The Ramsey Show - App - How Can I Stop Living Paycheck to Paycheck? (Hour 1)

Episode Date: September 7, 2022

Take our Audience Survey & Enter to Win a $500 Visa Gift Card: Click here to take the Survey Dave Ramsey & George Kamel discuss: Paying off your debt more quickly, Converting a traditional retirement account to a Roth, What to do with profit from selling a property, Getting on track after living paycheck to paycheck, How to use increased income, Why indexed universal life insurance sucks. 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

Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's the Ramsey Show, where net 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 actually love, and create real amazing relationships. George Campbell, Ramsey Personality, host of the Fine Print podcast on Ramsey Networks, is my co-host today as we answer your questions about

your life and your money. If you happen to be running around uh new york city for some reason or another and you're in uh tom square look up you'll see us uh the fine folks at amazon music um don't uh donate it or lent us their uh digital billboards all around the side of one building up there to advertise the ramsey show of course amazon music carries the podcast of this show we appreciate them doing that and um so wherever you listen to podcasts is fine but a little ramsey show digital action they're going on in times square all the times where tourists are now tuning into the show yeah welcome well i mean it's got my picture on there so that probably is that a deterrent i'm afraid that may mess the whole thing up but it's got yeah i think it's rachel and john are there too yeah i didn't mean ken didn't make they'll say they'll save it

for us but yeah anyway yeah so yeah you work too hard to be this broke or something like that it says so yeah check it out guys if you're running around new york city we appreciate that and good working with the fine folks at amazon music we appreciate them carrying the podcast uh this podcast is offered everywhere great podcasts are offered anywhere you want to tune in uh it's everywhere so uh spotify amazon apple of course um i don't know wherever else you do that oh i guess google play right i heart series xm you name it you got it all there yeah yeah the rams we have our own little network app that some people use to tune in youtube of course um and i heart we're on the that's right we have our own channel on the i heart radio app i forgot about that that's uh

that's been there since i mean we're so many places you get you're bound to forget a few at this point well i'm yeah i'm lost but um yeah on top of the 600 something stations well that's what my that's where i started so all this other stuff has come along since then. These kids and their new fangled technology. Get off my digital lawn. Shut up. Shut up, George. Open phones at 888-825-5225. We're going to start this hour off with Knoxville. Sam is calling. Hey, Sam, how are you? Hey, good afternoon. I'm doing well. How are you doing? Better than we deserve, sir. What's up? Yes, sir. Okay. So just to run down, I'm married, happily married with three children. My wife and I have been married for 14 years, something like that now. And we've got some debt that we want to get paid off.

We have some big goals in the future. And so I'm a small business owner and I really needed advice based upon that aspect because I think I get everything else if I have a standard salary or income like that. But with the idea of being a small business owner, I'm a little bit, I guess I'm ill-equipped or, you know, just ignorant of how to handle the situation. But I'll give you some numbers. We've got a truck loan, which is my work truck, and it's $19,000. We have a mortgage of $180,000, and then we have $800 and just two different zero-interest credit cards

that are going to be paid off within the next two months. And so I'm looking at a little over $ hundred thousand dollars in debt and i want to get this knocked out for my family uh so that i can make sure that we are in a position where we can help others uh as well as ourselves and then uh but what'd you pay taxes on last year in your business What's your taxable income? Fifty-four. Okay. Does your wife work outside the home? She's a full-time household engineer.

Okay. Do you anticipate making more than $54 on the business this year? Yeah, I'm looking to be around $60 to $70. Good. What do you do? I own a carpentry company. We finished carpentry how many employees it's just me and then i subcontract out to two other guys on occasion okay all right good for you okay um so it sounds like the income is fairly predictable uh and you know if you're doing say if you're doing trim carpentry there's a lot of construction in

Knoxville so you shouldn't have any trouble getting work for the next while without any trouble I mean you're not going to like dry up and get zero so you're going to be fine and you should be increasing pretty steadily as a matter of fact so good news there as far as running the business goes what we teach folks in Entrez leadership is to hold enough in the business to make sure the business stays healthy. Now, what do you actually spend money on in this business? You're a one-man show. You do trim carpentry.

Do you buy the supplies and then job ticket the whole thing out, or do you just supply the labor? So I do some supplies, and then I do the labor, and then my biggest expense, because I just started last year was acquiring all of my equipment, um, which we were able to do predominantly through a cashflow, but some of it was, uh, done through, um, uh, uh, temporary debt that lasted, you know, a couple of months at a time before it was paid off, uh, to buy equipment that was just absolutely needed for that moment. but i don't i generally keep a balance on my on my box store card uh but it's

nothing that doesn't get knocked down every every month i i chop away i don't always have a zero balance there though as i try and you know figure out how to do capital and all that do i need to so what you need to do is you need to stop that because that's a rubber crutch. It's going to fall under you. Okay. Right. And the other thing is you'll end up buying crap in the name of I need another tool that you really didn't have to have.

Right. So what I want you to do is I want you to pay cash for or write a check or debit card for your equipment purchases, and I want you to hold back a percentage of your profits before you take money home. Now you're setting money aside for taxes every month right? Yes and yes we are. Yeah we call it. It wasn't very convincing. Yeah so we did last year and we actually ended up not paying taxes last year because of the amount of income. So we've got money set aside as a part of our just, we just have one savings account. How did you not pay income with a $54,000 income?

So, okay, so I think I misunderstood your question then. So after taxes, no, I was not at $54,000. I was down at $42,000. I'm sorry, not after taxes. I was asking what your profit was that you paid taxes on. If you had a taxable income of $54,000, you did pay taxes. Yeah, yeah, you're right. I'm sorry.

I think I just misspoke. Sorry, apologies, you're right. I'm sorry. I think I just, I think I misspoke. Sorry, apologies. That's okay. That's okay. So you need to be setting aside money for your taxes each month out of your profits before you take money home, and you need to set aside a small amount for a tool fund each month before you take money home, and then take everything else home, and then, George, work the baby steps.

Yeah, this is just going to go in the debt snowball. So let's pay off the credit cards, get rid of the truck loan, switch to a business debit card, and start using cash to run this whole thing. And that's going to keep you from getting into the cycle where you're trying to keep up. Yeah, you're going to get caught in a cycle because we work with construction people and have for 20 years in entree leadership. And I've kind of got that in my DNA as well. I grew up in the real estate business. Dad built homes when I was a kid. And so've kind of got that in my DNA as well. I grew up in the real estate business.

Dad built homes when I was a kid. And so I love tools. I buy tools. I don't even know what they do, but I need the tool, you know? And so that those of us that are cut out of that cloth, we tend to overspend on tools that we in air quotes have to have. And I want you to have the minimum tool purchase because it's overhead to get the job done. This is The Ramsey Show. george camel ramsey personality is my co-host today guys we really value input from you that watch and listen to the show it helps us to know what's important to you so we can deliver the right content that will help you with the questions and the challenges that you have. We want to give you

motivation, inspiration, and information so you change your life. That's our idea. One way you can share your thoughts with us is by answering a few questions in a new survey we just launched. You can check it out at ramseysolutions.com slash survey. It takes just a few minutes, and we will do a drawing among the people that take the survey. Someone will win, randomly, a $500 Visa gift card. Check it out, ramseysolutions.com slash survey. We want to hear from you. So, as one of those surveys, we found out how popular Georgia is. Is that true?

It is true. I'm hearing it for the first time. It is. It actually came back. Your true. I'm hearing it for the first time. It is. It actually came back. Your personal ratings are very good on the show. That's good to hear. All right. That is job security, folks.

So thank you to all those nice people out there. Do they get to rate you, too? Yeah, but the difference is I don't care. There we go. I care deeply. I need all the validation and affirmation I can get. I've been doing it 30 years. I'm probably just get off my lawn guy.

You're done taking a poll. I'm just, I mean, I want to be helpful. I want to be attuned to the customer need, but we're not taking a poll on. This is not like the YouTube comment section. We actually want to make the show better, so we want good critical thinking skills here, folks. Sorry. Just busted on the youtube crazy too soon wow all right jack is in richmond virginia hey jack how are you hey guys i'm doing great how are you better than i deserve how can i help

all right so today my wife and i just finished up baby step two this morning. We just made our last, our last dead payment. How much did you pay off? We paid off $97,000 in 11 months. Whoa. Kicking it. So we've been, we've been hustling. Um, and the last, the last thing, you know, my question is, is we have about $70,000 sitting in a traditional IRA. I'm 29, she's 27. And my question is, as a part of we're finishing up going on to baby step three here, should we convert that to Roth and pay the taxes on it as a part of just finishing up baby step two? No. At our age, that dollar amount. No, after baby step seven, you would.

Okay. Okay. I don't want you to No. After baby step seven, you would. Okay. Okay. I don't want you to pay tax bills while you still got a mortgage. Okay. That makes sense. That makes sense. Yeah. You know, I always hear you guys say the, you know, match beats,

loft beats traditional. It does. And so all your stuff going forward should follow that formula. But this one, I don't want to convert it. Because converting it is going to create a, you know, a $15,000 or so tax bill. Yes, exactly. That's what I was worried about. It was another $15,000 that I wasn't looking forward to paying off, but I didn't know if it'd be the smart thing to do or not.

It is once you've got extra money. We've got priorities here. So we've got to get the fully funded emergency fund, begin investing 15%, get the down payment, get the house paid off, and then we have all the margin in the world because we don't have payments, and you can do stuff like that. John is in Oklahoma City. Hey, John, welcome to the Ramsey Show. Hey, thanks, Dave. How are you guys? Better than we deserve, sir. What's up? Okay, awesome. Well, hey, I took the Dave Ramsey advice here, sold my duplex, and I'm going to take the proceeds from that. And I was planning on paying off my truck.

But when I bought my house, my primary house in April, I had a co-signer because I didn't have enough job history. I just started a couple months ago. And I know it probably wasn't the smartest thing but anyways really what I'm getting at here is I think I'd rather pay off the house and I know it's a larger debt than the truck just because I'd like to get this cosigner off without having to refinance. Okay so you got enough cash from the duplex to pay off your home yeah yeah but not both i put it but not both right i put a pretty big down payment on the house and uh so what do you owe on your house uh 103 104 something how much you got in proceeds from the duplex uh 105 okay and you have any other

money uh yeah i got my savings you got got about $30,000 in there. Yeah, okay. What do you owe on your truck? About $20,000. Okay. What do you make a year? This year it's going to be a little bit lower, probably around $45,000 to $50,000. I'm just getting ramped up in this whole thing.

You're single? I'm in my new industry new industry uh yep single getting married next year oh good for you okay uh i'd pay off both pay off both okay she'll leave you not not much not much savings but i and i want you to dive in then build your build your emergency fund up to three to six months of expenses but i love the idea of having not a payment in the world that feels really clean to me right right yeah i can understand that i'll have about uh probably around seven to eight thousand in taxes um on this on the on the proceeds there so yeah but okay yeah i mean i think you can math i still think you can make both of them what's the truck worth uh it's worth about 40 38 40 um it's a lot you don't even be driving a 40 000 truck when you make 45 000 a year yeah i know i know yeah i i changed my mind i would just sell the truck sell it okay yeah Okay. Yeah, that ain't happening. But that is what you should do.

That went over. I regret this immediately. We went from advice to meddling. Either way, you're debt-free, and now you're in the market for a new, less expensive truck. Yeah, you really shouldn't be driving a $40,000 truck when you make $45,000 a year because they go down in value like a rock. That's where Chevy gets that, like a rock. And so, yeah, you don't want to do that, dude. That's bad investment,

bad place to have that much money parked with that level of income. A good rule of thumb, folks, is not have more than half your annual income tied up in things with wheels and motors. Things with wheels and motors go down in value. so when you got over you make 80,000 you got 60,000 worth of freaking toys you it's really diff you know you are you are like saying i am middle class and plan to stay that way that's what you're saying right and so uh looking good in the at the

stoplight and that's it. Not in the balance sheet. And so wealthy people think differently about this, and that's how they became wealthy. And when you sell for $40,000 and you owe $20,000, he can still go get him a $20,000 truck. That makes sense. Yeah, and that would be about half of his annual income. And, George, I know trucks have gone up, but a $20,000 truck is not a bad truck. No. You can get, and people go,

It's not a $40,000 truck. It doesn't have all the features I want. It's not a bad truck. Well, I mean, you know. You know truck guys. You're one of them. I, yeah, I just drove my Raptor in here this morning.

Tried to park it between those little electric things down there. Hey, you chose that parking spot, Dave. Well, no. Us little electric people. They put the little plug-in stupid thing right beside my parking spot, which is kind of like insulting to the raptor it just that's true it has it gets the hives every time i pull up next to one of those little plug-in cars i'll apologize me and rachel

will apologize to your raptor next time we pull up next to it your little plug-in car owes an apology i'm just saying truck but hey truck people are their own breed dave people get on to me they go well george you don't understand you're not a truck guy. That's right. I need this $65,000 truck. Well, you know, everybody's got a thing where they say, I'm that guy. But let me just tell you what you are. You're a broke guy when you put too much in stuff that goes down in value. You can blame it on the battery.

You can blame it on the truck. You can blame it on, you know. Any shiny object. I had to get a new bass boat with a bigger engine. Those bass were outrunning me. I mean, so, I mean, you can figure out a way to justify anything and call you. I'm a boat guy. I'm a, what, I know you're not.

Do you catch more bass with a better boat? Is that how it works? You're just broke, that's all. And so, you know, and I've been that guy. So, you know, the thing is yeah all of you out there where you just got it's drive like no one else so later you can drive like no one else i mean i drove a piece of crap that you know it's made a predominant color on this car was bondo and um i mean it wouldn't bring i mean it wasn't even a 500500 car. Wow. You have to give someone money to get rid of it.

It did run and go forward, but that was about the extent of it. And I drove that car for 10 years, one three-month period. During that three months, I saved everything I could get, and I upgraded considerably to a $1,500 car. And now what do I drive? If I got anything I want. Anything he wants. Because I saved my money, and I got out of debt. Dave, just give me your worst car. Work the stuff we talked about. Just give me By God, anything I want. Anything he wants. Because I saved my money and I got out of debt.

Dave, just give me your worst car. Work the stuff we talked about. Just give me your worst, least favorite car. Ever? I want to know which one of the ones you own right now. Oh, that I own right now? Yeah. I don't have a car that I don't like.

I get rid of them if I don't like them. That's why they call it a Dave car. Or rebranding it. That's it. This is the Ramsey Show. Thanks for joining us, America. This is the Ramsey Show. George Campbell, Ramsey personality, is my co-host today. Joshua's in Seattle.

Hi, Joshua. Welcome to the show. Hey there. How y'all doing? Better than we deserve, today. Joshua's in Seattle. Hi, Joshua. Welcome to the show. Hey there. How y'all doing? Better than we deserve, sir. What's up? So I am a 30-year-old single dad. Just got divorced earlier this year.

And I'm in about $38,000 worth of debt of my own. I feel like I'm living paycheck to paycheck, and I don't know where to start to just get out of this. I've reached an emotional point where I'm done. I've had enough. I know I need to set up a budget, but I'm not sure how or anything like that or what the first step would be. I'm so sorry about your situation, Joshua. How long ago was the divorce? When was it finalized? It was finalized in January.

Okay. And coming out of this, what kind of debt is that $38,000? So it is personal loans I took out a while ago and credit card debt. Okay. What's your income? $65,000. Okay. What do you do for work?

I'm a plumber. Cool. How old are the kids? Six and three. You're full-time custody? I have 50% custody. Okay. Well, we can definitely help you, and we'll give you some resources as well with this process.

Number one, getting on a budget. You're right. That is the key, and it's a difficult thing to do. And part of this, you might need to deal with the kind of trauma and the emotional side to just get, you know, you got the wind knocked out of you. And so part of it is just getting back up and going, how am I going to move forward with this new life? And what does this look like? And once we do that, then we can focus on the finances, but it feels like you're just treading water. Are you able to cover your bills every month, put food on the table? I'm able to cover my bills every month. I can somewhat put food on the table. I've got

friends and an adopted family around that they help me out quite a bit with making sure that I'm fed and the kids are fed. That's good. That's what we want you to cover first. Everything else can wait. And if that means talking to the creditors, the credit card companies, the lenders and saying, hey, here's my situation. Here's what I can do right now. That's okay. How much do you owe in your car?

I own my car outright. Good. How much is your rent? So I actually have a mortgage, and it comes out to $2,000 a month. And your take-home pay is what? So my take-home pay is right around 4,500 a month but then I also get um disability from the navy and that comes out to 1,500 a month okay so you're bringing home 6,000 yeah right right at it your house payment's awful high but bud. It's 33% of your total pay.

And that's left over from the divorce. That wasn't what you signed up for. That's left over from the divorce, but that's part of what's tanking your monthly budget. So, yeah, getting on a written plan will make you feel like you've gotten a raise getting on the budget. So that's going to be very important. But if we take your $6,000 put at the top of the and uh we take food out first and we take lights and water out second and we take house payment out third your truck is paid for so you just got to put gas and insurance on

it that's it and um you know you've got some money here you shouldn't be like begging food off of friends you're just disorganized you're just disorganized. You're just disorganized and have the crap beat out of you because it's been a hard year, but you've got mathematically, you're okay. You can, you can work through this. Um, obviously you need to cut up the credit cards and stop the borrowing. You can't, you can't dig it. You know, you can't dig your way out of a hole. You gotta, you know, you can't just keep get out of a hole. You can't just get out of a hole while you're digging out the bottom. You can't just keep digging. So no more debt.

Chop them up. Get on a written plan. Take care of food first, lights and water second, house third. Then you've got money left out of that. I mean, there's $2,000, $3,000 laying there to do some stuff with, and we can begin to work on this. And then the other thing, too, is on the days you don't have the kids, I'd pick up extra time.

As a plumber, you can make some serious money in overtime or side jobs, one of the two. Right. And, you know, an extra $1,000 a month on this debt makes it go away a lot faster. Okay, yep. That's a short-term fix, but it's a short-term problem if we get after it. Do you have any cash right now, anything in savings? I got about $100.

So step one, we've got to get a buffer between you and life, and that's going to be a starter emergency fund of $1,000. And we're going to get that as quickly as possible. We're talking a few weeks here. Then we're going to move on to the debt snowball, which is where we pay off all the debt, smallest to largest, regardless of the interest rate. And we're going to walk you through this in Financial Peace University. That's going to be our gift to you. Nine videos in there. Also with that, every dollar that'll help you create this budget, income minus expenses should equal

zero, a zero-based budget. Every dollar should have a job. And you're going to get to work. And over the next 18 to 24 months, you're going to bust it to get to a place where these kids see your sacrifice and you can put food on the table without having to worry about anyone else. Yeah, less than one month, I won $1,000. Less than a month later, I want two of these credit cards gone. And so you're going to list them smallest to largest. You're going to knock off the little ones first and get some momentum, like George was talking about.

Hang on. We'll get you signed up. Austin will get you signed up for Financial Peace University. We'll get you into the class where you're learning how to handle money, and this all goes in your rearview mirror then. And this is the year of life change for you. So some of it bad, some of it good. And we're here to walk with you. So hang on, Austin will pick up. Joseph is with us. Joseph is in Salt Lake City. Hi, Joseph. How are you? I'm doing pretty good. How are you? Better than I deserve. How can we help? So I'm 21 years old. I just came back from a summer of selling pest control and I made $117,000. I don't have, I didn't pay for myself

to go to college. I don't have any car debts. I don't have any mortgage or anything like that. And I was just wondering what your best advice would be going forward. I read Dave Ramsey growing up. My parents have been helping me through it. And I've got an emergency fund set aside for $10,000. And, I mean, I could start going into investments like Roth IRAs or, I don't know, trying to, um, like save for a house, you know, save for a house so I can just buy it after college. What would you recommend I do at this point in my life? So is this your long-term plan? Do you want to stay in pest

control? Do you enjoy it? Um, I mean, I'll probably do it for the next five years. But you said you're going to college. Yeah, I'm going to college right now. I currently go every fall and winter. It's 10K total for that. And I pay for myself to go to college. During the summertime, I go sell pest control. So I'll probably do that for five years until I graduate. And then I'll just get some kind of job. I'll probably go into into business management degree or something like that. What are you studying in college? I'm studying business management currently. Okay. So do you want to be an entrepreneur and run your own business? Yeah, that was always the dream to do, but, um, you know, just life beats you down sometimes. So going to college right now because i know that's a

very good thing to do at my age and i can always have that as a fallback but yeah definitely i would go ahead and finish that degree as fast as possible and you've got how much did you have saved out of this 100 grand so i have 117 grand is what i came back with okay um after taxes it'll probably be about 88 grand I'm gonna pay my tithing on that got my emergency fund in the two semesters and and I bought a car in cash because you know I needed a car good young man our stuff what did you buy how much you spent on the car it was nine grand I got a 2007 Ford Mustang GT. I love it. Very good.

All right. So, yeah, all I'm going to do is what cash is left after all the different things you listed out there, I'm just going to stack cash. It's college insurance plan. It's ensuring that you go through college. It's ensuring that you go through college. You don't need to start Roth IRAs. You don't need to start a house fund. You need to go through college debt-free.

And you've got this lined up. So you pay your taxes, you pay your tithe, you pay for the car, you set your emergency fund aside, and then you stack cash. And if you graduate from college with 50 or 60 grand in that account, then we can talk about starting to invest then or buying a home then. Just take it easy, man. You're just a go-getter. You're so far ahead of the game. You're a go-getter, man. You're a hustler. It's good. Hustle and grind, man. You're doing great. Big piles of cash, get through school, then start your investing and house buying. That's what I would do. This is The Ramsey Show. We'll see you next time. George Campbell Ramsey personality is my co-host today. Open phones at 888-825-5225. Danny is with us. George Campbell Ramsey personality is my co-host today open phones a triple

eight eight two five five two two five Danny is with us Danny is in Boca Raton hi Ben Danny how are you I'm doing all right how are you better than I deserve sir how can we help so I have a three-year-old and a six-week-old me and my wife would like to put some money away for them. We were wondering what the best thing would be. Okay. Are you, well, we teach folks a thing called the process for becoming wealthy and taking care of all the different components of our life called the baby steps.

You may have heard of that. You may not. But the first thing you would do is not put money aside for your kid. The first thing you would do is to set money in an emergency fund of $1,000, a beginner emergency fund. The second thing is get out of debt, everything but the house. How much debt do you guys have? Pretty much none.

We only have two credit cards, there there's no debt on them um we have about three thousand dollars in emergency funds okay no car debt no student loan debt no good what's your household income um together is about $80, $85, $90. Okay, cool. Well, once you've done Baby Step 2, which is debt-free but the house, all that means is you need to place some scissors across those credit cards and cut them up, start using debit cards so you don't accidentally slip into debt, which people do all the time.

Then we would go on to Baby Step 3, which is finish the emergency fund, and you're short on that. You've got a $3,000 now account, and it needs to be three to six months of expenses. Once you have that, then you would begin investing in your retirement, 15% of your income going away for retirement. And once you got that started, then you start saving for the kids' college, which is what you're calling about. But the best thing you can do to stabilize the the family for the kids is to uh

you know to be to be out of debt and be building your investments and then in addition to that we can start saving for kids college if you click on smart vestor at ramsey solutions.com you might find um a smart vestor pro that you will find, a SmartVestor Pro that we recommend. Sit down with one that you like that has the heart of a teacher, and you'll want to learn about 529s and ESAs and putting money in mutual funds for your kid's future. Is that what we're talking about here? Yes, sir. Okay.

It says on my screen something about an iul yeah we were looking into those because um but you got a friend in the insurance business yeah yeah and guess guess what which by the way is going to make way more commission yeah so iul's are awful it's an indexed universal life you never do investing inside of an insurance policy it is the world's worst place to do investing the only people in all of the financial world that recommend that you invest inside of a life insurance policy are insurance people nobody else does nobody else believes that crap it's so outdated so outmoded it's covered in fees horrible product don't do it was i unclear no sir okay and by the way your kids don't need

life insurance life insurance is meant to replace your income in case something happens to you so you your wife you both need a good term life policy meaning it's not for your whole life we're talking about a 15 20 year level term life policy 10 to 12 times your income if you have those in place you can rest easy at night yeah and then if something happened the two of you kids will be taken care of right um right but the uh and you get that at zanderinsurance.com they'll shop a gazillion companies get you the best. That's who you deal with. And it's way more affordable than these IUL policies. It'll be 5%. $5 if your IUL is $100, this will be $5.

It literally is 5%. It's horrible, man. So just stay away from that. So, you know, walk your way up into investing in real investments. And in the meantime, make sure you've got term life insurance in place and you've got the whole thing taken care of. Dave, I'm seeing this all over social media. I don't know why, but the young people are gravitating towards these universal life policies. And here's how it's marketed. They go, you know it, you're supposed to use your life insurance while you're

alive. Did you know that? And everyone's like, oh my gosh, this is brilliant. This investing policy inside of my whole life. Oh my gosh, this is amazing. I'm going to become a millionaire. And the commissions and fees these guys are making selling this crap is insane. And the amount of time you have to spend pulling that premium every single month in order to make any amount of money is absurd. I don't know how it's legal. The indexed universal policy is, it's a newer version of an old bad idea is what it amounts to. And so what you're going to find if you take this product apart and look at the components of it, the insurance portion goes up every year. It's basically what we call an ART, an annual renewable term. Term insurance, all life insurance gets more expensive every year that

you're alive period because you're statistically more likely to die every year you're alive right brilliant so if you're 51 you're more likely to die statistically than if you're 50 period okay end of story now why would you get how do you get then a 15 or a 20 year level term insurance well it is cheaper than the average of the 15 year of increases the art would start out cheaper and it would end higher and the lines would cross right in the middle hypothetically if it was exactly how you see what i'm saying so the art would go it'd go straight up and the 15 year would be level and it would cross right in the middle at seven and a half years however it doesn't do that because it is cheaper for an insurance company to produce a 15-year policy that because they keep you for 15 years then it's called persistence in the real

insurance business than it is for them to try to get you to stay with a policy that goes up every year can you imagine that if you get a bill and every year it goes up, you're probably more likely to cancel that? So that policy doesn't stay on the books, so it's more expensive for them to sell ARTs. So net result is a 15-year is way cheaper than the average of 15 years of ART. Okay? Now, the index universal goes up every year inside the policy, but you don't see it.

So if you've got a 400 premium a certain portion like on your you know if you ever look at your mortgage your mortgage payment a portion goes to interest a portion goes to principal the further you go along more goes to principal less goes to interest this is exactly the opposite the further you go along more goes to insurance less goes because the art is going up every year inside there. Less is going to your investments. And so if you keep the stupid thing long enough, it will begin to be the point that the premium you're paying will not even cover the insurance cost. And so it starts to eat back into your savings just to keep the policy alive. And the thing gets what we call upside down in the insurance business

and so now you've got a real piece of crap that's that's eating itself from the inside out but they pitch it as this really sophisticated nuanced listen it's so complicated you don't understand just trust me yeah as your insurance guy i'm gonna make you lots of money let me give you a clue okay when you drive past most cities the skyline has banks and life insurance companies these are the two towers in every skyline santa claus didn't build those and those people didn't build them with wealth they inherited they built them with money they took from you banks screwing you life insurance companies screwing you this has been going on for decades nothing new it's not a new it's not a new song not a new dance and just because you put it on

tiktok for god's sakes doesn't make it smart as a matter of fact that kind of dumbs it down that's a trigger word for you i'm sorry i shouldn't mention anything i mean it's just like what we teach is that you should take the difference that if you pay five bucks for term life versus 100 for whole life take the 95 bucks you would have spent and invest that and you're going to be way better off than having touched one of these crappy policies yeah oh here by the way after you paid an extra on this all these years and you die they only pay the face value they'll pay the face value plus your savings that you've been paying extra to build so it's like a savings account with a crummy rate of return. They get locked up.

That when you die, they keep your money. I mean, who would bank with that? Oh, people that buy stuff on TikTok. I think Danny needs better friends. Yeah, well. It's time. No, I mean, that happens to everybody. Because that's how most, particularly whole life, permanent life, crappy life insurance is sold,

is some old friend from college suddenly remembers you. My buddy from Northwestern Mutual said, let's be done with that. Oh, that's horrible. That happened to me. That happened to me. I bought it when I was a child boy. Yep, sure did. I did the same stupid stuff.

And I have a degree in finance. And I fell for the crap. Now he's a grown man, America. He made it. This is The Ramsey Show. Dave here. We just launched a brand-new audience survey for The Ramsey Show, and we'd love your feedback.

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