The Ramsey Show - App - Is It Time to Move Out of My Parents' House? (Hour 3)

Episode Date: June 7, 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. I'm Dave Ramsey, your host. This is your show. Thank you for joining us. Open phones at 888-825-5225. Erin starts us off this hour in Cincinnati. Hi, Erin. Welcome to The Dave Ramsey Show. Thanks so much. How are you? Better than I deserve. What's up?

So, I just finished my freshman year at a regional college campus. And I'm currently getting through school debt-free and I have about $16,000 in my savings account and I'm working throughout the year and I make around $1,000 or $2,000 a month and I already know that I'm going to get through school debt-free and I'm just looking to invest and save. I'm really interested in saving for a tiny house once I graduate, and I want to pay for that in cash. And I'm just trying to figure out when the right time to move out is because I get along with my parents fine. They're great, and I enjoy being there, but I want to learn independence before possibly getting married and um i'm debating whether i want to move out by

my 21st birthday or if i want to stay home and invest my money and save up for a tiny house and be able to pay for that cash once i graduate in three to four years wow you're on fire thank you how old are you um i'm 19 okay all right well, I suggest after college that someone moves out of their parents' home as fast as possible. But while you're in school, to ensure that you graduate debt-free and pile up some cash, and especially since you're telling me there's no toxic problem with your parents or anything, I would stay there, and I wouldn't begrudge one of my children having lived with us while they went to college, were they going to college in the same town and so forth, which ours didn't.

But I wouldn't begrudge that. Now, after school, they're going to be on a pretty short leash. I'm kicking them out. Yeah, right. Because, you know, there's no trouble kicking you out. You're ready to fly. Yeah. But I think it's not a bad thing at all.

It's a good environment for you to be in, and it's a good financial move for you to be in, and it's going to increase your ability to hit your goal of buying a home and other things. You know, if by the time you get to your senior year, there's just a huge pile of cash and you want to move out and rent an apartment and have a roommate for the last year of school or something, I might look at that, but I'm not concerned that you do that. I don't think you've stunted your emotional growth. You're not the 32-year-old living in their mother's basement, okay?

That's never going to be you. It's just not who you are. It's not the way you're wired, and it's not the way you were raised, apparently. So congratulations. Very well done. Thank you. I like every... And do you think investing...

Go ahead. No, you go ahead. I was just going to say, I mean, do you think investing at 19 years old is too early? Do you think having the money that I have, like I should start investing now, or should I wait? I would wait because I think the best investment in the world right now for you is Aaron. And, you know, you paying cash for school without any debt and having extra cash to make sure that that happens. If you come out of college 100% debt-free and you've gotten a degree in a field that actually has some marketability, meaning you have a career field that's reasonable, you have made one of the best investments you can make.

And that's not a philosophical statement, although it is that, but it's a practical statement. What I mean is this the amount of money that you're spending on school or that you're putting in a savings account to ensure that you go through school debt free had you invested that in a mutual fund it would not have given you as much money in return as that education will give you in return assuming you're studying something that is actually applicable. Yeah. Okay, that makes sense. By the way, what are you studying?

I'm double majoring with special education and American Sign Language interpreting. Okay. And so you intended to do what? I'm not quite sure yet. I'm thinking I want to be a teacher for kids with special needs and maybe interpret on the side. I haven't quite figured that out yet. Okay. But you have a heart for people with special needs, obviously.

Both of those things point to that. Very cool. Yes. Very cool. Very neat. Good. The only thing I might challenge you on, and you've got some time to think about this, you don't have to decide today, is i'm concerned about the little house movement or the small house movement or whatever you call it um because i think you're going to be fine to be able to buy a more traditional home

the the little house movement also has a very little market and anything that has a little market does not appreciate and value like things that have a big market not a lot of people people want to buy them, and if not a lot of people want to buy them, they're not going to go up as much as things that a lot of people want to buy. And so I personally have not made any investments in that, and yet I have a ton of real estate investments. But you've got two or three, four years to think about that idea and kind of see how I might be proven wrong during that period of time. I won't be, but I might be.

So you check that out. Hey, way to go, kiddo. I think you're killing it. You're a rock star. Jason is with us in Omaha, Nebraska. Hi, Jason. How are you? Good.

How are you, Dave? Better than I deserve. What's up? Yeah, I'm calling. My wife and I, we've been trying to figure out what to do with, we have rental properties, and overall it's going well, other than the fact that we do have mortgages on all of them. And we actually kind of live in one of them, one of them is a duplex. And so we're just trying to figure out what to do.

Other than the mortgages, we are debt-free. How many properties? Six. Six, Six. Okay. And how much do you owe on them total? We owe $635,000. Total.

And what are they worth total? About $1,045,000. Excellent. So you have about 65% equity position or debt-to-value ratio. And what's your household income? We make about $125,000 together. And how old are you? I am 34.

I'll be 35 this year. And where do you want to be with these rental properties by the time you're 40, debt-wise? Debt-wise, well, we're trying to figure if we should sell a few of them to pay a few of them off. It's kind of hard because they're all cash flowing. So it's like we don't necessarily want to make the wrong decision. We just want to be wise in what we're doing. I think realistically in seven years, with being aggressive, we can have most of them paid off. That's $600,000 making $100 a year doing $600 a year.

I mean, I'm sorry, you're paying off $100 a year and making $100.25 a year. I'm not sure how you're doing that. Well, we live in a way pretty frugal. No, you missed my point. You're making $100.25. You can't pay $100,000 a year in debt off. Okay. You can't do it. I mean, you don't even have $100,000 a year in debt off. Okay. It doesn't matter.

You can't do it. I mean, you don't even have $100,000 left after taxes. No, that's after taxes. That's essentially what we're calling it. Oh, okay. Well, still, you're not going to live on $25,000. I wouldn't. So I'm with you. I'd want to keep the rentals.

I probably would pick, you know, out of the six, I'd probably pick the three or four I like the best for future appreciation and cash flows and the neighborhood and so forth. And I'd probably sell either two or three to advance my debt freedom on the balance of them. If I were in your shoes, that's probably what I would do. And that'll put you out of debt probably in about four to five years if you do that, depending on how those equities are spread out. Hey, business leaders, are you hiring, posting your position to job sites, and waiting and waiting and waiting for the right people to see? Well, you need ZipRecruiter.

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We're glad you are here. It's all about you. Joshua is with us. Joshua is in Colorado Springs. Hi, Joshua. How are you? Hi, I'm vertical and breathing, Mr. Ramsey, and I already know how you are, so we can skip that question. Cool.

How can I help? Yes, sir. So last year, I'm actually active duty military now stationed in Fort Carson. Last year, I broke my motorcycle, and I'm about to get a settlement for about $900,000, and the insurance company wants to put me into a structured settlement, and I'm thinking I might want to go the other way and try to invest the money with my investment professional. You broke your motorcycle? Well, an SUV was involved and a drunk driver and a few other things, so that was a thing.

Okay. Because I was thinking, a broken motorcycle, $900,000. Okay. Yes, sir. It escalated quickly. So messed you up bad? Yes, sir. I broke 18 bones, 6 plates, 45 screws, 8 surgeries.

Wow. And you're still in the military? For now, sir. I'm actually going through the medical retirement process at the moment. I'll be a civilian in about four to six months. Okay, cool. So how are you doing on your physical? Are you healing?

About as good as I'm going to get, sir. I walk with a cane. I've got some limited range of mobility in my wrist and knee. But other than that, I'm doing way better than I should be, and God's grace alone. Amen. So what are your future career plans? So I am looking at a job with a government agency, and they're looking to pay me about $85,000,

but they can only really offer me that job once my disability ratings come back because I have to be a non-competitive hire so it has to go into that process but i should do pretty darn well working for them okay sounds like and um the reason i'm asking the reason i'm asking is that means you don't need any of the 900 grand you can live on the 85 i assume very very easily sir if you can't live on $85,000, you have serious problems. You are something else, man. I love it. Oh, what a great outlook.

Okay, so what I would do is sit down with an investment professional and have them actually crunch the numbers with you versus the structured settlement. I'm with you versus the structured settlement um i'm with i'm with you i'm gonna 90 chance say you can whip them using good i actually already talked to my guy okay he analyzed a three percent average internal rate of return on the structured settlement uh-huh and three percent is really bad yeah that's what i thought so i could outperform that with my mattress. I think you're right, just about. You can outperform that at a bad bank. And so, yeah, I'm with you. Take the lump.

Some. And that way you're in control of the money and they're not. Yes, sir. And that gives you the ability to do a lot of different things. Obviously, the money is invested well, creates a lot better rate of return minimum, number one. But number two, you've got access to it to do some other things with to enhance your life in other ways if you wanted to.

And not to waste the money or something like that. I don't think you're that guy with everything else we've been discussing here. I would hope not. But if you did take maybe that $900 in about seven or eight years is probably $1.8 million, maybe $1.9 million. It should double. And maybe you pull $100 out then if you wanted to start your own business or something. Or maybe you wanted to buy X or Y or Z that's $100,000. Then you could do that.

I do have somewhat of a plan. Okay. So $100,000 is going directly to an orphanage in the Congo that my family's been supporting for years. So that's tied out the side. I'm splitting the rest 50-50, I think. One half I'm going to try to buy some multifamily residential, and the other half I'm going to send directly to my investments and leave that alone. So one half is going to become its own LLC and do its own thing, and the other half I'm just

going to invest and leave, and it's going to become my future. But the multifamily, you're doing debt-free? absolutely sir i'm debt-free now i've been listening to you since i was 12 i read the total money makeover at 10 my family would kill me if i did this with debt after all of that i would too so there you go works for me sir you you're yeah i'm i'm with you i love your plan enjoy it uh you i'm sorry you've been through all the pain um but uh this is the this is the recompense for it so well done wow and thanks for serving your country by the way we appreciate you wow what an incredible that's exactly what you do right there you know you hear people get lump sums and they fritter it away, they blow it.

This guy's got a plan. Did you hear it? He gave some, he invested some in mutual funds, and he put some in paid-for real estate. I don't think I could have designed anything any better. Well done, sir. Very well done. Open phones at 888-825-5225. Annette is in Phoenix, Arizona. Hi, Annette. How are you? Hi, Mr. Ramsey. I'm doing well. Thank you. Thank you for taking my call.

Sure. I wanted to go over, my husband and I are considering, seriously considering selling our home, but I wanted to get your opinion, your advice on this. Why are you selling it? Okay, yes. So we currently own our home. We owe $180,000 on it, and it's worth about $350,000. And we have $95,000 in debt. The majority of that is student loans. Both my husband and I have student loans, and we have about $15,000 in a car loan. And so we were considering selling our home,

taking the equity from our home and purchasing, downsizing and purchasing a home almost cash, just having a really, really small mortgage loan, a super tiny mortgage payment so that we can get out of debt faster, including the loan on our home. And so there's a number of different reasons why we want to do that, but I just wanted to make sure that that made sense, that we sell our home, we downsize, we take our equity, and just really try to plow through as quickly as we can on getting out of debt and living debt-free. What's your household income? It's about $150.

And what are the number of different reasons for doing that? I don't understand. Yeah, so a couple of years ago my husband had open-heart surgery, and right now he's a principal at a school, which he absolutely is passionate about his job, and he loves what he's doing, but it's a high-stress job. It's 12-hour days. He leaves the home at 6, comes back at 6. So if he considered doing something else, and he's right now going through the diaconate program to work full-time at our local church, that really

doesn't come with a salary. It comes with a stipend, and I support him 100% on that venture, but we have three young children, so volunteer work really doesn't fit into our budget with three young children. So looking forward, and I would love to teach full-time at a community college or a local university, which that pays well, but again, not enough to sustain our current lifestyle of having three young children. But just looking forward, you know, if I wanted to take that out. So you'd rather hit those career goals than live in that house? We love our home, but I love the idea of being debt-free and being able to have the freedom to do what we want with a career choice.

Absolutely. Well, I mean, the thing is you can pay off $95,000 making $150,000 in three years and keep your home. Right. That's okay with me. That would be a normal track for a Dave Ramsey listener. That's what we would hear all the time. That's very doable. And then I would just, what I would do is set that, you know, let's be debt free in

three years and keep the house. And I would set that as choice, as one of the choices. The other choice is the downsize. And the only reason for the downsize then is not debt freedom because you're going to be there in three years. The only difference is that you're going to be there three years or two years sooner. And him moving into a career that is yet not really a career is not a plan. So we've got to have a way we're going to get to where we're going and a reasonable way to get there. Is it worth the two years gained here? And then where are we going to end up?

Because I still didn't hear how your kids are going to be fed. Being a deacon is not going to feed your kids. It's a good calling, but it's not going to feed your kids. For years, I refused to endorse any company that claimed to get people out of timeshares. I told my listeners it's a horrible product and that, unfortunately, they didn't have a lot of options. Then a few years ago, I sat down with Brandon Reed, the owner of Timeshare Exit Team. Brandon walked me through the timeshare industry, and I learned that you can't sell them, and you can't even give them away. And then we talked about Timeshare Exit Team's process.

Every ownership situation is different, which is why they have more solutions than any other company. And that's when they earned my respect. Don't call any of the imposters out there, and there's a lot. The only timeshare exit company I stand behind is Timeshare Exit Team. They have exited thousands from their timeshare burden this year alone. Yes, you will write them a check, but they stand behind their guarantee. They will get you out, or they'll give you a full refund. Call 844-999-EXIT online at timeshare from Blinds.com.

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only in my 30s, but my parents are getting older. That generally happens. My siblings and I are looking into purchasing long-term care insurance for one or both of them. I know you say that everyone should purchase long-term care insurance at 60, but if a person is in good health, would waiting until closer to 70 be a good idea? Additionally, does it actually cover everything needed for long-term care. About 70% – if you get a good policy, it covers in-home care as well as nursing home care. And about 70% of the policies right now, the claims that are going out are for in-home care.

And so that covers, quote, unquote, everything. Now, it doesn't cover your medical. It covers the nursing home or the in-home care that's the equivalent. And so, you know, that's what it does cover. Now, typically, most, you know, very few people spend very much time in a nursing home, and most of these policies cover only about three years, which is plenty, to be truthful, because of the way the thing is set up. It just doesn't, you know, the average time spent in a nursing home is 2.4 years, and they cover three years.

And the percentage that stay longer than three years is only a fourth of the people. And so that's what you're looking at. And so you want three to four years, maybe five years in coverage. You want an in-home care type of a benefit. And most of these are a $3,000 to a $5,000 per month benefit. And that's what they cover. So does it cover everything? No. If you sign up for a a six thousand dollar a month nursing home and you have a three thousand dollar benefit it doesn't so you know you pick a nursing home or in-home care that is within

the amount of coverage and that's what it does so if you want to learn more what you need to sit down with a good independent agent that will shop among several different companies and get you the best deal and no i would not wait until 70 if there is a need once they're 60 if people can afford it i don't want you to starve to death i don't want you going into debt i don't want you not paying off debt or something like that because you're buying a long-term care policy for your parents. But, you know, learn about it, look about it, don't panic about it, but I would not wait until 70. It's not a better deal if everybody's healthy because that's not generally the way the thing works.

So the statistics are 75% of the ladies will outlive their husbands. And so the normal scenario is papa goes into the nursing home they've saved three hundred thousand dollars and he burns it up dies mama's left with no money and if you don't have long-term care insurance that's what you're left with that's the normal scenario so that's why you get nursing home insurance but the good news is again the average stay is 2.4 years that's the average stay and um you know you can learn more about it at davramsey.com just click on elp for long-term care insurance and that you meet with somebody in your area sit down talk to talk to somebody. They'll shop, help you find it, and learn, learn, learn, learn, learn, learn. But that's the basics.

And some of you need to – there's a weird thing about nursing homes that people have. It's strange in their minds. There's two things that are weird. The thing one that's weird is they say, well, you know, we've got to move all daddy and mama's money out of their name because the nursing home is going to get it all. Well, that's weird for several reasons. One is it kind of says that you don't think that nursing homes deserve to be paid.

You go to a restaurant, eat their food, you expect to pay the bill. You go to a car lot and leave with one of their cars, you expect to pay for it. Why is it you don't think you pay for a nursing home? A nursing home took all our money. No, you bought their services. They didn't take all your, you know, it's funny how people, the words they use to describe nursing home care. And by the way, you can't move money out of mom and daddy's name in order for them to get government-provided nursing home care. Government-provided nursing home care is welfare.

It's for poor people. And if you intentionally make someone poor who's not poor by moving the money out of their name, that's called fraud. It's called welfare fraud. And the government has the ability on Medicaid-provided nursing home, which is welfare, to look back five years and see if you move the house out of their name, move the money out of their name in order to qualify.

That's like saying, I'm not going to work so I can get food stamps. Or I'm going to go get a job, and I'm not going to report my income so that I can get food stamps. That would be called fraud. Fraud, criminal activity. You get the idea? So, I mean, but somehow when it's with a nursing home, people who would never take out welfare in a million years

try to arrange a way to get welfare that they're not due, and they would never think about it that way they just think that somehow like the nursing homes are like walking around with a vacuum cleaner sucking up people's money like mysteriously stealing from you now listen they don't take your money unless you take their service a restaurant doesn't take your money unless you eat there and a car dealer doesn't take your money unless you take a car from there. It's the same way. It's a purchase of a good or a service is all it is. That's the process that you're facing. So that's the thing to think about as you're looking at nursing homes. So long-term care before age 60, I do not recommend it. I'm 57. I do not have it. I do not recommend it.

The percentage of people who spend time in a nursing home is less than one-half of 1% prior to age 60. And I would not insure that. But after age 60, the numbers go up every second. It's crazy how the statistics change on that. So, hey, business owners and HR professionals, you can listen up. We know you're always looking out for your team and that you want to do things to help your team. Well, did you know that the most common way your employees learn about retirement, which is the key, 401k, which is the key to becoming a millionaire, is from their employer.

And that's why we created our program called Smart Dollar. It is the best financial wellness program on the planet for your team. Major companies all over America are running Smart Dollar right now because they see their 401k contributions go up. Borrowing and cashing out on the 401k go down. It heals the 401k, and the team is really blessed by it. It's based on the money principles that we teach, specifically designed for the workplace. The program's accessible anywhere on any device at any time, and it includes every dollar plus for your employees.

You can't beat that. If you can set your team up to become an everyday millionaire, and you hold one of the key ingredients to do that, and that's the proper use of the 401K and getting out of debt and being on a plan. When people are becoming millionaires because they work for you, how rewarding is that? Smartdollar.com slash blueprint. Speaking of which, Ron is on Twitter. Should I contribute to my 401K with company match or put that same amount towards my mortgage?

Ron, what we teach people are what's called the baby steps. And baby step one is $1,000 saved. Two is debt-free, everything but the house. Three is three to six months of expenses set aside for emergencies. If you're there, that's when your question would come up. Baby step four is put 15% of your income into your 401k. Five is save for your kid's college. And six is any other money you can get your hands on and throw at the mortgage.

So to answer your question, I would contribute 15% of my 401k, which will to my 401k, of your household income. And that gets you the company match in almost every case. And then any other mortgage, any other money we can squeeze out of the mortgage, any other money we can squeeze out of the budget goes to the mortgage. This is The Dave Ramsey Show. I get asked all the time, when in the baby steps is the right time to buy life insurance? My answer is typically now. Life insurance is not part of the baby steps because it's needed when your family has debt and not

enough savings to provide for their financial needs. That's when they're at the highest risk. And no matter where you are in your baby steps, it's a necessity, not a choice. This includes working husbands and wives, as well as stay-at-home parents. It's pretty expensive to replace those stay-at-home parent responsibilities. I only recommend term life insurance since it's the most affordable way to get the right amount of coverage and not break your budget. Go to Zander.com or call 800-356-4282. These are the guys I personally use. Term life insurance is inexpensive and your family

needs this no matter where you are in your baby steps. That's Zander.com or call 800-356-4282. Zander.com. Our scripture of the day, 1 Peter 4.10, As each has received a gift, use it to serve one another as good stewards of God's very grace. Susan Blow said, to each man is reserved a work which he alone can do. Sam is with us in Tulsa. Hey, Sam, welcome to the Dave Ramsey Show. How are you doing today, Dave? Better than I deserve.

What's up? Well, I'm working with my employer and I also have a side business and I'm looking to figure out if I should continue my education and move up in my company or just take my side business further. How old are you? I'm 30. What do you do for a living now? I'm a welder and I'm looking to become a welding engineer. Okay. And your side business is what? A lawn service. Okay. So you said you're how old again?

30. So when you're 50, what do you want to have been doing for the last 20 years? Honestly, I think about doing them both. It's like it's a conundrum to me you know like i make good money with my lawn service but also like the aspect of the welding the welding world so i'm i mean today you like them but i want you to look a little bit further out i get that uh but, really, what do you want? When you're my age, I'm 57, what do you want to look back and go, that was a good career decision. I was fulfilled.

I'm glad I did that. I like running my own business. All right. There you go. That answers your question. Okay. It might be that you run your own business welding. Yeah.

I mean, yeah, that makes a lot of sense. Is it running your own business, or is it cutting grass? I like being a business owner more than just the cutting grass. Cutting grass, it's nice and all, but I like it. Yeah, the reason that's appealing is because you're the business owner, but the actual – I would finish up your education and become a top-line welder with the idea that in five years I'm going to open my own shop. Okay. I think that's where you're going.

That's great. And let me ask you this, too. The type of welding that you're doing now and you'd be doing for the next five years for someone else, would there be an opportunity to do that without a conflict, without stealing from your employer, in other words, to do some side hustle welding? Yes. Yeah, let's do that instead of cut grass. Okay.

And the side hustle then grows and grows and grows to the point that when you step out of your quote-unquote job into the side hustle you won't even notice because you're making so much money on the side hustle okay yeah because that's what i was leaning toward because my lawn service is taking off in such a manner that i'm just like wow making money for myself is a lot better than working for somebody. I agree with you. I've been self-employed my whole life. I wouldn't know how to do it otherwise. And if you're that kind of person, you're that kind of person.

There's nothing wrong with either kind, but if that's who you are. So here's the thing, okay? I want you to write down somewhere and put it where you can see it that at 35 years old, you're a self-employed welder. Doing something high-tech, high tech high end where you're making serious bank not grunt welding yeah i agree okay you see you know you know the difference right yes sir making some bank and you're in high demand and they need you because of your specialization and your particular skills because you're at the top of your game. Yes, sir. So my next question is, me and my wife, we bring in probably roughly around $100,000 a year, and we have about $30,000 left in debt before we get to baby step number three.

Is it like, should I space out my becoming, building up my side hustle, or how should I do that in terms of baby steps? Well, you're going to clear that 30 very quickly. The side hustle shouldn't be a thing that costs you a lot of money to get started. You may have a little bit of equipment costs or something if you want to invest a little bit, but I wouldn't invest more than $5,000 or $10,000 in kicking the side hustle off. And, you know, you've got the lawn business running. Let's run that for a little while and get out of debt.

Use some of that money then to create the welding, you know, to cover any costs of the welding side hustle. But, again, the idea is that we're systematically going to get that going and build that business very intentionally so that that boat pulls up next to the dock and you just step in when you're ready to change from working from someone else to doing your full-time self-employed welding business. Very cool. Very cool. Good for you. Hold on.

I'm going to have Zach send you a copy of our book Entree Leadership, which is how I grew this business from a card table in my living room to where it is now. We'll show you how to do it, man. Thanks for calling in. Patrick's in Macon, Georgia. Hey, Patrick, how are you? I'm good, Dave. How are you? Better than I deserve.

What's up? Good. Hey, got a quick question for you. My wife and I just moved about $23,000 from an old employer's 401k, and we moved it into a traditional IRA with one of the smart investors. He recently left it up to us to say we can leave it there in the traditional IRA or pay the taxes and move it to a Roth IRA. We just want to know what the best move is to pay the taxes now at a higher tax bracket or wait until retirement to pay those taxes.

It's better to do it now, but only if you're debt-free, have your emergency fund in place, or putting 15% of your income into retirement and have some extra money above that. Yeah, we're all set there. I have my own 401K and own Roth. We just didn't know what to do with this one. You got some extra money then?

Yeah, that's correct. We're not cashing out any of this money to pay the taxes, so what's the balance on this rollover? $23,200. Okay. And so you've got an extra $5,000 laying around then? Yeah, they'll withhold it and pay those taxes at the end. Who will withhold it?

It's with the same investor from the traditional IRA to a Roth IRA. No, you misunderstood. I do not want you using any of this IRA balance to pay the taxes. Okay, so unless we have that cash on hand to pay the taxes, that's a safer... That's what we're talking about. Because effectively,

mathematically, what we just did when I do that is you just invested another five grand into your IRA. That's right. That's right. Okay. But if you cash it out, it's a zero-sum game because the amount you take out to pay your taxes would have grown to enough to pay your taxes. That's right, at the end of the term.

Exactly. So it's a zero-sum game. There's no gain in this unless you pay taxes with extra money, which creates the same mathematical effect of additional retirement investing. So that's what I would do. But only, again, if you're out of debt. It sounds like you are. You're in Baby Steps 456, and that's when I would look at doing that.

And I think if you scrape together that $5,000, and you don't have to do it this year. You could do it next year. But, yeah, I would do it in the next 24, 36 months with cash out of my pocket. Good question. Thanks for joining us. Teresa's in Dallas. Teresa, we're short on time.

Go straight to your question. I was just trying to figure out how to know what is the right amount to spend on a new-to-me car when I happen to buy one sooner than expected. Okay. How much do you have in cash? So I have about $10,000 set aside, but I probably have an overfunded emergency fund, $40,000, that I could use some of. So what's a proper emergency fund? Probably $30,000. Okay.

So you've got $20,000 for a car. What's your household income? $160,000 for a car. What's your household income? Okay. What's the car you're driving, and what's wrong with it? It's a 2011 Buick, and I think I blew the turbo yesterday, so it's probably going to cost like $2,000 to fix, and Kelly Blue Book says it's worth $4,500. Agreed.

I'm with you. Okay, so how expensive a car are you thinking of buying? I was thinking somewhere in the $15,000 to $20,000 range is proper, but I have a 45-mile commute each way to work. I'm with you. I like it. $15,000 to $20,000 sounds about right to me. Is there a particular type of car in that range that you recommend for reliability for that kind of distance?

No. Whatever you drive, because of the miles you're putting on it, you're destroying it. I know, right? In value. So just keep that in mind. And, you know, you need something that will, you know, stand up to the commute. But whatever, you're just burning money with that level of a commute. And that's okay.

It's just part of your life. It's where you are. So just admit that when you're buying the car. So you don't want to buy a $35,000 car because you're destroying it. But a $15,000 will do. You're making $160,000 especially. That puts this hour of the Dave Ramsey Show in the books. We'll be back with you before you know it.

In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, it's Kelly Daniel, Associate Producer and Phone Screener for The Dave Ramsey Show. Did you know that in 2017, Dave Ramsey Show listeners paid off $50 million of debt? That's pretty impressive, and it could be you this year. Keep listening for more inspiration. There are few things in this world that irritate me more than when people pay too much for their mortgage. So many of you are paying way too much and you don't even know it.

I've got my good friend Mike Hardwick with Churchill Mortgage here. Mike, how do you help these folks? It's unbelievable, Dave, how much people can save if they just make a simple call. We've helped thousands of your listeners save hundreds each month or take years off their loan, helping them to save thousands of dollars in interest over time. Folks, do yourself a favor. Make a quick call to Churchill Mortgage today. I'm telling you, if you're paying a mortgage, you're potentially throwing money away that could be piling up in your savings account. It's

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