The Ramsey Show - App - It's Stupid to Believe Education at Any Expense is Smart (Hour 1)

Episode Date: February 15, 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. Hi, I'm Dave Ramsey, your host. This is Common Sense for your dollars and cents, God's and Grandma's ways of handling money. But it turns out common sense is so rare, it's like having a superpower. So it's marketable today in the U.S., and we have proven that. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Karen starts this hour in Los Angeles.

Hi, Karen. Welcome to the Dave Ramsey Show. Hello, Mr. Ramsey. How are you today? Better than I deserve. What's up in your world? Well, I recently got a new job that pays pretty well, so we're moving my husband and I and two dogs to Texas, but we do have about $36,000 in debt that we want to get rid of

in the next 12 months. So we're trying to figure out whether we should rent out a one-bedroom for about $1,000 or try to find a room and a house for about $600. Yeah, we're just not sure which way to go. Cool. Well, a room and a house with dogs sounds interesting. Getting rid of the dogs? We can't.

We've had them for a long time. I'm not getting rid of my dog. I was just asking if you're going to move in somebody's house with a room. You know. Yes. Have you got that option? Well, it looks like we do. There's some roommate situations where they would allow dogs.

Okay, cool. And so what's your new job pay? About $60,000 a year. And what's your husband going to be making? About 20-plus commissions. How much commissions? Well, I'm not sure yet. It depends on how well he does, I guess.

I mean, what's he thinking? Surely he's not thinking he's going to make $20,000. No, I'm thinking it's going to be in the range of $30,000 to $40,000. It's his first year there. Okay, cool. So roughly we're going to bump up towards $100,000 then. And you're going to pay off $36,000 in one year doing that. And you can either rent something for $1,000 or you can rent something for $600,000,

the difference being $400,000, which is $4,800 a year. So this is a five thousand dollar swing right it's up to you i mean if you can pay off 36 and be in the other rental it's fine with me be a better quality of life it's it's not it's not a deal breaker okay but now if you told me a 600 or or 2000 i'd tell you you know 600 but it's close enough that it's not, you know, the $400 a month is not going to keep you from paying off the $36. If something keeps you from doing it, it'll be because your husband didn't get any commissions, or y'all didn't watch your budget, or something else is going to come up. It's not going to be rent that breaks your back on this with the numbers you gave me.

Does that make sense? Yes, it does. I think I'm just worrying a little too much about the whole move, I suppose. Well, I don't know if it's worrying. You're just being very intense and very intentional because the reason for the move is to get your freaking life back and get this debt paid off, right? And so you don't want to screw that up. That's not worrying. That's being smart.

You're thinking through every little thing. You're squeezing every little thing. And it'd be okay if you want to call it an adventure and say, year we're going to do the roommate thing and after that we're going to be free and then we'll go do something else either one's okay with me because the deal is this it's not a big enough spread in your question to affect your goal you can still hit your goal either way and then you've just got to look at it and go you know what's this mean to us at our stage of life i'm old and grumpy and the chances of me working out something in a roommate situation is zero. So I would be renting something to get human beings away from me, you know, that kind of thing.

So that's just different, though. I mean, you know, if I was young and adventurous, it might be fun, you know. That doesn't sound fun to me, but it could be fun to you. Brittany is with us in Kansas City. Hey, Brittany, welcome to the Dave Ramsey Show. Hi, thank you for taking my call. Sure, what's up? I have a quick question.

So I currently left my old job. I just started a new job about a week ago. And I'm debating on if I should withdraw my profit sharing in 401k to pay off um some loans no right now my profit no no are you bankrupt if you don't no okay how much debt have you got um i have a car payment the total well not the payment but about thirteen dollars on my car. $13,000? Yes, $13,000. Okay.

And what else? Student loan debt is about $37,000 and credit card about $4,000. Okay. So you got $54,000. All right. And what are you making now at the new job? My new salary is $65,000. Good for you.

What are you doing? IT, quality assurance. How old are you? 27. Oh, you're killing it. Good job, Brittany. Excellent. Thank you.

Okay. And how much is in your retirement account? I don't have anything. No, the one you want to cash out. Oh, $16,000. Okay. All right. If you cash it out. It'll actually be more next month.

How much are we talking about cashing out? I was hoping to cash out all of it so I can just completely pay off my car. Which is how much, darling? $13,000. You're going to cash out $13,000? No, not your car. I'm talking about the profit sharing. $16,000. The whole thing next month out $13,000. No, not your car. I'm talking about the profit sharing. $16,000.

The whole thing next month is $16,000? Next month it'll, I'm not 100% sure. Let's call it $16,000 because I'm tired of this. Okay. $16,000. All right, $16,000. And here's what happens. If you cash out the $16,000, you're going to get a 10% penalty plus your tax rate, which is 22%.

Okay? Mm-hmm. Now, and that means you're going to be hit for 32%. So mathematically, it's like saying, hey, Dave, I want to get out of debt so bad, I'm willing to borrow money at 32% interest. And you and I would both instantly say that's a bad idea okay so no we're not going to cash it out we're going to work our way through this debt and you got a great new job you're making more money you're going to completely focus on this and beans and rice rice and beans mate you have 54 000 in debt you're single 27 you make

65 you should be debt-free in two years. Okay. All right, and you can do this. I'll show you how, but I want you to take that money. Don't give the government a third of it, kiddo. Yeah. It ain't worth it, you know, because that's what you're doing. That's what you're doing.

I mean, you're giving up a third of your money just to make a little bit of progress, and it doesn't even solve your problem. What solves your problem is that you're now paying attention and you're making good money. So congratulations. Good stuff. I'm going to send you a copy of the book, The Total Money Makeover, to show you exactly step-by-step how to attack this. Jump on DaveRamsey.com. Click SmartVestor, and those guys will help you.

A lot of brokers won't help with a little small account like you got, but our guys will help because they have to take small accounts or I won't endorse them. And so I won't let them be SmartVestor pros. And so click SmartVestor, get a SmartVestor pro in your area. They'll help you do a direct transfer rollover into good mutual funds with your old retirement. And that money, you're 27. When you're 37, you'll look up and that $16,000 will be $100,000. And you'll be glad it's in there.

And it'll be one of the things that causes you to be a millionaire someday is this conversation. So I'm proud of you. You're doing good stuff. Hold on. Kelly will pick up. We'll get you a copy of the book, The Total Money Makeover, and we'll get you going. You call me if you need some more help as you're continuing to win. Good job, Brittany.

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 pre-packaged 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.

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Derek is in New York City. Hi, Derek. Welcome to the Dave Ramsey Show. Thanks, Dave. How are you doing today? Better than I deserve. What's up? What's going on? Hey, I just have a. Hi, Derek. Welcome to the Dave Ramsey Show. Thanks, Dave. How are you doing today? Better than I deserve. What's up? What's going on? Hey, I just have a quick question, Dave. I recently got married. I have currently $850,000 life insurance policy and then also have about $465,000 in a retirement

account. So obviously before I was married, I had the beneficiaries set a different way. Now that I'm married, how should I be looking to give my wife, like, one over the other, whether it be the life insurance policy versus the retirement? What are the pros and cons of each? Where else would it go? Well, I have a son from a previous relationship, so he's 17. So at least for the next, you know, few years, getting through college and law school, I would want some of it to go to him. Good.

Other than that, it would go to her. So I just didn't know if there was a benefit to give her the life insurance versus the retirement, that kind of stuff. If you give her the life insurance, that's tax-free. If you give her the retirement as she takes it out, it will be taxable. Is it a traditional account now? It's not a Roth, right? Yeah, I started putting in Roth, but the majority of it is sitting in traditional right now. Yeah, so an inherited IRA, as you remove money from it, is taxable for whoever gets it.

Okay. Now, would she be able to take that money out immediately? Yeah, but she'd pay taxes with no penalty. Gotcha. Okay, and then I have one last question. So either one, you could, you know, it sounds to me, let me just throw out an idea, and then you chew on it and decide for yourself. You've got to pull this off.

But I've got this weird over-the-top, all-in opinion about marriage, like for richer, for poorer, in sickness and in health, unto thee all my worldly goods I pledge. Okay. And so let's pretend your 17 year old was 27 my my personal but it's just a personal belief is that my wife is in front of grown kids okay okay even if she's the second wife okay um and so you know but not not necessarily a hundred percent but i mean my primary is to her okay my secondary would be to grown kids and your your kid's not quite grown so you know if i'm looking at your numbers through that lens i'm probably going 850

to the wife 465 beneficiary to the uh teen which would get him on through school and set him up and i'm probably adjusting that when he's 27 gotcha yeah i was just trying to figure out i kind of agree with you i was just trying to figure out maybe i'll put um because he would need a liquid you know who would need the liquid money sooner it's all liquid i mean they can get to it it's just just going to pay taxes on it. So it's not really $465. It's more like $350. Gotcha. Gotcha. And I have one last question in regards to insurance. I travel a lot for work and they cover me when I travel outside the country for insurance purposes when it comes to health. But when I do personal travel, I've never really thought about it. So I just wanted to wonder what your opinion was on getting on having

insurance when you travel in regards to like more for health reasons than reimbursing for like travel expenses yeah i have never bought that um when i travel internationally i just but again i'm in a cash position to cover it if something came up that my personal policy would not cover on international um i did have a friend get sick and in fr, and it cost him a boatload before he got home. So, you know, he's kind of wishing he had that insurance at that point. But, you know, you just got to ascertain what you think your risks are in that situation. I had another friend get sick on an emissions trip in Africa. Come think of it.

Two of them popping into my head as I'm saying this. So I'm starting to get worried right now. But i've never bought it i've never bought it so uh uh that's not to say it's necessarily a ripoff i'm i would just look at it and go this it's like travel insurance i don't generally buy travel insurance i figure if i can't go on the trip because of something and that completely breaks me i probably shouldn't have been going on that trip in the first place so uh it's just too stinking expensive you know i'm spending too much on the trip if it's that big a my whole world is tilted because i don't go on this trip after i paid for it then i probably shouldn't have been going so i don't buy travel insurance very often now if i had a huge big thing we did a safari in

africa for three weeks last summer i did put a little travel insurance on that because it was massive. And the cost was up there, too. It was Sharon's Christmas present. So there you go. SWI. Sharon wants it. James is laughing. Well, it is. Open phones at 888-825-5225.

Lindsay is in Atlanta. Hey, Lindsay. Welcome to the Dave Ramsey Show. Hi. Thank you so much for taking my call. My pleasure. How can I help? Well, my question actually piggybacks very nicely off your last caller.

I am an avid listener, and my sister-in-law knows that, and so she's come to me for some help, and I'm actually seeking your help to be able to help her. She was recently widowed. She's in her early 40s. She was left with five children still at home. And her husband actually died on a flight overseas. And she was left with two inherited 401Ks.

And she's being told certain things about what she can do with them. And I feel like it's incorrect. Um, but we're, we're, I really want to know what are her options with an inherited 401k because she's being told that if she puts it into her name, once she touches it, she pays penalties on it. But if she takes anything out before putting it in her name, she doesn't pay any penalty? Is that accurate? Well, you can't really roll it into your name. It's not really an option. Okay?

The only thing that could happen is she could cash it all out, pay the taxes on it, and then start investing it in her name, and whatever she invested in her name was there. But you can't roll an inherited hire heir to IRA into your name and it and you do have RMD on it which is called required minimum withdrawals okay okay and so you have to do the required minimum withdrawals and um they're not huge but she's got to take some of it every year and that's based on a table based on her age and so forth so how much forth. So how much money is in these accounts? She's got two separate 401Ks. One of them is about $110,000, and the other one is $65,000.

Okay. All right. And no life insurance? No. No life insurance, no will. So any of your listeners who are listening, she was locked with a mess. So please buy life insurance. Please have a will. Amen any of your listeners who are listening, she was locked with a mess. So please, by life insurance, please have a will. Amen.

I'm sorry. That's so sad. And five kids, what's the range of ages on the kids? Her oldest at home still is 16, and her youngest is 6. Okay. And so does she have a career? She is getting Social Security for the kids, and then she actually teaches online, and she brings in a couple thousand dollars a month teaching online.

Her children are homeschooled, and so to be home with her kids and be raising her kids, she's found that to be her mode of income right now. Yeah, I'm not sure how she's making those ends meet. That doesn't add up in my mind. But I hope she can make it. I hope she can pull that together and not have to cash through and burn all of this money in one pile, trying to pull off something.

So if she's not, if the Social Security plus her online income is not enough to sustain the family and she's burning on this savings using some of it, then you've got to do some simple division and say, when's the money going to run out? So if she's got $200,000 and so she's burning $20,000 a year, she's got 10 years. Yeah, she's actually making it between the Social Security and her income. And what she was trying to figure out, like I said, is what to do with these 401Ks. The debt that she has remaining to her would be just the mortgage and one car.

I would take enough out and pay the taxes on it. There is no penalties on an inherited IRA. Okay. So I would take enough out and pay the taxes on it. There is no penalties on an inherited IRA. Okay. So I would take enough out and pay the taxes on it to pay off the car. Okay. Today. And that's going to help her monthly then, help her monthly work, because I want her monthly to work without burning into this.

And then I would get with a SmartVestor Pro and set these inherited IRAs. You can move them around, but you just don't put them into your name. They don't have to stay in what they were in. And so put them in good growth stock mutual funds, and let's let them grow as much as possible. Then it's there. And at any point, all you've got to do is pay the taxes and not pay any penalties to do anything, like kids' college, her future, whatever. Anytime she needs some money for something, it's there, and I want to try to keep from

touching it in the monthly budget if I can. It sounds like you're getting there. I'm sorry she's facing this. Thanks, Lindsay. I appreciate you calling. This is the Dave Ramsey Show. Did you know that if you combine the data breaches that have occurred in the past 12 months, almost every American has had their personal info compromised or hacked? Over 50% of our listeners and viewers tell us that they or someone in their family has been a victim.

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That's Zander.com or 800-356-4282. Thank you for joining us, America. We're glad you're here. Open phones at 888-825-5225. If you're someone who thinks insurance is boring or complicated, after that last call, you need to listen up, right? You need to make sure you've got the right coverages in place. you need to make sure you got the right coverages in place you need to make sure you got your will in place millionaires people who build wealth they both play offense which means they're doing things that make them money but they also play defense and they have the right coverages in place and do the right things to keep from losing money.

Now, we made a five-minute coverage checkup that's completely free. We ask you a couple of questions, and then we can give you some recommendations on if you've got some holes in your plan or not. Doesn't cost you a thing to do it. It's a five-minute coverage checkup. Doesn't get any easier than this. Just text the word CHECKUP to 33 789. CHECKUP to 33 789. Or you can just go to the website, DaveRamsey.com

slash CHECKUP. What you need to do, your checkup. Doesn't cost anything. Esmeralda is with us in California. Hi, Esmeralda. How are you? Hi, good. How are you, Dave? Better than I deserve. What's up? So my husband and I have been following your plan for, we're going on three years now. We've been able to pay $92,000 in debt down. Yeah, and we're almost at the finish line. We're about $14,000 still remaining to pay. Good. We should have that paid off in three months.

Way to go. Yeah, we're beyond ecstatic. Good for you. Well done. Now that we're to this point and we wanted to start paying down our health, we have been having this discussion about me going back to school to finish up my degree. Cool. What's your degree in? Human Resource Management. Okay. Are you working?

I am. I work for my family, which I absolutely love. So the purpose of finishing the degree is for what? In the past, we've had a volatile time financially staying afloat in the business. And right now, things are great. But if there was ever to be another, know kind of bump in the road I'm always kind of the first one that leaves and it's not because I am the first one to quit it's more because of my salary I'm one of the more higher paid employees and during those times I try to go find work elsewhere and I do as much as I can for the company for free.

Okay. That's good. All right. So the next time you might jettison and stay gone, though, huh? I'm sorry, what was that? The next time this happens, if you had your degree and you landed in an excellent career position, you might stay gone? Possibly.

Okay. All right. And so... So how much do you like finishing your degree? It's, you know, one of those I really, really want to do it things. How much do you lack? A year, 10 years? About a year and a half.

Okay, cool. What will that cost? $24,000. Cool. Well, you just paid off $100,000. Yeah. So you can cash flow $100. Yeah. So you can cash flow $24, right?

I believe so. I know so. Okay, I wouldn't do it if you're not going to cash flow it. But if you want to cash flow it, it sounds to me like it's got some marketplace value, and it's got some value under the heading of I just want to do it. Yes. And it's a $24,000 item you want to do it yes and it's a 24 it's a 24 000 item you want to purchase if you set it in the middle of the floor and burned it you can afford it if you pay cash for it now that you're debt free and have your emergency fund in place yes and so i guess the only question for us is um

there is no concrete yes i'll use it in the future um That's fine. If we need it, it's, you know, we need it. If you pay cash for it, and it's after you're out of debt, and after you have an emergency fund, by definition, you can afford it, and there's some percentage chance you'll use it. You're not asking to spend $240,000 in your household. It's $24,000. It's doable with the numbers you're giving me. It's not out of control. It's not a huge amount. I mean, if you wanted to spend $240,000

and you weren't sure if you were going to use it, I'd question your sanity. Yeah. Right? But $24,000 as a percentage of your world, you just told me this wonderful story of how you've already paid off over $100,000. This is a fourth of that.

Yes. Do it. Do it. But pay cash for it. Pay cash for it or don't do it. And then hopefully you'll get some use out of it. When Sharon and I got married, she had one semester of school left to graduate and did not graduate. That did not get her degree.

Fast forward a couple of years we had our first child three years into marriage and i had made a promise to her daddy that she would go back and finish so we start working that out so she drives back and forth to knoxville all summer long from nashville two and a half hours away to finish her degree she has a degree in child and family studies she She has never used it, except for the fact that she's a full-time mom, and that's the ultimate use of that degree, right? But the point is, she got the degree. She wanted the degree. We could afford it. We paid cash for it, and we couldn't afford it when we got married. That's why we didn't do it. So, you know, sometimes there's a reason to do academics, because it's expanding your life. It's a life goal. You want the completion of that sheepskin on the wall.

Sometimes that's there. What we don't want to do is use that as an excuse to go $250,000 in debt and call that education. That's not education. That's just stupidity. But you're not talking about that. You're talking about a life goal completion. You're talking about there is a good chance you're going to use the degree at some point in the future, and

it is a very reasonable purchase within the confines of your household numbers, and you're paying cash. All of those things say do it. So, very good discussion. Thanks for calling in. See, what's happened is,

let me tell you, this happens particularly in families that do not have a history of college education. If you're the first one to go to college in your family, that kind of a thing, okay? You don't have people around you to keep you from doing stupid stuff. But if you've got family that this is the third or fourth generation of college education, they'll grab you by the ear and go, no, no, no, no, no, no, that's dumb. Don't do education dumb. But if you're from a family where you've never done that or in a community where college education is not normal or on a socioeconomic rung of the ladder where college education is not normal, you hear this message, and it's a lie.

Here's the message you hear. Education is so important that you can pay any amount for it as long as you get it and it'll work out. That's a lie. It's a lie. You cannot go $250,000 in debt to get a master's degree in social work and go to the state and make $32,000 a year as a caseworker. That's stupid.

That's stupid. You don't do that. But if you've heard vague things of the way out of my neighborhood, the way out of my broken family culture, the way out of this thing that is my life into a better life is education, and therefore all education at any expense in any subject is worth it, then you get $1.6 trillion in student loan debt and people walking around whining like zombies that are so in debt that they can't breathe with a degree in left-handed puppetry. I've got a PhD in gender studies and I'm $400,000 in debt.

You're screwed. You're just screwed. You know, but somebody should have grabbed you by your ears and boxed them and said, no, that's dumb. See, we can't do education dumb. Esmeralda's doing it smart. But I most often find it, see, I grew up in a neighborhood where a lot of the kids that I grew up with didn't go to college. And so I can kind of relate to this.

I can hear these messages coming from teachers and coming from policymakers and even coming from academics that say education is the answer. Education is your way out. No, it's not. Knowledge is your way out. And knowledge that is applicable in the marketplace that pays you more than it costs you to get it. That's where education's your way out. You might be much better off getting a welding certificate than a Ph.D. in left-handed puppetry. This is the Dave Ramsey Show, Colleen is in Los Angeles.

Welcome to the Dave Ramsey Show, Colleen. Hi, thanks for having me, Uncle Dave. My pleasure. How can I help? Your name is on the cusp of working in our house. We call you Uncle Dave because we love you so much. Well, thank you, darling. So my question is, we are on step two.

We raised our income last year from $75,000 to $120,000. And in the process, we had a car break down a million times and we still had debt. And so we ended up buying a minivan. And we're still working the steps and we are just really hungry to get rid of our loan for our minivan. It's worth about $20,000. We owe about $16,000 on it, and we just don't love it, and we're just kind of torn what to do. How much debt do you have other than the minivan? Other than the minivan, we have $25,000 in grad school

and then about $6,000 in credit cards, and that should be paid off in two months. Okay. So all of this will be paid off if you kept the minivan within two years, right? Yeah, and that's where we kind of debate, because my husband and I go back and forth on your rules, and, you know, it's not a percentage. So if you sold the minivan, what would you get? Well, we have a few options.

We have a family member that would maybe let us borrow their car for a few months as we save in cash flow and then just buy something else. And my fear is, you know, I bought this car was used. It was new to us but used. And I just we got burned so bad with our last used car that we had drained what we had to spend, and that's why we ended up taking a loan for the minivan. You bought a brand-new minivan? No, we bought a used one. It was just new to us.

Okay, so you bought another used car. Yeah. So used cars aren't bad. Bad used cars are bad. Right. Okay, so if you got rid of this minivan and you drove a loaner for a little while then you would save up and pay cash for a used minivan or just a different car we don't love the van we were you know trying to grow our family we thought that was the right

best thing in the long term what would you buy buy if you were debt-free and had $10,000 right now? Oh, I don't know. Well, we kind of need a target because otherwise that will kind of tell you what you need to do with this. Because the minivan is not really, I mean, selling it doesn't change your life. It's not, you know, it's half your debt, not even half your debt. It's a third change your life. It's half your debt, not even half your debt. It's a third of your debt. If you want to sell it and drive the loaner for a little while and get on out of debt,

I don't have a problem with that, but let's, for God's sakes, have a target. Where are we going? You need a plan on where you're going, and does this step get you to where you're going? That's what we're after, And that's the big issue. Set yourself a goal and then ask yourself, what has to be true that's not true today for me to hit that goal? I make $60,000 a year, I want to make $160,000 a year. Okay, what has to be true about me and my life that's not true today for that to happen? For me to be out of debt and have a car that I like,

what has to be true? And then you can say, well, one of the things that would speed up me hitting my goal is selling this minivan, driving the loaner, so that I can end up three years from now driving this kind of a car, paid for in cash, that is less than, or all my cars are less than half my annual income. And that's what you ask yourself. So I can't really, all I hear is I don't really like the van, but I went into debt to get

the van because the other one was breaking down too much, and you need to decide where you're going. That's what you need to decide. Ryan's with us in Los Angeles. Hey, Ryan, welcome to the Dave Ramsey Show. Hey, Dave, thanks so much for taking my call. Sure, what's up? Well, my wife and I are saving up cash to buy a home,

and we want to be able to do that and just pay for it all and not have to deal with the mortgage. So it's going to take us over five years until we have some of the money. Okay, your phone is breaking up. You need to speak directly into it, please. Okay, I'm sorry. We have a portion of our money right now in an S&P fund, like you recommend. And I'm wondering if you have a specific recommendation

as far as how much of our savings we should put in there. And as we keep saving every month, should all of that go into the fund as well? The more you put in there, and as we keep saving every month, should all of that go into the fund as well? The more you put in there, the more volatility you add to your goal, but the more money you'll make. Does that make sense? It does. And so, I mean, you might make 10% or 12% on your S&P fund.

I think what you can look at if you wanted to go back as an example and this might help you decide this look at the s&p for the past 20 years and see how many years it did not make at least one percent in the year because that's what your savings is making you and if it's one year i don't know what the number is i haven't looked at it but the now what we're doing here is we're measuring the risk that you're taking if it was 10 years out of 20 that it did not make at least one percent which is not the case okay but that would mean this is a really risky endeavor does that make sense but if it was one year one time out of 20 years, it did not make at least 1% in the year.

Or two times out of 20 years, it did not make. Well, that's a risk. That's not an overwhelming risk at that point. It's like 10% of the time, it doesn't make more than I'm making in my savings. I'm putting the vast majority of it in there then. Does that make sense? It does, yeah. So go back and look at that, and that could give you some comfort

looking at the track record and what would have to happen for this to not work out to my benefit. What's the probability that I don't come out ahead as a result of being in the S&P versus being in savings? And the probability is pretty high when you're under five years. But over five years, your probability is pretty high you will come out ahead by putting almost all of it in there. That's my, you know, anecdotal look at it.

But if you want to actually dissect and comb through the numbers, it wouldn't hurt you. It's actually a good exercise for you to learn to analyze these things and do the critical thinking. Andrew's in San Diego. Hey, Andrew, welcome to the Dave Ramsey Show. Thanks, Dave. I hope you're doing well. I am.

How can I help today? I've paid off about $60,000 in debt using your steps. So I'm kind of doing a 3, 4, and five, six-step combo right now. I'm sorry, the four, five, and six-step combo right now. Sure. And the one question I have about baby step six, I have rental property and a primary mortgage. And when it comes to, you know,

throwing large sums of money to get a house paid off quickly, which one do I choose from? All things, if they're similar in balances, I go to the house, my residence. Okay. And the way I did that was a simple risk management question. If the world completely unraveled in your life and you lost either your rental property or your house because everything went sideways, which one would you rather lose well i'd rather lose the rental property than my house so i'm gonna pay my house off first because 100 of the foreclosures occur

on a home with a mortgage so we don't want to we don't want to keep the mortgage on the house now but if you got a rental that's uh 50 000 bucks owed on it and you owe 400 000 on your house you might reach over and knock the rental out. Okay. And part of the argument, or the discussion, I should say, that I have with my wife is, well, if we pay the rental off first, now that's retirement money free and clear coming in as opposed to only half of it coming in and having to go back out to mortgage. So that's kind of my... It's the same dollars, though.

If you've got a $2,500 house payment or you have a $2,500 payment on a mortgage, on a rental, either one of those frees up $2,500 when it's gone. That's true. It's just one of them's a cost savings and one of them's an income-producing asset. But at the end of the day, the smoke clears all the way to the bottom line of your personal P&L. You've got the same benefit either direction. So I just pay off the house if they're pretty close in balances

or the home is smaller in a balance. But if you've got a dinky butt little rental debt and you can just knock it out like it's a big old car payment or something and then reach over and work on your house later, that'd be fine too. But if you're sitting with a $220,000 mortgage on your house and a $210,000 mortgage on your rental, pay your house off first. That's my reasoning on it. Hey, good question, man. Sounds like you're after it.

Proud of you. Keep it up. Thanks to James Childs, our producer, Kelly Daniels, our associate producer and phone screener. I am Dave Ramsey, your host, and we'll be back. This is James Childs, producer of The Dave Ramsey Show. Once again, you made The Dave Ramsey Show one of the top five most downloaded podcasts last year. To get your daily dose of motivation and inspiration, subscribe today.