The Ramsey Show - App - Is Traditional Investing Still Safe in Today's Economy? (Hour 2)

Episode Date: February 8, 2019

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🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studio, 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 am Dave Ramsey, your host. We appreciate you calling and being part of the program today. It's 888-825-5225. If you were with us earlier in the week, we made a big deal about converting the studio to the Dollar Car Rental studio because our friends at Dollar Car Rental heard our cries.

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I love these people. I love the fact that they've done this system-wide just for you guys. They are so convinced that Dave Ramsey listeners are going to flock to a dollar, that they're doing everything they can. They've even got a special Dave Ramsey tab on their website now. As a matter of fact, if you want to make it even better, go ahead and go to dollar.com slash Ramsey and join their Dollar Express Rewards Club. Doesn't cost a thing to join.

Even if you're not going to travel right now, go ahead and get it done and be part of the Dollar Express Rewards. And then what you do is when you walk up to the counter at the dollar car rental you just keep walking and you go out of the parking lot and you get in the car and you use your debit card there and you drive away how fun is that yeah go straight to the parking lot i love it this is how it works they've got convertibles they've got premium they've got luxury cars they've got the cheap cars they got the nice cars they got cars lots every car i mean it's amazing it's a wonderful company as you know they're a subsidiary of hertz and we have been thrilled to work with their team they heard me griping about it one day. They called us and said, we want to help. And we said, we want to let you.

Love it. So Dollar Car Rental. You will take your debit card there now, and they will accept it. And if you do the dollar.com slash Ramsey and join the Dollar Express Rewards, be sure and tell them you're like a Dave Ramsey tribe member, okay? Because they want to know this, and there's going to be some other stuff coming. I can't get into all of it right now, but there's some other cool stuff coming. This is just the start of it.

These people are up for this. They got the memo, so it's good stuff. Philistine starts off this hour in Raleigh, North Carolina. How are you? Hi, Philistine. How are you? Hi, Felistine. How are you? Hi. How are you, Dave?

Better than I deserve. What's up? Thank you for taking my call. I attended your event this past week and actually won $25 because I knew the car you use in your slogan, which is BMW. Ha ha! Look at you. So you're there with Rachel and Anthony.

Yes, they're awesome. Yeah, they said you guys were awesome. They said you were the best audience they've seen in a long time. Raleigh was on fire. Thank you for being there. How can I help today? I have a question. I'm trying to decide what insurance.

I have a whole life, and I know I need to get rid of that. So I've already gone to Zander, and I looked at their rates. But I was also looking at an option about getting an insurance that pays off my house in the event that I pass. I'm single, no children, but I still want to leave it to someone. So until I pay it off, in the meantime, what would I get? Like this one has a rider, and it's $100,000, and it has a rider for like chronic illnesses and like kidney failure and cancer, that type of thing. And then, of course, the one for Zander doesn't have that. The one that has the rider is for $100,000, and it's $174 a month.

And, of course, Zander is like $41 for $ 41 for 125k so here's the thing mortgage life insurance plus or minus the gimmick rider is usually about five times more expensive it sounds like in your case it's four times more expensive four and a half times more expensive for because really all you're getting is term insurance because really kidney failure i mean seriously you're gonna do you have health insurance i have insurance for my job i also have like a whole life when it's like 75 i got that i got that i am i got that part but i'm saying all this gimmick crap on the side is covered by your health insurance if you get kidney failure you don't need you don't need your house paid off. You need your kidney paid off. You know, that's health insurance.

And so that mortgage life is gimmick, and it's four and a half times, in your case, more expensive. No, I would not spend $175 instead of $40. If you want to buy a small-term policy from Zander to make sure your home's paid off as a single lady in the event of your death, I would do that. That's fine. Forty bucks, it's not that much. You're not dropping a ton of money in it. And, you know, yeah, go ahead and do that if you want. But, no, I would not buy mortgage life insurance.

The only case I would buy mortgage life insurance is if someone is uninsurable. They can't get insurance because of medical. And most of those gimmick mortgage life policies will issue without a medical. But they're four to five times more expensive, as is the case at this one. Now, I would just get a simple insurance policy and make sure you have your health insurance in place, and let's save all that money. Roberta is with us in Austin, Texas. Hi, Roberta.

How are you? Hi, Dave. Thanks for taking my call. How are you? Hi, Dave. Thanks for taking my call. How are you? Better than I deserve. How can I help? So I just started listening to you this week, and my husband, he's very pessimistic about the state of the economy,

so he's very afraid of investing in traditional ways. So I feel like we are losing the opportunity of saving and investing a lot of our money. So how can I help him understand that it's okay to invest traditionally? Well, one way you can talk it through is this, okay? Traditional investment in good growth stock mutual funds. Now let's talk that through for a second. good growth stock mutual funds now let's talk that through for a second a growth stock mutual fund has got 90 to 200 stocks in it and it's companies that sound like mcdonald's coca-cola apple general motors ford and so on okay for that

entire portfolio of stocks to become worth zero the economy didn't just crash our entire portfolio of stocks to become worth zero, the economy didn't just crash. Our entire way of living is gone. If you take 90 to 200 of the biggest and brightest companies in America today and they all became worth zero, in order for that conspiracy theory scenario to occur, you have to understand if all of the McDonald's, the Coca-Cola's, the Hewlett-Packard's and the Home Depot's and Apple's and all of those are closed at one time and worth zero, that means that someone else is running this place. Our way of life is no more. That is the presupposition that you have to

believe in order to not be willing to invest, which is kind of ridiculous. It's not just merely a minor thing. You have to assume that the entire American way of life is gone. That doesn't make sense. This is the Dave Ramsey Show. Why in the world would you trust some random guy in a cube when getting your mortgage? Do you really think he cares about your long-term money goals? Well, he doesn't. Those companies care about getting you into whatever home loan program they're pushing that week. When it comes to ordering a cheeseburger, the meal deal works fine. But let's get real, people.

We're talking about the largest investment you'll probably ever make, so don't be naive and trust an order taker who pressures you into a prepackaged loan. My friends at Churchill Mortgage have been helping my listeners for over 25 years. Call Churchill Mortgage and get custom solutions from an expert within 10 minutes. It's simple. They'll shoot straight with you and quickly show you the real way to save money. Call 888-LOAN-200. That's 888-LOAN-200.

Or visit ChurchillMortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender 761 Old Hickory Boulevard. Redwood, Tennessee 37027. Thank you for joining us, America. We're glad you're here. Our question of the day comes from Blinds.com.

Find out for yourself why Blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and with the new promos they run every month, you save even more. Use the promo code Ramsey. Robertson, West Virginia. I am a gospel preacher who is considered an independent contractor. I will be maxing out my Roth IRA this year, and I'm projected based on 15% retirement to be able to put an additional $3,500 away for retirement. Given I'm a minister, where would be the best way to put the remaining $3,500?

In a 401k, 403b, or something else? Well, Robert, you're an evangelist as a gospel preacher in this case, so you're getting 1099s or not, but you're getting your pay as an independent contractor. So from a tax perspective, you're running a business, and so that qualifies you to have a small business IRA. It's called a simple IRA, in addition to your regular Roth IRA. And a simple IRA is basically a 401k for small businesses, and it's very inexpensive to set up.

It's easy to run, and just get in touch with your SmartVestor Pro, and they can help you set set up. It's easy to run and just get in touch with your SmartVestor Pro and they can help you set one up. It's like 15 bucks a year for the fee to set it up and then you pick good mutual funds and put inside of it. When our company was small, I very first did a SEP. You could also look at a SEP, a Simplified Employee Pension Plan. Either one of those would be fine for a single person company, a sole proprietor that is the sole member of the company. The SEP is an excellent way to do that. And you can put up to 15% or 13.6% after the calculation of all your net profits of your business into a SEP, or you can set up either way. If you want to put less or more in, you could use the simple IRA. Either one of those vehicles will work.

Neither one of them are very expensive, and you fund either of them, just like you did with your Roth IRA, with good growth stock mutual funds. Amanda is with us in Washington, dc hey amanda how are you good how are you doing better than i deserve how can i help well first thank you for taking my call um my husband and i are at a little bit of a crossroads right now and we just i guess just to assure that we're doing the right thing we were're seeking your opinion. Okay. We built our dream home in the Shenandoah Valley in 2014 and thought this would just be the home that we'd live out the rest of our days in with our boys. However, the market's come back, and we have since building, taken your FPU class,

and we've been on baby step two for about two years. And we have the opportunity right now to sell our home for a pretty substantial profit. However, because the market is good, we would probably be renting for the next couple years until the market was less desirable. We wanted to get your opinion on using our home as a means to pay off baby step two and just kind of move on with our lives. It would be my last choice unless you hate your house. If you hate your house or aren't going to move anyway, then we would use the money.

But selling your home is one of the last things I do. Sometimes there are situations where you need to. How much debt do you have not counting your house? We've probably got about $50,000 between student loans, and we had a pretty devastating car experience last year, so we had to purchase a new vehicle. So it set us back quite a bit. I'm sorry, how are you forced to purchase a new vehicle?

We had about $20,000. Well, it wasn't a new vehicle. It was new to us. So we had to take out a loan because we spent most of our emergency fund trying to fix the one that ended up needing replaced in the end. Okay. And so how much car debt do you have?

We have about $14,000 in car debt. Okay, all right. So instead of buying a hoopty, you bought a $14,000 car? Yeah. We were really afraid to get into car issues again, terrified actually to get into more car issues, so we bought something a little bit too expensive. Yeah. Yeah.

If you keep doing that kind of stuff, you can't sell your house enough times to get out of debt. Okay. The reason we are considering and selling is long-term, we don't wish to stay here. We're hoping to... I thought it was your dream home. It was. It was before we realized what we had done.

It was everything that we wanted. How much is your house payment? Our house payment is $2,100 a month. And what does your household take-home pay? My husband brings home $120. I'm a stay-at-home homeschool mom. Okay. So you're at 25% or less.

So what is it that you've done? Have you realized what we've done? It's a very expensive house that we custom built. We'd like to downsize and be a little bit more reasonable with the space that we have. We feel like we're kind of spinning our wheels with trying to pay our debt down, and I think that we both think that we could have a smaller home with less of a payment and be just as happy. Hmm. And this is the same lady who just bought a fourteen thousand dollar car because her other

one broke down oh well i mean we put fifteen thousand dollars into the other vehicle and the gas tank ended up failing as the last listen you do whatever you want to do hon it's gonna be okay uh i would stay in your home and I would buckle down my dadgum lifestyle and clean up $50,000 worth of debt. You should be out of debt in under, in around 18 months, 12 to 18 months. You make $120,000 a year, your household income, your house payment is less than a fourth of your take-home pay um if you want to move move i don't care it doesn't matter to me but um i i think that you guys vacillate back and forth on what is a crisis and what's important and if you don't stop doing that you're gonna be broke your whole

life because you can justify all you want but that car decision was a bad decision it was stupid and um and if you keep doing that kind of stuff you can't sell your house enough times to get out of it so uh and now you're going to move to a smaller house uh when this one actually seems okay in terms of the pricing or the monthly on it again if you don't like the house you decide it's more bigger than you want i don't want a big house i don't like the upkeep i don't like whatever then that's fine move for than you want i don't want a big house i don't like the upkeep i don't like whatever then that's fine move for that reason but i don't think you need to move to get out of debt i think you need to get clear boundaries on your life that we're not borrowing

money anymore and cut your lifestyle and get on a tight budget and then pay off your debt that's how you get out of debt but if you want want to move, I don't care. Move. AJ is with us in Canada. Hey, AJ, how are you? Hi, Dave. How are you? Better than I deserve. What's up?

Thank you for taking my call. Sure. So I recently got out of debt. I paid off all my student loans. I paid off my car. Actually, I just bought a used car. Now, I've gotten to a point where I have $14,000 in my emergency fund. And I'm just starting to, like, I want to start saving up for a house. Good. But I just, my car just broke down, and the mechanic says that it'll cost $1,000 to fix up the car. $1,000? Yes, $1,000 exactly.

Okay, what's wrong with the car? So he said that there are certain parts of the engine, like there are multiple things in the engine that have broken down or failed. So there's like, if he has to replace all those parts, then it'll take close to $1,000. That's what your emergency fund's for. You're just having a car emergency. If you have a reasonable car, that's what I would do. And then refurbish your emergency fund as soon as you can after that. So, hey, good question, sir.

Thank you for joining us. This is The Dave Ramsey Show. Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has debt and a struggle to make ends meet. But they're starting to make headway with their budgets and smarter decisions with money. They have dreams and plans, and the only real difference is that one family has the right amount of term life insurance, and the other doesn't. Big difference.

If one of the parents die, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is. Be the family that takes those deliberate steps to be different and responsible. It really does make you the hero of your story,

and it puts you on course for better things ahead. Thank you for joining us, America. We're glad you're here. Open phones at 888-825-5225. If you're new to the Baby Steps plan, our Baby Steps bundle is a perfect starting place. It's only $29.99. The bundle will help you understand the seven baby steps, make the plan, the long-term plan, create some healthy money habits. I mean, the Total Money Makeover book is there.

The Retire Inspired Audiobook is there. The Love Your Life, Not Theirs Audiobook is there. The Every Dollar Guide to Budgeting is there. And a free month of the EveryDollar Plus, which connects to your bank, budgeting app. All free access and free access to an upcoming Smart Money live stream event if you buy right now. Yeah, check it all out at DaveRamsey.com and click on the Baby Steps bundle. Mindy is with us in Auburn, Alabama. Hi, Mindy. Welcome to the Dave Ramsey Show.

Hi, Dave. Thanks so much for taking my call. I've been an avid listener for about six months. Your program has completely changed my life, so thank you so much for that. Thank you. How can I help? So I started working for a new employer about four months ago, and they offer a 401k plan. I'm currently trying to figure out what to do with my old 401k my previous employer i talked to them this morning and i have the option to roll it over into an open ira or into a 401k plan what do you recommend considering like the tax implications well the tax implications are the same uh you'll have no taxes if you roll it directly into your new 401K or into an IRA.

I would recommend an IRA because that way it's under your control. It's not under the control of your HR department. It's just you and your SmartVestor Pro, and you're figuring it out. The second reason I would recommend an IRA is there's 8,000 mutual funds to choose from in the open market, and with your new 401K, there's probably 10 or 12. Okay. And so you can obviously find better funds out in the open market

that would beat even the good ones, even if you have good ones in your 401K. So I like the flexibility and the broader selection, and so the way to do it is to sit down with your SmartVestor Pro, pick out the mutual funds that you want it to go into. You fill out all the paperwork to open an IRA in those mutual funds and a direct transfer form that is sent to your old company. The money is not sent to you. It's sent directly into the IRA.

You want to do a direct transfer rollover because if it comes to you it's sent directly into the ira you want to do a direct transfer rollover because if it comes to you they have to withhold 20 on it but you have to put in 100 now you only got 80 to keep from having taxes so you do the direct transfer and you got no taxes okay and can i ask you another question completely different sure okay so my husband and i got married about less than a year ago last april um we are about to get out of baby step two we planned on paying off my stupid car today um but i don't know if you've heard about all the stuff going on at wells fargo haven't been able to access my account for like two days really oh my gosh yeah they've been having intermittent outages i mean it, it's been awful.

So I guess you're going to have a new bank after you get your money, right? Yeah, we are going to switch over to a credit union like you recommend. Good. So we're currently saving for a house. When we buy our house, we're most likely, because we both work full-time, we're going to be working full full time when we buy the house. But eventually I would like to stay home with our future children. We don't have children yet.

How do you buy conservatively knowing that we're only supposed to have the mortgage be 25% of our take home pay when it may or may not decrease in the future? I would set it up as 25% of his. Maybe plus a little because he'll get raises in the future, and maybe by the time you came home he'd be making more. Okay. But the thing is this. The only reason I got the 25% in there is that gives you wiggle room to invest, wiggle room to save and buy the next car,

wiggle room to pay cash for your vacations. It keeps you from going into debt for stupid stuff, and it gives you the ability to invest and build wealth. If you put much more than 25% of your take-home pay into your house, you become house poor. You're handcuffed mathematically from doing the other stuff with money that you need to do because the house is draining you dry. And that's all we want to avoid here. And so if you buy it based on both of your incomes and then your income drops in half when you come home,

you're going to have a house payment that's 50% of your take-home pay. You don't want to do that. Exactly, yeah. That's what we're trying to avoid. I would say 25-plus a little bit of his income, of his take-home pay. And you round up, kick it up a little. You could do 30% of his. But the point being that he's going to get raises over time, and maybe even by the time you quit and come home with babies,

his income would be, I mean, the house payment would be 25% of his new income having raises over that period of years. If not not it'll be there soon enough so hey good question thanks for joining us open phones at 888-825-5225 sandy is with us in jacksonville florida hey sandy how are you hey. How are you? Better than I deserve. What's up? Well, I am a fairly new listener, and I work in a club of people who have paid off their mortgages in a couple of years. I am 50 years old. I just bought my very first house.

Unfortunately, my parents did not know how to manage money. They lived paycheck to paycheck, never graduated high school, never bought a house. So I am chipping away at my mortgage every single month, $300, $400 extra a month, but I'm also contributing to my IRA about 10%. I know your rule is 15, but I'm 50 years old. I don't want to stop contributing to the IRA. But should I just to get that mortgage paid off? No. Okay. No, I would put get that mortgage paid off? No. Okay.

No, I would put 15% of your income into retirement. Any other money you can find as you go along, whether it's lump sums, you get a bonus, you get a small inheritance, you get anything like that, or you just squeeze money out of your monthly budget, we throw it at your mortgage. How much is your loan balance on your mortgage? It is currently $106,000. And I've already, when I first started listening to you, I looked online at the baby steps. I don't have any debt.

My house is my debt, and I even have $25,000 in an emergency fund, and my retirement money is about $136,000 in Roth and traditional IRAs. Okay. And I make $50,000. Roth and traditional IRAs. Okay. And I make $50,000. $410 a month is $5,000 a year. Okay? $5,000 a year for 10 years is $50,000. Plus the regular house payment that you're paying,

that'll about pay off your house. Okay, so I'm paying an extra in my mortgage every month, $325,000. You're saying up that? Well, I'm just giving you the numbers. I mean, if you want to do $325,000, it's going to take 12 years. Gotcha. I want it paid off even in 10 years if I can, or even sooner, because I don't want to be 60, 70, or 80 years old burning a mortgage.

But here's the thing. You are doing such a good job and there's a healthy amount of worry that is driving you a healthy amount of fear it's a it's good to have some kinds of fear it keeps you from playing in the traffic or touching on that stove right or or retiring or retiring broke but i also want you to have a little bit of peace to go with this healthy fear that you are on track to make it and so let's just do a little bit of math a matter of fact i'm just uh you know just just take 106 000 and say 10 years that's ten thousand dollars a year that's 800 that's 800 bucks a month okay yeah if you start doing that you say i think i can get there counting my regular payment right now i didn't have any interest in that i'm just doing rough numbers right no yeah. If you start doing that, you say, I think I can get there counting my regular payment, right?

Now, I didn't have any interest in that. I'm just doing rough numbers, right? Oh, God, no, yeah. But your interest rate is probably not that high anyway. My interest rate was 4%. Let's see. There you go. And so it's going to factor into it.

It's going to be part of it. The other thing we didn't use in our example was in the next 10 years, you got zero raises in our example. That's not realistic either, is it? Well, sir, actually, I haven't had a raise in the current company in years. In fact, I've worked for the same employer for 13 years. I didn't even get a Christmas bonus. So I might, I don't know if I want to work somewhere else. I don't know if I want to work somewhere else or stay with the devil I know, so to speak.

Because, you know, I make $50,000 a year. Where else can I go at 50 years old making that kind of money? A lot of people 50 years old make more than that. So I don't know where you can go. I don't know what you do. But I think I'm looking. If you're not getting even a Christmas bonus, I mean, you're working for Scrooge. It's okay.

I wouldn't mind looking around though um but i suspect if you are on a normal career path you would be getting raises through that period of time Ryan is in Portland, Maine. Welcome to the Dave Ramsey Show, Ryan. Hey, Pete. Thanks for taking my Ramsey Show, Ryan. Hey, Dave. Thanks for taking my call. Sure. What's up? Well, first I want to tell you, for Christmas this year, I bought all of my adult nieces

and nephews your Total Money Makeover book, and I thought that maybe I ought to take my own advice, so that's why I'm calling you now. Cool. So I have a job that provides housing, so I don't have a mortgage payment. I've got $7,000 in debt on a vehicle that will be paid off in the next probably two months. Good. But I'm curious, like, what should I be doing as far as my retirement and saving for a house? Because obviously when I retire from this job, I'm not paying in a mortgage.

I'm not building equity in a house now. I've got my emergency fund, you know, my three to six months emergency fund funded, and I have a deferred compensation through my work. They don't match. I have an old Roth IRA that I haven't contributed to in years, and my wife has a 401K. And I'm to the point where once I pay off this car, I'm ready to start really saving seriously for retirement.

Good. How much is in your emergency fund? $10,000. Write a check today and pay off your car. Okay. That's baby step two. Then we build your emergency fund of three to six months of expenses is baby step three. If you read the total money makeover, you know that that's how we do it, right? Yep.

Yeah, and right now my expenses, since everything's included, are next to nothing for living expenses. Good. Well, then build up your emergency fund back up then after you pay off the car, and then I'd start saving 15% for retirement of your household income. Now, as far as the house situation goes, how old are you guys? 36. Cool.

And what do you do? Are you a pastor or military or what? No, I work for the state. I actually raise fish. Oh, okay. Okay. So you're wildlife, and so you're out on the property, and it's like a ranger situation then.

Yeah, very similar. Okay. Got it. Okay. And so I do have a retirement set ranger situation then. Yeah, very similar. Okay, got it. And so I do have a retirement set up through the state. Yeah, but I'm just saying in terms of the housing, I was trying to understand that. So you have no plans to do anything except live there until you retire from the state, and then you would want to buy a house, and you're 36. You're 36. Yeah, and if I could do it, I'd like to think about retiring a little bit early and enjoying my life.

Sure. Okay. All right. Doesn't sound like a bad life anyway. No, it's great, but, you know, things can always be better. Oh, yeah. Okay, so we're going to say 15% into retirement of your household income once your emergency fund is done, then instead of in lieu of what we would call baby step six, paying off the house, let's say any extra money we're going to throw into the house fund,

which could just be a simple mutual fund. I mean, you could use an S&P 500 mutual fund and just chunk money in there as if you were trying to pay off your house, but you don't have to. Instead, we're going to look up and have the equivalent of a house in there when you get to your early retirement and you reach over and pay cash for something. Right. Now, would I have access to that money? Anytime.

Anytime. Okay. If you leave it alone a year, you'll have no capital gains on it, but you'll have no penalties. I'm not talking about putting it in a retirement account at all. Just an S&P 500 fund and let it grow. And just chunk money in there. Just pretend like you got a $200,000 mortgage and you're just trying to pay it off.

Yep. So would you just use the 25% rule for that? No, you're not. I would just say anything you can find out of your budget after you're saving 15% of your household income into retirement and still have a good life. We're just reaching baby step six. It's not got 25%. It's not baby step six. 25% is if you're taking out a house payment, and we're not doing that.

We're just saying, I got a $200,000 imaginary mortgage over here, meaning I want to build up $200,000, and I'm just going to start chunking money in there, and that's kind of my goal. When I hit that, I'm going to ring the bell, you know, and that's right where you are. So that would be a cool way to do it. What an interesting deal. Hey, thanks for calling. Scott's with us in Indianapolis. Hey, Scott, welcome to the Dave Ramsey Show. Thanks for taking the call, Dave.

I just started listening to you two weeks ago. Cool, I'm honored. I enjoy the program. Thank you. And I just started listening to you two weeks ago. Cool. I'm honored. I enjoy the program. Thank you. And I just started going online. In fact, I got that little snowball bet thing. So I have a question. I don't know any of your baby steps, but what I was interested in,

I'm an electrical superintendent, and I travel around the country quite a bit. I just started living in a apartment about two years ago. I like the apartment life i have my best friend takes care of my uh place when i'm gone in fact to give you an example i was gone from september to june and i was in the apartment for three weeks my question is i'm not interested in buying a home how important it is this to buy a home and this whole process? It's not, especially right now. How long do you perceive yourself doing this?

Well, I'm 48 years old and 15 years traveling across the country where the work is. Okay, so you like what you're doing. Exactly. One alternative could be the ownership equivalent of what you're doing would be a condo. And that's what my mom and some friends have said and suggested. So there's a pros and cons to doing that. It's just like buying a home, is that correct? A condo.

Yeah, it is like buying a home. I mean, you are buying a home. It just happens to be attached to other homes, that's all. But in terms of if you buy a good neighborhood, just like with a home, it goes up in value. You're going to get 15 years of appreciation that you won't get if you rent. You will have also not gotten any raises on your rent during that 15 years because you got a house payment and you're going to reach over and get it paid off and have a paid for condo that's worth X number of dollars as you come into retirement, which stabilizes your future and your retirement while you're investing for retirement.

Now, as you open up the Total Money Makeover book, I'm going to send you one to read as my gift. It's going to walk you through those baby steps, and you would not buy a home until you're debt-free and have your emergency fund in place and have saved a good down payment. And that would be after what we call baby step three, which is being out of debt, everything but your house, and you don't have a house, so debt-free, and having your emergency fund in place. Andrew is with us in Sacramento. Hi, Andrew.

Welcome to the Dave Ramsey Show. Hi, Dave. Thanks. the Dave Ramsey Show. Hi, Dave. Thanks. How are you? Better than I deserve. What's up? Well, I just had a question about Roth IRAs.

So I'm on baby step four, five, and six right now. Cool. All of my retirement is currently, all of my retirement investing is currently going into a Roth TSP. And I was thinking of opening up two Roth IRAs, one for myself, one for my wife, to invest in over the 5% match that I'm getting with the TSP. But I just wanted to make sure, because the funds that I would be investing in the Roth IRA would greatly outperform the TSP,

but it would have a 5.75% sales charge on contributions being a Class A mutual fund, and I just wanted to make sure that that was the best option, seeing as how TSP is so cheap to operate. Yeah, you can go that way, or you can just put it in a managed account where they charge you 1% and there's no fees other than that. That is technically more expensive over the long haul, because 1% for 10 years is 10%, right?

And 5.75 over 10 years is half a percent per year, okay? And so, you know, if you look at it long term like that, it's not 5% a year. It's a front charge on what you were investing that year. All the other money is in there growing with basically no fee. A small maintenance fee is in there, a 12B1 fee. And so it's charged one time, and if you, quote, amortize that charge or divide that charge over the life of the time you're holding it, it's very, very minimal.

In other words, you look at an expense ratio, including commissions and 12B1 fees and so forth, over a 10-year period of time, and that tells you if a fund is too expensive or not. I buy A shares. I don't think anything about it in my retirement account because I'm investing for the long, long, long term. If you're buying for one year or two years, you would never buy an A share. You buy either a no-load or a B share, a managed fund, something like that. But, you know, if I were in your shoes, I'd do exactly what you're talking about doing,

and I would pick good mutual funds that had great track records, that outperformed the standard and poor, the S&P, and they're there. They've had 10-year track records of outperforming the S&P, which the best fund in the TSP is the C plan, which is basically an S&P. And so, yeah, pick up that 5% match and do what you're doing. That's exactly what I would do if I were in your shoes. Hey, man, thanks for the call.

You own it. You're going to be an everyday millionaire. You're on the way. This is the Dave Ramsey Show. heard about a product or service and didn't have a chance to write it down, don't worry. We list everything that is mentioned during this episode in the podcast show notes section. Thanks for listening.