The Ramsey Show - App - Should We Borrow Money From Our Parents To Build a House? (Hour 3)

Episode Date: December 6, 2021

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I'm Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's The Ramsey Show. Where debt is done, cash is king, and the paid off home mortgage has taken the place of BMW as the status symbol of choice. I'm Dave Ramsey, your host. Ken Coleman, Ramsey Personality, is my co-host.

Open phones at 888-825-5225. Joe is in San Antonio. Hi, Joe. How can we help? Hi, Eric. How's it going? Better than I deserve. What's up so i'm getting married to uh to a

girlfriend of five years this coming spring good for you and uh we're both both completely debt free she's about to graduate college and um awesome how old are you guys uh both 19 i'm turning 20 in a couple of days wonderful and. And I just wanted to know if it would be a good idea to gift her $6,000 to fund her IRA for this year before we're actually combining finances and marriage?

No. No? Nope. It will change the tenor and the tone of your unmarried relationship you're a guy and you're thinking in math terms i'm an old guy who's been married 40 years and has done a whole lot of stupid butt stuff that i didn't know i was stupid when i was doing it that affected the tenor and the tone of my relationship and i've

had to go back and clean up a lot of it but yeah no no no no no to you it's just a math problem to her it's a power play okay maybe i might be severe or melodramatic in that uh it could affect the way her dad feels. It could affect the way her mom feels. It might change the way you sit in a chair when you're discussing wedding budgets. You see what I'm saying? I see what you're saying. You've departmentalized, compartmentalized this as a simple mathematical thing over here to the side, which is a very smart mathematical thing, by the way.

You came up with a really good idea, but you did not factor in all the negative relational possible consequences. And it ain't worth it, dude. You're 19 years old. You got the rest of your freaking life to get rich, and you're going to be so rich it's going to be unbelievable. And none of it will be because you pre-funded your fiance before you were married's retirement plan when you were 19 years old that didn't cause you to be rich what caused you to be rich is you're smart enough to even ask this question when you're this age yeah uh pretty simple there's no upside at all just wait well there's an upside it's math yeah math upside's

huge well yeah but there's no relational upside that's what you're saying saying. Oh, relational downside. So that means that there's no upside. So wait until you get married, then you fully fund her once you guys get rolling. Yeah. And to their point, they're 19. He's going to be 20. I mean, my goodness. Or he is 20. She's 19.

So, yeah, just stay out of it. I love the question. You know, I love that he's thinking about it. Well, because it shows he's paying attention. Yes. God, if I was 19 and I paid attention, where would I be now? Boy, isn love that he's thinking about it. Well, because it shows he's paying attention. Yes. God, if I was 19 and I paid attention. Boy, isn't that the truth? Sheesh.

I did pay attention, but it wasn't a smart thing. To the right things. That's right. Gave a lot of attention to the wrong things. I was enthusiastically stupid. An enthusiastic ignoramus. But, yeah, that's, yeah, dude, you're very smart. It's a very smart and intellectual and good math question,

and mathematically it would be a beautiful move, but the offside is not worth it. And something happens and you've got a problem. So, good question. Thank you for joining us. Hey, let me grow on that just a little bit, Ken, because we've got a ton of folks, young folks in our audience, who are pre-married. Let's call them pre-married.

They hadn't gotten married yet. And when you pay someone's bills that you're not married to and you're not unified with contractually in a covenant in a spiritual relationship, you change the tenor of that. The old joke is if you loan your brother-in-law $100 and he never speaks to you again, was it worth it? That's the old joke because it changes when you loan people money, when you give people money, it the the chemistry now the better the person the more noble the intent the less obvious the change is but it does change it and uh and i'm old and i've done this a long

time and so i've seen all the negative things like we had a guy one time he paid off a whole bunch of his uh fiance's debt and then they bought a house together before they were married and um and then um she died in a car wreck before they were married now he owns a house with his fiance's mother and his fiance's mother the estate of his fiance owes him money wow for the debt that he paid off or he loses all that money either one i mean it's a tragedy upon tragedy upon tragedy it so uh obviously the death in a car wreck was an unspeakable tragedy uh And Dave, you're talking about money in the middle of something like that. No, I'm just talking about in the middle of an unspeakable tragedy, we've got more layers to the problem rather than just the tragedy.

And so, yeah, you do not want to be owning a house with your mother-in-law that was never your mother-in-law because you never got mother-in-law. No. Because you never got married. Yeah, and again, all the intentions are good, but it's so important that you keep everything separate until you get into that married union, and now it's we, and just you're right. You know what it does? It creates a little bit of leverage, and I think you're right. A mature person, a healthy person won't use that leverage.

Intentionally. Intentionally. But, boy boy the leverage is there it absolutely is there i'm i'm pretty emotionally mature pretty spiritually mature i've been doing this stuff a long time but if i give ten thousand dollars to something it changes my you know and it was a generous gift and i don't have an expectation of you know when i walk in the room you bow down three times or something i don't have anything like that but then i but then if they um you know they i don't know slight you in a conversation yeah you're much more your ten

thousand dollars worth are more offended that's the truth it's exactly you cannot keep that from happening because it's human nature and i'm aware of it i teach it i've written books about this stuff but but then i find myself in that it's not that i demand respect or i'm some kind of arrogant butthole or something like that that's not the point that's but but but you know you know i've given x numbers of tens of thousands or hundreds of thousands of dollars to this thing, and then you go in there and they act like you're not there. A, that's pretty stupid, but, you know, from just a development standpoint. But aside from that, it's just human nature to say, gosh, they didn't even say thank you. Yes.

You know? Like, I have a relative who, if you don't send a thank you note, she'll call you. Where's my thank you note? Oh. You know? And I get it. Seems healthy. Well, she's old school.

Right. Manners. Mrs. Manners, the book. You know what I mean? You should have manners and say thank you. But that comes with the gift, right? And so it's human nature. Human nature.

It changes relationships, the transfer of money does. You can't keep it from happening. The borrower is slave to the lender. This is The Ramsey Show. you've got a lot on your plate a job your home your marriage and your growing family while you're enjoying the present, you can't help but think about your future and your finances. As you explore your options, consider Christian Healthcare Ministries, or CHM, for your health care. Their generous maternity program and budget-friendly monthly programs have been a blessing to members welcoming

children into their families. Visit chministries.org slash budget to see if it's right for you. Christian Healthcare Ministries is a Ramsey Trusted Provider. Just a few days to Christmas. It's hard to think about, isn't it? Crazy. It's like Halloween was just here and now Christmas is here. I mean, it's really right here. You just got a minute. Did you get something for me yet?

Yeah. He didn't see that one coming. It's coming in your paycheck envelope. I'm excited about that. It's coming with your company Christmas party. Every once in a while, I like to just keep you guessing. What'd you get me, Ken? What'd you get me?

Well, you know, Stacy always gets it. You know that to be true. Stacy and Sharon may take care of each other, but you and me are up a creek. That's all it is. She goes, hey, we bought Dave and Sharon something, and it ends up it's just for Sharon. Because Stacy picked it out.

Guys don't think about stuff like that. I love it. Well, it doesn't have to be that hard. You could give Financial Peace University, not to Ken or me. We've had it. But if you want to plan for your money and you want some confidence so that Christmas doesn't sneak up on you next year, by the way, they don't move it, you can learn a step-by-step plan on how to get out of debt,

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Just ramseysolutions.com slash FPU. That's ramseysolutions.com slash FPU. That's RamseySolutions.com slash FPU. Jessica is in Phoenix. Hi, Jessica. Welcome to the Ramsey Show. Hi. Hi. What's up?

Hello. So my husband and I are trying to build a house. We figure it will cost about $155,000. We have $50,000 in the bank. I have the opportunity to borrow about $70,000 from my family. And so my question is, I know you don't like family debt, so I'm wondering if that's the way to go. No, don't like family debt. Okay. And the reason is, what we were just talking about before the break, that it changes the relationship. It changes everything.

Odd that your call would come right after that, but almost like you had to sit there and listen to that. Right. But the, but yeah. So what would be wrong with just going and getting a construction loan for the a hundred thousand? From my understanding. Well, a couple of problems.

One, I understand they're pretty high rates and then two, we're going to build it ourselves. And I don't think anyone will lend to us because we are not. You're going to build it ourselves and i don't think anyone will lend to us because we are not you're going to struggle with that that's true you'd have to get a general contractor to come alongside you and you have to have an approved set of plans but you probably ought to have that anyway the contractor doesn't have to make a big fee uh they could just be the supervising contractor and that'll help you get the construction loan.

Besides that, you don't have enough if you only borrow $70 from your parents, and that means they don't have enough to be loaning you money because they don't have enough to do this deal. Not the whole thing. Yeah, you're taking their last dime or stress all over them. Stress all over it. Stress, stress, stress, stress, stress, stress everywhere here. So now I would go to the local bank, and you're going to be required to get pre-approved for a mortgage

for the final loan amount when it's completed, which it sounds like will be $100,000 or so. And that bank might approve you for the permanent mortgage and the other, and then you're going to have to convince them with the aid of a supervising contractor, and here's a qualified set of plans. You can't just go in with stuff drawn up on the back of a paper bag. No, we've got plans already. Okay. You've got a full-on set of plans, and you bid them out with subs, and you show that

you know what you're doing, and you show that the contractor is overseeing this, and you can get that. You can get that construction loan, and that way your family's not stressed out. Okay. I don't know if a contractor would take that on because we don't plan to step out for any of it. I didn't say that. Okay.

I said a contractor has to supervise. And you will have to get approvals for codes on electrical. Right, yeah, plumbing. Building, plumbing, yep. Yeah, how are you going to get that if you sub out anything? You're not going to get that? You've got to sub that out or you're not going to get code approval because you're not licensed plumbers.

Well, you don't have to have it. You just have to have it inspected and it has to pass the inspection. You don't have to. So as long as it passes inspection, you have to have certain inspections as the process goes along. Okay. So then the contractor wouldn't take a – you can find a general contractor. They're not everywhere because everybody's busy right now, but you can find somebody with a GC license who you pay a flat fee just to put their name on this as the supervising

contractor. Okay. And if you have the knowledge to actually build a house, you probably have the knowledge to find that GC. Okay. And just pay them $2,000 to be your GC. And they don't do anything except put their name on it. But they go with you to the bank.

They say, you know, I'm supervising this. And if they want to walk over there as a matter of integrity and check it three times. But you need to have a plan for building this house in very short order, too. Don't enter into something that takes five years to build. That's not what you're talking about, right? No. How fast are you going to get this thing out of the ground and get it finished? I think a year and a half once we step once we break ground

okay so when does he when is he going to be working at his job my husband i'm going to build you're going to build the yeah the kind of construction we're doing is something that i can do you're doing the plumbing you're doing the electrical you're putting on the roof yep uh we have a brother-in-law that's going to help us with the electrical um my husband will have to help when we do the roof but nearly everything else okay so you've got construction experience no okay and you're going to plumb this house yep what off a YouTube video?

I don't understand. Yeah, pretty much. I'm pretty handy. Yeah, but there's a difference between being handy and constructing a house. This could turn into a four-and-a-half-year build at this rate. I admire your confidence and your sense of adventure but everything you're saying is scaring the crap out of me yeah um this is scary so you do whatever you want to you're a grown-up girl um but um but this sounds like a project that you're going to call me up in 10 years and

go i'm still screwing with this thing um because the youtube video didn't tell me about this and um there's a lot this is fraught with danger so definitely don't use family money definitely because you're pulling them into your dream that may be a nightmare definitely don't use family money that that seals the deal for me um in translation because i care about you and I'm just going to tell you the truth, I think you're biting off more than you know how to chew. And I've built many houses. I own several hundred million dollars worth of real estate. The building we're sitting in right now, the building complex, is 400,000 square feet

and somewhere around $200 million worth of buildings just in this one project. And so it's not like I don't have any clue what I'm talking about here. And let me tell you how much of the plumbing I did. None. Okay? None. It's not because I'm some stupid rich guy. But I, you know, I walk the property.

I walk the property we're building on the other day right now i'm just going up there looking at the footings going in on the thing and so i grew up in this business and you know you're scaring me for you you're not gonna affect me but you're scaring me for you it um and everybody's listening is going uh-huh so you be careful jessica be careful um i'm not trying to tell you not live your dream i just don't want your dreams to be a nightmare this is harder than it looks so um wow and way more expensive it's not just the execution piece you know it's the expense it is the real estate building the house is a little bit like business there's the three rules you know it's gonna take

twice as long as you thought. It's going to cost twice as much as you thought. And you're not the exception. Those are the three rules. It's not quite that bad with real estate. But, you know, it does take longer than you thought, especially in this world. It does cost more than you thought. And it is more difficult than you thought.

And you're not the exception. All right, welcome back to The Ramsey Show. I'm Ken Coleman, and we are here today, Dave Ramsey with me in studio. And I look across in the lobby, and what do I see? A beautiful couple on the debt-free stage. Andrew and Alexis joining us. How are you? We're great. How are you?

Well, I'm telling you, I'm having a blast. So tell us where you're from. We are from Valonia, Arkansas. All right. Valonia, Arkansas. All the way here to do a debt-free screen. Yes, sir. All right.

Tell us the details. How much did you pay off? $101,088. Okay. All right. And how long did that take? About 16 months. Good for you. 16 months. And what was your range of income during that time? We started the end of 2019 and I think we made probably $130,000 in

2019. But for 2020, we made around $167,000. So the pandemic was good to you. It was very good to us. Yeah. At least financially. Yes. Okay. What do you all do for a living? I am a registered nurse supervisor for the state of Arkansas. This is where you went nuts. Yeah.

And I own a cab service in Conway. Okay. All right. Good. Yeah. Both very busy. What kind of debt was the $101,000? Surprisingly, none of it was student loans.

It was two credit cards two vehicles and a four-wheeler y'all were normal we were very very normal how long you've been married uh five years i think five years she says with a question of course he's looking at her going i don't know i'm just here i'm just here because you told me to be here. Right. That's fun. All right. And so, but something happened two years ago.

Well, Andrew kept coming home with spreadsheets telling me that I was spending all of our money. So, we had to figure something out. Okay, Andrew, talk about this. Tell me what's going on here. Well, she's got a shopping problem. Not anymore. No, she's got a shopping problem. Not anymore. No, not anymore. I guess she just got tired of those spreadsheets,

and she started listening to you, and then she put me on to you. Oh. And I think we were listening to your Tony or Total Money Makeover when we were going up to our cabin. Mm-hmm. And we just listened to it, and it hit you right in the mouth, actually. Or it hit me in the mouth, for sure. Okay.

So, Alexis, he's coming home with spreadsheets, but you found us. Correct. Tell me about this. I just was tired of feeling guilty and tired of getting talked to. So I was like, I've i gotta figure something out you know so maybe i can have some spending money because we were drowning in payments so i found you guys on spotify from you know your podcast and started listening and then i bought an audiobook version of the total money makeover okay and that's the cabin ride yes and i punched you in the mouth as

you said correct so i gotta know Dave, before we go any further. So, Andrew, you're bringing all these spreadsheets. Was there a lot of tension here, or were you just kind of passive about it, real gentle, or were you kind of intense? I mean, I need to know. I mean, it kind of went both ways. There's certain times to be passive about it, and there's times that you just got to put your foot down and be like, hey, this is what's going on. You know, living paycheck to paycheck is just not my way of living. I didn't grow up with a whole lot of money, so I always wanted something more.

And that was a way of trying to do it. We make too much money to be this broke. Correct. You both said that on the ride to the cabin. Okay, so that's the opportunity. You're listening to the audio book, and that's the first time you actually both go we're going to work on this yeah correct okay and then you came home and did a budget or what'd you do yes she did most of the work actually um i used every dollar the every dollar app and that's uh where we started and we made a decision that you

know our we keep our thousand dollars for000 for our emergency fund in the bank, and that's our cutoff. And at the end of our paycheck, whatever was left between the balance and the $1,000, that's what I put on our credit card, or that's what I put on our auto loan. Working the debt snowball. Correct. Cut up the credit cards. Well, we did delete a whole lot of debt when we got rid of our two vehicles.

Yeah, we did sell our cars. Oh, you sold both of them? Yes. Whoa. What did they sell for? Well, I had an Escalade, and he had a 3500 GMC. Duly. That one hurt.

That one hurt. That one hurt. He got a 2015 Tundra, I think, for cash. And I did finance my Camry, but for less money than what we had originally owed. And it was more manageable. And they gave us more money to work with. But that loan's gone now. And you got it paid off, too. Yes. So, wow.

Way to go, you guys. So you moved down in car, substantially, both of you, and get on a budget and go crazy. And here you are. Was it worth it? Yes. Yes. 100%. Quick answer.

That's a good answer. Oh, yeah. They couldn't wait to answer that. Yeah. Yeah. So you'd do it again and know you won't go back in debt. Correct. Yes.

Never again. Never again. Never again. Yeah. Very good. All right. So when people look at you guys and go, you debt correct yes never never again never again no very good all right so when people look at you guys and go you lost your dadgum mind you sold these two great cars your friends probably thought you lost your ever loving your mother thinks you need counseling i mean you you got people thinking you're crazy but you didn't care well my mom's actually a

financial advisor for ever jones um so she she was on board with the whole deal. She thought it was great. Well, I was making that up. I didn't know. Well, yeah, yeah. No, our family was really supportive. Our friends do think we're a little bit crazy. And whenever we would say no, you know, to go and to eat dinner here, go do this or go on vacation.

But I think most of them probably see the benefit now yeah yeah so now they turn around they ask you how'd you do that you pay off 101,000 in 16 months how'd you do that what do you tell them the key is well for us um it was originally going to take us probably closer to three years um but whenever corona hit we were uncertain of what would happen with his business it was either we were going to get a payroll protection loan or we were uncertain of what would happen with his business. It was either we were going to get a payroll protection loan or we were probably going to fold. And so Andrew quit paying himself and went and got another job. So he was working a full time job as well as owning his business and running it usually at nighttime.

And then for me being a nurse, you know, there were plenty of extra shifts to pick up. And then I also sold some other things and um so we made up the difference in the income that way but where there's a will there's a way yeah there's an extra job right yeah yeah that's what it is and then you you know the other thing with you guys that i think stands out and we need to give it a word and say it out loud is one of your keys to getting out of debt was contentment. You were content with lesser car. Correct. And both of you took a sizable drop in car in terms of not just money, but in terms of the, you know, this massive, awesome Escalade, you know, Camry, right? And you get rid of the cool truck and, you know, in your world, oh my gosh it's

awful and uh but but you were saying i want that more than i want i want to be out of debt more than i want that thing yes right and i think a lot of it is that those things are just things and without social media or things like that who cares if you have the escalator who cares if you have the 3500 you're doing that for show. And for what? Just for people to say, oh, they have that. But really, you don't. The bank has that.

That's the pin in the balloon. Pop. There you go. That's it. That's awesome. That's a mic drop right there. Unbelievable story. Good stuff.

Really incredible. Wow, wow, wow. So real quick, we don't have much time. I'm going to get you to scream. what do you say is the key to folks if you say there's one thing we did that we can transfer to others to win this battle um budget and be on the same page if you're married yeah you gotta work as a team if you don't work as a team it's not gonna work yeah good deal we got a copy of baby steps millionaires for you that's the next chapter in your story. You're going to be one. It comes out January the 11th, but we have an early edition for you guys

because you made the trip over here. I'll hand it to you here in just a few minutes. And a copy of Total Money Makeover for you to give away to friends. And maybe some of them will be asking about it. You never know. Way to go, you guys. I'm proud of you. Thank you.

You're heroes. You're know. Way to go, you guys. I'm proud of you. Thank you. You're heroes. You're amazing. Andrew and Alexis, Little Rock, Arkansas, $101,000 paid off in 16 months, making $130,000 to $167,000. Count it down. Let's hear a debt-free scream. You ready? Three, two, one. We're debt-free!

Yeah! Woo-hoo-hoo-hoo! There it is. I love it. This is The Ramsey Show. Thank you. Our scripture of the day, Proverbs 4, 18, 19. The path of the just is like the shining sun that shines ever brighter into the perfect day. The way of the wicked is like darkness. They do not know what makes them stumble. Winston Churchill said, we make a living by what we get.

We make a life by what we give. Open phones at 888-825-5225. Jack is with us in High Point, North Carolina. Hi, Jack. Welcome to the Ramsey Show. Hey, Dave and Ken. I just want to say, Dave Ramsey, thank you. You changed my life and changing my legacy of my family because of you.

Well, thank you. So kind of two points. I'm in a position right now where I've got some paid off real estates. I still have debt. We started out almost 10 years ago, but ran into some situations where taking care of my parents and my mom, we bought their houses. We've been paying for their houses.

We had about $120,000 worth of debt, 80 over 80 in credit cards. And we've been killing it. My wife and I, we worked really hard. We're not in that fast get out of debt plan. We've been just working at it over the years. And so I'm at a point now where I've only got probably maybe around 14 in consumer debt of one type or another. We've got about a 1.4 million worth of assets and about $960,000 net worth. So I see the light.

We see the light at the end of the tunnel, and it's been an incredible journey. So we've still got a ways to go, but what I've run into is the property that's paid off as a rental and it's producing the income that we use to help pay for one of our parents home um and i don't want to lose that um so i also want to protect it um so i'm in a position where i want to put it in a trust so i can leave it to my family my kids um and i've looked at all these different trusts out there revococable, irrevocable, I'm just kind of lost. Why does it need to be in a trust? I don't know where to put it. Why does it need to be in a trust?

Okay, so that's where I need some guidance. So I don't want them to get a death and inheritance tax when I leave it to them, and I don't want them to get taxed to death with it. So I'm kind of looking for direction. How much is probate tax in North Carolina, do you know? It's probably going to be somewhere around a million, but we'll be leaving that. You know, I'm anticipating. No, no, no, no, no, no, no, no.

When I die, I'm leaving that. You misunderstood me. Okay. You do not have any federal estate tax problems. You have an $11.7 dollar exemption for federal so you don't have a federal estate tax problem the only estate taxes you might have would be probate tax for the state of north carolina which i don't know what that is off the top of my head google it oh there we go um and uh but uh uh because i i, a lot of states are like 3% or something.

So, it might be $30,000. You don't have an estate tax problem, I don't think, unless North Carolina's got some outrageous weird estate thing going on, which would shock me in North Carolina. But, all this property's in North Carolina, right? Yes, sir. Okay. Let's see here. The fee for estates in excess of $10,000 is $40 plus $4 per thousand.

So it's 4%. Yeah. Okay. So that's nothing. I was about right. You have a 4% tax on a million dollars would be $40,000. All right. So focusing on eventually leaving that to my kids what would be some

words of wisdom of what i might should focus on as far as the what i have how old are you uh 48 45 okay i mean you can just leave it to them in a will straight up and then they would become the owners of it. It's that simple. They're going to pay a $40,000 fee in this. Now, you can avoid that if you put this into a living trust. Okay. The portion that you put in the living trust will pass outside of probate and save you 4%.

A living trust will typically cost you about thirty five hundred dollars in legal fees to put in place i'm 61 i do not have a living trust and a lot more and here's why i don't have one here's why i don't have one at 61 the items that you move into the living trust after you pay the legal fees to form the thing are operated by the trust then. And I don't want to have to screw around to go get the trustee to sign something if I want to sell something that I own. And if I want to operate something that I own, if I want to buy insurance on something that I own, if I want to. Everything you do, you have to screw around with the trust on it and from an operations standpoint it's a nightmare and it's why a lot of people don't do it but uh but it will save you forty thousand dollars when you die uh in my world it ain't

worth it uh forty thousand dollars it's worth it to operate the thing and be able to not mess with it so if i were in your shoes personally personally, it's what I've done. I don't have a living trust. I have stuff in LLCs. I don't own anything anymore. Everything's in an LLC or corporation of some kind. But all of that is left in our estate plan through the vehicle of a will, and there are some trusts formed upon my death that are estate

planning because I have an estate in excess of $11.7 million. So I've got a federal estate tax problem that's a different set of issues. But in your case, dude, I just have a will. Thanks, Ken. Quick on the Google. Yeah, see, Dave, sometimes that's just all you know your role, folks. Okay, we get into this kind of complex finances folks there's no it's not who i am i'm the purpose and bigger paycheck guy uh but i can google things for you dave and see you got to know your role google can can google well give him a new name i do want to point out to these folks that it was a reputable site so that wasn't off of wikipedia i didn't just hand dave i looked at it long enough to

know that i'm not handing dave wikipedia all right nothing against that well there you go well it did come through google so i mean you know this is so folks anytime you want an answer to a question call us we'll google it for you if dave can't here's what it really means if dave can't answer it ken can via google ken can google it while i answer it. That's right. I'm Dave's research assistant when necessary. Michelle is in Boston. Hey, Michelle, what's up? Hey, how are you? Thank you for taking my call today. Sure. My question has to do, we have phased out this year of being able to put money into a Roth IRA for our retirement, and we get no tax benefit of doing a traditional IRA.

So what would be your recommendation? Well, this year is the last year you can do what's called a backdoor Roth. The Biden administration has closed the door after this year, but for this year you can do a backdoor Roth. And the backdoor Roth works like this. After the first year, just open an after-tax traditional IRA and instantaneously convert it to a Roth. And you can put $6,000 in that.

And I did it last year. Sharon and I do them every year. We'll do it this year. It'll be our last year that we get to do that. After that, you've got to invest. You max out any kind of anything you've got available, and it sounds like you already have, and you would just invest in things that are capital gains growth.

Now, let me explain what that means, okay? Okay. The easiest example is real estate, but you don't have to do real estate. So if you buy a house as an investment for $200,000 and it goes up to $300,000 in value, you do not pay taxes on that $100,000 increase until you sell the house, right? Right. The value increase, you don't pay taxes on until you sell it. Same is true with stock.

If you buy a stock and hold it, if it goes up in value, you don't pay taxes on the capital gains growth until you sell it and when you do sell it it's taxed only at your capital gains rate not an ordinary income rate so like a traditional like an annuity or something like that it's going to be taxed at ordinary income but if you sell a stock or a house or a piece of land or whatever you're going to be taxed at 15 percent unless you make over 400k and then you'll be taxed at 20% on capital gains rate. And so you buy things that will hold like that, and an example of an easy thing to do like that is called a low turnover mutual fund.

Write that down, a low turnover mutual fund. And that's an index fund like an S&P 500 is an example of that. You can put small amounts of money in there, it'll grow, and it won't pay taxes on it until you get there. Ken, thanks for your assistance today. Yeah, always there for you, Dave. That puts us out of the Ramsey Show and the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. 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. Check out the Ramsey Call of the Day podcast wherever you listen to podcasts.