The Ramsey Show - App - My Wife Isn't Onboard With Cutting Up Credit Cards (Hour 3)

Episode Date: December 19, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. That's 888-825-5225. Starting off this hour is going to be Brandon in Maryland.

Hi, Brandon. Welcome to the Dave Ramsey Show. Hello, Dave. How are you? Better than I deserve, sir. What's up? So my wife and I were debt-free and we seem to be on opposite sides about having a credit card. We typically, after our bills are paid each month, have a surplus of about $4,000 and we save every month. But she likes to use a credit card.

I have cut mine up and I can't get her on board. And I'm just trying to figure out what I can do. Maybe you have an opinion on how I can go about talking to her about it. Why does she want a credit card? I honestly don't know. She didn't give me a reason, but I believe that after reading your book, of course, that it's so mental that if you have a credit card, even if you have the cash to pay it off each month, that you're going to spend more on like if you actually had cash in your hand or you were using your debit card.

But I guess you're just not seeing my side of it. Well, I mean, it's not your side of it. What you just declared were actual facts. So it's not just your side. But that doesn't matter. I mean, the question is, why does she want a credit card? If a debit card will do everything a credit card will do, why does she want a credit card? Yeah, I mean, it's a reasonable question. Yeah. I i mean if i give you a debit card and you're

able to do exact same things you're able to do with your credit card our budget operates exactly the same way there's no limitations put on you that you didn't already have on you by the two of us working together what is the objection with the credit card and i guess you need find that out because what it amounts to is you're just stabbing in the wind and you don't know what you're aiming at here. So you need to find out why it is she feels like she needs a credit card. Because my guess is that she probably has some bad information. Yes, and I think her mother has told her that you should lower the amount on the credit card and it wouldn't be such a big deal so if we lower it from what it's at down to something around

500 or less then i don't really care what her mother thinks her mother's obviously a fool okay that's not the issue the issue is look at wife, the lady that you're married to, and say, if you had a debit card that did the exact same things that a credit card would do, what is the problem with that? Right. Well, I'll do so, and hopefully I can talk to you in the future and give you an answer. Yeah, and I think you can give her an answer then, because she's going to say, oh, I want the airline miles,

which is a bogus argument because 78% of the airline miles are never redeemed. If you do want to try to redeem them, you end up sitting on the wing, and you go through 73 cities to get to one location. You will find out how badly you've gotten screwed by that great lie. Or I've heard the debit card is not as safe as the credit card. Another lie, because if you actually look on Visa and on MasterCard's website, they have what's called a zero liability promise to you in the event of fraud or theft with the use of your debit card or your credit card.

You have the exact same coverage. You are not liable for people misusing, stealing your identity, fraudulently using your card. You have the exact same coverage there. I can't figure out a reason to use one. So consequently, you don't have one, and I don't have one. And you do spend less with a debit card, but you spend even less when you use cash. Now, I personally use both. I've always got several hundred dollars in my pocket in cash.

I'm an old redneck. I like having two or three hundred bucks in my pocket and no matter where I am and I've always got a couple debit cards. One on my business and one on my personal account and there's money in those accounts and I travel more than any two of you put together both for pleasure and for business and I really don't run into substantial issues with a debit card that are different than you more than any two of you put together, both for pleasure and for business. And I really don't run into substantial issues with a debit card that are different than you run into with a credit card. So, I mean, they all get, you have to toss all of them every so often now with the ID theft algorithms.

Your bank is going to reissue these things pretty consistently, whether they're debit or credit. But you're not liable in the event of fraud. And, um, you know, you do actually spend a little bit less. The studies tell us with the debit card, because you understand you're actually using money out of your own freaking account. And so you do have to stop and think about it a little bit, unless you have, you know, unless you got a hundred thousand bucks in your freaking checking account, you have to stop and think when you're spending $5,000.

So a thought has to go through this process. So I hope that helps. Open phones at 888-825-5225. Cannon is in Texas. Hey, Cannon, welcome to the Dave Ramsey Show. Hey, Dave, how are you doing? Better than I deserve. Merry Christmas.

How can I help yeah you too hey so i'm uh i'm 23 years old i make about 40 grand a year i'm married life makes around 25 i would say um i've i've been a saver all my life so started working was 15, saved up about $55,000 in cash right now. Wow. And so, yeah, just sitting on that, I hate spending it. So I have that. I have about $9,401K, and then I have an additional about $6,500 in a Roth. Good for you.

And thank you. But I have a truck payment. It's only about $230 a month. I got about $7,000 left on it. And then my wife has about $11,000 in student loans, and that costs about $120 a month. So with me being a saver and such kind of a stickler on spending, and I save about $1,000 a month.

So I don't know if with the nearly $20,000 I'm in debt, if it's smart to just pay it all off at once and be done with it, or the $1,000 I'm saving a month, do I just piece that each month until I break it down? Your shortest method to building wealth is to become and stay debt-free where you have no payments. Okay. So what I would do if I woke up in your shoes, you've done a wonderful job of saving. Okay. And the two of you need to start working together on a written budget and start investing, not just saving.

But, yes, I would write a check today as soon as you get off the phone and pay off your student loan and your truck. It's going to feel really good. as soon as you get off the phone and pay off your student loan and your truck. It's going to feel really good. Then you need to set aside some of the rest of that money, three to six months of expenses, and call that your emergency fund. The other money, then, is for investing or for, you know, if you're ready to purchase some things or something as you're continuing to move along. You're doing a really, really good job of saving.

You're way ahead of the game at 23. Well done, but I'd be dead free in about 20 minutes from right now. Ready, set, go. This is the Dave Ramsey Show. Support a small business this holiday season that does business right. I'm talking about Grip6 Belts. It's the only belt you can get online with no holes, no flap, and no bulk. And the buckles come in really cool designs and are interchangeable. I personally own a number of these belts.

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the word orlando to 44 222 of course you can check entree leadership.com davramsey.com text orlando to 44 222 and you can always call the ramsey concier Team, they'll help you. 888-22-PIECE, 888-227-3223. Chris is with us in Washington. Hi, Chris. Welcome to The Dave Ramsey Show. Hi. Good afternoon, Dave. I appreciate this opportunity to talk with you.

My pleasure. How can I help? Yeah, so I'm curious about a move I'm contemplating making. We are all the way through debt-free and we're close, relatively close to paying off our mortgage. And we have enough in our investments. We have several investment accounts and several of them are the ones where we have paid our taxes on it and it's growing. And I'm just, I'm having a hard time really, what I'm having a hard time doing is being patient and paying off the mortgage under our plan. And I see the opportunity to just be able to pay it off right now. And I'm just,

I'm curious about you walking me through my thoughts on that, if that's a good financial move or not. So you have how much in non-retirement investments? None. So like you're going to put that number. Would not be penalized because they're not in an IRA or a 401K or something like that. You have regular investments that are not in a retirement account, right? Correct. How much?

So I have about $130,000 in those two accounts. Okay. And what is the balance on your mortgage? $72,000. Okay. Well, based on what we teach, you would be debt-free by the end of this phone call. Okay. I would never have borrowed on my home to have invested in non-retirement investing.

And I know you didn't technically do that, but by not paying it off from a balance sheet perspective, it's exactly what you've done. Right. Okay. And I can buy into that. I'm just, you know, it seems like a good thing. And I'm just at a place, we're at a place in our house where I really just want to see all this going. Yeah. And I feel like I have the want to see all this going. Yeah. And I feel like I have the ability to do that.

You do. And I can, okay. This week, this week, before Friday night, I'd be debt free, house and everything. Here's what's going to happen. You're going to have a sense of release. You've been doing all this analysis with your mind only, your brain, and risk is measured in your heart. You're going to have a sense of release when you pay this house off that you don't even see coming.

It's going to be a blast. You're going to love it. And then when you don't have a house payment, you're in a position to seriously pour all of the cash you want to pour in any kind of an investment and any kind of generosity that you want to do. And those are where prosperity come from. All of the, the average millionaire, when we uh did our study our largest study ever of the million of millionaires done in north america for chris hogan's book everyday

millionaires we found that the typical millionaire has paid off their home in 10.2 years and the first the people have a five million dollar net worth or less between one and five million dollar net worth the first five million in net worth comes from paid for house and 401k that's where it typically has come from now you get a book beyond five million it's the other stuff we're talking about where you start doing non-retirement investing because you don't have a house payment and that's probably where you are because you don't sound that old how old are you 51 yeah yeah you're gonna be're going to be sitting in some serious cotton, dude. You got the math on your side. You got a lot of time left to really seriously do some good stuff.

Yeah, I'd be debt-free today. I'd look at your budget, you and your spouse, and say, Mama, okay, now we don't have any payments. How much do you want to invest? How much do you want to play with? And how much do you want to give? And let's do some of all three all the time enjoy money give money and uh always invest money so good question alex is with us in texas hi alex welcome to the dave ramsey show

how are you better than i deserve what's up well i'm calling because i already had um car, you know, that was paid off already. But it was getting kind of old, and I wanted to get a newer vehicle. Oh, no. So I purchased a 2015 Ford Fiesta. But right now, I barely have like a year with the loan. Oh, no. And I'm trying to resell it.

Oh, no. But the value is super low. that was a mistake wasn't it yes and then I also went to CarMax and the value they're giving me is probably like $4,500 yeah so I have to pay CarMax is offering you a wholesale deal because they're going to turn around and resell the car for a profit. So what you need to do is go to kbbkellybluebook.com and look at what the private sale is. So they offered you $4,500 at CarMax? Yes.

And what do you owe on the car? Right now it's $10,417, so then I would still have to pay around $5,800. Yeah. Well, you don't because you're not going to do that deal. Okay. But if you did a private sale on this car, it'll probably bring $7,000, meaning you just put it up for sale with an individual. Now, what is your income?

My income is around $25,000. Oh, baby girl. What do you do for a living? I'm a teacher, teacher aid. You're a teacher? Teacher aid. Teacher's aid, okay. Yes. All right, you're single. How many children do you have? No children. Good. Good. Okay. I'm just trying to get out of this loan, you know, because I'm trying to save money for maybe a house. Yeah, you need to get the loan paid off.

So here's what I would do. If you made an extra $800 a month working an extra job or three and put all of eight hundred dollars a month towards this car you would pay it off in one year and by next christmas the car would be yours and it's paid for and that's what i'm going to recommend um because you're stuck and selling it and being six thousand dollars in debt or five thousand dollars or four thousand dollars in debt is not going to fix your situation you're have to increase your income and dump it all on this car debt and clear it as fast as you can, kiddo. And never borrow money to buy a car again the rest of your life.

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Students across the country are learning that they do not have to get trapped in this student loan epic failure that we have in America today. And we've launched a brand new eight-episode podcast that now over a million people have downloaded. It's called Borrowed Future. It was one of the top podcasts in all of 2019. Eight episodes, and if you're out riding around in the holidays, this is a chance for you to get your hands on what's really happening in this student loan world. And it will shock you how predatory this mess is. We've got behind-the-scenes folks and whistleblowers and people from the industry and people like Mark Cuban, Seth Godin, me, Ramsey Personalities, Anthony O'Neill,

and we're going to unpack the whole student loan mess for you. It's called Borrowed Future. Of course, it's on Apple Podcasts. It's on Spotify or wherever you listen to podcasts. You'll be able to get it and jump in and check it out. So here's the deal. We took most of the summer off on the debt-free screams because we were moving into a new office building uh today is our last day of taking debt-free screams

we took most of the summer off for debt-free screams we were still doing the show but we didn't do debt-free screams because the building was you know under construction and we had people coming in the lobby and all that kind of stuff so uh we came up about three months less four months less of debt-free screams this year than we usually do typically debt-free screams on the air doing their debt-free scream by phone or in our lobby add up to around 45 to 50 million dollars a year this year we still did 37 million 36 million 762 dollars and 40 762 thousand four hundred dollars we get it out 36 million 762 thousand four hundred dollars paid off in 2019 with our debt-free screams that's on the air screaming debt-free can you possibly imagine if 36 million on the air did their debt-free screams how many out there more there are and how much more there is i mean it's

it's it's hundreds and hundreds of million if not billions uh pretty amazing so thank you and congratulations to all of you because that was our last debt free scream last hour for this uh calendar year because tomorrow is our giving show and um then we'd be done for this year you'll be getting best ofs after that baby because me and santa claus we're buddies We'll be hanging out together. I'll be drinking some of his hot chocolate. I'm just saying. So, y'all jump in and just congratulate all of America. $36,762,400 paid off on debt-free screams right here on the air. Absolutely very, very cool.

So, man, pretty fun stuff. Pretty fun stuff. So congratulations, you guys. And, you know, year in and year out, it's usually $40 to $50, sometimes even over $50 million. But somewhere around that $50 million mark every year. Because we do one an hour. We do 15 hours of shows, three hours a day, five days a week. And so the most we could possibly get in, you know,

ends up being depending on how much people pay off, obviously, but, you know, upward of $40 to $50 million. And we're very close, even though we took a couple months off on debt-free screams. So fun stuff. $36 million paid off. Way to go, you guys. We are so proud of you. Joel is with us.

Joel is, of course, in Indiana. Hi, Joel. How are you? I'm well, Dave. How are you? Better than I deserve. How can I help? I have a question regarding a traditional 401k and a Roth 401k.

So my wife and I, we are debt-free except for the house. Good. And I have $200,000 in a traditional 401k. My company does match both the regular and the Roth. Mm-hmm. I don't have the money to pay the taxes to convert from traditional to Roth today. Correct. Should I still just go ahead and contribute to a Roth 401k,

start at zero and leave the traditional? Yes. Or is that? Yes. So I would start in 2020 with your 401k being Roth from this point forward. And the matching portion is always after tax as well. It's not Roth or before tax. It's taxable as well.

So you're still going to have some adding up that's not because of the match that's not Roth. But that's okay. And then someday when you get your home paid off, if you want to turn around and convert the rest of it to Roth, you'd have the extra money to pay taxes. To pay the taxes that that creates, you could do that at that time. But I wouldn't do it until you got your house paid off. I don't want to create another bill for you right now that's not necessary until we get your home paid off. So even because the compound interest is not going to be there.

No, the compound interest is exactly the same. Well, I'm saying... No, it's exactly... You misunderstand how compound interest works, okay? If you open four new accounts next year, the total is compounding. You're not losing any compound interest. If you took the $200,000 that you've got and put it in 200 separate $1 accounts, you will have the exact same mathematical result at the end as if you leave it in one lump.

The lump sum does not cause the compounding. The time and the interest on the money is what causes the compounding. Ah, that's where I was getting hung up. Yeah. Thank you. Yeah, you're not losing a thing on that. You're going to be just fine. And so from this point forward, you just have tax-free growth,

and the other is going to continue to compound. Now, what you're not going to see is the nominal dollars in the Roth side grow. But let's say, okay, let's do it this way. What do you make a year? Combined, $225,000. Okay. So let's say $30,000 going in next year, okay, just as a round number. All right?

So $30, dollars is going to go either on the traditional or it's going to go in the roth that's our question that was posed now the thirty thousand that goes in next year regardless of where you place it is going to do what the thirty thousand is going to do follow me i mean if it's if it grows ten the 30 000 that you put in next year if you put add it to the traditional the 30 that you put in at 10 would grow by 3 000 if you put it in a roth right if it grows by 10 it's going to grow by 3 000 the 200 that's sitting over there already if it grows by 10 is going to grow 20 000 see how i want to mean that they're they're disconnected

so you're going to get three thousand dollars growth on the 30 and twenty thousand dollars growth on the uh 200 regardless of whether they're together or not Okay. So 20, if it's, okay, let's try it again. If it's 230,000 at 10%, what would you get? You get 23,000, agreed? Correct. That's in a lump if you left it in traditional. If it's 30,000 over here on the side, you get 3,000, right? Right.

If it's 20, and you got 200 left over in the other account at 10 and that's 20 000 right right 20 plus 3 is 23 got the exact same growth out of two separate piles as you got from one pile that's what i was my point was did that did that make did that work that time yeah that makes sense okay cool that's how it works. That's why compounding doesn't have to be in one pile to give you the result. It all ends up in one pile, and that's the beautiful part of it. So very, very cool. Hey, thanks for the call, man, and Merry Christmas to you.

You're doing really good. Wow, what a great income, and what a great pile of money you've already built. Proud of you. This is the Dave Ramsey Show. We'll be right back. Our scripture of the day, Isaiah 40, 31. But they who wait for the Lord shall renew their strength. They shall mount up with wings like eagles. They shall run and not be weary. They shall walk and not faint. Edith Wharton said, there are two ways of spreading light.

To be the candle or the mirror that reflects it. Saul is on the line. He's in Ohio. Hey Saul, welcome to the Dave Ramsey Show. Yeah, hey, Dave. Hey, what's up? Hey, so a quick question here. I think my wife and I have $110,000 in student loans. She's on the loan forgiveness program,

but she has to keep teaching at a low-income school for the next 10 years. And she also needs to file her taxes married but separate, which therefore I can't put money in a Roth IRA. Should I put it in the traditional IRA? I mean, and after 10 years, switch to a Roth IRA? What do you recommend? Not really bad news. What's your household income? $95,000. You need to pay the student loans off as soon as you can. Student loan forgiveness is not working. 37,000 people have made application to get their student loan forgiveness done under the program she's under. 93 have been granted it.

She's not going to get her loans forgiven. Seriously, maybe I shouldn't even invest anything until I pay all the student loans off. As fast as possible. You need to both roll up your sleeves, put your budgets together, live your lives together, married filing jointly, and just get these student loans paid off as soon as you possibly can. That also frees her up to do whatever she would want to do with her career rather than dumbing down, possibly dumbing down her career in order to align with a federal program that is basically screwing people. So that's what you're facing.

Hey, hope that helps you. I'm sorry. Open phones at 888-825-5225. Annie is with us in Rhode Island. Hi, Annie. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call.

I have a really quick question. Okay. So we're always encouraging all the young people to not get the credit cards. Now they're starting to want to move out and get apartments, and they're saying we can't get an apartment without a credit score, Mom. What do you think we're supposed to do? And I don't know what the answer is. Well, the answer is they have to look at a different apartment than the one they were looking at. Not every apartment

that you don't need to. Absolutely. Credit score. Absolutely. Yeah. Okay. You know, just, you know, basically what they're looking at is a corporate situation where, um, you know, a 28 year old is the property manager and they've got bosses in another city that gave them strict guidelines on how to rent this corporate apartment. So they may not be able to rent there. They may be able to talk their way through it and just go, hey, by the way, the reason I have no credit score is because I have no debt, which means I can pay your stupid rent, which makes me an excellent tenant, not a bogus tenant. And so, you know, that's the kind of stuff that they get

talk their way through it number one but uh you may have to deal with a more traditional landlord uh for instance i own a whole bunch of property and i couldn't care less what somebody's credit score is when they get ready to move in what we do is an analysis whether they can actually pay the freaking rent that's all we care about. And the credit score is irrelevant to me. Now, I don't want a bunch of bad debt outstanding, obviously, but I'm not proud of you if you have an 800 credit score. It means you probably have two car payments, a student loan coming out your ears and credit cards going everywhere. I'm not sure you're going to pay my rent. That's how I look at it as a landlord, but I'm actually a knowledgeable landlord. I'm not using policies and procedures.

I'm using wisdom when we make a decision on putting someone in. Open phones at 888-825-5225. Scott is in Florida. Hey, Scott, welcome to the Dave Ramsey Show. Hey, Dave, thanks for taking my call. Absolutely. How can I help? I have a question regarding some investing advice.

I am 27, debt-free, doing pretty okay, soon to be engaged. Yay! Yeah. I just wanted to make sure the trajectory is okay with what I've been doing and where I hope to be heading. At the moment, I've got some cash debt on the side, got two IRAs and some mutual fund investments on the side. In addition to a comp life insurance policy, which is really the meat of my question, because I know your opinion on

whole life policies, but I wanted to see and get your advice on if staying with a comp life policy is good investing and good family planning. No, no, I don't do any investing inside of life insurance ever. I've never seen a policy in 40 years of doing what I do that has good rates of return after I dig into all the crap. Now, they present a lot of stuff out on the front of it, but when you actually dig in and look at the actual rates of return after all their fees, you don't make any money. So, no, I would buy term life insurance.

I would never use a life insurance product as an investment vehicle never there's not an exception never so yeah i would be getting term insurance in place if you need some to make once you're married make sure that your what new wife is taking care of something should happen to you and then i would drop that stuff as soon as that happens now if you're worried about insurability you don't want to drop this until you have term in place but um uh no we don't use we don't use life insurance in any form any name any brand anything as a investment product and um no i don't own any of it i heard somebody say the other day what a remsey secretly owns this stuff because that's what wealthy people do and they're

like that's dumber than crap of course i don't own a whole life policy or an investment policy of some kind it's just ridiculous all right dan is in ohio hey dan welcome to the dave ramsey show thanks dave merry christmas you and your family i'll make this quick okay you too i a few years ago i got in some real estate investments and just bought some properties for rental and quite frankly you know those those properties i bought the rental income that it brings me is necessary for our family. I'm married. I've been married 22 years. I've got seven children. I'm selling one of those properties right now I own free and clear to completely clear my personal debt.

But then I have debt on the rental properties. But, like I said, it's giving me an income. I want your advice. Okay. How many rental properties do you own that have debt on them? Well, it's all kind of rolled into one big line of credit. I have two commercial properties, three residentials, four actually,

but I'm selling the one that I own free and clear. And you're doing... I'm sorry, you have a blanket mortgage, one mortgage across all the properties properties they have liens on all the properties that's correct oh crap okay yeah yeah so but again you doubled your risk money every month yeah you doubled your risk i do realize that. Oh, bad structure. Okay. Because the problem is this is never going to go away until it goes away. So how much do you owe?

Let's see. If I combine all five properties, I'm about $370, is what I owe. They bring me about... And what are the five properties worth in total? Four and a half, maybe $475. Well, you're not even cash flowing. You're an illusion. By the time you pay all those payments on that stuff,

and then you run vacancy and you run expenses, you're barely breaking even what's your interest rate on that uh three seven five maybe four between there something like that three eight seven five i don't know i don't i don't think you're making as much money as you think you are uh you're under the illusion this is supporting your family, and I'm calling BS. You don't have enough equity there to generate the cash flow spread that you think you're generating. The math doesn't work unless you've got some very unusual properties. So, no, I mean, you do whatever you want to do.

I'm going to lead you towards becoming debt-free as soon as you possibly can. And, you know, keep some of this. Don't keep some of it. Start to move in that direction depending on what your household income is. But, no, $100,000 worth of equity. Oh, well. Okay. That puts us out of the day.

Ramsey Show in the books. We'll 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 Kelly, associate producer and phone screener for The Dave Ramsey Show. This episode is over, but if you heard about a product or service and didn't have a chance to write it down, don't worry. We list everything that is mentioned during this episode in the podcast show notes section. Thanks for listening.