The Ramsey Show - App - Millionaire Mindset: You Have to Plan Ahead to Get Ahead (Hour 3)

Episode Date: November 8, 2018

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🎵 Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. You jump in. We'll talk about your life and your money. It's a free call at 888-825-5225. That's 888-825-5225.

Karen is with us in Kansas City. Hi, Karen. Welcome to The Dave Ramsey Show. Hi, thank you. I'm honored to talk to you. My husband and I are debt-free, including our house. Our daughter's college is paid. My husband, well, we both will retire in two and a half years at age 60, and that same year, our daughter will graduate from college. So I have questions about life insurance. We have term life insurance renewable for five more years,

and we're wondering how long we should continue to pay annual premiums until we retire or stop payment before or continue it after, since we have it for five years. How much do you have in your nest egg? In retirement, about $1.6 million. Okay. The purpose of life insurance is to make sure you're okay financially if he dies and leaves you with kids and mortgages and other stuff.

Right. Okay. If he dies today, you're a multimillionaire. I think you're going to be okay. Okay? If he dies today, you're a multimillionaire. Mm-hmm. I think you're going to be okay. Okay. Well, it's in retirement. I mean, it's in retirement that we can't get at right now.

Yes, you can. You can get at it. You're 60. Well, not yet. I thought you said you're 60. I thought you said you're 60. In two and a half years when we're 60. Oh, oh. We will retire in two and a half years when we're 60. And so oh. We will retire in two and a half years when we're 60.

Okay. And so now we have probably... You have zero money outside of retirement. No, outside of retirement we have about 30-some thousand that we can get at easily. No, no, no, that wasn't what I asked. I didn't ask if you could get it at easily. How much money do you have that's not in a retirement account invested in other things? Yeah, about $33,000.

You don't have more than that. 100% of your 1.6 is in retirement. Really? Well, yeah. It could be, but it would be very unusual that you don't have a couple hundred sitting outside of that. Well, I mean, $33,000 in other, just the bank. I got that. Do you have any mutual fund investments or paid for rental real estate or anything like that that is not inside of a 401k?

Well, our house. Our house is paid. That's it? Yeah. You don't have a mutual fund account that's got some money in it that's not in the 401k? Yeah. I mean, it has like $10,000, but that's part of the... Part of the $30,000.

Okay. You don't have much money then. Okay. All right. That's fair. Yeah. All right. That's fair. Yeah. All right. So if you wanted to keep some life insurance to bridge until 59 1⁄2, you could. You could.

Or you could say, I'm going to take the risk, and the only risk is not whether or not you get to eat, but whether or not you have to cash some of this out to the tune of penalties. Mm-hmm. So if he died, do you work? part-time very part-time okay so if he died today you got two years before you can access the money without penalty without penalty how's his health uh good okay i'm i mean you're in a position you're okay the only thing is if something happened in that dirt two years you'd have to take out the money and you would in a position you're okay the only thing is if something happened in that two years you'd have to take out the money and you would pay a 10% penalty

in addition to the taxes that would be on it when it comes out which is going to have the taxes anyway so that's your downside risk but the purpose of life insurance is to replace his income and make sure you're okay if something happened to him and you didn't starve because you had no money

mortgages and babies and you're't starve because you had no money, mortgages, and babies. And you're not in any of those situations. You've got lots of money, no mortgages, and the babies are gone. Yes, Jesus, this is the way this is supposed to happen. And so well done. You guys have done great. So if you just don't want to spend the money, you can do that. Now, I will tell you this.

I'm a multi-multi-millionaire, okay? My wife is completely set times a bazillion, okay? And we still have term life insurance. There's absolutely no reason for it. None whatsoever, except SWI. Sharon wants it. There's no other reason. It absolutely makes no financial planning sense whatsoever.

But she says the premium on that is less than what you would have spent to buy me another rock or something for my ears or my hand. And I'd rather have that shut up and keep it. And I went, yes, ma'am. Yes, ma'am. Happy wife, happy life. And so under that heading, if you want to keep it, you're not doing anything wrong. Okay? Okay.

But the point for purposes of teaching here on the air and all these other people listening into our conversation is the purpose of life insurance is to keep that until our debt-free kids are grown and gone and you've built wealth. And you guys have done all of that. So you've crossed the line. You'll be fine if he passed away without life insurance but if you just want it just cause just kwi karen wants it then that's okay you can afford it you got a couple million dollars you can afford a little term policy darling so it's okay you know just like sharon and that's fine there's nothing wrong with that but the purpose of life insurance is to get you to where you are you guys are everyday millionaires very very well done

it is very interesting y'all that when we start talking to these millionaires doing these everyday millionaire theme hours more of you started calling with the net worth of a million to five million dollars i'm talking to more everyday millionaires in the last three years than I ever have in 30 years on this show. Isn't that interesting? I guess because by talking about it, we gave you permission to be one, and so I get to take questions from people like Karen, 58 years old, $1.6 million plus a paid-for house,

so their net worth is in excess of, we didn't ask about the house price, but it's well in excess of $2 million. And how'd they do that? 7% chance they inherited it, 93% chance they didn't. That's the statistical points on the study we did on millionaires. So it's, you know, I'm getting to talk to a lot of you now. You've been hovering out there listening to this show. Some of you have been calling in, but we weren't saying these things out loud and so now we get to say them out loud because see the beauty of karen's situation is if you're 32 and you're listening to

me right now and you've got two kids at home and you're going i don't know about this term life insurance i'm going yeah go to zander insurance get your term life insurance get 20 years because in 20 years you'll be 52 and your house 15 your mortgage will be paid off because in 20 years you'll be 52 and your house 15 year mortgage will be paid off and in 20 years you'll be 52 and your four-year-old will be 24 which means they should be grown and gone by definition i'm old school throw them out throw them out fly a little eagle yeah i mean an eagle that stays in the nest too long is what's known as a turkey. So let it fly, you know, and, you know, get them out. It's good for them.

They grow. They grow. Let go of the bicycle seat. Take the training wheels off. Helicopter mom, you know, let them go. They're gone, right? And you got the house paid off. You got some emergency.

You got some money in your 401K. $1.6 million. Karen and her husband done a great job. Aren't they rock stars? Don't you want to be them when you grow up? Yeah. Well, you will be if you'll do the stuff I'm teaching because that's exactly how they got there. This is the Dave Ramsey Show. I get asked all the time about what people need to do to improve their family's money situation. Two of the most overlooked things are term life insurance and disability insurance.

Both plans make sure that you have income to pay bills and take care of yourself and your family if something were to happen. For term life, you need to carry 10 to 12 times your income, and I recommend 15 or 20-year plans for most families. Stay away from cash value or return of premium plans. They're just a ripoff. Disability insurance is just as critical. How are you going to pay your bills if you're unable to work? Disability is the leading cause of bankruptcies and foreclosures, and that's why I send you to Zander Insurance. They've been helping my listeners find the right plans at the lowest cost for almost 20 years. Call 800-356-1780 or visit zander.com and compare online. That's 800-356-1780 or zander.com.

Thanks for being with us, America. We're glad you are here. In a few minutes, I'm going to be leaving for the airport to go to Phoenix. I'll be speaking all day tomorrow in Phoenix to about 1,400 of you or so on business and leadership. Our Entree Leadership One-Day Event is there tomorrow. It is absolutely going to be incredible. Chris Hogan will be with us and two other guests, and we're going to be teaching you leadership and business stuff all day long. And so business leaders of all kinds, particularly small business leaders,

come to these events. There are about 100 tickets left. If you'd like to come in Phoenix tomorrow, just jump online at DaveRamsey.com, and you can get your tickets. We'd love to have you. It's basically a sellout, but you can still get in, and we'd love to have you. And on top of that, no matter where you're hearing my voice, you can sign up and watch online and gather your whole company around if you want

or gather your whole team around and watch online and gather your whole company around if you want. Or gather your whole team around and watch online. We're going to be talking about something really, really important tomorrow. The theme of tomorrow is market disruption. Are you a market disruptor or are you being disrupted by someone who is? Because you are probably one or the other. Because virtually every space is being disrupted one way or another right now. It's a wild, wild time out there in business.

And it's a wonderful time because a lot of opportunity. We're going to talk about how to analyze that and walk through it. And you're going to leave with some hands-on real information. And you'll be ready to run your business like never before. So Entree Leadership One Day. If you haven't read my number one bestselling book, Entree Leadership, it is our handbook on how we've grown this business from a card table in my living room to a major national brand now. We employ about 800 folks.

It's about a $200 million company. And so how did we do that? I'll guarantee you it was a pain in the butt at times. I'll guarantee you we've done some stupid stuff along the way. But we talk about all of it. It's real, man. It's just real. But you can learn about it.

We'd love to have you do that. And we've been talking a lot about millionaires around here. I was talking about it before that last break. You know, an interesting thing I read years ago, and it helped me as I was recovering from bankruptcy emotionally and financially and relationally. I read a study probably 25 years ago that said that people who build wealth use a planning window, people who start from nothing and become wealthy. They have a planning window, meaning they make their decisions on purchases and financial things based on how it's going to affect them 5, 10, 20 years from now.

People who are broke and stay broke, have a poor mindset, a poverty mindset, have a very short planning window and emotionally immature. Thank God it's Friday. Oh, God, it's Monday. Living for the weekend. Yeah, you're going to be broke your whole life. That's just, I mean, you're not in college. Even if you're in college, don't just live for the weekend.

If the best years of your life were in high school, you're Uncle Rico on Napoleon Dynamite. I mean, really. The best years of your life should be in front of you, not behind you. I mean, I had good friends in high school. I had good memories in high school. But thank God I don't have to go back to being that guy. You know?

He was not bright. Did some stupid stuff. So you think in long planning windows you think long term and see the interesting thing is you can just decide to do that it's not like a dna thing it's not like well i don't know how to do that yeah you do when you get ready to buy a car are you thinking about how it feels and smells right now have you got car fever? Oh, God, I've got to have it. When you walk into Costco, can you leave without spending $300? Or did you need that nine gallons of mustard? I mean, are you just thinking about quick response on everything,

impulse response on everything? That's emotional immaturity. One definition of maturity is learning to delay pleasure. I'm going to think long-term. When I purchase a vehicle, I'm thinking about how that's going to affect my finances long-term, not how it makes me feel today and whether I impress some girl to stoplight. I'm way too old and ugly to do that. And a car won't help. And if you think a car will help, then you're really up a creek.

So, you know So think about it. How is this going to affect? What is this decision? Where is it going to take me when I'm looking at my 401k and I think, well, I need to put it in that little, I'm going to put it in the guaranteed and I'm not going to even keep up with inflation because I'm scared. Instead of thinking, I'm going to invest this money long term and I'm going to ride the waves that come to the stock market long term, because that's how most people build wealth. So the millionaire mindset. So one of the things our team has done is we put in place a five-minute coverage checkup. It's the one thing you can do today to take care of the little things before they become big emergency things.

It helps you think long term. Instead of think, thank God it's Friday, oh God, it's Monday. It's called the five-minute coverage checkup. It's really five minutes, and it shows you exactly what you need to do, and you can breathe easy thinking that I'm thinking long-term. I'm thinking more like a millionaire.

So get your phone out and text the word CHECKUP to 33789. Text the word CHECKUP to 33789 or just go to DaveRamsey.com slash CHECKUP. It's all free. We're not going to charge you a thing, but we just want to put this place in place to remind you and cause you to think about some things that you need to be thinking about long term. I'll give an example. Wealthy people generally do wills. They didn't start doing wills when they were wealthy. They saw money and the management of it generationally as a responsibility, as a privilege, not as I hit the lotto.

And so they see doing the will to make sure their wife, their husband, their kids are taken care of with the money they worked so hard for as a necessary element. So one of the things you'll see in the five-minute checkup is a will. You've got to think long-term, and long-term includes dying. That's why you have stuff like life insurance in place, that kind of thing, right? This is how it works, guys. It's a mindset decision. And, yes, I'm impulsive sometimes, and, yes, I'm immature sometimes, even as old and ugly as I am.

But the truth is that much less these days because thinking long-term has been so good to me that I'm going to continue to think long-term. It's caused me to live a life that is really living the dream, not sarcastically saying, living the dream. Which, you know, usually when people say that, it's a sarcasm. It's like I'm stuck in a nightmare. No, me, I'm actually living the dream. And I want you to do the same thing. Donna's with us in cedar rapids iowa hey donna welcome to the dave ramsey show hi dave i'm so excited to talk with you you too

what's up well i know you're not a big fan of car leases so i have a question on a car lease my husband works for a major car manufacturer where they have a really good deal on leases. Who does he work for? Which includes Toyota. Do it. It's an amazing deal. Okay. It is not a traditional.

They have insurance. Yeah, they include everything. And you can turn the car back in and get another car. You cannot drive a car as cheap as they're letting you do this. Well, for my job, I get a $550 car allowance. That's not going to do with it. Now you've walked off on the ice again. But that's not going to do with it.

The deal that Toyota offers their employees is not the traditional to consumer car lease. It is an employee benefit. It's an employee benefit. And you're stealing a car. You're driving that car for about half of what it costs to drive that car. Yeah, and we even get 30,000 miles for each year. And so being a sales rep, I drive, and it's like it's just. It's a bargain.

It's a bargain. Okay. It's a bargain. Do it. It's not a car lease like I hate. Car leases like I hate are the consumer leases that toyota would give you if you went up and leased a truck on their lot and didn't work there okay don't do that because we're going through fpu and um this i was like i don't know maybe we should get rid of the car lease no no

we don't have a whole lot left but it's like this is such a good one and it's like with maintenance and tires and they give you everything the oil oil changes and everything. I mean, it's ridiculous. A wiper blade goes bad, they replace it. It's all built in, and it's at a payment less than anybody else could pay for that same car. Exactly. Yeah, it's a deal. It's a serious deal. Yeah, we're big fans of Toyota as a company.

Their products are great, by the way, and so you're doing good work. But, yeah, they've taken a ton of the employees through financial peace, as a matter of fact, over the years. But, yeah, that's a good deal. I've looked at that deal probably 15 years ago the first time. It's amazing. This is The Dave budget each month. Pure Talk USA offers smarter wireless with unlimited plans starting as low as $20 per month.

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The phone number here is 888-825-5225. You know, the Ramsey personalities, there are a total of five of us these days. Chris Hogan, millionaire expert. Rachel Cruz, my daughter and author of two best-selling books, three best-selling books, two number ones. Chris Hogan, author of Retire Inspired and the upcoming bestseller, Everyday Millionaires. Anthony O'Neill, co-author of the book Graduate Survival Guide with Rachel Cruz. And Ken Coleman, doing his Ken Coleman Show on XM Radio and author of the book One Question. And I'm working on a new book right now.

So we'll let you know more about that later, but these guys are on the show here periodically. Uh, not only as guests of mine, but sometimes when I'm out, one of them will sit here in this chair and, um, they're always answering questions on this show and on their shows. They have podcasts and Rachel has a huge following on her YouTube channel, as an example. And again, Ken Coleman has a huge following on his SiriusXM show that does very, very well on careers. So if you've got a question for any of them, you can email it here.

And when they're sitting here or on one of their shows, one of the two, they'll get your question out. Just email it to DaveOnAir. Questions to me as well. It's the same thing. DaveOnAir at DaveRamsey.com. Doesn't matter about capitalization. It's email.

No spaces, no dashes. DaveOnAir at DaveRamsey.com. And you can even put the personality name and the subject line. I want Chris Hogan to answer this. I want Rachel Cruz to answer this. I want Anthony O'Neill to answer this. Or so on. Ken Coleman. whoever, along the way like that. And so be sure that you get

some of those questions in, because you'll get to hear from them from time to time. Brian is with us in Kansas City. Hey, Brian, welcome to the Dave Ramsey Show. Hey, thanks, Dave. How are you? Better than I deserve. What's up? First off, we were at the Smart Conference in Kansas City, and it was an amazing day. So thanks to you and your team for that. Well, thank you. We love doing that conference. It's a blast.

It was amazing. It was an amazing day. So I have a 401K, and I had some money in there, and my company this year allowed for a Roth 401k. Good. I started transferring money, and I got to thinking, you know, the decent amount of money to have in the traditional, if I start, you know, basically starting from zero on the Roth, as far as the compounding going forward, is that going to impact as far as, you know, not being able the compounding going forward, is that going to impact that as far as not being able

to compound as much? No, it won't matter at all. It won't matter at all because all of your wealth is invested and all of it is compounding. It's not like you're having to start over. You're going to do very well. I would start all new money should be in a Roth. I would not convert

the traditional to Roth until you're up to baby step seven. Okay. The portion you've got in there, because you're going to create taxes when you do that, and any money that you would have paid out in taxes, I'd rather you work your other baby steps with. Okay, so until the house is paid off to start to transfer that to the Roth? Yeah, yeah, there's no rush. How much is in your traditional portion?

About $300,000. Okay, yeah, so when you move that, you've got $75,000 in taxes if you were to move it all at one time. And so that's not money you need, additional money you need to invest, which is effectively what you're doing when you do that right now until you get the house paid off. Right now you're at baby step four, 15% of your income going into retirement. Five is kids' college, and six, we're paying extra on the house. All of that kind of stuff.

So you're right on track with that. What's your household income? About $130,000. You're killing it, man. Congratulations. Thanks, Dave. Thanks. I appreciate that.

Very, very well done. Yeah, you're right on track. Now, anything that they match while you're doing the new Roth contributions going forward, the match has to be in traditional. It's not allowed to be Roth. It's not allowed to be Roth investment. Because a match is income to you, and they haven't collected taxes on it yet. And if they did it as Roth, it would all be free to you, and they don't want to do that.

So that will add to your balance of your traditional. The match portion will, so you'll end up with even more. Plus, it's going to grow before you get there, before you get to the point that you're paid off the house and you've got an extra $75,000 or whatever it is to go. So you're doing good, man. Keep it up. You're right on track. Don't stop.

Don't stop. Don't be normal. Normal's broke. Don't stop. Don't be normal. Normal's broke. Thanks for calling. Brad is in Seattle. Hey, Brad, welcome to the Dave Ramsey Show. Thank you. My wife and I are in baby step two.

We're expecting the birth of our first child in March. I have the money to get out of debt. Should I pay that loan off now and step on baby step three or wait? Okay. Anytime a baby is on the way, we tell people to stop the baby steps and pile up cash.

Until baby comes. Once baby comes and mommy and baby come home from the hospital, safe and sound and there's no hiccup of any kind, then any money that we have when we start our baby steps again, any money that you have that's not retirement above $1,000 goes on your debt, on your debt snowball. That's baby step two.

You don't leave any money in your savings account. So let me just reset this. In other words, if you did not have a baby on the way, I'd be telling you right this second to clean this stinking savings account out and pay off his debt. You follow me? Right. I also have an HSA fund that's fully funded with $15,000.

A what fund? An HSA. Okay. Yeah, well, I wouldn't put any more money in that either. I'd stop adding to that until you're debt-free. How much debt have you got? You've got enough in savings to pay off the debt now? Yeah.

And you'd be debt-free? I have $30,000 on a vehicle and $32,000 in savings. Yeah, okay. Yeah, I don't want you to have $2,000 with a baby on the way. But if you did not have a baby on the way, I would write that check today, and you'd be debt-free because that's how you work baby step two, any money that's in savings. And then that brings you to baby step three, and you know what that is,

three to six months of expenses. And so what are we doing? We're going to rebuild that $30,000 account as your rainy day fund. But we're not going to do that until baby comes in March. We're not going to do that until baby comes in March. We're not going to do that until baby comes in March. And just pile up as much money as you can pile up right now in that savings account so that when you write the check in March, there's going to be more left in the savings account than $2,000,

all the money you put in there between now and then. So this is not going to harm your process at all. But, again, we're just pushing pause on your debt snowball, pause on your baby steps, and pile up cash until you get past baby. Because I just don't want anything to have a hiccup, and we're sitting there with $2,000 when we should have had $32,000 or $38,000 or whatever. And I'm not predicting anything bad, but I want you to concentrate on the joy of the birth and not be thinking about the money at all. If one little thing happens, you don't want to be thinking about the money, even if there's a big HSA. Because, you know, hospital stays, insurance included, get really, really, really expensive.

And it could be bad. So, anyway, I'm not predicting that. I'm just more concerned about babies and mommies than I am your process on the baby steps. You'll get there starting in March and clean the account out, debt-free, 100%, accept the house. Then you move on to your baby step three, and that's your fully funded rainy day fund. Thanks for the call, sir. So to recap, folks, the definition of Baby Step 2. Baby Step 1 is you stop all savings. You stop all investing temporarily until you get $1,000 saved.

That's Baby Step 1. If you've already got $1,000 saved, then just label. In his case, he had $32,000. Baby's not on the way in his case. We'll use him as an example. Just label $1,000 of it, baby step one. The definition of baby step two is all money that is not in a retirement account and that would not be penalized. All stock accounts, all mutual funds, all savings bonds, all money in a jar that you got out of the couch, all money is cashed out above $1,000 and thrown at your debt. You list your debt smallest to largest, and that's your order of attack, and you clear all debt except your home in Baby Step 2.

Then you have $1,000 to your name and no payments, not counting your retirement. That's the definition of Baby Step 2. So if you're going to tell me you're on Baby Step 2, that's what you need to have done. Then you move on to Baby Step 3, three to six months of expenses. Then we restart the 401k or start it for the first time. Fifteen percent of your income going Romans 12, 11 and 12. Do not be slothful in zeal. Be fervent in spirit. Serve the Lord.

Rejoice in hope. Be patient in tribulation. Be constant in prayer. Henry Ward Beecher said, The difference between perseverance and obstinacy is that one comes from a strong will, and the other comes from a strong won't. That'll do. I like that.

I never read that one before. Dalton is with us in Colorado Springs. Hey, Dalton, how are you? Hey, Dave, I'm doing well. How are you? Better than I deserve. How can I help? Hey, so it's a pleasure to be on the show, by the way.

I am 22 years old, and I just graduated from the University of Alabama in May. Congratulations. And now I'm out here. Thank you. I appreciate it. What's your degree in? Now I'm out here in Colorado. Cool. Operations management.

Good. Yes, sir. So I'm in the Army right now, and I will be paying off my debt here come January 15th about. Yep. So that'll be all my student loan debt, so I'll be debt-free. Ding, ding. Good. Yeah, so my question is, after that, I know the next step would be to build my emergency fund around $6,000.

Uh-huh. So after that, I was looking at a mutual fund, and I'm looking at your total money makeover right now. Uh-huh. And I wanted to know, like, there's four different types of mutual funds you suggest. Yes, sir. And you say you invest 25% in each. Yes, sir. Right.

The Roth IRA, how does that come into play after you invest in those four other mutual funds? Gotcha. Well, a Roth IRA is not an investment. A 401K is not an investment. It's how the investment inside of it is treated. So here's the thing. You can buy those four mutual funds just out in the open market, and as they make money, they're going to be

taxed. Okay? Or you can buy those four mutual funds and wrap a coat around them to keep them warm from taxes, and the name of the coat is Roth IRA. See, the coat is not actually the investment. It's just keeping the investment warm.

It's just the blanket over the top of it to keep it from being taxed. And so the same mutual funds outside of a Roth, of course, are going to be taxed. All the gains are going to be taxed, either as a capital gain or ordinary income. If you take those mutual funds and put them inside of a Roth IRA, you have zero tax on the growth. If you put them in a Roth 401k, the same thing. It's the same mutual funds. It's just where they're sitting and how the government's going to attack them in terms

of treating them for taxation. Okay. Got you. Got it. So your baby step four should be Roth IRA unless at work you have a match and you're in the military, you don't have a match. No, I do. It's 5%. Oh, okay.

Your TSP is matching 5%? Yeah, it's a new program within the last couple years. Okay, cool. We'll take the 5% match on the TSP, and there is a Roth TSP is matching five? Yeah, it's a new program within the last couple of years. Okay, cool. Well, take the 5% match on the TSP, and there is a Roth TSP. Right. So take the 5% match on the Roth TSP and put 80% in the C plan, 10% in the S, and 10% in the I. Got it.

And then above your 5% that's going into the TSP where you get your match, then go do a personal Roth and pick you out for mutual funds in those four categories with a SmartVestor Pro, and they'll help you get that going. If those two numbers don't get you to 15% of your income, $5,500 plus 5% of your income doesn't get you to 15% of your income, then what you'll do is go back and put a little more in the TSP to get you all the way up to 15% of your income.

Gotcha. Gotcha. Okay. Hey, thanks for serving your country, man. We appreciate you, and thanks for calling in. You're a sharp young dude. You've got a bright future ahead of you. Rebecca's with us in Illinois. Hi, Rebecca. Welcome to the Dave Ramsey Show. Hi, Dave.

Thanks for taking my call. Sure. My question is about a universal life policy. I know that you say absolutely not, but here's my situation. It is a policy that my parents have owned for almost 30 years. Oh, that's sad. Yeah. It covers my mom, my dad, and the four of us kids. My mom passed away two years ago and

when she died, I became the owner of the policy. So my husband and I pay about $50 a month for this policy. It covers my dad and us four kids. The kids' amount is about $10,000, and the only reason I hesitate not to keep it, with the exception that my mom always wanted me to keep it, is I have a brother that is a drug addict, doesn't make the right choices, and he has two small children. And the coverage would cover a funeral for him. My father does not need the coverage.

My parents were divorced. You know, if anything happens to him, I am with an adversary. Let's stop for a second then. So you're going to buy a $10,000 policy on your drug addict brother for $600 a year? Yeah, that's the question. That's really what it comes down to. I don't know if you can cover him another way. I doubt it.

He's probably not insurable. Right. If he's that bad, his health probably... I mean, he relapses. You know, it comes and goes. Yeah. So, I mean, it's up to you. What's your income, household income?

My husband and I make over $200. Okay. Yeah, I keep it just for that. It's just a charitable act on your part. It's not a good decision, but you're stuck if you want to buy insurance on your brother. Right. And it's a gift. I mean, I kind of view it as either of my other no if your mother

gave you a box of poison that she thought in her good heart was not poison that is not a gift it's a mistake i mean i mean if something happened to one of my other brothers i could pay for their funeral with it as well as a gift to their family yeah but it wouldn't be the way you would do it wait a minute wait a minute how much wealth do you all have to their family. Yeah, but it wouldn't be the way you would do it. Wait a minute. How much wealth do you all have? My husband and I? Yeah.

We got a lot in retirement, like $350,000. Okay. How much money do you have in non-retirement savings? Not a lot, about $10,000. Okay. I'd keep it until you get that built up. But let's pretend you had $100,000 in non-retirement savings. Mm-hmm.

Then you just self-insure through your brothers. Absolutely. It's not a gift for the healthy brothers. It's only a gift for the drug addict brother. Right. And I would self-insure through his funeral and let the other people take care of their own families. Okay. And if you want to give them some money, just give them some money. But don't buy a bad policy to give them money.

Because this is not a deal. If you didn't already own this, you would not go buy it. No. And I would sell it if the circumstances weren't what they are. Yeah, I'd just cancel it immediately. And so once you've got enough to self-insure through, meaning you be willing. I've got $100,000, so I'm saying in order to cancel this policy, in my mind, I've got to be willing in good conscience to pay for my drug addict brother's funeral if something happens. Okay.

I'm going to earmark $10,000 of my $100,000 for that, and I'm going to cancel this crap. Right. But what happens, though, is you've got all the emotions tangled into the product. Absolutely. And that's what you're trying to untangle. And that's why I'm trying to think through this with you to say, how else could we cover the need without getting ripped off? Because it's a bad product.

I mean, it's just $600 for $10,000 worth of insurance effectively. Just horrendous. And a group policy like that on health, weird. Weird deal. I mean, on life, weird. So anyway, yeah, once you've got a little bit more money and you make enough money, you're going to have a little to the side pretty soon. Once you've got a few more thousand dollars, you know,

$50,000 to $100,000 sitting in non-retirement cash, which you'll have before you know it, making this kind of money, I'd cancel it at that point. You don't need to keep it for your dad. You don't need to keep it for your other brothers. The only reason you're keeping it for this, and we're certainly not keeping it for your mother's memory, she meant well, but she made a bad purchase.

Sweet lady, didn't know much about insurance. Got ripped off by her friend over at the church, or whatever it was, right? That's what you get into. That's how everybody buys this crap. Somebody they know that they have a relationship with who three minutes later is no longer in the business. That's how this stuff sold. Anyway, you got a good heart.

Let's try to untangle it. Is there other ways we can do good things for our family without having to do this? For right now, I'd keep it, though. Good question. Thanks for calling in. That puts this hour of the Dave Ramsey Show in the books. We will be back with you before you know it.

In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, it's Blake, Chief Production Officer for the show. And here's a little tip for 2018. Go download our revamped Dave Ramsey Show app from the App Store. We're always listening to your feedback and adding new features to make it even better. Check it out.