The Ramsey Show - App - Stop Being Complacent About Being Normal (Hour 3)

Episode Date: June 4, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave 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 am Dave Ramsey, your host. This is your show. Thank you for joining us. Open phones at 888-825-5225. Jake is in Starkville to start off this hour.

Hey, Jake, welcome to the Dave Ramsey Show. Hey, how's it going, Dave? Better than I deserve, sir. How can I help? Hey, so I'm a newbie to the Dave Ramsey Show. And first of all, I just want to say great work with everything that you all are doing. Thank you. My question is, okay, I just want to say great work with everything that you all are doing. Thank you. My question is, okay, I'm 25.

I'm married with two kids. And right now, my salary is kind of kept off at around like $35,000. And between my wife and I, we have about $90,000 in debt. Like 95% is% student loans. And I wanted to know, I only have 30 hours left to complete my degree. And, but I don't know how I would pay for it. So I'm trying to see, you know, would it be a great idea to go ahead and, you know, take out those other student loans?

What's your field of study? Accounting. Oh, that's very good. Okay. So 30 finishes your undergrad? Yes, I'm an undergrad. Okay. And what's your plans to do with your accounting degree then? I don't have any long-term plans. I was just trying to pretty much just get – I know I can get a better paying job in $35,000. $35,000 is a pretty good job without a degree, but that's kind of my cap in my area. So, I mean, I know a few people, you know, in accounting,

but it's hard to kind of get a job without that degree. And so I was just trying to get your perspective on that. All right. But you have all but 30 hours done toward an accounting degree. And what do you do now? I work in accounting now because i have the experience i've been working in accounting for probably three or four years what size company do you work for um it's a multi-million dollar company do they have any kind of tuition plan where they pay for it um i'm pretty sure they have tuition reimbursement.

Okay. Well, let's learn about that. Let's get the details on that and find out exactly how it works. Okay. And then let's lay out a game plan to use that to go to school for free. You don't have to go on student loan debt to go to school. Yeah. Why was that hard?

I mean, you know, you hesitated like that's not doable. It is doable, just the amount of time it would take to... Have them pay for it? Go about... No, they won't pay for it up front. I would have to put up the money up front. They'll pay for a semester at a time for it up front. I would have to put up the money up front. They'll pay for a semester at a time. Not up front.

Yeah, they will. They'll reimburse one semester at a time. You don't even know how your tuition program works. I'm pretty positive they won't pay it up front. I would have to pay it. No, no, you're not hearing me. You're not hearing me. Listen, you're not hearing me.

You don't have one semester of work to do. You have several semesters of work to do. You have 30 hearing me. Depending on. You're not hearing me. Listen. You're not hearing me. You don't have one semester of work to do. You have several semesters of work to do. You have 30 hours remaining. Okay? They will not pay the first semester, but at the end of that semester, they will reimburse you, which will pay for the next semester. Do you understand? So I pay the first semester. They reimburse me.

And that pays for the next one and it keeps going in a cycle until i'm done there you go man we're priming the pump and get the pump going but we got to put the first cup of water in and so you need to take an extra job and come up with the first semester's amount well i can't take an extra job because my wife, she works when I get off work. What does she earn? She just has a little part-time job, maybe like $500 a month. But she's a homemaker. She homeschools our kids.

So kind of hard for her to get a job and do that. Okay. Well, maybe she quits her part-time job and you get a good one, like delivering pizzas every night, which is $1,500 a month if you do that five nights a week, and you do that for two months or three months, and then you'll pay cash for your first semester, and then we'll get your degree. Let's develop a game plan here, dude. That's all I'm doing.

I'm just done. But the game plan can't be more student loan debt. You got freaking $95,000 already. You know, the last thing you need is more student loan debt you got freaking 95 000 already you know the last thing you need is more student loan debt you're drowning so you know we gotta get we gotta do something to temporarily get the income up we're gonna pay a price on the short term to win uh what we tell people all the time is live like no one else so later you can live and give like no one else but you're going to give up some some so later you can live and give like no one else.

But you're going to give up some sweet moments. You're going to give up some time. You're going to give up some you're too tired and don't want to screw with this while you go to school and finish your degree and while you work extra to get that first money to pay for that first semester. And you've got to go in there and find out how your whole deal works. And, oh, by the way, I would go ahead and ask them, because the worst answer they could give you is no, to go ahead and pay for your first semester so you don't have to do any of this except just go to school they might say no they might say yes but they're never going to say yes

if you don't ask so i'm going to go in there and present my case hey i got babies at home i really want to do this i want to add value to this company please make an exception if your normal rule is you pay for it as a reimbursement, please front me the first one. And I promise you I'll come out of there with straight A's. I'll come out of there with a 3.5 or whatever you got to do, man. I'm going to go in there and make a sale and get your supervisor to get a waiver done, an approval done, and get the money. And go get this job. Go get this degree because I think it's a great degree.

And to answer your question, I think you should go back to school, but no, you should not borrow money to do it. And you're in a perfect position to do that. And is it going to be pleasant? No. But as you've already figured out, living on $35,000 isn't pleasant either. Living on $65,000 is a lot more pleasant, and $165,000 is even more pleasant. So we're going to go try to do the things we can do to get our income up long term.

That's how we think around here, dude. You said you're new to the whole Dave Ramsey thing? It's develop a plan and execute it. Almost always people go into debt because they do not look at all the things they have available to them and execute to go do those things. Instead, fall back on debt. And that's how you got $95,000 in debt right now. No more debt. And that's how you got $95,000 in debt right now. No more debt.

Chris is with us in Dallas, Texas. Hi, Chris. How are you? Hey, Dave. I'm doing good. How are you? Better than I deserve. What's up?

Hey, so I'm trying to get some help deciding between a 529 and an ESA for my two young kids. If you pick the proper kind of 529, they're almost exactly the same thing. They both grow 100% tax-free like a Roth, and the ESA has a $2,000 a year cap. The 529s have all kinds of different caps depending on which one, but there's some around $10,000. That's where most of them are a year. But the kind of 529, the only kind you want to pick,

is one where you control the investments and the investments do not automatically move unless you move them. And if you get that, that's what you've got in an ESA. Educational savings accounts, it's an entry point. If you want to only do $2,000, it's an easy, no-brain way to do it. You go pick good growth stock mutual funds with long track records and you put $2,000 a year into it. If you want to put more than that, then you've got to pick a 529 that allows you to control the investing, not someone else. No auto adjustments, age-based crap.

You pick the mutual funds. You keep your finger on what's going on with the investments. You watch the investments. If you do that, the 529 works exactly like the ESA. You know, I get asked all the time, at what age should I buy life insurance? Let me be clear. If you have a family, if there are people depending on your income, now is the time to have term life insurance. I don't care if you're 20, 30, 40, 50, or whatever. Your age is less important than your financial situation. If you have debt and a lack of savings, it makes no sense

to risk your family's financial well-being based on the cost of a term life policy. Term life rates are just plain cheap, even if you're not in perfect health. And the best way to compare those rates is through Zander Insurance. Zander only sells the plans I recommend and shops among the top companies to find the best rates and the right coverage for you. Call 800-356-4282 or visit zander.com. You got no excuse to put this off, folks. Bad things happen to people all the time, regardless of age.

And it's your responsibility to deal with this. That's Zander.com or 800-356-4282. Thanks for being with us, America. We're glad you are here. It's all about you. Joshua is with us. Joshua is in Colorado Springs. Hi, Joshua. How are you? I am vertical and breathing, Mr. Ramsey, and I already know how you are, so we can skip that question.

Cool. How can I help? Yes, sir. So last year, I'm actually active duty military now, stationed in Fort Carson. Last year, I broke my motorcycle, and I'm about to get a settlement for about $900,000, and the insurance company wants to put me into a structured motorcycle, and I'm about to get a settlement for about $900,000. And the insurance company wants to put me into a structured settlement, and I'm thinking I might want to go the other way and try to invest the money with my investment professional. You broke your motorcycle? Well, an SUV was involved and a drunk driver and a few other things, so that was a thing. Okay.

Because I was thinking, a broken motorcycle, $900,000. Okay. Yes, sir, escalated quickly. So messed you up bad? Yes, sir. I broke 18 bones, 6 plates, 45 screws, 8 surgeries. Wow. And you're still in the military?

For now, sir. I'm actually going through the medical retirement process at the moment. I'll be a civilian in about four to six months. Okay, cool. So how are you doing on your physical? Are you healing? About as good as I'm going to get, sir. I walk with a cane.

I've got some limited range of mobility in my wrist and knee. But other than that, I'm doing way better than I should be, and God's grace alone. Amen. So what are your future career plans? So I am looking at a job with a government agency, and they're looking to pay me about $85,000, but they can only really offer me that job once my disability ratings come back, because I have to be a non-competitive hire so it has to go into that process but i should do pretty darn well working for them okay sounds like and um the reason i'm asking the reason i'm asking is that means you don't need

any of the 900 grand you can live on the 85 i assume very very easily. If you can't live on $85,000, you have serious problems. You are something else, man. I love it. Oh, what a great outlook. Okay, so what I would do is sit down with an investment professional and have them actually crunch the numbers with you versus the structured settlement. I'm with you. I you i'm gonna 90 chance say you can whip them using good i actually already talked to my guy okay he analyzed a three percent average internal rate of return on the structured settlement uh-huh and three percent is really bad

yeah that's what i thought so i could outperform that with my mattress. I think you're right, just about. You can outperform that at a bad bank. And so, yeah, I'm with you. Take the lump. Some. And that way you're in control of the money and they're not. Yes, sir. And that gives you the ability to do a lot of different things.

Obviously, the money is invested well, creates a lot better rate of return, minimum, number one. But number two, you've got access to it to do some other things with to enhance your life in other ways if you wanted to. And not to waste the money or something like that. I don't think you're that guy with everything else we've been discussing here but i would hope not but if you you know if you did take uh maybe that 900 um in about seven or eight years is probably a million eight uh maybe a million nine it should double and um and maybe

you pull a hundred out then if you want to start your own business or something or maybe you pull $100,000 out then if you wanted to start your own business or something. Or maybe you wanted to buy X or Y or Z that's $100,000. Then you could do that. I do have somewhat of a plan. Okay. So $100,000 is going directly to an orphanage in the Congo that my family's been supporting for years. So that's tied out the side. I'm splitting the rest 50-50, I think. One half I'm going to try to buy some

multifamily residential, and the other half I'm going to send directly to my investments and leave that alone. So one half is going to become its own LLC and do its own thing, and the other half I'm just going to invest and leave, and it's going to become my future. But the multifamily, you're doing debt-free. Oh, absolutely, sir. I'm debt-free now. I've been listening to you since I was 12. I read the total money makeover at 10.

My family would kill me if I did this with debt. After all of that, I would too, so there you go. Works for me, sir. Yeah, I'm with you. I love your plan. Enjoy it. I'm sorry you. I love your plan. Enjoy it. I'm sorry you've been through all the pain, but this is the recompense for it. So well done.

Wow. And thanks for serving your country, by the way. We appreciate you. Wow. What an incredible. That's exactly what you do right there. You know, you hear people get lump sums and they fritter it away, they blow it. This guy's got a plan. Did you hear it?

He gave some, he invested some in mutual funds, and he put some in paid for real estate. I don't think I could have designed anything any better. Well done, sir. Very well done. Open phones at 888-825-5225. Annette is in Phoenix, Arizona. Hi, Annette. How are you? Hi, Mr. Ramsey. Iette is in Phoenix, Arizona. Hi, Annette. How are you?

Hi, Mr. Ramsey. I'm doing well. Thank you. Thank you for taking my call. Sure. I wanted to go over, my husband and I are considering, seriously considering selling our home, but I wanted to get your opinion, your advice on this. Why are you selling it?

Okay, yes. So we currently own our home. We owe $180,000 on it, and it's worth about $350,000. And we have $95,000 in debt. The majority of that is student loans. Both my husband and I have student loans, and we have about $15,000 in a car loan. And so we were considering selling our home, taking the equity from our home, and purchasing, downsizing and purchasing a home almost cash, just having a really, really small mortgage loan, a super tiny mortgage payment, so that we can get out of debt faster, including the loan on our home. And so there's a number of different reasons why we want to do that,

but I just wanted to make sure that that made sense, that we sell our home, we downsize, we take our equity, and just really try to plow through as quickly as we can on getting out of debt and living debt-free. What's your household income? It's about $150. And what are the number of different reasons for doing that? I don't understand. Yeah, so a couple of years ago, my husband had open heart surgery. And right now, he's a principal at a school, which he absolutely is passionate about his job, and he loves what he's doing, but it's a high-stress job. It's 12-hour days. He leaves the home at 6, comes back at 6. So if he considered doing

something else, and he's right now going through the diaconate program to work full-time at our local church, that really doesn't come with a salary. It comes with a stipend, and I support him 100% on that venture, but we have three young children, so volunteer work really doesn't fit into our budget with three young children. So looking forward, and I would love to teach full-time at a community college or local university, which that pays well, but again, not enough to sustain our current lifestyle of having three young children. But just looking forward, you know, if I wanted to take that thought.

You'd rather hit those career goals than live in that house. We love our home, but I love the idea of being debt-free and being able to have the freedom to do what we want with a career choice. Absolutely. Well, I mean, the thing is you can pay off $95,000 making $150,000 in three years and keep your home. Right. That's okay with me.

That would be a normal track for a Dave Ramsey listener. That's what we would hear all the time. That's very doable. And then I would just, what I would do is set that, you know, let's be debt-free in three years and keep the house, and I would set that as choice, as one of the choices. The other choice is the downsize, and the only reason for the downsize then is not debt freedom because you're going to be there in three years. The only difference is that you're going to be there three years or two years sooner,

and him moving into a career that is yet not really a career is not a plan. So we've got to have a way we're going to get to where we're going and a reasonable way to get there. Is it worth the two years gained here? And then where are we going to end up? Because I still didn't hear how your kids are going to get there. Is it worth the two years gained here? And then where are we going to end up? Because I still didn't hear how your kids are going to be fed. Being a deacon is not going to feed your kids. It's a good calling, but it's not going to feed your kids. In the lobby of Ramsey Solutions, Mike and Jennifer are with us. Hey, guys, how are you?

Good, how are you? Better than I deserve. Welcome. Where are you guys from? St. Charles, Missouri. St. Louis area. Very cool. Welcome. Good to have you.

And how much debt have you two paid off? We have paid off $120,000 in 36 months. Way to go. And range of income during that three years? It began at $70,000 and ended up at $110,000. Wow, nice jump. What do you guys do for a living? I work in logistics for a manufacturing company. Oh, yeah.

I'm a mom. I'm a grad student. I coach college cheerleading and I do marketing for a real estate friend. Wow, look at you. Very cool. What are you studying in your grad work? Masters of Arts in Teaching. So, just to be a better math teacher. There we go. Continue

to move up that. Yeah, very good. What kind of debt was the $120,000? All student loans. All of it. Sally Mae got her eviction papers. Sally Mae and Fed Loans. Kick her out. Kick the old woman to the curb.

Well done, you guys. I love it. That is fun. So how long have you all been married? Five and a half years. Okay. So what happened two and a half years in, at the three-year-ago mark, something happened, and you guys went game on. Yes. Well, he did. It took me a little bit. So six months before that three-year mark, we were in the middle of financial peace university. It was the night

where we had to sit down and list out all of our debts, um, and get them on paper and confront that. Um, and so we were sitting there and, you know, a lot of people, they have stuff they can sell, or, you know, maybe it's a car or house and they can downsize or something. And we were staring at this knowing there's nothing we can do but pay it off. And I know just from our family histories, it's really important to Mike that we have a home. And we were in an apartment at the time. And I remember he sat down. We were looking at this. And he looked at me and he said, we're not going to be able to buy a home.

And we're not going to have a home for the next 10 years. And it killed me because to be quite honest, he was a fourth of that student loan and everything else was me. And so I felt very guilty and I knew I had to make it right. And so I told him, I said, there's got to be a better way. There's got to be a way to get us a house and not break ourselves. And so we looked at each other and we're like, okay, game plan, what are we going to do? So we moved out of the apartment. We moved in with my parents.

Ouch. Yes. Bigger ouch for him. It was kind of fun for me. But we did six months there. We were going to do a year to save up. And then after six months, this one over here found a double wide for sale. So we used what money we had saved, bought the double wide, moved in.

And then because that was paid for, we didn't have, you know, rent or anything with that. We chucked everything at the debt, everything, everything that you want to spend on vacations and going out with friends and all of that. Um, and then while we were doing that, we ended up cash flowing, a birth so we had our daughter um and then we also um bought a van with cash um in that whole process so wow yeah it was it was a lot it was game on for sure yeah very very cool so how did you end up originally in financial peace university that started this story just it was offered at your church or what through our church yeah they offer a lot of classes that was when they pushed um especially for young people starting out to

get the foundations they teach in that in that class and luckily we signed up for it and um it was a game game changer for us for sure now what'd you pay for the double wide um 15 15k in cash and then we put 3 000 into it just making it not look like an old, smelly, stinky double-wide. Okay. So either one of you live in a double-wide prior to that? Nope. Never at any time in your life? Oh, no.

So this was like camping out for y'all? Yes. Yeah, this was like a step in that direction. I mean, it's like, wow. So your family and people are looking at you guys like you've lost your mind. I think my mom cried because she was expecting us to be in the house for a year and then, you know, move into a home and crank out the debt after. And when we said we bought a house in cash, she got really nervous and said, what part of town is this in? And we're like, well, it's on wheels. So, yeah, it was a shock to everyone our

friends family um but you know they're really supportive and they came they helped us paint and fix it up and that's good yeah okay so uh now you've gotten rid of the debt and now you're saving for a house and i guess you'll sell the double wide yep i assume and use that money as additional down payment right we're hoping to use that to furnish the home because i mean moving from a double wide to a yeah big home we don't have anything so yeah perfect very cool this dream's unfolding yes i love it i love it quickly so mike what do you tell people the key to being debt free is guys did $120,000 in 36 months. To me, the key is stop being complacent with normal, the daily or the monthly payments.

Get angry about it. Use that as fuel to start putting money towards getting out of debt, doing all the things that you teach as far as budgeting, making sure that we're having our monthly meetings, we're talking about where we're at, what kind of tweaks we need to make to the budget, and just stop trying to keep up with other people. Take some time, live like no one else, and then later on you'll live like no one else. No, both of you really did set aside what other people think. You just said it's all about us hitting this goal, and it's all temporary.

We're going to live like no one else, so later we can live and give like no one else. And so, I mean, you got pretty radical and did some stuff that was way outside your normal comfort zone, what your friends were doing in the neighborhoods you grew up in or whatever. I mean, the way your parents looked at it and went, oh. But it's turned out. I mean, you did some stuff that was temporary. It wasn't forever. It wasn't a decision we're going to live in a double-wide for 40 years.

It's not a way of life. It was we're doing this because this gets us to our goal. When we were putting flooring down in the double-wide, the last board we flipped over, and he was like, let's write live like no one else so we can live like no one else. So we did, and we put the last board in, and we went. And our goal was to try and crank through all of this by our five-year wedding anniversary, which was January. And so kind of one of our, I don't guess, thrills that we were able to do was on our five-year,

we spent that in the Dominican, and that entire trip was less than what we were paying monthly towards our loans at that point. So that was our big trip. That was just one month. Yeah. Yeah, that was one month. Exactly. Yeah. When you don't have any payments, it changes everything. So how does this feel now that you're here? It's a huge burden lifted off you. You feel like you've got a thousand pound bull on your back every day when you're looking at your debt looking at how you're going to make it through um and then as soon as your debt's gone you're just you're freed you're able to live your life and you're able to plan for the future and give back schools we've we've been able to give back a lot to just our

friends in need or i mean we ended up having a girlfriend and her two daughters come live in the double wide with us for temporarily just because we were able to and we wanted to help so yeah I put you in a position to do that but what listening to your story the arc you're on it was a very tight turn you made here on everything so this has transformed not each not only each of you individually but the way you talk to each other the way you think as a couple has changed, hasn't it? Oh my goodness. I think, go ahead. I think you're going to say something. I mean, that was, it's not uncommon, but that was probably our biggest fighting point money.

And so we still have, you know, little spurts here and there, but it's not as significant. It's not as intense. It's, we've got peace with it. And then we know we have a game plan of how we tackle the tough situations and we know how to communicate with each other, we know the tools we use and it just makes our life a whole lot easier. We grew up differently too. He grew up providing for himself a lot and

everything he had he bought and he worked really hard and my thing was anytime I accomplished something, I got something or I bought something for myself as a reward and so going through this process and kind of learning together how we wanted to approach money and rewards and accomplishments, that changed everything.

Very cool. Well done, you guys. Mike and Jennifer from St. Charles, Missouri, $120,000 paid off in 36 months, making $70,000 to $110,000. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free!

Great job, you guys. Very well done. Man, that is awesome. Very cool. This is the Dave Ramsey Show. Our scripture of the day, 1 Peter 4.10, As each has received a gift, use it to serve one another as good stewards of God's very grace. Susan Blow said, to each man is reserved a work which he alone can do. Sam is with us in Tulsa.

Hey, Sam, welcome to the Dave Ramsey Show. How are you doing today, Dave? Better than I deserve. What's up? Well, I'm working with my employer, and I also have a side business, and I'm looking to figure out if I should continue my education and move up in my company or just take my side business further. How old are you?

I'm 30. What do you do for a living now? I'm a welder, and I'm looking to become a welding engineer. Okay. And your side business is what? A lawn service. Okay. So you said you're how old again?

30. So when you're 50, what do you want to have been doing for the last 20 years? Honestly, I think about doing them both. It's like it's a conundrum to me you know like i make good money with my lawn service but also like the aspect of the welding the welding world so i'm i mean today you like them but i want you to look a little bit further out i get that uh but i mean, what do you want? When you're my age, I'm 57, what do you want to look back and go, that was a good career decision. I was fulfilled.

I'm glad I did that. I like running my own business. All right. There you go. That answers your question. Okay. It might be that you run your own business welding. Yeah.

I mean, yeah, that makes a lot of sense. Is it running your own business, or is it cutting grass? I like being a business owner more than just the cutting grass. Cutting grass, it's nice and all, but I like it. Yeah, the reason that's appealing is because you're the business owner, but the actual – I would finish up your education and become a top-line welder with the idea that in five years I'm going to open my own shop. Okay.

I think that's where you're going. That's great. And let me ask you this, too. The type of welding that you're doing now and you'd be doing for the next five years for someone else, would there be an opportunity to do that without a conflict, without stealing from your employer, in other words, to do some side hustle welding? Yes. Yeah, let's do that instead of cut grass.

Okay. And the side hustle then grows and grows and grows to the point that when you step out of your quote-unquote job into the side hustle, you won't even notice because you're making so much money on the side hustle. Okay, yeah, because that's what I was leaning toward because my lawn service has taken off in such a manner that I'm just like, wow, making money for myself is a lot better than working for somebody. I agree with you. I've been self-employed my whole life. I wouldn't know how to do it otherwise.

And if you're that kind of person, you're that kind of person. There's nothing wrong with either kind, but if that's who you are. So here's the thing, okay? I want you to write down somewhere and put it where you can see it that at 35 years old, you're a self-employed welder. Doing something high-tech, high-end, where you're making serious bank, not grunt welding. Yeah, I agree. Okay.

You know the difference, right? Yes, sir. Making some bank, and you're in high demand, and they need you because of your specialization and your particular skills because you're at the top of your game. Yes, sir. So my next question is, me and my wife, we bring in probably roughly around $100,000 a year, and we have about $30,000 left in debt before we get to baby step number three.

Is it like should I space out my becoming, building up my side hustle, or how should I do that in terms of baby steps? Well, you're going to clear that 30 very quickly. The side hustle shouldn't be a thing that costs you a lot of money to get started. You may have a little bit of equipment costs or something, and if you want to invest a little bit, but I wouldn't invest more than $5,000 or $10,000 in kicking the side hustle off. And, you know, you you got the lawn business running.

Let's run that for a little while and get out of debt. Use some of that money then to create the welding, you know, to cover any costs of the welding side hustle. But, again, the idea is that we're systematically going to get that going and build that business very intentionally so that that boat pulls up next to the dock and you just step in when you're ready to change from working from someone else to doing your full-time self-employed welding business. Very cool.

Very cool. Good for you. Hold on. I'm going to have Zach send you a copy of our book Entree Leadership, which is how I grew this business from a card table in my living room to where it is now. I'll show you how to do it, man. Thanks for calling in.

Patrick's in Macon, Georgia. Hey, Patrick, how are you? I'm good, Dave. How are you? Better than I deserve. What's up? Good. Hey, got a quick question for you.

My wife and I just moved about $23,000 from an old employer's 401K, and we moved it into a traditional IRA with one of the smart investors. Good. He recently left it up to us to say we can leave it there in the traditional IRA or pay the taxes and move it to a Roth IRA. We just want to know what the best move is to pay the taxes now at a higher tax bracket or wait until retirement to pay those taxes. It's better to do it now, but only if you're debt-free, have your emergency fund in place,

or putting 15% of your income into retirement and have some extra money above that. Yeah, we're all set there. I have my own 401K and own Roth. We just didn't know what to do with this one. You got some extra money then? Yeah, that's correct. We're not cashing out any of this money to pay the taxes.

So what's the balance on this rollover? $23,200. Okay. And so you've got an extra $5,000 laying around then? Yeah, they'll withhold it and pay those taxes at the end. Who will withhold it? It's with the same investor from the traditional IRA to a Roth IRA. No, you misunderstood.

I do not want you using any of this IRA balance to pay the taxes. Okay, so unless we have that cash on hand to pay the taxes. Ding, ding. That's what we're talking about. Because effectively, mathematically, what we just did when I do that is you just invested another $5,000 into your IRA. That's right. That's right. Okay. But if you cash it out, it's a zero-sum game because the amount you take out to pay your

taxes would have grown to enough to pay your taxes. That's right, at the end of the term. Exactly. So it's a zero-sum game. There's no gain in this unless you pay taxes with extra money, which creates the same mathematical effect of additional retirement investing. So that's what I would do. But only, again, if you're out of debt.

You have, you know, it sounds like you are. You're in baby steps four, five, six, and that's when I would look at doing that. And I think if you scrape together that $5,000, and you don't have to do it this year. You could do it next year. But, yeah, I would do it in the next 24, 36 months with cash out of my pocket. Good question. Thanks for joining us. Teresa's in Dallas. Teresa, we're short on time.

Go straight to your question. I was just trying to figure out how to know what is the right amount to spend on a new-to-me car when I happen to buy one sooner than expected. Okay. How much do you have in cash? So I have about $10,000 set aside, but I probably have an overfunded emergency fund, $40,000, that I could use some of. So what's a proper emergency fund? Probably $30,000.

Okay. So you've got $20,000 for a car. What's your household income? $160,000 for a car. What's your household income? $160,000. Okay. What's the car you're driving, and what's wrong with it? It's a 2011 Buick, and I think I blew the turbo yesterday, so it's probably going to cost like $2,000 to fix,

and Kelly Blue Book says it's worth $4,500. Agreed. I'm with you. Okay, so how expensive a car are you thinking of buying? I was thinking somewhere in the $15,000 to $20,000 range is proper, but I have a 45-mile commute each way to work. I'm with you. I like it.

$15,000 to $20,000 sounds about right to me. Is there a particular type of car in that range that you recommend for reliability for that kind of distance? No. Whatever you drive, because of the miles you're putting on it, you're destroying it. I know, right? In value. So just keep that in mind. And, you know, you need something that will, you know, stand up to the commute.

But whatever, you're just burning money with that level of a commute. And that's okay. It's just part of your life. It's where you are. So just admit that when you're buying the car. So you don't want to buy a $35,000 car because you're destroying it. But a $15,000 will do. You're making $160,000 especially.

That puts this hour of the Dave 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, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. This episode is over, but if you heard about a product or service and didn't have a chance to write it down, don't worry. We list everything that is mentioned during this episode in the podcast show notes section. Thanks for listening.