The Ramsey Show - App - How Much Should We Be Spending on a New House? (Hour 1)

Episode Date: December 29, 2021

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Dr. John Deloney, Ramsey personality, is my co-host today.

We invite you to be part of the program, and he and I will be answering your questions. He's author of the best-selling book, Redefining Anxiety, the highly popular podcast, The Dr. John Deloney Show, where he talks about mental health, boundaries, relationships, things that are going on. So you can weave those questions into the show today if you want. He's here to help. And I've always got an opinion.

I'm an expert on my opinion. The phone number, 888-825-5225. Delaney starting us off in Fort Wayne, Indiana Delaney how are you hi Dave I'm good how are you better than I deserve what's up well my husband and I own 10 acres of property that our current home is on and we are considering parceling some of it off and building a new property, a new home on that. And my husband and I are just having a hard time kind of swallowing the idea of spending that much on building a new home. So we were just kind of looking for some personal advice as far as is it appropriate for us to spend that much money. Okay. Well, there's one of two things is telling you this,

either emotion from all the years of frugality to get to where you are, and so the facts are not that you cannot afford it, meaning you can't afford it, or you're getting ready to build too much house, and the arithmetic is telling you that, and you just need somebody to say it out loud for you, okay? So how much money are you going to spend on the house? Probably about $800,000. Okay.

How much money do you have? Well, between equity and our home, we probably have around $250,000 in equity. And how much in your nest egg? About, like, you mean our... Like your 401Ks, your retirement, your investments? Oh, yeah, yeah, yeah. About, probably about another $250,000. Okay. And how old are you?

I'm 32. Oh, okay. And what's your household income? About $350,000. Okay. Well, the guideline that we use is that can you afford to put the house on a 15-year fixed rate where the payment is no more than a fourth of your take-home pay? And so the answer to $800,000 is yes, you can do that.

Mm-hmm. Yeah. Okay. So here's the trick. 15-year fixed rate and a plan to go ahead and get it paid off with your fabulous $350,000 income even faster than 15 years. The average millionaire in the Ramsey research that we did, 10,000 of them we studied, pays off their home in 11.2 years. So I want you to knock this thing out. You have a fabulously large shovel.

Your income is amazing. What do you all do? knock this thing out you have a fabulously large shovel your income is amazing what do y'all do uh i'm a nurse practitioner and my husband is a cpa both gonna keep working yes we will what's wrong with your current house uh well we have four small children so we don't have quite enough bedrooms and um just like they're mostly desires. We could definitely make it work, but it's mostly just, you know, desires for a little bit extra. And that's where we're, like you said, we've been living frugally for so long.

And now it's like, okay, are we okay with taking this next step and spending this kind of money? Or should we, you know, use it to benefit in other ways? Now, you said equity in your home. Is your current home paid for? No, we have about $250,000. Would you sell that property off when you do this? Yes, we would.

Good. Okay. Yeah, then I would do this. Okay. Now, the trick is, for little kids, you can't call me up and go, oh, we decided to cut our income in half because I'm going to stay home. Yes, yes. You gave that right up when you bought this house. Yes, and we pay about $40,000 a year in child care.

I know. So in about three or four years, that won't even be on our budget at all. So that's another area that we'll gain more cash flow to. Well, the key part of this equation is just your income to your payment, and you can make that work. And not just make it work. It shouldn't be any trouble at all. And then you

just keep working your baby steps but as you as you find money in your budget you're going to keep working baby steps four five six four is 15 of your income into retirement five is kids college and six is all the other money we scrape together from something that any other money that comes up bonus money increases in income whatever's all going to throw it at the house this house is going to get paid off in sooner than 15 years. And that's the pattern that you want to be on. That's where all the data points lead us. So specifically, you would take that $250,000, put it against this house,

so now we're at $550,000, and I'm looking at that against my $325,000 a year salary. That's easy. That's simple math. Yeah, 15-year fixed rate, and where the payment's no more than a fourth of your take-home pay, you're easily going to do that. And so they can reach over and knock that thing out pretty quick. Real quick.

It is a little bit emotional, but also, really, they're taking on a big chunk of debt. Because I couldn't tell early in the call whether she had $2 million set aside or something. I couldn't feel it. So, again, the facts will lead you to say this is okay, but the facts also say you have to continue the trick that you're on. You can't change direction on.

And you also have the emotion of selling part of your 10-acre plot, and that's your dirt, right? Yeah. They're willing to do that, I think. That's pretty well decided. Now, when John Deloney gets ready to sell a piece of dirt that's a problem this is like the counselor will need counseling uh it will be hard for me to sell dirt yeah yeah you you are you are a dirt maniac i do like land i am too i am too i one of my favorite places on the planet is my big old farm and ain't nothing on it but some grass and rabbits i remember going out to it the first time bunch of spent shell casings that's i went out there

where's the oh no this is and i thought oh this is a happy place man there's nothing else here that's incredible nothing else here just a big old piece of dirt and somebody needs to hold the rest of the earth together and that piece of dirt does it so that's why i'm here that's my uh my calling no i'd have a hard time parceling but again everybody does their thing but uh earth together and that piece of dirt does it so that's why i'm here that's my uh my calling no i'd have a hard time parceling but again everybody does their thing but uh you taught me this um when you start playing with bigger shovels and you start playing with bigger zeros and it really leaning into those ratios is important yeah it is a little bit like you know your trauma formula facts are your friends yeah okay what's really going on

not what's the emotion right you know and what's really going on is you do you do the math and you know you look at a projection on that and you look at the facts and then you say okay why am i scared yeah why am i ashamed why then do i have these negative feelings when all the math indicates i shouldn't do you still if i go look at new truck, I still have a number from the first time I looked at a truck back in 97. And I look at new trucks now and I sound like a grandfather. Like, what do they do? You know what I mean?

Because in my head it should be 17 grand. Can you believe they charge that for a pickup? That's exactly right. Yeah, you can hear your grandfather coming out of your own mouth. I love it. Your great-grandfather. My great-granddad, yeah. With these prices.

My tire. One wheel. That's all I can afford. One wheel. Uphill both ways in the snow. This is the Ramsey Show. I saw some recent financial statistics and there was some pretty troubling news. When families were asked how long it would be before they faced financial hardship if a spouse died, nearly one-third said they'd be in trouble immediately.

Another 44% said they'd be financially drained within six months. People, it does not have to be this way. Term life insurance plans are just plain cheap, and companies have made it even easier by not requiring exams in many cases. There really is no excuse to leave your family in this situation by not having life insurance. This is why I talk about Zander Insurance every day. They're committed to protecting families with the only products that I recommend. And their team keeps the entire process simple and affordable. Go to Zander.com for quick online pricing or call 800-356-4282. This has to be a priority.

If your family is in this situation, you need to get this done. if you've ever made a dumb decision with zeros on the end you know you didn't do your research me too most people make choices based on feelings or opinions especially when buying a house but when it comes to the real estate market feelings aren't your friend facts are john says that about a lot of things so check your facts find out what you can actually afford research what's trending in home prices talk to a reputable real estate agent in your area never buy a house again without facts text the word house to 33 789 to get an agent who will help you make smart decisions. Text HOUSE to 33789.

Sarah is with us in Dallas, Texas. Hi, Sarah. Welcome to the Ramsey Show. Hello. Thank you so much for having me. Sure. How can I help? All right.

Well, my husband and I are in baby step two. And since December of 2019, we've paid off $58,000. All right. And we only have about three here. We're very proud of that. But we are on the second half of our debt now, and that's $37,000 left in student loans. but due to increased costs of having a second child over the last year and taking a job with a decreased salary, our shovel is substantially smaller compared to what it used to be. So I'm trying to think of ways, brainstorm ways to be gazelle intense given our situation. And I had this crazy idea and my husband was not super thrilled with it and actually asked me if I could call you to talk about it.

What if we sold our paid-off cars? If we did that, it would be a big step, but it would wipe out this $37,000 immediately, and we could then focus on all of the other things that we need to do. So you have a $40,000 car. We have two 23 000 cars oh you'd sell both your cars yes that's why it's a big step and what would you and then you'd get your two beaters huh yes maybe not beaters and what is your house what is your

household income 140 000 a year and why can you not pay off $37,000 making $140,000? So we bring home $8,800 a month, which is a lot, and we're very fortunate. $5,000 of it goes between daycare and our mortgage. They're about the same. That's over $5,000. We spend $1,000 on groceries, diapers, household things things your daycare is 60 000 a year uh yeah but well between the two kids uh we pay 2200 a month so not 50 000 a year that's that's not 5 000 no five mortgage plus i'm sorry it's between daycare and mortgage oh yeah okay yeah 140 i don't know why mortgage and daycare are on the same list, but anyway, we'll put them there.

So $140,000 minus $60,000, isn't that $80,000? $140,000 minus $60,000 is $80,000. And why can you not pay off $37,000 again? So I can pay off $37,000. I have a thousand thousand based on our no our debt snowball i have a thousand dollars a month going towards that i don't think your budget is very sacrificial and that's true there are other things that we could we could yeah like you're still doing a whole bunch of crap that you don't need to be doing okay well then we'll take

a look at that and make it a little bit i. Help me with this because I'm not just making this up. I mean, I just took $140,000 and I took out the mortgage and I took out the daycare, which were your two primary things you're worried about. You don't have any payments except a student loan payment, and we took care of daycare and we took care of the mortgage. Now we've got to buy lights, water, and food, and you can't find $37,000. That's just weird. Okay. Well, looking at our budget and the growth that we come home with,

like I said, it's $8,800. Yeah, that's $120,000 a year. That's $120,000 a year. Absolutely. And that's our growth, right? That's what we take home after taxes. Our net, I'm sorry. Yeah, I know.

And then it's about $1,000 on food, diapers, other household items. That's $1,000 on food, diapers, other household items. That's $12,000. We're going $1,000 on student loans, about $700 in bills. And at the end of the month, we may have an extra $500 left, which will go towards our student loans. You did not get down to $500. Your budget, you're still not doing it. I'm sorry.

The only thing I'm good at is math. And you still did not spend all that money. So you've got some work to do, kiddo. Sharpen the pencil. Sharpen the pencil. So one car maybe, but I don't think so. You're putting $1,000 a month towards 37. That's 12 of the 37.

So all you need is $24,000. All you've got to do is find $24,000 out of $140,000, $120,000 take-home pay. For one year? To do it in one year. If you want to do it in two years, all you need is $12,000. No, do it in one year. Just get it done with it. I really think you can do it. I really think that there's some whining in this budget. I really do. Yeah, it sounds like I want to be comfortable. Let me tell you, I'll go further. I don do. It sounds like I want to be comfortable and get there. Let me tell you, I'll go further. I don't think you're doing the whole budget. Because you're doing this

from your head. That's why you've got daycare and diapers broken out of separate line items. Diapers don't go in a separate line item. They're not that big a line item. You're trying to crank this through in your brain. You need to sit down and do a written, detailed, line-by-line budget.

With every dollar. Get on the EveryDollar app with your husband. The two of you give every dollar a name, and then you're going to see why I'm raising up on you. You're going to see there's money left here, and you can knock this out. No, you don't need to sell your cars. You need to tighten your budget and lower your stinking lifestyle. And I actually think that when she first called, Dave, I was going to say, yeah, sell your cars and be done knock this out no you don't need to sell your cars you need to tighten your budget and lower your stinking lifestyle and i actually think that but when she first called dave i was going to say yeah sell your cars and be done with this thing but i think i think the exercise

oh it's much better than selling the cars yeah this is going to be a i hate to use this words me a spiritual exercise for this crew to get down and and see what you're made of yeah yeah this is going to force you to do the last 10 of truth yes which is the hardest is the detailed budget because you can i mean you could do big piece budgets in your head and when you make 140 grand you just feel like you got so much wiggle room right and you should have and it's frustrating when you get to the end of the month and there's no money money left but you haven't detailed it out i'm might be wrong, but I'm not. I might be wrong, but I'm not. Been doing this too long.

So that's my opinion. You keep digging on it, kiddo. If we can help you, we're here to help you. But part of the time we help you by raising up on you because we love you. We want you to win. All right. Up next is going to be Armin. Armin's in Los Angeles. Hey, Armin.

How are you? Good. How are you, Dave? Better than I deserve. What's up? All right. So before I get into my question, I just want to give some context on my situation right now. So I'm 17 years old. I'm on my last semester at a community college, and I'm about to transfer to a UC school. But I'm faced with two different conflicting opinions. So I'm faced with the dilemma where if I transfer to UC Irvine, I would need to rent out a private house through UC Irvine Housing.

And on the other hand, if I go to UCLA, I'll need to get a car. But it's that question of should I lease or should I buy because my surroundings of family and friends, they're both raising pretty good arguments for leasing and buying. So I don't know. Leasing and buying what? A car. Oh, okay. Well, the only people that promote leasing a car are broke people.

Okay. I mean, wealthy people don't lease cars. I mean, a few of them do. But by and large, let me tell you, we did a study of 10,000 millionaires, the largest study of millionaires ever done. None of them, not a single one of the 10,000 said, you know, I became a millionaire because I really leveraged the use of that car by borrowing on it. Not one.

I mean, it wasn't a small percentage. It was freaking zero, Armin. Now, this is not your broke friend or family member who can make an intellectual argument. This are real millionaires. They don't borrow money on cars, dude. And when you ask them what the largest mistake they ever made in their working lifetime, they usually say, I borrowed to buy brand new cars. I bought a new car.

I bought a brand new car when I was 26, and I was so stupid when I was 26, and now I'm 46, and I would have been a millionaire four years sooner if I hadn't have bought that stupid butt car on payments that I couldn't afford to buy. So to answer your question, Orman, I drove a 1988 Toyota Tercel EZ hatchback. It cost $1,000. I bought it from some lady at my church whose husband had passed away. And that got me through my undergraduate. It got me through my first year of my professional job.

And I'm still driving somewhere, right? Yeah. Buy the cheapest beater car you can get to get to and from you're a 18 year old kid and don't take financial advice from broke people son this is the ramsey show Dr. John Deloney, Ramsey Personality, is my co-host in the lobby of Ramsey Solutions on the debt-free stage. Barry and Amber are with us. Hey, guys, how are you? Good. Good. How are you? Better than I deserve. Welcome. Where do you live? We live right here in Nashville.

Oh, Nashville. My gosh, we have a Nashville debt-free screen. We haven't had that in I don't know when. That's awesome. So you just, like, drove, like, from your neighborhood. Yep, we have a Nashville debt-free screen. We haven't had that in I don't know when. That's awesome. So you just like drove like from your neighborhood. Yep. Wow. Very cool. So how much have you paid off? It is just over $78,000. Very cool.

And your range of income during that, how long did that take? That's okay. We took 30 months. All right. And your range of income during that two and a half years? Started at 95 and ended at 115. Yep. Very good.

What do you guys do for a living? I am an ERP director. And I am a substitute teacher at our local elementary school. Cool. Which school? Harpeth Valley Elementary. Oh, yeah. Go Hound Dogs.

Go Hound Dogs. That's famous. Famous. Yes. The Harpeth Valley PTA. I've never heard of a school With that cool of a mascot Go Hound Dogs I love it

Well Ginny C. Reilly There's a song If you were old enough Old time country But yeah that's it That's cool Very cool y'all

I love it So how much debt The $78,000 What kind of debt was that? So it was a mix Like most We had medical That we started with

And then Auto And credit cards And lastly lastly, my student loan. So you're kind of normal. Very normal, yep. How long have you guys been married? 15 years. 15 years.

They're looking at each other to confirm. Just for this conversation. Nobody's in trouble, but we're both checking. You guys pulled that first consonant to make sure. Yeah, 15. Same number. Same number. So what happened two and a half years ago? We had a bit of a breakdown.

Yep. Yep. There was no more bank transfers on our credit cards that were available, and the money wasn't increasing like we had hoped, and we had to make a change. So you sat down and there wasn't too much month left at the end of the money yeah yeah it was pretty devastating yeah that's an emotional night it it was it really was it was a very uncomfortable conversation that

was ready to be had it's the ultimate oh crap moment so it's been building and building and building and building and then you just kind of hit the wall and you go, oh. Yeah, we went from a double income to one. Oh. And so that didn't help either. And we continue to live in our same pace. And, you know, you can only go so far. Amber, when Dave just asked you that,

you still remember that night like it was five minutes ago. It's still all over you. Yeah. He was sitting on the bed. Tell us what happened. We had this conversation and basically what you said, there wasn't enough money at the end of the month. And we had the, are you going to go back to work? Double our income.

But daycare or childcare here in Nashville is exorbitant. And I said financially that wouldn't make sense. And so luckily, they were at the age where they were both getting ready to be in school. And I said, well, I can start subbing. And I hit the ground running with a budget. The budget helped a lot. Yeah. But you changed your ways that night.

Yes, we did. You did more than just pick up a job. You said, okay. So you suddenly remember Dave Ramsey lived in Nashville? What happened? I have been telling my husband about you for years. Uh-oh. And I was doing the money.

And I was like, well, if you don't want to do this, then you do the money. Oh. And he's like, I can do this. Oh. Yeah. Until he couldn't. And I was like, see? Like, it's tough. It was money. Oh. And he's like, I can do this. Oh. Yeah. Until he couldn't. And I was like, see,

like, it's tough. So, it was tough. Yeah. So then, so then, we continued for a couple years.

I'm saying it, that night sitting in bed, okay, I'm going to start subbing and you said, all right, I'm going to figure out how to do this

because the way we've been doing it is not working. We enrolled in Financial Peace University. Oh, there. Okay. That's what I was trying to figure out. Where you got new information that changed. Yeah. So you jumped into a financial peace class. We did. Okay. That's what I was trying to figure out. Where you got new information that changed.

Yeah. So you jumped into a financial peace class. We did. Okay. We did. And then when that was finished, there she is, our lady, Lily. I ended up teaching one myself. Oh, wow.

Okay. I wanted to stay accountable. Yeah. And so he watched the kids, and I went and taught the class. And 30 months later, we were done. Wow. 30 long months. Wow.

Yeah. That's pretty cool. Because you were popping like a couple grand a month on this. We were. Over $2,500 a month. Every little bit we could get our hands on. You were hitting it hard. Yep.

And we cut out a lot of stuff. We made lifestyle changes to not go out to eat. We did only just the basic travel. We told our friends, we'll see you when you come to our house, and we can cook you dinner, and we can spend time together. But Nashville for us, I think, was a blessing because we wouldn't have been able to do that back home.

There's so much to do here that you don't need money for. And so we just started doing all that, and then COVID hit, and we literally couldn't go anywhere and spend money. That accelerates everything. It really did. As long as you're good as long as you're able to work yes and you were so yeah that's good news wow yeah so you go from your throat is tight your stomach's in your throat uh that moment like you said sitting on the bed yeah and uh sometimes it's sitting at the kitchen table and there's bills laying all over the table. Yeah.

And you just kind of have a miniature breakdown there. And you go from that to having a game plan and having hope. How long did that transition take from freaked out to hopeful? I would say it was in the first probably three months. Yeah. When we finished our FPU course, we had paid off one of our biggest credit cards that the intro rate was about to expire. And it was like just a few months into it

seeing like we can do this. You know, we don't have to live miserably thinking we're okay anymore. And so, yeah, it took a few months. But, you know, seeing that debt paid off and that payment rolled to the next one. We had an Excel sheet, and so seeing that snowball just get bigger and bigger and bigger was really motivating for us. Yeah, absolutely.

So what does it feel like now? We can breathe. A lot less stress. Yeah. We dropped our car off this morning on our way here for some work. We don't know what's going on with it. And it's okay. It's annoying, right?

It's annoying. Yeah, it's just annoying. But we're going to pay for it out of our bank account and not have to worry about not being. Yeah, where is it coming from? It's not a thing anymore. So, Barry, what was it like? You're a successful guy. You've got a beautiful family.

Thank you. what was it like you're a successful guy um you've got a beautiful family thank you what was it like having to look in the mirror with both hands on that on that armoire and say i'm not i'm not making it it was scary because it was one of those things where you know i wanted to be i didn't want to have any issues you know i didn't want to have to deal with them and i just thought that we could make it you know for so long and then after a while it just came to a point where we hit a wall yeah and once that wall hit it hit hard and um i knew we had to do something different and i just remember her bringing up dave a few years ago and i said you know what let's try something different let's inject something new into our lifestyle and go 110 on it.

Yeah. Cool. Well, the beautiful thing about being sick and tired of being sick and tired, you're ready to change your life. Absolutely. And you reach that point where you said, that's it. I've had it. Whatever we got to do. And you kind of have to surrender.

It's like, what have we got to do? What do we got to do? And I've been there. Most people have been there in different areas of our lives but certainly money's a big one and and the debt thing okay i quit i'm gonna quit trying to figure this out by myself what have i got today yeah because what i've been doing sucks and uh man you just reach that point and it's not a matter of name calling or something it's not a shaming thing it's just you it's just a reality and you're going this something just got freaking change here yeah yeah i think for us too real quickly was we actually went on your daughter's show oh um

like roughly the first few months that we had started there she is and i remember listening to the podcast some months later and you had asked someone had called in and they're like i wonder what that couple from the christmas show if they stuck with that budget and how they're doing and we were telling some people here too i was, if they stuck with that budget and how they're doing. And we were telling some people here, too, I was like, if they call us, we got to be doing this. We can't have them call and say, so, Jovers, what's the status? And we're like, we kind of fell off. We quit halfway through. We're failures.

No, that wouldn't work. Yeah. That's a different kind of accountability being on the Rachel Cruz show. We'll put you on the spot. Way to go, you guys. You brought the kiddos. What are their names and ages? We have Jocelyn, who just turned 8 recently, and Jeffrey, who's about to turn 12.

Great. They're very nervous. Very cool. They're going to do great. We've got a copy of Legacy Journey for you. That's your next stage and one of the total money makeover for you to give away. So $78,000 paid off in 30 months, making $95,000 to $115,000. Barry Amber, Jeff, and Jocelyn, count it down. Let's hear a debt-free scream.

Ready? Three, two, one. We're debt-free! Yeah! That's why I come down here every day. Awesome! This is the Ramsey Personality, is my co-host today. Julie is in Denver.

Hey, Julie, welcome to the Ramsey Show. How can we help? Hi, thank you for taking my call. Sure, what's up? I have kind of a funny situation. I have a brother-in-law who just offered to take us on a trip. We're on baby step two, and this year already we've had some extra bills come up with the medical stuff. We think it's strange that they've offered to pay for a trip for us, and we don't know how to say no, we don't want to go because we don't ever want to pay them back,

even though it's a gift. Why is it strange? Well, they have not talked to us for about six years, and then in the back, excuse me, about a year ago, they've had a change of heart and want to reconnect. That's nice. It's nice. It's nice. It's your husband's brother?

Brother, yes. So is there something about this gift you feel like is going to have strings attached to it? Yes. My husband and his brother had a fight over a four-wheeler about six years ago, and it's just now being repaired. Whoa. Don't worry about it. The fight is being repaired the relationship

like we're being invited back to family gatherings and stuff oh so you got ruled out of mom and dads and everybody's yes you know that was bigger than a four-wheeler right i think so yeah i'm an in-law a thousand percent bigger than a four-wheeler yeah that? I think so. Yeah. I'm an in-law. A thousand percent bigger than a four-wheeler. Yeah. That's probably some 30-year-old stuff that was proxy ward with the four-wheeler. I think so. It was a joint owned, you know, father and son's four-wheeler. Yeah. And it got ugly. You don't excommunicate family members over a toy, right? There's usually other stuff there. Yeah, there's big stuff. But it's strange, you know, just the other day

they offered to bring us on this trip. And we're on Baby Step 2, and we are just not there to go on vacation. But it's strange. We don't know how to answer, because if we say no, it's a money thing, and then they say we're paying for it. How much of this is um your pride

i don't know it well it would be kind of hard to be like thanks for the airfare and hotel and why is that hard i just don't want it to blow up down the line and be like well we took you here i don't know i don't i didn't think about that dr john actually so there's probably i i gotta i'm gonna defend her a minute okay i i'm i don't think it's pride i think she's uh gun shy it feels like you're projecting a future yeah well i mean thinking a future maybe people will blow you up over a four-wheeler why wouldn't they blow you up over yeah come back later and circle around hit you in the back of the head over a paid for trip that's right yeah but i also if somebody says man what an idiot

brother i was for losing out on six years of relationship hey i want to start spending some intentional time together and then i all of a sudden i walk up and y'all are in baby step two of this weird cult that's happening off in nashville and it's like hey cool come with us we're gonna so i the only reason i'm asking i'm trying to be provocative with you how much of this is you saying i'm too fancy i'm too i've got too much pride to take someone else's money versus no man if we do this is going to end poorly for us because Because I think to answer your question, I think it's relatively easy. You say, hey, you know what? We're not going to do vacations this year.

We're going to stay in. If y'all want to come visit us, that'd be awesome. But we're not going to do vacations this year. Next year, the year after, we can't wait. And then your boundaries are your boundaries. And if they want to throw a temper tantrum over that, then you've got your question answered for you, right? Okay. You knew they were using this as something else.

Otherwise, if they say, great, we can't wait so we can do this again just so you know money's never a thing with us but we're coming we want you with us and we're going to make up for lost time then you know hey there's something bigger at play here right but trust your gut right i guess i don't have a i don't have a problem either way with it. John's point that are hovering around in his point, I think, is if this is truly an olive branch, don't saw it off. That's what I'm feeling, and that's why I don't know how to respond. Well, no, I'm saying there's a way to push it to the side gently, but you don't have to saw it off. And so, number one, you don't need to respond. Your husband does.

This is about him. And he responds and says, hey, bro, man, I really do want to reconnect. And this means a lot to me that you would offer to pay for this. And it's so kind and generous of you. We are committed to this plan. And I know that might not be something you understand but um we're going to stay home but it's not because of anything except we're working this stuff and i know you're paying for everything but it's just it doesn't work for us this year if y'all

want to come down hang out get your hotel in the area you know we'll go to dinner we'll all go out and throw frisbees in the backyard we'll do some stuff like that uh and then maybe another year we'll go on vacation together but i just can't do it this year and thank you so much for reaching out and if if he then bows up and goes well you won't take my gift then you go well see there it was okay like john said but it's it's a way to test the waters without smacking the possible reconciliation in the face or without ending up four days into a seven-day cruise really like oh no what do we do we can't get away we're stuck on a boat now i'm stuck in here with cousin eddie yes yeah okay that's fair that's fair yeah and and my husband will talk to him i won't respond for him uh i just

we talked about it the other day and we're're like, we don't know how to save this. Yeah. It's like a vacation. It sounds great. Well, it's, you know, it is way over there on the edge of awkward. Yeah. But, hey, Julie, I also want to put this out in the water. It is easy from you and your husband's perspective to look at your brother-in-law and say, man, I can't believe he burned us for six years over a four-wheeler.

But your husband's got to own some of that, too. It wasn't a four-wheeler. There's something else going on. And he may not have the tools to have this conversation well, so he's going to know, I've got to be gentle. I've got to be appreciative. I want to always go into this thing assuming it's an olive branch. I love that analogy, Dave.

I'm not going to cut it. I'm not going to saw it off. I'm just going to move it aside and say not this year, but soon, but soon. Yeah. Gently. Yeah. Yeah. And then that's having you having strength.

And boundaries. And it also gives you a little bit of a little test here, because I'd rather do Frisbees in the backyard than in Cancun for a week. Yep. You know, in this weirdness. So let's just have a little where there's a little better escape hatch and everybody's not heavily committed and, you know, that kind of stuff. So, yeah, I would want we want you to rebuild the relationship if it's possible. Absolutely.

And it doesn't have to start on a paid for vacation. In spite of your hurt and in spite of your scars. Yep. Yeah. John is in Tampa, Florida. Hey, John, welcome to the Ramsey Show. How can we help? Thank you, Dave and John, for taking my call.

My wife and I are in Baby Step 7. We have paid for rental property, but I'm trying to figure out what our ROI is on that to determine whether they are a good investment to keep long-term. We've owned it for about 10 years. Is it a residential house? It's short-term rental, actually. Okay. So they're vacation rentals.

Okay. Usually those have much higher management fees. Management company takes a bigger chunk, right? Yeah, we actually manage it ourselves. Oh, okay. So you're like running a VRBO type thing? Correct, correct. Yeah, the benefit is that...

You get high rents when you get them, but then there's the off-season. Correct, and we've had a significant increase in property values over the time, too, which has been beneficial. But a significant increase in turnover of the tenants. I mean, it's week by week. It's not... Yeah's not yeah okay correct it's a pain in the butt i'm just trying to figure out okay on residential traditional residential uh i i own a bunch of houses and our portfolio

averages a little north of eight percent of the value after expenses without depreciation not counting depreciation not counting increase in value cash on cash no so the actual cash you paid for it. No, the actual cash of value of the property. It would be cash on cash if it's cash. You're correct, but we do it on value. We want to see our rents coming up to match the values to keep us around that 8% mark after expenses. Now, that's a traditional rental house that rents for a year, not by the week. By the week, you should be making more because you've got a lot more labor.

And you've got to account for the gap of no rent, right? And you've got these gaping holes of off-season and all that kind of stuff. So, yeah, if you're not getting north of that, you should probably rent it straight up instead of vacation rent. Because you're dealing this pain in the butt. This is The Ramsey Show. Hey, it's Kelly, associate producer for The Ramsey Show. This episode is over, but if you heard about an event, product, or service and didn't have a chance to write it down, don't worry.

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