The Ramsey Show - App - Should We Rent Out Our Home? (Hour 3)

Episode Date: March 8, 2023

Dave Ramsey & Jade Warshaw answer your questions and discuss: "Should we rent out our home while living abroad?" Top 10 List: "You Know You Know You Listen to Dave Ramsey When..." "Should I take the offer of a company car?" "What should I do with an inherited IRA?" Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Take our FREE 3 minute assessment: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the bots moving in storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Jade Warshaw, Ramsey Personality, is my co-host today as we answer your questions about your life and your money. Thank you for being with us, America. Nicole is with us in Bozeman, Montana.

Hi, Nicole. Welcome to The Ramsey Show. Hi, Dave and Jade. Thank you for taking my call. Sure. What's up? So my husband and I are planning to move abroad for two years, then return back to Bozeman, Montana, and we're trying to figure out what to do with our townhouse. We purchased our townhome in April of 2020, right before things went crazy here, for $310,000.

We currently owe $225,000 on it and have an interest rate of 2.6%. Our monthly payment is $1,950,000, which is right at a quarter of our take-home pay. We had our realtor come to our house last week. They said that they would list it right at $500,000. I called a handful of property management companies that said we could rent it for about $3,000 a month. And I'm just trying to wrap my head around if we sell it, which I think is what you're going to say we should do. I'm just nervous that when we come back, even with the equity that we'd get from selling it,

that we wouldn't be able to afford something that would put us at a 15-year fixed-rate mortgage at a quarter of our take-home pay. Because of the interest rates? The interest rates and even just – I mean, we bought it for $310,000. So he's saying that we would look at $500,000. No, no, no. What you bought it for doesn't matter. What you sell it for is what matters.

So if you sell it for $500,000 and prices don't go up, then the only difference in your payment would be a higher interest rate. The interest rate and, I mean, our realtor told us to expect about 12% to go to closing costs and things like that. And then once we pay off what we currently own, I'm assuming that if we sold it at $500, we'd take home about $215. So if we came back and bought something at $500, that would be a larger mortgage than we have now.

It's a 12% swing, Max. Okay. I mean, you're 6% realtor commission typically, and you've got other miscellaneous closing costs. So, you know, 10%, 12% swing. But that's assuming prices don't go up. So really your only, you know, your biggest issue is if interest rates stay right now where they are, they're double what you're paying now.

Correct. The payment's not double, but the interest rate's double. And you think you're not going to be able to get as much house for your money. Am I hearing that right? That's my concern yeah um i mean just like a lot of other places in the country things here are pretty crazy um i'd love to see it change i just don't think it will i just don't feel good about you going out of the country and having a rental i mean that that gives me more anxiety okay so if so when you come back, your income will not have changed.

What are you doing when you're gone for two years? You on the mission field, or what are you doing? No, we're planning to move to New Zealand. My husband's an electrician, and electricians are on the long-term job shortage list over there. So we'd be moving over. He'd be doing electrical work. I'd be able to get a job once we get there. We don't have kids or anything right now.

I'm 29. So before we settle down. So is he going to be making a lot more? Is your income going to be up, way up while you're there? Our income will be up, but the cost of living over there is more expensive. I don't expect us to come home with, you know, like a pile of cash. So we're doing this why? What it's going to cost for renting and stuff so we're doing this why it's going to

cost for renting and stuff we're doing this because we want to go to new zealand even more reason to sell because what have you i want to hear the end of this hold on a second why are you going yeah we've been working your debt snowball plan so we've paid off our debt and we're we don't have kids like i said right now so before we settle down to start trying so it's a break it's a break-even adventure country yeah it's an adventure for break-even to get to live in new zealand for two years to have a fun time okay all right cool and then when you come back you'll be doing back to your old jobs probably correct and these are a max two-year contract and then new zealand boots you out right um the work visa is up to three years but we're planning on two okay and then we'll be so max

would be three and then we'd be put it out so if real estate prices go up some which we're projecting when we did our real estate reality last year uh stream we projected and we shared with you guys projections and the reasons for them uh that we would see somewhere around a seven or an eight percent increase in prices in 23 across the board in the united states some areas more some areas less but that's across the board uh as of february it's 7.8 so we're dead on okay 24 is supposed to be a little less. And typically five to 10% increase in prices is normal year in and year out in real estate, somewhere in that range. Obviously we've seen craziness.

Now what we have seen, the biggest thing you've got is not the, um, for, for returning with the same income, no more money, the 12%, you know, the loss of some of your equity is not that big a deal. It's 40, 50 grand. That's not going to keep you from doing the deal. The biggest issue is our interest rate is going to come down while you're gone to where you can get a similar price. Because right now the 6% rate is going to make a bigger difference in your payment than the prices will. Okay?

So I'm not worried about you repurchasing for price increases. I am a little bit worried about your repurchasing on interest rates if they continue to rise or if they went down while you're gone in that two years. I don't know what's going to happen there. I have no clue to be honest with you. Now, what were you going to ask that I was missing? I just wondered, you know, you're talking about going abroad. This is something you want to do. Is there a chance? I mean, your plan is to stay for two years, but if you end up really liking it and you can stay three years, I just feel like there's a lot of variables that when you're tethered to this property, it kind of keeps you tethered down. Yeah.

Okay. Here's the thing. I'm going to New Zealand and I'm selling the house. Now, let me tell you why I did that. Because your reason for going is to live an adventure. Your reason for going is taken away from you if you are long-distance landlording from freaking New Zealand to Bozeman. Okay?

Some idiot will change his Harley oil in your living room. Okay? And this is what happens when you long-distance landlord, even with a property manager. And you're, you know, all of, so you can't have the adventure and still try to have the stability at home. It's not going to give you the adventure. We're trying to get the adventure.

Yeah, you're going to be stressed out. With the adventure comes freedom, and the freedom from this house. And then just deal with life when you come home. Figure out what it is. I don't know exactly what it's going to be. It could be higher prices. It could be higher interest rates. Prices could come down, which would mean I was wrong.

Interest rates could come down, which I have no idea whether that happens or not. I wouldn't be wrong because I didn't make a prediction there. But that's the thing. So do the adventure. If you're going to do the adventure girl, don't do the I'm going to have stability back home and adventure. This is two different girls. Be the adventure girl or be the stability girl back home and don't go. That's a good point.

But you can't have both. It's not going to work for you. Yep. Because what you're not realizing is the stress of continued home ownership in the midst of this is not worth what the transaction. It's taking away from the adventure. So I kind of think what you're doing is fun. I just wish you were doubling your income while you're in New Zealand.

That would have made it super fun. Like the people that do stuff going to Dubai for a year or something. That's going to the sandbox or to do whatever. That's serious money there. But if you're going to do it, but hey, maybe it'll turn out that way too. Maybe. I don't know. But sell it if you're going to go.

That's what I would do. This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down. And if higher costs aren't enough, the wait times to see your doctor are longer, and it's harder than ever to get anything approved through the bureaucracy. So, if you feel like the system is working against you, try a biblically-based alternative to health insurance, Christian Healthcare Ministries. CHM is a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of over $11 billion

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Hey, listen up. Our Smart Conference weekend. The inaugural event for the new Ramsey Event Center, which they're putting the finishing touches on as we speak. They're out there rolling out sod right now, which costs more than gold. Yeah, it's going to be beautiful. It is beautiful already. Tickets have been going fast.

We've got just a handful left, a little less than 100 tickets. So if you want to come to the weekend, it's April 14th and 15th. It's going to be a uniquely Nashville weekend. We'll do the show and stuff at the brand-new event center on Friday. We've got some of our good country music friends that we've gotten to know over the 30 years we've lived here that are going to stop by and say howdy to you guys and play a tune for you, that kind of stuff. And then all day on Saturday, we're having wonderful teachings on mental health, on career,

on money, on every part of your relationships, every part of your life. It's going to be an incredible, incredible smart conference. All the Ramsey personalities will be on the stage. We're going to do events. We're going to do live podcasts from there. You're going to get their commemorative badge for the opening event. You're there for the inaugural event. This is all Nashville. Yeah, live music and the whole bit.

Tickets start as low as $119, but, again, there's just a few left, just about gone. So if you really want your tickets, you need to get them like yesterday jump on there and we don't hype this stuff we don't almost sell it out and then tell you listen there's like i saw the report a while ago comes through i'm the ceo okay i get the reports on these things there's actually 74 tickets left okay that's exactly how many are they less than 100 it is 74 that's what's left okay and as i finish speaking it's probably going down so there you go ramsey solutions.com slash events ramsey solutions.com slash events now if you didn't know there's a very large i can't remember how many is in there now it's probably approaching right at a million folks now in the

baby steps community private facebook group not real private if there's at a million folks now in the baby steps community private facebook group not real private if there's almost a million people in there but it's a massive thing and uh we've been having some fun with this rebecca at the ramsey baby steps community made the following post and here are some of the responses she says you know you listen to dave ramsey when number one your kids know the call-in phone number 888-825-5225 look at you off the memory man I don't know you've been you're a listener for a long time before you came here I think so but if my kids could say it that might be this is funny you think of the Costco hot dog as splurging a dollar fifty you might be a dave ramsey i love this one oh and we've seen this your first date

turns into an fpu in a nutshell oh yeah we've seen that let's see i like this kids ask if it's in the budget yeah that's true that one definitely i would love my kids to ask that your child repeats debt is dumb cash is king to everyone he knows oh this one had a picture with it your child thinks one of the minecraft characters on his pajamas looks like george camel you know why because it looks like george camel there you go i love this you can't watch braveheart anymore without hearing dave's laughing in an otherwise serious moment of the film i've been there yeah when he yells freedom when he gets his head cut off you remember the end of the movie that's it i mean it's like freedom yeah it's like that's the that's what we use for the debt-free scream yeah it's like

i don't know yeah i agree with that love it i love this one you start using words like whoopty doopty i love when you say stupid butt. That's my favorite. Bass backwards. Yeah. Plasectomy. Hoopty. That's one of my favorites.

Stupid tax. Yeah, this one. You know, somebody started doing this years ago. You might be a redneck if you might listen to too much Dave Ramsey or Ramsey Show if rice and beans is a five-course dinner. Okay, there you go. Love it. Oh, this is my favorite. Baker Street comes on at the pool while on vacation and one of your kids yells we paid cash dave that's i told i was

telling dave earlier my kids like the movie sing and in the movie sing one of the characters yeah one of the characters is playing baker street on a saxophone and my son goes mama that that's dave ramsey's music jerry rafferty might take offense to that. Yeah, right? Yeah. Well, there it is. It's not my music, but yeah. Well, you're drinking the Kool-Aid.

Yeah, you've kind of got it all dialed down at that point. That's for sure. Hey, thanks for joining us, America. This is your show. It's common sense for your life and your dollars and cents. Open phones at 888-825-5225 justin is with us in atlanta hi justin welcome to the ramsey show thank you for having me how are you better than i deserve what's up uh so i kind of got a um a decision i'm wrestling with, and I was hoping maybe, you know, you guys could, you know, help me with that. basically gave me the option for a company vehicle or a vehicle allowance.

I'm just trying to figure out which is the best for me, which is the wisest decision there. What do you do? I'm in project management and estimating for a mechanical contractor. How many miles a year you put on this vehicle? Um, I've been in this role for two years and average is about 16,000 miles a year. So not much. That's not much.

That's below average. Okay. Or right around average, okay. Or right around average, I guess, something like that. How much is the allowance? $700 a month. It is taxed, so after it gets taxed, it's like $600 net. Okay, let's start with, let's back up two steps and give you the premise, okay? Number one, under no circumstances do you go buy a car with car

payments correct okay if you're paying cash for the car and they're going to give you 700 we can think about it all right now uh here's the thing what we often don't think about is if you bought well if you bought a car how expensive a car would you buy or you have a car i have a car yeah okay so you could just take 700 i can i mean it's good it's old it's an old car um okay have you got any money to buy a better car um i've got about five grand outside of my emergency fund okay so you could move could move up $5,000 in car. But we're not doing car payments. You got that, Justin, right?

Correct. Because if you lose the job, you've still got the car payments, and you don't have the dadgum $700 anymore. Yeah, and that's... People all the time take a car allowance and use that as an excuse to get a car payment. That's dumb, but that's horrible thinking. All right, so we're not doing that. But now once we get past that, then what we're doing is we're doing just a math analysis on the ownership of a vehicle.

If you were putting 60,000 miles on the thing or something, I would just tell you to take their car, company car. Because you cannot operate a vehicle and put 60,000 miles on it with the depreciation that's going to occur and the maintenance that's going to occur with that kind of heavy miles on 700 bucks. You can't do it. All right? So you'd be better off to drive their car. Now, in your case, you're not putting many miles on it, and this just sounds like they're giving you some kind of a benefit because you've been doing a good job, which is nice.

Right. Okay? I've worked up to this, yeah. Yeah. Good for you. It's a compliment to you. So well done. Thank you. up to this yeah yeah good for you that's a it's a compliment to you so well done uh thank you so what you've got to figure out is is let's say you your current car is worth what

i think sixty five hundred bucks okay so buy a twelve thousand dollar car you pay cash for it all right now what's going to happen to that twelve thousand dollar car and you got seven hundred dollars a month to cover it. Now, if they give you the company car, does that include insurance? I'm sure it does. It includes maintenance. I'm sure it does. Does it include fuel? Yes, I would get a fuel card either way. Either way. Okay. So that's a break even on the fuel. Okay. Wow. Nice offer. All right. So fuel okay wow nice offer all right so the question is can we drive a twelve thousand dollar car for seven hundred dollars a month in lost value yes you can because you're not gonna lose that much value it's a twelve thousand dollar car and so yeah as long as you keep the car cheap

uh i'm taking the money but if you're gonna put a high miles on it or you're going to try to do an expensive car then you're much better off to take their car because you take a fifty thousand dollar car you're going to lose seven hundred dollars a month in value just by it sitting in the driveway so you know that that's the kind of crap you're dealing with there so you're not got a lot of loss of value which is your primary problem and you've got your repairs covered, I'm probably taking the money and driving a $12,000 car if I'm you. Good question. And congratulations. Jade Warshaw, Ramsey Personality, is my co-host today in the lobby of Ramsey Solutions on

the debt-free stage. John and Carolyn are with us. Hey, guys, how are you? We're doing well. Welcome, welcome. Where do you live? We live in Whitehall, Wisconsin. Ah, welcome to Nashville. Long way from Wisconsin. Yeah, it is. So how much have you paid off? We paid off $166,029 months. Way to go. Very good. And your range of income during that time? It was 83,000 to 101. Cool. What do you all do for a living?

I work in accounting at Pilgrims. And I'm a stay-at-home mom. Very cool. Very cool. What kind of debt was your 166,000? It was our house. Yay! Looking at weird people.

All right. Way to go, weirdos.os i love it so proud of y'all what's this house worth uh we looked on zillow the other day it was about 232 awesome how old are you guys i'm 36 and i'm 32 and we paid it off just the day before he turned 36 all right well happy birthday right huh that's pretty cool man who would have ever thought that you two at 36 years old would have paid for house in 32 years old way to go well we were trying to do it by his 40th birthday but we uh got a little ahead of ourselves you got you got a little you got a little fired up did you tell us what happened what got you guys started on this whole idea

two and a half years ago well uh i bought the house about six months before we got married. So actually, I'm in the 20% that you mentioned earlier. She let you keep the house. I love the house. Yeah. And a couple months after we got married, we read your Total Money Maker book. Neither of us know how it got there, though. It's a mystery. Indeed.

Yeah, we were just looking for a book to read out loud to each other we'd been married about eight weeks and we were just like hey it'd be fun to read aloud to each other and he's like well what do you want to read and i was like well pick something off our bookshelf he's like how about this book and i was like sure and uh and then we were talking about it later and i was like where did that book even come from we're like one of your parents snuck into your house i think god ordained it that that book was on our bookshelf for a reason yeah we do that we sneak in people's houses and leave them there and then they just discover them yeah way to go you guys that's cool so you start reading total

money makeover and you go what happened then in your brain all right well um we grew up in normal families uh they had like mortgages and consumer debt and we uh then had a family over from church and they were uh talking about how they were planning to pay off their house the next year and they were like well we've had our house for like 30 years and uh paid more in interest than the house is worth so we were like we don't want to be like that yeah we had just finished reading the book and after they left we just looked at each other and we're like no we don't want to be like that. We had just finished reading the book, and after they left, we just looked at each other and were like, we don't want to do that. Nope. Nope.

Nope. Not us. Wow. So you read the book. It hit home, and you started making changes. Did you make any changes to your everyday life in order to make this happen? And if so, what were those changes? Because we say all the time, sometimes it's not about that same intensity, but you get intentional about it, right?

So what did that look like for you? Well, we adjusted. We did adjust our contributions a little bit. We went out to eat a little bit less, watched what we were buying with groceries and stuff like that. I also had some stock, some individual stock, and I sold all that and threw it all at the house. Love that.

How much of the 166 was that about 80 oh wow okay so that jump started big time oh yes yeah so it's just a matter of let's take what we've got and reorganize it to hit our goal yeah right what must be true indeed and then you take 80 grand and you just knock that out in 30 months with your incomes and the earlier done earlier the better i know that's right so how does it feel well we haven't gotten to uh feel the grass beneath our feet but uh the snow feels cold snow angels in the backyard to celebrate indeed very good good job good job guys all right so um what do you tell people the key is now uh accountability and budgeting with like sticking to your budget like laying out telling every

dollar where you want it to go and then my wife here was the my biggest accountability partner i did some budgeting before i uh got married but uh it was oh i'm gonna make the budget and then i come back to like four months later and yeah so okay so she she got a turn she she was the one that managed the system and then you all both worked the system. No, not necessarily. I'm the nerd, but she's the one who provided accountability and actually got me to actually do it. Holding each other accountable. Okay.

You know, hey, we want to go out to eat, but we already used up our eating out budget, so we're not. Yeah, so we're not. You know, just, yeah. We choose to pay off our house early instead. Exactly, yeah. Yeah, instead of one more steak yeah very good i like it i like it i like it i like it congratulations thank you thank you way to go we really appreciate appreciate what you've done in our lives well you did it all we did show

you how you're the heroes and you got the babies what age are your babies we got uh we got terry who's uh 19 months and harrison is four months we'll put them in the picture here to do the debt-free scream we've got the live and give uh bundle for you and that includes the baby steps millionaires book you're on your way to that the total money makeover book it can mysteriously appear in one of your friends house and uh of course financial peace university a membership to that if you hadn't done it, go ahead and do it. If not, give it away. We actually just got done leading. It's past Sunday.

Oh, wow. Way to go. You're leading it. Thank you. That's what I'm talking about. Well, you'll be great leaders. I mean, 36 and 32 with Paid for House, you can't really argue with these people. I know.

I have a different theory. We don't care. Yeah, listen to these folks. They know what they're doing. Yeah, it's very, very cool. But what these young men don't realize because they're not old enough to even grasp it, is that you've completely changed their family tree. I mean, this is a godly man leaves an inheritance to his children's children.

You have put yourself in a position to change everything. So very proud of you. I mean, if we just could multiply that couple right there all over America, we could change this whole country. Wow. Pretty amazing. Well done, you guys. Very whole country pretty amazing well done you guys very very very well done all right john and caroline terry and harrison from wisconsin

166 000 paid off in 29 months making 83 to 101 count it down let's hear a debt-free scream three two one we're debt-free scream three two one we're debt-free oh this is how it's done boys and girls you gotta love it you gotta love it man you know when i first started teaching this stuff I was convinced that I was debt-free because I was, and I was convinced I would never borrow money again because I wouldn't. But I'd been through hell. We'd lost everything. We'd been through everything.

And I didn't know if I could convince anyone else to really do this idea of we're going to pay off our house. And then I got a 36-year-old and 32-year-old in front of me, and I've got this in front of me almost every day of the week these days, people in their 20s and their 30s paying off their homes. Because here's what happens. Here's the thing. If you think, just take, I don't know, $2,000 a month house payment

from age 32 to age 72, that's millions and millions of dollars in a mutual fund. If they just put what used to be a house payment, that's all they do. They don't do anything else. Yep. In their 60s and 70s, they're going to be multi, multi, multimillionaires. Multi, multi. And for the people listening who sometimes go, I don't want to wait until I'm in my 60s to be a millionaire.

They're going to be a millionaire before that. Yeah. They're going to be a millionaire before that. They're going to have some millions before that. Because they're not going to just do a house payment. Right. But my point is the power of not having a house payment mathematically. Yeah. And the power of investing the equivalent. When Sharon and I finally paid off our house years and years and years ago, we went back and said, man, we're going to take that old house payment now and we're going to just

see what that put that one amount into a mutual fund. That mutual fund became a million dollars so fast. It was scary how fast it happened. Just that one fund. That was one of our millions. You know, I mean, it's just it's blows your mind how this math works. Yes. And don't just take our I mean, yes, take our word for it,

but man, like get on a calculator, get on an investment calculator, like start playing with those numbers and seeing it. I know for me, that's what I needed to do. Because you hear people talk about it, and there's still this piece of your brain that's like, but is it really possible? Yes, it is. Albert Einstein said that, you know,

compound interest is the eighth wonder of the world. Those who understand it earn it. Those who don't pay it. Good word. And that's, you know, hello. Good word, Albert. Rich people ask how much. Poor people ask how much down, how much a month.

That's how this works. Good stuff. Man, what a cool couple. Really, really cool. I'm just looking at them. Changing your life, changing your family tree. That's fun. Anyone can do it.

This is The Ramsey Show. Our scripture of the day, Ecclesiastes 1 and 9, what has been is what will be, and what has been done is what will be done, and there is nothing new under the sun. Paul Harvey said, in times like these, it helps to recall that there have always been times like these. Love it. This is true. Crazy's always been on the block. All right, Jill is with us. Jill is in Spokane washington hi jill how are you well hi dave hi jay thanks for taking my call sure what's up just had

a quick question um my father passed away a few months ago and one of his brokers or financial people called me today. He had an IRA with them and he was going over the options of either cashing it out or putting it in an inherited IRA where it'd have to be down to zero in 10 years. Correct. And wondering what you think is the best option. Do you have any debt? No. None at all? None. How much do you have in savings?

Just in savings in the bank, we have about $140. Okay. What do you plan to do with that? We're actually, we're both retired, so we're just kind of living off of it right now. Okay. Sorry, I'm sorry about your dad. How old was he? Thank you.

He actually was four days shy of 96. Wow. Okay. Yeah. How much is in the inherited IRA? It isn't, on this particular one, it isn't much. I think once it's split between my siblings, it'll be about $16,000. Okay.

Well, as he said, you have to pull it out $1,600 a year and be taxed on it as you pull it out, or you just pull it out now and you're taxed on it. Right. What I would do has nothing to do with the math it has to do with you guys are financially in great shape and 16 000 is not making any movement whatsoever in your life one way or the other and right so what i'm going to do is just to limit the hassle i don't want to mess with it for 10 years i'm just going to cash it out okay pay the taxes just but that has nothing to do with the math that's just i don't want to mess with it right

just be done with it you know if it was a million six you know i might fool with it because the taxes are going to be substantial but the taxes on 16 000 is going to be three or four thousand bucks and we're done we don't think about it again you know and so you take the money and go do add it to your savings go do with whatever you want to do with it do something in his memory or you know something that he would have thought was fun go do that i don't care whatever it is you want to do but um i'm just doing that on i try to do things just to keep things really simple these days i have enough complexity to my life without adding little nitsy things you You know what I'm saying? No, I appreciate that, yes.

So that's probably the direction I'm going. But if I'm you. But there's no math behind that direction. It's simply the minimalist, my friends, the minimalist, the way of living. I just don't want to deal with junk. I don't want to deal with stuff. So not like I really live a minimalist life. I don't but uh i do have more shirts than black shirts that's all they wear is black shirts but they uh they're friends of ours and they do a great job we love their stuff but the the point

being that simplify simplify simplify you know when you can when in doubt now again if you were broke and you need the money that's or you didn't have any investments going we it out, turn it into, you know, some kind of get a little bit complicated with it might be worth it. But in her world, it's not much money. I agree with that. Yeah. I would do the same thing. Good stuff.

Now, here's what the new SECURE Act says. Used to be that if you inherited an IRA, some of you got one three years ago or something. Okay. You had different rules, but if someone passed away in 2020 or later, then what you're going to have is, uh, January, uh, if you inherited an IRA on or before January 1st, 2020, the new law does not apply to you. But after that, the new law says you inherit an ira whatever it is it all has to come out in 10 years so 10 a year for 10 years it has to be emptied in 10 years because the government

wants their money and there's taxes due on that when it comes out so there it's like the required minimum distribution that's there it requires you to pull it out beginning now it's 73 and there's a formula that requires you to cash out traditional iras not roth iras but traditionals and this is all that traditional is the only thing we're talking about here because roth there's no taxes on anyway you just take it out yeah you don't have to worry about it but we're trying are we forced to take it out and pay the taxes now well today if it's if it's someone that passes after january 1st of 2020 secure act says this is the original secure act not 2.0 but still it still says 10 years you got 10 years to do it andrew

is with us in santa barbara hi andrew welcome to the ramsey show what's up hey sir um i just wanted to you know i want to be weird like you guys talk about. I heard that I hear the vet pre-screened all the time. You know, we want to get to that point. My wife and I, fortunately, we don't own a house right now. So that's something later down the road that we'll get to. But we just started FPU a couple weeks ago. We got step one knocked out. We're in step two right now.

Way to go. And speaking of baby steps, you know, we have a baby on the way. Our first we're in step two right now way to go um and uh speaking of baby steps you know we have a baby on the way um our our first we're expecting congrats thank you appreciate it uh and so we're just you know while we're paying that debt off we want to make sure that we're also trying to you know start saving up for kids for the kiddo um because kids are expensive you know i have a five-year-old from my first marriage, so I realize how expensive kids are. So I just didn't know if you guys had any advice on while we're working on baby step two,

you know, how can we kind of start stuffing away bits and pieces here and there to get the kiddo started off right? Yeah. How much debt are you working to pay off? Total combined. I mean, we really don't have a lot, honestly. So we have the car is our biggest one. We owe about 23 on that. Um, and then about, uh, 1200 bucks on a credit card. Um, so, you know, we've got maybe 24 total in debt that we got to pay off. What's your income? Um, we get $2,800 every two weeks. I'm on salary.

She's on time card, so it kind of varies a little bit with her time. About $5,600 a month is what we average. Okay. You know, a lot of times we would say to pause the baby steps or pause the debt snowball while you're waiting for a baby to arrive. You know, we want to make sure that there's so many variables with babies arriving in this world. So we want to make sure that you've got the money to cover it. I mean, obviously you're going to be paying your deductible out of pocket, that sort of thing. And, you know, stack up all that money, all the money that you would have. Go ahead. I'm sorry, I didn't mean to cut you off yet. So the good thing, the birth itself, I'm in the military,

so health care will cover the entire birth. Wow, great. We don't have to worry about paying for anything for the birth. We just wanted to start still stuffing away things for, I mean, because kids grow out of diapers. You don't need money for that. You need a budget for that. What's your due date?

August 12th right now. Congratulations. This is a wonderful time for you all. Thank you for your service. So I'm still going to do what Jade suggested, Andrew. There's no downside to it. Here's what I want you to do. I want you to keep working your budget with the same intensity that you were going to work it for paying off debt.

The only difference is pay minimum payments on everything and pile up as big a pile of cash as you can pile up. How much do you think you can pile up between now and August 12th? $10,000? I would say at least, yeah. If we're going to keep on track. Let's call it $15,000, okay? So $15,000 is piled up and baby comes. Military pays all the medical expenses.

There's no problems. Baby comes home. Mama comes home. No problems. Take $15,000, pay off your stupid little card, and then put the rest of it on the car, and then finish up the car by Christmas. You're going to be out of debt almost within a minute or two,

the same speed as if you just pay down the debt. But what this gives you is $15,000 worth of breathing room with a brand new baby coming in just in case something weird is going on. Right. And the key is don't cool out your intensity just because you're not making those extra payments every month, right? Keep going hard at it. I push pause and pile up cash. Use the cash to catch back up right to where you would have been. But that gives you this breathing room, because in case something happens, it's too important an event to not have margin right now.

That's what we would do. That puts this hour of the Ramsey Show in 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. Hey, what's up, guys? It's Jade. Look, if you like what you heard in this episode and want to know more about getting started on the Ramsey Baby Steps, go to RamseySolutions.com and click the Get Started button. We'll help you figure out the best next step for you based on your specific situation. That's RamseySolutions.com and click Get Started.