The Ramsey Show - App - Quit Trying To Trick Your Way Out of Debt! (Hour 2)

Episode Date: March 21, 2023

Dave Ramsey & Jade Warshaw answer your questions and discuss: Following a proven plan vs. "your plan",  Should I do a HELOC, from the blog: HELOC: What Is a Home Equity Line of Credit? "Should we pay off our house or invest instead?" What to do with a rental property (and the Sunk Cost Fallacy explained),  Handling an inherited IRA. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Take our FREE 3 minute assessment: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 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, this is The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Jade Warshaw, Ramsey personality, is my co-host today. Open phones here at 888-825-5225. Jason is with us in Sacramento. Hi, Jason.

Welcome to the Ramsey Show. Good afternoon, Jade and Dave. So my financial plan has ADD. I'm kind of all over the place with my baby tips. Why? Well, I've been listening to you guys for a number of years. I follow you online. I haven't actually signed up for financial peace, but I did register to become a coordinator. We paid off our basic debt. We paid off our car debt we paid off our car debt we have our emergency fund

um we we have our you know three to six months in savings so i think we're on four or five and six and then we just kind of went okay we're good you have no debt at all except your house uh well you're gonna yell at me i have two thousand in credit card debt that we roll not roll over but our monthly expense no wait were you listening okay i was dave okay so you already got yelled at a little bit for those listening we i will get yelled at yes for those listening the past segment we we yelled at some folks but here's the thing jason you you said you're a long-time listener you said you understand the program you're choosing to do something different you're choosing to work your own plan but you called us and i'm going to tell you to cut up the credit cards and i'm also going to look at

you with a with a smart look on my face and wonder why you are doing that honestly it came the way it started for years i was cash only before before your show uh-huh um and then we we weren't in a position where we wanted to pay cash for a car because it would have cut too much into our savings and we we just we had no credit so uh yeah i'm sorry let's stop let's stop a second because stop whoa whoa stop okay i've heard about your plan and you know about our plan what's your question yeah so the question is uh outside of my two thousand dollar credit card debt for the monthly bill um i'm somewhere between steps four five and six no you're not and i'm just trying to figure

you're not working this you're not working the baby steps but what's your question then okay what's your question you want me to pay off the credit card debt no what is your question four five and six i want you to tell me what your question is are you asking what baby step you're on um i in my head i think i'm in baby step four you're in baby step two you're in baby step four of your head but you have a different plan of baby steps than we do so now you're in baby step two you still have credit card debt and you still have credit cards so you're still have consumer debt 100 debt free with no credit cards and debit cards in your pocket that you use your money is baby step two and you're

not there okay and it's inconvenient to pay cash for my car because i don't want to limit my savings is your plan not a millionaire plan not a wealthy person plan a middle class person's plan i'm going to leave money in savings at three to five percent and borrow money to buy a car at eight to twelve percent well that's a freaking genius move i mean so you what you've got to decide jason is and it's okay we're not gonna be mad at you but don't walk around telling people that you're on a baby step because you're not doing any of it you're doing your deal and one of my friends who's a a wealthy guy that still had been playing around with debt and stuff i was i was actually speaking at an event and he and I ended up having lunch after the event

uh in another city and he said you know I finally did all your stuff and I'm like what do you mean what do you mean you did all my stuff because you ain't done nothing I said we've been friends a long time you've been stupid the whole time I know and he goes well what do you mean he goes man you don't it's okay I still love you you're still my friend but you don't do our stuff and he goes no I really do I said what do you mean he goes i did it all i'm 100 debt free i've got my emergency fund i matter of fact i'm paying off my house uh i paid off my house two weeks ago oh wow and so he's maybe step seven right he did it all and i said what changed and he goes well i finally had to submit myself to the process that you laid out because i kept thinking i could figure it out faster than

you could and i forgot that you're the guy on this yeah and he goes and he goes and oh by the way when you're doing the stuff in my world you're going to submit yourself to my way because i'm the expert there and i'm like i'm in smart guy you know i mean you but you have to you know you got to find a proven thing and then do the thing, not ish it. I mean. Ish is a wish. Dave, you're on the radio. We're on the radio.

What is it? Number 16 show. Financial expert. And when we, I'll talk about myself from before I got here. I listened to you and I listened to the other personalities because I'm like,'re in that position they understand money I'm a lay person I'm just trying to scratch and claw my way do I really think that I've got a better method or am I going to go for the folks that have helped millions of other people do it and if you do it's okay go do that go do that it's okay we don't have to be mad about it I'm not mad about it but here's the thing if you want to do the stuff we're talking about do it yeah and it'll work it's a proven process screwing around

with it and ishing it you know i'm ish i'm ramsey ish yeah it just doesn't work jason it doesn't work my brother i do get a little salty you though, Dave. You and I be friends, and you keep your car payment and your credit cards, and we'll still be friends, and I'll just be your rich friend. I get a little frustrated with it, Dave. I'm not going to lie. Well, it is. It is frustrating. But the frustration is not because we're insulted.

No, no, no. The frustration is because we love you, folks. Yeah. no, no. Because we want, we love you. Yeah. We love you. We want you to win. We want you to do better. Yeah. And we want you to turn the corner on this stuff.

And so, but it's like a lot of things in life. Have you ever had a friend that was, you know, trying to quit drinking or trying to quit misbehaving and you wanted it for them more than they wanted it for them? Yes. Yeah. That's the frustrating part because we see it and we know and we get it and welcome to the ramsey show yeah so there you go yeah because we love you and we i mean but everybody's got stupid people that they love i mean you know we all do and i'm the stupid people that other people love so it's okay i'm on the

other side i love dave but he's crazier than a bean you know i mean it's okay that's all right i'm good with that it's you know you don't have to be we don't have to be mad about it we don't have to troll somebody about it or something like that it's just a matter of are you going to do this stuff it's like i hired a personal trainer and he's got a six-pack i got a keg right and um i'm like and he tells me what i need to eat now if i don't eat what he says then i'm i'm not gonna look like him well that is one thing to not. Now, if I don't eat what he says, then I'm not going to look like him. Well, that is one thing to not eat what he says, but don't sit there and argue with him about it. I'm actually a nutrition specialist. Check out this belly. It proves it. Right. Some of the folks come on here and they rip off their shirt.

Taking in more food than you. so I know more than you. This is the Ramsey Show. Jade Warshaw, Ramsey Personality, is my co-host today. Thank you for joining us, America. Our question of the day is sponsored by Neighborly, your hub for home services. Don't wait until the AC or other home systems go out this summer neighborly is your key to staying on top of your home maintenance needs don't wait on emergencies find reliable home service providers like air serve mr appliance and mr router plumbing lots of others at neighborly.com keeps your house running like clockwork. Today's question of the day comes

from Harry in Georgia. He says, I have a budget in place and I'm using the debt snowball. Would you recommend consolidating all of the debt into one giant personal loan? I also have a total of $50,000 between five credit cards, a personal loan and an appliance loan. I also have a ton of equity in my home. So I was wondering about doing a home equity loan, which could give me tax savings on the interest. Should I just keep it status quo for now and continue the snowball or do debt consolidation loan? Overall, I'm just looking to expedite debt elimination. All right. So the debt snowball, I would not call status quo. I think that it is the most effective way to pay off debt. And it's been proven. There's been some studies. I know Harvard published a paper about why the debt snowball actually works and that it works.

It's the most successful way to pay off debt. So I would not recommend, um, Harry doing a consolidation or a HELOC. And I, it sounds like you're just like trying to think of ways to get this debt out of your life. And again, there's no easy button. You're going to have to list your debts from smallest to largest and work to pay this off. If you do a debt consolidation loan, there's a couple of things there. You're not paying it off. You're just clumping it all together, moving it all together. And actually, there are studies that show that when you do that, your brain thinks that you have less debt and you go back into debt again because you've moved it all into one payment. You haven't actually paid it off. Not to mention when it comes to debt consolidation, they're doing for you what you

can do yourself. They're making deals with these companies. You can do that yourself. You can set up payment schedules. You can do all of that yourself. You don't have to pay somebody to do it for you. And a lot of times the interest rate when you get debt consolidation is no better because it's based on your credit. And if you have ruined credit, then you're not going to have a better credit rate on that debt consolidation loan anyway, a better interest rate. So I wouldn't do that. And then talking about the HELOC, again, you're just moving debt and now you're moving it into your home mortgage. So you really want to put your home on the hook for your debt. I would not do that. Home equity line of credit is what he's talking about for somebody who's listening the first time and you don't understand what that is.

It's basically a line of credit that you pull out on your home and he wants to use that to pay off his debt. A terrible idea. You're not paying it off. You're just moving it into your mortgage. Not a good idea. Let's use the debt snowball. Again, list your debt smallest to largest, make minimum payments on all of the debt, and then take any and all extra money that you can and throw it at the smallest debt until it's paid off. Got to go quickly. Got to use intensity for this. And then when that smallest debt is paid off, the money is freed up and you throw it on the next smallest debt. And then you do that again. And before you know it, you've got a nice snowball going and that is how you pay off debt. And let me tell you something, you want to do that. You need to do it smallest to largest so that you feel those wins,

Harry, because when you feel the win of paying off that smallest debt, you're going to be like, wait a minute, wait a minute, I can do this. This works. And then you're gonna go to the next one and you feel that motivation once you begin starting. And once you start feeling the momentum that comes with the snowball. So just do it. Just walk yourself through the process. You're gonna be better for it.

You're gonna allow yourself to feel the pain of your debt. When you do the snowball, you feel it because you have to work to make it happen. You're not just rolling it into some other loan. You're not rolling it into your debt. When you do the snowball, you feel it because you have to work to make it happen. You're not just rolling it into some other loan. You're not rolling it into your mortgage. You're not taking the easy way out. Harry, the thing you got to remember is this. You have a block of debt that's $50,000. If that block of debt is a debt consolidation loan, it's still $50,000. If that block of debt is a HELOC, it's still $50,000. There's only one way to get rid of $50,000.

Pay $50,000. There is no, none of these programs, all they do is lower the amount of interest, and interest is not your problem. Spending more than you make is your problem. Not increasing your income enough to throw at the $50,000 is your problem. You need to come up with $5,000 a month for 10 months because you work so much that you can't breathe. Great place to go when you're broke to work the interest rate

on your heloc is versus the interest rate on your debt snowball is not going to fix the problem you need fifty thousand dollars that's the problem you're concentrating on the wrong end of the iceberg the interest is just sticking up above the water. There's a big iceberg below the surface. It's $50,000. That's the problem. And I want to write off the interest as having a HELOC. You're not writing off the interest.

You don't write off the interest on a HELOC. You know why? Only 13% of Americans itemize. 87% take the standard deduction. Good point. So you probably are taking a standard deduction, which means you don't get to write off the interest because you already took your standard deduction. If you are one of the 13% who itemize, you probably are not itemizing this anyway, and it's not that big a deal. I mean, the interest, let's say it's 10% on $50,000.

It's $5,000. You know what that saves you in taxes? $1,250. $1,250 isn't your problem. $50,000 is your problem. Quit trying to trick your way out of this. Come up with $50,000. That's how you do it

and the debt snowball leads you through that process and keeps you moving but you've got to concentrate you need five thousand dollars a month extra for 10 months or twenty five hundred dollars a month extra for 20 months that gets rid of your problem not a little bit of savings on interest or some faux tax write-off that you're not even really taking because you're taking a standard deduction. That's what's really going on. Tara's in Kalamazoo. Hi, Tara. How are you? Hi, I'm good. Thanks, Dave and Jay for taking my call. Certainly. How can we help? My husband and I are about 35 and we have one kid and one on the way. We have about $200,000 left on our mortgage, which is at a 2.375% rate. It was originally a 15 year. We have 12 left on it.

We have no other debts, about 60,000 in cash. We have about 500,000 in investments with one 401k that we max out each year. We have $140,000 in short-term treasuries like I-bonds and T-bills. How much was your mortgage again? Originally it was about $240,000. Now what is it today? We have $200,000 left. And you have $140,000 in I-bonds and $60,000 laying around in cash. Yes. Why do you still have a mortgage well that's what my question is around is surely like we've seen rates climb right with treasury is about five percent now so we're curious if we should take advantage of our current position

um thinking funding low duration like a 17 week um t-bill and put like all of our two hundred making any money on that if i were you i would be mortgage free today you're not making any money on that stuff you need to roll out the actual math that you're talking about here and how many dollars it results in it's not spit you're not getting wealthy with this. Yeah. I mean, you actually take $140,000 and multiply it times that. I mean, you can't even go out to eat. It's not real money.

You're just playing a math game. You're trying to do this with intellect. And if you're actually running out the nominal dollars that are the resulting here, you're not arbitraging your house into t-bills and making any spread it's it's the the difference is a joke mathematically i mean it's a couple thousand bucks it's not going to make you rich you're playing games with stuff that's not going to make you rich you can pay off your house today keep that'll make you rich yeah keep some money aside for three to six months yeah three to six months of expenses and emergencies no other, and liquidate everything that's non-retirement and pay this house off this week.

That's what I would do. Definitely not borrowing on my home to invest in T-bills. This is The Ramsey Show. Jade Warshaw, Ramsey Personality, is my co-host today. Open phones at 888-825-5225. Angie's in San Bernardino. Hi, Angie. Welcome to The Ramsey Show.

Hi. Hi, Ms. Jade. Hey, Mr. Ramsey. What an honor to talk to you both. Thank you so much for taking our call today. Our pleasure. How can we help? Okay. So I'm hoping you can help us out. My beautiful husband and I cannot agree what to do with a rental property that we have. My hubby is pretty concerned about the capital gains and the recapture of depreciation that we would have to pay if we sell it.

And I, on the other hand, I think it's a really good time to sell. And I think this money would change our lives. We would pay off our home. We would invest a little more in our Roths and maybe do a small home renovation. So, and eventually, like you mentioned before, read the menu from left to right. I can't wait to get there. So we are humbly asking for your opinion. I should disclose something and no pressure. Okay, no pressure at all. But he did say that if you said that we sell, that he's going to sell.

So go ahead and tell him to sell. No, I'm kidding. I think we've been set up, Jade. So the only reason he doesn't want to sell is simply to avoid those capital gains. It's not because he just loves the property and wants to hold on to it and loves the cash flow? No, the cash flow is very, very low, unfortunately, less than hundred dollars a month and um no we we don't particularly love it um it was our first home uh but we've you know we've been out of it for so long and um he is it's almost like we can't he can't stomach that we probably will have to pay quite a bit of money

so what am i what's the house worth the rental The house right now is worth about $530,000, and we owe about $220,000. Okay. All right. And so you're going to walk out with $300,000, we'll call it. Okay? Not quite, but somewhere in that range. Not quite, right. And the balance on your mortgage is what?

$225,000. Okay. So by the time you pay capital gains and expenses to sell the house you pay off your home you're going to have a little left but not much oh so i'm sorry our home that we live in now we only owe 120 oh oh i thought you said 225 okay 225 is the rental you were correcting the 220 220. Now I'm catching on. Okay. Just 120, and it's worth like 700. And so let's say 300. Let's call it 250 after some taxes and 120.

So you would have 130, 125, or whatever left over to do some other things with, give or take. Okay. So here's the thing. Let's pretend for a second. A good way decision-making tool that I use in our house, Sharon and I use this all the time, is if it was already done, would we undo it?

Meaning sunk cost analysis is what it's called. Okay, and this comes from the Harvard Investment Newsletter where the teacher in the investment class would say, if you ever use what you paid for something as your reason for keeping it, then that's using the wrong analysis. And the class was taught to yell out sunk costs. The only reason you keep something is that you like what it's going to do in the future, not how we got here. Okay. That's a proper analysis of an investment,

but it's also the proper analysis of possessions. Okay. And so if I'm looking at a boat in my driveway that I haven't put in the lake in four years and it's worth $10,000. And I say to myself, if I had $10,000 piled in the middle of the table, instead of that boat, would I had $10,000 piled in the middle of the table instead of that boat, would I go buy that boat?

And the answer is, since I don't use the boat anymore, would obviously be no, right? So that tells me it's time to sell the boat. That's a sunk cost analysis. If I didn't have the boat and I had the money instead, which is what happens if you sell it, then would I go buy the boat? And in my case case we have boats and we use them every summer we love to ski we're a rim we're a lake family and so if you said if i didn't have that boat would i and i had that money would i go buy that boat i'm like yeah

i sure would then i don't need to sell my boat because that means i'm because i like it it's what we're saying so let's reverse this and say your house is paid off this is your to your husband okay your house is paid off you have a hundred and twenty thousand dollars in a checking account to do renovations with go on a trip with or whatever it is you described a while ago you're going to do with the extra if that were the case and you have the opportunity to buy this property that you don't, that you're currently on and you didn't own it, but you had the opportunity to buy it and put down to, you'd borrow money on your house. You take the money out of your checking account and you go buy this house to put down two or $300,000 on it, $250,000 on it. And,

and we're going to have a $500500 cash flow and this is the house we own would you do that and his answer is gonna be no he's shaking his head right now you nailed it that's such a bid he's shaking his head what he's shaking his head you're right he wouldn't buy it yeah he wouldn't go buy it because the only reason he's keeping it is not because he's in love with the future of it he just doesn't want to give the government any money because he hates them and i agree okay but i get the emotion but that's not the reason for keeping the house the reason for keeping the house is it brings our it makes a better future for us and nowhere in your description of why he wanted to keep the house was that that's how i knew he would sell it that's how i knew he would sell it so it's sold

and the only bad part about this conversation angie is you win you set us up you set us up and you still won and we knew we were set up we all win mr ramsey good call good call you totally used us and you still won and we knew it was happening so this was a great experience we're so glad you called oh thank you i love you both thank you so much we love you darling thank you for calling that was good. Mark is with us in Knoxville. Hey, Mark, welcome to the Ramsey Show.

Hey, Mr. Ramsey, thank you for taking my call. Sure. I had an uncle pass away, and I was notified that I have a beneficiary IRA in my name. An inherited IRA. Yeah, yeah, yeah. I was just looking at my name. An inherited IRA. Yeah, yeah, yeah. I was just looking at the paper. Yeah, yeah. And for like around $56,000.

And so I was just calling to see like what I should do with it. I talked with the person there and they said I'll be taxed. Like I can leave it in there. It'll grow tax-free for 10 years, but then after that, I'm required to take the money out, and then it'll be taxed. No, it's not exactly true. It has to be liquidated 10% a year for 10 years. Gotcha. Okay, an inherited IRA, you have 10 years to undo it,

and you have to do it 10% a year. So $5,600 each year for 10 years comes out and is taxed. That is the longest you can leave it in. You can also just take it all out today and pay the taxes. How old are you? I'm 26. What do you make? I make about, like, I'm on contract now, but like $110,000 a year.

Good for you. What do you do? I'm a software developer. Good for you. What do you do? I'm a software developer. Good for you. Okay. Well, we want to honor your uncle's memory, and what a wonderful legacy that he's left to you, and I'm sorry for your loss. Oh, thank you. So are you asking what you should do with it?

Yeah, I'm like, what? I didn't know because I didn't know from like taxes. Should I just leave it and let it grow in there and take that minimum, like you said, that I have to take out per year and let it grow? Or is it like cash out, like just cash out everything? Like what? Do you have any debt? No, I don't. Good for you very good okay uh do you have an emergency fund of three to six months of expenses

yeah i do good for you you're doing good man well uh i would make sure that the money is invested in good growth stock mutual funds and learn about those. Sit down with an investment advisor. If you need one, you can find them at SmartVestor Pro that we recommend at RamseySolutions.com, clicking on SmartVestor Pro. And then I would leave it. You're going to be required to move 10% out a year for 10 years

and be taxed on it. But I'd leave it. Keep the government's hand off of it as long as I can. This is the Ramsey Show. Jade Warshaw, Ramsey Personality, is my co-host today. All right, folks, we've got a lot of questions this time of year about taxes. We have agreed that we ultimately hate them, but we got to pay them because it's the law and we don't break the law.

So there you go. Let's unpack a question from one of our listeners. Would Ramsey SmartTax software give me a lower tax bill than TurboTax? I doubt it. I wouldn't count on it to give you a lower tax bill. Tax software is tax software. The only difference is what you pay for it and how easy it is to use. It should give you, assuming both of them are reasonably written software,

that they should both give you a similar result. Ramsey Smart Tax is powered by a company called TaxSlayer, who's been around for over 50 years, and you can count on the software to be accurate and up to date. I think TurboTax would be accurate and up to date. It's a little wacky, a little wonky to use, and it's one of the reasons we did SmartTax, because it's owned by Intuit, which is Rocket Mortgage and QuickBooks and lots and lots and lots and lots of credit cards.

Yeah. So their whole reason for doing TurboTax is to try to get your name and use it to sell you debt products. So obviously, Ramsey SmartTax is not going to do that. It's just a simple software. You pay a few bucks and you do your taxes. It's no big deal. But I think the tax, you know, know even though uh turbo taxes the evil empire uh we're

also gonna not say lies about them in that i think i think their tax software is fine i think it does a reasonably good job and i don't think you're gonna think find anything particularly different about it in terms of the result like do i get a higher refund with ramsey no no i don't think so not if not if both of them are operating properly. Yeah. They should do that. So, RamseySolutions.com slash smart tax. If you don't want to be shoveled debt products while you're trying to do your thing.

The other thing is, all the forms are included and there's no, like, upcharge gotchas. You want some fries with that? You want some fries with that? We don't do that. The thing just works and you pay one fee and you get it it's real simple real clean ramsey solutions.com smart tax if you want to just keep your life simple but yeah both both are accurate open phones at 888-825-5225 vicky is in las vegas hi v you? Hi, I'm good. Thank you for taking my call. Sure.

How can we help? I am wondering, my husband and I both have long-term care insurance. And recently I got a letter saying that I could increase the benefit for an additional charge for my premium. It doesn't seem significant on either. And I just wondered what your feeling was. Do you just stick with the long-term policy that you have? I mean, it's with the same company, but every three years they send you this offer. I turned it down the last three years.

So if I turn it down this time, they won't offer it to me again. Okay. So how much is your coverage? We have three years, and it's about $61,000 a year, so just a little over $180,000. Have you shopped around and looked at long-term care, nursing home, or whatever process you're going to use, and can you do that for $60,000 in your area? No, you cannot. It seems to me like it would be like the max they pay a day is $165,000,

and it seemed to me like it was going to be more like $250,000. It was going to be what? No, no, no, I'm talking about per year. No, I think it'd be closer to about 80,000. Okay. So you have 60,000 per year for three years, and you think it's going to take 80,000 per year for three years. Right.

But the increase that they're offering is only an extra $17 a day. Okay. So it's not significant and then it costs an extra $20 a month on the policy. Okay. All right. And do you have any money? We have, our home is worth about $900,000 and we have about $700,000 in mutual funds. Good for you.

Well done. We have pension and Social Security that adds up to about $120,000 a year. So really, we don't need our money. So here's the thing, okay? Here's your way you pose the question back to yourself, and it'll tell you what to do. Okay. Do I want to take $20,000 a year worth of risk for three years, $60,000 total exposure? It's going to take 80, but you got 60 coverage, right?

Right. Do I want to take a $60,000 exposure for $20 a month and get rid of some of it, or do I want to, with my $700,000, be very comfortable that I can cover that $60,000? Okay. You don't take the increase. You self-insure it with the $700,000 because you're not taking that much risk relative to the size of your nest egg. Okay. Okay. Okay.

As a matter of fact, you really could self-insure the whole thing if you wanted to drop it. Well, I've been on the fence about it, but thank you for saying that because I just not know what to do. So I've kept it. Yeah, it's okay to keep it, but I would definitely would not increase it. But, you know, so again, what would you be taking on? The typical nursing home stay in America is two and a half years. That's the national average.

Right. And, you know, so your exposure is three years at $80,000, $240,000. So if Papa goes into the nursing home, you end up with a half a million dollars when the smoke clears. If you self-insure through this on average. Now, it could go higher, but if it goes higher, you run out of coverage anyway because you've only got three years of coverage. Right. Right. Exactly.

So it's taking the edge off by having the policy, but I would not give them another dime for any more coverage. I think you're in good shape financially. By the way, you're millionaires. You did a great job, Vicki. Very good. Great work. Paul's with us in Omaha, Nebraska. Hey, Paul, welcome to the Ramsey Show.

Hi, thanks so much for taking my call. I really appreciate it. Sure. How can we help? All right. I got a how much house would you buy question? Uh, we're moving from Omaha to, uh, the Pacific Northwest to be closer to family. And, um, we've got a total including, uh, our retirements, which this last year I converted all into Roth. We've got about 600K that we could spend.

That would take us down to no retirement and just our six-month emergency fund. And the question that I have is how much of that would you spend on a house? Are you talking about draining your retirement to pay cash for a house? Potentially some of it. It's a question. So right now, like almost all of that is basically Roth principal

because of the conversion this last year. How old are you? I can take, I'm 34, my wife's 31. So you're going to be penalized too? Because of the Roth conversion

and because it's all principal, we could take it without the penalties. Almost all of it. What's your household income? Let's call it $120,000. How much of the $600,000 is the Roth? Total in that's about $ uh it's about 135 right now okay so you've got 450 000 that's not in retirement correct okay

that's available to you the four the 450 that's left if you can take it without penalty and then leave the other 135. Yeah, it's just it's so the place that we're moving to, it's got a pretty wide range of houses that you can buy there. Anything from, you know, your $250,000 serious need of fixing up to your million dollar plus home. That would be true in every city. I mean, the fact of the matter is you can only buy what you can afford, right? So that's kind of what your parameter has got to be. And of course, we would say to pick something that's on a 15-year fixed rate where the income is no more than 25% of your take-home pay.

So those are the parameters we're working in. I wouldn't touch the 135K principle. I would just use the 450. If you want to save a little bit longer to have more, save longer. 450 down as a minimum. It'd be nice to buy a $450,000 house, just pay cash. That'd be choice one. Choice two is don't take out a mortgage that's more than a fourth of your take-home pay on a 15-year fixed with 450 down. This is The Ramsey Show. 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 Ramsey Solutions dot com and click get started.