The Ramsey Show - App - Life Is Good When You Have a Plan (Hour 2)

Episode Date: September 21, 2018

The show about you

🎵 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 am Dave Ramsey, your host. This is your show, America. You jump in, we'll talk about your life and your money. It's a free call at triple eight eight two five five two two five that's triple eight eight two five five two two five kelly starts off this hour in st louis hi kelly how are you hey how's it going dave better than

i deserve sir what's up uh just calling in. Retired from the Air Force here in a couple months, and I got my next job lined up. Congratulations. Thank you for your service. Thank you. One of the questions I had, I guess, was about my retirement coming from the Air Force. You were talking about contributing 15% of your income to personal IRAs and whatnot. And I guess my question is, should I be contributing a portion,

15% of that pension money that's going to be coming in as well? I don't know why it hurt anything. Right. I mean, the goal is to build wealth, right? Correct. And the more money you put in there, the wealthier you get faster.

Okay. So why not? I was just wondering, since it was a pension income, if it was something I would consider contributing 15% to. No, I mean, I would. I mean, if you've got a real logical reason to not, that's fine. But, you know, when in doubt, save more and give more. Okay.

Hey, thanks for the call, dude. Open phones at 888-825-5225. Angela is with us in Virginia. Hi, Angela. How are you? Hello, Dave. What's up? Well, I am calling because I have kind of a question about a line of credit.

Okay. My husband and I own a house. We're foster parents. Our house did not qualify for the foster parent program, so we moved into a rental house. And our plan was we would do it for a year and make sure everything worked.

How does a house not qualify for foster parenting? In the state of Virginia, your ceilings have to be seven and a half feet tall. And ours were only seven feet tall. You had, your ceilings have to be seven and a half feet tall, and ours were only seven feet tall. You had seven-foot ceilings? Yeah, that's weird. So did you sell the house?

We have not sold the house. We kept the house for a year. It's been a year. Our year's up now. Okay. But we took a line of credit on the house, so we would have our – we had to be able to prove that we had 30 months living expenses to be able to go into this program. Wow.

So we took a line of credit. Now we'd like to get rid of that line of credit and sell the house because we know this is what we're going to continue to do. Good. Do we, we're in baby step two. Do we put that as part of our baby step two? And. You're selling the house why does it matter i mean when you sell the house you're going to pay off all the debt right right so i understand why would you you wouldn't you can't keep a line of credit on the house you

sold exactly but we don't have three months worth of income we don't have any we don't have three months' worth of income. We don't have three months' worth of income saved because we're in Baby Step 2. I am so confused. Do you put the line of credit on a house you are selling in Baby Step 2? It doesn't matter because you're selling the house, and that's going to pay it off. But it won't give us enough money to put in the three-month living expenses that we have to have to qualify. You've already done that. No, we have not. Where's the money from the line of credit? We have not used the line of credit.

All we have to have is on paper that we have. Oh, I see. And how often do they audit you on this once a year okay and so when was the last audit um in july and if you sell the house before july um and you are debt will that make you debt free when you sell the house? No. Okay. So you have to have three months of savings by July. Right.

And that means you're going to have to put your baby step two on hold enough to make that happen or you won't be able to continue in this program. Am I correct? That's correct. Yeah, I would do that. Okay. But I'd get rid of this house. Well, that is the plan. Get rid of it as soon as possible.

Not counting the house, how much debt have you got? $42,000. And how much equity will come out of the house at its sale? I think $22,000. Okay. And so that gives you $20,000 more to go. And what's your household income? $80,000 now.

Okay. And so if the house sold today, you should be able to do both by july yes so the faster the house sells the more you can probably just make it without having to stop your debt your your baby step two to call pull this off but if as you're approaching july you're still in debt and you have not finished your baby step. I mean, you've not got your three to six months. Stop in time to have that proper amount in there so you don't get kicked out of the program. But I wouldn't stop today and do it. Okay. I'd put the house up for sale and let's plow through the debt and then build the three to six months back all before July.

That's your best plan, right? Right. Which you should be able to do, $20,000 by July. Yes, I'm sure of that. Yeah, so let's get the house sold and do that, and then save your three to six months of expenses. That's my best plan, but, you know, if the house doesn't sell for a while and it takes you a little longer and drags out for some reason

and you have to stop in February for two months while you build your three to six months up in time to be ready for July, that's fine. I'm not going to kill you over that. Because obviously this is something you're going to do no matter what happens. So in terms of this, you know, meeting the guidelines to stay in this program. And that's what you're facing. So, good question.

Thank you for joining us. Open phones at 888-825-5225. Chris is on Facebook. I'm a mechanic, and I'm in the middle of starting my own business. Do I need to keep my steady mechanic job while getting things started, or go ahead and start the business on my own? I'd like for you to keep your main job chris while you're doing it until you get some income coming in from the new new self from from your new small business in other words the way i always say

it is is try to get your try to make your side hustle big enough that it's close enough to your income that you don't feel it when you quit your day job it's kind of like get the boat close enough to the dock that when you jump towards the boat, you can make it into the boat. And that's what I mean by get your side hustle income up enough that you can use that to go, oh, it's kind of a no-brainer to quit my job now. But if you're just doing this on a wing and a prayer, man, you could starve. And you'll be back over begging for your old job back, and your dream of owning

a small business becomes a freaking nightmare. That can happen for sure. So you don't want to do that. You want to use your side hustle, work it, work it, work it, work it, build up. It doesn't have to be 100% of your income, but it needs to be a good chunk of it. Let's say you're making $50,000 a year now, and you can get your side hustle up to $30,000 a year. Well, you can probably pick up that other $20,000. You'll probably be all right.

But if your side hustle's never made any money and you walk out of $50,000, you're just hoping. Well, that's not wise. We don't want to do that. We want to have something to count on that is reasonable from forecasting and it's not just a wing and a prayer. Because a wing and a prayer, you know, that's called stress. And that'll mess up your business time, big time.

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war without having to bust their budget. Call 888-LOAN-200 or visit ChurchillMortgage.com. This is a paid advertisement. NMLS ID 1591. or visit churchillmortgage.com. Thanks for joining us, America. This is the Dave Ramsey Show. We're glad you're here. Amy is in Provo, Utah. Hi, Amy. How are you?

I'm doing well, thanks, Dave. How are you? Better than I deserve. What's up? Well, I have recently started to get an FDU at the encouragement of my father. I'm a 40-year-old, second-time divorcee now. And he paid for the class and has been attending with me, and I appreciate that greatly. A question that neither one of us know the answer to is, I have a vehicle that I have leased. I'm a year into it now. Two more years left on the lease.

It was leased brand new at the encouragement of a now ex-husband. I am about four months behind on the lease now, and I'm just not sure. Why are you behind? I'm trying to catch up on payments that the ex-husband had, trying to stay in my home, trying to keep up on debt, as I'm learning through your FPU, that aren't necessarily prioritized. So how much debt do you have? How much is your house payment? I rent my mortgage is only 1300 and what is your take-home pay um i take home about 2200 every two weeks

about 42 4400 a month okay and are you current on your rent now i am current on my rent yes good are you current on your utilities now i'm current on my utilities good are you current on my rent, yes. Good. Are you current on your utilities now? I'm current on my utilities. Good. Are you current on your food? Food, yes, and tithes to my church as well. Good. Okay, good. You're right on track. That's good.

Fine. Transportation will be next. What other bills did you take on of his that you've been paying on? The car he drives is also in my name. He is a past felon and wasn't able to get credit, so that's an ongoing battle. Is the divorce final? It is, as of about a month ago. And he got the car?

He got the car with the stipulation that he would either refinance it in his name or sell it by January 1st. That is trying to be. Okay, and you've had to pay the payments during that time? No, he's eventually paid him he's just always paid them late okay i wouldn't i wouldn't worry about that car it's going to be sold january 1st or it's going to be repoed before then if he doesn't pay the payments i'm not going to worry about it because you're in crisis mode what other payments have you been paying that in this mess um i have a tax payment that's two hundred dollars a month um to get caught up on

taxes um and then i have a student loan and then credit card payment okay i would stop paying the credit cards and i would stop paying the student loans call the student loan and get hardship deferral okay and then let's just pile on your car and get it current okay because here's the thing if you get repoed on your car you're going to get sued for a big pile of money because that thing's upside down big time at this stage in the lease. You're going to get sued for like $10,000 or something, and we don't want that. Plus, it's going to finish up what little credit you have left. It's going to finish up getting destroyed.

That's a minor thing, but the big thing is I don't want you to lose control of this car situation. How much is the car payment on the one you're driving? It's $606. Good gracious. Yes. It was after bankruptcy. It was the best I could do. I'm a series of bad decisions.

Okay. I'm learning. That's why I'm in your class. I'm glad you're there. We're here to help you. We've all done stupid stuff, kiddo. I got a PhD in DUMB. So what we're going to do is let's get you a current as fast as we can, and then let's also analyze what it takes to sell this car.

Okay. And let me give you the steps to do that. All right? Okay. I want you to call the leasing company. Who's the lease with? It's with Nissan Motor Corps. Good.

Okay. Call Nissan, and here's what you have to have. with Nissan Motor Corps. Good. Okay. Call Nissan. And here's what you have to have. You have to have the early buyout. Okay. Which is like on a regular car loan, your payoff amount. Okay. It's not the total of all your payments.

Your payoff amount is less than the total of all your payments. Agreed? Right. And that's what this is. This is like your early buyout. It's like your early buyout it's like your payoff okay okay and that tells you what you owe them if you sell the car okay okay now what was the sticker on the car do you think about what when you bought it

it was like 36 okay so let's pretend the early buyout is 30 okay that's about right i believe yeah i'm guessing pretty close and let's pretend the car when you look it up bring it will bring only 25 22 23 okay there we go about okay and that's private sale on kelly blue book um yes that yes and i've taken it to a couple of dealers i don't know that's's wholesale. That's wholesale. Yeah, private sale, yeah. You've got to get every dime out of it because you've got to come up with a difference. Right. So if private sale is $25 and it takes a little bit longer, you sell it for $25, and the dealer's $22.

That's probably about right, okay? It might be $24. It might be something like that. But anyway, you sell the car, but you have to have the difference figured out where it's coming from. Okay. And that might be your local credit union. It might be you sell something else to come up with the money. It might be that you have to scratch the money together.

But that's what gets you out of this car. Okay. Because $600 a month is mathematically crippling to you it is very much so and i don't i want you to not only get current so it doesn't get repo because at four months they're probably looking to pick it up yeah i've just been avoiding phone calls i'm yeah i'm not doing it the right way that's why i've called you yeah so what you need to do is try to get it sold and cover the difference if you can get that small loan. Even if you put that small loan on a credit card, it's better to owe $7,000 on a credit card than it is to owe $30,000 on a car.

Okay. In your situation especially. Okay. Okay. And so we're getting out of that. Then you've got to get your little hoopty of some kind to drive around for right now. Which, yeah, I'll ride a bike. I don't care.

You're sick and tired of being sick and tired. You're ready to fix this. But, I mean, get you a little $1,000 car or something. It doesn't have to be anything fancy because it's not forever. It's just until you get some of this mess cleaned up. Yes. But you've been pounded from every type of bill and from a financially abusive marriage absolutely and so you're you're emotionally tired yes fighting this and so you're going to feel amazing release

as you first get a plan together and then number two as you execute on the plan just sitting down and doing your budget's going to feel good because you're in control i got my i got my rent paid i got my lights paid i got food on the table life is good the rest of this just a monopoly game right yes that was a nice step last week to start working on so i appreciate yeah that you're you're gonna turn this around you've got the money to turn it around it's not going to be easy but yeah you need to be shed of this car. And I don't want them to pick it up, but if they pick it up before you can get it sold, oh, well. Life goes on. Then that's just a day I need to pay off. Life goes on.

Well, they'll come after you for the difference. In our example, you're $7,000 in the hole. They may sell the thing, and you may be $12,000 in the hole. But then you'll just negotiate with them and you know settle that 12 000 for 5 000 or something you know okay but it's going to leave a pretty big mark on your credit the good news is you won't have any payments of trouble for a while while you're cleaning up the rest of this mess but about a year from now it's going to start to be a real problem again yes so i really don't want to do. But if it comes down to that and you have to hand them the keys, oh, well, it's just a car.

Okay. Out of all the things that have happened to you in the past two and a half years, them picking up this car is fairly low on the scale of important stuff. Oh, you have no idea. You're absolutely right. Oh, I can smell it. I can smell it. I can smell the drama.

Is that obvious? Yes, it's coming all the way from Utah. Yeah, it's... My last question... Go ahead. I guess about the car that is in my name that my husband drives, then do I want to try and get that back and sell it myself also, or just not even worry about that?

I think the divorce court has already told you what's going on, that it has to be refinanced or sold by January 1. Yes. I don't think you've got a choice i think you're in that i would not pay a dime on it don't give the dime to that car okay if he gave he gets it repoed that's going to be on you too but oh well we'll have to work through that later but if he gets it repoed i'm going to have i'm going to file a motion with divorce court to have them go after him for whatever it costs you. Okay. Because he screwed up that.

He's under obligation to pay that payment until January 1, and he's in contempt of court if he doesn't do that. Okay. And I would smack him into next week using the judge to do it if he doesn't follow through on that. I suspect he can't refinance it. I suspect he's going to have to sell it. The sooner he comes to that conclusion, the better. Wow. You stick in there, kiddo.

If you need some more help, you call me back anytime. We're here for people just like you. 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 has struggled 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. Gabriel and Madeline are in New York. Hi, guys. How are you? Hi, Dave. Hi. Hi. I see on my screen you guys are debt-free. Congratulations.

Thank you. Very well done. How much have you paid off? So we have paid off $77,743 in nine months. Way to go. And your range of income during that time? So we started at $53,000, and we went up to over a little of $100,000. Ah, excellent.

Very well done. Good for you guys. Excellent. What kind of debt was this? So we had credit cards. Good for you guys. Excellent. What kind of debt was this? So we had credit cards. We had student loans. We had a car debt. Well, we had two cars that we owned, and that was $38,000 just in cars.

Whoa. Yeah. So you sold them because you said had. Yeah. So we sold both of them, and then the lesser-valued one we traded in for another one, and we paid it off completely. Wow, very cool. Good. You guys got on fire.

Yeah, we did. I mean, you start selling cars, that's serious business right there. Yeah, definitely. Big deal. So what happened nine months ago that lit this fire? So I had read your book before a few years back. And so we were just charging credit cards. We were buying a whole bunch of things.

And we started, our relationship started to get rocky. It was just fights after arguments and all that. How long have you been married? So we have been married for six months. Oh, okay. We were roommates, as you call it. And so, yeah, so that happened. And we actually got married the last week of when we became debt-free.

Oh. So it was funny because that happened then. And after we started, like, you know, following the program, everything started to fall into place. I guess we were being more intentional about everything. Oh. So, Gabriel, when you guys got your act together, she liked you more? Yes, she definitely liked me a lot more. I think he's marriage material now.

I love it. That's great, man. Very cool. What a great story. It's a financial peace love story. What can I say? Yeah. So what do you tell people the key to getting out of debt is?

I think the key is to not be afraid of work. And no matter how far in you're in, you can actually do it because that's our story. Like, I think that there was one particular time that I saw Gabriel. He was just, I think he felt really hopeless in our situation. So I think that if you're willing to work, because we've done a lot of working, and it's just not being scared to it. And it's funny, because we actually started a small business in the process of working. Oh, what's your small business?

Yeah, so you always tell people this, to get it as a part-time job. So we started a dog walking and pet sitting. Oh, what's your small business? Yeah, so you always tell people this to get it as a part-time job, so we started a dog walking and pet sitting. Oh, good. Yeah, so it's literally our main thing that we do nowadays. Wow, so how much are you making doing that? So right now, we're making a little over $100,000. Doing pet sitting? And dog walking. And dog walking. That's pretty incredible. Yeah. I've been following your Entree leadership, and I've been following Chrissy Ray. Wow.

Yeah, and it's been amazing. I mean, I tell people that I think a little part-time job and a little extra money, you know, better than flopping whoppers or something. You turned it into $100,000. You guys are rock stars. Yes, sir. Well done. That's impressive. that's a lot of dog walking a lot a lot well in new york there is a particular need i mean uh it's probably a better market for that there than just about anywhere or do you guys

live in the city so we actually live in new jersey okay um yeah so our city yeah definitely our clients are professional so they travel to the city every day so they need someone like us to come in and do the business for them oh okay i got you cool okay yeah that's neat well very very good man that's neat. Well, very, very good. Man, that's impressive. Good for you guys. So what was the hardest thing that you did to get out of debt? All right, so the hardest thing to get out of debt was actually paying $9,000 just so I could sell my car. Oh, wow. We were so over the actual debt of the car and the value of the car that paying $9,000 out of pocket just to sell it was so hard. That's sickening.

Oh, my God. That just makes you throw up. It was terrible. It was terrible. I hear you. I get you on that. That makes my stomach hurt just hearing it. I love you.

That's awesome. Good for you guys. Well done. Well done. So you said, when I ask what the key to getting out of debt is, lots of hard work. Anything else? I think being intentional.

You have to have the bigger picture of where you want to be from that point. Like, what is it that you want to do? So I think after you find your why, then you're definitely going to go somewhere. Got it. Okay. Yeah. Wow. Very cool.

Good job, you guys. Well, we've got a copy of Chris Hogan's book, Retire Inspired, for you. That's the next chapter in your story. We want you to be newlyweds and then millionaires and outrageously generous along the way. And congratulations on the wedding. Thank you. Thank you so much. Well done.

Gabriel and Madeline, New York City, $78,000 paid off in nine months, making $53,000 all the way up to $100,000. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! That's how it's done. Right there's how you play, boys and girls.

Oh, man. Absolutely excellent. Clint is with us in Indianapolis. Hi, Clint. How are you? Hi, Mr. Ramsey. Thank you for taking my call. Sure.

What's up? Well, I was wondering if you could settle a disagreement between my wife and I. About six years ago, our financial advisor advised us to start using a cash rewards credit card. It's not one with flight miles or anything like that, and buy everything with that. And we will get a check about once every quarter. And my wife wants to go back to paying everything with cash and not using a credit card. We're very disciplined. We pay the credit card off every month.

So I think it's a pretty decent deal where we get cash back. What are your thoughts? Well, she tricked you. She led you into the cave where the bear lives and asked you to ask the bear if he was hungry. That was unfair. She knew the answer, brother, before she sent you to me. So I'm going to be nice, okay? But here's the thing. How old are you? I am 60. Okay. Well, you're about my age. I'm 57, okay. But here's the thing. How old are you?

I am 60. Okay. Well, you're about my age. I'm 57, okay. I remember, and you do too, green stamps at the grocery store. Do you remember green stamps? Oh, sure. Oh, yeah.

And my mom would buy crap at the grocery store that she did not need so that she got more green stamps. And that's how green stamps worked. And what we have found is there's tons of studies on the behavior of a credit card user. And there's a thing in credit card usage or in the payments world called friction. And anything that they can do, for instance, Amazon Prime has low low friction you just push a button and stuff's delivered to your door and you don't even realize or feel emotionally that you spent money the other thing that they use in the payments world to increase the use of a payments vehicle like a credit card is a gamification which is you get points or you get to win the game if you play.

Airline miles, points like you got, green stamps back in our childhood are all gamification examples that direct and cause behaviors. They probably don't direct or cause them that much for you because you're a fairly disciplined person. But to assume that they don't affect you at least 1% is absurd. They make money on you. They make money on you. We know all the behavior.

MIT did a study that shows that when people pay cash, they spend 12% to 18% less on average. I don't think you're spending 12% to 18% more. I think you're more disciplined than that. But I can just about assure you, you're spending more than 1% more. And so there's tons of documentations, tons of behavior analysis studies in this world that show that while you feel like you're making money on this, at the end of the week, when all is added up, you're losing. And you're not losing by much, not enough to make you go bankrupt, but you asked me to solve the argument. And I got tons of data and logical thinking skills that say that she wins the argument.

Sorry, brother. This is The Dave Ramsey Show. Thank you for joining us, America. We're glad you're here. Michael's with us in Lexington. Hey, Michael, how are you? I'm fine. How are you doing today, Dave? Better than I deserve, sir.

What's up? All right. Thank you for taking my call. Thanks for all you do. I appreciate it. Sure. I got a letter from my investment company, and they're talking about some operational changes,

and one of the changes is talking about changes in brokers and dealers, and I'm wondering if there's anything that, before I call my representative and talk to him, any questions I might need to ask or whether I need to stay with this company or not? Well, if they're only changing broker-dealer, that wouldn't be a concern to me. Okay. That's just their conduit, their connectivity to be able to do the stock trades or the mutual fund trades that you request.

Okay. Okay. That's not a big deal as long as you're getting good service out of them otherwise and they're answering your questions with the heart of a teacher and your representative is still there and you still like him or her a change in broker dealer is not the end of the world i don't know of a a single broker dealer that i would just say they're crooks stay away away from them. I don't know any of them. That industry is so highly regulated, and there's so many laws,

that those guys, they just don't have much wiggle room to misbehave. The government puts them out of business long before you and I worry about it. It's on the broker-dealer level anyway. Now, if you run into some kind of a, you know, if the culture changes in the company, meaning that your rep starts trying to peddle stuff to you that you don't like or your rep changes his attitude or something like that, a culture change could occur. Okay.

It's a new wholesaler, in a sense, is a way of doing it. But that could bring some cultural changes. Probably won't, though. Okay. How long has your guy or gal been in the business? Matter of fact, I got him off of the, when y'all were called, the ELP. Yeah. So I've been with him about 10 years, a little longer.

Okay. He's probably all right. Okay. So I got on board there about 2008, and I appreciate that. Thank you for... Well, somebody that's new would be more apt to be influenced by an aggressive sales tactic coming from the home office or something. Right. But a guy that's been doing it 10 years, and he's been one of our ELPs, even if he still isn't an ELP, he's probably solid.

Right. Okay. Well, I appreciate that. Can I ask you one quick question? solid. Right. Okay. Well, I appreciate that. Can I ask you one quick question? Yes, sir. Okay. I have a pension plan, and I start drawing out of that pension plan because they would not let me have it lump sum. Right.

But when it goes into my bank account, I get it where it will go into an RRA. So I guess my question is, is it being taxed twice, or will it be taxed twice when I go to take it out years later? No, not if you're going. You're paying taxes on it when you get it as a pension disbursement. Okay. And then that money has been taxed. If you put that into a Roth IRA, it's a pre-tax investment, and nothing will be taxed.

If you're putting it into a traditional IRA, you're getting a tax deduction on what you put in there. So you're being taxed by the pension distribution, and then you're getting a tax break if you're putting it into a traditional. So you shouldn't have any taxes in that effect from having done those two transactions transactions but then when you turn around and take it out at retirement on a traditional yes that's going to be taxable but you won't have been hit twice okay okay yeah it's where it's going it's going to traditional yeah so what's one master is you're getting taxed when you pull it out but you get a tax deduction when you put it in okay so that ought to be a wash right now

but then you're going to be taxed on the entire account and its growth when you put it in okay so that ought to be a wash right now but then you're going to be taxed on the entire account and its growth when you take it out on a traditional later on so good question thanks for joining us michelle is with us in springfield illinois hi michelle how are you doing great day thank you how are you better than i's up? Well, my question is, my dad wanted to put my name on his property, his home. He doesn't owe anything on it. He owns it outright. As security, if anything ever happened to him, I would just take possession of the house. And my husband and I are wanting to buy a house next year,

and I'm wondering if having my name attached to his property is going to affect anything that I want to do when we live just out of state. No. Unless he didn't pay his property taxes. Okay, which he does that. I don't have to worry about that. Because, see, now you're one of the owners, and if you don't pay the property taxes, you he does that. I don't have to worry about that. Because, see, now you're one of the owners, and if you don't pay the property taxes, you're liable.

Right. So you're in a partnership now with your dad. Well, the other question is he's wanting – he's got the house up for sale, actually. He's trying to move. And he is wanting – the problem is that he's trying to get a VA loan for the house he wants to buy. And he wants to take his name off of the property to where now I'm the sole name on this property. That won't affect his VA loan one way or the other. You can't do that.

And it won't affect me either, right? The stuff he's doing, he's just making up crap. He has no idea what he's doing he's going to create a disaster in his own life and in your life he needs to stop this okay let me let me try to explain it to you okay he's anytime an individual gives another individual even your own children more than fourteen thousand dollars in a year it's subject to gift tax so i can't just give you a house if i just hand you a house if i just you know deed a house to you randomly whether i'm your dad or not it's subject to a 55 gift tax of the value of that house so he's going to get his he's going to get hammered by the irs if

they find him doing all these quick claim deed moves that he's doing. And it doesn't, it's not the right thing to do for estate planning anyway. For estate planning, you're better off to receive the house through a will than you are by having your name on it because of a stepped up basis. Okay. And let me go back. How do I know if they're going to do the tax, the gift tax thing? Honey, it's the law. They're going to do the gift tax thing.

He has not seen any financial planners he's not got a tax attorney he's just making this up i can tell so he's not done it right so this the transaction he did to start with is subject to gift tax because he screwed it up then he puts it over in your name the rest of the way it's going to be subject again for the other half that he didn't give you before. And it's not you that's going to get hammered. It's him. But it's at a tax rate of 55% of the value of this house. So he needs to stop this crap. You can't just make up your own

laws. Yeah. So he just needs to chill out until his house sells. Yeah, sell this thing and pray nobody finds your name on the stupid thing. And don't put your name on anything else again because it's stupid. He needs to go get an estate planning attorney and get a will done properly. Okay, so number one is gift tax problem.

There is a way to give you a house. It's called the Unified Estate Tax Credit, but you have to do a filing on this. And I'll guarantee you Bubba, who's making up his own laws didn't do this filing you follow me i certainly i don't want the house or need it he's i know i'm not accusing you of anything i'm just telling you your dad's running rogue here and he's going to bring lack of blessings into his own life and bring curses into his own life with this stuff so he needs to stop just making up stuff as he goes and just go i'm just gonna give it to him put in her name that way i know what happened and you know that's gonna it's gonna if he gets out of it it's gonna they're gonna take his freaking head off and you he does not

want to do this how does it affect that if he has um he has it doesn't affect the property but he has a home equity loan out on it well it doesn't get rid of his liability on the loan because you didn't sign for the loan right no no my name's not on the loan just the property itself so you know deeding it over to you doesn't get rid of his liability doesn't help him qualify for the va once again he doesn't know what he's doing and it's but it's not going to hurt me next year whenever i want to do my own thing. No, because your name's not on the loan. The only thing anybody cares about is your name on a loan. Okay. Now, here's what could happen, and I don't think it's going to happen,

but if he got foreclosed on on that home equity loan, then a house that you owned has been foreclosed on, even though you don't owe anything and you're not liable on the loan, it could show up on your credit bureau report that you have a foreclosure. Right. Another stupid reason not to do this, okay? Right. Lastly, let me tell you what I mean when I say stepped-up basis, okay?

Just for everybody out there listening, because it doesn't affect you. You're not going to do it anymore. Tell him to never put your name on anything again until he gets professional advice. For his own good. Not because we're mad at him. He's just bubbaing his way through this. Stepped-up basis is when you die and you give somebody a property after death and the will, the market value is the basis.

So if the house is worth $100,000, you turn around and sell it for $100,000, there's no taxes. If he gives it to you ahead of time, his basis is how taxes are figured. So he paid $20,000 for it. You sell it for $100,000. You pay taxes on $80,000. So he's nailing you for taxes on his death by doing this, too. Don't do this stuff. This is the Dave Ramsey Show.

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