The Ramsey Show - App - Providing the Best for Your Family With a Lasting Legacy (Hour 1)

Episode Date: June 15, 2018

The show about you

🎵 🎵 Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. This is your show, America. Thank you for joining us. Open phones this hour as we talk about your life and your money. The phone number, 888-825-5225. 888-825-5225.

Starting off this hour, Odessa, Texas. Emmanuel is with us. Hey, Emmanuel, what's up? Hey, what's up? How you doing? Better than I deserve, man. How can I help? Well, my parents want How you doing? Better than I deserve, man. How can I help? Well, my parents want me to buy

a house for them under my name in a city that depends on the oil industry. That's kind of scary. And since I have a decent credit score, 650, they want me to buy it instead of them, but they're going to pay for it. Mm-hmm.

So, yeah, I'm just... I don't know if I'm getting into some trouble there. You are. You're about to get in a mess. You're going to have two problems. One is, why don't they have a credit score? He went bankrupt in 2008. Mm-hmm. 2008?

Yeah, 2008, 2009. Okay. Has he paid his bills on time since then? Not really. Okay. So what makes you think he's going to pay this house payment on time? Yeah, it's just that he doesn't want to get any financial advice. He feels like that.

No, that wasn't what I asked you. I asked you what makes you think he's going to pay this house payment on time when he doesn't pay his bills on time. He's not. Right. And this is going to screw up your life. Right. Yeah, I'm 24 years old and he's 45. Yeah. So a very uncomfortable conversation to have with your dad to say,

no, Dad, I don't want to do this. But that's the conversation you need to have, sir, because what's going to happen is your dad's not going to pay the bill on time. When he doesn't pay the bill on time, it's going to screw up your credit, and you're going to be unable to live your life to buy. And, by the way, when you get ready to buy a house, you already own a house, so you're going to have trouble qualifying for the next loan for you to buy a house someday. Yeah, because it's a 30-year loan.

Yeah, if you put a loan in your name, another house in your name, then you get ready to go buy a house for you, you're not going to be able to because you already have one in your name does that make sense i mean you're not going to you're not going to make enough money to qualify for two houses probably most people don't and so you're not going to be able to buy another house in the future because of this because he's not going to pay the bill on time it's going to drive your credit score down mess up your credit and you're not going to pay the bill on time it's going to drive your credit score down mess up your credit and you're not going to qualify for two houses so um he's asking you to not buy a house so that he can correct and he is like about 150 000 in debt right now and so i i you know i i can't tell you how to make your dad be okay with this because he's probably not going to be okay with this.

But I can tell you that your answer should be no. I'm not going to do this. I love you, Dad, and I'd like to be able to help you. I talked to my financial coach, and he says I won't be able to buy a house in the future if I do this. And I've got plans to buy me a home in the future and my you know maybe my future wife or something like that and i know you love me dad and you wouldn't want to keep me from getting a house in the future and so i'm not going to be able to do this i'm sorry but he's probably going to be ticked yeah i mean he's gonna get mad i'm sure yeah i can't keep him from doing that.

But the very fact that he would get mad at you for not messing up your life, that's not a good thing on his part. That doesn't speak highly of him. But the guy who would ask you to do this is also the guy who will get mad, so that makes sense to me. But I just want to give you the strength to please for your sake and truthfully it's going to put a strain on your relationship he's going to get mad at you later when you call him up and go hey dad why didn't you pay the payment on time you're messing up my credit he's going to get mad then isn't he yep yeah because you can't challenge this guy you're his kid and so the best thing you can do is just go, I love you so much, and I'm so sorry,

and I don't want to make you angry with me. I really don't want you to be angry with me, but I'm not going to do this even if you're angry with me. And you being angry with me is not going to make me do it because it's a bad idea. Emmanuel, you're going to get yourself in a mess. You're going to spend the next 10 years, and your dad's going to eventually end up mad at you anyway because he's going to screw this up i'm sorry i'm sorry you're boxed in by this guy in this situation but i gotta beg you for your sake to not do this and you're not helping your dad either by the way because nothing's going to get better in his life until he changes the very

reason that he can't get a house now. Austin is in Cincinnati. Hi, Austin. How are you? I'm better than I deserve, Dave. How about yourself? Just the same, sir. How can I help?

So I just had a quick question for you. I was gifted a couple stocks, and I have a couple stocks that I bought on my own a few years back. And I was looking to sell those and buy a couple mutual funds. But a friend of mine told me that I really need to be careful about capital gains with that. So I just wanted your advice on how to go about that and if it's possible to avoid those capital gains. Not possible to avoid capital gains. Your capital gains will be calculated, of course, your gain over what you paid for it. And the stocks were gifted by someone that was alive, or you received them in an estate? No, it was someone alive.

It was my dad that gave a couple to me. Okay. The stocks he gave you, when you're gifted a stock, your basis in that stock is what he paid for it. And so you're going to have gain on that a bunch, regardless of how you sell it. And so what is this total pile of stocks worth in money? It's about $5,500 across three different stocks. And the amount that he gifted to me would be about $2,200 of that.

Okay, but it's all $5,500. Okay. So I don't know what your basis is, but we're not talking about much taxes either way. And so we're talking about $600, $700 maximum in taxes. Okay. And so I am going to cash them out and move to mutual funds because I think over time you're going to gain two things by being in mutual funds versus being in stocks. Number one, you're going to gain the diversification by being spread out. It's going to give you safety. And being in a handful of stocks, you've got a lot more volatility.

And so I don't buy single stocks personally. I know a lot about it. I know so much about it that I don't buy single stocks. Too much risk for me. Too much risk for me. The second thing is that you're probably going to end up making more money in mutual funds because mutual funds in general outperform single stocks in general. Now, I don't know what these particular stocks are, and I have no way of knowing if these particular stocks will outperform a mutual fund or not. But most of the time, a good selective mutual fund will outperform the average person buying

the miscellaneous single stock. But if the whole thing is taxable, the taxes aren't but $500 or $600, $700, something like that, and you probably is less than that. But your basis is what you paid for it, and the ones you bought But your basis is what you paid for it and the ones you bought. Your basis is what your dad paid for it and the ones he gifted you. The difference in that and what they sell for is your gain times 15%.

That's how you calculate it. That's how I did that just now. I just acted like it was all taxable. And it's not all taxable. So that's where you are. I'd cash them out. This is the Dave Ramsey Show. Are high health care costs getting you down?

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Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. Thank you for joining us, America. Paul is with us in Sioux Falls, South Dakota. Hey, Paul, how are you? Great, Dave. Thank you for taking my call. Sure. What's up?

My wife and I are getting ready to build a second home, basically, down in Arizona, and would not really be putting it to heavy use for maybe another two or three years. And so the concept of maybe having it as a rental is out there. I also have rental properties in my hometown, and I'm just wondering about the concept of a 1031 exchange from this investment property and calling the second home an investment property for three or four or five years. Does that work?

Conceptually, does that work conceptually does that work and as far as i understand it does 1031s have enough layers to them in the regulation that i would want you to sit down and talk with a tax pro i'm not one um we attempted one uh a while back on a deal we were doing we were not able to do it on a resort property because the guy had um had not rented it six months and one day you have to rent it six months and one day a year for it to be primarily that so i mean you can't rent it out on a bed and bread i mean on a airbnb or something for two two nights a year and call it a rental property and it'd qualify. So you do have a six-month, one-day reg. I know that because I ran into it.

And it kept – it killed that – it didn't kill the deal, but it killed the 1031 portion of the deal. And so I do know that's there. You'd have to do that. But other than that, there might be something else that prohibits you from doing it. And I'll tell you the other thing I'd want to understand is there's going to come a day that it sounds like you move there. It's not a rental property anymore. And then how does it qualify in the event that property is sold by you in the future? Is it going to be personal residence? And what do we have to do to move it from that?

And does that screw up the 1031 later you know how many how many years do you have to do it six months in one day and then when it becomes personal residence then what what happens i'd want to know the the back end of the tax law as well just so you know what you're getting into it might you might still want to do it but uh you want to know what you're getting into. So you need to get with somebody that really knows taxes. I don't. I'm not very good at taxes. I know some of the basic stuff, but I don't do my own taxes. So, you know, just if you've got a good tax person to sit down with, tax attorney or something, that would be good.

1031s will cost you a little bit extra in the transaction, probably another $1,000 to $2,000 in miscellaneous fees here or there to do that process. But it could save you tens of thousands of dollars in capital gains tax versus just selling a rental, paying the bill, the capital gains bill, and taking the money and going to buy your resort property with it if you wanted to liquidate a property to do that. So, you know, sorry, that's my only input is the little bit that I do know and tell you to get a tax pro. If you don't have one, check DaveRamsey.com. We've got tax ELPs, people we endorse for taxes there, and I'm sure one of them can help you. Jerry is with us in Austin, Texas.

Hi, Jerry, how are you? Hey, Dave. Hey, I recently converted a half a million dollar term policy, 20-year term, to a permanent policy. Why? Well, my thinking on it, I ran the math. I'm 61 now. When I'm 85, I will have put about $200,000 into that policy. I got a really good rate on it. And my thinking is using that for my – I would have put $200,000 in the debt benefit, $500,000. My thinking is I would use that for my kids' inheritance.

So I could spend 401K and all that without thinking about the inheritance part of it. You paid a premium for that. Ouch. Okay, so you got a question? Well, I mean, is that a good strategy? No, it's a horrible strategy. You don't use life insurance to build an inheritance ever. They make money on you with life insurance, and when you go to Whole Life, they make truckloads of money on you.

Whole Life Life Insurance is one of the worst financial products on the planet in terms of the rates of return and the process that's used, the pricing of it. Everything is just horrendous. The expense ratios on it are just bad. No one teaches to use that kind of a product except people that sell it. No one in the financial planning world believes in that garbage anymore. So, no, I would cancel that and cancel that plan. And I wouldn't even use term life insurance to build an inheritance.

I mean, your 401K, your nest egg, whatever net worth you have built, you live out of that, and then whatever is left is your inheritance, and that's fine. And your best inheritance to children is first and your inheritance and that's fine and your best inheritance to children is is first and foremost the character that you transfer to them and um but uh we don't use life insurance products uh you know to create a state situation so it's just the math on it doesn't work out when you crunch the numbers the the biggest problem is not the the return on investment's a problem, but the opportunity cost. Had you taken that same amount of money and put it in a good investment, you know, a good piece of real estate,

or that same amount of money and put it into a good mutual fund that's got a good rate of return, it would have destroyed in terms of the size of nest egg it creates by the time you're 85 versus what this thing does because these things just underperform horrendously horrendously so hey hold on uh since you're in that world and you're thinking about legacy i'm going to send you a copy of the book the legacy journey uh has nothing to do with what we're talking about except it has to do with leaving a legacy which is part of leaving an inheritance and what you're wanting to think about that. So I'll send you a copy of that.

I hope you enjoy it. Folks, if you've not read that one, that's the only book I've ever written that was a Christian book purely. And that, I mean, you don't have to be Christian to read it. We'll let you read it. But it's chucked full of the Christian worldview, in other words. And it's a book not about money but about wealth. And there's a difference philosophically, theologically, even mathematically in wealth and money. Money creates wealth, but wealth is different.

And when you start reaching the point that Jerry's at and you start asking some of the questions he's asking, then your mind takes a change from just money. Money is like how you pay your light bill. Wealth is your net worth, as an example, that kind of a thing. Jason is with us. Jason's in Jackson, Mississippi. Hi, Jason. How are you?

Better than I deserve. Good. How can I help? I have recently completed a manuscript for a sci-fi novel. I'm currently trying to sell my soul to a literary agent so we can get it sold. What I'm wanting to know is once I get it sold, is there any point in this process where I should incorporate for dealing with the money? At any point, should I do it before i get an agent before i sell it no no there's no tax advantage there's no tax advantage whatsoever and no one is that

i'm aware of has ever been sued over a sci-fi novel um for liability you know so now i mean that's the only reason you incorporate is for liability reasons, and you've got no liability. Are you a first-time author? Yes, sir. Okay. And when you get a literary agent and then they were to, if they were to land you with a real publisher, not a vanity publisher, that gave you money for this book and that agreed to sell this book, what would you be doing to help them sell it? Definitely go to book signings, sci-fi conventions.

I know my crowd. They're the geeks. So I try to go there, get on panels to get my name out there. The last two answers would be right. Book signings don't sell books. Book signings are what happens after you've already sold books. Yep. But you need to have a marketing plan in mind,

and the last two things were part of a marketing plan, that you can be willing to present to publishers, because publishers these days don't do a good job marketing, number one. The ones that do do a good job marketing very seldom do that for first-time authors. And so you've kind of got to bring a plan of how you're going to help them sell your book that they bought from you. And if you do that,

you'll get a lot better chance of getting a publishing deal and actually getting some money for the publishing deal as well. So good luck with it, man. That's pretty cool. Congratulations. This is The Dave Ramsey Show. Folks, the real estate market is on fire all over the country. If you're looking to buy a home and you need a mortgage, don't sell yourself short by going and getting a typical pre-approval.

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So become a certified home buyer and get ahead of the game. I trust Churchill Mortgage. Call 888-LOAN-200 or visit churchillmortgage.com. This is a paid advertisement. NMLS ID 1591, Equal Housing Lender, 761 Old Hickory Boulevard, Brentwood, Tennessee, 37027. Thank you for joining us, America. Tim and Brittany are with us in Charlotte, North Carolina. Welcome to the Dave Ramsey Show, guys. Thank you. Thank you.

Welcome, welcome. We're calling to give you our debt free screen i love it how much have you paid off uh 222,099 months wow good for you your range of income during that 99 months uh eight years ago we started at about. We went up to about 85 with a wife working. A wife stopped working because we have five kids in the meantime. And then this last few months, we're at close to about 100,000. Good for you. What do you do for a living?

Full-time firefighter for Charlotte. And I also do a lot of side work, a lot of handyman work. Good for you. Hard working. Very well done. So I'm guessing over eight years, $222,000 in Charlotte, North Carolina, is your house. Yes. You paid off your house.

Yes, sir. You paid off your house. Yes, sir. We paid off the house. I love it! How old are you two? Both 31. Wow!

So you start the process of paying off your house when you're 23, and here we are. Yes, sir. Wow. Yes, sir, that's it. What in the world? What made you think you could have a paid-for house by 31 years old when you're 23? Tell me the story of how this unfolded. Go ahead, Brittany.

Okay. Well, my husband was at the fire station, and there was a guy there that taught your classes. And he was talking to my husband, and I gave him the financial peace book. And he read it within his shift and came home and showed it to me, and I think I probably read it the very next day. And from then on, we dived in headfirst and went for it and never looked back. Wow. Did you have other debt other than the house when you started?

Yes, we had two car loans and then like a $10,000 family loan. Okay, so you had to clean that up first and then you get to tearing on to the house. Yes. Yes, sir. Wow. And so over eight years, your life unfolds. You have five kids and you pay off $222,000. Yes, sir.

Yes, sir. That's pretty impressive, y'all. I mean, do you not feel weird oh yeah completely do you know any 31 year olds that i've paid for house uh none of our friends yeah we're working on them though yeah we're gonna get them there you led the way into the land of weird that's for sure way to go guys very impressive very fun stuff so what do you tell people when they find out you're 31 and everything is paid for house and everything and you got all those kids because everybody knows if you got a bunch of kids you can't be out of debt but you guys did it right so what do you tell people the key to being out of debt is what did you do uh i think probably the main thing for us was um just being consistent and

just sticking with sticking with your plan and taking the baby steps one by one and uh i think we realized that every little small amount of money that we get we just applied to it rather it's fifty dollars here a hundred dollars there, every little bit counts. And we just kept applying it and working on it little by little. I would say just the small sacrifices. Stick with the small sacrifices, you know, cutting your things out of your budget that you can because you know it's going to make a change in the end. Well, I mean, now you make $100,000 a year.

You don't have a payment in the world, not even a house payment. You've got so much room. You have lived like no one else, and now you can live and,000 a year. You don't have a payment in the world, not even a house payment. You've got so much room. You have lived like no one else, and now you can live and give like no one else, right? Amen. Yes, sir. You don't have to make any sacrifices. Well, you have to make some, but you don't have to make the small sacrifices. You can enjoy, and you start to be in control, but there's a lot you can do now, right?

Yes, sir. So what's the first big thing you're going to do to celebrate? Oh, sir. So what's the first big thing you're going to do to celebrate? Oh, goodness. We're trying to work on hopefully an RV or a travel trailer here soon. That's our next goal with our family. Okay, so you want to buy that so you can do some camping. Yes, sir. Do that.

Just have a lot more family time together. That's perfect. Very well done. To be able to give as a family a lot more family time together. That's perfect. Very well done. And obviously to be able to give as a family a lot more. Yeah. Excellent. Very cool, you guys.

We've got a copy of Chris Hogan's book, Retire Inspired, for you. That is, of course, the number one bestseller on the subject of becoming a millionaire because that's the next chapter in your story. You'll be millionaires soon at this rate. And, of of course outrageous as you said outrageously generous along the way so well done you guys i'm proud of you thank you thank you thank you very well done i bet your parents are proud yeah yeah yeah we feel uh we feel very blessed to have a very close family to support us. Yeah, very cool stuff. Tim and Brittany, Charlotte, North Carolina. $222,000 paid off in 99 months. That's their house and everything by 31 years old, making $65,000 up to $100,000, having five kids through that scope of time.

Count it down. Let's hear a debt-free scream. All right. Ready, kids? Three, two, one. time count it down let's hear a debt-free scream all right ready kids three two one i love it i love it you see i don't know if you heard the sound but there was a unique sound in the end of that call. Did you hear it? It was the sound of a family tree being changed.

Did you hear it? That's little kids that were born during the journey of their mom and dad becoming debt-free. When you are debt-free and you make $100,000 a year by 31 years old, unless you really screw it up, you're going to be wealthy. I mean, you really got to mess it up. Those people are going to be wealthy. And those little kids screaming on the radio, I'm debt-free. Did you hear those little voices, little chipmunk voices?

Did you hear that? That's the sound of a family tree being changed. Because they know that their daddy, who's a fireman, worked handyman jobs on the side for the last eight years to hit this goal. You don't think those kids know what's going on in that house? I'll guarantee you those kids know what's going on in that house. Eight years they've watched dad sacrifice, dad pay a price, mom keep the home fires burning while this is happening. That family paid a price to get there.

And when you're a kid that's eight years old, you know what's going on. A kid that's seven years old, you know what's going on. You can see what your dad's doing. You can see what your mom's doing. And then they gather around the phone and they say, we're going to mark this moment in our family's history because our family is not going to be in debt anymore. Our family is going to be in a position to be outrageously generous and wealthy. Our family tree is being changed, kids.

Now, you don't have to even say that out loud to a little kid. They know it because they've watched the price that was paid. They participate in the celebration. And now in the coming years, they'll participate in the fruit of the hard work and the sacrifice that mom and dad did. 31 years old with a paid for house you do the math let me help you a hundred dollars a month saved from age 30 to age 70 is a million one hundred and seventy six thousand dollars in a mutual fund so what is two thousand dollars a month when you don't have a house payment?

You do the math. Yeah, it's a lot. That's what it is. It's tens of millions of dollars, and if I'm half wrong, it's millions and millions of dollars. That was the sound of a family tree being changed. You know what changed it? Mom and Dad's decisions. Their belief system. They believed that if they

worked hard and paid off debt, that they would have the room and the margin in their income, which is their most powerful wealth building tool, to change their family tree. And they've done it. And she's home with five kids. Yeah. So when is your turn? I think it's now. This is the Dave Ramsey Show. With more frequency than you know, I get calls and emails from people dealing with the recent loss of a spouse or a parent.

You can hear the struggle and the heartache that they've been experiencing. And at a time they should be grieving, what breaks my heart the most is the strain and tension that they're going through because of money. Especially when it's a situation that could have been avoided. If you have a family, it is your responsibility to have term life insurance. It's one of the things you do to say I love you. And yes, this is an ad for Zander Insurance. But since this is one of the most effective ways I have to get my point across, so be it. For over 20 years, I've been telling you about the importance of term life insurance

and protecting your family. Listen, you need to check out Zander.com or call 800-356-4282. I can't say it enough. Protect your family. It's what you're supposed to do. Go to Zander.com or call 800-356-4282. Thanks for being here, America. Brad is with us in Monterey, California. Hi, Brad. How are you? Good, Dave. Thanks for taking my call.

Sure. What's up? So my wife and I are considering, we own two homes. We own our current residence as well as a rental. We are considering selling the rental for sure, and then possibly selling both, and then maybe relocating to an area where we can pay cash for our own home and then possibly pay cash for two rentals. I'm wondering if that is a good idea or if we should just sell the rental, put it towards the house that we're currently in. That would leave us with about $30,000 to $40,000 left on our current mortgage. Gotcha. Are you retired? No, I'm 38, she's 39. Oh, and so what would you do with your careers if you just up and move? Well, she's a stay-at-home mom. My career probably would

stay the same. Right now, I'm self-employed and make about $80,000 a year. If we moved, I'd probably go to work for somebody else for a year or two until I could start my business over again. I'd probably drop down to about $40,000 to $45,000 a year. Very few places can you move, even though Monterey is expensive, that is half as expensive as Monterey. You can find real estate half, but not cost of living half. Right. That math doesn't work unless you just want to leave the area for other reasons. But just purely financial and saying this is an expensive area to live, do I want to leave, but I'm going to make half? No, I don't want to go make half. And I don't, I would picture making half for a couple of years

until I started my business over again. I think I know more now than I did 13 years ago when I started my business, so I'd like to think that I can build myself back up into the same position that I am today. So. Okay. Um, so, um, you know, I would want a, uh, that to be a pretty quick bounce, like not, you know, like a, a 12 or an 18 month bounce back up. I mean, if you, you know, you have a temporary step, step back, that's fine. But if this is a, a five year plan to rebuild your business that's that's

disturbing uh now again if you just for quality of life reasons or whatever reason you just say i'm done we're leaving you know that's okay that's a different discussion but if you're running this purely on the math and you know or you say you, my family or my wife's family is in X city and we want to move to that city and do this idea. That's certainly OK. You know, that that makes a difference. Or we don't have any roots in Monterey. And, you know, we're real. It wouldn't take much to pull them up because they're not here.

And we really want to, you know, start our family, run our family in another area. That's OK. All of that enters into the equation because this is personal finance. But just on the math alone, I would want to see your career have a better trajectory than I'm hearing right now in order to do this move based on math only. I had thought that the passive income from having the two rentals and owning the three properties cash might supplement the lack of personal income. It will, but you've got that now.

That's not a gain. I mean, you've got 80 plus your rentals now. You'd have 40 plus your rentals then. So the plus rentals, that doesn't that doesn't shift it i mean you can go if you want to go dude but you just you know you need to have a plan to bounce that career back on the financial side to make the math make sense um and or you need to say we're taking this cut because of other personal reasons and that's fine if the other personal reasons are just fine. You know, we don't like this area.

We want to live in New York. We want to live in Florida. I don't care where Texas, I don't care where it is, just Tennessee, whatever. Just that's fine. But again, my point is you don't make the decision 100% on math ever because it's personal finance. There's other variables in the mix. But we have to be wise about the math and wisdom says you got to have some way to get this business running

and kicked in the butt faster than i hear right now i i would want i'd want to challenge that part of this decision process but it still doesn't keep you from doing it it just says i got to do something different with my plan on that part of the equation justin is in indiana hi justin how are you i am blessed how are you sir just the same how can i help i uh so my brian and i are graduates of fpu we are in a baby step two and we making great progress. We want to speed that up a little bit more. We currently owe on two cars, and we're wanting to sell my car. I don't commute hardly any anymore, and so we don't really have to have it. We're going to be, if we sold it, according to a Kelly Blue Book,

and what the car, what we still owe on it, according to a Kelly Blue Book, and what the car, or what we still owe on it, we could potentially be around that $3,000 to $4,000 deficit. We have about 50% equity built up in our home, and for what it's worth, I have good credit. Should we take out a loan we we could cash flow two thousand um if it's between zero to two thousand if it's over that well we don't we don't have that kind of cash idea okay if you took out a loan it would not be against your home it would just be a personal loan because you know how much is the total debt on the car? $13,000, and that was the complete.

Yeah, so if you go from a $13,000 loan to a $2,000 loan, we made progress. Right. And so, yeah, I would take out a loan, a $2,000 loan to get rid of a $13,000. A personal loan, though, like a signature loan, not something on the home. Never anything on the home, ever. No, there's no need to. There's no need to. And plus, you could probably, if you wait too much, you could probably save up the rest of it. It would slow down progress on the debt snowball.

Well, this is the debt snowball. I see. We're going to increase the progress on the debt snowball by $13,000. Right. That's a big jump. And so, you know, if you put this at the top of your list because it gets rid of the car payment and gets rid of a huge chunk of debt and just move it around and make it a priority, you can knock it out with no loan.

And that may be the best way to do it. What's your household income? Just right north of $100,000. Okay. Yeah. I'm probably just going to save it. Let's just put this $1,000 or $2,000 that you're shy at the top of your debt snowball and just throw that cash together, and then let's dump this car.

That way there's no other loan. You don't have to wait on someone else to give you permission to get the car sold. You're sitting there with $4,000 in the bank, and the guy comes along and buys it. You write him a check, put $3,000 with his money, and you get the title and sell the car. And that's a great way to do it. Thanks, Justin. We appreciate you joining us. A lady asked me on Twitter this morning,

Dave, what does it mean when these people say they're upside down on a house or upside down on a car? What that means is that they owe more on it than it's worth. And so in his case, he owed $13,000 on the car. He thought he was about $3,000 upside down, which means the car would be worth about $10,000. And so if you have an item that is worth less than you owe, we call that upside down. People in the financial world do. Because right side up would be the item is worth, the asset is worth more than the debt, worth more than the liability, which means you'd have equity in it. Upside down means you have negative equity. You're in the hole on the item. And so a lot of real estate was upside down when the market turned down a few years ago

most of it has recovered now not all of it but most of it has recovered and certainly most people that have a car loan are upside down on their car loan because cars drop in value so fast they drop in value so much faster than you drop your balance by paying down on it and so almost everyone that doesn't put down a huge down payment on a car is upside down on the car debt because even if you put down three thousand bucks or four thousand dollar down payment on a thirty thousand dollar car you drive it off the lot as soon as you hear the wheels go across the curb into the street. You lost three grand. So, I mean, it's just, you know, the worst car accidents happen on the showroom floor. New cars lose value so fast in that first year, so dramatically that you're just stuck and you're in the hole.

That's what upside down means. So, good questions. Thank you for joining us. That puts us out of the Dave Ramsey Show in the books. Our thanks to James Childs, our producer, Blake Thompson's

our senior executive producer, Kelly Daniel, our associate producer and phone screener. I am Dave Ramsey and we'll be back. Hey, it's Blake, chief production officer

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