The Ramsey Show - App - Here’s What You Need To Know About Tax Season 2023 (Hour 2)

Episode Date: January 6, 2023

George Kamel & Jade Warshaw answer your questions and discuss: What to expect with your taxes in 2023, How long to plan to live in a house, "How can I make a large business purchase without debt?" Getting out of a car lease. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET 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 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Девочка-пай Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm Ramsey personality George Campbell, joined by our newest personality, Jade Warshaw, and we are so excited to take your calls today at 888-825-5225. If you need a second opinion, a third opinion, some advice, some confidence in a decision, we want to help you take that right next step for your money, 888-825-5225. Cliff kicks off this hour in Knoxville, Tennessee. Cliff, welcome to the show. Cliff, are you there? Hello, can you hear me? Yes, you sound great.

Okay, good. Thanks for taking my call. What's going on? So I'm new to this investing thing. My wife put me on to your show. I've been listening for a little while. So I had no debt. My house is paid for. My vehicle is paid for. I just built up $40,000 in my emergency fund. And so last year I put about $15,000 into the S&P 500. And that was right before the Ukraine war started. Before the crash? last year I put about 15,000 into the S and P 500 and kind of,

that was right before the Ukraine war started before the crash. Yeah. So that's worth about 13,000 right now. Um, and I had a little, um, I was in the army when I was a kid and when I got out, uh, I put 3000 into a Roth IRA when I was like 20. Um, so I've had that forever. And just yesterday, from listening to y'all and thinking about it, I put $40,000 into two mutual funds, and then I did the IRA for last year and for this year. So my question, that left me with $90,000 left over.

You just got cash sitting everywhere, man. Way to go, Cliff. That ain't a bad thing. How old are you? I'll be 38 here in March. Well, first of all, great job. I thought you were going to be like, I'm 70. And I mean, you're doing so great at 38 years old.

My guy is killing it. This man has no debt. He's got all this money saved. He funded last year's Roth, this year's Roth. You're like so great at 38 years old. My guy is killing it. This man has no debt. He's got all this money saved. He funded last year's Roth, this year's Roth. You're like the poster child. And my screen says you have $90K in savings. Yeah, that's what's left over. It's just sitting in a savings account, you know, making very little.

And that's beyond your emergency funds. You've got $40K in the emergency fund, $90,000 in savings. Yeah, I've got $40,000 in one account. That's just my sort of walking around money in case something bad happens. And I had $130,000 in just sitting in savings. I wanted to buy land. I'm real land hungry. I own three acres right now and I want more. And the house I live in, like I said, it's paid for, but it's just, it's a little shack. Like I'm shivering right now because it's cold. You need to upgrade. Yeah. Yeah. I need to do something. What's your income? I had a hunt. So that's the thing too. I'm an archaeologist by trade, but that is real spotty work. I'm also a musician. Believe it or not, I make most of my money as a musician. And then I

also, I work doing construction and odd jobs and stuff like that. I just, I need to pile up money. What a renaissance. Yeah, Cliff, you're different, man. You're different. I like it. I'm glad to hear that. The way I like to think about what to do with money is obviously our seven baby steps, which you've kind of walked through accidentally, it sounds like, living debt-free, paying off the house, investing for the future. But beyond that, I want you to think about where does Cliff want to be at 40, at 45, at 50? Where does he want to be living? And so part of that is we got to get you upgraded in-house.

And you've been living debt-free. I think it would be really cool to be able to pay cash for something. Absolutely. And beyond that, obviously investing in retirement accounts that are tax-advantaged. It sounds like you've been throwing money into brokerage accounts outside of retirement because you don't have a lot of options. Are you kind of self-employed yeah i'm yeah i am basically my my steady income that's the most is is self-employed as a musician and a music teacher believe it or not that's where i've

like in the past couple years i've made a hundred almost about a hundred thousand a year mostly with the music which is kind of crazy. Awesome. So the way I'm thinking about this, for all intents and purposes, Cliff is in Baby Step 7. However, the way I think about it with money, you can do three things with it. You can give it, you can save it, you can spend it, right? So you've done a decently good job at saving it. You've gotten your debt paid off.

You've got your emergency funds. You've even gotten into your retirement. You've got things saved. You can spend some of it. And if I'm, I agree with George, I think that you can start looking into, you know, a nice place, you know what I'm saying? Something that's within your means. We're not going to go overboard, but something that fits right with your income of a hundred K, you know, it looks like you might, you know, have a head start possibly on it on a down payment and then I also want you to start thinking about some generosity are you have you had some opportunity to give uh recently I've never like donated money I do free music lessons for youngsters okay that's kind of that's great that's great yeah but I just want

you to approach money from those three three angles and if i agree with george i think now's the time to start looking at a place something that you can afford possibly pay cash for are you wanting to like build on land or are you going to just buy a property somewhere i wanted to just invest in undeveloped land but but I searched around. I had 130. I could not find anything that I liked for 130. I mean, it just wasn't enough.

So that's when I just yesterday I put the 40 into two mutual funds, left me over with 90. And the thing is, this place where I currently live, it's just a little shack. The shack needs a lot of work. It's real uncomfortable, but it's on a little shack the shack needs a lot of work it's real uncomfortable but it's on three really nice acres i only paid 50 000 cash for this whole place so what are you thinking you're gonna demo it wants me what no well yeah i don't know i need to figure that out it's a 1920 it's a historic home um... Can you just build a home on the property? I've thought about that too. It's kind of with the way that the, where the well is,

the other build site, it would impede, if I put septic up there, it would impede on the well boundary. So I kind of can't really build another structure, I think. What I'd love to do is restore this home to its former glory as a sharecropper house. Make it a nice little place. Would $90,000 do that for you? Yeah, I think $90,000 would do it. So that's what my question was. My wife wants me to renovate. She makes her own money.

She's bought herself a nice other place where we kind of split time between the two places. She wants me to renovate this place and make it real nice. I'm hoping that I can do that in 90. So where's your other place? Is that just a normal house in a neighborhood? She bought this 1930s brick farmhouse that's nice. She dumped a bunch of money into that and made it pretty nice. Can that be your primary residence?

I'm a little bit confused. Are you guys doing these things together? No, they're not. It doesn't sound like you've combined your incomes. Yeah, he said she bought the house. Yeah, we're on two separate pages. She works out of town most of the time, and I'm here at my place. Cliff, you just threw a wrench in our

plans, man. Yeah, this is a bigger conversation. I think we got to get on the same page before we make any another big financial decision. Yeah, because y'all got a house. You got multiple houses, but it sounds like y'all are just roommates when you want to be. So I'd work on that part first, but you've got the ability to renovate this or put a down payment on a home. You got this, man. Thanks for the call. This is The ramsey show i'm george camel joined by jade warshaw this hour triple eight eight two five five two two five is the number to call. You jump in.

We'll talk about your life and your money. Well, Jade, I wanted to talk about something that is about as exciting as stepping on a Lego brick, and that is taxes. But I want to make sure our audience knows about all of the tax changes, maybe some tips and tricks to help them along the way, remind them of some deadlines, all the good stuff. Let's do it. So let's start with the big day to celebrate. The holidays aren't over. April 18th is the filing deadline for all federal tax returns and payments.

You can start filing at the end of this month. You'll start getting those W-2s from your employer if that's your situation. Don't put it off, guys. No, and the good news is you can start getting some of the paperwork right now, which is, you know, make it a date night. Have fun with it. You're going to start getting those paperworks in for your investment statements, mortgage

interest statements, 1099s, whatever have you. Just kind of pull all those together, put them in a folder for when it's time. That's right. And the extension deadline is October 16th, if you are in that bucket there. And so there's some good news about this year's taxes. There are some bad news too. Yeah. So the good news is the standard deduction continues to climb, which is good because that lowers your taxable income.

Yes, that is correct. We like that. Anything that's going to make us pay less taxes, that is a good thing. You want the bad news now? I know. You know what, George? Let's skip that. I'm just kidding. We can't skip it. Well, the bad news is you're going to get a smaller refund this year across the board

because there was no economic impact payments. So you remember all the expanded tax credits? It was like, and you have a kid. Here's $5,000 and you have a kid. Bro, they went off. Like the amount of money that was coming through. I was like, we have two kids. I was like, what is happening?

This is different. It was wild times. So all of that is gone. The expanded tax credits and deductions are reverting back to their pre-COVID-19 amounts. The charitable contributions deduction, that is out. And so if most people are going to file with the standard deduction. Yes. So only do itemized if you can get more than you would have with the standard.

Yeah. And you need to really sit down with a professional to really see how that works, especially if you have a business, a small business, you definitely want to get into that with a, you know, because you've got the personal side and your business side. So yes. So if you're wondering, all right, I may not get a refund. I might owe. How do I save some money this tax season?

Well, the two magic words are deductions and credits. Hit me. And these two can get squishy in people's brains. So here's an easy way to think about it. Deductions help lower the amount of your income that can be taxed. So that's kind of before. That's right. After the tax credit.

So think about you get your final bill at the restaurant. This is going to actually give you credits off of that final bill amount. And so think about things like earned income tax credit, child tax credit, you've heard that child independent care credit, education credit. So you need to be aware of all the credits and deductions you might qualify for. Yep. Yep. And again, working with a tax professional, they'll help you know that. I mean, you don't have to know everything, but it's good to go in there with an idea to just kind of make sure everything's on the up and up. You know what I'm saying? Yes. And to add to your homework here, there are something

called above the line deductions, which are really helpful. So there's things you can still do, even though we're in 2023, to lower your taxable income. Oh, great idea. Yeah. Talk about that. That's great. So one of them that is great is the HSA. If you have a high deductible health plan with an HSA and you contributed to that HSA, you can deduct that for your taxable income. So it's not too late to do that. It's not. Another one is IRAs.

If you fund your traditional IRA, you can do that through April 18th. And I think a lot of people forget that. I think people think that it's over in January because the year is restarting, but you've got until tax day, April 18th, keep funding. And I like to, I'm a nerd. I like to get my taxes done as early as possible, but here's why I want to know if I'm going to owe, or if I'm going to have a refund because you don't owe that money until April 18th. That's true.

Well, let's talk about that a little bit, because I know a lot of people are like, Ooh, I'm going to get my tax refund. I'm going to do my taxes. I want to do my taxes early so I can get my thousands and thousands of dollar check so I can, I don't know, go do something that you're probably going to spend it all. It's like they think Uncle Sam is Uncle Santa and he's just gifting you money because you've been such a good boy. It's horrible. It's just horrible. The amount of money that people lend the government a good boy. It's horrible. It's just horrible the amount of money

that people lend the government with no interest. Zero percent. Man, I wish, man. That drives me crazy. So here's the deal. If you get a refund, it is not a blessing. Yes, it's better than like owing $10,000, but you are just lending that money to the government interest-free when you do that. So you want to get as close to zero as possible, believe it or not. You don't want to owe much and you don't want to get a big refund. And there's something mentally about that, right? When you set up your withholdings to where it's correct, right? To where you're not- It's goldilocks. You get the perfect amount of taxes paid. You get the perfect amount, but then that money is cash flowed within your normal monthly flow and you're more likely to do something smart with that money.

It's going to be worked into your budget. It's probably going towards debt. It's going to something fun. I know y'all. You're getting a sea-do. You're getting jet skis. You're out here buying, I don't know, a Peloton. Y'all are out here really buying things with these returns.

You're going on vacation. Unless you're a baby stepper. If you're a baby stepper, you're like, sweet, that's going towards my dad. That's true. That is true. I just think it's harder that way. It is. I think it's like, we're all children deep down. I need to know, do you happen to know the average? I don't know if there's a number for that. Like the average return. I was talking to a friend. In my head, it's like three grand. That's just in my head. I was talking to a friend. He was, I said, what type of return, like what type of tax return do you get? He said his was $8,000.

Wow. Eight, is that normal? Somebody needs to come into my DMs at Jade Warshaw and tell me, is that normal? That can't be right. So here's the thing to think about. If you're trying to pay off debt and you're like, well, inflation and there's so much happening in the economy,

I don't have the margin to pay off debt. One thing you can do is change those withholdings that you keep getting a big refund every year because that money will go back into your bank account instead of sitting with Uncle Sam all year. And that's what we're talking about. We're talking about you being able to get the maximum amount out of your paycheck. You know, sometimes the way it's set up automatically, it's not in your best interest and you can actually go back on there, claim more dependents, however it is that you do it, to even that out. So you're having more money in your check each month. And like I said before, chances are you're going to be smarter at spending that money.

Yes. And our team has painstakingly created an amazing hub as a resource to all of our listeners out there at ramseysolutions.com slash taxes. So we have articles, resources. There's an incredible tax prep checklist that's free. I use it every year and I just go down the line and I start going, yep, got that. I got to go print that. I got to go save that. Good job, George. I know. I told you I'm a nerd. When you said that you did it, I really imagined it. And I was like, yes, George does do this. I live it out. I can see it. And the other thing you can do is if you are one of those that does it on your own, you use software, you've got to check out Ramsey SmartTax. This is the no-nonsense tax software that you can actually trust. There's no hidden fees. There's no hidden agenda. We're not here

as a gateway drug to get you into debt products like TurboTax. Sorry, I said it out loud. Hey, George, you know what I told you before the break? Yes. You have experience with Intuit, which is the parent company. Guys, it's hard for me to even get it out of my mouth. Well, if you're wondering why... I used to work for Intuit. If you're wondering why I have feelings about that,

we did an entire episode on my podcast, The Fine Print, about TurboTax and how turbo tax is trying to screw you over i remember their shareholder presentation about how they're going to make a bajillion dollars from you all america and it has nothing to do with taxes it's about how they're going to use you to create loans and debt and create money from interest to make themselves bajillionaires yeah you stay broke it It's not good. No, I did into it as a side hustle. I'm glad you kept it on the side and now it's gone. It's gone. She gone. Oh, she gone. Well, you can check out all of those resources, including Ramsey Smart Tax,

our awesome tax software. Just go to ramseysolutions.com slash taxes. And like I said, I know this is no one's favorite thing to think about. It's not on your top 10 list of favorite things. It's number 11 for me. I was going to say, I think you like this, George. I think this is, this might be what it is.

I like, you know what? It feels very productive to get it done. And here's what me and my wife do. We will schedule a date right after we finish our taxes. We go to a really nice meal to treat ourselves

because we're adulting. I'm so proud of you let me tell you something if sam warshaw said to me jade the date night is tax night post tax return i'm shutting her down i'm shutting it down right there i'm like what okay not quite romantic i need to do a better job of that no george you do your thug but it just it's good to get it in the rear view mirror get it done folks if you do tax software go ahead and start that process at the end of January. That's right. If you meet with a tax pro, that's great.

Schedule that now because it's about to get crazy for those tax preparers out there. And don't go to those H&R blocks inside of Walmart. Find a real professional. Sorry to dog H&R Block, but not a fan. Be real. So, ramsaysolutions.com slash taxes is the place to go. Are you sick of planned obsolescence? You know, when companies make products crappy so you have to buy more of their crappy products?

Well, me too. And it's why I love companies like Grip6. Grip6 is all about quality products meant to last forever. That's why their comfortable, bulk-free belts, slimline wallets, and lightweight wool socks all come with a lifetime warranty and simple returns and exchanges. So check them out at Grip6.com today and get up to 20% off with the promo code Ramsey Show. I'm George Camel, joined by Jade Warshaw this hour. The number to call is 888-825-5225. You jump in, we'll talk about your life and your money. Caleb joins us up next in Springfield, Missouri. Caleb, welcome to the show. Hi, George and Jade. Thanks for taking my call. How are you two this afternoon? Caleb joins us up next in Springfield, Missouri. Caleb, welcome to the show.

Hi, George and Jay. Thanks for taking my call. How are you two this afternoon? We're doing lovely. How can we help today? Good. So they told me to be blunt with the question up front and then fill in the details later. So my question is, how long would I have to plan to live in a house for it to be worth the hassle and the cost of buying and then later reselling. It sounds like you already have an exit strategy. Tell us about that.

Well, I don't really, I don't have an exit strategy or anything like that. I'm currently living in an apartment and I'm just, I'm sort of planning for ahead after the, after my leases expire and thinking about if I need to purchase a house right then or if I need to wait a little longer. So I'm trying to figure out for how long do I think I will be living in a given house for it to be worth the hassle of purchasing it. Okay. Well, I'll hit you with just some general details, then we'll dive into your numbers specifically and talk about it. So in general, you want to at least recoup the costs of purchasing the home. So all of the closing costs that are involved, there's also going to be potential capital gains. So if you sell that home, you haven't lived there for two years and you go and sell it and you make $100,000 profit from when

you bought it to when you sold it, that will count as taxable income. And so you want to be careful about things like that, because if you stay there income. And so you want to be careful about things like that because if you stay there for two years, you get to keep up to $250,000 if it's just you. And if you're married, you can keep up to $500,000 in profit before ever paying a dime in taxes. So that's one thing to think about if you're going to be there for a short amount of time. So what's your financial situation right now? Do you have any debt? What's your income? How much do you have saved? Sure, yeah.

So I just left graduate school and started a new job a couple weeks ago. It's $78,000 gross and about $58,000 take-home after taxes and insurance and benefits and whatnot. Okay. And do you have any debt? I have $10,000 in student loans. And currently I'm following your baby steps the best I can. I'm on step one, and I've laid out a plan that should get me through one, two, and three by the end of this year. So I think I've got the debt should be okay after that.

Awesome. So 2024, you're completely debt-free. You're at baby step four. You're investing 15% of your household income, and you've got to start saving the down payment at that point. Okay, okay. So have you looked at the area you want to buy a home in to see what it's going to cost? Not too much in-depth, no. Okay.

Well, a good parameter to get you started here, if you take your take-home pay, now you can deduct anything beyond your normal taxes like your health care, your 401k. If you took those out of the equation, I want your payment to be no more than a quarter of your take-home pay on a 15-year fixed rate mortgage. Okay. And obviously the 15-year mortgage is going to have a higher payment than the 30-year mortgage. So that's something to take into account. But the goal here is to be in debt as little as possible for a short amount of time as possible so that you're debt-free living like no one else down the line. And that helps dictate your down payment on how much you need to save. Okay. Okay. How much would I, so if it's a quarter of my after-tax income on the 15-year fixed-rate mortgage, just for regular payments, how much do you recommend saving up for the down payment?

You know, if you can get 20% down, that's amazing because on a conventional mortgage, you're going to, you know, get rid of PMI at that point, private mortgage insurance. But, you know, for a first-time home purchase, you know, you might not be able to get up to 20%. So get as much as you can for sure, for sure. Minimum 10. Minimum 10. We want you to, you know, you want to have skin in the game. We don't want you to purchase a house and be, have the potential at all to ever be upside down. So making sure that you're putting down a decent down payment, it kind of guards against that. Right. Okay. Gotcha. And then back to the how

long I'd be living in it, the minimum for getting rid of that capital gains income, taxable income situation, that would be two years, you said? Two years. Is that, okay. That's the current IRS rule. So that would be my game plan. And buying a house for your primary residence, it should be kind of a long-term thing. You don't want to be jumping in and out because when you sell that, there's going to be a lot of fees, closing costs associated with it. So it's inexpensive, and you mentioned it's a hassle.

It's a lot of work to move. And so I plan on staying there for at least two years. That's right, George. Do you have plans to move elsewhere soon after? Do what? I'm sorry? Do you have plans to move within a few years? Not to move within a few years not not to move like from the area that my mate so uh the reason i was asking is because i don't at the moment have any um like romantic prospects or anything like that but i was uh thinking once i like got married you know we'd want to move into a separate house together. So I was, I was

planning on that would be the only reason that I would be moving out early. Yeah. I mean, if you're getting married, I would wait to buy. I think that you guys could rent for a year together and kind of get an idea of what your life is going to look like, that sort of thing. Because like George said, it's expensive to buy a house. It's expensive to sell a house. It's expensive to move. So you really want to think through what your life is going to be like before you make such a large purchase, for sure. But there's no one special in the picture right now, Caleb? No.

Okay, so you got time. Then I would move forward with your life as is, and when you're ready to buy a house, you go ahead and do that, man. Being a homeowner is special when you do it the right way. Thanks so much for the call. We've also got a great mortgage calculator for you at RamseySolutions.com under the tool section that you can use to start crunching those numbers. All right, let's move on to Joshua in Orlando. Joshua, welcome to the show. Hey guys, how you doing? We're doing great. How can we help?

So I am currently 18 years old and I am living in Florida at the moment. I am a full-time student at a trade school to become a welder. Love it. And then I'm also another full-time student for another college online, getting my business administration degree. Sweet. Both colleges are going to be fully paid for through scholarships and FAFSA and Pell Grant. Way to go.

Yeah. Thank you. going to be fully paid for through scholarships and uh fast phone tail grant way to go yeah thank you and um so i'll be graduating here in mid-may through for my uh welding school and so i plan on doing traveling welding uh so i'll be a little bit on the road well and so my problem is is that i'm going to need a truck and a camper later on. And right now, as you could probably assume, I'm in no really financial situation to really be paying cash for these things. I have no credit card, so I have no credit score. And I'm worried about if I ever get a loan to buy these things, the interest rates are just going to kill me. I don't really know how to really approach these things, the interest rates are just going to kill me. I don't really know how to really approach these things the smart way. So I'm just kind of needing an answer right now. I'm

just really lost right now on what to do and really to have to think about the situation. Yeah, I think that first things first, you've done a good job. You're going to college debt-free. Everything that I hear you saying sounds good until the point that you said, if I ever get a loan. And the question or the response to that is, you need to tell yourself, I'm not ever going to get a loan. You need to take debt off the table in your life. Because the moment that you start thinking through that lens, in my mind, it eliminates a whole bunch of other options, right? You need to keep your mind open and free for lots of ideas, right? So let's take debt off the table and let's really start brainstorming what that can look like. Right, George? Absolutely. So when you go, all right,

if debt wasn't an option, what would you do, Joshua? You'd get creative, right? You'd start looking at used equipment. You'd try to get deals. You'd negotiate. It's going to take longer. So you might need to work locally and have this be a one to two year dream. Yeah. It's something where maybe you can work next to somebody as kind of trade and learn it, learn the business very well while you're saving up money. And it's not to say that you can't weld during that time. Right. I don't I'll be honest. I don't know a whole lot about the travel welding position. But it's not to say that you can't be involved in that career field while you're saving to do your business. Because at the end of the day, when you want to do a business, you got to move at the speed of cash.

Right. The moment you start bringing debt, your risk, it skyrockets. And at 18 years old, well, at any age, you don't need that kind of risk in your life. It changes the game when you run this business debt-free and do it from the start. That's how Dave Ramsey built this company, this building that we're standing in, paid for in cash. And it's hard to believe, Joshua, but I'm going to send you his best-selling book, Entree Leadership, how he built this thing from a card table in his living room to the empire that it is today. And it took time, but he did it all with cash without owing anyone anything. And that changes the decisions you make as an entrepreneur.

And so I'm rooting for you. Hang on the line. Austin's going to pick up. We're going to send you that book, Entree Leadership. សូវាប់ពីបានប់ពីប្រាប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់� We're back. It's the Ramsey Show. I'm George Campbell, Ramsey personality, joined by my colleague, Jade Warshaw. And we are taking your calls at 888-825-5225. Well, about this time of year, we get flooded with calls on The Ramsey Show because everyone is looking for a fresh start with their money, especially after a cuffed up years. Maybe there was some regret, some financial hangover from the holiday spending. Maybe you had some

stupid tax and you did some dumb with zeros on the end. Well, if that's you, you can't wish for things to change and expect it to happen. You've got to do some different things with your money and have a plan. And we can teach you that plan in Financial Peace University. This is the course that will help you rethink how you manage your money. And you're going to learn step by step how to pay off debt and how to build wealth. And here's what's crazy. Nearly 10 million people have taken FPU. They followed this plan and changed their lives.

I'm one of those people. This stuff works. Don't try to reinvent it. Don't try to do your own plan. I'm telling you, this one works every time you work it. And when you intentionally follow this plan with focus intensity, this year will be different. You will have more peace in your finances and your life. You're going to sleep better. You're going to make different decisions for your financial future. So get started today. Financial Peace University, go to ramsaysolutions.com slash FPU. That's ramsaysolutions.com slash FPU. I try to tell these people Financial Peace University can change your life, George. It's one of those things like you always hear people

talk about it. You're like, oh yeah, she's just real excited about that. No, I'm not real excited. Oh, I get it. I get it. I'm excited because of what it does. You know, it truly changes your life. I can't say it enough. I mean, a lot of you listening, maybe you've heard my story, maybe you haven't. My husband and I paid off $460,000 of debt because of the teachings in FPU. We were in life thinking, this is just, our life sucks.

Like this is just our lot in life until we heard about this. And it was Dave. We heard Dave talking about it on the radio. And then, you know, from there, the rest is history. But I don't think people really grasp how this can change your life. And, you know, not only that, but, you know, my husband, Sam and I, we've gone on to coordinate other FPU classes and we have seen people pay.

I mean, buddies of mine last year, this time they paid off 74K. My sister paid off over 100K. A buddy of mine, you know, they text me, hey, we just paid off our car. Hey, we just did this. It's possible. It's possible to become free. Matter of fact, George,

I'm thinking about coordinating an FPU class. Let's go. If enough people show interest, I will coordinate the class and I will make sure y'all do these. Like a virtual class or are we talking one in person? Man, I think we should do both.

I like that plan. Because people are like, I can't come to Nashville, Jade. We'll get a virtual class going so you can join us wherever you are. But there's something about being around other people, even if it's virtual,

obviously in person is going to be the best, but something about it where you go, oh, I'm not alone and I'm not crazy and other people are sacrificing too. I can do it. If they could do it, I could do it. There's an amazing thing that happens there. It's accountability. It's the accountability of showing up and knowing, all right, you know, Biff, he did his budget. I got to make sure I do my budget. Biff's budget. If Biff did the budget, you got to get your budget done. All right. I love that. RamseySolutions.com slash FPU.

This is the year you just do it instead of thinking about doing it. Change your life. Giovanni's up next in Denver. Giovanni, welcome to The Ramsey Show. Thank you. How are you doing today? We're doing great. How can we help?

Great. So I just made a horrible financial decision. I leased a car, and now I'm $17,000 in debt. Yikes. And I'm a full-time student. Thankfully, I'm on full-ride scholarship. They pay for food, housing, and books, everything. Nice. I work three jobs. I'm a videographer, an editor, and an assistant producer. Awesome. What's your income doing all that?

It really depends on me and how many hours I work, but usually it's just around, what, $2,000 a month. Okay. And that's like if you're busting it, or is that just an average if you're doing your normal thing? That's just it. I'm just doing my normal thing. Okay.

What's the payment on the lease? It's $300, and then insurance is like around $400. Yippies. Ouch. So your $700 a month is an expense, and you're making two on a decent month. Yeah. All right. Do you have any other expenses?

Any other debt? No, no. I don't have any college debt. I have $100 in debt of credit card but i'll okay well a1 is just let's pay that off let's cut up the cards and say no more we're using giovanni's money and not the banks okay so that's an easy start that's a quick win you can do as soon as you're off this call and i want you to remember the pain of this moment giovanni i want you to remember how you feel right now, which is like, dude, I just screwed myself big time.

Because this moment right here is what's going to make you not go back into debt, hopefully ever again, right? Yeah, for sure. All right. So we're going to get ourselves out of this thing. And there is a way to do it depending on the terms that you sign. Do you know what the car is worth? Yeah, on Kelley Blue Book, it's like worth worth what? $8,000, $9,000? It's only worth $8,000 and you owe $17,000?

Yeah, it's $2,000. So I leased a used car. You leased a used car? How much do you owe? Like what's on the lease? Oh, so I bought it for $11,000 and then there's this finance charge of $5,000. Okay. You had mentioned $17,000 earlier. Well, $13,000 and $5,000. Got it.

Oh, shoot. All right. Have you found out the early buyout amount from the lender? No, I haven't called about that yet. Okay. That would be your next piece of homework to find out is what it would cost to buy yourself out of this lease. And then based on what the car is actually worth, that gives you a kind of number to go, all right, either I'm underwater on this

thing, in which case it would be the only time we would tell you, hey, go down to your local credit union and get a small loan to cover the difference so that you're able to pay that car off. And now at least we have a $4,000 loan instead of a $11,000 loan. So how it works, would I just sell the car first and use that money or get the title in my hands first? You're going to need the title in hand. But you can't do that until, you won't have a clean title until the car is paid off so you need to pay it off first to have the title to then sell it um and you're going to need

to get a probably a small loan to do this if you're underwater it sounds like he might okay like depending on what it's worth if it's only it's if it's truly only worth eight thousand which still feels super low it does is it because of the used car market slowing down? I'm not sure. That's what I got on Kelly Blue Book. I was pretty disappointed. It's a 2011 Mercedes-Benz C-Class. I bought it because I thought it would get me more clients, make me feel more established.

It was a stupid decision. I've never once worked with a videographer because they drove a Mercedes. I work with them because their work was excellent. Facts. Yes. Yes. Which I know you know that now. Yeah. But just for anyone listening out there who's like, whoa, if I get a Mercedes, more people want to work with me because I think I'm really successful. That's what they do on real estate. That's true. That's what they do. They think the car makes them. Well, those people are divas. Yeah.

Okay, so Giovanni, you've got your homework ahead of you, man. This is one of those stupid tax situations where you go, remember when I was a knucklehead at 18 and I made that stupid decision, never leasing a car again, going to save up and pay cash for that used car to get myself out of the situation. That's right. And a key point that George made is, you know, after, because you are going to have to pay some stupid tax on this.

You know, hopefully it's not 8,000. Hopefully it's worth a bit more. But if you end up getting a loan to cover the difference, yeah, you know, a $6,000 loan is better than being $17,000 in debt. But the key is the money that you gain from the sale of the car, that is your car budget. That's what you're spending on the next car and you're paying for it cash. And then you got to pay whatever debt off, you know, from, from getting out of that lease. And, and I got to, for anybody listening, when it comes to car leases, you know, you, you hear us say all the time, and Dave used to say, it's not a car lease, it's a car fleece, right? Cause it, you're getting screwed. You're getting screwed every way that, uh, that this thing can get you. And I think a lot of people don't realize this, because I'll be honest, you know, back

in the day, Giovanni, I thought that car leases were for rich people. I thought that that was the way, like, if you want to show your status, you get a car lease. Boy, was I wrong. I was so wrong, because they get you four ways. If you're out here listening and you don't understand this, car because they get you four ways. If you're out here listening and you don't understand this, car leases get you four ways. Number one, he's got a used lease, but most people lease a brand new car, right? And a lot of us don't realize this, but the cost of that goes down

60 to 70% in the first four years. So they build that in. Then they add an interest, which they call cost of capital. And then they add in, you know, their own profit. And then wear and tear. You're getting screwed, people. Gross. Well, Giovanni, keep working your tail off on those side gigs to get as much income as you come. Sock away that cash that you can get a beater car once that lease is out of your hair, man. Sorry to hear that.

That puts this hour of The Ramsey Show in the books. My thanks to my co-host, Jade Warshaw, all the folks in the booth keeping the show afloat, and you, America. Thank you for listening. We'll be back before you know it. Dave here. You can find all of our shows with the Ramsey Network app on your smartphone. It's the only place to listen to the entire back catalog of episodes. Download the Ramsey Network app in your favorite app store today.