The Ramsey Show - App - Saving for College (Hour 2)

Episode Date: February 19, 2024

Live from the headquarters of Ramsey Solutions, this is The Ramsey Show. It's where we help you win with your money, in your work, and in your relationships. 888-825-5225. 888-825-5225 is the phone number. I'm Ken Coleman. George Campbell joins me this hour. We love being together. We've already had one fun hour.

We're warmed up and ready to go. I'm irritated and caffeinated. You're irritated and caffeinated. You need to gargle that cold brew right there on the mic. I don't do that to America. They deserve better. It's the sound effect that America wants to hear, but the guys in the booth do not. We need healing, Ken.

It's the last thing America needs. And I'm telling you a good good gargle sound effect will bring people together it really will let's go north of the border ontario canada is where rose joins us rose how can we help um i've got kind of a loaded question um okay. I'm recently separated. In the spring of last year, I finally had my husband removed from the house by police for a protection order. And I've been in the house by myself. I'm finally feeling safe. There hasn't been any issues since last August. Um, but I'm wondering if I should buy him out or sell the house and divide the profit. Um, mostly because I'm feeling safe in the house. I can just afford it on my own, but I would be using up my emergency fund to stay in the house. And I'm a little bit scared about moving out to a different area and feeling unsafe.

Why would you be unsafe if you moved out on your own? My neighbors know what's going on, and I'm in an area where i feel protected by my neighbors um are there any kids in the equation no well that's good news yeah why don't you lay out your financial situation because i think that the financial component to me seems on the surface, George, a little bit more black and white. Lay out your money situation. Do you have any debt at all? No, no debt. And you have an emergency fund. How much is in there? It's waning because it's going into lawyer fees. But at the moment I have, let's just say about 99,000 in savings.

Okay. And are you working? No. I do. I work full time. What's your income? I make $55,000 a year. $55,000.

Okay. So with this buyout, you'd have to refinance and be able to handle the mortgage on your own? Yeah. With the current rates in Canada? There's $155,000 left on the mortgage. The house is worth approximately $215,000, although I've had real estate agents say we can get more, but the average I've been, like assessment or I've been getting from real estate agents around $215, $220. Okay.

What are your chances to grow your income? I think I could easily grow my income. I'm very happy where I am at my work. People know what's going on and they're also kind of protecting me. So I've had a

really good place of work for a while. All of this chaos has been going on. How long has it been since he got removed from the house? It'll be a year. Okay. And he hasn't pulled any stunts in over a year? No, he has. He's been arrested twice for breaching um the restraining order

uh yeah we called it a protection order here but yeah restraining order and then a peace bond was just uh put into place uh so he's right now they're not proceeding with the trial. He's taken a DV course, but he did have breaches until August of last year. And then because he took the course and he agreed to the peace bond, which is like an extra protection, they're not proceeding. They're not going to trial with the charges. And it seems like he's willing to leave me alone right now. But I'm always worried that if I bump into him somewhere in public, that it's going to trigger something again.

Yeah, I'm so sorry. Rose, I'm so sorry. The reason I'm asking is because I'm trying to, just from a common sense standpoint, if I were your brother, I'm trying to take on the role of older brother here. Well, I just keep thinking this abuse happened in this home, didn't it, Rose? It did. Yeah, I think we need to remove ourselves from the physical. Yeah, I would get out for that reason alone on top of the fact that you straight up told us you're barely going to be able to afford a mortgage on your own and you deplete your emergency fund. So it's not financially sustainable.

And emotionally and mentally, this is not the best place for you. I agree with George, Rose. I was going to say I wouldn't want my sister to add financial stress to everything else you're dealing with. It just doesn't make any sense. The problem is rent prices are so high now, though, too. So I'm like, if I were to go rent... Well, if you can't afford the mortgage payment long-term... Doesn't matter.

You're going to get foreclosed on. Yeah, I could afford the mortgage. You just told us you'd have to deplete the emergency fund. I'd have to get $10,000 extra a year if I wanted to really be comfortable for travel and, you know, all those extras. Well, you're what we call a house poor right now. You can't live the rest of your life because you're stuck making the mortgage payment.

And so for that reason alone, this is a bad idea. But I want you to hear what we're hearing, Rose. And Rose, we're on team Rose. Okay, hear us. Listen, we're not trying to disagree with you, but you need to hear what we're hearing. And what I'm hearing is, well, I need to stay in this place that has all these awful memories and bad psychology and everything else that I cannot afford. And the reason I have to stay there is because rent's too high. And that's not the, that's not, you know,

you got no, you don't have much equity at all. And equity's not going to matter. If your refrigerator breaks, you're screwed over, right? Well, yeah, you don't have the money for the home repair and maintenance costs. You need a roommate. That's what you need. That's what I was going to suggest is get a roommate because that's going to add to the level of safety that you feel.

Cut your costs. And cut your costs in half. Get your life stabilized. There is feel. Cut your costs. And cut your costs in half. Get your life stabilized. There is a home in your future. There's equity in your future. So you sell this place. You each get $20,000. Is it an even split?

Yeah, that's the hope. Is he paying his portion? My lawyer already gave him a separation agreement. They had already said, these are the terms. His lawyer agreed to it. I'd get him out. And then my lawyer wrote up the separation agreement, and then he won't sign it now. Now, I have no way of proving this, Rose, but my gut tells me that if I sold this house and I give him a chunk of money and he's not on the hook for his payment, it goes a long way to get him out of your life. George? Yeah, you've got financial streams.

Well, you're not giving anything towards the house right now either. Well, whose name's on the mortgage? Both. Exactly. That's what I'm saying. You have financial strings attached to him until you get out of this. And he gets out of it too. Because if anything goes wrong with the house, he's on the hook.

So I think it's a clean separation. Yep. Judge George, give us a final judgment there. The gavel's down. Sell this thing. Move out. Get an apartment. Get a roommate.

And you'll be back to home ownership one day. But right now, you've got to focus on what's best for you. Wow. Man, being a judge is hard work, Ken. Not all it's cracked up to be. Glad you're thinking about you in this moment instead of Rose. But Rose has been through it. We are pulling for Rose again.

We're pulling for you. I'll give George a hug during the break, America. He'll be ready, I promise. Don't move. This is The Ramsey Show. Welcome back to The Ramsey Show. America celebrating President's Day, an unnecessary holiday in my opinion.

Just a hot take there. Love my U.S a hot take there. Love my U.S. presidents. Can name just about all of them, but I'm not sure we need a day off. I think you're upset because you don't have the day off. Could be. But you also love to work. I do love to work. That's Ken's thing.

Thank you very much. I'll be taking your work questions because that's how we make more money and get through the baby steps faster. George Campbell will be taking your money questions. So we are here for you, America. Very excited. I was telling my kids last night, James, they have winter break this week. And spring break is just two weeks away.

And so I was grumbling on the way into the bedroom last night that when I was a kid, you know what break I had? No break. Now we got winter break, spring break. What's with all the breaks? I feel like my kid's life is a break. Well, to make matters worse, you had no break uphill both ways.

Now, see, that's really funny. You think you're really cute with that. I thought that was cute. I'm just saying, we got too many breaks. Too many breaks. Ken said, get off my lawn. We got smoke breaks. We got cell phone breaks. We had too many breaks. But I digress off my lawn. We got smoke breaks. We got cell phone breaks.

We had too many breaks. But I digress. We're here to help you. Even though I sound grumpy, I'm going to be happy to help you. You sound more like Seinfeld, but like the generic brand. You know what I mean? Like great value Seinfeld. Generic?

Yeah. With this sweater, there's nothing generic about me. I don't want to give you too much credit and say you're Jerry Seinfeld. That felt like egregious. That would have been egregious. John is in Minneapolis. John, how can George and I help? Hey, guys.

I have a question. Is it better to invest in a Roth IRA for my kids' education or open up a 529 plan for them? Great question. I am assuming the heart of this question, and you can tell me if I'm wrong, is that you're not sure if the kids will go to college, if they're going to use all the money, and therefore I'd rather have it on the Roth side. Exactly. Well, the 529 plan acts as a Roth IRA, but it's for education. And the beautiful thing is with the new secure 2.0 act ruling, you can now roll over a portion of the 529 money into a Roth IRA if they don't end up using it. Yeah. And that's, that's, that's the caveat that I was wondering too, because I feel that when, what is it, like 15 years? So when they don't use all the money, they have a retirement fund eventually,

because they're 10 and 7 right now. So they'll be mid-20s, you know, when that would convert into a Roth. To have a Roth IRA in their name, it would have to be a custodial Roth, and they would need to have earned income. Yeah, I thought the 529, if you don't use it for 15 years, or after you're done using it for like 15 years, it converts to a Roth.

Yeah, and you can convert up to $35,000 over to the Roth side. So I would just go with that plan, and number one, there's no income limitations or contribution. The contribution limits are way higher on a 529 plan versus your Roth IRA. And also the other piece of this is it's going to count as regular income tax. So you can avoid the early withdrawal penalty using a Roth for education, but you can't avoid paying the income tax on that. And so there's another reason the 529 plan wins in my book for those expenses. Let me add another

wrinkle to this, John. So just give us an idea, if the 10 and 7-year-old don't go to a traditional college university, what would you see them doing? Do you see them getting some type of training? And if that's the case, give us an example. Yeah, their expectation is some sort of secondary education after high school, whether it's be a plumber, electrician, some type of secondary education. So here's the point. The 529 is pretty liberal in your application of those funds. And so any kind of trade school, certificate program, coding bootcamp, it's going to cover all that.

Okay. And you can always change the beneficiary. I mean, that can be loose. It could be a first cousin. It could be the first cousin's spouse, aunt, uncles, son-in-laws. I mean, so there's a lot of options to still pass down this money and use it. So I would be less concerned about that and more concerned about what college is going to cost for any kind of education for that matter 10, 15 years from now. So much is going to change to parents everywhere of 7 and 10-year-olds. Hear me now, listen to me later. Okay? Think about that one, George. That'll take me a second.

I know. I'll tell you this. What education is going to look like for a seven and ten-year-old in America right now is going to be dramatically different. Mark my words. Mark my words on this. I'm paying attention to it all the time. There's a lot of shifts going on underneath the service. You'll see the occasional headline here and there about enrollment rates dropping because they are. You're going to see a lot of shifts over the next decade. I think it's going to be remarkably different. So just stay the course. The 529 is a really good vehicle for all the reasons we just talked about. I've got one for my now almost six-month-old. Do you really? Yeah, very excited about it. Yeah, that's great. And I'm hoping, you know, family can contribute. Instead of birthday, you know, gifts and toys, throw a little money in the 529. Yeah, I like

that. A little 529 party. She'll be going to school debt-free. I mean, we know that 100%, but that's what I do personally, and that's why I recommend it. Yeah, I love it. Let's go to Marilyn now in the City of Angels, Los Angeles, California is where she is. Marilyn, how can we help? Hi, Ken and George. My name is Marilyn, and my husband and I are debating on selling our condo and renting. Whoa. Who wants to sell it? Who wants to keep it? Well, we're actually kind of at peace with selling it, both my husband and I. So there's no debate. Yeah. I feel like George and I are useless, which happens a lot, by the way.

Okay. What's the reason you want to sell it? Okay, a couple reasons. Our HOA dues are increasing. We are now at $563 a month in HOA. Yes. Welcome to condos in LA. Ugh, HOA. That is correct.

Ugh. Yes. And also another main reason is we are in 950 square feet for three people. Yeah. One bedroom or sorry, one bathroom, two bedrooms. Who's the third person? It's actually my stepson. His name is Clay. How old is Clay? Clay is going to be 12 in August, and we have shared custody. So we have them 50-50, but I'm worried about teenagers, right, and friends coming over and things like that. Listen, as a former 12-year-old, I wouldn't want to share a bathroom with a 12-year-old boy, all right?

I mean, they are the most disgusting human beings on the planet, and I say that with love. I have two boys, but they're disgusting. All you parents out in the lobby with little boys, when he turns 12, disgusting. It's disgusting. It's horrible. I have to go in my boys' bathrooms with a hazmat suit on.

George. Wow. I just needed to say, Maryland. That's an aggressive. Well, I was going to say, I grew up in a 1,000-square-foot home, four of us, my brother and I, my parents. We had one tiny bathroom we shared, and I'm saying we survived. I'm just saying.

It's not as dire as it sounds. So you're surviving, but I don't want them surviving. I want them thriving. Beyond the space and the HOA, what's the reason you're wanting to sell it? Pay off debt. Aha. Yep, 84K in debt. That includes college loans, 56,000, car loan, 11,000, personal loan, 17,000.

Ooh. Okay, so how much equity do you have in this house? Or what will you net if you sold it? 91,000 in equity. We would sell it for 4555,000 and profit $63,000. Okay. After fees and all that, you've done the math? Yes. Okay. And do you have anything in savings?

We have in savings about $7,000. What's your combined income? Combined income for last year was $183,000. Wow. All right. Okay. I like your plan, but I have this gut check. And here's the gut check. You're almost going to clear the debt. You'll clear the car loan, the personal loan, and you'll have most of the student loan knocked out. Here's the thing that didn't change if you do all this your behavior that got you into this mess you are correct you have the sacrifice part down in the first place yeah like you guys are willing to sell the condo to get out of debt but are you willing to never go into debt again a thousand percent and she just said something on board she said they should have never bought the condo did i hear you say that you should have

never bought it in the first place yes you are say that you should have never bought it in the first place? Yes, you are correct. So you're going to go rent somewhere in the area? That is correct. Okay. A three-bedroom, two-bathroom is about $3,200 in rent. We are spending $3,100 living here in the condo. Well, I mean, you're just going to be paying someone else's HOA fee.

So it's not like it disappears. It's built into the rent. But I think this is the best move for you and your family right now, Well, I mean, you're just going to be paying someone else's HOA fee. So it's not like it disappears. It's built into the rent. But I think this is the best move for you and your family right now. And I'm proud of you. Yeah, I like it. But George is right. You better change your behavior, not just the numbers. This is The Ramsey Show.

Welcome back to The Ramsey Show. Thrilled to have you with us. 888-825-5225. I'm Ken Coleman. George Campbell joins us. We always love being together, taking your questions. All right, folks, a lot of you have questions about taxes. Taxes are confusing.

My goodness, the U.S. tax code is an absolute disaster, and it's just unbelievable. I'm for a flat tax, George. Cross the board. I've heard you talk about this. Fair tax. Everybody gets one thing, but that's not where we are. So how do we win in today's crazy tax code? So this is a question we recently got from one of our listeners.

We normally have someone do our taxes, but our accountant retired. I think we have a simple return. Should we try to file ourselves with Ramsey Smart Tax? What do you say, Judge George? So this is a tax software that at Ramsey Solutions we developed, and you can definitely use this if you feel confident filing on your own and your situation is relatively simple, which is more people in America than it's not. And so here's what I would say, get in touch with a tax pro, an actual CPA, if you had a major life change, like you retired,

you had an inheritance, you adopted a child, you own a business, that's a big one where I go, hey, I'm probably going to work with a tax pro. There's a lot of trickle down pieces of running a business that I would work with a pro for. Another one is you're not confident about filing taxes on your own. Just the peace of mind that someone else is going to handle this, that is a huge bonus of working with a tax pro. And then lastly, you want to save time and stress. It can take a while to do your own taxes. So if you're confident about filing on your own, go check out Ramsey Smart Tax at ramseysolutions.com. And while you're there, you can find the tax pros that we trust at ramseysolutions.com slash tax. And I'll tell you, Ken, I did a post about this,

and what was really cool was seeing all of the people who were like, hey, I used Ramsey Smart Tax for the very first time, and I can't believe how easy it was. And I had used the pro for years, and I decided I'm going to try this on my own. Yeah. And I used this the other day, and it was amazing how it walks you through and educates you every step of the way. It's great.

ramseysolutions.com slash tax. And then again, our Ramsey Trusted Tax Pro. A shout out to David if he's listening. Sometimes he listens. In fact, last time you and I were on together, he was listening. So, David, if you're listening, you're my guy. Thank you. You're the man.

I got total trust in David. I don't want to mess with it. You know what I mean? I don't want to go to jail. I would not look good in a jumpsuit. You know? I can see you rocking it. I don't think to mess with it. You know what I mean? I don't want to go to jail. I would not look good in a jumpsuit. You know? I can see you rocking it. I don't think so. You would hem it. You'd make it fashionable somehow. I'd do my best.

Rest assured. But that's not the place for me. You'd be hemming all the prison jumpsuits for the guys. You've got to have a job. You've got to stay busy. You've got to find some purpose no matter where you are. Alright, Karen is up next in Milwaukee, Wisconsin. Karen, how can we help? Hi, guys. How are you? got to find some purpose no matter where you are all right karen is up next in milwaukee wisconsin karen how can we help hi guys how are you we are having a blast can you tell it sounds like it it

sure does good so i am on this uh financial peace mission i'm on baby step two working to change your family tree there we go brought some lightought some light. Yes. My mother's situation. My question more is about my mother's non-planning and what her situation could become my situation pretty quickly. So I wanted to ask some questions about that. Okay. Tell us a little bit more and ask away. Okay. So her, she's a wonderful lady. She's 83. She's independent. Got her sweetheart living with her. She decides to go back to college when she's 70 and gets her PhD in biochem, but she takes out student loans.

At 70? At 70. She's a PhD in biochem. She's a rock star. That is fantastic. Yeah. Except for the student loan part. Exactly. So she's been paying on these student loans and now she's 83. She stopped working when

she was 80 a few years ago, teaching at the college. Geez, what a slacker. Yeah. She's also got 18K in an equity loan she took out. Oh, no. And she has no retirement. Oh. She has just paid off her condo, which is good news. It's worth about 170K. Okay. And she's on Medicare and Social Security. She takes social security. And so what happens if something happens to her

she needs to be cared for, say in a nursing home or in-home care, there's no money for that. And I'm guessing, do me and my brother take that up? We don't have any money for that. How do we, is her condo protected from the student loan and her equity loan? Or do we put the condo in our name? Well, the home equity loan is tied to her condo.

Yep. And so her condo is at risk. That would be paid off. Yes. It's one of the scariest parts about these home equity loans is it puts your home at risk. If she can't pay that, they can take her condo away. What kind of margin does she have on her social security payments and her basic expenses? So she gets $1,800 a month in social security. She has a contribution with her partner of $725

a month. Her student loan is around $300 a month. Her equity loan will be about $300 a month. And that's basically, and then she's got a condo fee of $300 a month. So she's already $900 out, right? And she's making... $25. And she hasn't even had any food yet. Exactly. Is the sweetheart still living with her?

Yeah. He's a vet, and he is a little bit younger than her. Is that a girl? She's impressive. I mean, I'm sorry. Your mom's a rock star. Degree at 70, retires at 80, got a younger man in the house. Is he pulling his weight?

That's what I'm concerned about. No, he's got so much weight. His kids are millionaires. They'll take care of him if something happens. But not your mom. Your mom's not involved in this picture. Are they considering getting married at all, or is this just like that? That's what I'm trying to do, close the deal on that.

I was wondering if that would be a good advantage. I know he's a vet, though his benefits don't cover her or any spouse. That's what I'm told. Why haven't they gotten married to this point anyway? Just hasn't. I don't think he wants to, and that gets awkward. You know, who brings that up? You know?

No, I mean, he would. I think if it meant something. something they're so old they're like why would we get married we're here we're together what's the you know why i don't know well the obvious answer is to be great for your mom but you know again that's kind of an awkward situation so yeah so here's the deal i doubt she's going to be able to pay her debts off with the income she has. She's going to be lucky to just make the minimum payments until she, you know, heads to the other side. Yeah, I'm not really worried about her debts. I'm worried about what happens to her if, I mean.

Long-term care. Yeah, exactly. She never did that. There's a dire situation where you use Medicaid, which is not a great program, and she's not going to have quality care and limited options. Can they get an affordable long-term care policy at this age? Probably not. I doubt it. No, they cannot. Long-term care insurance, they're going to factor in age and risk, and the chances of her needing a nursing home is very high at 83.

Why isn't she living with Mr. Deep Pockets? Why is he living with her? Why is he living with her? Yeah. Because when he looks at her, it makes him happy. Yeah, but he's the one who's loaded, right? Yeah, his health is, I mean, he smoked for 50 years, and she finally got him to quit last year. And I don't know.

I don't... You know, every day we think, is he going to make it another month? The reason I bring this up, we only got about a minute and a half, George, but I'm going, is selling the condo a good play for her at this point? I don't know what it would do for her

other than cover it when you run some... If she ended up in a nursing home situation, the condo is useless anyways. That's what I'm saying. I wonder, can we compound? She's really healthy right now. Yes? No?

Yes, really healthy. I mean, George, I'm asking. Yeah. They don't have long-term care. I think sell the condo and use those funds to cover it later on down the road. That's what I'm saying. Could we invest those? Could we invest this money?

That's a great idea. You could. She'd have to then go pay rent, which she doesn't have right now because the condo's paid off. And so there's an added expense now that she didn't have before. And so there's a balance here. Maybe her partner would pay the rent.

Well, that's the hope. He's got to pay his fair share. We don't have a lot of ideas, and since he's got a better financial situation, if he loves her... How much could this place sell for? $170. It's not going to financial situation, if he loves her. How much could this place sell for? $170,000. It's not going to create an astounding amount of income, even investing it.

And so I don't know that that would be enough to cover all of her expenses with the added expense of rent. This is a tough one. There's not any really great, clear options. Well, her brother is another option, too. Is it okay to talk to him about it? Yes, we've got to talk to everybody right now. Get the whole family for a Come to Jesus meeting. Yeah, including the sweetheart.

You know, let's go. We've got to help mom. She's helped you. Get creative. This is The Ramsey Show. Welcome back to The Ramsey Show, America. Thrilled to have you with us. I'm Ken Coleman. George Campbell joins me. And the phone number for you to jump in is 888-825-5225.

That's 888-825-5225. All right. Now we go to Charlotte, North Carolina, where George's favorite superhero is waiting for us. Thor, how can we help? Hey, pleasure to be on the show thank you for having me you bet and i gotta ask thor what's your middle name my middle name is actually thor doll thor is short for thor doll my family's scandinavian wow i would have guessed that part so what's the first name if thor doll is the middle go by thor well the first the first name

is biblical we had to keep it balanced so the first name is biblical. We had to keep it balanced. So the first name's Isaiah. Alright. I thought I was going to get two great Scandinavian names. But it was great. Thank you, Thor. By the way, if my middle name was Thor, I would go by Thor, too. 100%.

That's a good choice. Exactly. Enough of the nonsense, but I had to know. I couldn't focus if I didn't get that out of the way. How can we help today? So I have a small business. We're located here in Charlotte. We do event production, lights, videos, sound.

And business has been good the last couple years. We have doubled our annual revenue year over year up until this year. And it's looking like it's going to be another great one. And what I am curious is in y'all's opinion, what is a healthy margin of money or maybe a ratio would be a better term for a business to keep on hand or to reinvest? Because in our industry, it's all about growing your inventory. So the majority of the revenue does get reinvested back into the company. I'd say about 90 plus percent of it annually goes back into the company. But now that we're at a stage where we're not having to buy as much, how much should we keep set aside? Are you running this business debt-free?

Pretty much, yep. We have about $12,000 in interest-free debt. Okay, and how much do you have in... That is very well managed. How much do you have in retained earnings now in savings? We have about $40,000. Okay, and how many months of operating expenses would you say that is? Oh, that's over a year and a half. Oh, wow. Wait, I'm talking about, you're saying your entire operating expenses are a few thousand a month? Yes, I have extremely minimal operating expenses.

How big is your team? I keep it as tight as possible, just me. Okay, I was getting ready to say that makes more sense. Okay, I thought there was payroll involved here. Everyone else is subcontracted in on the show. All right, one other quick question, and George is going to give you your answer here, but you had said that up to this point, it felt like you were reinvesting 90% of the profits into equipment, and now you said, I don't need to do that as much. Do you have some type of forecast for George on what you think that percentage will be this year? I would say this

year, we would probably only need to reinvest 40 to 50% of gross earnings. Now we can invest more and probably some context. I am big on tax planning. So I spend as much tax deductible income as possible to avoid paying taxes at the end of the year. But the court, and that's really where the question comes in is, do I continue doing that? Do I continue keeping my tax payments as low as possible? Or do we start to hold on? Like, at what point do you start to hold on to the money, if that makes sense? Well, we may have different schools of thought here. I go by the Entrez Leadership School of Thought, which is how Dave Ramsey built this place from a card table in his living room to the empire it is today. And one of the principles there is start and run your business completely debt-free. And so if I'm in your shoes, I'm going to use 12 of

that 40 to pay off all the debt today and never go into debt again. Because you don't need to. You're crushing it. Oh, absolutely. And the other thing is we never spend to save at Ramsey. That doesn't make any sense to me, if I can challenge you, Thor, I, as a small business guy, I hate taxes with a, trust me, I hate taxes more than George hates taxes. Tell him, George. This man is like, if he could go back to the Boston Tea Party, just throw some tea overboard, he would. If he could use a time machine, that's where he'd go. Believe me, I would. But at the same time- I'd be right there next to you. I know, but I would not agree with what you just said, and I want to challenge that for a moment.

Because this idea that I've got to spend as much money as I possibly can to avoid taxes makes no sense. I'd rather save as much as I possibly could, realizing that taxes are a necessary evil. And I've got a good tax pro who's going to help me save. But I'm not going to go spend a dollar to save a dollar in taxes. It doesn't make any sense to me. Do you understand what I'm getting at? Believe me, I completely understand. Part of the beauty of this particular industry, though,

is that to a certain extent, there's always additional equipment you can purchase and rent and make additional money on. And so it is, it is easy, easier. I would say that it's not like we're going out and making unnecessary purchases, but it's easy. They're easy purchases to justify, but you don't necessarily have to make them. It's just the equipment that you actually need instead of just going by a $40,000 toy, because you could potentially justify it. The very word justify tells you where you're at. So listen, I'm not going to try to preach at you. I just wanted to point that out. I think it's a misguided policy for somebody who, in your case, could be really well off financially, George. How would

he do that? What would we tell him to do? Well, number one, pay off the debt. Number two, it sounds like you have plenty of operating expenses, retained earnings. We would go six months is what you want to aim for, for retained earnings. And then you were talking about investing back into the business, saving up for larger purchases. I would separate that out. I would not use your retained earnings for that. Instead, I would do what we call a sinking fund.

And so if you know there's a $10,000 item you want to purchase, well, let's put money away, $1,000 a month, for example. So in 10 months, we can make that purchase when we need to. And I would do all of this with a high yield savings account for your business. Yep. Okay. Very interesting. And so, and then obviously safer taxes. It sounds like you're on top of that, but make sure you put, you're putting money aside to pay your taxes. Do you do it quarterly? We do not currently do quarterly, but this year we are. So we haven't up through the 2023 tax season, but we are 2020. So you may want to set aside 25% into a separate savings account and then pay quarterly and pull it out of there to cover your taxes

so you don't have a big burden at the end of the year. Absolutely. All right, Thor, one other thing, and I want George to weigh in on this if he wants to. Have you ever heard the phrase cash is king? Absolutely. Have you ever heard, all right, let me ask you another one. Have you ever heard the phrase equipment is king? No.

Yes and no. No, you have not covered Thor's question. I tricked you and you're trying to get out of it. Here's the point. No, no, no, no. I'm 100. Thor. Trick question. I tricked you and you're trying to get out of it. Here's the point. No, no, no, no. I'm 100. I'm with you. Cash is definitely king.

But, you know, in our industry, the kings are the ones with the biggest inventory. Here's a question, though. I don't know about your industry, Thor, but could you buy used equipment that's cheaper and still make the same amount of money? That's exactly what we do. Which is great. All I'm saying is, Thor, I know you know what you're doing. I'm not questioning that you know what you're doing.

I'm just saying that you yourself said, I don't need as much equipment this year. And I'm saying when you are in a season like this where you don't need as much, stack the cash. Then when you got to buy, buy with cash. That's all I'm getting at. I wanted to drive that home with you because you're going to be really wealthy if you figure that out. Very interesting. The other thing you can do is upgrade your own life.

I appreciate that. Are you paying yourself first? Very little. That's the other thing. I take almost no salary. I'm in T. Okay, now you understand where I'm driving. Thor, you've got to be making some dough, man.

You're working too hard. Well, you've got to be making some dough, man. You're working too hard. Well, I've always felt like I'm making money if the business is making money, because I own the whole business. You know what I mean? So I've never focused on pulling a salary. I've got news for you, Thor. I understand, but that doesn't equate to what's in your actual personal bank account. Am I right, George?

Exactly. A business can make bank, and you can take home very little of it. So I would pay yourself first here a living wage, and it sounds like you need to upgrade that. And the other thing I'll point you to is a great free resource called Entree Leader's Guide to Business Finances.

And anyone out there, if you've got a small business, even a larger business, check it out. Go to EntreeLeadership.com slash finances and download that for free. It's going to show you the same principles we use at Ramsey to run this place debt-free. I think Thor's still

not sure. I think he's hearing what we're saying. He's not listening. We stuck to our guns. You're not going to be an Avenger doing it your way, pal. You do it our way, watch out. He's never going to live that down. I had to say it. I couldn't not say it. Great hour, George Campbell. Good times. I want to say thanks to our fearless eater, James Childs. He's enjoying a snack in the control room. And thank you, America. This is The Ramsey Show. Take care.