The Ramsey Show - App - How Does Inflation Impact the Baby Steps? (Hour 1)

Episode Date: July 13, 2022

Dave Ramsey & Rachel Cruze discuss: Getting a reluctant spouse on board, Increasing your emergency fund to account for inflation, Selling a rental property to pay off the primary home.   Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6

Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. We help people actually build wealth, actually do work that they love, and actually create amazing relationships. Rachel Cruz, number one best-selling author and Ramsey personality, and my daughter is with me today as a co-host. We'll be taking your questions about your life and your money. The phone number is free. Some say the advice is worth what you pay for it triple eight eight two five five two two five that's triple eight eight two five five two two five looks like mario's gonna start us off this hour and he is in atlanta hey mario how are you i'm doing better than i deserve as you would

say dave i'm doing great glad to be on the show. We're honored to have you, sir. How can we help? So the big point is I'm fairly new. I'm not new to you, but fairly new to the show, and I'm really on fire and on board about just becoming financially free, debt free. The teachings that you and your team teach are phenomenal. And my big question is, I want to know the best way to get my wife on board with implementing some of the drastic changes that we would need to make in order to get to that point. I make a pretty good, I have a strong income. I know all of our debt areas. I know the areas that, you know, where I feel like we're spending too much or overindulging. But I know that I'm going to get some resistance with the changes that we're going to need to make in order to get to where I know that we can get to.

Give me an example of one of the changes that you think you need to make that you think you're going to get resistance on. Some areas of convenience, like going out to eat a lot or ordering food. How much debt have you got? A lot of, including house. No, not including house. Okay. Credit card debt, I'm at about $15 okay uh credit card debt i'm at about fifteen thousand dollars credit card debt uh student loans total um around seventy five thousand um and i have

one car that's not i have one car that's not completely paid off and i think we owe twelve thousand on that car and what's your household income? $175,000. Oh yeah, that's a great income. So Mario, what's causing you to believe that she's going to have a hard time with all of this? Is it comments

she's made? Is it something that in your head you just know her and you know what's going to be coming? Has she given you clues on it? Oh, I have proof. Oh, yeah. I have proof. Yeah, absolutely.

Comments she's made. There's other things that I've implemented. So why? So then for her in these conversations, what are her hesitations? A lot of it has to do with our kids. Okay. a lot of it has to do with our kids okay okay um so like for instance um i'll say okay hey we've completely paid off this particular credit card we're not going to use it we're going to put it up interest rate is high on this thing it doesn't make sense and paying somebody to

borrow from my future self you know i do all of that and she's like great sounds good uh but then time will go on and how she charges on a credit card. And then when I say, Hey, what happened here? Why did this take place? And it was like, Oh, I had to do this. I had to make this decision and do this. And so it's just kind of like, you know, these things, a lot of times it's with the girls, you know, my kids. Sure. And, and it's life, right? Yes. You know, my kids. Sure. And it's life, right? Because you guys have not put systems in place for life to look different.

So you're still keeping the credit card. We're going to put this credit card over here. We shouldn't touch it, but it's still there. Get rid of it. Get rid of it. Do you guys have a written budget that you have together sharing an account saying hey here's here's the line item for the kids this is what we're going to spend on the kids here's the line item for you me food out to eat clothes here's where every single dollar this month is going i've done all of that no have you

guys together no mario have you guys together done that we have we done that or have you done that? So I have done it and I've shared it and it's communicated. This looks good. I'm on board. Let's do it. Let's run this plan and we'll start running the plan. And totally. So, Mario, I also think I'm sure Ramsey has become a cuss word in your house because a little bit of me, I'm fearful that you're using this against her. I don't believe your wife is malicious.

I think she's a great mom, probably a great wife. And so so these things, life is just happening to her. And she's reacting, obviously not in the way that you prefer or that even what we would teach. Right. She's going charging the credit card. But it's not malicious. And so I think that there needs to be a higher level conversation to say, okay, you and I together as a couple,

where do we want to be? What do we want life to look like in five years? What do we want? What is our why? Does she have any level of pain or stress around money? Is she worried in any way like i want you guys to yeah i me me for the most part i am the weights i don't want to have to work until i retire

100 and right now i'm the i'm the listen listen she's a homemaker you're treating her like she's your teenage daughter she's not a partner and she's not a partner in any of this you're just bringing the budget and laying it down giving some instructions about a credit card and then you're shocked that she didn't do what you told her to do uh she's not a partner right she's right you need to get above this and the two of you need to sit down with the kids away or the kids in bed and say we have a hundred and two thousand dollars in debt we make 175,000 dollars that makes us stupid people we need to change some stuff here we're broke and we make 175,000 a year we have got to as a couple aim at something bigger than kids clothes lord jesus

really yeah okay and so we've got to have a big plan that we're going at now honey he feel it and Kids, clothes. Lord Jesus. Really? Yeah. Okay? And so we've got to have a big plan that we're going at. Now, honey. And he feels that. I know, I know, I know. But this is him and his wife talking, okay? Yes. We have to get on the same page. I do not want to be your daddy.

I don't want to be your daddy. I want to be your husband. I need like a grown woman beside me helping me make decisions about our future. And she needs an input in all of that, too. And then she gets input. That she gets to say. And then, by God, when she gives input, it's a contract. Yes.

Yes. But she has no reason. She has no contract with you now because you dictated it to her and walked away. And then we're shocked that she went and bought kids clothes on a credit card. Because she had no buy-in. She had no buy-in she had no buy-in none whatsoever she didn't have a voice in this and she has no belief in the overall vision she was just going along with you yes and i would say this too just as an encouragement mario that the conversations that i feel like winston and i the best conversations we have around money is not really even about money. It's more like, hey, let's just dream. And in five years,

what do we want our life to look like? How old are the girls going to be? What kind of car do we want to drive? What vacations do we take? What do we want to be giving to? Allow your numbers then to motivate you to your goals together as a couple where you guys both want to go. And then the day-to-day plays into that.

But kind of... I'm looking at her and I'm going, I make $175,000 a year. I'm really not okay with us being broke. I think that's fair. It's just crazy. But also, there's a level... Yes, I know. But there's also a level marriage-wise to get above it to have a conversation.

I think it's all of that. I think it's every bit of that. But I think you've got to say, look, we're sloppy. We're disorganized. We're fat what can we do to help you what can we do together to fix this i just saw a study that really made me sad. It showed that families owning life insurance in the U.S. was at its lowest point since the 1970s. After what we've been through the past few years,

I'm just lost on how people don't make this more of a priority. How are you going to make sure your family needs are met if something happens to you? This is why getting term life is an absolute necessity. Rates have never been cheaper and the whole process to apply is pretty simple, with many companies not even requiring an exam anymore. This is why I send you to Zander Insurance, and I have for almost 25 years. They'll make sure you get the right protection at the lowest cost possible, and they're there for you and your family every day. I challenge all of you to make sure your families are protected.

It needs to be a top priority. Call Zander at 800-356-4282 or visit zander.com. That's 800-356-4282 or zander.com. Rachel Cruz, Ramsey Personality, number one bestselling author, joins me this hour. Rachel and George and I have spent the morning going over our talk and stuff we're doing tomorrow night, the Real Estate Reality Check. It is a free live stream that you can watch. It'll be about an hour long. You can join us July the 14th at 7 p.m. Central Time. Free live stream.

Just go to RamseySolutions.com. We're going to dig into the real estate market. All the facts. No just facts we're going to address your feelings but we don't make decisions based on those that's right it's a crazy it's still a crazy world out there there's still a lot of fear and questions anger and predictions and anger anger a lot of anger and you predicting it's not gonna i can't not just i can't buy a house so i'm mad at dave you know that kind of anger you know there's a lot of that so um yeah i mean i posted a blog about this stuff uh last week and it's gotten like i don't know several hundred thousand or almost a million views or whatever but the comments are angry it's because

of the formula yeah well they just don't know period they just don't you know i'll never i'll never listen to you again because i'm basically you know just saying the housing market's not going to crash yeah and that pisses people off you know yeah they want it to crash it's weird so yeah there's just when there's that much fear people misinterpret it all kinds of ways and it's very interesting so we're going to cover the facts we're actually going to have a little bit of a college class almost professor dave he's coming out get my little prof get ready and um it's about as close as i'll ever get to that but um and uh we're going to cover some of that and then george and rachel and i will go through some of

your feelings and comments and your um you know things your people are concerned about we want to address what people are concerned and frustrated yeah and frustrated because what you could buy 36 months ago in a house is not the thing you can buy now and that's frustrating when you've saved up and you got yourself out of debt and all of it so what does it look like and what's the reality of of grieving what was i experienced that same anger when i filled up my raptor you know okay filling up your truck and buying a home, though. I know, but it's still frustration. It's like I can't control the price of this crap.

I just have to put it in my truck, you know? And then I'm laying in the, I told them yesterday, I was laying on the pavement holding my heart, having a heart attack, and Rachel drove up in her Tesla and laughed at me because she didn't have to buy gas. Plug her in. Plug her in. Our question of the day comes from blinds.com find out for yourself why blinds.com

is the number one online retailer of custom window coverings when you get ready to put up a shade or some kind of window covering you get free samples free shipping new promos all the time this is a great company we've been endorsing them for a long time and they take great care of you use the promo code at blinds.com promo code ramsey today's question comes from lindsey and albuquerque we have ten thousand dollars beyond our six months emergency savings and we want to help we want to use that to help pay down our mortgage because we have no other debt. But with inflation, we partly feel the need to keep it in case inflation gets worse. Should we save it or put it towards the mortgage? Thanks so much. You have inspired us to live like no one else. It's a great question. I mean, inflation just came out to what, 9.1% in June. It went up higher than they were even expecting

and predicting. So it is something obviously that's affecting all of us. We were laughing about the gas earlier, but groceries, I mean, all of it, the everyday necessities, it's just gone up, and everyone's feeling it. And so I don't think it's enough to not continue on the baby steps, because, Lindsay, if you guys have an emergency fund in place, it may just mean adjusting your monthly budget, which is not always fun and exciting but where you are today i would do that and continue to pay off the mortgage because becoming debt-free and not having a mortgage payment it's going to free up more monthly to put towards that inflation and towards your budget you know to all your monthly expenses so i would continue to put that

ten thousand dollars towards your mortgage because you have an emergency fund. Very good. Here's the thing. The $10,000, anytime you have an ongoing chronic event, it's not a singular event, it's going to keep going. And you want to offset that with a lump sum. That is always a recipe for mathematical suicide because you're going to burn the lump sum and then you're screwed because you never made any changes to adjust to the situation yeah okay so example of that is we saved up twenty thousand dollars my wife wanted to quit and come home and uh that twenty thousand dollars is going to make it okay to not have her income no it's not because if you're burning through the 20 000 because your spending was at a level higher than his income while she comes home when you burn through the

20 000 you're screwed yep yep so that's a chronic ongoing serial event which is her income goes away permanently monthly we are underwater because we made no changes and the lump sum made it feel better until the lump sum is gone. Right. And that's the exact same thing here. Let's talk about inflation for a second. Can we? Because it continues to rise. And what are you seeing when you're looking out?

It's like, OK, because what causes inflation? You know, we say around here the supply and demand and we can talk about that more. But but there's a lot of a lot of people pointing fingers, a lot of different directions. You know, Biden saying, well, the war in Iraq and then the war in Ukraine and Russia is causing it. People are saying, well, the Fed runs in the interest. I mean, there's there's fingers pointing everywhere of what's causing inflation and it continues to rise. It's not like we're seeing it subside. My personal opinion is that's a lagging indicator, the CPI, that it's not. I mean, this time next year, we're not going to be at 9%.

I just really don't believe it. I predicted that we were going to be here now a year ago. You did. And I don't think we'll be here now a year from now. It'll be better. Yeah, it'll be a lot better. And here's why. There's three major

components to this inflation it is not a white hot economy that caused the inflation in the 70s we had a white hot overheated economy and it drove things crazy covid and by and large the pandemic the economic suppression when we shut down the world we left entire gaps in supply factories weren't making cars factories weren't making lumber factories weren't services weren't being provided so we left these huge gaps and so we ended up with shortages in everything okay and we have supply chain problems we started calling it because we couldn't get stuff off the ocean it was sitting in the bay at la and that kind of stuff so all of those shortages anytime there's a shortage of something it runs the price up now that's smoothing out okay for instance

lumber went up triple it was running about five hundred dollars a board foot and then it went to seventeen hundred dollars a board foot it went up triple and now it's back to about 480 of board foot right now okay so it's the factories caught up to this the supply caught up through the demand and the price came back and normalized same is happening with cars used cars for the first time in the history of mankind went up you know they went up and the reason it went up was there was no new cars right and once new cars started hitting the lots again the factory started emptying the car the car containers right there on the lot boom boom boom boom they start lining up on the lot now you got new cars so that again that's absorbing some of the demand there's more supply so you could use cars are coming back

down and they're going to start going down again like they used to yeah okay so we're seeing that part of the inflation go away but it's not all gone yet and it's still a component it's going up and they're going to start going down again like they used to yeah okay so we're seeing that part of the inflation go away but it's not all gone yet and it's still a component it's going up it's still a component of that nine okay the the cpi is the consumer price index okay that is the measure of inflation and that's the measure of goods and services and they've got it weighted meaning that the things that you spend the most on have the bigger portion of creating that nine percent okay so uh the things that you spend the least on actual dollars okay so for example housing is an element of the cpi well obviously in all of our budgets most people's

budgets that have a house payment housing is the biggest line item in your budget. So it's the biggest portion. So as long as housing is going up, your CPI is going to go up. So housing goes up a little. Bread and milk and meat. Eggs and cheese and crackers. And all that stuff. But look at the number of dollars you spend on that versus the number of dollars you spend on housing. Right.

If that goes way down and housing goes up, you're still going to see inflation. Inflation, okay. Okay? Yeah. But if housing goes down and... Housing values? Housing values. The prices go down, the values go down, and milk and bread doubles, you might not even

see inflation because the house price going down might... So the housing market has caused all this inflation. It drives a lot of it, is what I'm saying. Okay. And energy is the other one. Energy. The cost of the pump. That's what's killing us.

And that one is a political issue. That's not an economic issue. That was created by Biden shutting it off to go green. And when he did that, it created a tremendous shortage, and it's doubled our gas prices. Rachel Cruz, Ramsey personality, number one best-selling author, is my co-host today. In the lobby of Ramsey Solutions on the debt-free stage, Stephanie is with us. Hi, Stephanie. How are you? Hi, I'm good, Dave and Rachel. How are you both? We're honored to have you. Where do you live? I am about 25 minutes away from Boston, Massachusetts. Awesome. How much debt have you paid off? About $105,000. Way to go, kiddo.

Excellent. How long did this take you? Three years and eight months. Wow. And your range of income during that time? So I started at about $60,000 and I ended at $115,000. Excellent. And what do you do for a living? So I work for a hospital manager in IT. Good for you. Okay, cool. And what kind of debt was the $105,000? So it was everything, Dave. About $360 was medical. I had $3,100 in a car loan, $6,200 personal loan, $7,000 in credit card debt, and the biggest was my student loans. It was about $88,000. Wow. Okay.

Very cool. Okay. Tell us your story. What happened three years and eight months ago that put you on this journey? So I've been living with debt since I was 18. So from the first time I got a credit card, I just... How old are you now? 36. Okay. So it took me 18 years to get here. But so 2018, like I said, I'd been struggling for many years. And I'd really have been praying and asking God

to really help me because I never knew how to budget, just was out of control, didn't know what to do. So September 2018, I was home on maternity leave. I had my third child. And I was actually searching for sermons really to watch on YouTube. And then in my feed, this couple video came up. And the title was Dave Ramsey Ruined Our Lives. And so I never saw the couple before. I never watched them ever. And I never heard your name. So but it was a pretty, you know, good looking couple, sharp couple. So I

decided to watch. And they proceeded to say how, you know, they said from the time they started your program, they were getting out of debt. I mean, you know, selling things left and right, living on rice and beans, not going out, just making sacrifices to live the life that they wanted to live ultimately. And I believe it was divine connection. I believe God led me to that video. And so as I was watching, I said, wow, they can do it. I can do it too. So I started searching for you on YouTube. At that time, I just saw a lot of the short videos, the seven to 10 minute clips. I didn't know you had a show, but I just saw a lot of the short videos the seven to ten minute clips I didn't know you had a show but I just started digging into those learned about these you know the seven baby steps

I learned about you know just what you teach what you practice and it all made sense like I said I was on maternity leave so I only had I was making half of my income at the time because I was it was just using my vacation time to try and spread the time out. So I downloaded the EveryDollar app, and I couldn't really start the budget until October. That's when I went back to work. But I had the budget in place. I listened to Rachel Cruz and all the material that you guys put out there and tried to do my budget as best I could. And so once I went back to work in October, my budget was set,

and I pretty much hit the ground running. I initially started out, I was, you know, picking up Instacart shifts, you know, even with sometimes my little kids in the car and my daughter. I would work full time during the day and I picked up a temp agency job, you know, at the evening. So we were home. It was during COVID. So, you know, kids running around in the background, but I'm doing a temp agency job. And I also, you know, delivered pizza for Domino's, you know, a short while. Fast forward to 2020, December 2020, I interviewed and got a position at another hospital. So that jumped me up in my pay about 20,000. And the next year, 2021, about November, I got a promotion to manager. So in that jumped me up as well. So that has been

my journey up, you know, through 2018 to now. He worked your tail off, kiddo. I was. And you know what? I believed in the vision. I believed what you taught. And I, from that first, paying off that first credit card, just seeing how free, you know what I believed in the vision I believed what you taught and I from that first paying off that first credit card just seeing how free you know how a little bit of you know space in my budget and I said wow this really works and I was determined regardless of what people said I was determined that I was going to do it not just for myself and my my kids to leave a legacy and that's really why I kept going wow congratulations that's very proud of you that's a big deal i mean you know we get all different types of debt-free screams on the stage and we celebrate them all but you doing this with little ones over three years working

all these shifts i mean you've done the hard work you've done it congratulations thank you incredible absolutely incredible beautiful what do you tell people the secret to getting out of debt is? It sounds like seven extra jobs. Yeah. Well, in perseverance, but I think the biggest thing is a mindset change. You know, people that I talk to and I share my journey with, they're happy for me. But, you know, a lot of what I hear is, you know, you'll never be out of debt. You're always going to have debt.

And by soaking myself into your show, listening, watching all the debt-free screams that have come across the stage, watching the everyday millionaire, listening to all these people that have done it and they live debt-free, it is possible. So I think it requires a mindset shift, being around different people,

listening, but realizing that it is possible, but also perseverance. I mean, regardless of what comes, I mean, I had life happen during those three and, you know, eight months. So, but it's perseverance, being willing to persevere through and trusting God in the process, because once you've committed to it, he will see you through the end. Amen. Amen. Well done. Very, very, very well done. Who are your biggest cheerleaders? I would say a little bit of everybody. I mean, my mom is here, my family, they all supported me through this journey. My coworkers at work, at the time when I could pick up on call shifts, they would know I was on this journey. And so they would, you know, help me out, you know, send me there on call shifts.

But I think the biggest one is my oldest daughter. During COVID, she was my babysitter. When I had to pick up the during covid she was my babysitter when i had to pick up the shifts she was my babysitter and she sacrificed a lot but she knew what we were after she knew the reason why we sacrificed and she was willing to delay gratification for a season so that we could be here today you know and become debt free so i would say she's my biggest out of out of everyone my biggest supporter my biggest cheerleader was it worth it absolutely absolutely how's it feel to be free amazing i cash flowed this trip here it wasn't cheap and but i i didn't stress the money's there it's absolutely amazing and i wouldn't i wouldn't trade anything for the world i would do it again if i had to and you don't have any payments that world. I would do it again if I had to.

And you don't have any payments. That's the beauty of it. Making $1,500, $1,200 a year and the ability to pick up and do whatever you need to do because you're proving that to yourself and to your kids. So your kids got to witness a warrior princess. That's beautiful. Amen. Yeah, you got after it, kiddo.

You really got after it. Well done. Very, very well done. You're a good mom. Absolutely. You're a good mom. Absolutely. You're a good mom. We got a copy of Baby Steps Millionaires for you. That is definitely the next chapter in your story.

You are on your way. Thank you. And a copy of the Total Money Makeover for you to give away to someone who was inspired by your story that you run into, because I'm sure you've talked about it some. And, of course, Financial Peace University. We want you to go through the class we just launched the new videos the best best class we've ever had at financial peace right now available so one year membership will give you that as well if you've been through it and you want to give it away that's fine we're happy to have you uh pass it

on however you want to do it it's very very good all right bring the kiddos up and tell us their names and ages so i I have Sanaya. Sanaya is 15 years old. Emanuela, she is five. And my youngest one, Atara, she's three years old. All right. Love it. Beautiful.

Very, very, very well done. All right. Stephanie from Boston, Mass. Three years and eight months to pay off 105,063 jobs. I'm exaggerating a tiny bit, but not much. And some help from the teenage daughter. That's just beautiful. 60 to 115,000 income during that time. Count it down.

Let's hear a debt-free scream. Three, two, one. We're debt-free! Yeah! Well done! Godfrey! Yeah! Woo-hoo-hoo-hoo! Well done! Oh, man. Oh, man.

She made me tear up. She gets it. I got the sniffles. She gets it, and she pushed it through. That's beautiful. Very, very well done. That lady's a force of nature right there, man. That's what you have to do.

She said it beautifully. What's it take? It takes a mindset change. I know. I know. And you know it's not forever. It's a mindset change. But in those moments and those nights, it's hard to leave, and she still did.

I'm going to live like no one else so that later I can live and give like no one else. This is The Ramsey Show. Thank you. Rachel Cruz, Ramsey personality, number one best-selling author. My daughter is my co-host today. Open phones at 888-825-5225. Ben's with us in Salt Lake. Hey, Ben, what's up? Hey, Dave. Hey, Rachel.

Thank you for taking my call. Sure. I've gotten an investment property, and I'm debating whether or not to sell it. I've got enough equity in it to pay off my mortgage plus quite a bit extra, and I'm just wondering if it makes sense to go ahead and sell it. Okay. What's it worth? Best estimate is about $300,000.

Okay. What's your home worth? $750,000, $800,000. Okay. All right. And how much do you have left on your house, Ben, to pay off? About $120,000. Okay. What's your household income about 190 okay

all right well you can run the numbers out both ways okay because here's the goal the goal is to end up with zero debt because that is your fastest method to build wealth okay at least the most at least the fastest right way to build wealth because it's gonna it's gonna free up everything and you're gonna head the right direction so if you had no payments making 190 but you didn't have a rental property anymore you would probably begin to save towards buying your next paid for investment property property, wouldn't you? Yes. And 10 years from today, you would have a paid-for house, paid-for rental property. Ten years from today, if you just beat on both of these with $190,000 income, you probably can work your way through and be debt-free on both of them

about 10 years from today, right? Yeah, when I run out the numbers, it's more like four or five. Yeah, okay. So really the trade-off is four or five years. The tradeoff is not, I'm going to be in debt the rest of my life because I don't make this decision. Yeah, yeah. The other side of that is also the taxes that would be due if we did sell it.

Well, that's one side of it. The other side of it is the peace and freedom you would have without screwing with a renter or a mortgage. Yeah, very true. So there's-offs all the way around this deal uh so i i think i i love investment real estate if you listen to this for very long you know that i own a bunch of it personally but not everyone should own real estate not everybody likes it um and not everybody wants to mess with it so this particular three300,000 investment property, you like it, love it, don't care? Like it. Okay.

So 10 years from now, you'll be glad you own it? Yeah. Yes, definitely. Okay. I'm probably just going to work through paying them both off. Okay. Okay. That's excellent advice.

You see how I got there? Yeah. Yeah, absolutely. That's how I got there is probably more important than the actual advice. But, you know, again, if it was going to take you 20 years, you know, if you told me you had an $80,000 income, I'd sell your investment probably in about 30 seconds. Right. Right. No's that's not the

case yeah but i mean you see what you see how i'm how i'm analyzing that that's my point yeah yes i do okay cool okay so what's your threshold then i thought you were going to say something different i really yeah i thought you would say sell it pay off the house take the five years five years about my threshold okay that's that was my question if he can clear the deck in five years in five years so same thing on paying off your car okay think about your car okay i take what do we tell people we tell people yeah if you get paid off in 18 24 months right yeah then it's okay but if it's going to take you four years so why wouldn't you just sell the car every time because you're going to turn around buy another

one yeah but a cheaper one i know i'm saying if'm saying if you could pay off the car in 18 months and you sell it today to get out of debt, you're going to be turning around and buying another car in 18 months. So it just was a dollar swap. In other words, the car was not weighing you down to the point you couldn't get out of debt. Right, right. And the same thing is true here, the five-year mark on this because he can clear his mortgage and his house yeah when most of the

people following the baby steps are debt-free house and everything takes them about seven to eight years to pay off their home alone just the home right right but because he has an inordinately high he has an inordinately high income in relation to his mortgages yes yep then he can knock it out he could do both but again if he if it was going to drag out 12 years i'd have flipped it sure sure and the thing that would have caused that to happen would have been if his income was lower yes okay but then on the other end though he sells it gets he's 100 free yeah 100 free and then he goes and buys a cheaper rental later three or four or five years from now so he's back in the rental business and either way at the end of five to seven years at the end of five to seven years he has a paid

for mortgage in a rental business at the end of 18 months you still got a nice car yeah you just had you didn't have to flip in and out of it was all true that's the difference and so if this was like who wants to be a millionaire some game show i would have lost i really was like expecting you to say sell it and sell it and pay off the mortgage have the piece have your extra cash and if you want to go buy something else later and cash complete you know well and of course there's another element to this he likes the rental property fair if he yes he said you know it's a bad neighborhood i'm not that thrilled with it i probably wouldn't buy it again then sure let's go ahead and flip it out now yep

you know but he's like he didn't love it if his mortgage was different if his mortgage was different his income was different or if he liked the didn't like the property all of it's good all right that's um you learn something new every day brad is in toledo hey brad what's up hey how you guys doing? Great, man. How can we help? So my wife and I, we're frequent listeners. We've been investing for a while, and we're just kind of struggling to understand some of the advice that you put out there when it comes to like a Roth versus a brokerage account. So we currently, we have no debt um we bring home about or we before tax about 175 a year our living expenses are like 45 000 so that would put us in like a zero percent or a zero

percent capital gains tax bracket for a long-term capital gains you you know, at that kind of living expense. So what's the advantage of a Roth contribution versus like a brokerage account when you fall into that 0% long-term capital gains tax bracket? Well, I'm sorry. Take me one more time from, I got lost, from $175,000 income. You said, right? Yes. And why is it, why with that income you have a 0% capital gains again? Well, I'm just looking at in the future our living expenses,

if we were to replace that with investment income, rather than try to replace our $175,000 if we were trying to cover our living expenses. But capital gains doesn't go to zero just because you want to cover your living expenses. When you have capital gains on a brokerage account, when you have capital gains on a brokerage account at $175,000, you pay 15% on it. It's not 0%. Correct. So if you're going to pay 15% on it versus 0% in a Roth, doesn't that answer your question?

Yes, in that scenario, yes. But I'm saying if our income... What possible scenario with $175,000 do you get a 0% capital gains rate? He's going to tell you. Go, Brad. Never. Never. At $175,000, never.

What do you make we were to pursue different careers where we where we've made less money and it was more you know of a passion job or something like that i would suggest you don't do that i suggest you find a passion job that pays you 200 um not a passion job that pays you 14 it's not going to work out it's not going to work out for you so um you make you currently make 175 000 a year if you are truly going to go on the mission field and make zero then you know we can have this discussion but you're not okay you're going to pay 15% on a brokerage account,

and you just want to screw around with taxes and find out some, or screw around flipping stocks and find out some way that that's okay to do. No, it's not smart. I would buy mutual funds and a Roth IRA. Okay, so what if Brad wakes up tomorrow and says, we're going to go work for a nonprofit where my wife and I together, we're going to make $45,000. Then they're going to have the capital gains tax at 45 000 you don't have zero capital gains unless

you make under 20 000 bucks i mean it's you know you got to be at the poverty level and going from 175 to the poverty level in order to have zero capital gains is not a wise move okay that's just that there's nothing in this whole scenario that This is like something. No, no. I don't think it's going to happen in your world, sir. And so you need to do Roth IRAs. It's pretty simple. The math is going to work out better for you all the way around. Thanks for the call.

That puts us out of the Ramsey Show. If you want to do your debt-free scream live on the show, visit ramsaysolutions.com slash debtfreescream. We'd love for you to come to Nashville and tell Dave your story. That's ramsaysolutions.com slash debtfreescream.