The Ramsey Show - App - Should I Follow the Baby Steps When It Comes to Rentals? (Hour 1)

Episode Date: June 21, 2021

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Music Music Music Music Music Music Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. I'm Dave Ramsey, your host. You jump in, we'll talk about your life and your money. It's a free call, and some say the advice is worth what you pay for it. Flying solo today, the phone number is 888-825-5225. That's 888-825-5225. Melissa in New York City starts us off this hour. Hey, Melissa, how are you?

Hey, thank you very much for taking our call. It's much appreciated. Absolutely. How can we help? Okay. I have some, you know, I'm not exciting, but my husband's going to be retiring, and he has the final papers to fill out, and I figured you're the best person to ask this question.

He's being offered $1.6 million to retire for his pension payments, and I really don't know which way to go because there's so many options. So a lump sum on the pension is $1.6? Well, correct. So you can get a $1.6 million. Well, correct. So he can get a $1.6 million, correct, payout. Lump sum on his pension. Correct. Okay.

That would be that. That's not a retirement package that they're paying him compensation to retire. That's his pension. Correct. Okay. All right. So that will have to be rolled over right into a, you know, like a retirement, you know, you get it. So it differs, so no tax implications either way.

Right. Or he has an option to take, like, he has options like 50, 75, or 100% for survivorship. Right. For you or for your heirs beyond you. Yeah. Correct. Okay. So obviously you can only choose one.

So obviously it would pick me. Okay. But he would offer the 100% survivorship. Mm-hmm. If anything. You know, they make it very attractive. It only survives one generation past you, though. After that, it's gone.

Yes, sir. That is correct. Yeah. So ultimately the money either evaporates or it stays in your family it stays it only stays in your family if you take the lump sum and you roll it to an ira correct correct yeah so you take it okay and how about the pension payments because i'm just so scared with the market and what's going on. And, you know, my husband taught me I'm crazy for not to take the lump sum.

Yeah, take the lump sum. Because we can make money on the lump sum. Now, go back and sit down with your investment advisor, or if you don't have one, get with a smart investor pro and sit down. Right. And look at how old are you guys? He's 55 and I'm 50. Okay.

And look at the market for the last 40 or 50 years. Okay. And you can even, there are some charts that are interesting to look at, which will help you with your nerves, okay, that have the worst day. Here's what happened on Black Monday in 1987. Here's what happened when the market went down at the end of the Bush beginning of the Obama administration. 2008. Here's what happened after 9-11.

Here's what happened spring of COVID. Yes. OK, which, as an example, it went down dramatically for 57 days. Here's what happened spring of COVID. Yes. Okay. Which, as an example, it went down dramatically for 57 days. Right. It went down dramatically, and it took 57 days to recover. We did not know that because we did not know what COVID was going to do to our economy. Right?

Correct. But the only way you would assume that you would not ride this roller coaster out from the bottom back up would be you would have to make the assumption that the economy is entirely collapsing. Same in 2008. Same in 9-11. Same if you go back into the Carter administration. Same if you go back to, here's a weird one, in the late 1950s, the stock market shot way down when the Russians launched the first satellite and beat us into space, Sputnik.

Actually, you can see a stock market change on these geopolitical issues. The assassination of Osama bin Laden sees a spike upward, you know, and so on. So these are issues that don't have anything to do with finance, but that end up driving the market on a short term because the market is also driven by emotions. So it helps you to look at that, and it helps you to go, okay, how long did it take? After the planes hit the towers and the stock market was literally closed for two days because Wall Street is right there on that tip of Manhattan, and then when it finally did reopen, it tanked.

It dropped 500 points in 20 minutes. Right. I remember that. I remember that. What most people don't remember is that in 47 days it returned. Right. And better than ever. Exactly.

And never looked back. It went down to 6,500 in 2008. It's at 35,000 Dow is, this week. No, you're right. Yeah, you've got to get those numbers kind of down in your heart, or you're going to freak out with this idea. Now, once you've done that, then here's what you're going to discover. The average on the stock market return since it began is a little over 11,

between 11 and 12 percent, depending on how you want to measure it, somewhere in there. Right. This pension is paying out at about seven percent okay so if you run your pension numbers on the 1.6 million you're going to see seven percent or thereabouts okay depending on which survivorship you choice you pick but that's what that that number of dollars annually on as a return on 1.6 will be right around there. So you're going to get more money while you're alive in mutual funds, and you're going to get more money when he dies in mutual funds by rolling it to there. At least my children can have it too then.

And it doesn't disappear upon the death. Your children and their children's children and their children's children. Here's another interesting thing. If you don't touch it and you just live off of something else, and you invest it in that, it'll double about every seven years. Well, he's got about a million in his 401k plan now. Yeah. That's in addition to the 1.6.

Yeah, if we take 1.6, just talking about this one discussion, you know, it's going to be 3.2 after seven years. That's 62. At 69, it would be about seven. And at 76, it'll be 14. 14 what? A million. Holy mackerel.

Yeah, and that all goes to your kiddos and their kiddos' kiddos and so on, and 100% of the time it does not go to them if you leave it in this stinking pension. So you take the rollover, and you roll it in a direct transfer, traditional IRA, which you've already researched, you've already discovered there are no taxes, and you invest it in a good mix of mutual funds. I'm 60. I'm older than you guys. Mine is invested across the four types that we talk about here on the air. One-fourth in growth, growth and income, aggressive growth, and international.

All mutual funds that have long 10-year or more track records. All mutual funds that have outperformed the index for the area that they are in, meaning the stock market. So they're doing better than the market on average and have a track record of that. And 100% of that money will pass to my heirs. It will not be left behind for the pension plan. There's very few times, folks, that you won't take the lump sum on a pension, and that's the reason. Because you lose it all when you die.

That's it. You get a zero. It's easy math. This is the Ramsey Show. Ever wondered how to save more money or pay off debt faster? What about the right way to invest? Listen, I've been there asking the same questions with no idea where to turn for answers. But here's the good news.

You don't have to keep searching for answers. Ramsey Plus shows you every step of the way so you know what to do with your money. Get the plan and the tools you need to make consistent small wins with money, and even some big ones, so you can see exactly how you're making progress. We'll be right back. To start your free trial of Ramsey Plus, text TRIAL to 33789. That's TRIAL to 33789. 33789. Our question of the day is from Blinds.com, a wonderful American company. You can find out for yourself why Blinds.com is the number one online retailer of custom window coverings, free samples, free shipping, the new promos they run every month. You'll save even more.

Use the promo code RAMSY to get the best possible deal. You know, I bought blinds from these guys many times, and we've endorsed them for over a decade now. You know why? They take care of you guys. Today's question comes from Debra in Arkansas. My 90-year-old mom recently received $300,000 from the sale of her home. She now lives in an independent living residence at a cost of $4,000 a month.

She received about $1,500 a month from Social Security. She has no debt. She's cognitive, ambulatory, and in good health for her age. Someone from her bank called me to talk about investment options for the $300,000. Should she invest any of these funds or just let it sit in her bank savings account? If she should invest, then how much? Well, it's a touchy subject. If we're parking it for her peace of mind, we can park it in a savings account,

it will make absolutely nothing, which is the bank's goal, and she'll make nothing and she'll lose nothing and she'll have that nest egg just sitting there. The likelihood of her burning through it while she's alive at her age, statistically, would be zero because you only need a couple thousand bucks a month

24 000 into uh she just lived over 100 and that's not gonna you know likely statistically not likely to happen do people lived over and yes they do but that's not statistically um were i her, was it me, if I was 90, I would not be handling this money for my own use. I would be handling it to pass on, in which case I would want it to work a little harder than a stinking bank account. And so I personally would invest it because I'm very comfortable with that. But I would not want her to do that unless she was very comfortable with that because she's not really investing it for herself. She's investing it for whoever is going to inherit it. And so during the next five years that she lives, 10 years that she lives, two years

that she lives, the money will be earning a decent rate of return. I mean, we're not talking about a lot of money here. We're talking about the difference in nothing in about $30,000 a year. So basically, if this money were invested, it would make enough to cover the difference that she doesn't have or pretty close. And so you wouldn't burn through it. You would basically sit there and tread water, and the whole 300, give or take a little bit,

depending on how she lives and how the market does and all that kind of thing, would be there for the heirs. That's how I personally would want to handle it if I were in her shoes. But I'm very comfortable with all of that, and I would not want her to do that if it kept her awake at night, if she were scared. We're certainly not going to make investment decisions based on a banker's recommendation. That's like making a transmission decision based on a muffler guy's recommendation. You don't need to do that.

So you need to sit down with an investing professional, and if she's cognitive, talk to her about what she wants to do with her money. Mom, do you want the money to work a little harder and take a little risk with it, or do you want to park over here and not make much but have no risk? That's really her two options. There's not much middle ground. It's really going to be a little bit one way or the other, but the risk is not that she's going to lose it all because that doesn't happen. Good question. Side note.

You ever hear people say, I lost all of my retirement money in the stock market. You ever hear somebody say that? That is someone that did one of two things. They either emotionally were so caught up in the market going down that they just lied, because there's never been a time that the stock market, even in the Great Depression, even the crash of 29, or the dad-blame rock slide of 2008, whatever you want to call it, right?

The market went in half. And so if you had a million dollars at the beginning of the 2008 slide, it would have become worth a half a million dollars. And today, it would be worth four million dollars if you left it alone. Okay? So if you bought at the highest possible point before the 2008 slide and you sold at the lowest possible point and you had a million dollars, you would have lost a half million dollars. That would feel, that would leave an ouchy mark. That would feel like crap.

Like, oh no, I just lost a half million dollars. Ouch. And if you cashed out, you would have locked that loss in, and you would have lost that money. But you still cannot say, I lost all of my money in the stock market, because you didn't. You can say, I lost half my money in the stock market. That would be accurate. Point being that even when you're 90, if the market goes down unprecedented, with the exception of a couple of times in 100 years, if the market went down 15%, oh, God, it's $60,000 out of 300K.

And it comes back. So far, 100% of the time. So far. There's no guarantee. There's no guarantee about that house you bought either. So far, 100% of the time. So far. There's no guarantee. There's no guarantee about that house you bought either. Oh, well, real estate's a good investment. I'll trust it.

Well, why? Why do you trust it? Because your whole life you've been driving by houses, and especially if you're old like me, you've been watching these houses go up in value for a long time. When I turned 18 years old, I sold my first house for $42,500. I got my real estate license three weeks before that, which tells you a couple things. Number one, an 18-year-old kid sold a house. Number two, somebody was dumb enough to buy it from him. And number three, they bought a house in 1978 for $42,500, which today would be easily worth

over $300,000. Now, we all kind of know that if we got walking around since, so we feel comfortable with real estate investing. But the stock market is exactly the same way. What are we looking at there? We're looking at historical data. We're looking at the period of time over which real estate has gone up in value. And it's gone up in value pretty well all the time.

Stock market exactly the same way. But there's something different about the stock market. I guess because you don't drive by it and you don't see the trees and the bushes and the bricks and the mortar. And so there's something emotional that feels out of control about it. But if you're looking at historical data, well, past performance is not indicative of future performance. Yes, it is. It's the only thing you've got to forecast with. That's the biggest line of crap ever put out by a regulator.

They have to put these big disclaimers on the bottom of all investments. Past performance is not indicative of future. Yes, it is. It's the only thing that is. I mean, my past performance of growing hair on top of my head is indicative of the future of that. It's not likely to start happening tomorrow. You know? It's not going to happen.

You can take the past and project it into the future. It is going to happen most of the time unless something changes. So that's what you're looking at when you're looking at stock market history. When you're looking at real estate history, you look back far enough to go, is this a stable investment? It's why I don't invest in other things. Because when I look at the history, it's too scary for me. And there is the chance of losing 100% of your money. That's why I don't invest in currencies.

That's why all the Bitcoin people are angry with me, because I'm not jumping in on their little fad. It's, you know, I got socks older than Bitcoin. And I'm just, I'm sorry, guys. You can be angry with me, and you can call me unsophisticated, and Dave doesn't know what he's doing. None of which would be true, except you just disagree with me and I hurt your little feelings.

And you've made some money on Bitcoin lately. I'm glad you've made money. I didn't want you to lose money. I want everybody to prosper. But I don't like the risk. I don't like the risk. I don't buy gold because I don't like the risk. The volatility of gold is cray-cray.

It's nutty. So what you're looking at when you invest $300,000, you're not going to lose $300,000 if you put it in mutual funds. Now, if you put it in a single stock, that company could go broke and you could lose the entire thing on that one company. But that would be ludicrous. But if you're well diversified, the chances of you losing it all are very close to zero. The chances of you losing half of it are very close to zero. So you can't go, I lost all my retirement. No, you didn't.

Stop your drama queening. This is The Ramsey Show. We'll be right back. Cynthia is in New Orleans. Welcome to the Ramsey Show. Cynthia, how can I help? Hi, thank you for taking my call. I have a question. I retired. I'm 60, and I had to go back to work.

And the job that I have now does not put into retirement. So I talked to a smart best approach. She suggested that I don't worry about investing into retirement at this point and just focus on paying off my home. Do you agree with that? Not a bad idea. How much do you have in retirement? I only have like $100,000.

Okay. All right. And what are you making at your new job now that you're retired? About $3,000 a month. And what is your, do you have a retirement income already coming in from your old job or from social or anything? Yes. $2,500 a month. $2,500? Okay. All right, good. Well, how much do you owe on your home? About $220. I think that's probably pretty good advice. I'd love for you to be doing both. You don't have a ton of money coming in.

You've got about $60,000 coming in total between these two or three sources. And so I'd love for you to get that house knocked out because a paid-for house sets you up for a lot of stability in your latest years. You know, like when you're 80 with a paid four-house versus a mortgage, that's a big deal. Okay. It would be okay if you wanted to do a Roth IRA. I mean, you can do $6,000, $7,000 a year on that.

That's not going to keep you from paying off the house. If you want to go that route, that would be okay. It's not the end of the world. I mean, you qualify to do $7,000 a year since you're over 50, and you're making over that. You have the earned income. So you could do a Roth if you want to, but over five years, it's just $35,000 you're putting in,

and it only reduces how much you pay on your mortgage by $35,000. So, you know, yeah, I might go ahead and do a Roth just to get some more going in there, but I really do want you to focus everything you can focus on, the majority of it, on paying off the house. So I think the essence of what your SmartVestor Pro told you, I would completely agree with. So, hey, thank you for the call, and congratulations on the retirement. Andrew is with us. Andrew's in Atlanta. Hi, Andrew. What's up?

Hi, Dave. Pleasure to speak with you. Sure. How are you? Fifteen months ago, I entered into a three-year car lease. Since then, I've learned how foolish that was, and I'm considering how to get out of it. Given the current market and cars value, should I find a way out? Or, you know, specifically, would the dealership let somebody come back in

and just say, I want out, you guys can make more on it right now? Or should I just take the lesson learned and never lease again when it's over? Well, the way the numbers work out is this. What you're on the hook for is 20 more months approximately of your car payment plus the closed-in buyout. At the end, there's a stated value in your fleece that you can buy the car for at the end of the 36 months, and there's approximately 20 months of that left, right? $30,000 plus about $800 car payment.

It's a monster. It's about $46,000. Nice car. Big car.. It's a monster. It's about $46,000. Nice car. Ridiculous. Big car. Yeah. Okay. And so those are the two numbers.

You can add those two numbers together and say that's what the whole picture looks like. Now, if you wanted to get out, the way to measure against it is really to measure the 800 per month for 30 months, or for, I'm sorry, there's 20 months left. So is that 16,000? Is that right? No, that's 160,000. 14,600. 14,600.

Something around there. Yeah. Am I dropping a zero? But anyway, so compare what you have, exposure that you have. Yeah, it would be $14,000, $16,000, somewhere in there, versus what you would lose on it if you sold it today. Now, the way you would calculate that is you find out what you can sell it for in this ridiculous, wonderful, hot market for used cars,

and you compare that to another number, and that's calling the fleece. Who have you got the fleece with? Toyota. You call Toyota and say, I want the early buyout number, which is the equivalent of your payoff today. That's not the $30,000 at the end. That's today.

If I write a check today and pay the thing off, that compared to the value, how far upside down are you? That could be less. I'm sorry? That could be less than what the contract says. Less than $15,000. And so, you know, what was the original MSRP on the car, the sticker price? I'm just looking at the lease here.

The adjusted capital cost is $55,000. I don't know what the sticker price was. Again, I learned the hard way. That's okay. All right. And have you looked up what it's worth at all? The trade-in value is around $43. Private party is around $46.

Okay. So let's call it $45 for discussion purposes. And now you call Toyota up, and they say your early buyout is 40, okay? You can ride check today for 40 and be clear. Then that means you're five in the hole. If you keep it, you're 15 in the hole even if you turn it in, right? Mm-hmm. Yeah, so if you want out of it, this is probably going to be a good one to get out of.

You're probably going to find you're not much in the hole right now. What kind of Toyota is it? It must be a truck. Yeah, it's a Tundra. Yeah, it's a beast. So going through the specifics, would I find someone that is willing to buy it from me? Yeah, you would sell the car to someone and write a check for the difference in that and the early buyout. And you've got to send that whole amount to Toyota, then they send you a title. Okay, so I just let Toyota know I'm selling it, and I'm, you know, sorry, I haven't looked up any of these details.

I'm just curious about how that works. Well, I mean, it's just like, pretend you had a car loan, God forbid, with Bank of America. The title would not be held at your local branch. It would be held out of town. Yeah. And so if you did the same thing and you were upside down there, you have to give the whole amount of the payoff, which is the amount you put with it plus what the buyer gives you, right? So the buyer drives off with a car and a bill of sale and the keys.

This is the way it always works. Then you send the full payoff to Bank of America, in this case Toyota. They send you the title. You sign it over to your buyer. It takes about five weeks. Okay. Four weeks, three weeks, depending on how efficient Toyota is to get the full transaction done.

And if you do it with a dealer, you're going to get less for it because the dealer's going to buy it at wholesale, but you're not going to have to screw with anything. They're going to take care of everything. So I'd get a dealer bid on it, see what a Toyota dealer will give you. I'd compare that to what private sale is saying on Kelly Blue Book, and then I'd get your early buyout number from Toyota. But you're going to write a check for something here.

It's just not going to be as much as if you keep it. Understood. Thank you. Hey, thanks for the call, man. I appreciate you joining us. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money.

The car fleece is the most expensive way to operate an automobile. It is not cheaper. It's more. Because when you add up the numbers he just said, and here's the thing. The car goes in his example. MSRP sticker was 55. At the time he turns it back in three years later, the turn-in value is 30,000. He can buy the car for 30,000 at that time or hand them the keys, right?

Now, I'll guarantee you this. Toyota's a lot of things, but stupid's not on the list. 100% of the time, that $30,000 has been very carefully calculated with Toyota Tundra statistical evidence that says that that's about what that car is going to be worth. It's not a $35,000 car and he can buy it for $30,000 at the end of the lease. And it's not a $40,000 car that he can buy for $30,000 at the end of the lease. And it's not a $28,000 car that he can buy for $30,000 at the end of the lease. It's a $30,000 car he can buy for $30,000 car that he can buy for $30,000 at the end of the lease. And it's not a $28,000 car that he can buy for $30,000 at the end of the lease. It's a $30,000 car he can buy for $30,000. So when you put that number in there with $800 and something dollars a month, you figure out what his cost of capital is, which is the effective interest rate,

and it generally is around 14.2%. It's the most expensive way to buy a stinking car don't do it it's a car fleece you're getting fleeced it's a bad idea paying off debt is smart saving and investing is smart being generous is smart but there's one key to winning with money that's often forgotten, and that's protecting your family from emergencies. There are 10 kinds of insurance coverage you might need based on what stage of life you're in, and we've built a tool to show you what coverage you need to add, which one of the rip-offs you need to drop, or what you need to adjust. It only takes five minutes, and it's free.

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Defense is as important as offense in finance. Carla is with us. Carla is in Des Mo offense in finance. Carla is with us. Carla is in Des Moines, Iowa. Hi, Carla. Welcome to the Ramsey Show. Hi, Dave. Thanks for taking my call.

Sure. We have four rental properties, and we're just wondering if you have any, like, baby steps associated with owning the rental properties like you do with the, like on your personal side, you know, the, is there a certain amount we should have in an emergency fund? And, and like, where do we park extra money as we're saving to buy the next one? Okay. Are they all paid for? We have kind of a little bit of a long story. We have like a $3,000 on one, um, because

our personal residence is, uh, will be a hundred years old next year. And people our age are getting older and they have things like hip replacements and that. So we're thinking we're going to probably have to get out of this place eventually. And so we keep a little bit of a note there at the bank so we have that relationship with them in case we need to. Why do you want a relationship with a bank? So we can borrow when we need to get our own, like if we need to get a different house. Like we don't need to move right now. Yeah, so what's the house that you're living in worth? It's worth maybe $95,000.

And when you sell it and buy the one that you want to live in because you can't live in it anymore because of hip replacements, what would you buy? Well, we'd probably buy a ranch thing, so it's all one level. Like how much? I don't know. Around that, but there's that period of time where you have to get the loan. No, you don't. You put your house up for sale, and you sell it on a contingency and you go buy it you've done a lot of real estate deals you know that and all of your rentals paid for except for three thousand

dollars yeah yeah okay write a check today and pay off the stupid loan okay that's your baby step the next baby step is just pile up cash oh by, by the way, before you get ready to move, you're probably going to have a big enough pile of cash to just buy you a house. Then when you sell the one you're living in, you'll be able to use that to buy some other rentals. So, like, do you have, like, like here, we would probably not have to replace all the water heaters at the same time. The chances of that happening are very rare.

But it could happen that we would have a hailstorm and we're replacing like siding and all of Well, you'd have insurance. So there's not like an amount that you keep. Well, what does it take to operate the rentals? I try to keep six months of that, of what it takes to operate them. Just stay in a cash position. Real estate people like me and you are the world's worst about keeping cash around. We always want to put it back into more real estate, and we don't ever have quite enough cash.

Well, and that's another question I have. Is it possible to have too many savings accounts? There's no point in it. One will do the same thing as seven. I know, but like if I, like our car fund, if I would marry that to our tax fund, it looks like I have a bigger amount. Well, as long as you keep a little spreadsheet tells you what the breakdown is, it doesn't matter. I know, but I have, I, how many savings account have you got? Well, we have an HSA, and we have a car fund, and then we have, like, a taxes fund, and then we have, like, a regular savings account so that it's attached to the checking account

in case I'd ever overdraw the account, which never happens. And then we have, like, we have a savings account for our rental deposits, and then we have, like, a savings account for just rentals in general. Yeah, well, that would be an investment account. The last one should be invested because your rentals in general means you're trying to buy more, or in maybe this case you're going to buy a personal residence when you sell the one you're living in for some reason or another you're doing fine i i think you're just obsessing about this whole thing if you want to have 14 accounts i don't care it's just a lot of trouble um but

it's also a lot of trouble to keep up with all of them on a spreadsheet and they're all in one so however you want to run it uh i don't keep that many accounts and i got a lot more rentals than you got so um i mean i have one account for each of the businesses that own the rentals and I've got LLCs that own rentals. And when I get more than $5 million in one LLC, I open another one. And so if I buy a property that's in excess of $5 million, I have a unique llc just for that particular property and so i've got a handful of those but uh but that's you know but i don't have different personal savings accounts floating around i do have a separate emergency fund that i never touch because sharon said if i do she's gone and um and then uh beyond that we've got it we're we're investing money to get ready to buy the next piece of real estate.

So you're doing fine. Overall, what you're doing is accurate. You know where your money is. You know what's going on. You're in control. You've done a great job. It sounds like you've got a net worth well in excess of a million dollars. So way to go.

You're an everyday millionaire. You're a baby steps millionaire. You've done the stuff. Way to go. Samantha is in Colorado Springs. Hi, Samantha. How are you? Hi, Dave.

Thanks for taking my call. Sure. What's up? So my two debts that I have to pay off are the exact same amount. So I've asked some other people their opinions, and everybody seems to differ. So I figured I'd ask you. What's the amount? same amount so i've asked some other people their opinions and everybody seems to differ so i figured i'd ask you um what's the amount a HELOC i have a HELOC for 50,000 um and then i have 50,000 on my student loan and what's your household income um we bring in around $6,000 a month.

Okay, your HELOC does not go in Baby Step 2. It goes in Baby Step 6, and it's big enough you probably need to look at refinancing your house and rolling your HELOC into a new first mortgage, because your household income is only $72,000 a year, right? Yeah. Yeah. So when your HELOC or second mortgage is over half your annual income, we throw it to Baby Step 6, and in your case, it's so big, it's going to be so long before you get it and the student loan knocked out

that you need to probably get you a new first mortgage. What's the balance on your first mortgage today? $255,000. $255,000. $255,000. So you owe $305,000 on your home. What's it worth? About $415,000. Good. Okay. Yeah. I probably, what's your interest rate on your first? It is 3.65. Okay. You can beat that, and you can get rid of a HELOC. So you now have two reasons to refinance unless you've got bad credit.

I'm going to go get in touch with Churchill Mortgage and try to get a 15-year fix down around 3%. It's going to save you 0.65 on the first. It's going to get rid of the instability of that HELOC because it's usually a variable rate, and it's indexed based on the banker's whim meaning it's not indexed at all they just decide what the freak they want to charge you on these things and they change it periodically they've been historically low for so long they've lulled everybody to sleep but they're dangerous as crap because a lot of them have a call and almost all of them have a call, and almost all of them have a variable rate that's not indexed to anything. So that's simple.

Yeah, I refinance that, and then that means, guess what? We're working on your student loan. We're going to knock it out as fast as you possibly can. And that means beans and rice, rice and beans, extra jobs, not eating out, and you're not going on vacation until you get rid of, said Sally Mae. That old woman needs her eviction notice from your life. Get after it. Get it.

Get it. You got this. You can do it. That puts us out of the Ramsey Show and the books. Our thanks to James Childs, our producer. Kelly Daniels, our associate producer and phone screener. I'm Dave Ramsey, your host, and we will be back. Have a friend or family member that needs a daily dose of Ramsey advice in their life? Let them know about the Ramsey Call of the Day podcast. It's a quick hit of advice about life and money in under 10 minutes.

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