The Ramsey Show - App - How Do I Start Investing? (Hour 3)

Episode Date: November 30, 2023

🎵 Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. I am your host, Jade Warshaw, joined by your other host, best-selling author, host of the Rachel Cruz show. Rachel Cruz. I almost said the Ramsey Cruz show. It's great. Hey. Very similar.

It's all the same. All the same. We're taking calls about your life and money, so give us a call. The number is 888-825-5225, and we would be happy to talk with you. Again, anything that has to do with your life, your money, Christmas gifts, whatever you can think of, we will talk about it. As long as it has to do with life and money. So give us a call. We'll go directly to the phone lines here with Dorothy in Boston, Massachusetts. What's going on, Dorothy? Hey, Jade. Hi, Rachel. My question today is,

where would be a really good place to start when someone knows little to nothing about investing i love that question how is it you invest it is me i'm asking for a friend um yeah right here no it's great you know i let me just tell you what i did um i knew that i wanted to work with a smart investor pro or like work with a professional but I also wanted to kind of have like a baseline of knowledge going in so that I could follow them in the conversations and also have an idea of what I wanted because I didn't want to go into it with this idea of like okay you just tell me what to do right I wanted to learn and understand it. And so for me,

a lot of that was I started listening to shows like this and digging into that content. And on our website, RamseySolutions.com, we have so many articles on investing and all these things that you can really sort through. And I think that that's a really great resource. And then I just spent time doing my own research. And then I called up a Smart Investor Pro and I kind of let them know, hey, here's what I'm thinking. The financial plan that I follow talks about investing across four types, growth, growth and income, aggressive growth and international. And they talk about putting 25% into each one.

I agree with that. And I just really started that conversation and I let them know, hey, I'm open to learning. I just want to understand how we're investing and how we're doing this. And so that's how I started. Does that, is that ringing? Is that pushing any buttons for you? Yes, it is. I'm not quite there yet to baby step four. Yeah. Yeah. So, but I just want to have like.

Some basic knowledge. Yeah. Yes. So when someone's like S&P 500 or whatever. Yeah, totally. Okay. So here's just kind of a, let's just do a quick like four minute high level investing school for you, Dorothy. Oh, I love it.

Okay. So when it comes to investing, we always, we have the rule, we call it the KISS rule. Keep it you, Dorothy. Oh, I love it. Okay. So when it comes to investing, we always, we have the rule, we call it the KISS rule. Keep it simple, stupid. That's what we say. Keep it simple.

Great rule. Yes, because people get very deep into the weeds of stuff and they're all like trying to do all this fancy stuff. So keep it simple. So yes, you mentioned the S&P 500, the Dow Jones,

when you turn on the news and you see the big chart, right, with all the stuff, right? So what you're looking at is just basically the values of these companies. And so with the S&P 500 is the top 500 largest companies. And so you're going to have Apple, you're going to have Ford Motor Company, you're going to have Target. I mean, you're going to have 500 of the largest you're gonna have target i mean you're gonna have you're gonna have 500 of the largest companies and when you buy into those companies you buy into the market right you can do s&p 500 which is not to get too complicated like the index index funds you can go into the stock market but basically what you're doing is you're buying a small

portion of these companies when you go and buy a stock. Now, we recommend, Dorothy, people can buy single stocks where you put all of your money in Apple, or you put all of your money in Target, or all of your money in American Airlines. We don't recommend that. So some people's strategy is they go and they buy individual stocks, and they put their money and hope that a few of these companies do really well. What we teach Dorothy is to invest in mutual funds. So mutual funds are 90 to 200 of those stocks in one fund, okay?

And so that's gonna help spread your money out so you're not in single stocks. So that's kind of how the market, the basis of that. Now, we can branch off into retirement investing. So you're going to hear things like a 401k, which most companies offer their employees and they'll do a match. So if you put in 3% of your income, Dorothy, the company will match 3% or some companies it's 4%, 5%, 6%. Now, when you're opening a 401k, then you have a choice. The money that they have,

where is that money going? And that's what Jade is talking about, is actually taking your money and buying mutual funds with it. Now, the specific mutual funds are the four types that she talked about. That's pretty deep in there, in the details of it. But that's the 401k. There's a IRA, a traditional IRA and a Roth IRA, which is another vehicle for investing. And again, you can open that account, but the money you have in that account, you want to actually invest. And that's where a SmartVestor Pro can help you. And then another term to remember, Dorothy, is Roth. Roth is your friend, R-O-T-H. Roth means it's after tax dollars. So it's after you've paid taxes on your income, your income hits your checking account. You use that money to go and

fund a Roth IRA, which the great thing about that, since it's after tax dollars, that means all the growth that's going to happen, compound interest in that account is tax-free because you've already paid taxes. Yes, which is beautiful. So whenever you see Roth, we want that. We want Roth IRA versus traditional. And if your company offers a Roth 401k, you take that too. Now, again, it's after-tax dollars.

So you're going to feel it a little bit more. It kind of hurts a little bit more because you've paid the taxes and you're like, oh. But again, that's kind of just, I don't want to confuse you, but that's kind of just the basics. No, that's very clear.

That we look at. But I would sit down with a smart investor pro what Jade said. If you go to ramseysolutions.com, you can find one in your area. And if you're anywhere near Boston, there should be multiple. And sit down and talk to them set up meetings and interview each of them and kind of figure out who you like just from a personal standpoint who you enjoy

who's going to teach you because this is yeah you want someone in your corner because it can get really granular really fast that's right and you want somewhat of an understanding but you also have to know that these people you know they do this day in and day out that's right so there's a level of trust you have with them too in this process yeah and i also want to encourage you or anybody else listening people rarely understand it in one take you know what i mean like i had a buddy come visit me and she was like jade explain this explain. Explain this Roth IRA thing to me one more time. And you rarely get it in the first try. It's like I remember the first time I was like, wait a minute.

What now? And it's like you want to go back and listen to it again. So go back and listen to this call again. Like I said, dig into some of those articles. Make sure you're setting up time to talk with these people because it takes a minute for you to really understand it. Because like Rachel said, and it's true, it does get granular very quickly. And it's like, okay, well, once I finished my Roth IRA, then what do I do next? And then if I have more money, where do I go next? And so before you know it, you're really going down the line on this and you want to make sure that you do have a clear

understanding because these are your hard earned dollars. Yeah. And Dorothy, and for anyone listening, that baby step four is 15% of your income into retirement. So retirement is gonna be your 401k at work or 403b and a Roth IRA. So those are the two main ones. There's other things like an HSA and different things if you max out those other two that are options. And we talk about that here at Ramsey.

But for most people listening, always remember it's your 401k and Roth IRA, 15% of your income that goes into those. That's right. All right. This is The Ramsey Show. You are listening to The Ramsey Show, and I want to let you guys know that our Ramsey

Solutions Cyber Monday sale is extended. So if you thought the savings were over, you were wrong. You can still go on and get some of our lowest prices of the year all week long. You can get meaningful gifts for your family and friends as low as $7. I'm talking about audio books. I'm talking about every dollar premium gift cards for $49.99. That's amazing. You can even get things like Financial Peace University, our nine-week series to help you learn about money. You can get that for as low as $59.99. There are gifts for everyone. You can find things for your kids. You can find things to set and accomplish your goals. I'm talking about

the Ramsey 2024 Goal Planner, which is just $44.99. And by the way, the content in that was designed by Rachel Cruz sitting to my right, Dr. John Deloney and myself. So it's a great planner to help you work on your faith, relationships and finances through all the teachings that we give you throughout the year. So that's a big one. And honestly, one of my favorites, the Rachel Cruz wallet is available in many colors. I think the champagne color is my favorite one, Rachel. Oh, and a brand new edition navy. We did a navy this year. I know. I think the champagne color is my favorite one, Rachel. If I'm being, oh, and a brand new edition Navy. We did a Navy this year.

I know. I love it too. What I'm saying, guys, is you've got to get online and shop our week long Cyber Monday sale. It's at RamseySolutions.com slash store. Got to go pick that up.

Wow. All right. Let's talk from Neighborly.com here for a moment. So our question of the day is brought to you by Neighborly, your hub for home services. Now, if you need work done on your home, your yard, but don't know where to start or who to trust, I'm telling you, Neighborly is the answer. Find all the help you need at neighborly.com slash Ramsey. That's neighborly.com slash Ramsey. And today's question comes from, we're ready for this, Scrooge Mom on a budget from Ohio. She requested this name. She said, please address the topic of

Christmas gifts for teachers. I hear my adult children talk about the cost of gift cards, et cetera, for their children's teachers. I raised four children. They had multiple teachers every year for specials,

you know, PE, speech, music, art, playground, supervisors, cafeteria workers workers homeroom etc uh any given christmas i could have dropped hundreds of dollars on 30 plus teachers and

support staff alone they are hard-working professionals and i'm trying to understand how this all got started and why it has gotten out of hand i am more inclined to get a Christmas gift for those working on Christmas Day. Interesting. Fair. Yeah. So I don't know where this quote unquote got out of hands. I don't know. And I think it's a really personal thing that whatever you choose to do, what your budget allows. But I do think the expectation of just people in general doesn't need to be your expectations. You have to set your own for your own household. And Jade, what I have found with majority of my kids, majority of years, a lot of the room mom or someone will actually, you'll Venmo her money and she'll get a big gift from the class.

Oh, that's great. So that works out really well, which is very nice. Now, I will say this is one my our teachers. I will. I do kind of go big on my kids like specific teachers. So like the kindergarten teacher and Amelia has third grade. She has two teachers. So I will. I'm like, because I just appreciate them a lot.

And again, we have our budget. It's something that I plan and I do. So that is one area of life that I feel like I'm more. I probably I may spend more on a teacher than my like my parents oh my god because look but that's your choice yeah and I want to and I genuinely do and I don't do it for all of them you know um even though there's so many people that help out and all of that but I I think it's it has to be in your budget that's's right. And the expectations for your family, not letting everyone else set it. But I think the group gift is always a great,

it's a great idea. I like that. Look, I hope that's what happens with my son's kindergarten class because I haven't heard anything yet, but I'm like, what do we do? And I know teachers, I've heard from them. They don't want candles and all of that.

Please no candles. So gift cards is a thing, right? So if you go and yeah, spend 20 bucks or whatever to get them a great gift card at target or yeah they're gonna appreciate that and can i just say for the people get them a gift card that they really can choose what it's spent on like visa gift cards target gift cards like target and walmart gift cards i think are fine because there's so much or like amazon gift cards because there's so much to choose from but don't come in here with like a subway gift card because everybody doesn't like subway or even starbucks yes i just feel like yeah yeah yes i just i i think that i speak for the teachers

when i say let them kind of choose their own gift if you're going to do a gift card make sure you make it a generalized yes and it is for me it's a you know it's a profession that it's i mean and everyone knows that they're not paid but they should be paid for the amount of hours and work generalized yes and it is for me it's a you know it's a profession that it's i mean and everyone knows that they're not paid but they should be paid for the amount of hours and work and what they're doing they're literally teaching the next generation i mean i i can't i'm not a homeschool mom i mean i i would be terrible terrible teacher and then amelia's bringing home common core math now and i'm just like i literally have no idea what you're like i can't do this i don't know what you're doing.

I'm scared. So it's, yeah. And so I really do appreciate good teachers and we've been so blessed. Our kids school. I mean, every teacher we've, we have just loved.

I mean, they're just wonderful. So yeah. I teachers out there to all you teachers listening and watching, or if you know a teacher, send them this clip. Cause Jade and I both as moms greatly appreciate good teachers. Cause it's a lot of work they deal with a lot i mean i would say at the very least if if your holiday budget if you're like look on the holidays i'm stretched to my like stretch to the core make make it a point to contribute at least at some

point throughout the year yeah i would say that or like do baked goods like do something like a loaf of bread with it with a letter like some level of appreciation yes it doesn't have to be through a present yes some level of appreciation i think is they all need it yes at christmas or like just yes make it part of your rhythm because they need that stuff oh love it that's good sorry scrooge mom we had. We had to debunk you on that one. All right, let's go straight to the phone lines. We've got Debra in Dayton, Ohio. What's going on, Debra? Hi, I'm looking at starting building a real estate property portfolio. Cool. And I'm ready to do like probably a baby step. I'm very, I would say conscientious about being in debt. Um, I own my own home.

We don't have a payment there. We own another home that's no payment, but that's getting prepared to go on the market for rent here for probably around 16 to 1700 a month. Um, I do own another smaller property that I purchased waiting for that refi at 6% and I owe about a 70K on that. My payments are about 600 and rents for about 975. Just to get somebody in there quickly, I did that. And so I'm selling to the air. The debt that we only are carrying now is a truck that we got at zero percent interest and that was like for our future future uses and um that is probably about 1200 a month what's the full amount that no oh how much did it cost yeah oh we went day 95000? Yeah. We've been getting some expensive cars this show. We like cars.

We like motorcycles. What else do you have? It's our passion. What other? Just curious. Four motorcycles. Four motorcycles? Are they all paid for?

Yes. Yes. Okay. All purchased. Range Rover, purchased. Fully in cash. How much did you guys make a year deborah a van no purchased i just wait until i have it or we paid it off okay um so together um i have

an escort set up for myself and my husband makes 110 i make maybe somewhere similar because i'm on a commission so you guys make 220 000220,000 a year? Yeah, roughly $220,000 to $250,000. Okay, $250,000. Okay. So we purchased the house a year and a half ago, remodeled it, and it took about $50,000 to get it up to what we want. So I'm very happy. I was very conscientious to stay to where probably I could sell it now for $350,000. You may have to come on with your question because we're right up against the clock. So how can we help? Yeah, my question is, I have probably $60,000 in my account.

So I could pay off that rental property. I could pay off the 0% interest. But I really want to maybe have money to purchase another small rental. Okay, so if I were in your shoes, have money to purchase another small rental. Okay. So if I were in your shoes, if I were in your shoes, I would pay off the final rental that you have because your primary residence is paid for in cash. Home number two is paid for in cash. If you can pay off home rental home number three, I would definitely do that.

And I would not buy any more real estate without paying cash for it. Also, you guys have too much stuff that's tied up, too much money tied up in vehicles that are going down in value. I would seriously consider scaling back on buying things with motors. It sounds like you have too many as it is. This $95,000 truck really, really deeply, deeply bothers me. But you guys have got a high net worth, so I'm not that concerned about it. Get it paid off as soon as possible.

This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down. And if higher costs aren't enough, the wait times to see your doctor are longer, and it's harder than ever to get anything approved through the bureaucracy.

So if you feel like the system is working against you, try a biblically based alternative to health insurance, Christian Healthcare Ministries. CHM is a health cost sharing ministry that's helped hundreds of thousands of families like yours take care of over $11 billion in medical bills since 1981. And CHM has also helped them stay true to their values and avoid miles of red tape. And CHM support goes far beyond meeting financial needs. They'll also help meet spiritual needs. Members become part of a family who will pray with them and for them when they experience a medical event. So listen, y'all, there's no better way to take care of health care costs. CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget at chministries.org

slash budget. You are listening to The Ramsey Show. There are only two more paychecks till Christmas. So help, let us help take the calls about your life and your money and what you're doing with your money, not only now, but into the new year. So you can get on a plan where you're actually making traction and paying off debt and saving money. We want to help you do that. So give us a call. The number is 888-825-5225. I'm Jade. She's Rachel. We will take your call. Let's go straight to the phone lines where we've got Mary from Calhoun, Georgia. What's going on, Mary? Hey, y'all. Thank you for taking my call.

You're welcome. How can we help? Okay, so my husband and I are babies at this, but after watching y'all for about a week now, we are on fire, and you have come up, helped us come up with a solution for our health situation. So we want to spend the next year or so saving up for our emergency funds.

We'd like to get $20,000 in that. And after that, we want to pay off our home as quickly as possible, investing everything that we have to get it done so that we can demo it and rebuild. Wow, okay. I know that sounds kind of crazy why would you demo your investment but um we live in a farmhouse that was built around 1880 and unfortunately the additions that they did to it are garbage okay and we didn't discover this until after moving in and none of the bones of the house Okay. Okay. hurting our family to not invest in retirement or any of our children's college funds or any of that while we try to get this paid off as soon as possible because the damage to the house is pretty severe. I mean, we've got broken joists and there's rot, and it's not something that we should be sticking with for much longer.

And we're hoping that if we can really pour our hearts into this, that at the conservative end, we can have our house paid off in about five years. Well, Mary, I, look, I love the way you're thinking, like, hey, we want to do this. We want to try to do this really responsibly. I will say there's a reason

that the baby steps are listed as they're listed. And I do have a couple of questions and holes to poke in your plan um number one your plan doesn't align with our plan and so I just want to call that out we would say hey after you finish baby step three after you get your 20,000 saved you do need to start investing 15 it would be one thing if you're like hey we're saving for another down payment and I'd say yeah I do that simultaneously no problem and since you do have kids I do want you putting away some money as well for their college and you get to decide what that percentage is as far as the kids college but I do want you to start investing because five years is a long time to delay that process after you've already delayed it for paying off debt and saving money, right?

And so for that reason, I would not do that. And then the other thing that we can talk about is why you feel the need to pay the home off before you cash flow any changes to it. Because you don't necessarily have to pay off the home before you cash flow any changes. You could do them both intentionally if you wanted or one first and then the next. The house just isn't worth putting money into. But if you pay it off, you will have put the money it takes to pay it off. And then you will have...

Because the equity and everything. Yeah. So it's not like you're bypassing that step. If you pay it off, that is money that you've put into the equity of everything so yeah so it's not like you're it's not like you're bypassing that step if you pay it off that is money that you've put into the equity of that land and lot and then if you choose to rebuild it that house and then you're basically demolishing the house so the equity is that that's not tied up in the land and a lot the equity in the house which how much like how much would the house be worth if you were to sell it um our estimated home value is about 282.5 okay so yeah so my 147 okay um and you think a complete reno is what you guys want to do or would you ever look

at moving or what are there any other options that you guys have looked at we we love where we're at. We love our church. We live in a very small town in a very small community. Okay. And, you know, we do homeschool, so it's not like school ties us down here or anything like that. But looking at the house, it just, it breaks my heart,

but it just, it doesn't look like it's worth putting money into trying to fix it at all. I mean, we put Band-Aids on it to make it livable and safe for our children. And we just had an infant. Have you run any numbers, Marion, on how much it would cost to build what you guys want? So we found house plans for free, and it's about 150 000 to build that house it's very small and it's something we can build on in the future okay okay um yeah well i would not sacrifice retirement for this i understand that this is a really exciting dream and you guys want to do this

but i'm with jade i would it would be simultaneous for me um and i yeah and there's a part of me too i'm like i i would hate for you guys to still have 147 000 mortgage um and then have to take out a construction loan you know on top of that so yeah so you i mean it's just going to take a little bit mary i think you guys need a little bit of patience how much you guys make a year um my husband's net is 60 000 a year okay and that's including overtime and things like that okay so yeah i mean i mean i would say this mary if if the house is as in terrible condition as what you're describing like is it safe for you guys to live in it for five years yes we can make it work for five years okay so it's safe okay

i would not i would not i would not sacrifice retirement mary i think that these five years um are crucial for just compound interests and starting for the future so if i were you guys i would not sacrifice that how old are your kids i have eight year old twins a four year old and a six week old yeah if you wanted to wait on kids college i mean you you could if you wanted. I mean, I would maybe put a little bit away for them. But I just think that this will be a slower process than probably what you're giving it credit for.

And who knows too, Mary, in five years, when the house is paid off and the kids are five years older and all the things like life changes, you know, you guys may make the decision of, gosh, we may want to move just houses in general. Maybe we want to do something different. I don't know. Like, so just know between now and five years, there's a lot of life that happens. So yes, I would aggressively pay off the house, but I would not sacrifice investing while doing that. Yeah. I'd also be curious. I'd also be curious if you've had anybody,

like a contractor or a home builder, come out and look and say, do we need to start from scratch? Or what can we do here? Because that just feels really like we're going to bulldoze our house and completely start over. Because you bought it for almost $300,000. So it's worth something. It's not like you're like, this house is worth $2,750. You know what I mean? It's not what I'm picturing. Well, we bought it at $157,000, but yeah. Okay.

Where did I get $282,000? That's the estimated home value. Okay, okay, okay. But my point is, yeah. I'm not sure I could sell it in this condition. Interesting. Okay. Well, I mean, I still would.

It just feels really drastic. So I would get definitely a second opinion. And I think I like what Rachel said, which is in five years, you don't know where you're going to be. And you may be like, look, I don't want to go through all that. That's a lot. Yeah. And maybe you do.

And yeah. And then again, maybe you guys look up in five years and you say, well, we have some money. We have some money in our 401k that we've been investing and the house has paid off. And what do we want to do now? And that's the beautiful thing about being debt free is it does give you options and choices. And if you guys want to go build something, I would just hate to lose complete value of the house. But if you want to stay on the same land and all of it, maybe it's what you guys choose to do. But I would just say, Mary, to have a little bit more patience and definitely not sacrifice retirement in this. And if the house does become unlivable for any reason, then yeah, I mean, be prepared to go rent somewhere for a

little bit and all that. Because you probably have to do that during the building process as well in five years, six years when you guys decide to do that. So I hope that helps, Mary. Thanks for calling. Yeah, that's a very good call. That's so interesting. You know, we've had a couple of calls like that today, Rachel, where people have gotten into a house and then they've realized this is not what this is not all it was cracked

up to be like. We need to get out of here, whether it's I just want to turn and run and move or I'm ready to bulldoze the whole Jackham thing. And I just think it just goes to show like planning and taking your time and really understanding what the steps are going to be long term is going to save you a lot of time, a lot of money, a lot of heartache. And it's worth doing that due diligence on the front end so that you don't kind of find yourself at this place where it's like, oh, I got to make a move fast. And then you lose money because of it, right? This is The Ramsey Show. You are listening to The Ramsey Show. I'm Jade Warshaw, your host. I'm joined by Rachel Cruz. So give us a call. The number is 888-825-5225. And we will do our best to help you with the questions you have concerning your life and your money.

Let's go straight to the phone lines. Jake, do you have our scripture of the day? Oh, I do have our scripture of the day. Rachel. Tradition. I know. I know. Well, I didn't even think about it until you were going into the fourth segment.

And I thought, into the show. We don't want to break tradition. Have we ever skipped it oh we have oh well once or twice accidentally we wouldn't have been the first look i'm glad you got my back on that we can't look i'm all i'm already thinking about other things the christmas miracle it's only two paychecks to christmas we saved the show you did all right scripture and quote of the day hopefully it's a good one it says uh psalm 42 look this is you rachel here we are she lifted me out of the slimy pit out of the mud and the

mire he set my feet on a rock and gave me a firm place to stand thank you rachel for pulling me out you are so welcome and then we've got reba mIntyre. She says, to succeed in life, you need three things. A wishbone, a backbone, and a funny bone. Come on, Reba. We didn't want to miss that, Reba. That's a good one. I love it. Backbone, funny bone, and what?

Wishbone. Oh, I love that. There you go. That is so, so good. You're welcome, America. Rachel saved the show. She pulled us up out the slimy pit. That's what I'm talking about.

All right. Now we can go to the phone lines where Devin is waiting for us in Kansas City. Kansas City. What's going on, Devin? Hey, I just had a question about, I want to see your opinion on dropping my car insurance to liability only with being in baby step two. It would save me about $700 a year, but my car is worth only about $2,500. So that's kind of the dilemma there.

Yeah. I got to say, I don't think that I would do that. Liability, I mean, that's like the bare minimum. And we would say that you would need at least $500,000 worth of liability coverage. So I probably wouldn't drop it down because here's the thing. You want to make sure you're covered no matter what. Like if you get in a five car pileup, you want to make sure you are covered. Right.

And so it's just one of those things that you never know what's around the corner. And I find this a lot. You're not the only person, Devin. I think when we're in baby step two, we're so intent on paying off debt that we're willing to sacrifice everything to do it, and a lot of people erroneously think that insurance, because it is something that we add to our budget, right? A lot of people think that we do that after baby step two,

and that's just not the case. We always say that insurance is not a baby step. It's something that you do the moment you find out about it, right? The moment that you get the knowledge and go, oh my gosh, I need life insurance or oh my gosh, I need the right coverage on my vehicle. And there's a reason that we suggest these amounts because it really does protect you in case the worst happens and you run into somebody and the damage is far beyond what you ever thought it would be. And so those are the sorts of things that can really bankrupt people and put them in a really tough situation. So I would not do that, but

I would use our coverage checkup and make sure that you have the right insurance, the right amount of insurance, and that you're getting it for the best possible price. I would do that. Yeah, I'd keep the liability at the highest that I can get it. I just didn't know if having the collision and the comprehensive, would it not be worth that much? Say it was my fault in an accident, getting another $1,000 car probably wouldn't be an issue because the car is not worth that much. So I didn't know if it would be good saving that amount because i'd be paying about seven hundred dollars a year um every year just for a car that's worth about two thousand twenty five hundred dollars and you can't drop it lower since the value of your car is lower

no the the collision and the comfort uh how we said the comp um they are what they are um but the liability i've got that maxed out as high as it can go okay well if you feel confident that you can replace the value of your own car yeah and you've got 500 000 on the liability you said yeah i've got the max I can do, I think, 500, 300, something like that. It's just the portion of insurance replacing my car, that part, I don't know if it's justifying, you know, because almost about three years if I didn't get in a wreck and needing my car replaced, I'd be paying over the worth of my car pretty much. I can understand that. Let's see. That's your choice. I'm just kind of thinking through that because they're usually together,

right? You're comprehensive and your collision is together or are they separate? I think they're together as far as I'm aware. I can see what you're saying and that makes some sense. I would still just check that coverage, check up just to see. You might be able to get it for less expensive and that way you're covered on all three fronts. But I do understand

what you're saying about like if my vehicle is only worth this much, like I can cash flow that if something happens and I get in a wreck, right? Yes. Yeah, that's what, we're in baby step two,

me and my wife, and we've only got $8,000 left to go. We should have that paid off by April. So that's why it's kind of like, we're about to have more income coming in with another car being paid off. And then we'll be working on baby step three. So it's just kind of a weird timing. And that's what I'm trying to figure out. Yeah. Listen, in your case, if you if you have the cash to replace the car, if something happens, you can remove the collision. But if you move to a more expensive car, just don't forget to add it back because you want to make sure you're covered in that case. Does that help you out? Yeah, it does. Thank you, guys. You're very welcome. That's a really good question. Thanks for the call. It ends up being kind of that puzzle of figuring out okay what do i have and always still wanting to be insured right to a degree that you get that like that's another thing so it's it's all it's it's that puzzle yeah i mean the liability is the most important piece because you want to make sure that yes you don't you don't know what the nature of

the accident is going to hold and you want to make sure that you're covered in that area so that's a really really good call um let's take another one. Let's go to Jason in Sioux Falls, South Dakota. What's going on, Jason? Hey, Rachel. Jade, pleasure speaking with you. My quick question is my wife and I are expecting some hospital bills to arrive in the next week or two. And we were wondering, is there anything we can do now to take advantage of my HSA or are we kind of too late for that? Should we just keep stacking cash? Well, what are you expecting? How much, yeah, how much in medical bills? Not sure the total, but assuming that it's nothing more than what my health insurance deductible is, then it would be $4,000. Okay. Is this on top? What other

Baby Step are you in? I just want to get a picture of where you're at. Yeah, we're in Baby Step 2 right now. Okay. And how much is in your HSA right now? $400. $400? Yes. Okay. Yeah, I mean, you could put money in that and use it. I mean, the health savings account is a great option for health expenses. I mean, that's what it's there for. That's right. So yeah, that's a great place to save some money versus, you know, you could just do a high yield if you wanted. But yeah, I mean, I'm trying to think the rate for for hsas i don't think the the rate is really the thing because what i would do i think what i would do and double check this but unless you're investing that hsa money that you're not getting a return on it it's sitting there tax but but it's protected it's protected but what you could do is save up the how much time until this $4,000 thing takes place?

Maybe two weeks. Oh, two weeks. Okay. Yeah, just throw it in the HSA then. Like once we receive the bills. Oh, gotcha. Okay. Yeah, I would just filter it through there. And then you're at least going to get the tax shelter on that money that you use for those qualified medical purchases.

What I was going to say is if this was going to be like... Long term. Six months or whatever yeah six or eight months you could like save it up in a high yield get a little return on it and then throw it over there but you know yeah this is in two weeks so so yeah yeah just put any extra yeah any any extra cash you have yeah and that hsa that's great i love it does that help you out sounds good awesome thank you so much jake whoops i didn't mean to cut you off i thought you were done thank you for the call i hope you got the information that you needed. I think we

covered it. So good. I love an HSA, Rachel. I know. Well, and what's so interesting too, and I feel like even in the past few years for us using it with an investment. And so you can actually use it as an investment vehicle. That's right. And beyond Baby Step, you know, four, five, and six. That's right. So it's a great place, yep, to put money, whether you're in Baby Step 2

to actually use for medical that you need expenses. But also in the future, it's a great investment tool too. Yeah, that's right. Because when you're 59 and a half, that money, you don't have to use it

for medical expenses anymore. You can use it just for general, yeah, anything that you want. So that does it for this hour of The Ramsey Show. Thanks for joining us. Remember when it comes to your life and your money, you can tell me that you won't do it, but don't tell me that you can't. Thanks for listening.