The Ramsey Show - App - My Husband and I Have a $6 Million Portfolio and Disagree About a Rental (Hour 1)

Episode Date: December 28, 2021

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the 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. Dr. John Deloney, Ramsey personality, best-selling author, and host of an explodingly popular podcast. I've got to come up with a better phrase for that. But it is not the explodingly popular. So, yeah, there's a lot.

Well, anyway. But, Dave, you've been doing this for 30 years. There's a lot of people listening to it in a very short period of time. And I'm proud of it, and I am proud of you. And I love that it's popular because what you're putting out there, the material, the answers to questions in people's lives is absolutely valuable. And it's unique, and it's fresh and refreshing and so i'm glad that i appreciate that i'm glad the curve on the listenership is through the roof i appreciate that plus i just like being associated with a big hit well and i think 30 years you've been making up words so why start now stop now

right we're gonna go with exploding this isn't the season to fix your grammar, Dave. So I say explodingly, let's do it, man. I'm in. It's a little late in life because, number one, I'm beyond help. Number two, I just really don't care. That's the dufecta. Is that even a word? That one does it right there.

Open phones if you want to talk to this couple of clowns. Open 888-825-5225. We'll talk about your life and your money. The call is free, and some say the advice is worth exactly what you pay for it. Laura is with us in Los Angeles. Hey, Laura, welcome to the Ramsey Show. Hi, thank you for taking my call. Sure, what's up?

I'm a little nervous. I'm going to try to calm down. Oh, you'll be fine. We've never lost a patient. You'll make it. Okay. My husband and I are at total odds kind of right now what to do about a decision. And so we're calling names. So we're new listeners. We've only been listening for a couple months, but we've listened a lot. And so basically we're 15, 60 years old. All of our money is in real estate. We've done well in real estate. We have about $6 million in paid off real estate. It's all rentals. I hate it when that happens.

And we probably made some stupid decisions, but we were lucky and it worked out. I think you've made some good decisions somewhere. So anyway, where we're at right now is everything is owned outright except for our personal residence and a vacation home in Palm Springs that's a very successful Airbnb. Our personal residence is worth like $1.6 million and we owe $350,000 on it. And our rental home is worth about a million and we also owe $350,000 on it. My husband wants us to sell a paid off rental that's about worth about 350,000 that we own free and clear. It brings in about $2,000 a month and it's really, it's a condo. It's easy. It's, you know, it's just the money

just comes in. He wants to sell that to pay off our Palm Springs Airbnb just so he just feels like he's 60 now, and he just wants to not have that debt. You know, he wants to just have a home mortgage, and he wants to really attack the home mortgage. And this whole debt-free idea is brand new to us, you know. And I want to keep it because we have no retirement other than rentals. We have no stocks. We have no all the rest. You have $6 million in real estate.

We do. No whining allowed. $128,000 a month. No whining allowed. This condo's not going to break your retirement bank. Right. Sorry. I mean, it's okay.

So why did he pick that condo to sell out of all the other properties? He wants to sell something. Well, also, our tenant just moved out to vacant which california rent laws would make it easier you know to sell a vacant unit and so it's just sitting there and rent it you know it's just and we're at a stalemate like kind of locking ahead and i said well why don't we take rent it take the 2000 and since we don't need that to live on it just attack the palm springs mortgage you you know. And then we could just, and they're already on 15-year fix that we're already, we only have 13 years left. So what is your household income?

It's all off of rental properties is your income? All off of rental, basically, yeah. So what did you take in in cash that you put in your pocket that you paid taxes on last year? $200,000. On $6 million? Well, yeah. That sucks. Well, it was like $340,000 is brings in, but then we write off a lot.

I'm not talking about depreciation, but, I mean, you have actual expenses that eat your cash. I would hope you're making $340 after expenses on a $6 million portfolio. Well, maybe it's just because real estate's so expensive like our home is in that you know what i mean no no no no no cash you should have 340 000 income net of expenses before depreciation on six million dollar portfolio anyway that's still low but you ought to at least have that yeah well we don't don't. So what is the cash after expenses before depreciation that you guys have coming in to work with? I'm not sure. Okay.

Well, that'd be a good number to have. Okay. Because that's called your income. Right. That's what you have to work with. Because if I wanted to answer the question, how fast can I pay off $700,000 worth of real real estate debt i would need to know what my income is to do that with i will tell you 24 000 on a property that's worth 350 000 as your gross income meaning you're netting somewhere around 17 000 really sucks the roi on that condo is pitiful yeah it's bad i don't care if it's low if it's

hassle not got much hassle you're not you know you're not making a you're making what four percent on your money that sucks so i thought i was hoping maybe you're gonna tell me he picked it out because the income's horrible on it but But no, she said it's empty. Yeah, right now. Okay, yeah. Well, as you know from listening for just a few weeks, I'm going to lead you to be debt-free as fast as I can. So the answer to your question is going to be you have to go back and do some homework,

and you guys have to keep talking because you need to get to the bottom of this. So number one, we need these properties to be producing and a cash on cash rate of return that is substantial okay number two once that's our income once we know what our income is number two how fast if we keep the condo can we get these seven hundred fifty thousand dollars worth of debt cleared how many years is that going to take How many years is that going to take? How many years is that going to take? Five years, six years, seven years? He's 60 years old.

He doesn't want to leave you with debt. And that's the goal. He's trying to take care of you. So then if it's going to take you 15 years because you're really making $200,000 on this $6 million because your real estate sucks, if that's really all you're making on it and it's going to take you 10 or 15 years to clear this, yeah, you need to sell the condo because you need to clear this debt as a part of preparing for him to not be there or the golden years, whatever we want to call this next decade or two. If, however, you're making $300,000 or $400,000 that you have cash on at your fingertips,

which I suspect you should be. I mean, unless these properties are just not well run, you should be. I feel like because everything's so expensive. No, it's not going to do anything with that. It's not going to do anything with that. Right. Okay. Yeah.

If a property is worth a million dollars, it should rent for a price. The rental price should reflect the value of the property. If you've raised the prices as the values have gone up because rents go up as values go up. And so anyway, I own several hundred thousand dollars, several hundred million dollars of real estate. I love real estate estate so it's my you're in my sandbox right now kiddo so you either need to clear the debt with your income or you need to clear the debt by selling the condo in the next five years now you run the numbers out and decide which one's the best In an uncertain world, being a good steward of your money is more important than ever. While some circumstances can't be controlled, there are items within your budget you can take charge of,

such as your healthcare costs. For nearly 40 years, Christian Healthcare Ministries, or CHM, has provided a budget-friendly means of sharing for medical bills when our members need it. Learn more by visiting chministries.org slash budget. That's chministries.org slash budget.

Christian Healthcare Ministries is a Ramsey-trusted provider. Dr. John Deloney, Ramsey Personality, is my co-host today. Open phones at 888-825-5225. If you're tired of feeling stuck with your money like you'll never get out of debt or save enough for the future, it does not have to be that way. You can make progress with your money faster and faster and faster with Financial

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to 33 789 our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee. It means even if you mismeasure, you pick the wrong color, they'll remake your window blinds free. Free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code RAMSEY. All right, today's question comes from James in Texas.

James writes, My wife and I pay our bills based on our income. Good, James. I earn more, so we split the rent 70-30, go 50-50 on the electric bill, and I pay for cable, water, and internet. When we moved into a new rental, she asked if she could hold off paying rent the first two months, and I agreed. What a saint.

The third month, she was late with her contribution, and now she's going to be late again this month. I asked her to manage her paycheck and other debts so that she uses the second check of the month to save for rent and electricity to avoid being late, and she got mad. She's a little late to the mad party. I'm already there. Was I wrong anywhere? Yeah. Everywhere, James. Yeah, you were just wrong before the whole thing started.

A hundred percent, James. Every step of the way. We both are going to smack you around. Are you ready? I was helping her manage her pay. What a saint. More responsibly because paying things late is a bad habit to break. You know what else is a bad habit?

Being an idiot. James, what are you doing it's like he's living with a with a co-worker right like they're co-running a business i don't know man listen dude this is your wife you remember the part richer for poorer in sickness and in health? So when you're laying in the bed with the flu, I hope she doesn't give you as much crap about making you some chicken soup because you're sick as you are about making her be a grown-up

and manage her money by herself. Oh, my God, dude. Really? Come on, man. So, yeah, here's the thing, son. You guys need to put your money together. Together you work on it. Together you make decisions.

And together we manage our money for the good of our family. This is not your roommate. The old marriage vows say, unto thee all my worldly goods I pledge. If you wanted a roommate, you shouldn't have gotten married. And if you want to divide up your life into mine and yours and you owe me this and that and I'll let you borrow this from me. Man, just listen to that language. That's not a marriage. It's not a marriage.

That's a business arrangement. It's not even a good friendship. No, it's not even buddies. You know what? We all had this friend in college that was like, hey, bro, remember you owe me 428 from like three months ago the mustard that you used in the refrigerator door that was mine so you gotta pay for like four dollars a quart dude i can't everyone had that friend you know what i learned about friendship in college i got around some guys you know what the fights were about who was covering the check like this is ours right that's just knucklehead college buddies this isn't a husband and a wife.

So, James, y'all have a pronoun issue, and that is y'all got to sit in a room and say, what is yours and mine is ours. That's it, right? What yours and mine is ours, and we got to do this thing from the floor. And you're not sanctioning irresponsibility, and she's not going to sanction you

being a control freak, out-of-control, arrogant jerk. Yes. Because I had enough adjectives in there. And I kind of want to hug you, man, because you know what? I read this and I... After you called him an idiot. I know. Hey, that's a term of endearment for me.

I know. I want to hug him because I think he's actually trying to help. And he's asking, did I screw this up? Yeah. Yes, you did. You did. But that question... It is astounding that he could be that clueless, though, really. I Yes, you did. You did. But that question. It is astounding that he could be that clueless, though, really.

I know, but it's endearing. I wonder if that's even a real question. It's endearing. It's endearing. Is that dumb? Yeah. When he's like, hey, did I mess this up? And everyone's like, yes, of course.

Relationally, you get a sub-zero score here. No, I'm going to give him a one. No. Because he looked in the mirror and said, maybe it's me. Well, now she's pissed. Why did this woman wait this long to get pissed? I've got to tell you, before the first sentence was over, the hillbilly woman at the

Ramsey house would have been over it. I'm just saying. I know, but she's getting a free ride here with this guy, this Romeo who's paying for the internet. She won the lottery. I'm going to give you a little time off on that rent there just because I really like you. Listen, lady. I'll get the internet and the cable because that's what men in Texas do.

Come on, James. Oklahoma City, Chelsea, get us out of this. What's up? Okay, I'm a little nervous. You're going to have to bear with me. Okay. But I'm a stay-at-home mom, and I'm trying to start a side hustle planning murder mystery parties. But I'm, like, almost totally blind.

And I'm not sure how upfront I should be with my clients about that, because I don't want to be disingenuous with them, since it is a visual medium involved. But at the same time, it it's like it's my medical record is that really their business i'm i'm not sure what to do because i don't want to mislead people flip shoes you were going to a murder mystery place would you care if the lady that put it on was blind not really unless unless they couldn't do the job you win the award can you plan awesome parties yes and to the extent that your site limitation would cause a mistake you can go ahead and disclaim that on the front end, and people will give you a lot of grace. Okay, that's a good idea.

I didn't think of that. But you go, look, but it's not a thing. I got this. And if I don't got it, you can call me out on it, and we'll work it out together. But I got it. I've done 20 ticks of these or whatever you've done, and there's no problems and so on. Chelsea, you throw that head back and go. Yeah, have at it, but just treat other people like you'd want to be treated.

It solves almost all your business ethics questions. Okay. And by the way, if I were your customer, that's exactly what I would want. I don't care if I'm coming in there to have a party and have fun. If the person conducting it is whatever fill in the blank i want an awesome party i don't care until their whatever affects my party right but if it affects my party uh and it's an and i need to have a little bit of compassion with that person or a little bit i'd like to have had a heads up about that let's have a conversation about it yeah but

so i don't get surprised because i really you know like i'll tell you i'll give you an example okay i went to check into a hotel a while back and uh we use only debit cards and the stupid debit card had gotten an algorithm hit for id for id right for id theft and i and then the people come back from the uh desk and they go well you're over your limit well honey my debit card don't have a limit okay this is freaking me it's got i can buy a car on my debit card if i want to right so but i'm it's late at night i'm tired i'm exhausted and i can't get in a stupid hotel and i'm pissed at my bank i dial up my personal banker and i was unhappy with her can you imagine me doing that yeah to which she says hey i'll get this fixed in the morning i'm at the visitation for my dad's funeral can i work on it in the morning to which dave goes oh you're a butt to dave he says to himself dave the butt you know

you so in other words if i had had that piece of information i might have been a little nicer to her right you follow me yeah so just give me enough information so that i can be kind if i'm the customer if there's a mistake that uh might be related to the information. And Chelsea, I think what's going to cause you the most grief is if you walk into business deals self-conscious of something. If you think you're bringing an impairment to something, then you're going to not sell yourself as strongly. Go in with your head held high. You're going to do a great job. A community with you is going to help you fill in your gaps, and you're going to go get it. The reason we know you're going to be good is you bothered to ask the question. That's awesome.

You weren't arrogant and throwing around entitlement stuff or something. I love it. You just said, hey, how should you do this? By the way, folks, if you're wondering how to act in business, always ask the question, how would I want to be treated if the roles were reversed? Do unto others as they would do unto you. It solves almost all your business ethics questions. We'll be right back. In the lobby of Ramsey Solutions on the debt-free stage, Charlie and Rachel are with us.

Hey, guys. How are you? Hey. Hey. How's it going? Better than I deserve. Welcome. Where do you guys live?

We live in Park City, Kansas, just outside of Wichita. Oh, yeah. Very nice. Well, welcome to Nashville. Thank you. Good to have you. Love it here. And all the way here to do a debt-free scream.

How much have you paid off? We paid off $40, forty thousand four hundred and eighty five dollars very good how long did that take 28 months good for you and your range of income during that time uh 65 to 80 000 cool what do you guys do for a living i am a police officer with the wichita police department and i stay at home and have a side gig where i refinish furniture. Oh, cool. Very good. So what kind of debt was this? $40,000. It was two credit cards, a car debt, also braces. And then we also had to cash flow emergency dental care that happened when we were doing the, when we started the program. Okay. Wow. Wow. So you guys were kind of normal. Yeah. Yeah. Yeah. Just making money and it's all

gone. Yeah, exactly. Yeah. And, uh, two and a half years ago, 30 months or so ago, something happened. What happened? Uh, you know, we really just got tired of, of our money just being gone. Like you said, like every month, uh, we live paycheck to paycheck. And at the end of the month, our money went to everybody else except for us. Yeah we'd get I think we did Dave-ish for a long time so we decided so you kind of knew Ramsey stuff Ramsey issue you knew what you were doing a little bit but but didn't do it yeah and then we went and did the class and just decided that we just needed to go full force and get it done. So the class gets you off of center, or you went to the class after you got off of center?

No, we were kind of doing Dave-ish, and then our friend offered the class. Oh, okay. And they said, hey, watch. That's game on. Yeah. That's the gas on the fire. It is. Yeah.

And it was, you know, right at the beginning, the class teacher encouraged us to cut our credit cards up, and I was very hesitant. That was kind of my fallback. That's when you knew you were ish. Yes, yes. And then probably a month after the class, I think, I said, you know what, we're going to cut these things up. And we cut them up and I've never had a credit card again and I never will.

Wow. Just like that. Yeah. Laid the pack of cigarettes down, never pick it up again. That's exactly. Exactly. Never smoking again. Exactly.

And we've paid cash for everything ever since. And it been it's been wonderful i love it i love it so this past year has been gnarly for stay-at-home moms for police officers yes for people's finances how have you guys just kept taking another step in another step what's kept y'all going through a really messy year and a half or two years yeah it was uh you know we were right on track uh we planned to pay it off in probably like 20 months 24 months and then one weekend i work extra part time jobs i work security at churches baseball games whatever i can to make more money and it all stopped it ended so you, it was really just working together and having that budget and sticking to it that helped us get through it. And it extended it a little bit, but you know what, we're not going to quit. Yeah. It was a crazy year. Like you said,

just within 24 hours, all that extra money that we had worked so hard for, he worked so hard for was gone because of COVID. And we're thinking, well, that's it. We're just going to be in debt, you know? And then, um, you know, we had a rough year because of all the turmoil that our country's gone through and the rioting. And so Charlie actually worked so much overtime that we just took all that money and just kept going, just kept throwing it at debt. And at the end, it actually wasn't that much longer. It was only four months past what we had originally planned. So God still provided for us, and it was great. But during that time, you know, there were times where we thought, man, we're not going to make our goal. It's not going to happen.

But it ended up being great, and we got through it. Yeah. And, I mean, I could say when we first started, just thinking $1,000 a month emergency fund seemed like unreachable for me because it was like at the end of the month you had like $25 left over. But it's possible. And $40,000, if you would have asked me when we first started that you're going to pay off $40,000 in 28 months, I would have laughed. But we put our minds to it and worked together and we did it.

And you had all these hills and valleys all along the way that you didn't anticipate when you started right once you put down the 40 and said we're doing this but you didn't know pandemic you didn't know you suddenly you were gonna lose all the ot all the extra job stuff you didn't you didn't know all these challenges were going to come but what is so interesting to me is that a couple working together as as one unit or a person when they set something very clearly in their mind and then someone tells them or something tells them oh you're not on track we just automatically adjust our lives to get back on track right once we really believe it i mean it's like we cannot it's something upsetting to our psychology that says oh wait a minute that's already assumed then i'm not going to unassume it we're going to do something else right and you found another way right exactly

and god sent you another way i mean it's just it's so weird how you grab the gravitational pull of a clearly defined vision clearly defined goal is uh it's pretty amazing i'm so proud of y'all yeah it's been it's been great and i think you, in the last two years, like, our car needed four brand new tires all of a sudden. And it was, I mean. No, it doesn't. Not all of a sudden. Well, not all of a sudden. They don't wear out all of a sudden.

Right. But we had the money. And we just put four new tires on there. You realized it all of a sudden. Yeah. Oh, crap. Those little belt things are waving at you. Yes, exactly.

When you go out to the garage, that little thing's sticking out there looking at me yeah we just started paying attention more and it's amazing what happens when you pay attention and yeah a lot cheaper than a flat yes exactly and yeah and when we the first time we cash flowed our christmas time right was uh amazing because we really had to strategically figure out you know what all is gonna be under the tree and things of that nature for each other. And before, we would just kind of throw it on a credit card and then see where we were at January 1. And our kids had to learn the word no, which they lived through it. They look like they're still breathing.

I know. Shocking. They're quite alive. That's just so extraordinary. What do you guys tell people the key to getting out of debt is you know it's just working together and really uh i don't think i'm more of the free spirit and i like to man i like to go to tgi fridays and have the big steak and potatoes uh every friday and she's more of the more the conservative one so it's really working together and staying on that budget and having that budget every month is really what has kept us there.

And being both of us on the same page, I think, is the key for us. I still don't like to do the budget, even though I'm a saver. It's stressful, but it has to be done. But then once it's done, it's like, okay, now I have a roadmap. Now this is where we are. This is what we're doing for the month. So it's kind of a crazy feeling, but I don't know what we would do without the budget now. That's even scarier.

And, you know, the security you feel being out of debt and just having a budget and you having money available for emergencies, I can tell you, husbands, it's good for your spouses to feel that security. And I could tell the difference when, you know, we're at this point we are now. Yeah, it's a big deal. Yeah. Financial peace. Yes, exactly. Two words Yeah, it's a big deal. Yeah. Financial peace. Yes, exactly.

Two words that don't go together like Fauci math. Pretty cool. Pretty neat, dude. Well done, you guys. Thank you. I'm so proud of you. Thank you. Very, very well done.

And you brought the kiddos. Bring them up. What are their names and ages? Let's get them in the debt-free screen. This is Brooke, and she's 14. She just turned 14. All right. And this is Noah.

He's nine. All right. Good-looking guys. Way to go. Good family. This is fun. You changed's 14. She just turned 14. All right. And this is Noah. He's nine. All right. Good-looking guys. Way to go. Good family. This is fun. You changed their lives, Mom and Dad. You're heroes.

Thank you. I'm proud of you. Yep. She's saving for a car right now. Well, hey, go. Go, Brooke. Yeah. Good stuff.

Well, we got a copy of The Legacy Journey for you. That's the next chapter in your story. You've changed your legacy, and you'll get to read about that and learn more about it as you go. And also an extra copy of copy the total money makeover so you can give that away like your friends encourage you guys to go to that financial peace university class and when you went ding ding yep no more ish right exactly it's the antidote for ish like it good stuff all right charlie and rachel brooke and noah wichita kansas forty thousand dollars paid off in 28 months making 65 to 80 count it down let's hear a debt-free scream three two one

that is fabulous. So well done, you guys. Incredible. Way to go, guys. Well done. Yeah! That's how you pull it off. I love it.

Two people with a goal can do anything. Yeah. And will adjust their lives to hit that goal because you're going to hit bumps. And you just reset the steering. Reset the steering, reset the steering. I love it. This is the Ramsey Show. Thank you. Dr. John Deloney, Ramsey Personality, is my co-host today, best-selling author and host of The Dr. John Deloney Show,

which you ought to check out as a podcast uh it is uh if you're not listening to it you're one of the few it's really a going zoom zoom steve is with us in daytona beach hey steve how are you hey dave how are you guys doing today better than i deserve brother what's up that's my wife and I are in a dilemma. We want to pay our house off. We owe $127,000 on a $250,000 duplex. And she was wanting to know if she should go back to work or if we should use our retirement to pay it off. And here are the numbers.

We're both debt-free. We have a fully funded emergency fund. And our retirement amount is 400 or excuse me 464 000 so what do you think total 464 000 all that's all the nest egg you guys have correct well plus we have i have a fully i have a pension a lifetime pension and we have a social security okay and so what is your income nowadays in retirement? $48,000. Okay.

$48,000. You're able to live on that? Oh, easily. Okay. Plus, if you didn't have a house payment, it would be real easy to live on it. Oh, you know that. Yeah. And so the money's all in 401Ks or IRAs and that kind of stuff?

The money is in mutual funds and Roth IRAs. Okay. How much in mutual funds that's not in retirement? Well, actually, it's all in retirement. Okay. Okay. So it's all in an IRA or a 401k, but in a mutual fund or not. Okay.

Correct. 403B because I was a school teacher. Okay. So you got $467,000 if we take out $150,000 to pay off taxes and the house. Right. Then you've got $300,000. We have $300,000 plus. You'd have $300,000 left over, right?

Correct. After you paid off the house and the taxes, and you can live on your income without touching the $300,000? Oh, easily. And you're 65? Correct. Okay. My wife's 55.

And so if you don't... She was thinking of going back to work. She does not need to go back to work. If you don't touch this money, the $300,000, if it's invested at a rate of return of 10%, it will double in about seven years. So at 72, you'll have $600,000. At 79, you'll have $1.2 million. That's if you don't touch it. Right.

In six years, she'll get Social Security, too. Well, I i mean you're living on the 48 you'll live on the 48 plus uh her income will go down but then it'll go back up with social right she's she's oh no she's not working now no she's we're both retired okay that's right but she was thinking to go back to work now i'll pay at the house no not as long as you don't have to touch this nest egg i mean after you pay off the house as long as you're not living out of the nest egg i'd pay off the house today and uh i don't think just to go back to work because of the numbers i just gave you sounds pretty comfortable to me so walk me

through that normally we tell folks don't cash out retirement but he's got this pension well he's that it's don't cash out retirement before you're retired. But they're retired, so they've got taxes but no penalties. If it's his retirement, and we can't cash hers out, she's only 55, but I'm assuming he's got enough that they can do this. But between the two of them, they'll have a nest egg of $300 left over after we cash out a portion of his to pay off the house. And then how do you get get what's the difference between

a non-retirement mutual fund and a just a regular old john went to the store and got a mutual fund well the mutual fund john went to the store doesn't have uh didn't have any tax protections okay and so the taxes have already been paid on it so it's after i get my paycheck i'm contributing to you know so if i take if i take a hundred and $127,000 out of a mutual fund that's not in a retirement account, I take $127,000 out. Because I've already paid taxes through my payroll. Right. But if it's over in a 401K, I've got to pay taxes on it, so I've got to take enough out to pay the taxes and the $127,000. Okay.

So now we've got a $150,000, $160,000 withdrawal out of $467,000. Okay. So I don't want to be taxed. So I would have cashed out, if he had mutual funds that were not in retirement, I would have used those first. Because the taxes weren't even paid on them. They're going to take out extra money. I want to leave as much money in there churning to make more money as I can.

Okay. So I would have gone to that first to let it, well, just tax efficiency is what it amounts to. Brian is in Rochester, New York. Hey, Brian, welcome to the Ramsey Show. Hey, Dave, thanks for taking my call. I appreciate it. Sure.

How can we help? Got myself into a little situation here. So I got myself into a car lease sometime back in November of last year. I was working from home at the time, so I wasn't going to put a whole lot of miles on it. Just recently got myself into a new position as of a couple months ago, which is now more of an outside sales position, which requires a lot more travel. So basically, I have theased vehicle i'm putting a lot more miles on it now than i had originally anticipated and i'm just curious as to what your thoughts were as far as what i should do at this point well you you really got in a stupid mess and then you made it even worse with adding the miles to it so it was never never smart, and it didn't just get dumb all of a sudden

because of the miles. It was dumb to start with. So we're going to get out of it. That's what we're going to do. Have you looked up what the car is worth? I have a general idea as to what it's worth. So it originally was about a $40,000 vehicle. It's probably now worth somewhere around 34 okay look it up on kelly blue book

kbb.com on private sale we'll use 34 for our discussion have you called the fleece company and asked what the early buyout is on the fleece no i have not okay it was originally 40 i assume you put down nothing let's call it 37 is the buyout meaning meaning the early payoff, where you pay off the whole freaking car because you sell it. Okay? If that's the case, you're $3,000 in the hole, $37,000 minus $34,000. If those numbers turn out to be true, they're probably not going to be too far off of that,

but you need to get the real numbers. And then so, yeah, you just got to have that $3,000, and then we've got to have enough to get you some kind of car to drive around. But if you're putting a bunch of miles on it, whatever you're driving, you're destroying its value. So you need the least expensive car that will get the job done, which means it doesn't break down. And and it's not some kind of dinky, but little smart car because you spend all day in the car and you're going to be at the chiropractor's office if you have that so you need a you need like a real car not a pretend car and uh and you know something that that is going to be reliable but you know maybe a ten thousand dollar car max and even if you borrow the ten thousand it's better than being thirty four

thousand in debt and running this miles up on this lease because you're going to get hammered with the miles you're putting on it at the end it's really turned into a bad situation don't lease cars period so folks let's talk about that for a second okay 78 percent of the bmws that that leave the lot this year will be leased. Really? New car dealers make more money in their pocket on the transaction when you finance or lease a car than they do by far. They make about six times more if you lease or finance the car with them than they do if you just walk up and pay cash for the car. There's not a lot of spread on cars. They don't make a ton of money.

The most profitable square footage on the new car lot is the finance office. The second most profitable square footage is the shop. It is not the showroom floor. The showroom floor is the gateway drug. It's what gets you hooked and so the average car dealer will make 1500 to 2500 dollars in their pocket cash on a 25 000 car on the lease they make five to seven hundred dollars less if it's bank paper or Chrysler Motor and it's just straight up debt. And they make $2,500 less if you pay cash on a $2,500 car.

The reason all people are leasing cars is because they're selling you that because they make more money on that than they do anything else. So please don't let them set the tone for your finances. And when you drive down the road and see all these BMWs, just know it's not real. Yeah. It's a mirage. It's a rental car. It's a rental car. Jeez.

Wow. And it's not just Beamers. It's Lexus. It's everything. Yeah. You're getting slayed, people. This is The Ramsey Show. Hey, it's Kelly, associate producer for The Ramsey Show.

This episode is over, but if you heard about an event, product, or service and didn't have a chance to write it down, don't worry. We list everything you've heard about during this episode in the podcast show notes section or head to theramseyshow.com. Thanks for listening.