The Ramsey Show - App - Navigating Money and Family (Hour 3)

Episode Date: May 9, 2023

Dave Ramsey & Jade Warshaw answer your questions and discuss: "Should my brother take over dad's finances?" A high school senior who breaks U.S. record with 125 college offers, $9 million in scholarships, from the blog: Break the Chains of Student Loans, "I'm scared of buying a house..." "Should I pay off student loans or put money in a high-yield savings account?" Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Join a Personality-led FPU class. Click here! Enter The Ramsey Cash Giveaway for a chance at $3,000! https://bit.ly/TRSgvwy Shop our bestsellers during the $10 Sale! https://bit.ly/TRS10Sale Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the pods, moving, and storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual actual amazing relationships. Jade Walsh, our Ramsey personality, is my co-host today as we answer your questions about your life and your money.

The phone number is 888-825-5225. Megan is with us in Las Vegas. Hi, Megan, how are you? Hey, good. How are you, Dave? Better than I deserve. What's up? Yeah, so I had a question um my mom 68 she was the caretaker of five people um my dad was one of them and they divorced years ago but it was a platonic you know relationship where he lived with her he has has dementia and my mom nine months ago suddenly passed away. And so, so now we are trying to kind of pick up the pieces. She cared for several other people.

And so I've been kind of overseeing their finances, making sure their four walls are secure and she didn't have a will and her finances were a hot mess. So I've cleaned it up and I've saved a lot of money for the family with like their social security, uh, income coming in and everything. Um, and so my dad has a little bit of savings because, um, you know, I've been packing, piling it away for him. Um, so now we're realizing he, he probably needs to move on and out of the house where it would be a better situation for him. So he's going to move in with my brother in Utah. And my brother is moving out

of the apartment and he's moving into a house where, you know, my dad would have a space with his own bathroom and things. So now I'm thinking, well, maybe my brother should take over his money, but I'm hesitant because my brother doesn't have the best track record with money. He's 47. He doesn't own a house. He sold his house years ago and he has a big, healthy savings from that, but like, he just doesn't have anything else to show for. So that's where I need you to come in why for me I feel like if you've been handling the finances up until this point I don't see a reason for you to change it um do you feel good about your dad going to live with your brother do you like that solution yeah so he wants the

best for him and um we both kind of agree with the majority of what our plans are for him. Now, when you said that you don't like the way, you're not worried in any e-bike because he lost part of his vision when he had the stroke, which caused dementia. We need to buy him an e-bike so he can get around. And I'm like, okay, what are you thinking? He's like, we need to get him one of those really nice ones that are like $3,000. I'm like, we don't have $3,000 to spend on this, you know? It's just things like that. And then I'm like, ooh, red flag.

What are you going to do with this money? Okay you just why don't you just move him in with your brother you're in agreement on that and then you agree that you're gonna your dad is going to pay your brother x number of dollars rent per month to cover food lights water and water, and rent. Right. And you just send him that check, and you manage the rest of it. And that's kind of what I'm thinking will happen. Yeah, me too. Because that's what has been happening. But I don't, he's like, well, you know, like with inflation. Well, I mean, with inflation what?

I mean, how much is the rent, how much is the lights and water, and how much is the groceries with inflation? And just take half of that, and that's your number, right? Two grown men living in the house, right? Yeah. There's no inflation on this. It's just we don't have to build in an inflation. It's not like, you know, we'll reassess it once every six months, but for this six-month period of time,

here's what we're actually spending on groceries, lights, water, and rent. Yeah. And I'm going to give you half of that, and you're going to cover the other half. Right. So if he says something like, well, I should take over the money, like... You say no. Okay, and then I just say, I'll send you X amount to cover this. Yeah, I'm not comfortable with that part right now,

but I do want to make sure that you're treated fairly and that you get plenty of money to take care of Dad and that he's not a financial burden to you. As a matter of fact, it would be fair to pay more than his half because your brother's providing the service of caring for an Alzheimer's patient. Yeah. So it'd be fair to assess, you know, put another $1,000 a month on there or something. What's your dad's income?

Yeah, that's the issue. He has Social Security income, and that's all he's got. How much is it? $2,300 a month. And what's it take to buy half the rent and half the groceries and half the gas? Well, because my brother hasn't moved into this house yet he hasn't picked a house yet we're not sure but he my dad's been contributing a thousand to his current my mom's household and that doesn't matter that's small town utah yeah that doesn't matter where

does your brother live and how much is the rent well you think the rent's going to be on the house and he lives in salt lake what do you think the rent's going to be on the house i maybe over 2022 maybe okay let's call 1100 your dad's then yeah but and then he's got he's got to buy groceries and electricity on top of that and give your brother a little something else so basically your dad's social security check is going to go to your brother and if you have any say whatsoever in this i know you don't have a ton the brother should not buy something based on your dad's contribution he should buy what he can afford does that make sense rent he's renting yeah but still he can't get something you don't do you know i'm saying i don't want him dependent on dad rent something that he can afford yeah true rent so i want to

make sure that's solid too because if he's renting something that's like you know he's so dependent on the money coming from his dad and i just feel like that's going to make things awkward as well yeah i mean if your dad passes away your brother's up a creek he's up a creek you know because social security stops at death hello so yeah that's this is the thing you got you just need to lay out. But this is not going to make anybody wealthy in this situation. But we're trying to keep your brother whole, meaning that he's taking on extra expenses for your dad, and he's providing care.

So with all of that, the majority of your dad's Social Security check is going to go to your brother. Yeah, that's tough, man. In order to cover this, in order to cover their actual expenses and a little bit of labor. I mean, that's fair. A lot. It's not like you're giving, you know, he doesn't need $20,000 a month, but he is going to need two if $1,100 is half the rent.

And that's probably not that unrealistic in Salt Lake. You know, it's probably not that bad. Yeah. So that's what we're looking at. So you just got to walk it through like that. And I don't know what your brother taking over the money would really solve, except he could drain the savings account. Yeah, I don't like that.

And I'm just saying, you know, I'll go ahead and give you the Social Security check. We'll assign that over to you. And then you call that taking care of dad and call that the rent or something about like that. I feel like that's it. It's about what it's going to be. And then I'll keep control of the savings. And if we need to do something else for Dad, you and I will talk about it. But meantime, you keep his half of the expenses under his Social Security cost,

and you will have a little bit of payment for helping take care of him, and thank you for that act of love. You know, that's a wonderful thing. Wow. That's tough. That's a tough situation. Not easy. It is. You know what solves it?

$100 a month from age 25 to age 65 invested is $1,176,000. You know what you could do if you're in that situation with an extra million? Hire home health care. Anything you want. This is The Ramsey Show. Jade Warshall, Ramsey personality, is my co-host today. Thanks for joining us. So the Associated Press is reporting a 16-year-old high school senior in New Orleans received scholarship offers from 149 colleges and universities, totaling $10 million. Wow. $10 million?

Totally. That's Guinness Book of World Records. I think I read that. Yeah, probably. Unbelievable. A GPA of 4.98. He's going to go to Cornell. He chose Cornell out of the 149. Now, let's understand that he does not have $10 million in scholarship money coming.

Right. He had that equivalent offered from all of the different schools added together. That's true. He would have had to have attended them all to get the $10 million. That's right. Because they're all giving him. But still, he got. I mean, it just blows out of the water.

No, let me tell you, this did not just randomly happen. This is not a lightning strike. Right. Yeah, he had a clear path, and clearly some folks in his corner that were looking at, you know, after him. He says, today's an exciting day for me and my family. I look forward to working with the Cornell College of Engineering over the course of my undergraduate.

It says that he plans to study computer science that's very very cool yeah uh okay said in an interview last week the major reason he cranked out applications to close to 200 schools was his desire to have numerous educational financial options he ultimately was accepted to 186 colleges and universities the school said it believes the 10 million in scholarship offers from $149 is a record by a college. So, you know, he did what we teach. Yes, he did.

And what former Ramsey personality Christina Ellis said. Yeah. And she had a book, Confessions of a Scholarship Winner, who was on the air here with us for quite a while and got $500,000, not $10 million, but she got $500,000 in actual scholarships. Actual money. In her hand. And then went to two schools, getting a degree and then getting a master's degree. And paid cash for all of that, of course.

So what did she do? She filled out a bazillion applications for scholarships. What did he do? He filled out a bazillion applications for scholarships. Did not say, I want to go to that school over there that has the pretty buildings and is another state where my boyfriend is going. And I know it's $900,000 to go over there and I don't have two nickels, but that's where I want to go. It's my dream school.

You don't want to be a dream killer, do you? No, these kids put in work they worked this as though it were their full-time job and they worked yeah and did you notice there's not a dream school no 149 possible 186 but 149 gave him scholarships yeah and then he goes okay now i have options yeah when you have lots of options you know what you can pick whatever you want that's when you when you narrow it down and my dream school this dream you gotta you gotta create you gotta create the options the options don't just you know you don't get to just willy-nilly choose based on nothing based off of sticking your finger in your mouth and throwing it in the air

that's not how it works so there's a couple things that we know and if you haven't seen the documentary the award-winning uh documentary borrowed future that we did there's a couple things we know if you want your kid to go to college your kid wants to go to college 100 of the time they can do that debt-free you should never have to take out a student loan. But Dave, because you know. Yeah. So let's talk about how you do it. Okay.

Number one thing. If you want to go to college debt-free, pick a school you can afford. Boom. That might mean going to community college. And a lot of states is free. Yes. For the first two years. Transfer those two years of work to your four-year degree. And did you know if you take two years' worth of credits to Auburn

or the University of Tennessee or wherever, Alabama, wherever, I'm taking good southeast schools here, University of Michigan, whatever, right? They take the two years' worth of credits, and you start you start as a junior when you graduate you know what your diploma says Michigan okay doesn't say Michigan but went to community college but Dave my daughter wants to go to the state school with all her friends I know I know she does and you ain't got any money either so she gets to go where she can afford to go so in-state tuition to the state school is by far the best bargain by far and you get quality education and you graduate in a degree that actually has use in the marketplace we don't need any more people with a degree in left-handed

puppetry or german polka history. Those degrees have no value. You're going to be a barista, okay? You're going to be stuck, and then you're going to be whining about the student loan debt and how the culture has taken advantage of you. Study something that is actually usable, where you put tools in your belt. Okay, so we're going to go to a school we can afford. We might do community college. We're going to get scholarships.

We're going to apply for, you need to apply for 200 to 500 scholarships if you get turned down for all of them but a handful you'll still get 30 or 40 000 heck yeah you will yeah you've got to spread your net wide yes exactly right and you'll catch some fish that way and then here's another thing parents while these uh people are in college these children that are in college, these adults are in college, you know what else they can do? Work! Wow, that came out quick. It was almost like you said it.

It was weird. It was weird. They can work, Dave. It's not child abuse. It's not. Actually, the students that work, they tend to manage their time better. They tend to have higher GPAs. And they graduate in four magical years instead of five.

Wow. There's a little list of classes that if you take these classes, you finish in four. That's right. It's just a checkbox. It's just a checklist. You have to just go to that class, go to that class, and go to that class. And if you go to all those classes, then they give you the degree if you pass all of them. Yeah, you got to do it. And it's scheduled to where you can do that in four years that's right i don't

know what else you're doing other than playing beer pong well my daughter says she can't work because she's got too big of a class load dave you're killing me here you're killing me here look hey let me just tell you if you the kids that are athletes they're on scholarships they have a full-time job they sure do and they get their classwork they sure do i know because i was one they do it and so i mean we work with athletes on a lot of a lot of college campuses and they do it all the time i wouldn't want to do that i'd rather go out working and making money personally but um you know work while you're in school choose a school you can afford and moms and dads it is your job these are 18 year olds their brains are not fully formed yes it is your job to love them so well that you will not participate with them in doing

something they can't afford to do no i will not give you my money and i will not give you my support if you are going to go to the if you're going to go on a track that's going to put you in a student loan debt no i won't i don't have to see that's called good parenting i was so mad at my mom this is a 30 year old but she made me do this and now i think she's a genius boom there you go i'd rather you would rather than be angry with you on the front end when they're 18 oh i don't i wanted to stop me yeah why didn't you stop me because there wasn't any stopping you you were hell bent on stupid you know but you're gonna do it without my support but if you're gonna do it the other way i'm gonna

i'm gonna help you i'm gonna do everything i can'm going to put money into the thing if I've got it. You know, you pick a school that's smart. You pick a degree field that's smart. You work and you get scholarships. You can go to college debt-free. Let me just tell you, the average in-state tuition right now is $11,000. You can do that. Well, that's a part-time job.

You can do that. It's not even a good part-time job. That's what I say. Whatever you look for, you're going to find. If you look for excuses why you can't go it's not even a good part-time job that's what i say whatever you look for you're going to find if you look for excuses why you can't go to college debt free why you can't do it you'll find that but if you look for reasons that you can do it you will find that as well you will find ways to get scholarships ways to work ways to find colleges you can afford that's the way it works you get to make a choice very very possible to do. So it's this idea that, you know, Rachel Cruz used to say, and she's right, and she still says, but she's the first person I ever heard say it.

We don't have a student loan crisis. We have a parenting crisis. Right on. Because you've got to look at these people. I remember a guy called me from Michigan. He said, my son told me he's going to this school that we can't afford. What do I do? And I said, well, see, that started a few years back because my son told me he's going to this school that we can't afford. What do I do? And I said, well, see, that started a few years back because my son doesn't tell me anything.

Well, not when he was a minor. Nowadays, he does tell me stuff. But yeah. But back then, when he's a minor, I told him stuff. I know. I would have been like, I know you're not talking to me. You told me what? I'll make another one that looks just like you.

Okay. All right. I know you're not talking to me. Take you out. Oh, man. Oh, brother. Wow. That's so true.

All right. So debt-free college is possible. Most of it mathematically is school choice. $11,000 a year or $52,000 a year. That's a big difference in private and across the street is public. And there's no correlation between that and being successful. That's right. None.

This is The Ramsey Show. Thank you for joining us, America. Jade Warshaw,all remsey personality is my co-host today paying off debt is smart saving and investing is smart but there's one way to win with money that people overlook you not only have to play offense but you also got to play defense you got to have the right insurance in place there are 10 kinds of insurance that are not rip-off that you might need. And we've built a free tool called the Coverage Checkup to show you which types you need to add, drop, or adjust. And we'll tell you about the scamos, the, oh, those weird little policies that nobody needs, but we all get them, right? No, no, no. We're going to get rid of those

and put that money in your pocket. So it's a free thing. It's called the coverage checkup. Go to ramseysolutions.com slash checkup. ramseysolutions.com slash checkup. Don't let an emergency sneak up on you. You've got the right kind of coverage in place. That's playing defense.

Not against insurance. I'm just against dumb insurance. So ramseysolutions.com slash checkup stacy's with us hey stacy how can jade and i help hi um my husband and i are both 51 and um i just recently received a really large inheritance from my father and how much um um one million dollars wow Um, $1 million. Wow. Cool. Yeah. Sorry for your loss. Happy for your game. He, uh, he followed your steps. Uh, my husband and I have followed your steps. We're on baby step seven and, um, we've been debt free for a, for a long time now. And, uh, so we've recently been talking about moving and we were thinking about, um about building a new home and the new home

cost would be $650,000, which to me is mind blowing because I've lived a pretty Dave Ramsey kind of life where I've been saving and investing and budgeting. And I'm just wondering what your thoughts are when, if you think I'm just wondering what your thoughts are, and if you think I'm being irrational with not thinking about building this house. How long ago did your dad pass away? Last year. And how much other money do you guys have in addition to the million inheritance? We have about $1.2 million in retirement funds and $124,000 in savings.

And then we own our own house as well. And it's worth what? It's worth between $320,000 and $350,000. We're thinking we could probably sell that for. Yeah, okay. All right. And so at this point with the inheritance and with your house and everything, you have over a two and a half million dollar net worth. Yes. So a $650,000 home is perfectly in line. Okay. That'll make my husband very happy. And by the way, it helps me

in situations like this to say it's not really a $650,000 purchase because we're selling a $350,000 house. Okay. It's a $300,000 purchase because that's all you're increasing. Okay. That's great. And so, yeah, the Dave Ramsey way is live like no one else so that later you can live and give like no one else. It's not be frugal your whole life and stack up money to the ceiling. It's enjoy some of it, give some of it, and continue to invest some of it.

And this is the enjoying part because you've done a really great job. And so did your dad, and he would be honored by that. Both of you. You've got great DNA, and you did a good and he would be honored by that both of you you got great dna and you did a good job haven't you yeah thank you i mean you're really i mean you're you were millionaires before he left this yes and he was a millionaire this is we're talking like rich people legacy stuff here you ever have anybody call you rich people no you're rich people it's kind of hard for me to think about i know it's true i can tell because you think of yourself

as broke what's your household income um right now it's 211 000 but when we started i was a stay-at-home mom i I know, when you started. I was in my 30s. It is normal for your emotions to not keep up with your financial growth. When this stuff kicks in and you look up and you go, okay, we've been scratching and clawing so long, we had to watch every nickel, make it scream, and pinch them, pinch them, pinch them, right? And then all of a sudden you look up and it's been a decade and you've got some serious money and then it's normal for your emotions to not catch up.

I mean, like when you and Sam got free, you mathematically intellectually realized they paid off four hundred sixty five thousand dollars. You mathematically realize it's there, but you still it takes your spirit a while to accept that I'm free. Absolutely. It does. I'm free. Absolutely. It does. I think about that regularly. I have to remind myself sometimes.

So I get what she's saying, but Stacy's rich. Yep. She is. Wealthy. And good. And you know why? Because she's been diligent over a long period of time. That's right.

Diligence is excellence in the ordinary on a daily basis. That's right. Do it all the time. Do it all the That's right. Do it all the time. Do it all the time. Yep. Do it all the time. Like reading a story to my little grandson. I think I can.

I think I can. I think I can. I think I can. The little train that could, right? I mean, this is the stuff. And that's exactly who she is. Yeah. The problem is you get in that grind and you don't look up and realize, wait a minute,

I have one. Because she was a millionaire, over a million dollar net worth. He leaves another million, so now they're over a two million dollar net worth. Approaching a three million dollar net worth. Can you afford? Oh, and by the way, folks, if your emotions, Deloney talks about facts are your friends when you're analyzing things, okay? Facts are your friends. They help analyzing things okay facts are your friends they

help you tell you tell you if your emotions are lying to you if your emotions are saying you can't do that you're broke people and you're looking at well 650 as a percentage of three million or as a percentage of two and a half is a small ratio ratios are facts okay can you buy that car because that car when you were broke and 25 and starving to death and coupon clipping that car was ridiculous now that car is pocket change small piece and you know and you just you just buy it's just pocket change it's just fun that's all it is and its ratios help you tell you if you're out of line if your emotions are telling you you can't afford that that your your frugality is holding you back because you haven't looked at the ratios and said it's a small

percentage to buy that car to buy that to upgrade the house by 300,000 when your net worth is almost three million that's right That's a small ratio. And think about it, because before her house was worth $350,000, she had $1.2 million. Now she's gained another million, and she's basically going up by $300,000 more. It's the same piece of the pie. It's exactly the same ratio. Yeah, exactly the same. We're not changing the ratio at all.

So when you look at it like that, she's not really upgraded ratio-wise. Yeah. If she had not inherited that suddenly, and you just look down and say two and a half, is $650,000 reasonable? Yeah. Yeah. You would say that's reasonable. But in this case, that doubles it.

Because all she did was she almost doubled her net worth. That's right. Not quite. A little bit. With the inheritance. And really, Dad would be smiling because Dad doesn't see this as irresponsible that's right if he did he wouldn't have left her the money if he thought that she was irresponsible he wouldn't have left her a million dollars yeah but he wouldn't see this act as irresponsible no not at all yeah it's not it's

not so it's a good thing it's a great question stacy this reason we're riffing on a little because a lot of people deal with this as you move from the being broke and get out of baby step two and you finally get the stupid debts paid off and you can breathe and you've been living on nothing and you've been working all the time and you know you don't do anything then all of a sudden you get your emergency fund in place and you go wait a minute now we can we can actually go out to eat that's right and then it feels weird look sam and i went to the movies the other week and you know back when we were dating it was like if we want to date you're looking at every you know penny he said jade i don't care what this costs i'm going big you can even have popcorn

he's just splurging look i bought i got a glass of wine now i will say we got two drinks it was 40 and i did clutch my pearls. I was like, oh. Wait a minute. Wait a minute. And this is movie theater wine? Yeah. Come on, Dave.

Come on. Dave, we can't all have. Come on. Come on. Come on. You know, with the waiter with the. Come on. Yeah, but we don't have to drink movie theater wine.

I mean, that's like, oh, it's nasty. Let me live, Dave. I do want you to live. That's the point. I want you to live a long life. All right. Next time it will be a French bordeaux. Okay.

You can sneak that in. All right. Let's Sam spring for it. This is The Ramsey Show. Our scripture of the day, Psalm 28, 7. The Lord is my strength and shield. I trust him with all my heart. He helps me, and my heart is filled with with joy i burst out in songs of thanksgiving martha washington said the greater part of our happiness

or misery depends upon our dispositions and not upon our circumstances martha washington there you go right on behind every great, there's a great woman and a surprise mother-in-law. There you go. Open phones at 888-825-5225. Jade Warshaw at Ramsey Personality is my co-host. Ted is with us in New York. Hi, Ted. Welcome to the Ramsey Show. Hi, Dave. It's an honor to talk to you you too right to my question okay my question is uh about 10 years ago i'm 60 years old about 10 years ago i got talked into an annuity and didn't realize how bad they were started listening to you a couple of years back and uh i'd love to be able to get out of that annuity, and I just need some help.

Any advice? At 10 years, you should be past the surrender charges. They're still happening. In other words, I had a... What is the surrender charge? I'm not sure how much it is, but there's $365,000 in there. Yeah. And 10 years, highly unusual for an annuity to

have a surrender charge after 10 years highly unusual are you sure you need to check on that yeah i will i'll check on it um last time i don't think you did if you checked on it at seven year it might have had one yeah that's probably the last time i checked on it okay well so here let's pretend it does let's pretend you have an unusual one and it does have a surrender charge that's substantial if it's small just forget it and pay it and i mean if it's 10 or whatever just get your money out of there and go put it mutual funds right um so get it go to ramsey solutions and click onestor to find one of the people that are in our network that we recommend.

They're investment brokers. And those guys can look at your actual documentation and actually, you know, and read through it with you and tell you what you're, you know, and get in touch with the company on your behalf and find out what's really going on. And you can move the money that way over to those guys to manage and some good mutual funds. Or there's one other possibility if there's a huge surrender charge, and this would be really for other people that are listening.

I don't think you're going to find that. But let's say you were five years in and there was a 30% charge or something. Well, you wouldn't want to do that. But you can roll a fixed annuity into a variable annuity, oftentimes with the same company, and avoid any surrender charge until you can get out of the variable annuity. Now, variable annuity, Ted, is mutual funds inside of the annuity. And so it'll perform a whole lot better. And variable annuities aren't bad.

Fixed annuities suck, but the variable annuities aren't bad. But I would rather you have it in just low turnover mutual funds. But a variable annuity is not a bad product. It's certainly better than being stuck. And you can do that rollover without the surrender charge in most cases again a smart investor pro can help you do that very cool with the variable annuity you can choose the mutual funds inside of it right exactly and re-choose them you don't have to just choose them once i mean you can change the mix you decide i don't like it you can reset it reset it it doesn't it doesn't start the clock over and you're still capped on the gain

right or you're still capped on what the performance no no no they give you a minimum floor a lot of times on the performance they'll tell you that it will at least make six percent um and we'll protect your principal and we'll let you name a beneficiary so they have the variable annuities have some benefits to them, but you wouldn't use those unless you've got extra money laying around. And you're 100% debt-free. You're baby step seven. You've got millions of dollars, and you want to put some over here to protect the principal in case of a market downturn or something like that. And you can also use a little bit of an estate planning tool because you can pass outside of probate by naming the beneficiary interesting go straight like a life insurance

policy go straight to the person and there's no tax oh interesting all right that's a nice feature that they have but again i wouldn't do it just for those but that those are while you're at it you might as well enjoy those features and again a smart investor pro can tell you when the ramsey team would suggest that and they will suggest it at the same exact time and um because some people are misusing these variable annuities and putting people in them that shouldn't be in them too too early while they still got debt while they haven't maxed out their retirement accounts they haven't paid off their house yet that kind of stuff you would not use a variable annuity until you've done all of those things. Last ditch.

Yep, yep, yep. Kim is in Virginia. Hi, Kim. Welcome to the Ramsey Show. Hi, Dave and Jade. Thanks for taking my call. Sure. How can we help?

Yeah, I was calling because I am weighing my decisions for how to pay off my student loans. I have about $48,000 in student loans and I have all of that in a high yield savings account right now. I mean, obviously right now the student loans are in forbearance. I'm not a current interest in the savings is occurring about 4%. So I'm wondering if it's smart to just hold on to it until a final decision is made and then just pay it off on the day that it starts to be occurring interest. Just pay them off.

Pay them off. You're going to sleep better tonight. And here's the thing. That forgiveness, just mark my words, is not going through. It's not. I'm not like banking on it coming through, but I'm like, why not make some additional money on the savings right now? Let's pretend for a second.

Let's pretend you were debt free and you didn't have any money in a high yield savings. And I came up to you and said, hey, Kim, I want you to go borrow $30,000. And the government's got a program. They're not going to charge you interest for the next few months. And I want you to take that $30,000 and the government's got a program. They're not going to charge you interest for the next few months. And I want you to take that 30,000. I want you to put in a high yield savings account. In other words, I want you to go into debt so that you can have a high yield savings account.

When I put it that way, it sounds pretty stupid. Pretty much. Yeah. Yeah. That's, that's what it is. That's what it is. It is hard to know it's not hard passive it's not hard at all money it's not hard at all you're not

gonna get rich doing this you think that you're gaining something from it you're you're not you're not gonna you're not even making any money i mean what's what the crap is four percent of 28 000 even 48 500 a month. Yeah. I mean, it's not changing your life. Yeah. It's not changing your life. No, yeah.

You can't strut around your bedroom acting like you're doing something sophisticated. You're just not. Or the den or anything else, you know? I mean, come on. It's not. It's $100 freaking dollars. Yeah. You can't buy a pizza.

I mean, you know, no. And we're screwing around with this and and you're and you're worried about to the point you called a national radio show where you knew we were gonna tell you she knows what to do she knows what you knew what we were gonna tell you this is this is how worried you were about it so yeah you clean it up you're gonna the piece on the other side of this yes and then just use your money to make money. Use your money to make money. And this idea that, so guys, that this, you know,

in the financial world when you borrow money and invest it at a rate higher than the borrowed cost, we call that arbitrage. And they teach it in finance class what they don't teach you is that every time you do that you increase risk that is nowhere you can get a master's degree in finance and they will not associate borrowed money with risk mathematically. That's unbelievable. With one exception. And that exception is that when you're taught when a company, a publicly traded company, has too much in bond, too big a balance in bonds outstanding, that's debt, that you would

associate that with risk and reduce their stock price because they're carrying too much debt. But otherwise, we are not taught anywhere in sophisticated financial world, nowhere, even at the master's or the PhD level, to mathematically associate risk with this, which when you put a risk factor on this on a tiny little spread like 4% and you put a risk factor on it, like I don't sleep good tonight, it dissipates the returns they're just gone yeah you

know they disappear so it vaporizes them so it's just it's just it's a very incomplete view of how the world really works that puts us our the 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, what's up, guys? It's Jade. Look, if you like what you heard in this episode and want to know more about getting started on the Ramsey baby steps, go to ramseysolutions.com and click the get started button. We'll help you figure out the best next step for you based on your specific

situation. That's ramseysolutions.com and click get started.