The Ramsey Show - App - I'm Feeling Financially Overwhelmed (Hour 2)

Episode Date: January 6, 2021

Investing, Retirement, Insurance, Savings Sign Up for a FREE trial of Ramsey+ TODAY: https://bit.ly/31ricKt  Tools to get you started:  Debt Calculator: https://bit.ly/2QIoSPV Insurance Coverage Checkup: https://bit.ly/2BrqEuo Complete Guide to Budgeting: https://bit.ly/2QEyonc Check out more Ramsey Network podcasts: https://bit.ly/2JgzaQR

Music 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. Christy Wright is Ramsey Personality co-host of the day. You call in, we'll talk about your life and your money. Open phones at 888-825-5225. That's 888-825-5225. Jerry is in Phoenix. Hi, Jerry. Welcome to the Dave Ramsey Show.

Thank you, Mr. Ramsey. Thanks for taking my call. Appreciate that. Sure. What's up? So my wife and I have been, we've been listening to you for a while now, and we're able to pay off all of our debt except our house. We have about four years, best we can tell, about four years before we pay the house off. We've got a rollover IRA. It's in mutual funds. It's $260,000 in there. We have $25,000 cash. And again, no debt except for the house.

My question is this. Is it wise or the negatives, I guess, of taking some of that 260 and putting it into a Roth IRA? What should I do with that? Is that a legit thing to do, or should I leave it alone or start with new funds and fund a Roth outside of that, my 260? Second answer, yes. I would fund everything from this point forward in a Roth. How old are you?

I'm 52, sir. 52, okay. Yeah, if you convert it to grow tax-free from this point forward and you pay the taxes without using some of the money to do that, some of the money in the IRA to pay the taxes. In other words, if you paid the taxes that it creates outside of there, so that's going to be about $65,000 at some point, $70,000, something like that, then that has the same mathematical effect of having invested that much more

because now that $250,000 is going to grow 100% tax-free from 52 on, and it's going to make mathematical sense,000 is going to grow 100% tax-free from 52 on, and it's going to make mathematical sense, provided you plan to leave it alone. And you probably will leave it alone up into your 60s and even your 70s, is what it sounds like, or the vast majority of it you won't take out. You might take some income off of it. But if you're going to cash the whole thing in at age 59 1⁄2, it might not work. But you shouldn't do that you shouldn't be planning to do that so no no so what i would do is get the house paid off and then i would

convert it with extra cash that you have after the house is paid off but i wouldn't convert it now you don't need a 65 000 tax bill while you're trying to pay off your house ah okay got it got it got it okay okay very good i appreciate your help sir thank you we appreciate you calling in open phones at 888-825-5225 caleb is in daytona beach florida hi caleb how are you good how are you dave better than i deserve what's up hey so um i was wondering, right now I'm putting 10% into my 403B through my employer, and they match 3.5% and they gift 6%. Nice. So effectively, that's about 19.5% going in.

But my question is, I can afford more. I'm in zero debt right now. I just got off my car. Good for you. How old are you? 22. Way to go, Caleb. Wow. Okay. What do you make? Just under 50.

Okay. Awesome. Good for you. Well done, Caleb. Good job. Well, what we recommend is that you, you're debt-free, except your home, or debt-free even without a home, and you're putting 15% of your household income away. In your case, you are not putting that away.

You're only putting 10% away, so I would up that another 5%. And you probably could just do a simple Roth IRA yourself, do an individual IRA that's a Roth in some good mutual funds, get in touch with one of our SmartVestor pros. They would thoroughly enjoy working with a 22-year-old as sharp as you. That's a great joy for them because they know that they're going to turn you into a millionaire because you've got so much time in front of you and you're so smart. You've done such a good job.

And so, yeah, I would probably do another 5% of your income into something, and that's not going to quite fill up an IRA, but even if you wanted to completely fill up the IRA, you could. It's up to you. You've got some room right now. And do a Roth IRA and good mutual funds, good growth stock mutual funds. Growth, growth and income, aggressive growth, and international are the four categories that we recommend.

Hey, way to go, man. I'm proud of you. Very good. And it's just amazing that he's asking those questions at 22. I love it. Like, that's recommend. Hey, way to go, man. I'm proud of you. Very good. And it's just amazing that he's asking those questions at 22. I love it. Like, that's incredible. I love it. Kevin's in Buffalo, New York.

Hi, Kevin. Welcome to the Dave Ramsey Show. Thank you for taking my call. I'm 55 years old. I make $75,000 a year washing cars at my home. I have no debt except for rent. I just had a newborn child, so I don't have health insurance for myself.

And I'm just trying to, I'm away from big brother. I'm living off the land, really. So my advice, I want my advice from you, what you recommend, if I was setting up health insurance for my child and maybe income for my child as she gets older. Oh, what a good dad.

You're thinking on your feet, man. Good for you. Well done. Thank you. Well done. Yeah, the number one cause of bankruptcy in America is not too much debt. That's the number two cause. Number one cause is not having much debt. That's the number two cause. Number one cause is not having health insurance.

And so I immediately, this week if I were you, would get health insurance on you and your family. It's not a ripoff. And the way to make it cheap, Kevin, is the big deductible. And the big deductible is, you know, you might do what's called an HSA, a health savings account plan. A lot of those have a $5,000 or a $7,000 deductible, which means the health insurance only kicks in on big stuff. It doesn't kick in on little stuff. Little stuff, you're a

hard worker. You can work your way through the little stuff. A $5,000 thing, $2,000 thing, you can work your way through that. But it's the $500,000 quadruple bypass with an ICU visit by you that could break your family. And so that's the one you want covered. That's why you have health insurance. And so that's what I have. I have a large deductible. I'm 60. Large deductible health insurance plan.

And it pays 100% of everything after I hit the deductible. And it's an HSA plan. And you can check with, go to an insurance broker. You can check them out on our website. You want a broker. That's somebody that will shop among a bunch of different companies and get the best deal for you in Buffalo, New York, in your situation, and explain all of that to you. But, yeah, you need to get health insurance in place immediately for you and the kids. And then you can set up a college fund if you want to start that.

Before I did that, though, I would make sure you're out of debt. You have your emergency fund in place and make sure you're investing for your retirement because one of the best ways you can bless your kids is not be a burden to them later. Why do you think that some people are scared of health insurance? Like they feel like it's a rip off you know everybody i think all of us secretly hate all insurance well for sure it's not fun i mean it's not even a secret it's just we just hate it and it's just like we pay we pay we pay we pay we pay and you know you're never gonna it's never gonna work out but you're buying the peace of

mind of that big event that's right that takes you out yeah that's the that's what you're buying the peace of mind of that big event that takes you out. That's what you're covering. But generally, we just hate it. And a guy like that that's off the grid, he really hates it. This is the Dave Ramsey Show. People all over the country are discovering a faith-based and budget-friendly way of meeting health care costs through Christian Health Care Ministries. Christian Health Care Ministries, or CHM,

is a nonprofit organization that helps members carry one another's burdens with healthcare expenses, and they have successfully shared each other's medical bills for nearly 40 years. See if CHM is right for you by visiting chministries.org. CHM is a proud sponsor of Dave Ramsey Live Events. Thank you, America, for your response to Rachel Cruz's new book. Came out yesterday, Know Yourself, Know Your Money. Now one of the top sellers on Amazon at this moment. Her appearance on Good Morning America this morning did not hurt that, I'm sure. And causing some sales to happen. They were very kind to us there.

And a good mention and pushes to the book. Thank you. And a good interview, too, by Michael. Strand does a great job. And, you know, she's done a hundred and some odd uh pieces of media in the past 48 72 hours so she's all over the place in your city and everywhere else check it out know yourself know your money you can of course get it at daveramsey.com uh we will know uh in a little over a week whether or not it is a number one bestseller or not but we suspect it will be based

on the number of sales going out of here and thank you for that we appreciate The Money Guy podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast. We hope you enjoyed this podcast.

We hope you enjoyed this podcast. bigger problem with your money than the technical questions some of you ask. You get the person in your mirror under control, you can make it through most of the technical stuff. Speaking of which, it is time to reset. Last year, many of you got the crud scared out of you, no pun intended, and you were like, got your wake-up call, and you're thinking, I've got to get this money stuff straightened out, it's time for me to reset at the first of the year here. So we're going to have a reset event this coming Tuesday night, and that's on the 12th

at 7 p.m. Central Time. We'll be broadcasting a free, did I mention it's free, live stream from Oklahoma City at LifeChurch.tv's campus. Rachel Cruz, Chris Hogan, me, and Pastor Greg Groeschel, pastor of Life Church. And all four of us will be speaking throughout the evening. It begins at 7 o'clock. It is completely free.

And if you'd like to view this free reset live stream and get yourself on a track to get out of debt, to become wealthy, to become outrageously generous, to get control, get yourself on a track to get out of debt, to become wealthy, to become outrageously generous, to get control. Get yourself where you're not susceptible to every big bad wolf that comes along and huffs and puffs like a pandemic. A lot of you, if you'd had a big pile of money and no debt last year, would have had a whole different year.

And I'm not making fun of you and I'm not shaming you, but this is your chance to reset. I've had a moment to reset a time or two in my life. And, you know, some of you were kind of going along at ish. You were doing Ramsey-ish. And this is your chance to reset. Text the word RESET to 33789 and watch this free live stream. We'll get you started, guys. We want to help you.

We want you to win. We want to show you how to win. Text RESET to 33789. And speaking of which, if you go to DaveRamsey.com slash reset, Ramsey Plus has a free offer right now to go through Financial Peace University, get on the Every Dollar Budgeting Program, and they've got a detailed step-by-step, little small steps you can take, not the baby steps, but little small steps you can take

to start to win immediately in the first 90 days. You're going to see a huge change in the way you feel about money. And Ramsey Plus has a free trial going right now. Access to all of that at DaveRamsey.com slash reset. So a lot of different ways you can reset. Another way you can reset is Christy Wright has a best-selling devotional out called Living True. And it absolutely, you know, this 40-day devotional, she started doing live Instagram for free this morning, a live Bible study every morning for 40 days.

Well, it's each section, so I'm going every 10 days to kick off this section. But what's so cool about it, and you know this, Dave, as a writer, everything doesn't make it in here. It's like they edit it down, edit it down, edit it down. So it's fun because when I go live, I can share the back story of the story or some scriptures that supplement and complement the heart behind it and have a really

great discussion where we talk about how you put this into practice and what God's showing you through this area or that area. So we kicked it off today with day one. I'll be going live again in 10 days to kick off section two, where we talk about who you are and what God says about you in his word. And so it's one of those things where it's like, it makes it a little bit more personal when I'm able to lead them through it since I'm the author. So it's been fun. Well, and since you can put in all the stuff we made you cut out. That's right. That's right. Because Christy has a lot of words. Christy has words.

Words are Christy's thing. Listen, my first book. She does not come up short on word count ever. Y'all, listen, my first book, Business Boutique. It would have been thick. I don't think they thought I could turn in the word count. I was like, oh, challenge accepted. Let me turn in double the word count.

There you go. And then we had to go back and go. Cut it. Cut it.y this is a freaking shopping mall we got to take it back to boutique okay it's all important it's all important it's all matters it's all my words fun fact for those of you guys that have business boutique or have seen it that's the reason for the trim size that's the reason for the larger trim size because dave was like christy this can't be six inches thick let's spread out the worst so it's not so overwhelming this looks like a doorstop we gotta fix it oh my gosh oh all right open phones at 888-825-5225 heather is in orlando hi heather welcome to the dave ramsey show thank you um first off i want to say y'all have been such a blessing in my life.

I paid off $111,000 worth of debt. I have a fully funded emergency fund, and I've been through Entree Leadership and Business Boutique, and I really appreciate what you guys teach. Wow, thank you. That's amazing. You've made a huge difference in my life. Way to go. I'm proud of you.

I needed good guidance, so that's where made a huge difference in my life way to go i'm proud of you i needed good guidance so that's where you guys all came in i feel like your family thank you we are how can we help today um my husband and i just had a little boy he's three months old yeah he's awesome we i'm thrilled to be a mom. I'm feeling a little overwhelmed financially, thinking of all the different things to provide for him, college and helping him get on the right path. Also, I just finished the emergency fund, but saving a down payment for a house, putting away money for retirement,

putting away money for his college, it all kind of hits at once when you have a little guy. Like I hear it all in theory on your show, but now it's for real. And I'm just wondering some guidance. Yeah. So you paid off $100,000 and how much debt? $111,000. Yeah. When you started that debt snowball that was that tall,

that felt unattainable, didn't it? It sure did. And then as you chipped away at it, you started going, I think I got this. And as the snowball got bigger and bigger and bigger and you were reaching towards the end of it, you were like, oh, now I see it. I got it.

Right? Remember those emotions? Yep. exact same thing's going to happen here exact same thing's going to happen here you're going to finish your emergency fund and you're going to start saving for retirement or a house whichever you want to do if you want to do baby step 3b as you know you've listened to the theory you said you can stop everything and save up a down payment or you can while you're doing your 15 or some portion towards retirement up to 15 you start saving for the down payment on your house but as you know and you know the story heather you go baby steps four five and six are at the same time once you start doing them you start doing a little bit towards junior make sure you're putting your 15 away and as you guys make more and more money you'll put more towards junior

and junior is going to be just fine because he's got a really smart mom and heather i just want to encourage you you're you're doing great and you're okay like you are this is so new and heather i remember those feelings i remember someone telling me when i was pregnant with my first son car Carter, that when you have a child, it feels like your heart is walking around outside your body. It feels so vulnerable. You feel like the weight of the world on your shoulders, this whole new level of responsibility that is unlike anything you've ever felt before. And that's a little bit of what you're feeling. And I just want to encourage you, you're doing great and you are okay. And part of it is, i'm just going to go on a limb here and say part of this is the fact that you're three months out like i remember i remember one time when i was

reading to carter he was maybe two months old and i'm reading this book and dave seriously i just start crying imagining him going to college and he's like three months old you got a lot of hormones heather you got a lot of feelings it It's just life is overwhelming right now. You're not getting any sleep. So I just want to say, hey, you're okay. You're okay. You're doing a great job and you're going to continue to do a great job and you're going to take care of that baby. You're doing awesome.

Just like when you started the debt snowball when he is six, you're going to look back and go, wow, we got this retirement thing going. We got this college thing going. We almost got the house paid off and we're going to be in great shape. And you're going to feel exactly the same way as accomplished as you feel right now about that. You're going to feel that way about his college fund and all these other things you're worrying about. Christy's right. You got this. You're doing a good job. This is the Dave Ramsey Show. show. open phones this hour christy right ram personality, is my co-host today.

We are taking your calls at 888-825-5225. Phillip is with us in Milwaukee, Wisconsin. Hi, Phillip. Welcome to the Dave Ramsey Show. Can you hear me? Absolutely. What's up? Hey, Dave.

I had to pull over. I can't believe I'm talking to you. This is awesome. So a little back story. Dave had to pull over. I can't believe I'm talking to you. Um, so, uh, little, little, uh, backstory. Um, my parents recently approached me with a possible living situation. Uh, they want to move up North, but they don't want to sell their house. So they had offered my wife and I to possibly rent from them. Now I have a home of my own. I still owe approximately $180,000 on it. I'm wondering if I should sell that or not in the coming year. What are your thoughts?

What's it worth? It's worth about $230,000. I'm just wrapping up baby step two right now. I got about 5,000 left. I think what scares me is not building equity, renting from my parents. I rented before, and I hated it, but the home they have is beautiful. It's worth about half a million. Yeah, that's great. But you're married, right? I am married, yes, sir.

How many kids you got? No kids. I'm 24. Okay. What do you make a year? What's your household income? $120. If this wasn't your parents, you wouldn't even be considering this.

Yeah, I guess you're right. You wouldn't be driving down the road and go i'm gonna sell my house and rent one yeah it wouldn't have happened would it no you got a nice house my other thought was i keep my house and i would rent it out i see this money um you know chiseling at this debt and now i want to do it with my mortgage you know yeah but i think this is a distraction you don't need a house you have a house and you don't need to be a renter you own a home and you don't need to sell your home because you're not in financial trouble you make plenty of money to pay for this house you were hitting all your financial goals everything's working and all of a sudden we're making a hard left on two wheels i don't see why you would do this

what do you i don't i don't know what you're gaining by doing this i mean you're not you're not gaining big traction it's not like it's gonna throw you forward in your financial goals uh it's it's let me actually ask that why why were you considering it? To help your parents because their house is nicer? Like what was going through your head as like a possibility? A little bit of that. Yeah, their house is very nice. My wife and I are potentially thinking of starting a family. The schools are really nice in that area. And yeah, the home is beautiful. I really like the home. I can never afford that home right now if I would just

buy it outright. I think my dad owes $80,000 left on it, a very modest mortgage. I'd basically be covering his expenses while he would move up north. Okay, you're in Milwaukee. What is north of Milwaukee?

Canada. Good point. Two and a half hours. Canada? No, no, no, not that far. Just about. Oh, my gosh. Okay.

I'm from the south, so that's funny to me. Okay. Anyway. All right. You know, I don't think this serves you and your family. I think you guys sticking with your plan serves you and your family better. Ten years from now, what will have been the right decision? And I think ten years from now, you will probably sold this house and moved to a different school system.

You'll be making a lot more money. Oh, by then you would have a 10-year-old in school. Now you don't even have a child, and you can't really start thinking about school systems like eight years before you need one. You don't need to worry about that today. Your home in your current situation is going to go up in value. You're going to pay it down. You're on track. I think you're going backwards to sell your house and become a renter.

I wouldn't do it. Yeah, it sounds like a short-term play that doesn't make any sense versus a long-term play that makes a whole lot of sense. And I think you're just getting distracted, just like Dave said. I think you're getting distracted by the fact that it's your parents and their house is nice. If they weren't your parents, you wouldn't even be considering something like this.

And so they approached you with an opportunity and it's just not what is in the right path for you. It doesn't make sense for what you're trying to do and what you need to do right now. Hey, thanks for the call. You're doing good. Steven is in Los Angeles. Hi, Steven. Welcome to. You're doing good. Yeah. Stephen is in Los Angeles.

Hi, Stephen. Welcome to the Dave Ramsey Show. Hi. Thank you for taking my call. Yeah, it's exciting to be able to talk to you. You too. I was listening to you yesterday, and you were talking about whole life insurance. And so I got motivated, and I went ahead and signed up for a term life program and I have a whole life

insurance policy that I'm wanting to get rid of. It's got a cash value of about $36,000 in it. Do I just go ahead and cancel that policy and then they send me a check and then I've already been approved for my current 20-year term. How do I go about maneuvering through this? I would wait until you have the term policy in your hand. You've been approved, the application's been approved, but the policy's not been delivered. I want the policy in your hand. And then, yes, you just simply cancel it.

You can send them a note. You can send them a letter. You can jump on. Most of the places have online ability to cancel now and that kind of stuff, but just enter in to cash it out. They're going to fight you because they don't like to cash these things out. They like taking your money. And so one of the things they're going to come at you with

is that you're going to have taxes, and there's a very high likelihood you're not going to have taxes. And I'll go ahead and answer that question before it comes up. Okay, and here's the reason. Your basis for taxes, meaning anything over what your basis is is what you pay taxes on, on a whole life policy is the total of all the premiums you've paid in. In 90% of the cases, you pay in more premiums than you will ever get out. And so my guess is that if you add up all the premiums you've ever paid,

it's far in excess of $36,000. Does that sound accurate to you? Yeah. in excess of $36,000. Does that sound accurate to you? Yeah, in terms of what I just went through and did some quick math with my monthlies I've been paying over the years, and it does add up. Yeah, if it's more than $36,000, you will have no taxes because your basis then would be higher than $36,000. So you're actually taking a loss, which you cannot claim on your taxes because of the way these stinking things are structured.

But anyway, at least you're not going to have any taxes. So if they come at you and go, oh, you don't want to cash it out. You may have taxes. Capital gains could hit you. You're not. You don't have to worry about it because you're not making any money. You're losing money. And all we're doing now is stopping the loss by getting rid of it.

But I would wait until you have term life policy in your hand. You want to do a solid exchange. You don't want to drop one and three days before you get your policy and then have a car wreck and something weird like that. Well, because it's a couple weeks. I mean, it's a few weeks. You've got to have your physical. Well, he said the application has been approved is what he said.

So it may be forthcoming. But either way, just wait until you have the little policy in your hand, and then you will be considered covered. And you know that you're covered. You know that you know that you know that you're covered. That's the big thing. So, yeah, probably it's not going to be long. But if it's just made application and they're going to go through a physical

and everything else, with COVID it may take a while. So some of these app processes have slowed way down. Way down. So, hey guys, inviting you to Christy Wright's new Bible study she's doing. You make it sound so official. It is official. I'm going live on Instagram. Well, I mean,

when you do stuff on Instagram, it's pretty official. I'm just saying. And so a lot of people follow Christy Wright on Instagram. So, Living True 40 days to get back to you the 40-day devotional she's going to be covering the devotional time uh in the mornings is it every morning or once a week once every 10 days i kick off a new section it's at christy b right oh at christy b right on once every 10 days so you did this morning so 10 days from now that's right we'll do a new That's right. And the devotional bestseller

is called Living True, Getting Back to You. And you do not want to miss out on this. It's good stuff. This is the Dave Ramsey Show. Thank you. Christy Wright, Ramsey Personality, is my co-host today. Open phones at 888-825-5225. Laura is with us in Spokane, Washington. Hi, Laura.

How are you? Hi, I'm well. Happy New Year. Thank you for taking my call. Sure. Happy New Year to you. What's up? So, I first have to say that me and my husband are in our current financial situation.

Not due to your steps, but kind of through my dad. My dad always preached your advice. He was always my go-to person, but he's recently passed away, so I'm hoping that Papa Dave can bless or advise what next steps to do. Okay. And he's up in heaven just smiling right now that I even got a hold of you. So it's an honor. Thank you.

Well, thank you. I'm honored. But my husband and I were in our early 30s, and we're wondering what we should do with a settlement check. We'll be getting one, and then our minor children will be getting another one. We're on baby step six. Our household income is $190. We're already putting 16% into our retirement and $150 per month per child and a $539.

And so what we were really going to focus on these next four years is paying our mortgage off. Yep. Do we throw the settlement check for us at the mortgage or invest it? What's the nature of the settlement? Where did it come from? It's a personal injury. Is everyone fully healed? No. Okay. Are you going to need some of it for medical?

I think we'll be okay with our income because we've been able to do it without so far. So like something like a car wreck type situation? Something like a car wreck? Yeah. Okay. Yeah. Okay. Yeah. All right.

But how many people were injured? Two. So a minor child and one of you? Yes. Okay. So the minor child we want to put in a trust and invest. We just don't know kind of how to do that. How much is the settlement?

It's $25,000 for ours. Yeah. For each? She'll be getting $50,000. Okay. All right. But the medical care that remains, you guys plan to cash flow? Correct.

And without any doubt, there's no question you're going to be able to do that. So you're considering this money, quote, free and clear of the tragedy? Correct. Okay. But I'm kind of mad at the check, if you will, just because of the whole events that have happened. Oh, sure. So I don't really know.

I don't know what. I don't have emotional attachment to it because we've always earned our money. Yeah, that's okay. That's okay. I understand. I mean, but it's just a mess. I mean, people got hurt, and obviously. Oh, it was.

Yeah. Yeah. It's been really hard.'s been hardest um with watching our child suffer it's been the hardest part um so i think just ongoing counseling is going to be the main thing and um we'll be able to cash flow that with our income um but we just well in your case yes i would throw it at the mortgage it's a-brainer. Any money we get goes on the applied baby step, okay? In the case of the child, the money is in the child's name. It's a lot of money in one way, but with your financial situation, it's really not a lot of money.

It's okay. I mean, you can put it into a trust, and that would allow you to manage it further up into their adulthood if you wanted to. And if you put it just into their name, that is called an UTMA, U-T-M-A, and that's simply opening a mutual fund in a kid's name. Okay. And you would name yourself as the custodian, and you can choose what to do with the money and move it around, but it's all for the benefit of the child, obviously,

a Uniform Transfer to Minors Act, which is actually if you open a child's bank account, that's the same thing. It's done under that exact same piece of law, okay? Because you cannot own a bank account or contract for anything until you're 18 years old. And so if a 7-year-old has a bank account or contract for anything until you're 18 years old. And so if a 7-year-old has a bank account, they really don't. It's really in the 7-year-old's name, but it has mom and dad as the custodian on the account. And the same thing is true of a mutual fund.

It's how we used to do before 529s and ESAs. It's how we used to do college funds back in the day. It's how my kids' college funds were structured because that was before those things opened up. So anyway, you can just put it in a mutual fund. The downside of that is that it will be 100% available to the child at 21. It's their money. Okay. And you're no longer in control.

So you're going to have to train them that this money is there and it is a responsibility. They didn't hit the lottery. Absolutely. And if you want to do that, that's how I did my kids. That's fine. If you're because of the counseling that's going on here and the tragedy and that kind of stuff, if you're more worried about that, you want to put it into a trust, it's probably going to cost you more taxes in a trust than it will in an UTMA.

Oh, okay. More taxes? Yeah, probably. But, I mean, you'd have to see your tax guy to be sure. But a lot of the way, depending on how this trust is structured, you can get into a thing where the trust is paying ordinary income on that, and the UTMA could grow on a capital gains basis and so you may have less taxes with the utma than you would with the trust but you lose control at 21

technically speaking now we told our kids the money was there good luck finding it if you're a cocaine addict we will steal it from you so uh to protect you from you but um but we're those kinds of parents and so uh uh that's what we have done and but it worked out our kids we started talking to them about hey you've got this money uh that's for your college and whatever's left over after college you'll have it and so it was it was an opportunity for us to have a teachable moment teaching them when they start to be 10 12 years old about you know they start to do multiplication you can teach them about mutual funds and it gives you a opportunity i mean christy you're already talking with your little ones and they're little and rachel's already teaching her little ones the basics on money and you look for things in the rhythm of life yeah to have an

opportunity to teach them yeah and it's some simple stuff too i mean carter's five years old now but since he was even three i trained him i said carter where does money come from he says work work work i was like that's right bud he's like i need to i want to go buy this i was like great go to work what do you want to clean i need help well and that that would be laura that'd be you just continuing your dad's legacy obviously he did that with you he taught you about it and so you guys are making a ton of money you've been very responsible with money. You're down to baby step six. You don't have any debt, but your house, you're investing. You've got kids' colleges going.

You've got everything rolling, and that's your dad's legacy. He taught you how to do that, and way to go. That's very, very cool, and now you're going to get to pass that on to your child with this money, and it'll be part of the emotional and spiritual healing of this thing you guys have gone through to see the money as a blessing instead of seeing it as a as a as a I don't know a payoff or something you know as a it doesn't need to be emotionally associated with a bad thing we can change that if we choose to in the discussion and the narrative of how we how we deal with the teaching about it but either way you got to do that whether it's a trust or whether it's a um

just in and out my but um i i probably as far as that part goes i probably just sit down with your smart investor pro and talk that through with them they can probably give you some advice about the taxes that's more accurate than mine. I'm not very good at taxes. I don't do my own. So never trust Dave's tax advice. It sucks. There's about five things I know about taxes, and I'm 100% right on those.

And the rest of them, I don't know. I almost made a mistake on my stuff this week. And I stopped and had the accountant look at it, and he went, no. And I went, oh, see, there it is. Dadgummit. Okay. It was a weird little thing, though. Anyway, hey, I'm sorry you guys went through this, and I'm glad you got the blessing, the financial blessing from having gone through the hard time.

That puts us out of the Dave Ramsey Show and the books. Our thanks to James Childs and Kelly Daniel in the booth I am Dave Ramsey, your host and we will be back This is James Childs producer of the Dave Ramsey Show Once again, producer of The Dave Ramsey Show. Once again, you made The Dave Ramsey Show one of the top four most popular podcasts last year. To get your daily dose of motivation and inspiration from the Ramsey Network, subscribe or follow today wherever you listen to podcasts.