The Ramsey Show - App - He Traded a Lawn Mower and Case of Beer for a Van! (Hour 2)

Episode Date: March 8, 2019

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Live from the headquarters of Ramsey Solutions Broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show. When 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 am Dave Ramsey, your host. This is your show. Thank you for joining us. As the status symbol of choice. I am Dave Ramsey, your host. This is your show. Thank you for joining us.

Open phones at 888-825-5225. That's 888-825-5225. Skye is with us in Oakland, California. Hi, Skye. Welcome to the Dave Ramsey Show. Hi, Dave. How are you? Better than I deserve.

How are you? I than I deserve. How are you? I have a question for you. I'll be 59 1⁄2 in two months and 60 years old in eight months when I plan on retiring. And also at that time, I'll be receiving an extra $1,500 a month for being an Army retiree. I'm on baby step two. I have $48,000 in debt and $150,000 in TSP right now. My question is, should I withdraw the $48,000 to become debt-free and then roll over the balance into a Roth IRA? You're single? Yes.

You got any other nest egg or retirement that we're not talking about here? Maybe about $5,000 in savings. Okay. Why are you retiring at 60? 34 years working with the postal service is enough. Okay. What do you make? $65,000. Okay. Because you you make? 65.

Okay. Because you don't have much money. Right. If you pay off this debt, it's going to cost you about $75,000. It's going to cost you about half of your nest egg. Then you've basically got $18,000 a year to live on, which is your Army income. Uh-huh. That's not much.

I'll have what? You'd have Social Security, plus you'd have the $1,500 from the Army, right? And a check from the post office, which will be probably about $2,500. Okay. Well, there's another $30,000. So that puts you at $48,000, plus Social Security, you might be at $60,000. And basically you'd have no money and have a $60,000 a year income. Do you own a home? Yes, in another state, but I'm in California right now.

You're renting? No, my mom lives there. And so you're living in her home? No, my mom lives in my home in Louisiana, but I'm in California living right now. So you're renting now, or you own the home now? Oh, I'm sorry, yes, I'm renting right now. Are you going back to Louisiana when you retire? Possibly.

I haven't made up my mind just yet. Okay. All right. Because you've got to pay for housing out of this is what I'm starting to figure out. Yes. Is the home in Louisiana paid for? Yes, it is. What's it worth?

Probably about $80,000. Okay. All right. Well, you and I are about the same age, okay? I'm 58 1⁄2. Okay. So we're pretty close. The chances of me quitting next year are zero.

However, I love what I do, and you hate what you do, so I get it, okay? I don't actually hate what I do. I like what I do, but I'm tired of doing what I do. I got you. Okay. So here's what I do. I like what I do, but I'm tired of doing what I do. I got you. Okay. So here's what I'm looking at. Your income is going to drop, and you have almost no nest egg after we pay off your debt, meaning you've got about $75,000, which is, you know, if you hand it to me, I'll take it.

But in terms of a retirement nest egg, I'd rather it be $750,000 than $75,000. You follow me? Right. And you've got a paid for house so if you live very conservatively which you have done a pretty good job of except for this debt you ran up if you live pretty conservatively and live within your social security your army and your post office income at retirement then you'll be okay but it's it's going to be a pay cut so i'm going to suggest you look for what we call an encore career i think during the decade of your 60s you might make more money than you've ever made in your life if you get a little bit creative and think about what you want to do when you grow up right and so uh going and fishing at the bayou probably is not in your future.

You probably need to think about creating some income. Because if you could create another $60,000 of your income and doing something that you enjoy during the 70s, I mean during your 60s, and put that into a nest egg while you've got this other money coming in, you know, you've got $120,000 income at that point point basically uh more than you've ever made in your life because you got all this retirement income plus you'd have the new income from the encore career that means like take a bow right and that's encore after the curtain goes down curtain comes up you come back out and take a bow that's your encore right and and so a lot of people make a lot of money in their 60s because they're having fun doing something they love and they're enthused about it, creative about it. And it's just not time to put your feet up. I'm OK with you saying I'm done with the post office after 34 years.

I get that. I'm worried mathematically that you don't have a lot built up. So, yes, I would pay off your debt, and I would take a bow, take a breath, probably move to Louisiana, and step back out onto the stage and say, no, what's my encore? I got 10 years left, maybe 15. I could do all kinds of stuff from 60 to 75. I'll probably write three books and do 500 or 600 events during that decade while you're doing this, just to give you an idea. I don't really need any money.

I'm good. But I'm just having fun. I'm just having fun, and I like helping people. I like doing what I'm doing. I like getting out here in the marketplace and stirring it up. I like helping people. I like doing what I'm doing. And I like getting out here in the marketplace and stirring it up. I like helping hurting people and making crazy people angry. I just enjoy it. And so, you know, that finds you something like that where you just are like, yeah, thank you, Monday.

Thank you, Monday. Here you come. And plug into something like that and let's get some more income coming in because I think it's going to change your life if you do financially. Thanks, Monday. Here you come. And plug into something like that, and let's get some more income coming in because I think it's going to change your life if you do financially. Thanks, guy. Good to talk to you. Open phones at 888-825-5225. Thank you for joining us, America.

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confident you'll love pure talk usa that we invite you to try our service risk-free. Visit puretalkusa.com or call 844-862-3677. Enter promo code SAVEDAVE and receive 50% off your first month. That's puretalkusa.com. Thanks for joining us, America. We're so glad you are with us. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee. That means even if you mismeasure, you pick the wrong color, you goof up. Sometimes I goof up on stuff like that. They'll remake your window blinds for free.

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I'm a promo code. Oh, brother. All right. Hey, Blinds.com is great, though. They're an incredible company. Charlotte is in Colorado and says, I've got a question in regard to the 25% rule for home mortgage. We live in Steamboat Springs where property prices are high. Only condos will be in our price range.

Should the HOA fees be included in the 25%? HOA dues are very high here due to the high cost of snow removal, sometimes as high as $350 a month. Okay, here's the situation. The whole thing of saying don't put more than 25% of your take-home pay into a house payment on a 15-year fixed-rate mortgage is so that you don't get house poor. I grew up in the real estate business. I got my real estate license in 1978.

I'm old. I have seen a lot of people do a lot of stupid stuff with real estate. And I've seen a lot of people make a lot of money in real estate. You know who makes money in real estate? People that don't get themselves in a position that they're forced to sell it. Real estate that sells fast is known as cheap. It's a good buy for me because I'm going to buy it from somebody who's in trouble. So you can kind of back in going, you know, I live in New York or Steamboat Springs.

There's snow. Do I get a pass on math? No, you don't get a pass on math. Math works everywhere. Exactly the same. And so if you don't make enough to live in an area where the real estate is expensive, that means you don't make enough to live in an area where the real estate is expensive, that means you don't make enough to live in an area where the real estate is expensive.

I live in Williamson County in Tennessee. It's the wealthiest county in the state. It's the 11th wealthiest county in the nation. It's absurd. The average house price in our county is double any other county in the state. Cray cray. I mean, it's nuts out here. It's this little suburban bubble outside of Nashville.

There's those types of areas all over America. And I can't afford to live in Williamson County. Maybe not. Maybe not. You have to make afford to live in Williamson County. Maybe not. Maybe not. You have to make more to live there. I can't afford to live in Manhattan. Probably not. Pretty much got to make six figures to live on the island, darling.

Some of the most expensive real estate on the planet. Orange County, Manhattan, Miami Beach, Tokyo, London. These are all right. Singapore. They're all right there together. And you just have to make a lot of money to live there. And so I get this question all the time. Well, Dave, I live in California.

Well, maybe you don't anymore. Or maybe you're going to move to a different part of California. But you're probably not going to a different part of california but you're probably not going to live in freaking laguna beach you know if you're making 45 000 a year the numbers don't work sorry you don't get a pass on math so you can include the hov fees. You can talk about snow. You can not talk about that. But at the end of the day, the question is not whether my 25% works or what you include in the 25%. The question is, after you get through paying for your house, are you broke?

And when you take out a house payment, HOA fees, PITI, principal interest taxes, and in Texas, you're high. Well, I understand. You live in one of those areas where stupid people have run up the tax base and then wonder why everybody left. And so that's what's going on. And so you've got to ask ask yourself do i fit in here but when you add it all together and then you are finished paying for your housing are you broke that's called house poor and when you get much over 30 on that you start to get into trouble 30 of your take-home pay now a mortgage company on a 30-year adjustable rate will qualify you for about twice as much as you can actually afford

but you can't do anything else after you pay your payment i mean your kids are going to be skinny please don't talk to me about vacations please don't talk to me about vacations. Please don't talk to me about saving for your kid's college. Please don't wonder why you're not able to fund your retirement when you've got your house strangling you. I love real estate. Owning your own home and getting it paid for is one of the two primary pieces of financial data that will lead you to being a millionaire. Owning real estate is absolutely vital for your financial future. But owning it the wrong way will destroy your life. Biting off more than you can chew and you choke on it will destroy your life.

So real estate's a two-edged sword. Oh, everyone should buy real estate. Real estate is the answer. When poor people don't have access to real estate's a two-edged sword. Oh, everyone should buy real estate. Real estate is the answer. When poor people don't have access to real estate, when broke people can't buy real estate, we need policy change. There's systemic problems with our way of life. Capitalism isn't working. No, you're full of crap, and you just can't do math.

Because when a whole bunch of broke people buy houses, you know what happens? They securitize that stupidity and sell it in hedge funds. Oh, wait, then they take it to the main market. Oh, wait, you can almost destroy the entire way of life known as the United States. You know what happened in 2008 when a whole bunch of broke people bought houses that couldn't afford houses and put them on mortgages and overpaid for them, and they securitize that crap meaning they bundle the mortgages together and sell them as fannie mae blocks in bonds and then they all failed well shock broke people buy houses it makes them broker that's why they call them mortgage brokers don't do it i love real estate i want you to get a house it's a key part of you

becoming wealthy but when you rationalize your butt off and think math done and you try to find a way that i can i can somehow figure out a way that i'm going to overpay for this and it's going to be okay because my situation we have snow that's just bogus doesn't work it's like the guy who says i gotta have a four-wheel drive truck for snow snows once a year you gotta have a four-wheel drive truck so you go forty thousand dollars in debt to drive once a year i mean this is just rationalization no, you count everything. You don't count the utilities, but what does it cost for you to own this property? And is that going to own you? That's the question you have to answer. The rule of thumb we use is you shouldn't have more than about 25% of your income,

your take-home pay, going towards that. Then that leaves room in the other 75% to buy stuff like food, college funds, retiring with dignity, saving up and paying cash for the next car so it's not in debt, saving up and paying cash for the next couch so it's not in debt, saving up and paying cash for your little vacation so it's not in debt. And when you have so much debt on your house that you have no margin, no disposable income in your budget, all the other stuff starts turning into debt, and this snowballs and falls down on your head.

No pun intended. So, check it out, folks. We've got to use common sense. If you think you've got house fever and you're getting ready to do something stupid with the house, go take a cold shower. It'll help you get over the house fever. This is the Dave Ramsey Show. All right.

Hey! All right. Yeah. We'll be right back. Heidi is in Dayton, Ohio. Hi, Heidi. Welcome to the Dave Ramsey Show. Hi, Dave. It's a pleasure to speak with you. You too.

What's up? My husband and I are on baby steps four, five, and six, and we are eager to pay off our mortgage early. I'm considering taking a part-time job for that purpose. And we were wondering if 15% of that income should still be invested for retirement. Doesn't matter. Okay. The point is to be putting a substantial amount of money into retirement. Okay.

I mean, if you did 16% or 14%, it's not going to mean you end up broke. Okay. You know, and so what's your total household income, not counting the part-time job? It is $75,000. Okay, and how much would the part-time job pay? Well, it depends because it's an hourly thing. So I was thinking about eight to ten thousand per year ten percent ten percent okay and so that's the difference in saying uh i'm going to only do

13 and a half in my baby step four instead of 15 okay whoopee you're still going to be wealthy okay it's not a big deal for me yeah i me. Yeah. I mean, you can do it. You could do it or you could not do it is my point. You see what I'm doing? Yep. So the big principle is in Baby Step 4, be putting a substantial amount into retirement, but not so much that you can't do some other things like get your house paid off,

which is what y'all are aiming at. Right. In other words, I try to keep people from putting 25% away into retirement when they hadn't got their house paid off because then they don't have any extra money to pay on their house. But I also don't want them only putting 5% into retirement because that's going to be weak. That's going to be anemic.

You follow me? And so the 15 is something we kind of just jostled with back and forth and ran several case study scenarios out many years ago, and it works for almost everyone over a long period of time while you're getting your home paid off. The trick is, when we're talking about 5 to 10 years, because most people pay off their home in between 5 and 10 years working this program, and so then you're debt-free completely.

Then you just load up everything. Mike's with us in Los Angeles. Hey, Mike, welcome to the Dave Ramsey Show. Thanks, Dave. How are you today? Better than I deserve. What's up? Oh, great.

Hey, my wife and I are on baby step three. I'm 30 and she is 27, and we have a combined income of $115,000. Our only mortgage, or I'm sorry, our only debt is our mortgage. And so we're taking that into consideration as we're on Baby Step 3 and building just that amount for Emergency Bunch. I'm actually starting a new job thanks to Ken Coleman's help that I think is going to be my dream job. Fun. And I'm starting that at the end of the month.

Great. And they offer a 403B that matches up to 5%. I'm curious if I should take that or if I should do an IRA instead. The order of the rock, paper, scissors on your retirement, how to do your 15% of your income is matching is first, Roth is second. Matching beats Roth. Beats beats traditional. Now, is this 403B a Roth 403B? I don't believe so. I need to look through the benefits package again probably not not many

of them out there okay about about 70 of the 401ks now have roth available but a lot of the 403bs they're running behind so uh anyway but you got the match so i would do the five percent into the 403b in good growth stock mutual funds, and then I would do individual Roths. Okay, so 5% in the 403B. Because match beats Roth. Because, see, basically, they're doubling your money before you start. Correct. But you've got to pay taxes on the growth.

Well, after you pay taxes, you still came out ahead on doubled money. I mean, you put in $1,000, they put in another $1,000. It's hard to mess this up. Sure. So you get the match, but then tax-free growth beats non-tax-free growth, which is traditional. So we get the match, then we do the Roth, which is tax-free growth. Then, if that doesn't get you there, then you could go and put a little bit more non-matching traditional into a Roth.

I mean, into the 403B if you had to. So right on track. Well, very cool, Tyler. I'm glad Ken was able to help you. His new book, we started the pre-sale on it, The Proximity Principle, and it is going zoom, zoom. The Proximity Principle Proven, and we'll pick it up off the proximity principle proven i'm gonna pick it up off the floor here proven dropped it yesterday the proven strategy that will lead to the career

you love by ramsey personality ken coleman the proximity principle he does a career show answering questions for you on sirius xm it's a very popular podcast and this book is uh on pre-sale right now we just launched launched it this week. So good stuff. Thanks for calling in, man. Tyler is with us in Baton Rouge. Hi, Tyler. Welcome to the Dave Ramsey Show. Hi, Dave.

It's an honor talking to you. You too, sir. How can I help? I got in a situation in April of last year. I was coming up on a layoff at my job in Pasagula, Mississippi, and the railroad called me up in Baton Rouge, and they offered me a job, and I was only making $50,000 a year at the time of the layoff, and, you know, God blessed me with this opportunity over here at the railroad. I had $30,000 worth of debt at the time. I eliminated that within the first four months.

What'd you make? How much did you make? I was making $50,000 a year back home at my last job. Yeah, yeah. And when I got the opportunity to come to the railroad, I made about $100,000. Oh, you doubled your money. Wow. Yes, sir.

Yeah, you went from being laid off to doubling your income. Look at you. Ding, ding. Thank you, God. Okay. Thank you, God. Yeah, you went from being laid off to doubling your income. Look at you, ding, ding. Thank you, God. Okay. Thank you, God. That's right. So my problem is, you know, my wife is disabled, so she can't move over here with me.

So what I did was I— Why? You can't be disabled in Baton Rouge? Well, you know, she needs her mom and dad to, you know, help her out, you know, and to get around and all that stuff, you know, while I'm at work. So that's kind of the issue we're facing. What's the nature of her disability? You know, it's like a brain disorder type thing. It's like a neurological thing.

So she can't drive or anything or get the kids to school or anything like that. But what I'm getting at is, you know, it's really good to have the support back home. So she couldn't move it with me at the time. So what I ended up doing was I found a van on Craigslist, traded a llama or any case of beer for it. You traded what a llama did you say a llama i traded a lawnmower and a case of beer lawnmower oh okay a lawnmower and a case of beer for a van i got you i love this guy okay so i moved into the van because i didn't want to pay i'm in debt at that point right so i didn moved into the van because I didn't want to pay. I'm in debt at that point, right?

Yeah. So I didn't want to move into an apartment and have two mortgages and then also have debt to pay off on top of that. So I just basically have been living in my van for the past year. Down by the river. I'm in debt. The van down by the river, huh? Pretty much, man.

Oh, you're incredible, man. You're roughing it in order to get your family straightened out. I'm proud of you. Unbelievable, man. So I've got about $95,000 left on the mortgage. And at the rate of the money that I'm making right now, if I just kept doing this for like two years, I could have the house paid off, you know, by the time I'm 30.

Mm-hmm. So would you recommend me just do this for like the next two years and just keep doing it? I mean, it ain't bothering me too bad. And pay it off in two years and then move back home? And then take another job making like $50,000 a year again? Or do you think I should just do this for like 10 years and, you know, build up a lot of wealth? What were you doing when you lived there before? I'm an electrician.

Okay. And the railroad doesn't have jobs there? Not really, no, sir. Okay. I kind of like, I would look for an option where I didn't make $50,000, but I went back home. I'd like to make $75,000, and then I'm going back home and getting out of the van down by the river as soon as I can. If I'm you, you know? I mean, you know, you're willing to do it.

I mean, that's very manly on your part. I appreciate you, you know, sacrificing for the good of your family. I'm not, well, I've got to answer the truth. Truthful question. I'm not doing that. I wouldn't do that. But if you're willing to do it, it's not a bad thing. Wow.

Wow. The beauty about this show is we take more calls than all the other talk radio shows in America put together. This show is about you, and you are just inspiring. Okay, because you hear all the stories of these little snowflakes who can't get a job, right? Oh, I can't get a job. My life is falling in, and I can't find something in my area of study. And so I live in my mother's basement till I'm 38. You hear all that crap, right? I hear these people.

I got participation trophies lining the wall, right? You hear these people. And then you talk to that last guy. His wife is disabled with a neurological disorder to the point she can't get her own kids ready for school. Her parents have to help her. He loses his job in Mississippi. And what does this man, this manly man, do? He commutes to Baton Rouge.

How does he do this? As only you could do in Mississippi. He trades a case of beer and a lawnmower for a van. Touchdown. I'm a redneck all the way to my soul. Touchdown. If you could trade. I want to hear how this negotiation went down.

Oh, the lawnmower. I don't know about a lawnmower. I'll throw in a case of beer. Done. I'm just wondering what kind of beer this was. That's what I want to know. You know, he's not even 30 years old. And he doubled his income, making $100,000 a year working as an electrician

on the railroad, away from his family in order to take care of his family. You didn't hear him whining at all. He's living in the van during the week while he's in Baton Rouge, and he goes home to see his wife and kids on the weekends. He's sleeping on the floor of the van. And just cheerful. Not whining. Not entitled.

Not mad at Obama or Trump. Not trying to figure out how some socialist is going to fix his life. He dove in the back of the van and took care of his family. That's freaking inspiring. It's inspiring. What a guy. I mean, you should be lucky enough that your daughter would marry a man that would do something like that to take care of his family.

That's who you ought to interview for is to find a guy with a backbone like that. I mean, this guy's doing it. And not only that, he's willing to do it for two more years. So that his house is paid for. So that when he goes back home and takes his pay cut in half, everything will still be okay with his family, because he's experienced being jobless and doesn't want to feel that feeling again.

Now, we were cutting up with him, and, you know, I couldn't resist. He's living in a van down by the river. I mean, it's the old Saturday Night Live skit with Chris Farley, right? You'll end up in a van down by the river. I mean, it's the old Saturday Night Live skit with Chris Farley, right? You'll end up in a van down by the river. And I mean, remember the skit, right? But all of that aside, just listen to what that guy was doing. And who does that? Real people every day.

And that's why some of us have no tolerance for you if you're one of those whiners oh well the little man can't get ahead there's just no jobs out there in the trump obama economy you just can't we must resist you little whiner well that guy dove in the back of a van that he traded for a case of beer and a lawnmower translation this ain't much of a van boys and girls and he's sleeping in it you listen i don't hear your whining my tolerance for whining for the next hour and a

half is zero i've just used it up on him because he didn't whine wow wow you know what this means if you listen to that would you do that i'm not doing that i mean i i probably would have when i was 28 i probably did stuff like that when i was 27 you do whatever it takes you hustle grind feed your kids done some pretty wild stuff i've worked a lot of hours in my life i've done some pretty nasty butt jobs that nobody else would do just to make a little money to keep the lights on i've done all that i've opened the front door and the wolf was standing there. I know who he is, the wolf at the door.

But you know what? I got to answer truthfully. I don't know if I have never been away from my family for three years. And some of you that serve in the military are gone like that all the time. Thank you for your service. I can't emotionally relate to it. I so honor you. I so appreciate you if you're willing to do things like that for the good of your family, the good of your country.

That's called serving. That's called sacrificing for others. And that's what that guy was doing. Now, maybe you're not willing to do that but maybe you're sitting there with a sixty thousand dollar debt on your freaking tahoe and you're whining about having to get rid of that to get your life cleaned up and this guy just made you look like a fool he made you look like a complete wuss you're sitting there with debt up around your eyeballs all your little lifestyle he made you look like a complete wuss.

You're sitting there with dead up around your eyeballs, all your little lifestyle and your pride, and you're unwilling to break that. And this guy dove in the back of a case of beer van and took care of his family. Wow. We salute you, sir. Appreciate the humor. Appreciate the good humor in your voice and in your character and it's

a great story because there's a little humor in there with all the pain but wow wow so would i for another two years do that if I were him, I doubt it. I think I would find another way to pay off my house. I think I would go back home, be with my wife and kids, take a pay cut, but let's not assume that it's all the way down to $50,000. Let's try to find something in the $75,000 to $100,000 range. Maybe you start your own electrician's outfit

because you obviously have a lot of initiative. And maybe it's time to start your own business, and maybe it's time to do some other stuff. But, you know, in other words, I don't think it's just do I do 50 at home and 100 there. No, I think we do more than 50 and we go home. And that's what I would do. I appreciate your willingness to do what you've done. It was very manly of you to take care've done it was very manly of you to take care of your family

very manly of you but I'd probably go home and find a way to make a little more money than I used to make and be there with the wife and kids it's just too hard to be gone that much thanks for the call open phones at 888-825-5225 wow wow wow wow wow wow katie is in sacramento hi katie i yacked so much i almost used all your

time how can i help hi dave i'm so excited to talk to you you too what's up my husband and i just got really intense we read through the total money makeover. We finished about two weeks ago. We're on baby step two now. And just in a month, we've been able to pay off $12,000, which is insane. Way to go. Thanks to your baby steps. And we are kind of in a pickle.

We moved to Redding, California about a little over a year ago, and we found a great rental for a fantastic price. And we have a contract for two years. We signed that with our landlord, but about a year in, so in January, he let us know he's selling his home. And he was trying to offer us to move out early. So we're living really tight here in our home. What's he willing to pay you to break the contract? Well, he was willing to pay us $2,500 like last month, and then he retracted on it.

And because he had another deal that he was going to go through with, but it fell through. So he said, just keep staying there. But we have two small children and I'm pregnant with baby number three. And so we're having people in and out looking at the home. It's kind of an inconvenience, but we were more looking at it as a blessing to get out and maybe find a cheaper place to live. Yeah, that'd be great. Especially if you can get some money out of him. I'd hang on a little bit longer.

It's very inconvenient with everything you're trying to do at once. I get that, especially when you're pregnant with a baby on the way. But I'm going to try to hang on and let him write you a check to move because you do have him over a barrel. This is the Dave Ramsey Show. This is James Child, producer of the Dave Ramsey Show. Once again, you

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