The Ramsey Show - App - Priority Number One: Conquering Addiction (Hour 1)

Episode Date: April 25, 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 am Dave Ramsey, your host. This is your show, America. Thank you for joining us. Open phones as we am Dave Ramsey, your host. This is your show, America. Thank you for joining us. Open phones as we talk about your life and your money.

The phone number is 888-825-5225. That's 888-825-5225. Christina is with us in Gettysburg, Pennsylvania. Hi, Christina. How are you? Good. How are you? Better. How are you? Better than I deserve.

What's up? I am calling because I'm trying to figure out if we should sell our home to pay off our debt. You like your house? I do. I like our house, but we are a family of five, and it's a 1,300- foot or yeah 1300 square foot house excuse me i'm nervous that's okay um and it has one bathroom so we're going to need to upgrade eventually so you have three kids yes all right and uh what's your household income um it's about 62 what do you owe on your home?

We have a mortgage that's just under $98,000 and a home equity loan for just under $14,000. Okay. And how much other debt do you guys have? Aside from the $14,000 for the home equity loan, We have a $20,000 student loan debt. $13,000 on one car, $6,000 on the other. We have an unsecured loan for $9,000 and $8,000 in credit

card debt. You're normal! Yeah. Yeah, you're in a mess. You don't want to be normal. You want to be weird. Normal's broken in debt to everybody. And that's what you guys in a mess. Yeah, you're in a mess. You don't want to be normal. You want to be weird. Normal's broken and debt to everybody. And that's what you guys are. Okay. Well, I sell a house as a last resort.

If you're going to be moving anyway or you don't like your house, it'd be okay to sell it and help you get out of debt and rent something and build your emergency fund and build a down payment. But you're not going to sell it and buy something that's going to meet your needs. So you're pretty much saying we're going to rent for probably three years. I don't know. What's the house worth? We spoke to a real estate agent last year, and then our sewer line went out.

But she said it was worth about $170, about 170 then i don't know if the market's gone up or down i haven't looked into it okay all right well it would clear up most of your debt and get you started so you're probably renting for a couple of years if you do this are you okay with that i'd be okay with renting um as long as it's in a good school district you know yeah and you might and you might be able depending on if you you know went out a little bit uh further out of town or whatever in a little cheaper area you might be able to rent more square feet than your than you've got now for about what you're paying now per month okay and if you got that in a new school district, that would almost be a move up, right, temporarily.

And Sharon and I did that many years ago. We sold our house. It paid off the rest of our debts. And we moved to a good school district, and we rented for two years, which was really hard for me because I've been a landlord most of my life, not a tenant. So it was kind of an emotional slam dunk. But I got through it. And Sharon hated the rental house, by the way. She hated it.

Yeah, I'm having a hard time wanting to sell, but my husband wants to do it, so that's why I'm calling you. You're kind of like the tiebreaker. Well, the thing is, here's the thing I'm looking at. If you were out of debt and had built your emergency fund and started having some money saved, you're probably moving now. Yeah. Because this house is small for you guys is what you're saying.

Yeah, it is small. Yeah. So if you can make a plan to end up where you want to be in three years, and the fastest way to get there is sell and rent for two of those years, then that's a pretty good plan. Okay. If it puts you where you want to be. It's paying a price to get there.

It's living like no one else, so later we can live like no one else. It's not a slam dunk. If you're willing to sit there it's living like no one else so later we can live like no one else it's not a slam dunk if you're willing to sit there that's fine but it probably accelerates you to get to the house you want um in the area that you want and the debt-free goal that you want it probably accelerates all of that you know at the end of the story what gets you in the house that you want to live in debt-free other than the house the fastest? And I think selling it does that. So it's more inconvenient because it's two moves.

Karen is with us in Knoxville. Hi, Karen. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking my call. Sure. What's up? Well, I am calling with my family, and I are in a little bit of a predicament.

We recently, my brother, my sister, and my father, and myself are trying to help my brother currently. He is in a detox clinic. He has been an alcoholic for 30 years, and he's decided to finally get help. Wonderful. We are very excited, yes. So we are in a predicament now trying to take care of his finances. And if he goes somewhere long-term, possibly a year or 18 months, we obviously don't want to enable him,

but we want him to be able to get out of the facility and have some freedom. What do you suggest in that situation? He probably has about $20,000 in debt. To what? Two vehicle loans, which he's upside down on, and a camper loan, which he also is upside down on, and possibly some back income tax. Does he have any money? Obviously not.

He's been drinking for 30 years. No, he does not have any. Okay. And does he own a home? No. And no family other than you guys? He does have a family, but it's estranged because of the alcohol. We're the three that are there for him.

No, I'm just saying there's no one counting on him, quote, unquote. It's been a long time. Okay. Yes, right. That's what I would guess anyway. So, all right. Is he willing to sell the cars in the camper? I think he would be willing to.

Yeah, let's sell them all. Okay, sell them all. How much would that leave you in the hole? Maybe 10. 10 in the hole? Maybe $10,000. $10,000 of the $20,000? The whole kit and caboodle won't bring $10,000? I don't think so. These are some junkie butt cars.

Yes, I think he got himself in a bad situation. Poor credit. Who are the loans with one is with lindmark or i guess two are with lindmark and then one is with just a a little motor place near his where he lives okay right does he live in your area no he lives in north georgia okay all right um all right well let's first set our priorities okay him getting well is not dependent upon any of this junk okay the him getting well is a 12 on a scale of 1 to 10 agreed yes absolutely and so if he comes home and there's nothing there but some repo notices and he's well he's got a really much better life than he had agreed agreed okay so worst case scenario if you don't do anything

you're okay if he gets well if he gets well if you guys want to help him and if you guys are sitting on some money and you want to write $10,000 worth of checks and sell all that junk, that's fine. And you said he's got an IRS loan lien? I think so, maybe. How much? That could be $10,000 maybe, but we don't know. We're trying to figure that out. Yeah.

I would put that on payments on his behalf, installments, the minimum possible installments, get a tax advisor to help you, Go to one of our ELPs. And if you want to pay those payments and write the $10,000 check as a group, you can. The last thing I want you to feel is buyer's remorse, especially when you offered thousands more on a new home to win a bidding war. If I've taught you anything, it's that blindly throwing money at a problem is a stupid plan and something you'll regret for years. The key to avoiding this rookie mistake is to call Churchill Mortgage and get certified.

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Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Thank you for joining us, America. We're glad you're here. John is with us in Phoenix, Arizona. Welcome to the Dave Ramsey Show, John. Hey, thanks for the welcome, Dave. How are you today? Better than I deserve.

What's up? Hey, I have a really well-paying job. I'm thinking about retiring early, however. They're offering some additional money for me to stay. And I don't like the work. I don't like being away from my family. Job requires a lot of travel, but it's been very lucrative. And I'm just curious about your take on whether or not I should take the extra money and stick it out for a few more years or go about my business a different way.

What do you make? $300 right now. They're offering $400 to stay. Wow. What do you make? Wow. What do you do? Wow. Yeah, you're killing it, man. Congratulations. Well, you're right.

That's breathtaking money, so it causes you to take a breath and stop and look at it, right? Exactly. So what's your financial situation? Are you debt-free and multimillionaire? Yeah, actually, I've been a listener for about seven years. Never called to do a debt-free stream, but we started your journey in 2012. We've been debt-free now for the last four years. Started with about $700,000 in debt, and right now, this second, our net worth, according to personal,

I won't do any advertisements for anybody else right now the net worth is 4.397 okay and um you're how old i am 37 sir wow okay so if you retire what are you gonna do with your life well i think i want to take my immediate thought it just take six months off to go maybe RV around the country with the wife and come up with a better answer to that question because I don't have one today. Okay. All right. Because probably 45 years of RVing is going to get old. So six months is pretty cool, right?

And that's fine. And you've worked your butt off, your fingers to the bone. You've been gone from your family. You paid a price to win. You've won. And so you're going to live like no one else for a little while. That's great. I'm guessing you have...

Can I have one more data point before I get your advice, sir? Sure. I think if I take the six months off, that if I come back to work, I can probably get another job, but it'll probably be in that 180 to 200 range. I don't think I'd get this job again. No, but you'd stay in town? Yeah. You wouldn't be traveling all the time away from your family?

Yes, sir. You'd work normal hours? Yeah. Okay, so at a minimum you could do that. The second minimum would be you could start your own shop, right? I won't be able to do that for two years. My non-computer is pretty ironclad. All right, so that's fine if you did nothing for two years.

The thing is I just don't want to have a plan to do nothing for a decade or two because that's not a good use of a human as smart as you. You ought to do something, you know, because you're just going to, you know, your brains are going to rot. So, you know, you need to use them. And but six months off or two years off or six months off and then if you couldn't start a thing non-compete, but you could work at a competitor? I couldn't work at a competitor in the mechanical trade but i could get a job doing

like plumbing or electrical or something else that was service related i could my some of my skills are transferable but i couldn't go do my specific trade i got you okay all right well yeah i mean so probably sounds like you're going to come back make 180 200 for a couple years and then do something else that is the dream, whatever it is. But the point is you're not going to earn zero income for the next decade. Right? Right. Maybe the next six months, but not the next decade.

Decades is a long time, yeah. And if you're not telling me that, I would quit. I agree with you. Okay. You've done it, man. I mean, you're 37 years old. You have a $5 million net worth. You're 100% debt-free.

You have the ability to come home from a six-month trip and land a $180,000 job. And after that, you probably could make even more doing your own thing. And that's probably your future. So it looks really bright. I would quit. Well, thank you for the clarity. Yeah. I assume you've got enough liquid assets to live off of for six months, right? Yeah, liquid.

Money you can get to or income you can get to. 3.8 million liquid. Okay. 3.8 million liquid. That's not in retirement. That is not in retirement. My retirement's actually pretty small overall. The IRAs and 401Ks is only a couple hundred thousand okay so you can live off the you know some portion of the revenue created by the 3.8

during the six months and you're not going to starve yeah i'm gone i'm done you paid a price to win and the price is too high and it's not that you're never going to make that money again or that you're never going to make any money again. It's just we're not going to, you know, keep the candle burning so hot. You're 37. You did it. Congratulations. Man, incredible. Very studly.

All right. Lauren is with us in Jacksonville, Florida. Hi, Lauren. Welcome to the Dave Ramsey Show. Hi. How are you doing? Hey, what's up? Okay.

So I have just recently gotten out of rehab, and I'm living here at my aunt's house with her, and I have a car that I still owe $12,000 on it, and the transmission just recently went out of it. To get a new transmission in it, it's $4,000. With that, including what I owe on it, is about $17,000, and that's more than what the car is even worth. I have another vehicle, my mom's old car, that I could see driving that's paid off.

So I'm just, I'm clueless of what to do with the car that i still owe money on if i should let it go back if i should try to sell it for parts um i'm just absolutely clueless understand how old are you 22 20 years old. 22 years old. And are you back to work now? I'm actually, I've been out for about two weeks, and I've been putting applications in. I've just been trying to get settled, but, yeah, I'm working on getting a job. My parents have actually been keeping up with my payments while I was in rehab and everything. They were making the payments. They were also dropping it a little bit, and that's actually whenever the transmission

went out of it. Okay, so how long were you in rehab? Three months. Okay, for what? Heroin. Okay, and how long have you been dry? Today makes 118 days. Good for you.

Proud of you. Thank you. That's a really tough one to kick. And you're a tough lady, you kick that thing. That's a beast. Okay. Well, number one, your folk told you this at rehab, and I'll just reiterate it. Your number one job is sobriety.

Absolutely. That's a big deal. This car, the stress around this car, the drama that it brings into your life is way down the list of things to worry about. Absolutely. We do want to be mature we do want to address the issue but um you know we're not going to go do crazy stuff over this stupid car because you're you're uh you staying dry is a big deal okay yes sir thank you and you've done it good job okay so um i think you can probably what kind of car is this it's a 2010 nissan maximum okay i think you can probably, what kind of car is this? It's a 2010 Nissan Maximum.

Okay. I think you can get a used transmission for probably $1,500. You can probably get it put in for $500. None of that matters because you don't have $4,000 and you don't have $2,000. Right. Now, my parents, they got a quote to fix it to, like, get the new transmission. Or a used one. It was $4,000.

No, that's just not right. Yeah, I was thinking it was a little high. And they offered to pay for it and get it all taken care of, which I don't want to do because they've already... Here's the thing. Without the transmission in the car, the car's going to sell for half of what it's worth. Right. So even to sell it, and you do need to the car's going to sell for half of what it's worth. Right. So even to sell it, and you do need to sell it, even to sell it, you need to fix it. But we need to spend the minimum on it to fix it that's possible,

and that's a used transmission from a salvage yard put in by a traditional mechanic, not a car dealership. This is an inexpensive way to fix the car. If mom and dad want to help you with that at your 22, your 118 days dry, accept their help and get the car off your back, okay? Yes, sir. I'm proud of you. You hold with it, okay? All right, absolutely. Thank you so much. All right, this is the Dave Ramsey Show. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? New Testament Principles, Christian Healthcare Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ

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That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. Ryan's with us in Columbus, Georgia. Hey, Ryan, how are you? Hey, Dave, doing good. How are you? Better than I deserve. What's up? So my wife and I are currently in baby step number two. We have a Toyota Tacoma.

That's all we got left is this $21,000. We're working baby step number two. We're about to have a baby in August. So we're putting back a little cash for that now, but a situation's come up where I could sell the Tacoma and get a truck from a family friend for $8,500. It's got a lot more mileage on it, but my problem is I would still have to take out another loan to do that. So it's a what-would-they-do question. What's your household income?

It's $100. And what's the other car worth um it the kelly blue book on the it's a gmc it's got no no no no you have two cars in your family or one we just have one one's a company vehicle and then one is the tacoma i got you four-door tacoma four-door Tacoma. We owe 21. It should be worth about 21. I'd keep it. Keep it? It's a great truck, number one.

Number two, it works with kids with the four-door. And number three, you like it. Number four, it is less than half your annual income. And number five, you can pay it off in under two years. That's the guidelines I use for keeping a vehicle. Okay. And I think I'm right on all of that. Don't you like the truck?

Yeah, yeah, we definitely like it. It'll be a little tight with two car seats in the back, but I think we can make it work. My son-in-law drives one. He's got two girls. Okay, perfect. My grandbabies-law drives one. He's got two girls. Okay, perfect. My grandbabies are in the back of that thing. So it's all right. It's all good. And my son has one, too.

We've got two of them in the family. But good cars. They've got a bazillion miles in them. They're well built. And, yeah, if you like it, I mean, and I think I heard the way you're describing this, that you liked it. Yeah, it's definitely a great truck.

We know it'll last a good long time. So we need to just make the minimum payment on that until we have the baby and then get back into. Yeah, and then throw all the money you've saved up that you would have been paying on it at it and then finish it off by, what, Christmas? Maybe by this time next year at the latest. Okay, yeah. You'll be done with that thing in a year easy. I mean, you make $100, it's $21.

Don't go furnish a baby room with $8 million worth of baby furniture that the baby doesn't even know is there while you've got a truck payment. You get the truck cleaned up, okay? So you can tell that might have happened before. Ann Antonio is with us in San Jose, California. Hi, Ann Antonio. How are you? Good. How are you, Dave? Better than I deserve. What's up? Awesome. So, Dave, I'm in baby step number two right now. I'm getting my stuff together, and that's going okay, but yesterday I got a call from my

mom, and she's also getting her finances straight, and she asked if I could co-sign on her refinancing the parent loans that she took out for me to go to college no um so i want to help her out dave but i don't know what this does to my baby steps no it makes you liable on the note you're not liable on it right now um so um no i would not co-sign on it. Why does she need to refinance it? Well, she's paying around 7% on what I don't know the exact amount, but the interest rate is too high for what she thinks she could get if she refinanced. But she doesn't need you to get on it in the first place.

She shouldn't need you to get it refinanced. That's the question. So I think her credit is good, but I think her income, I make a lot more money than she does. Okay, so how much is the parent bless loan? I think the parent loan, I don't know the exact amount, but I want to say it's between $15,000 and $20,000. And what do you make? I make $128,000. Okay.

Did you make a promise to her back in the day when this was all done that you would pay this loan? No, I didn't, Dave on i took all my own loans i still have 20 500 left on my own student loans and we just took on those loans individually okay do you intend to go pay this loan ever my loan or her loan her loan um i would if i get the baby step number three, whatever she needs as far as her debt would be a priority for me. Okay. All right. I would just tell her that. Okay. So hold off right now.

Not if you get to baby step three. When you get to baby step three. When I get to baby step three. There you go, dude. Touchdown. All right. You got this. You can do it.

If you want to reach over there and pay it. It was for your benefit. And if it's straining your mom and you make $100,000 a year and you can go reach over and knock out $15,000 after you're out of debt as a favor to her after she did a favor to you, that seems like a reasonable thing to me, even though it wasn't a promise you made. But, no, I would not go sign on the line. It can sit there for a couple years at 7%. It ain't killing anybody. Good point, Steve. Yeah, just let it sit there. And just let her know, Mom, I'm going to turn you down on this, but I want you to know

I'm going to swing back around after I get my stuff done and take this out for you. That's what I'm going to do. Thank you, Dave. You got it, man. Thanks for the call. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money. Beth is in Chicago.

Hi, Beth. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking my call. Sure. What's up? So my fiance, Alex, is a podiatrist. He just recently finished residency, a three-year residency. He's about almost a year out of the residency program.

He struggled to find an ideal job. And recently just got an offer from the Air Force. He would go in as active duty for the Air Force. We thought there would be so many perks and benefits that would outweigh the salary, but the salary is pretty low, and they're putting us in a pretty high-cost city. They're putting us in Colorado Springs. So I want to see what your thoughts are on this. Okay, I'm confused.

Why is he an MD? He's a podiatrist. Why has he not been able to land a job? So he's actually a podiatrist or ZPM. I don't know. I'm truly kind of shocked. I thought he'd get something right away. He's gotten some really low offers.

They all come with non-compete. So if you took the low offer and you worked for two years, you'd have to literally move probably 100 or so miles away to get another job. What is a low offer? So the Air Force is offering $79,000. No, what are the other offers he's gotten? So he got an $80,000 offer with no health insurance. He got a $100,000 offer also with zero perks.

Both of these jobs, there was no perks. How much student loan debt does he have? So he has $350,000 in student loan debt. I should mention he has done some local tenant work. Those pay pretty well. They're $1099, but, you know, they're not consistent. Yeah. And what's the Air Force going to do for the student loan debt?

Anything? So there will be some. It's not guaranteed. I guess they work on, was it 24-month things? So right now he's guaranteed $40,000 towards the student loan debt. In two years. So right now he's guaranteed $40,000 towards the student loan debt. If he went into the private sector, on average they should pay between $150,000 to $300,000. Again, we haven't seen this, but he does have friends that have, and I think it's maybe luck of getting it. Yeah, and it's not luck.

You don't finish med school by luck either. Right. Wait a minute, stop, stop. So what's the Air Force offering? They are offering $79,000. Obviously, you'd have the health insurance and that sort of thing. No sign-on bonus, which they kept saying that we'd get that, and they still haven't given us.

They're saying there's none. They're putting us in Colorado Springs, which is not ideal. It's expensive to live there. I'm the attorney. I've looked there. It's very saturated. I'm kind of nervous that I will find a job there. You're an attorney in Chicago?

I am. And you think Colorado Springs is saturated? Yeah. I thought Chicago is where all attorneys think Colorado Springs is saturated? Yeah. I thought Chicago's where all attorneys live. Chicago's saturated, too. Yeah, I think. So, how old are you guys? I am 34. He's 31.

Okay. Well, you don't want him to go into the military, so he probably shouldn't. Why do you say that? I'm just curious. Because of the way you've stated your case, Counselor, the whole time. Everything has been negative toward the military. Every sentence structure you've used in this conversation. You think he's worth $140, and I think he is too, and you don't think he needs to be in the military,

and you don't want to go to Colorado Springs. I don't blame you. There's nothing wrong with any of that. But for that reason, I wouldn't do it. This is the Dave Ramsey Show. Thank you for joining us, America. We're glad you're here. Open phones at 888-825-5225. Thank you for jumping in. Well, the proximity principle is about here.

About two weeks, this book will be shipped. And this is the book, The Proven Strategy That Will Lead to the Career You Love, by our Ramsey personality, Ken Coleman. Ken is our trusted voice on careers. He has the Ken Coleman Show on SiriusXM and a very popular podcast answering your questions about what job I ought to take and how I ought to get that job and what can I do in my career, all of that. The Proven Strategy That Will Lead to the Career You Love, The Proximity Principle.

The book's $19.99. If you pre-order it, which you can still do now, you get $20 in free bonus items. Go to the online store at KenColeman.com or call us at 888-22-PIECE to pre-order today. That's 888-227-3223. Gregory is with us in Hamilton, Ohio. Hi, Gregory. How are you? Hi, Dave. Thanks for taking my call. I'm fine. How can I help?

Dave, question. My wife is going to retire in July of this year, and she has a company-sponsored pension plan that offers approximately eight different options that you can take. And my primary question was the lump sum amount, is there any way to avoid paying taxes on that immediately if you take a lump sum payment? Yes, you can roll it to an IRA. And I would put that in good growth stock mutual funds, and would do that that's exactly what i would do and if you pick some good growth stock mutual funds like we teach we teach to put it in four types growth growth and income aggressive growth and international it's what i personally do i'm 58 um and that's what my 401k consists of my iras consist of if you did that it will outperform what what leaving it in the pension plan will do, which will be around 6% or 7%. The other thing that happens is when you die with a pension, there may be a survivor benefit where you get some.

But when both of you die, that money is all gone. If it's over in an IRA, it's never all gone unless you spend it. It survives you. It's an in an IRA. It's never all gone unless you spend it. It survives you. It's an asset of yours. And so you make more while you're alive by rolling it to an IRA, and you make more when you're dead by rolling it to an IRA. Okay. Well, I guess my wife's concern was that she needed some supplemental income from that.

Well, you can do a draw off of an IRA. How much is the lump sum? It's $195,000. Okay okay and what is your all's net worth why does she need a lump why does she need additional income i i would say we got two hundred thousand dollars in uh just cds and bank accounts and uh another two hundred thousand dollars in uh of actual, it's not an employee-sponsored plan, but it is through where she works a savings account or an IRA. Okay. And do you have a home that's paid for?

The home's paid for, yeah, actually debt-free. And I have to say, I never did follow your principles, but my wife was pretty much in line with all your principles. So what's the homework? What's your house worth? Like I said, unfortunately, I had to retire a couple years ago due to health problems, and she's just tired of working. What is your house worth? A house is worth probably $150,000.

Okay. All right. So you've got about a $750,000, $800,000 net worth, and $600,000 of it is in retirement accounts and CDs and so forth. And how old are you two? I'm 63. She'll be turning 62. Okay.

All right. And so whenever you chose to take Social Security, you'd also have that to live on. If you watch your budget, you shouldn't really need a big amount of this money. I try to keep my hands off of as much of it as I can and just let it grow some more. I don't want you to live on beans and rice. There's no need to. You've done very well. You've saved money.

She has. And you guys are in pretty good shape. So I would sit down with a good broker like a SmartVestor Pro and let them help you organize those investments so that they're growing and so that you're able to pull off what you need to pull off in order to do this. But that would allow you to do that. And I would get it away from a pension and do a lump sum rollover into a traditional IRA. Now, when you hit 70 and a half, you're going to have what's called RMD, required minimum withdrawals, RMW, whatever you call it. Anyway, I can't even say it.

My brain's not working. But you're going to have required withdrawals at that age. And they're not great, but you probably already will be doing some by then so good question thank you for joining us justin's in detroit michigan hi justin welcome to the dave ramsey show hey how you doing dave better than i deserve what's up oh my question was i hear you talk about the uh roth and the 401ks pretty often on your show, and I was just wondering, are you against people using, like, just an ordinary taxable brokerage account for, you know, building their retirement and stuff?

Well, it's just not as efficient with the money, because if you take $1,000 and you bring it home, it looks suspiciously like $700. And so you've got $700 to invest or you've got $1,000 to invest. On a traditional pre-tax investment, traditional IRA or traditional 401K, that's the math. Are you going to invest $1,000 or are you going to invest $700? That brokerage account would have to kick butt to make up that other 30%. You're just sent to Uncle Trump, right? And so, you know, you've got to think about that.

And then the second thing is if you don't do that, if you do pay your money on it, which I also suggest, and you do a Roth IRA, the growth grows in the Roth 100% tax-free. How old are you? i am 25 years old okay so if you'll run a calculation out and you said okay i'm going to put a hundred dollars aside from 25 to uh 65 okay and i'm gonna put a hundred dollars aside and if made 12%, you'd have $1,176,000. Okay. So you'd have a million, million one, almost a million two in that account if you put $100 aside. But that's $1,200 a year, $100 a month in my example.

Okay. And it's for 40 years. So you have put in, there's $1,200,000 in there. Of that $1,200,000, all that's in there that you put in is $48,000, $1,200 a year times 40. Okay? And that is in the Roth? That would be in anything. Okay?

Now, if it's in a traditional account, it would be $1 two and if you put in a hundred dollars a month and it would the the out of that million two all of it is growth except 48 000 so you're going to pay taxes on a million dollars or you're not because all of its growth so if it's in a Roth, you pay zero taxes. Taxes on a million dollars, let's just pretend 25%, that'd be $250,000. So that's why you're making an extra $250,000. And that little simple example of only $100 a month, and I obviously recommend you save a lot more than that. So if you just look at that tiny little example, it goes, wow, tax-free.

That word Roth is worth hundreds of thousands of dollars a letter, R-O-T-H, right? I mean, wow. And because most, if you're under 50 years old, most of what will be in your account, if you're starting to invest now, will be growth. I mean, what, 48,000 from 1,176,000. So 96% of what is in that account in this example we just did was growth, 4% you put in. So you're saving taxes on 98% of your income, of your growth. And so 98% of what's in there is growth.

So always do it as a Roth first. And if you can't, then do it as a traditional because at least it's growing tax deferred. And all of that money that's staying in there, growing money, is ultimately the government's money. And it would have been the government's money if you'd have done it pre-tax or post-tax, like a traditional taxable brokerage account. You just can't keep up doing brokerage accounts until you've maxed out your retirement accounts, because it's just so mathematically efficient to grow tax-free or tax-deferred. Hope that helps you, Justin. Thanks for being a listener.

This is The Dave Ramsey Show. Hey, it's Blake Thompson, senior executive producer for the show. You know, you can listen or watch anywhere with the Dave Ramsey Show app on your smartphone. Catch the full show or watch the highlights and check out Dave's upcoming guests. Head to the app store and download it today.