230,000? It was a little bit of everything, Dave. We didn't meet a 0% interest card that we didn't love.

So we had all sorts of consumer debt from beds to furniture to appliances, car loans. Student loans were the biggest. We even had a house that we decided to keep for a while and ended up getting rid of. Okay. That was your personal residence or your rental? It was a second home at that time, yeah. Oh, I see. Okay.

So you still got your house. Correct. Now, does this include your mortgage? One of them. It included the first house. Okay, but you still have a mortgage on your residence? Yes. Okay.

All right. Cool. Cool. Yeah, that's a lot, you guys. You were normal. We were very normal. Very normal. Yeah, normal sucks. Yeah. Cool. Yeah, that's a lot. You guys, you were normal. We were very, very normal. Normal sucks much money left over at the end of the month. And we had this nine-year-old and no way to pay for college. And so it just, it really hit hard. And we looked at, you know, how many debts we actually had. And we had, I think, about 18 different people we owed money to. And that like really hit hard that the majority of our paycheck

was going to debt. So I remember telling Brandon, we've got to do something. We've got to figure something out. And so I Googled how to get out of debt and baby step two snowball popped up. And so I clicked on it and I immediately was like, this is a great plan. And he's our spender. And so I did not think that he was going to get on board. And then I realized that was baby step two. So I kept looking and saw that there were seven baby steps. And Brandon agreed to do it.

I did not think it was going to stick. And then the next day he came home and he was so excited. And he said, oh, my gosh, there's a podcast and you've got to listen to it. And there's even people who will get on and they'll scream that they're debt free. And it's super exciting. And we were hooked from there. I love it. Sneaking in there. Yes. Oh my gosh. Okay. So what did that conversation look like? Because there's a lot of people listening that are like, oh, you know, it's the wife and she's like, I want to get my husband on board. What did she say, Brandon, that kind of made you, that kind of hooked you, that made you even look up a podcast? That you kind of were like, okay, I'm intrigued by this idea of actually becoming debt-free.

It was that budget sitting down and looking and realizing we make a decent amount of money, but we can't enjoy it. It's gone before it even hits the house at that point. It does kind of tick you off. We make six figures, we're broke. It's gone before it even hits the house at that point. It does kind of tick you off. We make six figures, we're broke. It's very frustrating. And then to see the little one here at nine and not know how we were even going to think about college at that point, I felt like we were letting her down.

So we needed to get kicking into gear. Good dad. Good mom. That's good. There's nothing like changing your family tree to motivate you. That's real. So we needed to get kicking into gear. Good dad. Good mom. That's good. There's nothing like changing your family tree to motivate you. That's real. You look in their eyes and you go, I have to be a grown-up, and I'm going to fix this mess.

That's good, guys. I'm very proud of you. So what were the things you guys did to get the most progress when getting out of debt, would you say? Well, I took on quite a few different little side gigs i did a lot of tutoring which brought in quite a bit of money um what can you get an hour tutoring i did about 35 an hour yeah what was the main subject um reading reading yeah i love it and then i also that's also the way, very helpful for the parent. Yeah. Yes. And whenever my county offered like any kind of training and they would pay us to do it, I went through the training. So even if it didn't really apply necessarily, I still did it because they were paying me

for it. And so that definitely helped. Nice part-time jobs. Yeah. Yes. And we also sold his truck. Sold the truck. Oh, man. Oh, now it got real. Yeah truck. Sold the truck, Dave. Oh, man.

Oh, now it got real. Yeah. What was the truck? It was a Ram 1500. Brand new at the time. Whoa. What did that sell for? We just sold that a couple years ago, so it sold for around $20.

Yeah. It's a beast of a truck. Yeah. Oh, man. That was a hard one. The good news is if you drive like no one else later you can drive anything you want we're gonna get there you're on your way yeah way to go guys wow that that was that you guys are committed you you deserve a big bold shirt yeah you were committed i mean you you did the hard stuff the hard work and everything else so at

the end of the day when someone hears you paid off $230,000 in 38 months, a little over three years, that's a rowdy number. Sold the truck. Sounded like you sold a second house or a third house or whatever it was. And so you moved some stuff. But what do you tell people the key to getting out of debt is? I'll let you go first. Okay. To me, it's the budget. It allows the

spenders to spend. It gives you permission. I feel you, Brandon. That's right. It gives the savers a little control over us. So I think that's really important. And when Murphy calls, because it's going to call along the way, especially over 38 months, and I know others have done longer journeys, you have to start with taking debt off the table. It's really easy to say, let's go grab some more debt. But when you make that decision to take debt off the table, you find other solutions on how to do things. And then for me, it's all about changing your mindset. You have to realize, one one that you're not a victim. That was really big for me because I'm like oh poor teacher can't get ahead. You know we don't make a lot. Took out all these loans. But then I had to realize no I took out these loans. This is

my fault. Now let's get out. And then to also realize that you're not the exception. There's a lot of people who say oh well but my story different, and so I can take the debt out. Or, you know, I can use a card here because this is a different situation, and you are not the exception to the rule. Your plan works. And so if you follow it and you do it correctly, it works for anyone. Can you guys fill in for me when I'm out? They got this dialed in. I mean, that's good right there.

That'll preach. Amazing. Good stuff. Very, very good. Good job. that's good right there. That'll preach. Amazing. Amazing. Good stuff. Very, very good. Good job. So proud of y'all. Thank you.

Hey, we got a copy of Baby Steps Millionaires for you. That's the next chapter in your story. You will be Baby Steps Millionaires, the third most likely career to become a millionaire as a teacher. So you are on the list right there, right up there at the top. Very, very good. And a copy of Total Money Makeover for you to give away to someone someone we'll also give you a one-year membership to the brand new financial peace university new videos with george uh camel chris hogan dr john not chris hogan i'm sorry

rachel cruz and chris was in it yeah and rachel cruz and dr john deloney in it and me of course so brand new videos all out right now with Ramsey Plus, Financial Peace University, and that'll give you something to give away. Or if you hadn't ever been through it, time to go through it. Did y'all ever go through it? We did. Oh, okay. Whenever we were pregnant and we were about to have the baby, you had done a trial where you could do it for free during COVID. Yeah. And so we binge watched all the videos. Good, good. I love it. Very good.

We weren't going anywhere, so yeah, we just sat there and watched them. Might as well, yeah. I guess I have something to do. It's either that or Tiger King, so. Good job, you guys. Good job. All right. Brandon and Blair, and bring in Madison and Rowan with us from Greensboro, North Carolina.

$230,000 paid off in 38 months. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! Yay! That's how it's done, ladies and gentlemen. This is The Ramsey Personality is my co-host today.

Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee. Even if you mismeasure or you pick the wrong color, they'll remake your blinds for free. Free samples, free shipping, and new promos all the time. You'll save even more. Always use the promo code Ramsey. Today's question comes from Robert in Kentucky. I used to be a business owner, and my minor children were on the payroll for modeling on our website and doing commercials.

Their pay was just enough to fully fund their Roth IRAs. Now I have sold my business so they no longer receive W-2s. Can I fund their IRAs by having them do chores around the house if I keep track of the chores and the amounts paid? No. No. Won't survive an audit. So you have to have an earned income to fund an IRA and you have to file a tax return on the earned income. And no, you can't have them work for you.

Now, what you can do and what I did with Rachel, Daniel, and Denise was that any work that they did at the office, like you had done, I mean, we didn't do any modeling, but we had you selling books at the – you were the cute kid selling books at the book table, but you actually did work your little tail off. And so we paid you well for that, kept track of that. And then I added up anything that you all made outside of our home. Babysitting, dog sitting, yard cutting, whatever.

Your integrity snacks. It had to be something outside of our home you cannot pay a kid for doing chores and file taxes on it but you can do that if they work uh doing something outside the home because someone else has paid them and is an income and then you file that income and pay income tax on the income if it's taxable in that situation if there's enough there and whatever that amount totals up to up to the maximum on the roth ira you can put in so like i remember one year one kid made like 1223 dollars and we added it all up and that's all we could uh with integrity

before god tell the irs that they had really made we don't we didn't lie about it in other words and so i filed tax return on that kid 1223 dollars and i opened a roth ira now i paid the taxes this is a 14 year old or something you know i paid the taxes and i put the money into the roth ira the 1200 bucks into the roth ira but it enabled me to where you guys all came out of college with a pretty good amount it wasn't like two hundred thousand dollars or something but it was up there's north of 50 grand probably and that they had all grown to and you've done them a little bit of time from the time you're about 10 up through 18 or whatever and we file tax returns on you every year and so that you have proof that there's an earned income when you file it.

Now, if you don't file the tax return, you're going to get in trouble. And if you can't justify proof that there's good work. In other words, you can't have someone come to your office and do modeling and pay them $800,000 when you could have hired another model for $2,000. You can't do that, okay? It has to be market value for the labor now it can be the upper end of market value for the labor but you know so uh when you guys did work here at the office in the summers we did we paid you well so that we could fund that thing but we didn't pay you like 5x of what we would pay someone else because you can't that won't survive an audit it's not it's didn't have it's not a marketplace wage and so that's how you can do that but it's a good

it's a good question and it's what uh baby step seven that's where you would do stuff like that you would not do that if you don't have your mortgage paid off yeah you pay your mortgage off you would not do that while you're putting more that you put more than 15 percent away for retirement you would not do that while you haven't funded the kid's college fund. And instead, you funded the Roth IRA. You would not do that. So this is all after everything else is done. House is paid off at baby step six.

Now we're just loading up anything we can load up, and that sets the kid up. Wow. And, you know, realistically, they can be millionaires well before they're 30 if they stay out of debt, don't have college debt because of you, and you do stuff like that because of you. And then they come into their first home, and you're able to help with that because of you. You do all of those kinds of things. You could set that. If the kid's got their head screwed on, you know, then they can come out.

The math comes out really well in their favor. Well, and it's the intentionality, and I feel like that's a little bit of that idea, like when people say, like, the rich get richer kind of thing, right? Like, it's a different mindset, but when you have the mindset of Baby Step 7, when you, as a person, you have no payments, your house is paid off, you're funding college, it almost gives you the bandwidth to think, okay, how can I continue to change my family tree? What is that? How do you continue to pass on not just the monetary side of it, but also the character

side of holding it? Yeah, you teach them the hard work ethic and saving and generosity. Versus a home where nothing is ever talked about. You're just, you know what I mean? And this isn't a conversation. There's no teaching. There's no guiding there's nothing then your child has to start from ground zero as an adult probably getting themselves out of debt and trying to figure this out right so it's just the whole changing your family tree it's it's a it's a it's a big scope a big scope

yeah it is it's more holistic than simply the math. Totally. Yeah, I think so. That's what you're saying. For sure. And you're right. It is the answer because I didn't grow up in a rich household. I mean, we weren't poor. I didn't go without food or anything, but we weren't rich. I mean, we knew those rich people lived over there, you know. And so when I decided I was going to become a student of rich people, the rich get richer. That's how people that are mad about it always say,

Ah, the rich get richer. Par get par. Yeah, because they keep doing rich people stuff, which is intentionality. It's not screwing people. They just think about it. The way I grew up, you wouldn't have thought about doing something like fund the kids' Roth IRA. We weren't even funding our own Roth IRAs. Let's talk about funding some 12-year fund the kids Roth IRA we weren't even funding our own Roth IRAs but let's talk about funding some 12 year olds Roth IRA right that's a that's an intentional

like you said that's intentionality and you have the bandwidth mentally to say you're not worried about you know putting food on the table and paying the bill next month when you're out of that mindset something happens when you don't have debt you have an emergency fund you follow this plan there is a a shift i think that you just you have the capacity in your mind to start thinking okay what else can we do creatively to to help our family well it opens up both investing and generosity yes because you've got the bandwidth and the bandwidth doesn't come from more money the bandwidth comes from being on a budget right and when these folks say you know what what got you out of debt i always i always say the budget

everybody says the budget the budget because what the budget does is you're telling your money what to do instead of wondering where it went and no one tells money to do something stupid on purpose but we've all done something stupid with money because we didn't bother to tell it what to do yes and so when you're thinking about it like that that's what rich people do yes do you recommend utmost still utmost do i recommend them yeah you can do them it's just an account in the kid's name but i know would you it doesn't grow tax-free right so would you recommend parents let's just say you have parents listening on baby step seven go that hey kid work work work we're gonna file taxes on you we're

gonna do the roth ira route that's more i would do the Roth, and I would do a 529 for college. Yes. Before I did an UTMA. Yes. Those are in better favor for the child long term. Right. Well, the UTMA, Uniform Transfer to Minors Act, is simply any account in the kid's name. Yeah.

If you open a savings account at the bank, it's an UTMA. Yeah. Technically, under the law. It just means, because kids are, if you're not 21 or not 18 in some states, you can't do contracts, so you can't open a bank account. So your parents open it in your name, and they are named the custodian, and that is an UTMA. But that happens with a mutual fund, or technically a 529, it falls under that. Because I've heard of some parents doing that instead of like an ESA or 529. Yeah, but they're not getting the tax break.

Yeah. And so, no, you're missing out on the free tax growth. Tax-free growth is not an up-money. So, no, I wouldn't do that. I would do the 529s first. But everybody's always trying to game the system. So, instead, just bother to care. And that games the system.

That's what rich people do. Rich people are not consumed with money. They're not greedy. It's just they are students of it rather than students of victimhood now some poor people are poor not because of their uh bad habits some people are poor because they're in a situation where they're being oppressed by another people group in some way and so poor people are often taken advantage of and it keeps them poor and that's that's not

good i mean we never endorse that but but you know every time i have done something stupid with money it made me more poor you lost money you know that goes with the part of it is that okay part of it is you're doing stupid stuff with money and part of it is just the evil that is in the world that you know payday lenders taking advantage of people. Right. That kind of stuff. And you don't see payday lenders and the rich into town. There's a reason.

Rich people don't do that stuff. They got rich. There's that thing. OK, so that puts this hour of-host on The Ramsey Show. If you want to do your debt-free scream live on the show, visit ramsaysolutions.com slash debt-free scream. We'd love for you to come to Nashville and tell Dave your story. That's ramsaysolutions.com slash debt-free screen.