The Ramsey Show - App - Insight on Inherited IRAs and Taxes (Hour 1)

Episode Date: December 19, 2018

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Live from the headquarters of Ramsey Solutions, 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. Merry Christmas, America. We're glad you're with us. This is a show about you and your life and your money, and it's downright entertaining. Thank you and your life and your money. And it's downright entertaining. Thank you for joining us and hanging out. We're going to talk to you.

The phone number is 888-825-5225. Again, 888-825-5225. John in Houston starts us off this hour. Merry Christmas, John. How are you? Hey, Dave. I'm well. How are you?

Better than I deserve. What's up in your world? Hey, John. How are you? Hey, Dave. I'm well. How are you? Better than I deserve. What's up in your world? Hey, man. Long-time listener, and I wanted to ask you a quick question. First of all, I'll say I'm debt-free, and I'm happy to say that. I'm 27, by the way, and so I wanted to give you a little back story before I ask you my question. I've just bought a used vehicle, paid cash for it. I've got $30,000 in a checking account and make about $90,000 a year, and I want to buy a house.

I'm trying to decide if that's a real stupid decision. So here I am. It wouldn't be a stupid decision at all. You're debt-free. You have your emergency fund in place, and now you make a lot of money. And at 27 years old, you're killing it. Way to go. And, you know, you save up your down payment in addition to your emergency fund.

What would you call your three to six months of expenses? What would that be your emergency fund? How much? If I continue on the path I'm at, paying $1,400 a month for rent, it's rent plus a couple hundred bucks a month for groceries and stuff. So, you know. So $10,000 or $15,000 is your emergency fund? Yes, sir.

Okay. And you have $30,000, right? Yes. So we earmark $15,000 as the emergency fund. We set the other $15,000 aside and say that's a head start on our down payment fund. We start chunking money in the down payment fund and then start talking about buying a home. Are you dating anyone seriously? I'm not. cool then there's no issue at all with buying um i will warn you that uh whatever you buy were you to get married later you will discover you have bought the wrong home

one bedroom condos down that probably wouldn't be the smart decision. No, I'm just saying, whatever it is, if your life were to transition in the future that way, but that's not in the foreseeable future. So if you want to buy a one-bedroom condo in downtown Houston, that's near work, it's near where you play, where you work and where you play, where you go to church, that kind of stuff, then, yeah, that's a cool idea, and it's a good vibe, and you probably got a good investment there. Work towards getting it paid off,

and we'll see where the next phase of life takes you. But that's a great step. And as soon as you get in there, of course, then you move on to baby step four, which is 15% of your income going into retirement. And if you do that from this point forward, you're already making good money. You're going to be very wealthy. You're going to be an everyday millionaire that we talk about all the time. You just got to stick with it and do what you've done so far, and that's continue to save, continue to invest, continue to be generous and give, and continue to avoid debt.

And if you do that and continue to make the kind of money you're making, you will be wealthy. It really is that simple. It's hard to do, but it's that simple to understand. Michael is with us in Chicago. Hey, Michael, welcome to the Dave Ramsey Show. Michael? Michael?

Tommy is with us in New York City. Hey, Tommy, Merry Christmas to you. Hi, how are you, Dave? Better than I deserve. What's up? So I got a little bit of a weird story. So the gist of it is I'm 23 years old, and I'm making really good money, and I've never gotten a degree what is uh

what is very good money um 120 000 that's excellent for 23 years old what do you do for a living um and i'm a network engineer in the it field very good um so my question to you basically is would you recommend in my situation to get a degree, or should I just leave it and, you know, just because my parents are, you know, convincing me that, you know, I should go get a degree, and I'm not sure because I'm not sure that it even will increase my salary at all. It doesn't. If you're going to stay in the field that you're in, continuing to take the technical

classes and continuing to stay ahead of the curve, I mean, getting your Microsoft certifications or the various things that you need to do in the technical field that you're in and whatever area you want to grow into, whether you're working on the hardware side, the software side, the app side, whether you're working on programming, you know, what is it you're wanting to do in the tech field? But right now you're a network engineer, so you're working a lot with hardware, right? Yeah. Okay. And as you know, the Microsoft certs are probably driving that more than, I mean, the guys that

come in here that we hire to do what you're doing, we don't look for a four-year degree, but we do look for some kind of certification that proves they know what the flip they're doing. And so, you know, and we're also going to check their ability to actually do it. We're actually going to do a little bit of a technical test in the interview process, which would be unlike hiring someone for sales as an example or marketing as an example. But, yeah, I would not spend my time to get a four-year degree in your world. If you see yourself being 45 years old and still in this field. Now, if you want to get into some kind of information management

and wanted to go get a degree in that because you see yourself in leadership in a Fortune 500 company in information management? Maybe. But if you want to stay, you know, driving the lane on the tech side and actually hands-on doing that stuff, it's a very practical world. And honestly, the universities are not up. Most of them are not up to speed on what's going on out here in the real world. And so if you just graduated from a standard four-year state

university with a four-year degree in information systems you probably don't know what most of my two-year out of high school tech guys know because they've been hands-on because the stuff moves so fast it changes every day and so it's a it's a constant learning you guys and medical guys have to read every day to stay ahead. And if you don't do that, you're going to become irrelevant in a heartbeat. And no, I wouldn't. Today, I wouldn't fool with it. But again, you ask yourself, where do I want to be in 40 years?

Or when I'm 40, you're 23. Where do you want to be in 20 years when you're 43 years old? It's hard to imagine. But do you want to be, do you like what you're doing? which is hard to imagine but do you want to be do you like what you're doing you like the field you like this stuff because what you do will be completely different by then i mean um you know 20 years ago the internet didn't exist you know and just think think about that does that blow your mind? You know, there was no YouTube, Google. Apple was a fruit we ate. You know, I mean, this is just 20 years ago.

So I'm trying to ask you to look out 20 years into the future and say, wow, what could be something as big as, say, the Internet that comes along in the technical field? And see, that four-year degree does not prepare you for that. Constant state of learning and staying ahead of it and taking classes and being part of groups and association and learning and reading and always be stretching. But, dude, if you think you're going to be doing what you're doing right now, 20 years from now, you're not.

It won't even exist. It'll be a laughable antique. And that's the beauty of it. That's wonderful. It gives you all kinds of upside and all kinds of opportunity. So, no, I agree with you. Get your certs and keep working. This is the Dave Ramsey Show. One question I get asked all the time is, do I need life insurance?

Listen, the whole point of life insurance is to replace your income for someone who counts on you. So if you have a spouse or you have kids, yes, you need term life insurance. It's the only way to protect them until you're out of debt and have built up your wealth. You're only digging a deeper hole if you waste money on cash value plans since it robs you of the ability to make real progress. And that's why I send you to Zander Insurance, and I have for 20 years. That's where I get all my insurance, and they only offer the plans I recommend. It is not expensive.

It's not complicated, and Zander will be there as your guide every step of the way. Visit Zander.com or call 800-356-4282. You need to get this taken care of. I can give you the advice, and I can tell you where to go, but it's really up to you to take that important step to get your family protected. That's Zander.com or 800-356-4282. Phil is with us in Denver. Merry Christmas, Phil. Welcome to The Dave Ramsey Show. What's up?

Hi, Dave. Merry Christmas to you and your family. Thank you. I have a question about 529 investing and strategy. I have a three-and-a-half-year-old, and I opened a 529 basically as soon as we got a Social Security number. And after capping out for my wife and I for four years now, I got about $130,000 in that account. And so moving forward, you know, the general feedback I get is I'm already bumping up against too high of a number. Maybe I should be putting it somewhere else.

And I'm not entirely convinced about that. Yep. I wanted to hear your thoughts on it. I would. I think you got enough. Because if you fast forward what $130,000 is going to be worth 15 years from today, if that's invested in good mutual funds inside that $529,000, you're going to have too much in there.

So you don't need to put any more in that. Because here's the thing. You can take the money out and use it for education, and that's all. If they get a scholarship, you can pull that amount of money out without any taxes. You can use the money for education without any taxes. But if you pull the money out for anything else, or unless you transfer it to a sibling of the child, then you're going to get taxed and penalized like you were taking money out of a 401K earlier or something. And, you know, at that point, you've got too much in there.

And, yeah, I think you probably do have more than enough in there. I wouldn't put another dime in that. So I guess the ancillary question is that right now it grows tax-deferred, and I'm at a pretty high tax rate at the moment. It grows tax-free. It does not grow tax. It does not grow. Compared to an alternative, if I had it in just a standard mutual fund. Right now, yearly, I'd be at a pretty high tax rate,

which may be 10% higher than what I'll be at, let's say, in 20 years when I'm pulling it out. And that's sort of the math. Why would your tax rate go down 20 years from now? Well, if I'm retired and living on my retirement savings at that point well i hope you've got enough retirement savings that your tax rate goes up uh if you build substantial wealth your tax rate will not go down because your income will be as much or higher just off of your investments than it is now.

And you're the kind of guy that's going to do that based on the kind of thing you're telling me here. So, no, I'm not going to play that game. Plus, you haven't paid off your mortgage yet, have you? I'll be paid off in about 14 months, but not yet. Until you've done that, we don't have a discussion. But, you know, what I have done is just stay debt-free, and I use a max-out retirement, and I put the appropriate amount in kids' college. We did not have 529s or ESA available 25 years ago, 30 years ago, when we were saving for kids' college.

But then from there, what you can do is two things or three things that i have done if you wanted to to avoid taxes you can buy low turnover mutual funds and uh an example that means they don't sell the stocks inside the mutual fund very often a low turnover mutual fund would have a five percent or less turnover ratio uh and so that means those stocks inside that mutual fund, that mutual fund value is growing tax deferred, capital gains wise. And when you pull it out, it's taxed at a capital gains rate if you've left it on one year, which would be less than your current tax rate or your future tax rate. So it is tax advantaged in two ways.

One, it's growing capital because if a stock goes from $50 to $70, you don't pay tax on that $20 until you sell it, right? Right. And that's what's happening with a low turnover mutual fund. So I've done some of that. An easy way to do that is just like a no-load S&P fund, okay? And that's not a big part of my strategy, but I have some in there. The second thing you can do is buy real estate that you pay cash for, which will, of course, do the same thing. It grows with tax-deferred growth because it's capital gains-type growth. You don't pay taxes on the increase in value of a piece of real estate until it sells.

And there was a third thing, and I lost it. But that's the two main things I have. Oh, as far as the kid goes, that was it. The third thing is you can put some more money just in the kid's name. And that's called an UTMA, a Uniform Transfer to Minors Act. And then that account's growth is taxed at the kid's rate, not at your rate. Gotcha. And so it is a lower tax there.

And for the first big block of money it makes, if you file and let the kid take their own standard deduction, you don't use them as a deduction, depending on which way works best in your tax planning, then you can actually grow that account quite a bit without paying a dime in taxes on it for the first big chunks of money that it makes. And so I actually did all three of those things because the UTMA was the only thing we had back in the day.

There was no 529s or ESAs. The UTMA is what you did for college planning. But all that is is opening an account in the kid's name, and you're the custodian of it. It's their money when they turn 21. You lose control of it at that point. And so we used to laughingly say, let the beatings begin. Yeah, you got to make sure the kid has got some character because you're getting ready to hand them a lot of money.

And if they're doing cocaine, you just finance their habit. So that's not a plan. But anyway, that's the three things that we did. And they were all tax advantaged and gave us a lot of flexibility because you end up with just a big pile of money, and then you can kind of do, you know, I can just take care of college over here if they want to go get a master's degree or a Ph.D. or something. You know, the ESA or the 529s run dry.

Well, you've got plenty of money. You just go over there and do it, pull it out of their UTMA, or you just, you know, pull it out of some of your wealth. But you're going to have plenty of wealth. You're not going to come up short. It's just a matter of how to keep the government's hands off of it. And one last thing on that, Phil, and I did a lot of what you're doing. I used to think you spent a lot of my time and effort, and I still do, by the way, trying

to keep the government's hands off of my money because it's my money and any legal way uh that that is proper under the code that i can any move i can make to keep their hands off of it it is my job as a good manager of the money for god to do that because sending the money to washington dc is not a godly activity and so i'm not doing that unless I have to by law. And so I spent a lot of time and I actually spent a lot of money now with tax experts trying to, you know, do whatever I can that's reasonable and smart. What you don't want to do in that discussion, and I've seen people do this all throughout my career, is you cut your nose off to spite your face. And what that means is you start making bad moves because they're good tax moves,

but they're bad economic moves. The economics behind the move don't make sense. And so you end up in bad investments or are trapped in some kind of a thing or you build this flow chart of companies that money gets trapped in, and you can really get yourself in a mess there. So don't spend so much effort trying to keep taxes off of wealth that you forget to build wealth. And people do that.

People do that all the time. I'm not saying you are yet, but guys that think like you and me, where we just hate sending money to Washington, we have a tendency towards making that mistake. And I have made that mistake, and I've seen people throughout my career of coaching people make that mistake a lot. They spend 90% of their time on taxation and 10% on wealth building instead of 90% on wealth building and 10% on dealing with taxation, which would probably be about the right ratio. So, yes, you want to be wise.

Yes, you want to be thoughtful. But don't overthink it to the point you put yourself in a bad situation. Good question, sir. Very good question. And I love where you are. Wouldn't you guys like to have your three-and-a-half-year-old already have $130,000 for their college? That's where he's sitting. I mean, what a stud stud that is very well done i mean that that's that college check box you know that one's done maybe step five over over and out right i mean i love it

that is so well played so well played hey guys you can do this stuff. People, that's one of the reasons. I love having people on this show that have messed up, like me and you and some of the rest of you. But I also like people like that on there. They're so studly. They got their crap together, you know, which says you're in your 30s. You can get your crap together. You can actually be like a grown-up in everything. Wow.

It's doable. This is The Dave Ramsey Show. It's time to take another look at your budget. That means scouring every expense and making sure you're not leaving any money on the table. One of the biggest expenses is your mortgage payment. I recommend a quick Churchill checkup. In just five minutes, our friends at Churchill Mortgage can tell you if you could save some cash each month. They've helped thousands upon thousands of my listeners

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That's 888-LOAN-200 or churchillemortgage.com. This is a paid advertisement. NMLS ID 1591. NMLS consumeraccess. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Janine is with us in Phoenix, Arizona. Hi, Janine. How are you? Hi. How are you, Dave?

Better than I deserve. How can I help? I have a question. I'm in Baby Step 2, and I have just over $39,000 left on a student loan. It was a master's degree to pay off, and my husband died two months ago, and he had, I've come to find out, about $40,000 in two separate retirement accounts. My question is, should I use, should I cash that in and pay off the student loans or continue just doing the baby step to enroll those retirement accounts into a Roth IRA account that I had set up prior to starting with Dave Ramsey? So what's your master's in? My master's is in education. My bachelor's was in business, and so I work in technology systems for education. What's your income? My income is 68.5. Okay. How old are you?

I am 46. Wow. What happened to him? It was like a culmination of he had severe sleep apnea. He was overweight. The men in his family have bad hearts. Usually at the age of 50, they get a pacemaker kind of a deal instead of a birthday cake. Wow. And so it just was, you know, one day he didn't wake up. I'm so sorry. Yeah, thank you.

We're just dealing with it day by day. So what is the rest of your, if you take this money out that is in his name, it's an inherited IRA. It will not be penalized, but it will be taxed. Yes. At your rate um let me preface too i'm putting in sixteen hundred dollars a month on my student loan so it'll be done and i'm trying to sell a few that like his car that we're not using that kind of stuff so my goal is to be done with it in 22 months if i don't take this out and um i take it there was no life insurance?

Because of his health issues, no. We did have, like with his work, some money set aside to pay for the burial and everything. There's not another pile of money here that we're not discussing? No, not at all. But we've paid off like almost $16,000. Yeah. No, like $160,000. I mean, we've paid over the last five years, we've worked our butt off. Wow.

And you're almost there now. Okay. We're close. I can see the end. Yeah. I think you're right. I think we work your 22-month plan that will probably end up being about 18. I think anywhere along there that you run into a major catastrophe, you can cash this money out and pay it off.

Okay. But I don't think you're going to run into another catastrophe. No, I have to. I bought my house from my parents. I mean, if worse came to worse, they would just say, don do anything for a little bit, and, you know, we'd make it up later. Okay. Well, you've got a good education. You've got a good career field.

You know, it's a real steady, real predictable environment in the middle of all this pain, and I think you can be the tortoise here and just trudge your way through it, which sounds like just listening to your tone of voice and everything, it sounds like your tendency is to do that. Yeah, we will. And you'll be fine doing that, but you always have that safety net that you can do this. I tell folks never cash out retirement to pay off debt because you have the penalty and the taxes. In your situation, you would not have a penalty.

You would only have the taxes. So just roll it into my Roth IRA or my regular IRA? It's called an inherited IRA. It would be a regular IRA because it's a traditional now, right? It's not a Roth now. No, I do have, like, from before we started doing this, I had a Roth IRA and a traditional IRA. Yeah, but the one that we're talking about of his was a traditional, right? Like one of his was in like a, it was in the state retirement system.

Yeah, yeah. It's not a Roth. No, it's just, it was like a 401k kind of a situation. We do not want to make these into Roths today because that will all become taxable when you do. Okay. So just move them to do a direct transfer rollover into a traditional IRA in good mutual funds. Sit down with a SmartVestor Pro. Click SmartVestor at DaveRamsey.com if you haven't gotten yours picked out yet.

I'll drop down a list of the people we recommend in your area that do the stuff the way we teach, and they'll sit down with you, help you do the rollover on those two accounts. It'll be called an inherited IRA. There is a mandatory withdrawal, but it's minor, that you gradually have to begin taking down an inherited IRA, but it's minor, and it lets most of it grow tax-deferred, and I would do that to avoid, I think I just want you to go ahead and be building your nest egg with that, if possible. And then, again, if you stub your toe, you have a problem,

you can reach over and grab that money without penalty, only with paying taxes, ordinary income on it, and use it to pay off this debt instantaneously. But today I probably wouldn't do that. I'm sorry you guys are facing this, especially during this season. My goodness. Thanks for calling in. Open phones at 888-825-5225.

Megan is with us in Cincinnati. Hi, Megan. Where are you? How are you? Fine. How are you, Dave? Better than I deserve. What's up?

So, me and my husband, we have no debt except for our home. Great. I'm in nursing school. Great. We have a two-bedroom duplex. We live in one side and we rent the other side out. Mm-hmm. So we have three children and, you know, we're kind of busting at the seams here at this point.

And I was wondering if you think it's okay for us to go ahead and buy our next home and use this as rental or if we should just sell and buy our next home. I'd sell it. Okay. Because you don't have the money to buy the next home in cash and I wouldn't be buying a rental while you own your next home until you were ready to do that with cash. And so let's take this equity and just move it to the next property by selling it and making the move.

And then, of course, never taking out more than a 15-year mortgage and never taking out a 15-year mortgage where the payment is more than a fourth of your take-home pay. Tessa's in Santa Rosa, California. Merry Christmas, Tessa. How are you? Merry Christmas, Dave. Thank you for taking my call. Sure. What's up?

I have been listening to you like crazy these last couple weeks. A girlfriend of mine mentioned your name, and I was super curious, and I want my husband and I to have financial freedom. We have a big pile of debt. Part of it is my student loans for my master's degree, truck payment, a fifth wheel that we don't even have in the state with us because we move from place to place. So it's really a sore spot for me.

And I'm struggling. I have a really special gift from someone that I lost a couple years ago. I received $50,000. And from listening to you, it seems that once we have that little bit of savings in place, to use excess savings to pay off debt is our next step. But I'm struggling with coming to terms with that because I feel like using it on stupid things that are so not important

and that person was so important to me is not the right thing to do. Okay. What would be the stupid thing you'd be using it on? Credit card debt, you know, my husband's decisions to buy things that, you know, we didn't need at the time or before we were married. I'm very conservative on spending. He is not, and it's something, you know, I've been working through,

and I had a challenging conversation with him, and, you know, I ordered your book, and I'm so excited to get it. I'm trying to get him to just be on the same page with me, and he says that he is and wants to work towards this because I know he wants our future to look better than what it is. Until he's willing to sell the fifth wheel and maybe the truck, I would not do this. Okay. Because I don't need his words, I need his actions. I know, that's how I

feel, and I come to terms with thinking about taking $20,000 to pay off the four big credit cards that we have, and one is mine, and I You're trying to halfway do something. See, the problem is not the debt, and the problem is not the gift, using the gift to pay off the debt.

The problem is, you can't see a future where your husband's not going to repeat the stupidity. Yeah. And you need to have that future cleared up, and the future's cleared up when we know he has transformed his art and has become a grown-up and has quit buying toys that he can't afford. I did that. When I was a, quote, grown man, I was a little boy buying toys I couldn't afford. And so I know who he buying toys I couldn't afford. And so I know who he is.

I know this guy. He likes stuff. He likes trucks and things to pull behind the St. Louis area dropped by. Hey, Sean, how are you? Hey, Dave, doing well. How are you? Better than I deserve. Your question, sir? Yeah, so right now where I work, I'm supposedly going to come into some more money. And currently I contribute to a Roth 401k as well as a Roth IRA.

And in 2019, I'm going to start contributing to those. However, if I do see a pay increase, I'm kind of questioning where taxes will work with that if I go over those thresholds. If you go over the thresholds, your Roth 401k does not have an income limit. I do a Roth 401k. There's an income limit. I do a Roth 401K. There's no income limit on your 401K. Your Roth IRA, when you make over $200,000, are you married? Yes. Okay, over $200,000 married, you're going to run into AGI.

You're going to run into limits on doing a Roth IRA, and you may have to do what's called a backdoor Roth. And the backdoor Roth, as long as you have an earned income, is not a big problem. And basically, I do one of those, too. There's no income limit on that. What you do is you open, instead of opening a Roth, you open an after-tax traditional, which you've already paid the taxes on it, no tax break on it, after-tax traditional, and then roll it to a Roth instantaneously. And so you can still get into the Roth.

It's not got the same exact rules as a Roth, except that it does grow completely tax-free. You can't pull the money out for five years, all that kind of stuff, like you can with a regular Roth, but we're not pulling money out anyway. We're investing long-term here. Okay. So what if I've contributed the money already throughout the year, and then I hit that threshold and I find out I can no longer do a Roth? You can reverse it before you file your return.

Okay. You just reverse it and work with your investment advisor. They can help you do the flip on it. You just pull it back out, then do a backdoor is what you'll have to do. But, yeah, you won't be able to leave it in there. You probably want to fix it before year end, not before filing. But by year end, you would know. You know, in other words, by this time next year, you're sitting there, you know, two weeks left in the year or something like that. And you look up and you go, hey, I'm going to be at 210.

I'm going to have to get out of this thing. Sit down with your advisor. They can reverse the paperwork on the individual Roth. Has nothing to do with your 401k. Your 401k, you don't have to worry about it. Okay. It's going to be fine. And then thek, you don't have to worry about it. Okay. It's going to be fine. And then the other thing, does your company match?

They do. Okay. And they match in non-Roth. They have to. And you can once a year in 99% of the companies, ran into one the other day, first time ever, that wouldn't allow it. But you can roll your matching portion into your Roth portion, and that creates a taxable event on that. But it all is Roth that way. So I do that every year.

I match myself since I own the company. Okay. And so then I have to roll that into Roth at the end of the year and have a little bit of an extra tax goes on to that amount of money because it's extra income. But that way it keeps it all Roth. It keeps it all Roth if you do that every year. It sounds like you're in a position to do all of that.

Right. Hey, way to go, man. Keep it up. Appreciate it. Everyday millionaire on the way, huh? You know it. Love it. Thanks for stopping by.

Thanks, Dave. Open phones at 888-825-5225, and we'll talk to you about your life and your money. Michael is in Sacramento. Hey, Michael, welcome to the Dave Ramsey Show. Hi, Dave. Thank you. How are you doing today?

Better than I deserve. What's up? So in about the last 14 months, my wife and I have paid off approximately $90,000 in debt. Woo-hoo! And we have, I know it's crazy and it's unbelievable, and we have about 140,000 sitting in our savings and 250,000 in 401K, 50 in a pension. And we started saving for our kids' college. We have one 17-month-old. And I just came across your show about two months ago, and I've listened to the

podcast religiously since then. And my plan before I came across your show was, do I continue our gazelle intensity and paying off our house as quick as possible and kind of stopping our retirement contributions? And if we do that, we could have it paid off in 28 months. What's the balance on your home? $358,000. Okay. And what's your household income? $250,000.

You're killing it, man. Good for you. What do you all do for a living? Thank you. I am a CPA on my own tax practice and work for a municipality in Sacramento, and she is a pharmaceutical cancer drug manufacturer. Woo! Wow. Man, awesome.

Very cool. Very cool. So how old are you two? Thank you. I'm 37. Oh, man, you got this on the run. I'm 38. Okay.

Well, I mean, you obviously have not only do you make a lot of money, but you're also paying attention, which is really incredible. Your intentionality with everything has been very, very wise, and that's what's gotten you where you are. If you used our system, which would just be a fine tune on the general principles that you're already following, then you would be debt-free other than your home, which was your $90,000 you paid off way to go, ding, ding. Then you would build an emergency fund of three to six months of expenses. So it sounds like we would earmark some of that $140,000 for that, correct? Yeah.

Okay, and then we would start putting 15% of your income towards retirement. We call that baby step four. Kids, colleges, baby step five and six is pay off the house. We do those three simultaneously, but in that order. And so what I would do if I woke up in your shoes, which is how I answer questions here, obviously you can do whatever you want. You're killing it. You're 37.

You're making $250,000. You're probably going to be okay because you're intentional. I think you're going to be fine. But if you worked our system, it's what I would do if I woke up in your shoes, knowing what I know, coaching all the thousands of people we've coached, tens of thousands over the years, I would put 15% of your $250,000 into good 401Ks, Roth IRAs, and good growth stock mutual funds, call that my retirement. I would earmark a little of the 140.

I wouldn't panic about it, but you might take 10 grand and throw it in a 529. Let's pretend and say we put 30 aside as our emergency fund and threw 10 aside for the 529. Now, we've kind of, I mean, a one-year-old is a long way towards a college already when you did that with compound interest between now and then. So it's a really good thing to do and let it put it again in good growth stock mutual funds where you're controlling it, that type of 529. That's baby step five. Six is I'm going to throw that other 100 at the house, and while putting 15% away, making 250, how fast can you pay off 250?

Because that's what's left if I throw $100,000 at your house? Probably, maybe not 28 months, but it might be 38 months or something. I mean, it's going to be very similar. But you will have really gotten started with a healthy dose of retirement investing. Okay. And that's the only fine-tuning to what I'm doing. If you choose to say, you know, for two and a half years, we're going to touch over two years, we're not going to do retirement because we're just going to knock this house out. That's certainly not on the dumb list. That doesn't put you on Santa's naughty list. I mean,

you're going to be fine doing that. I just like getting you started and you still, it doesn't change the end game that much when you actually run the math out. It's such a philosophical argument in your head, though, that it feels like it should, well, instead of being 28 months, it'd be 28 years or something. You know, it's not. It's going to add six months or something to the equation when you run all the numbers out. So knowing that, I'm going to go ahead and get started doing my baby step four and do four, five, six simultaneously, and that's how I would play this out. But, dude, you're a stud. You're killing it. I'm proud to go ahead and get started doing my baby step four and do four, five, six simultaneously.

And that's how I would play this out. But, dude, you're a stud. You're killing it. I'm proud of you. Very, very well done. I mean, you got this thing going. And, you know, I mean, you're a CPA. You obviously know how to run the numbers.

But a lot of CPAs can run numbers and can't control their family's intentionality because your wife's a salesperson, and she makes a lot of money. And so you're doing good stuff as a family. You really are. Very, very well done. Oh, I love talking to people winning. That's got to be the theme this hour. We've had some winners on today. That's good.

I don't mind talking to you if you're broken and broke. I've been there, too. I'll help you either way. But we've talked to some people that are, I love talking to me, 27 years old, 32 years old, 37 years old, making six figures, out of debt, saving money, taking care of their kids. These are like citizens. These are citizens. They didn't call me up and go, I sure hope the government fixes my life. I'm waiting on Donald Trump to send me a check. You're going to be waiting a long time. He ain't going to send you a check. You know? Any more than Barack Obama did. Turns out it's not their job to

send you a check or fix your life. And you're doing a good job out there fixing your own life. Thank you. Well done, Americans. I like it. Well done, Americans. I like it. Not Americans. Americans. I love that. This is The Dave Ramsey Show. Hey, guys.

This is James Childs, producer of The Dave Ramsey Show. I'm excited to announce that we're now carried on 600 radio stations across the country. To find one near you, head to DaveRamsey.com slash show.