The Ramsey Show - App - Shanae Hustled Her Way Out of Almost $100K in Debt! (Hour 2)

Episode Date: January 14, 2022

Home Buying, Investing, Retirement, Home Selling, Debt, Education, Budgeting As heard on this episode: Sign Up for a FREE trial of Ramsey+ TODAY: https://bit.ly/3rZTUAx Tools to get you started:  Debt Calculator: https://bit.ly/2Q64HME Insurance Coverage Checkup: https://bit.ly/3sXwUn5 Complete Guide to Budgeting: https://bit.ly/3utmVXi Check out more Ramsey Network podcasts: https://bit.ly/3fHhbVE

Live from the headquarters of Ramsey Solutions, it's the 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. Welcome to the Ramsey Show. Rachel Cruz, Ramsey personality, three times the number best-selling author is my co-host today. Open phones at 888-825-5225. We'll be talking about your work, your relationships, your life, your money. It's all intertwined right here all day today. We'll talk about you right in front of you the phone number is 888-825-5225 hannah is with us in jackson mississippi hey hannah welcome to the show hey mr ramsey how are you better than i deserve what's up okay so i'm in baby step three i've

paid off all my loans and i'm working on my savings. Good. And I was wondering what would be the, what should I focus on saving more on now? Retirement or a house? That's a great question. Hannah, where are you in life? Are you married? How old are you? What's your current status? I'm 27.

I'm single and I live at home with my mom. I'm currently a teacher and I don't foresee getting married within the next five or 10 years. Okay. And is buying a home something that you want to do soon? Is it something that you're looking at? You're like, I would love my own place. What, you know, just the situation of your living, what do you want? It is within probably a couple years, not immediately. I'm kind of wanting to stay home for like a year or so. We had a tragic event that happened in our life recently. So I'm not trying to get out of the house right now. Okay.

Is it just you and your mom? Yes. Okay. Then I think that's wise, especially when something big happens, a big change in life. Pausing and waiting, I think, okay, what kind of home would you look at? What is something that you think you would probably settle in? What is that going for right now, even though I know this could change in two years? And kind of just run some numbers to see, okay, how much would it take to save up 10% of that? Would it take a year? Would it take five years? And map it out because that also could give you part of your answer because if it's going

to take three years to save up for a down payment, then you may say, okay, I'm going to just start saving for that right now and hold off on retirement because I know in three years I probably will pull the trigger and, you know, go ahead and buy a home. But if you think, okay, I, you know, don't even want to do that right now, you could go ahead and start dipping into retirement and putting 15% of your income there and then pausing that down the road when you think, okay, I really do want to save up and pay for a home. How old are you? I'm 27. What's your income?

I'm a teacher. I make about $2,000 a month, so I bring home about $ 000 a year as soon as you finish your baby step three i'd start saving for a house okay right now i do have 31 000 in savings okay is that not your emergency fund that's a big emergency fund well you know kind of with the event that happened my mom was able to get my brother and i each some money. So after I paid off all my debt, that's what I had left. Okay. I would separate that out between down payment for a house and emergency fund.

And you're done with Baby Step 3. You just allocate some of that as your emergency fund, maybe, I don't know, $10,000 of it or something. And then you've got $21,000 towards your down payment on your house. And then I would just work on your house down payment for the next two years after two years if you still think it's going to be a while you could stop saving for a house at that point and uh but your income is so low that you're going to want to go ahead and start chipping away at this down payment thing okay and are you positioned where that income is going to change pretty dramatically quickly? Well,

That sounds awfully low for a teacher. It is. The state I live has one of the lowest teacher salaries. But I think the House is voting within the next few days to increase it. And if that goes through, my salary will increase by about $6,000 a year. Okay. All right. Yeah, I'm going to keep working on that side of the equation as well if I'm you.

But there's not a lot you can do to actually make it happen. But that's a concern. That's a concern because the average household income in America today is $65,000. And you're sitting at 24 take-home pay, which means you America today is $65,000 and you're sitting at 24 take-home pay which means you're making about 30 and so um you know that that's what you're looking at so yeah I'm going to go ahead and just start piling up money out of this I mean if you if you were making $150,000 a year or something we might say you can wait a little later to start saving for your down payment because you don't know when you're going to buy but you've got

enough you know it's going to be a big enough hill to climb for you to go ahead and start working on it now. Good question. Thank you for joining us. Elizabeth is in Boise, Idaho. Hi, Elizabeth. How are you? I'm good. Thank you.

Good. I have a question about reverse mortgages. Do you have an opinion on those? They suck. They suck. They're horrible. Well, I have a lot of home repairs. I'm in my middle 70s. And because my home is older, there are a lot of repairs and renovations that just seem to be piling up. And so for $50,000, I could probably have this house. And you don't have any money?

Well, I have a fairly decent pension and income stream, but it pretty much gets eaten up with medical. But you don't have any money. You don't have any savings. Well, I have a Roth that would pretty much pay for a project that is... How much is in your Roth? $25,000. And that's your only nest egg?

Right. My financial guide didn't want me to use that because that would be my emergency. You don't have any money. I have about $10,000 in savings is all. And how much is your pension a year? I get about $66,000 a year, including... How long have you lived in this house? 20 years.

So could you be more specific about why reverse mortgages suck? Yeah. The foreclosure rate on them is tenfold the normal mortgages, and the interest rates are unusually high, and the fees that are built into them are predatory. Really? It is an industry that feeds on the elderly, and it's a predatory industry. It's horrible.

And you are going systematically into debt. Right. And you can't borrow that much anyway. So what's this house worth about 650,000 i'm going to give you some heartbreaking advice that you're not going to like if you were my sister i'm 61 i would tell my sister I love you, sell your house I wouldn't repair it I would sell it I would move into a nice modern $400,000 house

and bank $250,000 that's what I would do In an uncertain world, being a good steward of your money is more important than ever. While some circumstances can't be controlled, there are items within your budget you can take charge of, such as your health care costs. For nearly 40 years, Christian Health Care Ministries, or CHM, has provided a budget-friendly means of sharing for medical bills when our members need it. Learn more by visiting chministries.org slash budget. That's chministries.org slash budgetian healthcare ministries is a ramsey trusted provider so Rachel Cruz Ramsey personality is my co-host today as we talk about your life and your money how would you feel if you knew you were going to retire with dignity that you'd leave an inheritance to your family that'd be freeing wouldn it? And the truth is you can have that kind of life.

You actually can become wealthy. You can become a millionaire. This year, take control of your money and start building lasting wealth with the Best Year Ever Bundle. In this bundle, you get Financial Peace University and the premium version of every dollar, two resources that'll help you take back control of your largest wealth-building tool, your income.

And you'll use a copy of the brand-new book, Baby Steps Millionaires, to learn the right way to invest to get to a million-dollar net worth. And what you do right now is impacting the kind of life you're going to have later. So the good news is you get to decide what that life looks like. Get the best year ever bundle going to RamseySolutions.com slash best. That's RamseySolutions.com slash best. This is the Ramsey Show. Rachel Cruz is with me today.

We're talking about your life and your money. Open phones at 888-825-5225. Mark is in Miami. Hey, Mark, welcome to the show. Hi, good afternoon, Mr. Ramsey. Thanks for taking my call sure what's up um so i have a question regarding uh my and my wife's uh student loan situation the best way to to approach it we do have a large amount of student loan debt it's uh just around four hundred thousand. Good Lord, who's the doctor? Well, I'm an attorney, and I've been out of school for about six years. My wife just graduated from

nurse anesthesia school this December, and so I have approximately $250,000, and she has about $150,000. please tell me both of you have wonderful incomes as a result of this uh i think we do we have a combined um income of just under 300 295 good okay all right we're on our way and hers is probably going up from there maybe maybe faster than yours depending on what kind of law you're practicing definitely faster than mine yeah okay well and so oh go ahead go ahead well no i was going to say i mean that's that's part of the the the ray of hope and the story with four hundred thousand dollars in debt though is that your income it's a big shovel you guys have a big hole but you got a

big shovel and so being able to attack the debt with this, you guys will make good progress in a much faster, obviously, period of time. You know, the average household income in America is $65,000, right? Yeah, no, we're definitely in a good spot. I know, but my point is, what if you lived on that? That is a good spot i know but my point is what if you lived on that that is a good point yeah and that would be like two hundred thousand dollars a year towards your student loans and you'd be done in two years yeah so that's a very good point a very good way to look at it um that yeah i didn't sound real convincing it is but you signed up for this trip brother Mark's not really. Yeah, it's a hard pill to swallow. It's a hard pill to swallow, you know.

It is, but you signed up for this trip, brother. Yeah. No, you're absolutely right. What's the other factor, Mark? I interrupted you. You were about to talk and I interrupted earlier. So is there another factor to this? Yeah, it was just how you all would recommend approaching it because we have two sets of of loans and and as y'all are aware with these loans

are individual per semester per section of the school so they all have different principal amounts and different interest rates and is there a way that you would recommend approaching that as opposed to i would just list the smallest smallest loan to largest loan but more than anything what you guys need to do is you need to really say say to yourself do we want to screw around with this mess for 10 years or do we want to go scorched earth where our lawyer and doctor friends think we've lost our minds and be done with this fast i will tell you that your probability of getting out of debt and becoming extremely prosperous increases by every year you cut off this get out of debt plan

understood so i would be i would be if i woke up in your shoes knowing what i know i'd be band-aid off rip it off guy i'd be i'm we're doing nothing we're not going on vacation we're broke yeah we're a lawyer and a doc a nurse anesthetist but but we're broke we are four hundred thousand dollars in debt we are broke and this is the way i start talking to myself and go no we're not buying a car. We're broke. No, we're not going on vacation. We're broke. No, we're not going out to eat.

We're broke. We're going to live on $65,000. I don't really care what your stupid friends think. I'm getting out of debt. Because, dude, if you get rid of this, you know what you got? You got a $300,000 going on a $400,000 income with no debt. You're going to be so stinking wealthy you're going to be able to do anything you want to do the rest of your life that's how

i would approach it that's how i'd approach no no i i appreciate it yeah looking at the the long game looking at the end yeah the end game and the problem is in your world it is so in lawyer world doctor world nurse world it is so normal to walk around for a decade with this backache when you make more money than 98 of the people out there walking around and they just they they i gotta tell you man i meet broke attorneys all the time and they just that because they've normalized it that this is okay and when other people in other industries look at it and they just freak out going oh my god he's got you know but in your world it's just normalized and you if you're not careful man because you're running around with a bunch of people who on the financial side of things are stupid.

They're stupid. And they're keeping these loans around and it's just a way of life. It's just part of it. And they walk around with this backache. Man, you ought to get fired up and I want you to be a weird lawyer. And it would be interesting, Mark, the exercise of getting just an investment calculator out and saying, what if we invested our student loan payments? So just say you did this plan, right? You went two years, scorched earth, paid it all off.

And then you took what is your student loan payment every month and put it in an investment calculator and just play it out. It's tens of millions of dollars. Play it out and just see, okay, what could it look like? This is what it's costing you. And for a short-term sacrifice for what you guys could do, I mean, it's amazing. And I think what would be hard, too, is with this income, the pain probably isn't really there.

It's not like... So you have to almost create this urgency, even though you're not feeling it. Like, I even hear it in your voice, Mark. There's not an urgentness there. I even hear it in your voice, Mark. There's not an urgency. There's not an urgentness there. I'm more scared for you than you are. So, find the why.

What is it? What is it about this debt that's going to piss you off and say, man, if we had just paid it off earlier, what would we have done? Run all the scenarios. Look at all of it. Because you guys could have a lot of money, which is awesome. Because you can do a lot of fun stuff help a lot of people your life could really be different if you just said hey what if we got rid of this debt this massive the difference in what i'm talking about

and what you're thinking about is 10 million dollars that's the difference you need to get that in your dadgum head man because you because you're going to screw around with this thing, and you're going to normalize it, and you're going to keep your stupid lawyer lifestyle while you're broke, and you're going to take 10 years to do this versus two years to do this, and the difference is $10 million. That's what it's going to cost you, and what the money should have done. That fabulous income should have become what you could have become, but you've got to pay a price to get there. And here's the interesting thing. You do have, you and your wife, have the unusual ability to delay pleasure for a greater gain.

We know this because you went to law school. That's while everybody else finished their undergrad and went to work. But you delayed pleasure for a greater gain. She went to anesthesia school. You delayed pleasure for a greater gain she went to anesthesia school you delayed pleasure for a greater gain and that's all i'm trying to get you to do is apply that that level of maturity to the math on this money situation and if you do that dude but if you get doctoritis where you come out and have to look like you're a dadgum rich lawyer when you're broke and miami may not help either you You're not living in Des Moines.

There's a flashiness to Miami, which is fun, but the culture to it, you're going to push back, you're going to get a lot of pushback. Sure, stay out of Miami Beach. A lot of pushback. Yeah.

This is The Ramsey Show. We'll see you next time. Rachel Cruz Ramsey personality is my co-host today. On the debt-free line, Shanae is with us in Laurel, Maryland, with her debt-free story. Hey, Shanae, what's up? Nothing. I'm so happy to be talking to you, Dave. You too. You too. How much debt have you paid off, kiddo? A little over $ three thousand dollars good for you how long did that take two years and ten months all right i like it and what was your range of income during that time well i started off at about 64 and i finished at 170 000 how what

happened to your income i um i started my own business, and it did really well. Apparently. What are you doing, Shanae? What is it? What's the business? I actually am an herbalist. I sell herbal tea, but I kind of do it with a hip-hop flair, and so I just got a lot of other interested people

and just really worked on my marketing, and boom. I love it. Hip-hop herbal tea is big in maryland oh my gosh girl that's awesome i like it this is very cool good for you so what kind of debt was the 93 um well 73 626 was student loans um and about 11,000 was a car loan, and then the rest were some credit cards. Wow. Yeah. So what happened three years ago that woke you up?

Well, honestly, I was sharing a bank account with someone, and they had a judgment against them, and they took the money out of my account. So I was really in a rut I didn't have any money for anything and I realized man this really sucks um and so I got more serious about paying off my debt um and just realizing how much more money I would have if I wasn't putting out so much to debt and other bills that it was I I was just working to pay bills. Like I didn't have anything at the end of it to the point where when I had a mistake, I lost all the money. I didn't have anything. So, um, it was like a scare, but I got serious about my finances.

How'd you find us? Um, um, the, um, total money makeover, I used it to pay off my very first car after college. And then I guess I chucked it away, Dave. And I got more debt and didn't use it for paying off my student loans. But it worked to pay off my first car. So I said, let me try it again. Even though I'm worse off now, it should work. Okay, good. That's awesome.

Good, good for you. How old are you, can I ask? I just turned 34. Congratulations. Well done. That's awesome. Good, good for you. How old are you, can I ask? I just turned 34. Congratulations. Well done. Thank you. That's amazing. Absolutely incredible. And from start, I mean, like what happened to you three years ago,

and your bank account's wiped out. I mean, all of it, I'm like, whew. I mean, you started from the ground up. I mean, you really, you've done this. It's amazing. And started your own business. I mean, it's incredible. You have an amazing story.

Oh, thank you. You put God first god first um nothing you can't do yeah that's right that's right for you good for you well done okay now that you've now that you've done all of this will you will you go back in debt again oh i i i need therapy i I've got PTSD. I need my good son. You need some good herbal tea. Yes, yes, yes. I know a girl, by the way. She can hook you up. That's funny. Yes.

Oh, man. So I'm done with that now. Forever. And you're done combining accounts with people that haven't got their crap together. Yes, I'm more than done with that now. Forever. And you're done combining accounts with people that hadn't got their crap together. Yes, I'm more than done with that. I got a feeling there's a story there. Oh, my gosh. So what was the hardest part, Shanae, for you as you're doing this?

I mean, you started from basically nothing, like you said, with your story at 31, and you did it. So during the journey, what was the toughest part? A lot of it was just kind of feeling like I would never get out of debt. I think that was like the most crushing blow. It's just feeling like I really screwed up and there was no way out. But there is a way out. You just got to work the plan and work your hardest to make more money and be diligent about paying off your debt. But in those dark moments, man, it's like, oh, you have nothing to spend. You have only, you've got, you learn to be grateful for having your car note paid and your rent paid and having food in your refrigerator. You know, you really learn to be appreciative of those moments and not thinking

about, man, all the extras and what everyone else is doing on social media and where your friends are going. You can really feel like you're left out and not doing the right thing. But if you work the plan, you'll realize that in the end, it all works out for the good. A heart of gratitude, too, which is a big piece of this that you have. Well, I like that you decided this answer to your equation was entrepreneurism. I mean, you went after it. Yeah, I did. You know, a lot of it helped.

You've been working. You don't accidentally do this. No, you've got to work hard. Even on the days when you make no money or the days you lose money, you've got to work like you made a million dollars. There you go. It'll definitely work, yeah. I can tell. I can tell you've been busting it.

I mean, $170,000 is a lot of tea yes and taxes yeah tea and taxes boston tea party is on the horizon i'm just saying wow look at you look at you well done okay so what do you tell people the key to getting out of debt is? You got to make more money. You got to do what you got to do, whether that means getting more skills, whether that means finding a side hustle. Whatever you got to do, you got to make more money, because once you get to my point, there was nothing else to cut. So I had to make more money to pay off those significant student loans. They weren't going down.

Some of the best businesses ever in the world were started by someone that had to get something going yeah you know and you're just you're you're amazing i and i got a feeling this is going nowhere but up you you're you're like a force of nature i'm proud of you well done oh thank you thank you so much well done well done we've got a copy of uh Steps Millionaires that we'll send to you because that's definitely the next chapter in your story for sure. How ordinary people built extraordinary wealth and how you can too. I think you'll be in that list of people that did this thing. And also I'll send you a copy of the total money makeover that you can give to somebody so they can pay off their car loan and 11 years later decide to do it all again. Yes. Hopefully they'll be better than me be smarter don't fall off the wagon again shanae don't make me come to maryland no i can't do it i can't i can't do it i love it i'm proud of you

you're something else very well done all right it's shanae in Laurel, Maryland. $93,000 paid off in two years and ten months, making $64,000 to $170,000. Count it down. Let's hear a debt-free scream. I'm debt-free! Yeah! Woo-hoo! This is how it's done, ladies and gentlemen. Oh, my goodness.

That's fabulous. I love it. I love hearing people's stories because either the equation of cutting expenses is a big part of their story or making the income. Because some people are like, oh, gosh, we were spending like nuts. We just cut nothing. And we had all this money. We were able to throw out the debt, pay it off. And for her, she's like, I cut everything.

But I had to make more money you know that it's interesting which part of the equation people uh gravitate towards or for their specific situation what they need to do the most of well if not both but we don't know what happened with that account that that got messed up but what we do know is is that there's a whole lot more happened with shanae and there usually is than simply going oh i think i need to pay off some debt her whole way of looking at life was transformed yeah it had to be i mean she had to get different people in her life and get the wrong people out of her life the right right people into her life uh she changed her way of looking at her career and her income boom here comes this business out of these ideas.

This is a whole abundance idea rather than a scarcity thing, which is exactly what you're talking about there. And you talk about that and know yourself, know your money, as a matter of fact. Yeah. But she transformed. And then as the debt was leaving and it was necessary for her to do that for the debt to leave, it was a whole lot more than simply i'm going to change the way i handle my money that's right her whole life turned over yeah and in a good way and that happens so often and it runs parallel that's why we hear people

losing weight while they're getting out of debt we hear people whose marriages are healed while they're getting out of debt and it's not not that getting out of debt is magical. It's just that you're affecting your relationships and your behavior so positively all at one time. And there's this massive, massive move in your life. Good stuff. This is The Ramsey Show. Thank you. Rachel Cruz, Ramsey Personality, best-selling author, is my co-host today. Open phones at 888-825-5225. Anastasia is with us in New York City.

Hi, Anastasia. How are you? Hi, Dave and Rachel. I'm better than I deserve. Cool. How can we help? So me and my husband, we're huge fans. Currently, we are refinancing our 30-year to a 15-year.

We've been working with a lender. We signed an initial disclosure with them in December. They got back to us with a 2.75% interest. Our current bank is offering us the same or possibly a lower rate, but we also get a SEMA tax, which, uh, adds up to about $7,000. My question is, should we, um, is it moral to stop working with the bank that we've been working with since December and stay with our current bank and get that ball rolling, or should we not take the free money for some reason? What is the free money from your bank, we don't have to pay the $7,000 transfer tax. Excuse me, we would have to pay with any other bank.

So to record the mortgage? It's like a transfer tax. You're not transferring anything. Transfer tax is if you sell the house. Are you sure? Yes yes i'm sure because we've also talked to another lender who was trying to get us a schema but he said that our bank is slow on it and that it would take 12 weeks to close and we don't know what the rates would be like in 12 weeks and to lock in the rates for 12 weeks might not make sense to save so another lender can offer to pay the transfer tax.

Is that what you're saying? Yes, but they're also not going to pay all of them. So the best option that we've come to after talking to three lenders is either staying with our current bank and doing the whole application and everything from start or to keep going with the bank that we started going with. Your current bank really shouldn't have a bunch of application and stuff. They've already got a loan on the books. Right.

Who's your current lender? Our current lender is M&T Bank. Okay. All right. And so it's $7,000 cheaper for the same mortgage, but you have to start the process over. Yes. And is it moral

to like stop now before we locked in the rate that we're talking sure it is yeah you haven't closed on loan you haven't signed a contract with a mortgage company you just were you're trying to get a loan worked and you got a better deal that's right but then like can they charge us attorney fees or anything we haven't paid anything no no you don't you didn't sign a contract they just are you just running a loan application and you decided you didn't want the loan right we signed an initial disclosure that's fine a disclosure just means they disclose to you what the rates are right that's all that means that's that's not a that's not a contract on your part that says i'm contracting to close i mean they're going to be disappointed they're going to lose a deal but um you're just shopping loans and you found a

better loan that's all it is i mean there's no there's not a moral dilemma here okay um and i do have another question i would try to i would try to give the current bank the opportunity to match it but i don't think they can no they can't match a FEMA loan like that's seven thousand dollars off of our clothing yeah I know that's why I doubt they can but I just go look this is this is what's driving this you know we weren't mad at you we were ready to do this but seven thousand bucks I mean what would you do and they got to go well yeah that's what you should do I honestly I'm not familiar enough with New York uh law real estate law to know what you're talking about. It's a very, the thing you're describing is very unusual on a national level.

But, hey, it's New York. I mean, of course it's unusual. It's like California, it's like saying it's California weird. Yes, of course it's weird, you know, but I mean, weird laws, weird laws in both states. Taxes, too. Taxes, and this is yet another in both states. Taxes, too. Taxes, and this is yet another tax. It feels like a fee, yeah. I don't know of another state where when you refinance your mortgage, you get tagged by a tax.

I've never heard of that in any state. I didn't know that happened. So I'm learning something in this call. But doing this show for 30 years, I learn something almost every day. Steve is in Chandler, Arizona. Hey, Steve, what's up? Hey, Dave and Rachel. Nice to talk to you guys.

You too. I'm in Baby Step 7. And I have about, yes, thank you. So I have about $65,000 that I got from Inheritance. And I fully funded my Roth for 21 and 20, which I do at the 65K. That's a fun question, Steve. What do you do with $65,000? I'm maybe step seven.

Well, when you're at this point, I mean— Send it to the Rachel Cruz Travel Fund, and here's the address. That's right. I can give you lots of destinations you can go. No. I mean, it's, you know, at this point, you really do three things with money. You give it, you save it, you spend it. And so with this amount, I mean, I would do that.

I would take a little bit. You could be generous with some of it. I think some of it you put away. Maybe you take some of it out and say, hey, retirement next year i can i can stock some this way or maybe you're um i don't know if you have just even a just a mutual fund open outside of retirement you can throw some in um but saving a little of it and then i think enjoying some of it where did it come from an inheritance yes but like a family member? Yes, family member passed. And are you married, kids? No wife, no ex-wife, no kids. Okay, yeah.

So, I mean, if I were you, Steve, that's what I would do. You have no payments. I would give some of this away. I would put some away for the next year or two if there's something you're saving towards, and then you can enjoy some of it. Excellent. Excellent. Exactly. That's what Sharon and I do.

We get lump sum checks from publishers occasionally from, you know, some of the books are still paying royalties over the years and that kind of thing. Even an old financial piece, I still get a check on it from the 90s occasionally. And so when we get a check inin what we're what we have the practice of doing is we're always going to we take percentages and we say all right we're going to tithe on it we're evangelical christians so we're going to give a tenth and then we're going to do another chunk of giving a percentage we're going to enjoy a percentage spend it on something guilt-free, and we're going to invest a percentage. And, of course, in our case, we have to set aside, you don't want an inheritance,

but we have to set aside 40% for taxes before we even start talking about this. But that's, you know, we teach people that high net worth people, when they get lump sums like that, to always just give every dollar an assignment. And it helps if you're going to be doing this regularly, and hopefully you're not going to be getting inheritance regularly. That would mean bad things for your family. But, I mean, if you're going to get a lump sum regularly, folks, you just apply, set yourself up a formula.

So I've already got a formula set that, you know, when I get a check in, it's like that percentage goes there, that percentage goes there. And so if it's, you know, no matter what the amount of the check is it's still laid out okay so that's a good point you make you said yeah you're not gonna get taxed on this inheritance what is like there there's no tax on inheritance right uh but the gift tax there's gift tax like what like the there would be there would be gift tax if somebody gave you money yes yes but that's on the giver not on the receiver the giver yes okay so they're still not taxable from an income tax yep perspective and inheritance is there like a lot what is what's

around that to protect an inheritance that it's not well the it there is a tax as income there is a tax on an inheritance tax but it's up if you're over $20 million on the estate. There's an estate tax, federal estate tax. Now, local, most states have a probate tax as well when the will is probated, and that sometimes can be as much as like 5%, which is pretty substantial sometimes. But, again, when the estate is settled, that money is paid out of the estate, so when you send a check to the person who inherited money, it's already netted out. It's already done. Yeah, so you still don't have any taxes in that case.

Even the federal estate tax, you don't have it, but it does come out of the estate before you, or it should come out of the estate before you distribute to the heirs. But land is different though, right? But when you inherit land, you have to pay the tax on it? The value of the land is there. Same thing. It's in that. Okay.

Same thing. Stock, any of it. Yeah. But what's the whole thing? I mean, I feel like I know about family members that have inherited land and they can't keep the land because they can't pay the taxes on it. Because it's too much value. But that's different.

Huge value. That's different in an inheritance. No. It is an inheritance. Well, it is an inheritance. Well, they can't pay the... If it's like a huge family ranch, like these huge ranches are being broken up, family farms, because they're worth over $20 million.

Oh, but it still has to be over that $20 million. And the taxes can be as much as 55% on that. So, because we must punish rich people. It is a rule in America. This is the Ramsey Show. If you would like to do your debt-free scream live on the show, make sure you visit theramseyshow.com and register. We would love for you to come to Nashville and tell Dave your story.