The Ramsey Show - App - I Used To Think You Were Arrogant…but Now I Need Your Advice! (Hour 2)

Episode Date: October 13, 2021

Debt, Retirement, Savings, Investing As heard on this episode: Sign Up for a FREE trial of Ramsey+ TODAY: https://bit.ly/3rZTUAx Tools to get you started:  Debt Calculator: https://bit.ly/2Q64HME Insurance Coverage Checkup: https://bit.ly/3sXwUn5 Complete Guide to Budgeting: https://bit.ly/3utmVXi Check out more Ramsey Network podcasts: https://bit.ly/3fHhbVE

Music Music Music Music Music Music Music Music

Music Music Music Music Music Music 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 pain of 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, America. George Campbell, Ramsey personality. Host of the Fine Print Podcast, among others, is my co-host today. Open phones as we talk to you about your life and your money.

This is a weird talk radio show because it's about you. It's not about me. Not even about George. Shock it. I thought that was going to be the answer, Dave. Shock it. It's not about me. Not even about George. Shock it. I thought that was going to be the answer, Dave. Shock it. It's all about George. No, it's not.

Sorry, George. Not about me. My feelings aren't hurt. All about you guys. It's weird because most talk radio is about the guy on the microphone, and we're not the hero in this story. You are. We're just showing you how to do it.

Open phones at 888-825-5225. Asheville, North Carolina. Glenn is with us. Hey, Glenn, how are you? Hey, doing great, Dave. Thanks for taking my call. I really appreciate all you do. You too, sir.

How can we help? Our family's been very blessed in that our children are registered with, through my wife, are part of a Native American tribe. And so they pay money into, I guess it's part of a native american tribe and so they pay money into uh i guess it's kind of a trust fund for them that they can't access till they're 18 and then they disperse it for a few years after that um we have seven children and they're all registered so my approximations uh the oldest is 16 right now and my estimates are that when they turn 18 it'll be in the neighborhood of about $250,000 that each be getting.

Each. So each, correct, yeah. So my question for you was, I mean, I have some ideas, but I wanted your opinion on what kind of things should we be doing in the home to teach them about money now, as well as make sure that once they get it, they don't squander it. Because we know a lot of other people that are in the same boat and, they buy cars and end up in a ditch in a few years, and it's pretty sad. I know it's not $10 million, but to us it's pretty substantial. Oh, it is substantial. It is. And this happens a lot, and we've worked with a lot of tribal situations

because the money has turned out to not be a blessing because it's caused people, as you said, to fall into addiction, to fall into a lack of a work ethic because they think they've got it made without working because they're on the tribal dole. And it's had a socioeconomic effect that I don't think anybody really saw. It was an unintended consequence across the board. Right. that I don't think anybody really saw. It was an unintended consequence across the board. Certainly certain individuals have used it to be a blessing, and others it's really damaged their life, which is really sad. And so we've seen that.

So you guys are, this is probably what, Cherokee? Correct. Yeah. Okay. All right, cool. Yeah, been there. Been to that Harris. Yeah, so I mean, I was born in Marable,

so Cherokee, North Carolina is just up over the hill from us. Not too far, yeah. Yeah. So, I've been around this my whole life. But it's just become extremely profitable because of the casinos in the last few decades for a lot of the tribes. So, anyway, all that to say, it's a little bit like growing up in a wealthy family, only the family didn't earn the money. Right. up in a wealthy family only the family didn't earn the money right and so you have to guard your kids about against the dangers of wealth which are sloth addiction and misbehavior sloth

meaning laziness okay and so we had to teach the ramsey kids as an example growing up that they that they're entitled to nothing don't talk to me about entitled uh you know a ramsey kid get jacked up growing up if they start acting entitled and especially if they start acting like my dad's on the radio so i get to do so and so i really jack you up you start playing the dave card rachel can tell you stories from her childhood that left scars and so because it's just because i was not going to have our kids turn out as a reality show because we built wealth and i wanted to quite the opposite the wealth needs to be a blessing and the money's not the problem the problem is how you react to it and so what you have to start teaching your kids as early as possible is that this is this is not you hit the tribal lottery.

This is you have a tremendous responsibility. With great blessing comes great responsibility. And I want you, instead of feeling like you scored a touchdown in the Super Bowl and like you did something fancy because you hadn't done nothing, you just hit the DNA lottery. That was it. That's all you've done. because you hadn't done nothing. You just hit the DNA lottery. That was it. That's all you've done. You're entitled to nothing here. So instead, you need to take this money and see it as a responsibility to your family,

your own future family, to yourself, to your community. And so wealth is a responsibility, and I want you to feel the weight of that. We did that through a spiritual lens saying we don't own it. God owns it. We're managing it for him, so we have the responsibility to be faithful, to be trustworthy, worthy of trust in this. And so there's going to be a lot of dad speeches in your house if you're wise.

And, you know, teach them to work. Teach them to act like this money's not there. If they act like the money's not there, they'll be just fine, and that money then can be a blessing. And they can hold it with an open hand, with a generous hand. They can hold it with a hand towards the future, all of those kinds of things. But it can be done. You can teach a kid in a rich family work ethic. You can teach them integrity.

You can teach them character. You can teach them delayed pleasure. You can teach them the generosity. But where this all falls down is when it becomes very all about me, all about me, all about me. That's the entitled arrogant mentality that sometimes the, in a sense, it's like a trust fund baby, right? Right.

Yeah. So, Smart Money, Smart Kids is the book that Rachel and I did that was the number one best seller that addresses how to raise kids and teach them how to handle money. We talk about this kind of stuff in there. I'll send you a copy of it. George, what do you want to add to that? You've watched Rachel and Daniel and Denise around this place. Yeah, there's zero entitlement and all work ethic. And what I've seen, Glenn,

is that money is going to make them more of whoever they are. And so whatever they are at age 18, well, that's how they're going to handle that money when they get that 250K. So what I want you to do is raise them in the best way you can, walk them through the principles of smart money, smart kids, have them go through Financial Peace University, maybe as a family. And then you can. Walk them through the principles of smart money, smart kids. Have them go through Financial Peace University, maybe as a family. And then you can start to go, hey, what are your goals? This money can then flow through that framework that you've worked so hard to build to where they go, cool, we're going to cash flow school. We're not going to take out any debt. We're going to get ourselves a car. We're going to have a down payment for the house. We're going to have a fully funded emergency fund. And what that's going to do is catapult them into their adult life. While their peers are hanging behind with all these student loans and car payments,

they are able to have a paid-for house at 24. Yeah, here's the deal. They can be college-educated with zero debt and be millionaires by 28 with the numbers you gave me. Yeah, and that's kind of what I told them. I said, you can work because you want to, not because you have to, at a very young age. The rest of your life, and you can learn the real value of money, which is not what it does for me, but what it does for others.

Yeah. It's the most valuable thing a kid can ever learn. And sometimes it takes us kids until we're 50 to learn that one. And your kids don't have that option because if they wait until 50, this is going to screw up their lives. Yeah. And it's a scary, scary thing. I'm glad you brought it up.

I've not answered that question here on the air. I've answered it behind closed doors with a lot of discussions with tribal leaders because they're facing this, because it's created in some cases, not every case, but there's too many times it's created kind of a welfare state mentality rather than the blessing that it should have been. Yeah. Because the tribes are, you know, they're dispersing the money to the tribe. That's the money they're making in the gambling industry, which is a boatload of money.

Boatload of money. And so I'm glad the young men and young ladies are being blessed. It's a good thing. Let's just make sure it is that they understand they're blessed so that they can be a blessing. It continues to amaze me how identity thieves keep finding ways to use our own identities against us. Not only do they commit crimes related to financial fraud, medical ID theft, and insurance benefit fraud, but now we have to deal with home title fraud. Thieves are using your own personal info to take ownership of your home so they can take out loans, and you end up with a pile of debt and foreclosure notices. Over 4,000 data breaches happened in 2018, exposing 3.6 billion records. So thieves have plenty of identities to use, and there's a one in five chance it will be yours.

That's why Zander Insurance is the only program I use and recommend. Their plan covers all types of identity theft, and it takes over all the work if you become a victim. Visit Zander.com or call 800-356-4282. George Campbell Ramsey personality is my co-host. The last 24 months have been, hmm, a lot, hasn't it? A lot of worry, a lot of wondering what's going to happen next, a lot of uncertainty, a lot of cray-cray out there. And maybe that's how you feel about your money. You're tired, you're stuck, you're stretched thin. It doesn't have to be this way. The weird thing is, even in a wicked, weird environment, if you have a plan, there's a

sense of calm and a success level that changes. Because a plan gives you confidence when everything else is out of control. We teach you the plan and have for decades in a class called Financial Peace University. Almost 10 million people have been through this class, and it'll teach you everything you need to know to save money, out of debt become wealthy and be outrageously generous you can stream the lessons on your own or you can even go to class with other people and get support that way or both then you'll put the plan into practice with the premium version of our every dollar budgeting app the world's best budgeting app. It syncs up with your bank, and you can track your spending and see where your money goes. You get all of this only with a Ramsey Plus membership.

You don't have to stay exhausted. You don't have to be overwhelmed. You can win with money. To start your free trial of Ramsey Plus, text TRIAL to 33789. Text TRIAL to 33789. George Campbell, Ramsey Personality, is my co-host today. Open phones at 888-825-5225. Riley is in Minnesota. Hi, Riley, how are you?

Oh, not too bad. How are you doing, Dave? Better than I deserve deserve what's up okay so my question is kind of a two-parter so i'm gonna try and keep it as short as possible um when i took um personal finance my junior year of high school my personal finance teacher actually showed us your classes for her class to help prove, like, reinforce her point. And when I was a junior, I was not very smart, and I thought you were actually quite arrogant, and I didn't take your advice. But now my grandparents recommended I start listening to you again,

and now I'm feeling really arrogant and stupid. The table's turned. Well, that's okay. Me too, brother. I understand. That's exactly what I would have done in high school. I like you. If I had watched me in high school, I would have been making fun of me.

That's exactly what I was doing, unfortunately, because now I feel like I've put myself in quite a bit of a pickle. What'd you do? Well, to start, I don't, this is going to make your jaw drop. I don't use debit card or cash. I strictly use credit cards. Okay. What's your question for today? Let's try it that way. My question for today? Okay. I that way my question for today okay um i guess like the first part would be um with how i use actually i'll get to the big problem is i am 20 years old and i bought my house when i was 19 years old on a five percent down payment and a 30-year loan. Okay. And I was wondering what should I do?

Are you having any trouble making the payments? No, that's not the problem. It's just you, after watching, I've been only watching your videos again for about five days now, and you recommend doing a 15 percent uh your 15 year loan so what is uh what is your income my income um do you want that from my main job or from all sources all sources oh about 40 000 good for you a year good for you okay um well here's the thing what's the interest rate on your mortgage uh three percent

fixed okay you don't have to do anything with this mortgage you just need to get yourself on a plan and just you can pay extra on it without refinancing it and if you pay a 30 like a 15 it pays off in 15 so you haven't you haven't ruined your life you're okay. Okay, good. That was just my biggest concern is because when I bought the house, I thought of it in more of a mathematical thought process, I guess you could say it, because the house is a, I bought it under market value because the area I'm in, the houses are roughly $150,000 to $250,000. I got it for $110,000. And I figured if I spread it out over the next 30 years with inflation, that $112,000 will be $200,000 and the house plus interest will be $160,000. So I was if i paid out the full 30 years i'll end up saving

money through inflation because 30 years from now i'm going to be paying the same amount but with money that's technically worth less than it is now yeah but not really and here's why okay the house is going to go up in value due to inflation whether it has a mortgage or not these are independent equations these equations are not interconnected and so you don't have to have a mortgage in order for the house to go up in value and so what if you had it paid for and it went up in value oh now we've got the formula on how to be a millionaire yeah and to the credit card thing, he wanted to make it clear that he uses no debit cards and cash, only credit cards. There's other pieces to this equation that

you've got to figure out. Obviously, the mortgage is not sinking you financially, but I am worried about your mindset when it comes to debt. And so this is something I want you to really take a hard look at and go, what other areas am I willing to have payments on? Because right now you're willing to have the credit card payment. I don't know if you're paying it off. I don't know what other kind of debt you may have. But I think we need to change our mindset here because you're 20 years old and you're good at math, but you're not great at managing money. And so I want you to get better at the second part and then the math will help you going forward. So you're doing great, Riley. Obviously, you made a little ouchie here, but it's not sinking you, and your income is only going to go up.

And as it does, I want you to pay that mortgage off. I don't know why you wanted to hang around for 30 years. You made it very clear, like, well, in 30 years. No, I want this thing gone in 5, 10, 15 years because you have a life to live. And I don't know about you, but I don't want a mortgage when I'm 50 years old. Well, you're getting ready to be done with yours. Yeah, I'm 32, and we're paying it off in the next four or five months, and I'm saying sayonara. And I wish I was like you, Riley.

I was really good at math and really bad at money management. And once I realized that there is a difference between the two, it changed everything. So go through something like Financial Peace University. Maybe now that your arrogance has gone away, maybe it'll stick this time, and you'll listen to Grandma and Grandpa because they've got a good head on their shoulders. It's just common sense. You're fine, man. You didn't do anything that most of us haven't done or wouldn't do. The trick is to learn and change because continuing to do the same thing over and over again

and expecting a different result is the definition of insanity. Mark is in Peoria. Hi, Mark. Welcome to the Ramsey Show. Thanks for taking the definition of insanity. Mark is in Peoria. Hi, Mark. Welcome to the Ramsey Show. Thanks for taking the call, Dave. Sure. What's up? Hey, I'm 60.

My wife's 65. Five years, I'd like to be retired or semi-retired. I have no pension, no 401, no so-called retirement fund, but I have accumulated, and that's my business. We've got 32 rental properties, and I'm in the process of selling them. A month ago, I sold one of my last ones I sold, I took that money, paid the last three mortgages off a week ago, closed on another one. So I've got about $70,000 sitting in the bank, and I've always been confident in the properties that I've bought. I know the business, but I would like to start buying mutual funds, and I'm out of my comfort zone. And I guess I'm terrified to, you know, I've watched American Greed over the years, and you've always talked about smart vests or pros that you have.

But that being said, I'm out of my comfort zone, and I'm a little skeptical or scared of starting to put the money in mutual funds. Wow. How much do these 32 houses sell for? What did you get? You should have more than $70,000. Well, no, no. Well, I mean, we live, I'm in the Midwest, Midwestern part of the country.

All right. I'll tell you what. You hang on through this break. When we come back, we'll talk about it and see what's going on and see if we can help you with this process. This is The Ramsey Show. We'll be right back. George Campbell Ramsey personality is my co-host today. We're talking with Mark in Peoria, Illinois. He just sold 32 rentals thinking of putting the money into mutual funds,

but he knows real estate at 65 years old, is comfortable with that, and is scared about mutual funds. Is that a fair summary of what you told me so far? Yes, I haven't sold 32. I have 32. Oh, I misunderstood. is comfortable with that and is scared about mutual funds. Is that a fair summary of what you told me so far? Yes. I haven't sold 32. I have 32. Oh, I misunderstood. The last few I've sold have been in the $60,000 to $70,000 range.

Okay. They're nice, small, well-maintained bungalows or ranches. You can rent to either one person. So why are you making the decision to get out of the real estate business and into the mutual fund business? Well, I'm tired of it. With 32 properties, there's a lot of maintenance. I'm a one-man show.

I pretty much do everything. I've had one person help me throughout the years, and right now I haven't been able to get anybody to help me in the last six or nine months. There's just nobody out there that I can hire. So you've got 32 individual single-family homes? Yeah, a couple, two, three, you know, a couple duplexes and three units mixed in there, but the majority of them are single-family houses. What's the total value of the whole portfolio? Which is just about everything, including my house that I live in is about $2.1 million.

Good for you. Well done. Well done. Well, thank you. Well, I'm not sure that if I were in your shoes, I would make the leap to 100% mutual funds from 100% real estate. What I would consider is some different kinds of real estate. You're in the highest hassle factor type of real estate. And you're talking about selling the entire portfolio off, right?

Well, I'm thinking three quarters, sir. I might consider buying a commercial property that's income producing, whether it be an office building or something that has a lot less maintenance issue and a lot less hassle with the tenant issue. The number of times, I mean, I've got several of both, and the number of times I get a call from a commercial building versus we get a call, I don't get a call, but our team does, our real estate team does, versus the number of times we get a call off a single family home is, I mean, commercial is just about a tenth of the hassle.

And so you could take, you know, three quarters of these, you know, 20 of these houses, 25 of these houses, and convert them into a different kind of real estate if you wanted to. If you don't want to, it's okay. As far as mutual funds go, it's just like real estate. The first time you bought a piece of real estate, you didn know what you were doing it was scary all right the more you did real easy now the more you did it the more you became familiar with it the more you studied it the more you knew the neighborhoods the more confident you became in real estate because of your knowledge level and so mutual funds are going to be the same way. Click on SmartVestor at RamseySolutions.com.

Get with the SmartVestor Pro. They have the heart of a teacher. That's why we use that measure as one of the ways we vet them, whether we will endorse them or not. They have to have the heart of a teacher, because I don't want people putting money in something they don't understand, because you are always scared then so you need to begin the process of learning a whole new type of investing and just work on it and just

learn and you can weigh it in you don't have to go all in at one time there's nothing driving this except you're just tired of fooling with rental property yeah and hopefully i don't know that his income if all these rentals are producing that income, but if you get rid of three-quarters of your rentals, that might be three-quarters of your income. So just be thinking about that if it's tied up in mutual funds. Well, in mutual funds, you can pull the income off. Yeah.

I mean, the income, it can produce. You put $2 million or $1 million in mutual funds, it should produce $100,000 a year. Grow at 10%, 12%. Yeah, you don't have to leave the growth in there. You can pull it off. So he can live off of the income there just as well but the truth is the real estate is going to make more money than mutual funds but it does have a higher hassle factor it has more you know more to do and you've got to get out of the business of doing the

maintenance yourself that's just not a good long-term plan that just steals your joy it just you know when you start out it's like kind of cool because i got a hammer on my belt and all this but you know real quick that crap gets old i know how to do it all but i'm not doing it all all right let's go to jordan and lee in albany new york they are debt free leah hi guys how are you okay doing good how much have you paid off so we paid off a hundred and five thousand dollars in about three years good for you and your range of income during that three years so we started off at forty thousand dollars and we wound up at a hundred and seventeen thousand dollars at the end good for you wow What do y'all do for a living? I'm a dietitian. And then I'm a special

education teacher. Cool. Well, you definitely increased your income during this time. What was the $105,000 worth of debt? So we had a loan to Leah's parents. We had a loan on a BMW. We had Leah's student loans, and then we also had my student loans. Whoa. Okay. And making $40,000. Yeah, to start with. Yeah. We were working with one income at the time. Yeah, and that Beamer's just looking at you in the driveway. Yeah, it was nice, but it wasn't that nice.

Yeah, really. So what happened 36 months ago that put you guys on this journey? Well, we got engaged really is sort of where that boiled up. I had known about you for years, and when marriage was on the table, you know, it was time to get serious with the finances. Mm-hmm. Who had the Beamer? Jordan did. Who had the most student loans? Jordan as well.

Also me, yep. She's very quick to point out. We've already been paying them off for a while. Okay. So, see how... I was still accumulating when we got married. Ah, okay, good, very good. How'd you get connected to our plan?

Well, I had heard about you when I was in college, just listening to Christian radio, and your show would pop on every now and then, and I found it fascinating. So I didn't necessarily take all the principles and apply them, but I listened to the advice, and then when time came to get serious about it, I knew where to turn. Wow. Way you guys wow so uh what did you do to get out of debt what do you tell people the secret to getting out of debt is well the first thing we paid off our parents debt first and then we sold the beamer that'll do it that'll do it so are the parents are both sets of parents off in the background just cheering you on? Certainly, yeah.

Yep. We had a little bit of skepticism, but also a little bit of cheering on. Okay. Healthy mix. That's a good thing. That's good. Who were your biggest cheerleaders? So I'd like to give a shout out to my brother, Robbie,

who was definitely a cheerleader in the process and is going through the same process himself. All right. Yeah. And then other than that, we cheered each other on and we kept each other honest with it. Yeah. And fueled it that way. Well, congratulations on your success. We're really proud of you.

We're cheering you on for sure. Well done. How's it feel now that you're free? It feels good. I was expecting almost to have more freedom with money, but there's also goals that we have now, the next baby steps. So I don't just get to spend my money on whatever. Yeah. But cash is king and the paid off home mortgage has taken the place of the BMW as the status symbol of choice, right?

They lived it. There we go. This is real. I love it, you guys. Well done. Yeah, you'll get whatever car you want later. You drive like no one else later, you can drive like no one else. You live like no one else later, you can live and give like no one else.

So you paid a price to win. Congratulations. Will you go back in debt? No, never. Absolutely not. Okay. had all this fun you want then good well way to go you guys we're very very proud of you got a copy of the total money makeover for you to give away and encourage someone to get their journey started and we've also got a copy of the legacy journey and uh the that's for you guys because that's the next chapter

in your story to change your whole lives your family tree you're in the process of doing that very well done you'll be baby steps millionaires before we know it you'll be calling in to talk about that so congratulations all right jordan and leah in albany new york 105 000 paid off in 36 months, making $40 to $117. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! Yeah! Woo!

Woo-hoo-hoo-hoo! You gotta love it. Well done, you guys. Well done. This is The Ramsey personality, host of the new podcast on the Ramsey Networks called The Fine Print. Ten episodes of things that you might or might not know are not a good idea, and George will explain it to you. The one that came out this week is on...

Credit scores. The Dirty Truth. The Dirty Truth. It is dirty. The FICO score. Filthy, dirty. Filthy, filthy, filthy, filthy. All right, check it out, guys.

You'll be amazed. It's a great podcast. I have enjoyed it on my walks and runs in the mornings. I get to listen to a lot of George, and he does a great job. All right, here we go. Lee is in St. Louis. Hi, Lee. Welcome to The Ramsey Show.

Hey, Lee. Hey, Dave. How's it going? Great, man. What's up? Hey, so my wife and I own a small catering business. We do a lot of big corporations. We go to a place like Walmart and FedEx,

and we've been pretty successful with it for the past two years, and we're looking to buy some ground and build a house. And I was just curious on what your take is on buying ground versus how much to spend versus building a house. Well, when the whole thing is done, the mortgage that you end up with does not need to be more than a fourth of your take-home pay on a 15-year fixed rate. And the ratio of ground to house can vary. And if you're buying a big track of ground, obviously you're probably going to have a higher ratio of land cost versus house

than you would if you bought a simple lot and built on it a subdivision lot generally is going to be around 20 of the total price if you buy you know a standard subdivision lot if you spend you know a hundred thousand bucks on a house on a lot you're going to drop about a half million dollar you're gonna have a half million dollar project total. So about $400,000 more on the house. That's a fairly standard ratio, but it's not a rule, and there's nothing wrong with it being different. If you wanted to buy a big track of ground and build a small house on it because you wanted a farm type setting, there's nothing wrong with that at all. That doesn't mean you did something. Yeah, we're quite a bit away from St. Louis, and so we're going to

be buying a three acreacre track of wood. And then we work in the ground and building our dream home on there. Cool. Good. Yeah, so we're hoping to get the land for about $60,000 and then build our house on that. So I know, yeah, the ratio between land and house. I mean, what are you thinking you're going to spend on the house, on the construction?

You know, we're hoping, you know, between, you know, $400,000, I think, is what we're going to be comfortable with after getting the land. So that's about a 20% ratio. Again, you're not far off of that. So you're a little higher on that. But it's not the end of the world. Everything you're a little higher on that but it's not it's not the end of the world everything you're saying is fine i mean um in some cases you may be in you're in an area where the let

you're far enough out that the land cost has gone down you're three acres for 60 grand anywhere in america that's a pretty good deal you know and so um where whereabouts outside of st louis are you effingham illinois oh Oh, yeah, absolutely. We've got an affiliate there. Very good. Yeah, so we're looking to buy a little check of land and start our dream home. Absolutely. I don't see any reason not to do it.

As long as when you're finished, $460,000 on a mortgage on a 15-year, depending on how much cash you put into the deal, but your net mortgage cannot be more than a fourth of your take-home pay, should not be more than a fourth of your take-home pay on a 15-year fix, because otherwise you end up house poor. Yeah, and we experienced that. We did an episode on the fine print on the housing gold rush, and we talked to people who got into these houses.

We've taken calls where people go, Dave, I'm 50% of my take-home pay is going towards this mortgage, and it's crushing me. So it really comes down to the ratios and math on this where you can breathe and you have margin to attack your other goals and invest and give and do all these things to where the house payment isn't bearing down on you. It's a big deal. All right, Matthew's with us in Little Rock, Arkansas. Hi, Matthew. How are you? Doing well. How are you, sir?

Better than I deserve. What's up? Oh, not a lot. Just want to start off by thanking you and the team for everything y'all do. A few years ago, I was able to make a jump into doing my dream business for my day job and I would have never been in a position to do that if it weren't for the principles y'all teach.

The value y'all bring is awesome and I'm forever grateful. Well, thank you, sir. Yes, sir. Down to my question. My wife and I'm forever grateful. Well, thank you, sir. Yes, sir. Down to my question. My wife and I have a three-year-old son. We are starting to want to talk about a college fund getting together. We're wondering about the difference between a 529 plan and a custodial account. Both my wife and I have been to college, however, kind of went the budget route.

And if my son ever did want to do anything outside of college business-oriented like we do, I would want him to be able to convert that, and I was just curious on your thoughts of a 529 versus the custodial account. Well, even as mad as we are about student loan debt and some of the ridiculous decisions people are making in the education world, we're not against education around here. And so, you know, there's no shame in going into the trades at all. And sometimes you're a diesel mechanic, a welder can make more than somebody with a master's degree in sociology right now. And so, you know, you have to be careful about your decisions on your career path and what you spend to become whatever it is you're going to become.

And so there's no shame in any of that. All of those are valid careers. You've got to decide that. But I will tell you this. Spending some money on knowledge is going to be a good thing for this kid whether you whether it's a classic higher education four-year degree or whether it's a community college or whether it's an associate's degree or whether it's a trade school of some kind that they're plugging into so all of that can be used for the 529 the 529 grows tax-free the custodial does not that's a that's a big

difference uh the custodial does have an interesting feature in that you control the money until they're 21. You do not in a 529. Interesting. Okay. You control it only until they're 18 in the 529. And so if during that three-year period of time they continue to have no brains, then you can have more say in it if it's a custodial account. When our kids were growing up, the 529s and ESAs were not there if it's a custodial account. When our kids were growing up, the 529s and ESAs were not there,

so we did custodial accounts. Okay. So I'm not afraid of them. Basically, the mutual funder, people don't know what that means. Anytime you open up a bank account in a kid's name of any kind, mutual funder or otherwise, it's a custodial account because you cannot do contracts until you're 18 so you cannot open an account so basically you're opening an account in their name but you are the custodian you're the one doing the transaction and so if

you open a savings account at the bank if your 16 year old has a checking account at the bank it has you on it as a custodian because they cannot legally do that in any state you cannot do contracts in the state so and when you open an account you on it as a custodian because they cannot legally do that in any state. You cannot do contracts in a state. So when you open an account, you're entering into a contract. So these are all custodial accounts. But when you open a custodial account with a mutual fund company, the money is in the kid's name technically from a tax standpoint. And so until it makes enough money to go past their standard deduction there's no taxes on the account so the account can grow to pretty good size because it's not going to make enough

return to even be taxable so it's going to grow tax-free for the first big chunk of time the custodial account will but the 529 um i like the fact that it points them towards knowledge and points them towards education because even as mad as we are about student loans and the stupidity in the higher education world, we still want to point people towards education, higher education, trade school education, education of some kind. No education is not the answer to the student loan problem. Yeah, and with the ESA or the 529, I love that tax-free growth, and you can pass it on. It can go to a different family member. There's a lot of things you can do with that, even if they don't go the traditional route. But that growing from three years old to 18, that's a massive growth, even if you're putting in a little chunk of change every year, $1,000, $2,000, 15 years.

So if you're watching this kid and as he ages, he's less and less likely to be higher ed, more and more likely to be starting a business or something else. You know, you may want to divert and put less into the 529 and open a custodial as its twin sister to run with it. That would be fine to have some money in each. But I there's something positive about going. This is your college fund. This is your college fund. Your brainwashing them the whole time they're going to college. This is your college fund. This is your college fund, this is your college fund. You're brainwashing them the whole time they're going to college. This is your college fund, this is your college fund, this is your college fund.

Mine looked at their college fund and helped me calculate the mutual funds when they were 12 and 10. So there's kind of this assumption that, well, we must be going to college. And so it's a good thing. And I'm glad that my three kids and I and my wife all have four-year degrees. I think that's a positive thing. You just want to do education in a smart way where we've somewhat lost our minds in this country. There was a lot in that sigh. And you'll find out why when Borrowed Future launches tomorrow as a feature full-length film. Yeah, we've got this documentary coming out.

Check it out on Apple TV, Google Play, and Amazon Prime. Thank you very much, George. And BorrowedFuture.com. You can rent it there as well. This is The Ramsey Show. Hey, guys. This is James, senior producer for The Ramsey Show. Did you know over 18 million people listen to The Ramsey Show every week?

And a lot of those people listen on one of our 600 plus radio stations across the country. To find a station near you, head to theramseyshow.com.