The Ramsey Show - App - How Much Should I Keep in My Bank Accounts?

Episode Date: May 5, 2022

Dave Ramsey & George Kamel discuss: How much to keep in your checking and savings, Which distribution option to choose on a pension, How to determine if you have too much life insurance. 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. I'm Dave Ramsey, your host, George Campbell, Ramsey Personality, host of The Fine Print, one of the Ramsey Network's best listened to podcasts. This is my co-host today. As we answer your questions about relationships, mental health, we answer your questions about jobs and careers, we answer your questions about your money and your life and your marriage and your parenting,

and sometimes we're right. The phone number is 888-825-5225. But we are this. We are definitely an expert on our opinion so you got that 888-825-5225 thanks for joining us william is in tampa to start this hour hi william how are you um great dave how are you guys better than we deserve, brother. What's up? Hey, well, I am 42 years old, and I make about $48,900, and I shall be debt-free by the end of this summer. Woo-hoo, I'm excited. Yay.

And I want to know, I know the emergency fund, you say, is three to six months' worth of expenses, but what about checking checking and how much should I keep in checking and my emergency fund? Like I said, my income's around $48,000. And I just want to know how much I should keep in both accounts once I'm completely debt-free. Sure. So, William, do you have a stable income? Yes, sir. I'm a teacher. All right, good. And are you married?

No, sir. Single. Okay. So if you're single, you've got a stable job. You can play within that three to six. If you've got a stable job and you want to lean towards the three, that would be fine if you don't have a lot going on there. Do you already have that? You said you're getting out of debt, so you still need to go work on this emergency fund after that, correct? Correct, sir. Yes. Okay. So once you have that three to six months on the saving side, on the checking side, you obviously have to have enough to cover all of your expenses in a monthly budget. But I'd also have a little buffer, a little foundation, maybe 500 bucks where you go, all right, 500 is basically zero. That's kind of your new baseline so that you're not running into

a situation where you're overdrafting. Yeah, we do run a zero-based budget. We don't run a zero-based checking account because that just life's too short. Okay, so you do want to keep a pad in there of some kind. And, yeah, I'm with George. I think three months. And if you just take your paycheck for three times, I know that's not your expenses, that's your income, but that's not going to be that far off of your expenses.

That might end up to be four or five months of there. But if you had three months of your pay set aside, that would be probably in the four to five months of expenses set aside once you're debt free. So, you know, somewhere in there, the point is to be ready for a rainy day because it's going to rain. Dave, you need to be positive. I'm positive it's going to rain. You need to get ready. All of us have stuff happen. And the weird thing is that if you have a big old emergency fund, it turns an emergency into an inconvenience. So to have less emergencies, it's amazing. My favorite, George, was 100 years ago.

It feels like now it was probably 20 plus years ago. I was teaching a Financial Peace University class. This lady was sitting in there and she said, oh, it's a GOK i'm like what and she said my grandmother raised me we always had a gok fund and i said what's the gok fund she said well it took care of anything like the car broke we got the gok fund i had to have braces one time it was a gok fund and she said my granny always just had the gok what is the god only knows oh i love that it's a great emergency fund. Yeah, that's good. I like it. So I'm going with that.

But the point is, is that most people walk around with absolutely no money in one of the wealthiest societies that the world has ever known because we spend like most people spend like they're in Congress. Yeah. I mean, it's just they're out of freaking control and they don't have any money. And so all we're teaching you is a little bit of common sense here. Carry an umbrella because it's spring and it might rain it won't cover the catastrophes but it covers most of life's emergencies and the weird thing is when you're 100 debt free other than your home and

you have that emergency fund baby step three done you quit having emergencies yeah it turns into an inconvenience and you go well i can take better care of my stuff. I can buy higher quality stuff. I can do maintenance on my stuff. And all of a sudden, you're not dealing with it. Yeah, when I started doing this, I didn't even know that part of it because I hadn't experienced that part of it. But you're right. As you build wealth, your car is better and you don't wail the tire blows to get new tires

and you don't wail the brakes squeak to get new brakes and, you know, that kind of stuff. And, you know, you're right. You're not, you know, everything's not a piece of junk in your life. And so all of a sudden, then crap doesn't break as much. You're not waiting until you need a root canal to get your teeth looked at. That's a scary one. Well, I don't know about that one. Have you had a root canal?

Ah, no. Okay, good. Let's keep it that way. And you know what? I still have my wisdom teeth. Isn't that weird? A lot of wisdom. That's weird. I canal? Ah, no. Okay, good. Let's keep it that way. And you know what? I still have my wisdom teeth. Isn't that weird? A lot of wisdom. That's weird.

I think I do, too. That's why we're so smart, Dave. That's it. That's it. You and me, George. That's the secret, America. We have this cornered right here. All right.

Terry's with us in New Hampshire. Hey, Terry, what's up? Hi, Dave. Hi, George. I'm so excited to talk to you. I'm a huge fan. Well, we're honored. How can we help?

Thank you. I've been listening to you for three years, and I'm out huge fan. Well, we're honored. How can we help? Thank you. I've been listening to you for three years and I'm out of debt except for my home, which I'll pay off in under four years from now. So thank you for all your help with my finances. Way to go. So I've been a teacher for 22 years and I'm thinking about retiring. Things are getting just, as you know, probably just really muddy and confused. So I have a choice to hire a teacher. Oh, wait a minute. You're like one of those teachers that wanted to teach and stuff.

Yeah. Okay. I wanted to teach kids. Yeah, you wanted to teach kids, and they got confused about teaching kids. Okay. I'm with you. Yeah. So my pension right now would be $1,800 a month for life. My district will also pay me $1,500 a month for five years and allow me to keep my medical insurance until I'm 65.

I need to know whether to take that $1,800 a month or take the lump sum, which is right now $110,000, and that's after 22 years of contributing. So I know you always say to take the lump sum, but I use your calculator, and if I were to invest that $1,800 a month, I would come out a lot better. So what do you think, Dave? You'd come out a lot better until you die. Until I die, exactly. And when you die, they keep all the money in the pension and when you pulled it out it's in a in a mutual fund in your name and your heirs will get that 110 000 dollars it doesn't yet die with you yes i don't think that 110 is going to produce 20 000 a year that's a

that's a pretty good trade-off they've got that discounted pretty heavily uh so you're you're right i don't think i don't think you're going to get $1,800 a month off of $110,000 invested. That'd be a 20% rate of return. I think you're going to take a loss on your monthly income if you take the lump sum, but the long-term

play is to take the lump sum. Do you need the $1,800 a month to exist? No, I wouldn't because I would be getting a second career. So I could just invest it. I'd take the lump sum. Then I would roll it, and I'd roll it to a traditional IRA. It will not produce the same monthly, but believe me, the pensions run,

they have actuarial tables, and they run the numbers out as to, you know, they're projecting your death in these numbers. Okay. And they know they're coming out ahead. And so I'm always taking that lump sum. And almost always it works both ways. Better off with the income and upon death. In this case, it's only going to be upon death. But I'm still taking it.

And if you keep it, you get to have that as a legacy, you know, to your family that inherits that IRA or whatever it is versus the pension. You know, you reach 65, you can do a lot of stuff with it. You can do, I mean, 59 and a half, you can do a lot of stuff with it. A lot of options. Yeah. This is The Ramsey Show. Hey folks, there's never been a better time to find a job doing work you love that matters to you. That's why I can't wait to tell you about the

exciting roles open here at Ramsey Solutions. And these aren't your average jobs. These are life-changing jobs that matter. You might think we're just a radio show out in the middle of sticks in nowhere Tennessee, but we're so much more. Our creative team is over 120 people. Our marketing team has over 100 team members. And our product engineering team is over 250 strong. With over 1,000 people on the entire Ramsey team, we are breaking into new products and ways of delivering hope to the masses. Digital products are the future. So, in order to help more people with these digital tools, we need more talented team members to join us, especially developers, UX designers, and writers. You could be a great fit.

So come do work that matters with us. Find all of the open roles at ramseysolutions.com slash careers. That's ramseysolutions.com slash careers. George Campbell Ramsey personality is my co-host today. Open phones at 888-825-5225. Joy's in Cleveland, Ohio. Hi, Joy. How are you? Good.

How are you? Thank you so much for taking my call today. Sure. What's up? Okay. I'm 46 years old, and about a year and a half ago, my husband committed suicide. Oh, my. I've had a kind of tough, you know, last year and a half ago, my husband committed suicide. Oh, my. So I've had a kind of tough, you know, last year and a half.

Yeah, I think. Oh, my. But, yeah, and then in the whole process of it all, you know, we had gotten into the rental house business, and we had acquired, I think it was 15 properties at the time. And several of them were fixer-uppers. So we were kind of like in a mess. So when he passed away, I sold all of them but 10.

I kept 10, you know, to manage myself. And five of them are paid off. And the other five have, you know, small mortgages. I think the total I owe on all five is $275,000. But every month they bring in $10,000 and $5,000 goes to the mortgage payment. So, you know, I clear five. And my question was, do I sell a couple now that the market is up and just pay off my house or do I continue to manage them? Because I only have like seven years left before they're all paid off. We had done 15-year loans back, you know, in the day. So if I keep them and keep making the payments for seven more years, that would be like a $10,000

a month income, secured income. Or do I sell three and lower my income to like $7,000 a month but have my mortgage paid? Is that confusing? No, it's not confusing at all. I'm just heartbroken for you. I'm sorry for what you've been through. It's tough. Yeah. Very tough. Oh my goodness. And I have two boys in college. One just finished actually and with that money, you know, we've been paying their school so they don't have student loans. So it's good, you know, for that also. And I'm also a nurse and I work full time. So who manages the properties? You manage them?

I do, yeah. And, I mean, we've had rent. I've had, well, now it's interesting. I've had renters in these houses, you know, for years, and I think it's because I really haven't raised the rent on them. They've been there faithfully paying, and, you know, I know I should be charging more, but I think it's almost better to have a renter in there that's good and long-term than having to keep, you know, going in there, painting it, freshening it up, and trying to find another

good renter, you know, to rent them out again. So I just pretty much keep the rents lower, and I mean, they've been there for years, these people, so. What's left on your primary mortgage? Well, I had to leave the house we were living in because it happened, you know, in my last house. So I bought a house, and I currently owe $460,000 on it. My rate is at 4%. And the houses make the payment for me. You know, I, the payment is like 2,600 a month and the rent, the rent pays for that for me. So, I mean, whether I sell the houses and pay off my mortgage or just sit here, someone else is paying for it, you know, so I don't know whether to just wipe it out with, if

I sold three, that would probably be enough to pay it off. Or do I just, um, let the renters continue making my house payment, and then in seven years I would have more of a bigger monthly income than if I sold three now. Yeah. Well, you're making the decision. If I were in your shoes, I would be making the decision in a weakened state. Yeah.

Because of what you've been through in the last year and a half. You lose your husband in the house. You have to move out of the house because you can't walk in there without memories flooding. And so you have to move. You have to go through the loss of your husband, a funeral, you have to go through the surprise, the shock, everything associated with suicide. Even some people deal with embarrassment as if you had anything to do with it, and you didn't,

but that sometimes comes up, that kind of thing, and you're dealing with all of that, and then you throw in just a rental property question, okay. Rental property is a wonderful investment. I've got a bunch of it, as you know. And it is not to be managed from weakness. And so when you say things like, oh, the renters are paying my payments, no, that's not true. Just try waiting until they don't pay your payments, and then you don't have to pay your payments. And so then you'll know that that's not true. So that's, you know, if they pay the rent, that's true.

And you say things like, I don't want to get market rent because I might lose my renter. And so now your renter is holding the landlord hostage. No, I'm going to raise my rents every year. Every time the lease is up, I'm going to raise the rents. It's going to be close to approaching market rent. And I don't want somebody sitting there on a 10-year-old rent rate and rents have doubled during that time. And then we've got an emotional problem when I do finally try to raise it

because I feel strong enough to do that emotionally. And then they jettison on me. I'd rather just have some normal turnover as part of owning rental properties. If you can deal with normal turnover and market rates, that's an indication you're in a position of emotional strength as a landlord to work with these things, and you want to ride them out, I'm okay with that. I'm not okay with your current plan. Because it indicates you listen i've had enough crap in my life don't rock the boat is what you told me six different ways in

your conversation i don't want to do anything causes any disturbance in the force i've had enough disturbance and i don't blame you by the way i think that's where that that's where most people would be that are human beings and so i i think that so i if i were you i'd ask myself the question if my house was paid for and i owned uh the five paid for rentals or six paid for rentals or whatever would i go buy some other rentals on payments? And I think the answer is no. So I'm going to have a smaller, more efficient portfolio, meaning a smaller portfolio of rentals that are paying me market rather than a larger portion that are not paying me market

because I don't want to deal with the hassle. And I don't have any debt, house or anything. And that's where I would want to be. And from there, if you want to buy some other rentals as the years go on and you continue this desire to grow the real estate portfolio and you want to do it with cash, then I would absolutely go that way. Yeah, I'm looking down at the numbers here and there's three quarters of a million dollars in debt. And after being what she's been through, I just want some financial peace in my life and I want some stability. to me i'm going i'm going to sell a few i'm going to get rid of my mortgage it's a lot off the shoulders a lot less to manage in the portfolio and if you raise the rent you might make some of that up on the other properties so i feel good about that plan give

yourself permission to not be the strongest you've ever been in your life right now. Because that would just mean you're a human. Because humans hurt when they go through things like you've been through, honey. And so it's okay to just sit where you are for a little while longer. You don't have to make any decisions. There's nothing pushing any of this. And it's okay to simplify your life. But at the end of the story, whenever the end is, whether at the next chapter of the story, whenever that is,

I want you to be three years from now running an efficient, paid-for set of rentals that are being charged market rate, and you're landlording from not only financial strength but from emotional strength um but no i i um if you're not having some turnover your rents aren't right that's part of the rule and again we've got a bunch of property and um you know rental rates have changed a lot in the last 12 months in our area they've gone way up and so we're seeing some pretty substantial increases on some of our existing tenants. And by the way, if they were to leave because we increased it, guess where they have to go rent?

Somewhere else that's charging market rent too. And so that's how it works out here in the world. That's the story. And so I'm not going gonna lose them if they go shopping because i'm not overcharging i'm just charging the market that's all and that's just efficient management of the asset that's called good stewardship this is the ramsey show We'll be right back. George Campbell, Ramsey Personality, is my co-host today. I'm Dave Ramsey, your host. This is The Ramsey Show.

Brian and Jamie are with us in San Bernardino, California. It says on my screen, you guys are debt-free. Congratulations. Thank you. Thank you for having us. Cool. How much debt did you pay off we paid off 325 000 in uh 29 months wow and your range of income during that time

uh we started out at about 225 000 and uh last year brian doubled his income so that's what you broke up brian doubled his income and what brian we started about 225 000 and then last year brian did really well he's in so he did really well and doubled his income last year which helped us pay off the debt so i'm sorry your household income last year was what then did it went from 225 to 450 yes okay all right so brian is the only income i'm getting it okay that's what i was trying to figure out good way to go guys what in the world do you do for a living dude i'm in sales actually jamie jamie's uh in the medical, so she also has a career. Her occupational is in medical. Oh, okay.

Okay. So was your household income $450,000? Did I get that right? Yeah. Wow. So what kind of debt was the $325,000? So we had two cars that we had to pay off. We had a truck, my car, and then we also had an RV. And then our house was paid off as well.

We just paid that off this morning. Whoa! Talking to weird people. So what is this California house worth? What's the house worth? So right now, maybe $800 to $850. Okay. Okay. Wow.

Very good. How old are you two? We're both 40. Way to go. And how much good do you have in your nest egg in savings? So we did, that's where we did do Financial Peace University, and we had savings. In order to pay off the house, I wanted it paid off today since we were calling you, so we did pull money out of savings

to pay that off this morning. How much do you have in your 401ks and your retirement and that kind of stuff? Oh, all of that together, maybe $400,000. So you're 40-year-old millionaires. Way to go. Way to go. I'm proud of you. Did you guys just figure that out? Please tell me you knew that. Maybe steps millionaires way to go way to go i'm proud of you just figure that out please tell me you maybe steps millionaires $50,000 house 400,000 that's a million two net worth way to go when

you say it that way yeah it's well that's the way it's said well done proud of you way to go you guys amazing and you make incredible money you're doing so well. Congratulations. Okay, what started you on this whole? That's a huge lifesaver for us. Okay, what started you on this whole Ramsey journey thing? So, Dave, I've listened to you for 10 years over the radio, but I've always told Jamie, hey, we should look into this. You know, it'd be fun to kind of hear how to invest as millionaires going forward and getting that lifelong goal. So this came up with our church, and I said, you know, we should

do it. She was hesitant at first, and I said, I think it was $60 when we did it. And anyways, we ended up doing that, and I kind of drug her through it, and the first day that she was in there, she's like, why are we doing this? We're not in debt. Oh, I was so mad. I said, we have no credit cards. We don't have any debt. All we have is our house and our cars.

And the financial piece totally changed our mindset. And then you start looking at your bills, seeing how much you pay in interest. It was shocking. Jamie, I'm confused. You got two car loans, and you didn't see that as debt, even though the payments were going to lenders every month. Talk to me about the mindset there. Correct. Because a lot of people say that. They call and say,

Dave, I don't have any debt except for my cars. Yes, that's what we said. Yeah, way to go. You guys. So how many classes into Financial Peace University, Jamie, before you flipped and said, okay, I'm not mad anymore? Oh, it was probably the third class. Because the first class, I still said, why are we doing this? This is such a waste of our time. And it wasn't until they made us write down our debt, start a budget, when you really start looking at numbers. The reality hits you, and you go, oh, my gosh, he's right. We're broke.

Yeah, yeah. Yeah, when you write down that you have 140 000 in debt it's it's it's shocking and 29 months later house and everything is paid for yes way to go how's that feel oh we're in shock still we recorded uh us making that last payment this morning i love it that's awesome i love it well congratulations we're very proud of you guys what do you tell people the secret to getting out of debt in 29 months is what do we tell them you said oh you got to take financial peace you have to do that snowball effect ah okay cool and also be on a budget you know i don't think we realized

how much money was going out the door on a monthly basis versus what we were bringing in and we were living you know as we considered comfortably but um the mindset that that class gave us to change our our viewpoints and just roll it down has now put us in an extremely good position going forward. Yeah. Wow. Pretty amazing. Way to go, guys! Thank you! I love it. So proud of you.

You're incredible. Very well done. All right. We're going to send you a copy of Baby Steps Millionaires because you are one. Maybe you can pass that on after you read it and inspire someone else to do what you've done. I'm so proud of you. How Ordinary People Built Extraordinary Wealth. How'm so proud of you. How ordinary people built extraordinary wealth.

How you can, too. It's the number one bestseller. We're also sending you the number one bestseller, Total Money Makeover. So you give that away and disturb someone's life. Let's create a holy ruckus together. Well done, you guys. I'm proud of you. Very, very cool.

Well done. All right. Brian and Jamie San Bernardino, $325,000 paid off in 29 months, making two and a quarter to over 400. 100% debt-free, house and everything, baby steps millionaires by the time they're 40. Count it down. Let's hear a debt-free scream. One, two, three. We're debt-free!

I love it! Yeah! Woo-hoo-hoo-hoo! I love it! Well done, well done. Absolutely incredible. Very cool, you guys. Very cool. That is how it's done. Man.

Three lessons in. Just for everyone to know, if you're taking FPU, the first lesson. Sometimes I hear the first lesson turns them around. She was hardcore. If you've got a bad attitude, it might take two or three. She's hardcore. I mean, she had the arms folded, you know? And the old body language that says, I'm pissed and I don't want to be here, right?

And you start to let the hair down, the arms start to spread out. Yeah, we can do this. Wait a minute. Wait a minute. We can do this. I love it. That's so good. What a great story.

Very, very well done, you guys. Michelle is with us in Miami, Florida. Hi, Michelle. Welcome to the Ramsey Show. Hi, Dave. Well, thanks to everything that you've taught, I am now on the E-Step 4. I have a fully funded emergency

fund, and I'm saving 22% towards retirement, and my house is paid off. Yay! Wow. Like George said to that last couple, I'm out of debt except for my car. Whoa. How in the world do you have a paid-for house and debt on your car? I know, I know, I know, I know.

Don't beat me up for that. But the lease term is up in December, and my payoff amount is $22,000. I just learned that the Kelley Blue Book trade-in value is $27,000. So I'd like to know, should I pay off this car at the end of the lease term, or should I just cut my losses and go find another car? I'm sorry. I thought you said you could buy it for $22,000 and the value is $27,000. Yes. That would not be cutting your losses.

That would be gaining. I guess. If you turn the car in and went and bought one just like it, you'd have to spend $27,000, or you can pay this one off for $22,000. Is that right? That's right. Therefore, you're getting a $5,000 discount, which is unheard of in this market in that sense. So do you have the money to buy it?

Well, I'd have to eat into my emergency fund. Well, we're going to do that. What's your household income? Okay. I make $41,000. Oh. No. I would buy the car and I'd turn around and sell it.

And get something cheaper. Make you a $5,000 profit and then get something that's less expensive. Making $40,000, you don't need to be driving a $30,000 car. That's a lot of car for that income. That's too much. Too much of things going down in value. I know they're not going down in value at this moment, but they will be soon again. It's used cars, and they always go down in value.

So, no. No, I would make the five grand on it, though, and flip it, and then move into another car at that point. And then never touch that again. Yes, ever, under any circumstances. This is The Ramsey Show. Thank you for joining us, America. George Campbell, Ramsey Personality, is my co-host today as we talk about your life and your money. Julia is with us in Portland, Maine. Hi, Julia.

Welcome to The Ramsey Show. Thank you so much. It's an honor to speak with you both today. You too. What's up? So I am on baby step six and I have a rental property. Do you recommend that I include 15% of my rental income in my retirement contribution? No. Okay, good. Because I want to throw everything at my mortgage. Yeah, not everything. But you have other income, don't you?

Yes. Yes. I have a regular job. So what does your regular job pay? What does it pay? So I'm a freelancer, and I make I make about 115,000 a year. Nice. So Julia, the point is not the magic of 15% works, but if you do 14, you're going to be

poor. I mean, it's not, it's not that precise. The idea is to put a large chunk, which 15% is, but not so large that you can't get your other debts paid off on your house and that's where the 15 came from because when i first started this i would have people doing they're putting 25 away or they're putting one percent or they're putting one percent away and so what i ended up doing was we were you know we got with the financial coaches that here on our staff and we ran a bunch of scenarios and said okay what if you were this

income and you say 15 would you be okay and this age and what what if you if you saved 12 and if you save 17 and if you save 10 or 20 and we kind of went back and forth and so what we've zoned in on is at most any age at most any income 15 is a good healthy amount but it's not a magic it's not a magic number so you see what i'm saying so i'm gonna stick with it i'm gonna tell you to do 15 because it's worked and it's a proven plan that lots and lots of people have done yeah and julia once you do pay off that mortgage and you're in baby step seven you could increase that oh you're going to increase it then yeah you max out everything but right now we've got to get our priorities straight and paying off the house is a1 yeah that's a great question yeah that that's very good but the point on these guidelines of these

process people is is a it's proven millions of people have done this and it worked and she wasn't trying to change it she just get clarification b um some of these things are just based on some common sense principles and this idea of a baby step four being 15 baby step four is put a good healthy amount on your retirement but not so much that you can't find some spillover to put on your house and get your house paid off but not so little that you end up with nothing in your retirement in a paid-for house you have to dig the bushes up and eat them. Oh, yeah. Because you've got no money.

And saving for a kid's college, you know. Exactly. You want to be able to help out a junior. You've got to leave some money to spill over in the budget to five and six, because five and six are, baby steps five and six, are simultaneous with baby step four. And that's where the number comes from. And then it's a bunch of case studies and a bunch of possible scenarios

that we ran out. And here's what's weird. You take somebody and make it $20,000 a year. They save 15% and they never get a raise. They're still, they're not going to be rich. But they never really made any money. They've been at the poverty level. Yeah.

And they still end up with a really nice nest egg. It's not about the amount of money. It's how much time that has to grow. Exactly. And even a little bit amount over a long period of time, it's amazing what can happen with compound growth. Yeah. And, of course, we all know that where you are today is not your destiny, that life is a film strip. It's not a snapshot.

And so you're going to get better or get worse in a lot of areas, your health, your relationships, your money, your income, your career. And so it's not a static. You never have a static situation either. But we ran the scenarios on static just because it was the easiest set of variables. You never got an extra dime in your income. Are you still okay? Yes, you're still okay.

All right, Jennifer is with us in Raleigh. Hi, Jennifer, how are you? I'm doing fine, thanks, and how are you? Better than I deserve. What's up? So the question is about whether we have too much life insurance. We're in a unique situation in that we can't add life insurance once we drop it. My husband is uninsurable, and so what we have for life insurance was carried over from a previous

employer and we just carried on paying it but we're kind of wondering if now if it's more than what we really need and we could use those you know that money in a different place wow why is he uninsurable he had a heart transplant oh that'll do it yep yeah and we we checked and they confirmed yeah no you no, you can't. Yeah, that's a tough one there, yeah. So how's he doing? He's doing fantastic. How long ago was this?

We're coming up on four years ago. Awesome. How old is he? He is 50 years old. That's amazing. That's so powerful. Well, praise God. That's awesome.

Good. It was an amazing, long journey, but we made it through, and he's doing fantastic. So we should not complain. That's just, wow. Okay, so why do you have too much life insurance? What do you mean by that? Well, I just mean that it's very expensive. So it's carried over from an old employer. So when we left, we had the opportunity to keep it. And we knew even back then, which has been, oh gosh, that was like 2007. We knew it would be expensive, but we also knew we couldn't get it. And he generally, throughout his career, has not worked for large companies. So we kept it as our only option.

So how much is it? How much is the coverage, and how much is the premium? It's $480,000 in coverage, and right now, because we just hit 50, we're paying $720 a quarter. Quarter. Okay. Okay. That's $2,800 a year.

$2,900 a year. It's 50 or so. Okay, what's his income? His income, $150. What's the rest of your financial situation? I also work, so I make $75, so between the two of us, we're at $225. We have a mortgage that is our only debt. Our kids are grown and through college and on their own and off my payroll, which is fantastic. Ding, ding. Yeah, huge ding, ding. We save 15% in our retirement. How much is in there? Somewhere between 1.2 and 1.8 million.

So the question you ask yourself is this, and you answer it with math, by the way, not a feeling. If he died and you didn't have any life insurance on him and you had a million-two, no kids at home, and a house with a mortgage, and you make $75,000 a year, are you okay? And I think the answer is yes. How old are you okay and i think the answer is yes how old are you 50 okay that's all okay none of this million two you can access to your 59 and a half right

correct but if he died it'd be an inherited ira portions of it and you could access it that's the scenario we're running out, not predicting, because we're asking about life insurance, which is actually death insurance, right? Right. So, you know, can you make it on $100,000 a year in addition to your income and still get your mortgage paid off and still have a good life? I suspect you can, by the way. Okay.

All right, and there's one other thing that just dawned on me. I also have insurance on him through my employer. You know, the Mac still allowed me to do without any kind of medical review. So I think between that, yeah, I would be okay, right? Well, that's what you need to run out and and if the answer is yes i'm okay you know i'm a millionaire with a paid for house or are close to paid for house i'm sorry and the kids are grown and gone am i okay if i he leaves me no life insurance then that's when you are self-insured and you don't need it.

Now, if you want it, you want to keep it, you make enough money to pay $3,000 a year and keep this around for a few more years until you feel really good about that decision because you're right. Once you drop it, you're not getting any more. Yeah. And to Dave's point, it's not about how you feel about it. Run the budget. See what your household expenses are.

Could you make it by peeling off a percentage of what's in that inherited IRA? And I think the answer is yes, based on your current income and expenses and lifestyle. And so that's what we end up doing to call it self-insured. And it gives you some peace. And that's why we teach you to do these baby steps. And once the life insurance is out after 15, 20 years, you don't need it anymore if you follow our plan. Yeah. And, you know, just be real sure that you're really comfortable because you don't get a second shot at this in your situation.

So it's a good question. It's an absolute yes or no, though. You have to make a decision permanently. This is The Ramsey advice in their life? Let them know about the Ramsey Call of the Day podcast. It's a quick hit of advice about life and money in under 10 minutes. Check out the Ramsey Call of the Day podcast wherever you listen to podcasts.