The Ramsey Show - App - If You Wouldn't Buy It Again...Sell It! (Hour 1)

Episode Date: January 31, 2020

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🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave 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. Open phones this hour at 888-825-5225.

That's 888-825-5225. Andrew starts off this hour in Colorado. Hi, Andrew. How are you? Hi, Dave. I'm great. It's a pleasure to speak with you. You too, sir.

What's up? Real quick, I met you in May at your old studio, and you gave me my everyday millionaire's coin, so I'm excited about that. And we're also FPU coordinators, and I just found out yesterday that one of our students has paid off $17,000 since November. I love it. Awesome.

Well, thanks for leading the class, brother. You bet. We love it. My question is, we live two hours outside of Denver in the mountains. We just bought a house, according to your guidelines, 50% down, 15-year loan, and our payment's $1,800 a month. But we have two rental condos in Denver. One's paid off. Another one is not. It's $145,000 to pay off, and we have the cash. But since it's two hours away, I'm wondering if we should sell it and pay off our primary home and just be debt-free.

Yeah. Okay. Why not? The answer is that. Doesn't it kind of feel good? You kind of thought you were going to do that, didn't you? We're torn because it used to be my wife's condo before we got married, but I'm so ready to be that for you.

Well, I mean, of course, you know the drill, right? Just reverse the process. You didn't own the condo, and your house and your residence was paid for would you borrow on your residence to buy the condo no not that far away same effect right right we just reverse the you know the drill the reverse engineering on it and it just tells you oh that's checking my motives and it's gone baby sounds great makes sense we're doing it. Hey, have fun, brother. Appreciate all you do. You can reverse engineer like that on almost anything. If I wouldn't buy it today, why is it still sitting in my driveway?

That boat's been sitting there three years, hasn't been in the lake. I wouldn't buy that boat today if I didn't already own it. Well, why do you still own it? If you wouldn't buy it again whatever it is an investment uh you know a boat a car a rental if you reverse engineer it and say if i had this pile of money in the middle of the table instead of this thing would i buy it again if not sell the thing and put the money in the middle of the table and that just

tells you every time what to do with it because you know what happens is we just kind of get i don't know we feel like we're stuck on something it's hard to get rid of it's hard to make that decision to pull the trigger and just smack something and um interesting just very interesting randy's with us randy's in Virginia. Hi, Randy. How are you? Doing well, Dave. How are you? Better than I deserve. What's up? So in January every year, I always max out my Roth IRA. Unfortunately, last year, in the middle of the year, I sold a house and the capital gains pushed me over the income limit so i recharacterized it into a traditional ira and i was just wondering if i

should just go ahead and pay the taxes and get that back over to my roth ira so you put it into an IRA. You put some money into a traditional IRA to lower your tax bill because you were having a tax bill from capital gains. You didn't recharacterize it. You can't do that. Well, I... You just took a tax deduction to offset the fact that you had taxes.

Well, I actually had already put $ thousand into my roth ira at the beginning of the year oh and you flipped it to traditional to make it a write-off i said that's a recharacterization okay i'm with you now i thought you meant you recharacterize the capital gains somehow you can't do that no no no all right okay um yeah i mean you you have the cash to pay the taxes as a result of it, right? Yes, sir. Yeah. Yeah, I'm going to do that.

It feels like I'm biting the bullet twice on that. No, it's just once. You just delayed the bite on the capital gain by keeping it traditional. Now you're accepting the bite when you flip it to Roth, right? Right. You didn't get hit two times. You just got hit once. You just put it off.

And, yeah, I'd do it. I'd do it. Hey, thanks for the call. All right, Rich is in Virginia. Hi, Rich. Welcome to the Dave Ramsey Show. Hey, thank you for taking my call. Sure.

How can I help? So how would you go about deciding between refinancing an investment property for the increase of cash flow and then look at the possibility that you may sell that property before you recoup the investment of refinancing the the money that i spend at settlement well you would never refinance if you're not going to recoup there's no point in it you're that's just losing money okay you don't you don't create cash flow and lose money that's not that that's that's a that's a faux move it's a false move it does it's false false logic okay because you're basically borrowing the cash flow

right effectively when i was looking at doing it it looks like it would take me about four to five years to recoup what i would spend at settlement to do the refi why you're not much interest rate savings i'm sorry because your reef your your break-even analysis on your interest rate saved what's your current rate my current rate is four and three eighth. I could get a 3.75. Yeah, that's not worth screwing with. It's not worth screwing with. No, if you can't break even in about three years on your closing costs, it's not worth it. And how do you come to that conclusion?

Because I look at this and I think, oh, five, six years, this is still a good investment. It looks like an annual rate of return on that increase in cash flow. The annual rate of return looks like, wow, 20%, 25%. Well, no, it's not that. But the conclusion comes from this. The average mortgage is refinanced every five and a half years or sold. The life of a mortgage in the U.S. on average is five and a half years. Wow.

That's the average. And that means some people are 20 years, you know, and they don't ever touch it. And some people refinance every two years, and some people sell and buy. And, you know, there's all kinds of reasons that that average is there. So it's just, you know, if you're going to put out cash out front and you're going to wait five years to get your money back, that's just a long time. The present value of that doesn't give you anywhere near the returns you were projecting there. So, no, I don't want to tie my cash up like that with the bank.

So these things, you need usually a 1.5% to a 2% move in your interest rate to recoup in that 24 to 36-month range, generally speaking, is what's going to work out. And so, yeah, refinancing is great, but if you're going to go from a 5 down to a 3, yeah, you'd jump on that. But you're not moving enough with this to screw with it, I don't think. I wouldn't do it. I'd just get the thing paid off.

Hey, thanks for the call. Open phones this hour as we talk about you, baby, right in front of you. This is the Dave Ramsey Show. Okay, I need you to listen to this. When you're on Wi-Fi anywhere in public or at home, you're at risk of hackers easily seeing every site you visit and search that you're doing online. It doesn't matter if you're on your cell or laptop. Public Wi-Fi is a hacker's paradise. They can see you visiting websites, streaming, downloading, or uploading photos, uploading files, and more. I'm not telling you this to scare you.

I don't operate in fear, but I want you to be aware and take action. You need to download an app called CyberGhost VPN on any device you access the internet with. CyberGhost VPN helps you keep your connection on your own Wi-Fi and any public Wi-Fi secure and private. Over 34 million people worldwide have downloaded CyberGhost VPN. Download it now. Just search CyberGhost on iTunes or Google Play or go to CyberGhost.com. thank you for joining us america we're glad you're here open phones at triple eight eight two five five two two five our question of the day comes from blinds.com they have a 100 satisfaction guarantee.

That means even if you mismeasure or you pick the wrong color, if you mess up. Y'all hear me say this all the time, but this is an unusual guarantee. A lot of places don't have this. If you screw up, they'll remake the window blinds for free. And you get free samples and free shipping. And with the new promos they run every month, you can save even more. Always use the magic word, the promo code RAMSEY. It's magic. Justin is in Ontario.

Dave, my wife and I are currently on baby step two. And my question is with step one and three, what's the best key? Is it best to keep cash on, keep that hand, keep that on hand cash? Or would it be wise to place it in an investment fund that allowed you to withdraw at any time, no fees? It would be best to collect the interest on this money while it's not being used. The purpose of your emergency fund is not an investment. Everybody say not an investment. An emergency fund is insurance. Everybody say insurance. Insurance costs you money to protect the things that are building you wealth.

The emergency fund's purpose is not to build wealth. So the interest rate that you get on your emergency fund does not matter. You're not going to make money on your emergency fund. If you're waiting on that to become wealthy, you're never going to be wealthy because you're going to have it in a one or a 1.25 money market account, or it's going to be in a shoe box in the corner of the closet. And really, there's not a lot of difference. I mean, you got $10,000 and you're in 1% on it. Nobody cared. The math on it is just ridiculous. So you're trying to get the wrong thing working for you.

You don't expect to make money on your homeowner's you. You don't expect to make money on your homeowner's insurance. You don't expect to make money on your car insurance. It protects your assets. That's what the emergency fund does. It protects your assets. You don't lose the house because you lost a job. You can put a transmission in the car without going into debt. It's there for that kind of a thing.

It is not there to build wealth with. And that's where you missed your point here. Not an investment. Insurance. Insurance costs you money. Investments make you money. Not an investment. Insurance.

Now, if you're putting in a kitchen sink or you're fixing a gas leak, or in most cases working on a car, you're not DIYing that. You are not do-it-yourself. You're certainly not pulling your own teeth. You get an expert to help you do certain things. And it's amazing to me that as complicated as the tax law is, that some of you with a very complicated return are trying to, you spend days and hours and weeks on it. Get somebody else to do it for you. I don't do my own taxes. Now, if you've got a real simple return, then you probably don't need a tax pro. You don't spend that kind of money. You don't spend 300 bucks on something you can do for 20 bucks with software,

right? But if you've got a complicated return, it'll make you more than it costs you to have a pro do it for you. So jump online at DaveRamsey.com. Take our quick tax quiz. It just takes just a second to take it. DaveRamsey.com slash tax quiz. Take the quick assessment. DaveRamsey.com slash tax quiz. And we'll show you. We'll say, look, based on this, you're probably going to get an ROI. You're probably going to get a return on investment using a pro. Otherwise, you probably ought to get some software into it. And we'll show you how to do that, okay? And it's just not that expensive.

Basically, stuff that pays you more than it makes you is called free. So if you go and you pay someone $300 and it saves you $1,000, that's called free. Someone else did all that work for you for free. But if you pay somebody $300 and it doesn't save you a dime because you have a very simple return, then you shouldn't have done that. And we're not going to ask you or suggest that you do that. DaveRamsey.com slash tax quiz. Matt is in North Carolina.

Hey, Matt, how are you? I'm doing good, Dave. How are you doing? I appreciate taking the call sure man what's up all right so i'm gonna make this quick um so i'm 29 years old i'm in the military so i make that i make 32 000 a year um extremely predictable income uh my wife we're about to have our first boy any day now, actually. Congratulations. Thank you, thank you. I'm about roughly rounding up from 24 and some change, $25,000 in debt. $11,000 is in credit cards, five different credit cards, ranging from $700 to the lowest balance to the highest balance, $4,500. And then I have a Jeep that I have a 2017 jeep patriot that i finance it's about

14 000 uh so i pay about 280 a month on that it's like a seven percent um i know it's a little high but that's okay but the thing that i'm i have a 2004 infinity g35 coupe that i got when i was younger like in my 20s like younger twenties, like 2021. Um, and that's worth about five to seven grand. It's paid off, but it's a two door coupe. I'm about to have a family to me that seems unrealistic. So I'm trying to figure out what to do. Cause I'm getting deployed, uh, in September getting deployed for nine months. And then here in about two months, I'm getting deployed for a month. So we only really need one car. That's just the honest, God truth. Except for emergencies, but, you know, there's things that I can do personally to take care of that.

But we only really need one car. So this car's sitting, and it's like worth five to seven grand. Is there a third car, or you have the coupe and the Jeep? The coupe and the Jeep. Yeah, why don't you sell them both and get a used minivan? Get rid of the debt on the jeep use the five thousand dollars from the coupe to get you a van because neither one of these are kid cars right well the yeah i mean the cheap patriot i got it because it had like 40 some thousand miles at the time

so i thought it was a good deal i I don't care. You're leaving. Yeah. And she can't drive it with a baby. Or she could, but it would be difficult. Now, my only concern is that, you know, the Jeep, like, I might not be able to get back the money that, you know, I might not even be able to get $9 or $10 for it, $9 or $14. Yeah, I know.

And you got $5 in the other thing. So you're going to end up with, like, a $ five thousand dollar car loan probably for a five thousand dollar van because the coupe's gonna cover the hole you're in but that thing's just man it's half your it's half your debt and you're not driving it you don't want to get rid of it because you love it kind of i can part with it it's a cool jeep it's a cool jeep patriots are neat yeah you know for a military guy that's a cool Jeep. Patriots are neat. For a military guy, that's a studly Jeep. I mean, really.

Yeah. It is the bottom line when they've still got the windy windows and all. It's kind of this thing where now I'm a daddy. Yep. It changes everything, brother. I want to get ahead of the game. I'm one step number two by the way so we got that thousand yeah insurance money that you're just talking about exactly um exactly

so we're working on the getting a three to six months saved up and see if you got rid of that if you flip the jeep out and you had a five thousand dollar car loan by flipping these two cars into one loan one car and uh you ended up with a little five thousand dollar minivan that mama can drive that's a good, solid car. It's predictable while you're deployed. You can get that paid off, get those credit cards paid off. You going to be in a sandbox where you're getting combat pay? No, no, it's just going to be like a training thing in Europe

for Atlantic Resolve, a big yearly thing. Okay, okay. But is it tax-free? No, because it because not combat uh that i i don't know off top of my head it might be okay but i think i think you're right on the combat thing has to be uh that that's your tax-free yeah i'm pretty sure it is okay well hey listen okay let's do this that's what i would do thank you for your service i'm going to put you guys into financial peace university have you been through it yet uh i have not no okay we're gonna put you in it because here's the deal it's all it's a nine-week class and you can get through it before you leave but if you don't

it's all online as well and it gives you every dollar plus which connects to your bank and while you're deployed you've got the budget in your hand on your phone she's got it in her hand on her phone lots of communication so you guys can work this together and it's not like you move like you're in europe and she's trying to run the house because you'll be able to run it together if you learn how to do this this way and we've got the tools to help you do it i'm going to give it all to you just to say thank you for your service, okay? I appreciate that. One last thing real quick. So I understand that with the cars. So I was also thinking, what would I afford if I sold the car and then put that towards the credit card?

Nah, I think you've got to get Mama a car. And neither one of these are kid cars. So somewhere you've got to end up with a car, and you don't need two while you're gone. So you can do whatever you want, but that's what i would do thanks for the call Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based on New Testament principles, Christian Health Healthcare Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major healthcare costs. Christian Healthcare Ministries is the original health cost-sharing ministry, a Better Business Bureau-accredited organization CHM members share to pay each other's medical bills. It's not insurance. It's Christians financially and spiritually supporting each other.

It's what Christian Healthcare Ministries has done for over 35 years. And our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events the debt-free stage, Andrew and Janet are with us. Hey, guys, how are you? Doing great.

Welcome. Where do you guys live? Charleston, South Carolina. Welcome to Nashville. And all the way here to do a debt-free scream. How much have you paid off? $67,893, and we also cash flowed $19,000 extra. On what?

Oh, major house repairs, major car repairs, medical debt. Maybe. Maybe. Yeah, there's always that. Yep. Slipped that right in there. All right. Surgery, extra surgery.

Yeah. And how long did this take? 27 months. Wow. And your household income during that time? $83,000 up to $101,000. Cool. What do you all do for a living?

I'm a HVAC consulting engineer. So when people are hot, I make them cold. When they're cold, I make them hot. There you go. I like it. And I'm a stay-at-home mom. Perfect. Very cool.

What kind of debt was that? $68,000. Sally Mae. All Sally Mae. All Sally Mae. And a little medical debt. And a little medical debt. Okay.

A little medical debt. Yeah. Okay. Yeah. All right. So she's been hanging around so long, like a member of the family. We tried to ignore it for a long time. Denial's not a plan, is it?

It is not. It gets worse and worse and worse. And worse and worse. How long have you been out of school? Since 2007. Okay. 13 years. But what happened 27 months ago that lit you guys up? Well, we had moved from New York City where we were both making dual income,

and I was a fashion designer, and he was also still doing engineering. And we made a lot of money, and we didn't have to pay attention until we left. We started having kids, and then we left New York. And then it got real when we had one income, and we lived paycheck to paycheck. And it didn't get better. We just thought it would get better, get better, get better, get easier. And it didn't. And I got really pissed, so pissed.

I couldn't deal with it anymore. And I was online looking at mommy blogs, and I saw this girl who had paid off $90,000 in 18 months. And I said, oh, my gosh, that's amazing. That was amazing. And she had followed her plan, and so I immediately ordered the book, gave it to Andrew. He read it.

We both read it. We were like, let's do it. Didn't have to talk each other into it. You were both ready. Well, I did make a few, what are they called? Well, spreadsheets. Yep. So I convinced him through spreadsheets.

Ah. Well, that's a good thing to do with an engineer. His love language. Yes, his love language would be numbers, yes. Yep. The nerd numbers. Yep. Okay.

I like it. Good. Good for you guys. So you went through total money makeover, and that got you started. Yep. That was it. And you took off and then just tore into the spreadsheets and did it. So what's the secret to getting out of debt?

What's the secret to paying off $68,000 on one income, way down in income from before, and you got after it? What's the deal? Budgeting. I mean, it's the biggest thing. And you have to have hope. If you feel like you can never do it, you won't ever do it. And you have to get mad and say, I'm tired of living this way.

And mad enough to do anything, anything to get rid of the debt. And if you don't have hope, you won't do it. If you don't have a reason, you won't do it. My family lived and lives with the fear of money. And I didn't want that to be our legacy. And it doesn't need to be my family's legacy. They can change if they want. But being afraid of money doesn't help you. You just need more information. You need to try something different.

And as soon as we tried something different, we saw the success. All the snowball really works. You pay off something little and you get that energy. It really works. We were told it's not going to work. You'll never pay it off. We would just be happy paying the minimums, which we were for a long time. And, oh, my gosh.

It's a lie. It turns out it's not happy. It's not happy. That's a lie. That part's a lie. It is a lie. It's going to be okay. It's not okay's not happy. It's not happy. That's a lie. That part's a lie. It is a lie. It's going to be okay. It's not okay.

It sucks. It's not okay. It sucks. Well, I just think the debt-free screams are what helped encourage us continuously. Millionaire Theme Hour, that was a huge thing for me. Yep. And, you know, it didn't come out until later, but the Borrowed Future podcast, that really helped me understand kind of the frustration and pain that Jana was going through.

I mean, you know, I started getting frustrated, but I never totally understood how, you know, a split-second decision could just destroy 10 years of your life. Because when you sign up for student loans, you don't understand. No. No one explains it to you. No. And even if they do, you really don't understand what it means. You don't care.

It's what I got to do. And you don't know how much the end payment's going to be. It was $1,200 a month for the minimum for how many years? 15 years. It's for a 15-year loan. It's what they wanted us to do. It was. And that part was all of your decisions are already made for you.

You have no more freedom. And you're just chained to this until you get pissed and decide to change, do whatever. What was the hardest part of the journey for y'all? We had a lot of low spots. I had to have an emergency surgery due to miscarriage, and then there were complications after that that required an MRI, I had to have an emergency surgery due to miscarriage. And then there were complications after that that required an MRI.

And they looked at me and they said, all right, do you want this MRI? And I'm like, how much is it going to be? And it was something like $2,000. And I just started bawling in the middle of the hospital. I can't make a $2,000 decision right now. Like, you know. And it's nice to know we don't have to do that ever again. It's amazing. I mean, we finally have money.

If that ever happened again, cash. When I get sick, I go to the doctor. Right. I don't try and figure it out on Google and hope it'll get better. It won't. Good for you. Well, that's cool. you plowed through you pushed through yeah you pushed through so the secret is budgeting the secrets working together secrets get pissed

you said it three times yeah yeah you got to get sick and tired of being sick and really do enough that you're willing to do whatever it takes and you don't care what other people think exactly you're going to cut cut cut cut and when you do that that's when it moves and i try to explain that to people. It's not an intellectual decision. It is emotional and visceral. Yes. And it's just to the point that when a bill comes at you like that, you do cry.

Because you're like, no, you're messing up my plan here, you twerps. You know? It just, yeah, you get, it gets, but then you get to the other side of it. You do. Where you've lived like no one else and now you're where you are. How's it feel now? Feels amazing. Amazing. You're free.

It was like somebody was choking us for eight, ten years. How long have you all been married? Ten years. Ten years. Okay. So you've never been free while you were married? Never. Wow.

And it's been amazing for our marriage. Like just talking. Communication. Yeah. Yeah. Talking about it. You know, things that we weren't taught, learning together. And it's been wonderful. It really has.

We already had a great marriage, and it made it even better. People that we talk to all the time are worried about college. They're worried about things that are far down the road, and we've already got, you know, a plan for that. That was the biggest thing. We have a plan, and we've already got a plan for that. That was the biggest thing. We have a plan. We're not scared of it. I get asked all the time, I have three daughters, and people say, how are you going to pay for a marriage?

Cash. I'm going to drop cash on it. How horrible for you. You've got to have a wedding fund and a college fund. That's right. That's about the size of it. Well done, you guys. You bring them with you?

We sure did. All right, let's get them in the picture. We got a copy of Chris Hogan's book for you, Everyday Millionaires. That's the next chapter in your story. As you said, the millionaire theme hours are a big motivator. And that's where you guys are going from here. So what are the girls' names? This is Caroline.

She's one. This is Susan. She's seven. And this is Jenny. She's four. All right. Beautiful family, guys. Now, have the older ones been practicing?

They know the deaf-rish group? A little bit. Yeah. They listen to it all the time. All right. Girls, are y'all ready? Are you ready? Are you ready?

You ready? Yep. Okay. Here we go. Andrew, Janet, Susan, Jenny, and Caroline from Charleston, South Carolina. $68,000 paid off in 27 months, making 83 to 101. Count it down. Let's hear a debt-free scream.

You ready? Three, two, one. We're debt-free! You did it! Look at them go. That was awesome. Woo! I love that. I love that.

Love that. So what happens now when some unlucky young man pulls up to pick up one of those girls on a date in the future, they're going to have to have a discussion about money. Because Andrew and Janet have changed their family tree. We're going to let some boy in the future mess that up. Well done, you guys. I'm so proud of y'all. Very well done.

This is the Dave Ramsey Show. One of my favorite parts of this show is hearing your debt-free screams. You guys are our heroes. You've kicked debt to the curb and you've saved for the future. Now we want to celebrate with you. If you have lived like no one else and are currently in baby steps four through seven, well, it's time to enjoy some money. And the perfect place to do that is on board our first ever live like no one else cruise in March. That's right, just a couple of months away. But get this, it's not too late to book your cabin, so don't miss your chance. This

Caribbean cruise is going to be an incredible seven days at sea on a stunning new ship with amazing experiences. I'm talking all of our Ramsey personalities and other world-class entertainers. We're stopping in the Bahamas, Puerto Rico, St. Thomas, and Turks and Caicos. It's going to be an amazing, debt-free celebration designed just for you. Don't miss the boat. Head over to RamseyCruise.com today to reserve your room. Thank you for joining us, America. Ashley is in North Carolina.

Welcome to The Dave Ramsey Show. Ashley? Hi, thank you. So, Dave, I called you last year and asked you if you thought it would be immoral for me to quit a high-paying job to stay at home with my family. And you really encouraged me to... Hello? Lost her? And you really encouraged me to. Hello? Lost her? Pick her up again.

Okay. Oh, I'm sorry. I think we had a little technical faux pas here. Okay. I encouraged you to what? You really encouraged me to give some thought to how I might be able to make that work, if that's where my heart was. And I did that. And I'm so excited that I'm,

I'm leaving that job and I'm going to continue working for my employer as a contractor, which I'm really excited about. And Dave, if I've done my math right, I'm going to work a whole lot less and I'm going to make even more money, which never occurred to me that that was even going to be possible. So thank you for that encouragement. And as I get ready to make that switch, I'm trying to think through, you know, what are the things that I don't know? What are the things that I don't know to ask? And I'm trying to figure out what kind of professional support I need as I try to make a decision about basic things like do I need to be an F Corp or do I need to

form an LLC and you don't need either trying to figure you don't need either you're just a sole proprietor you're just doing a contract for one employer right for now but i do think that'll probably um i'll end up with other um clients as i go forward if you do that you may want to move to an llc the only reason to have an llc or an s corp is liability are you in something where you're going to get sued by work you're doing for this employer um i don't think so i don't either i would not go to the expense and the extra bookkeeping and the extra tax filing and all the other crap of dealing with a side company there's no point in it it doesn't it doesn't give you anything except it's a liability

umbrella is all it is yeah and i think the other thing i was thinking about was um thinking about it from a tax deduction perspective. It's the exact same tax deductions. It's 100% pass-through on S-Corp and LLCs. Great. All your expenses pass through to a Schedule C as a sole proprietorship. All your income lands on the Schedule C as a sole proprietorship. It all passes through.

You do a P&L, and whatever the net is on your LLC drops out too. So there's nothing that's deductible. One place is not deductible another. Now you are picking up the other side of self-employment tax. That is, but that's not got anything to do with the LLC. Yes, that's right. And then also, you know, thinking through retirement contributions and all that good stuff. But I think even with that, I'm expecting to bring home even more money this year, which is just unbelievable. I mean, you're losing a benefits package and you're losing 765, half the tax. And you're probably taking a pay raise that offsets most of that. You may be making a little more net of all of that.

You may be breaking even net of all that, but now you've got your life back too. That's right. Yeah. That's right. So even if it's a slight cut, so what? Even if it goes up a little, that's wonderful too. Yeah, you need to, if you want to sit down and work out your retirement plan, just get with one of the SmartVestor Pros. I would not recommend a single person doing one customer bothering with an LLC or a sub-S.

I wouldn't. Unless you've got just, if your family's worth multi-millions of dollars where you want to keep everything somehow with some risk management, that's fine. But if you're a normal working family and one of you is a contractor, I would not make the contractor into an LLC, or certainly I wouldn't put it into a sub-S. All right, up next is going to be Christine in Washington. Hi, Christine.

Welcome to the Dave Ramsey Show. Hi. Thanks so much for taking my call. Sure. What's up? Hey, so I know that you always say, you know, don't ever take out your 401k just to pay off debt um my question is i've had a 401k that i haven't touched in almost 10 years um from a from a previous

employer um i'm a stay-at-home mom with kind of some part-time gigs that don't have a pension. My husband makes enough to support us. And my question is, we've got about $40,000 in debt, and I've got about $29,000 in my 401K. And my husband thinks it's a good idea to take it out and put it towards the debt. So when you take it out, you get charges. What's your husband make a year? What's your household income? About $110,000.

Okay, so you're in a 35% tax bracket, and you'll be charged that plus a 10% penalty. So that's kind of like saying, Dave, I want to borrow money at 45% interest to pay off my debt. Well, that would be dumber than a rock. Right, and that's what i've tried to instill upon my husband now it sounds like though that this 401k is almost an afterthought and you all have not managed it well you probably need to get with a smart investor pro and roll it into an ira and some good mutual funds so it starts getting some better returns and you've got something to be a little bit more excited about sounds like it's over there dormant and it's sucking.

Yeah, that was kind of my next kind of goal was to do something like that. Yeah, just jump online at DaveRamsey.com, click SmartVestor, find a SmartVestor Pro in your area. It'll give you a list of them. You pick the one you want. And then you can sit down and just do a rollover on that, a direct transfer rollover. But, no, I wouldn't cash that out. Yeah, 45% hit.

Well, there's no way that mathematically makes sense. It's not found money. It's in there for retirement. You're going to get hammered. All right, up next is going to be Dean in New Jersey. Hey, Dean, how are you? Good, thanks, Dave. How are you?

Better than I deserve. What's up? I have a question. I just completed Baby Step number one, and I started attacking my basically $12,000 debt. In the future, back in about three years ago, I modified my mortgage to lower my monthly payment. So at the end in 2035, I'm going to have a $160,000 balloon payment because they took it off my monthly payment. So I'm wondering, as I'm

attacking this debt, I see this on the horizon, what should I do about it? Refinance the property. Once you get clear of everything else, get your emergency fund in place. If you can pay the payment, can you pay the payment now? Well, once I – basically I'm paying $1410 a month. I mean, if you had a real payment on this loan balance, can you pay it? Yeah, once I pay off my credit card. Yeah, and have your emergency fund in place. Yeah. Yeah. So once I get this $12,000 debt paid off,

then that $500 that I'm basically paying off, if I put that towards my mortgage, the boom payment would be minimal. What's your interest rate on your mortgage? Right now it's a, because it's a modified, it's a flat 2%. Oh yeah. I keep that as long as I could. But you can pay extra on it? Yeah. Without losing the 2%?

Yes. Yeah, I'd hold that in there and just hold that and then just start jamming to where you don't have that balloon facing you at the end, and then you've got a deal. And then, of course, as you get on up to maybe step six, you're just going to prepay the whole thing. You're not going to have a mortgage by 2035. If I follow your plan, which I'm definitely going to do, that is my goal.

Exactly. That's where you're headed. So you're going to be in great shape. Hey, man, I'm proud of you. Keep it up. Sounds like you got it going one step in front of the other, one step in front of the other. Well done.

Mallory on Twitter, I'm a single mom. I have a crazy amount of daycare i have to pay it was suggested percentage that i should be paying no um and daycare can be very very crazy so it is something that a lot of people when they're working their baby step two in particular we're trying to find money to get out of debt they are modifying where they do daycare they're not just accepting the uh one way to do it uh they're they're working you know they're they're finding other ways uh other other providers uh other creative ways to cut that bill because it is a tremendous bill. It's tremendous. But I'll tell you, there's a vast range of what people end up paying for it because of all kinds of different situations that they look for

on ways to get their kids cared for. But, man, if you just sign up for a straight-up daycare and you start writing checks, my God, it's like tuition or something. It really is. It's expensive. Thanks to James Childs, our producer, Kelly Daniel, our associate producer. I'm Dave Ramsey, your host. That puts a sour in the books. Hey guys, this is Blake Thompson, senior executive producer of The Dave Ramsey Show. Did you know over 15 million people listen to The Dave Ramsey Show every week?

And a lot of those people listen to one of over 600 radio stations across the country. To find a station near you, head to DaveRamsey.com slash show.