The Ramsey Show - App - Studies Show 401(k) Millionaires Are Booming

Episode Date: May 10, 2022

Dave Ramsey & George Kamel discuss: What to do with an annuity left from a relative that passed away, Should you take a one-time alimony payout offer? How long you should save up for a house in baby step 3b, Tithing off of gross vs. net, Where debt in collections goes in the debt snowball. Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6

Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. George Campbell, Ramsey personality, host of the Ramsey podcast, The Fine Print on Ramsey Networks, is my co-host today. We help people build wealth, do work that they love, and create actual amazing relationships. We're glad you're with us. Open phones at 888-825-5225.

Thank you for being part of the program. Melissa is in Jersey City, New Jersey. Hi, Melissa. How are you?, New Jersey. Hi, Melissa. How are you? Hi, Dave. Hi, George. Thank you so much for taking my call. It's an honor to speak with you today.

You too. Thank you. My question is, my dad passed away a few months ago. He was your typical, I know, he was your typical everyday millionaire, had a net worth of about 1.3. Wow. After I split that with my siblings, obviously my share will be a third of that. One of the things he left is an annuity, and I'm just not sure what to do with my share of the annuity.

I don't know if I'm supposed to cash it out or roll it over or just like, I don't even know what to do with an annuity that's my question you are the one of the beneficiaries on the annuity i assume yes sir okay i would just take my money okay and then do with it wherever you are in the baby steps you don't want you don't need an annuity you don't want money in an annuity at your age unless you're in a very unusual situation how much money is this uh that's about 42 the annuity is only about 42 000 out of the 1.3 yeah where are you in the baby steps um well let's see i guess i'm four five and six i'm contributing 15 into fully funding my retirement. With this inheritance from my dad, I'll put away a big chunk for my kids for their college,

and then the rest, I guess, put towards my house. So you're going to use this $42,000 on five or six, and the same with the rest of it. Is the $42,000 before the split with the three of you is the 42 before the split with the three of you that is before the split okay oh so you're only getting 15 20 000 okay of the annuity yeah yeah okay yeah definitely definitely take the money just use that probably towards the kids college or wherever it doesn't matter it's free money you don't have any income tax on it. You don't have any penalties on it. You don't have anything on it. And I'm so sorry for the loss of your dad.

So sorry. What a horrible thing to go through. Brian's with us in Chicago. Hey, Brian, welcome to the Ramsey Show. Hello, how are you? Great, man. What's up? Well, I'm divorced. I've been divorced for about five years. And I'm currently paying, divorced for about five years and I'm currently paying,

and for these five years I've been paying my ex-wife spousal support payments of about $2,100 a month. And that was based on my income at the time of $110,000. But now my income is only $60,000 due to a lot of COVID damage to my business and so forth and not able to make as much money. So I wanted to seek an adjustment to the spousal support payments, and it's kind of up in the air how much it could be adjusted because it's up to the judge. And, uh, you know, if we were getting divorced today based on my income, I would only owe her about $600 a month. But when you seek a modification, they don't necessarily apply that, that, uh, same principle. They leave it up to the judge and how much he feels it should be adjusted based on the change of circumstances. Gotcha. How can we help today?

Well, in the discussions of trying to get this modified, my wife has floated the idea of she'd be willing to take a one-time buyout. So, like, I'm scheduled to pay her for life or until she gets remarried or, you know, maybe when I retire it could be adjusted. But she's willing to take a buyout of about $50,000. And I'd be pretty much a one-and-done payment and would not owe her anymore. But due to my financial situation, I don't have that money. The only way I could get it is to take it out of my IRA. But I'm age 60, and I've only got about $70,000 in an IRA. How old is she? So she's 54. I mean, age 60, and I've only got about $70,000 in an IRA. How old is she?

She's 54. No, you can't afford to do it. Well, like I said, unless I take it out of the IRA. You can't afford to do it. If you take it out of your IRA, you're going to get charged a penalty of 10% plus your tax rate. You're borrowing money at 35% or 40% interest to buy her out. That's not a good deal. Well, I don't think there's a penalty because at 59 and a half you can minus your interest. Oh, that's true. You're 60. Okay, so you're just going to pay your tax rate.

But no, I'm not going to clean out your – I don't know. Okay, you don't have a financial advisor, do you? Well, I do, and I talked to him and um he wasn't totally against the idea because when you compare that wasn't what i was asking what i need him to do is i need him to do a net present value calculation for you on 2100 a month for 20 years yeah and what is that going to come out? That's $24,000, $25,000 a year for 20 years. Yeah, $50,000 is probably not a bad offer. Right. I mean, it would really, you know, help me out because there's no signs that she's going to get remarried or anything right now,

and I could be paying her indefinitely for many, many years, and that's a tremendous strain on my finances to pay her. Yeah, what are you doing to get your business back? Well, you know, I've done all sorts of marketing and advertising. I've done some networking and, you know, online stuff, and it's just very difficult. It hasn't been working, so I'm really struggling. Okay, I want your financial advisor to do a net present value calculation on this and tell you what your rate of return is

because there's a thing called a discounted value or in other words a stream of payments is not worth the total 25 000 for 10 years is not worth 250. But it might be worth $50,000. Okay. And it probably is. It probably is. That's probably a very low discount rate or high discount rate. And so you can have your financial advisor explain that to you and tell him to run a calculation, Dave said, on net present value. And I think it's going to be north of $50,000,

so I think that's going to make this a good deal. Now, what you've got to do then is you have to take the $2,100 a month that you don't have anymore as a bill, and you have to get down and dirty about rebuilding this nest egg ASAP. Yeah. George? Yeah. I mean, what I'm seeing here is you can see what the adjustment is,

but I don't want you to limit your income because you now have this new payment where you go, well, I don't want to make any more because they're going to adjust it again. And so I'd rather you get this income up and do what Dave's saying and see if we can fix this thing once and for all instead of paying this for life. I like being rid of the bill and her. She's the ex. Both of these are good things. And I like every bit of that. And so it's not a bad thing. I just want to make sure the calculation's right, and I can't do it in my head right now. But I'm thinking what I am doing in my head is leading me to north of 50. So, God, that's a big alimony payment.

Yeah. This is The Ramsey Show. I just saw a study that really made me sad. It showed that families owning life insurance in the U.S. was at its lowest point since the 1970s. After what we've been through the past few years, I'm just lost on how people don't make this more of a priority. How are you going to make sure your family needs are met if something happens to you? This is why getting term life is an absolute necessity. Rates have never been cheaper, and the whole process to apply is pretty simple, with many companies not even requiring an exam anymore. This is why I send you to Zander Insurance, and I have for almost 25 years.

They'll make sure you get the right protection at the lowest cost possible, and they're there for you and your family every day. I challenge all of you to make sure your families are protected. It needs to be a top priority. Call Zander at 800-356-4282 or visit zander.com. That's 800-356-4282 or zander.com. George Campbell Ramsey personality is one of my, is my, not one of my, he is my co-host today. Thank you. We don't have multiple co-hosts. We have one, and you is it. We've got multiple personalities, but hopefully not in this room.

That's the key. I've always had multiple personalities, and then I proved it by getting them. So there you go. It's one of the best times of the year here at Ramsey. We're giving away up to $3,000 during our Ramsey Cash Giveaway. We're discounting our best-selling books for only $10 each. George, what's the last thing you got for $10? Oh, you know, probably some Pad Thai.

Some what? Some Pad Thai. I got some Pad Thai. I got a takeout meal from a Thai place nearby. Oh. Yeah. It's under $10. It was just about, yeah.

Okay. You know. That's what I budget for is mostly I buy things for food to eat. I'm trying to think of an item that I purchased that I was like, this is worth $10 to me. You know, I'm pretty frugal. I'm trying to think what that might be. Yeah.

What's the last thing you bought for $10? That's a great question no idea what does dave ramsey spend ten dollars on i have no idea i it would have to be something i mean something silly like a you know buying a soft drink or something i mean it's just like you can't get anything for ten bucks but you can get books for ten bucks really our today's day and age our books for ten bucks uh you need to spend 22 to go the movie 15 for pizza 10 for almost two and a half gallons of gas that's sad that's real scary it's not even worth putting oh man 10 i'm done and that's why I got the electric car day well yeah that cost you more

than $10 that's true so $10 you can spend you can get the total money makeover you can get most of our best selling books they're on sale right now at RamseySolutions.com don't forget to enter the Ramsey Cash

giveaway Travis is with us in Indianapolis hi Travis welcome to the Ramsey Cash giveaway. Travis is with us in Indianapolis. Hi, Travis. Welcome to the Ramsey Show. Good afternoon, Mr. Ramsey and Mr. Campbell. How are you gentlemen doing this afternoon? Great, brother. How can we help? Well, first of all, I just want to say on behalf of me and my wife that your program,

your financial university has been a blessing to us. God has used your program to be a blessing in our lives. And my wife, I have to say this. If you ever need a new personality for your program, she will be excellent. She does radio. She does music. And she is just a beautiful person, beautiful personality. And she, I mean, we watch, we YouTube your episodes, so she loves your program.

She just heard it in the background. She said, I love you, Dave. Well, we appreciate it. This is awesome. Very cool. How can we help you guys today, sir? Well, sir, I was calling because we're at step 3B, as you call it, where we're saving some down payment on a house. Okay.

And I'm 43. My wife will be 39 this year. I'll be 43 tomorrow. And right now we have about, I would say, up close to $20,000 saved for a down payment. We got $13,000 in our emergency fund. And the reason why I'm calling is that I have some concerns about, because we haven't been saving for our retirement, but we're still saving for our down payment. And considering our age, should we move that snowball that we accumulated throughout our debt and move part of it to retirement while saving part of it for our down payment for our home, number one. And number two, where do we put that savings for

our down payment? Do we put that on top of our emergency fund or do we put that in a separate account altogether? Great questions. I like to separate them personally because I don't want to get them all mixed up. And all of a sudden, the house down payment becomes part of the emergency fund. So I like to just separate them having a different high-yield savings account or money market savings account. That's fine. And to your other point, you guys at your age, 43 and 39, it's a valid question. Should we start investing while saving up the down payment? And there's a few ways to go about 3B.

Some people, they start investing 15% while saving up down payment payment. And there's a few ways to go about 3B. Some people, they start investing 15% while saving up down payment. Some people split the difference, maybe invest up to the match from your employer while saving up the down payment. And some people do zero investing and go all in on the down payment. It sounds like in your case, you're getting a little antsy doing nothing in retirement right now, correct? Yeah, that's what it sounds like. And so I think the whole point is, you know, you can decide if you want to go ahead and buy a house with $20,000 down, you're going to end up probably with PMI in that case, private mortgage insurance, because you're not putting down 20%. But, you know, on a first time home purchase,

we don't tell people, you know, we just warn you about PMImi but we don't yell at you for not putting down a full 20 second home you should sit on your tail until you have 20 i mean you know because you should avoid pmi but when you're trying to save up and scrape up and you guys have been working this diligently uh if you want to go ahead and buy with twenty thousand dollars down if it'll get you in the house i don't know if it will or not i don't know what we're looking at here uh but uh if you want to continue to say we tell people not to not to do zero retirement between three and baby step three and baby step four to not get stuck there at three be more than three years at zero so uh i mean it can be three and a half but i mean i don't

want you saving for a down payment for 10 years and not doing retirement so that that's the point of the whole thing. So, hey, thanks for calling. We appreciate you joining us. Our question of the day comes from blinds.com. Find out for yourself why blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code Ramsey to get the best deal. Today's question comes from Austin in Oklahoma. I'm a real estate agent, and I opened up an S-Corp this year for my business. My question is in regard to tithing.

Should I be tithing off of the S-Corp gross revenue or off the amount of my paycheck minus the S-Corp business expenses? Well, Scripture says to tithe on your net increase in Deuteronomy. Your net increase would be your net profit in business. And sub S or not, you have a net profit. Whether you have a sole proprietorship, an LLC, a sub S, all three of them have a gross revenue minus expenses equals net profit. And you would tithe on your net profit because that's your taxable income if you want to get the technical mathematical answer. Now, you know, if you hold some money back in the S-Corp for retained earnings, which you probably don't need to do in this case,

I'm not sure you need an S-Corp as a real estate agent. I'm not sure that was a good move. You can certainly meet with your tax advisor to find out but i'm questioning whether that's smart or not um but if you um an llc might have been better but i'm not sure you even need either one you could do you can do whatever you want to do but um uh there's no extra write-offs for having an llc or an s corp because it's 100 pass through so anyway all that to say i tithe on my taxable net income that's the technical answer because i tithe on my net increase before i pay taxes what my net increase is my net profits out of ramsey and uh that that's what we use around here and if i don't

take it home i don't tithe on it if i leave it in the business for home, I don't tithe on it. If I leave it in the business for retained earnings, I don't tithe on it. You can if you want. I don't care. There's not, listen, you can split hairs on giving and tithing 43,000 different ways. God is not mad at you. He loves you. He wants you to have the principle of being a giver because he's a giver and he wants you to be like him. When you say you're Christ-like or a follower of God, then you would do, you know, he's a giver, and you want to model giving.

That's the main thing you want to do, and build in some kind of process where there's a standard, regular rhythm of giving. Yeah, one of my favorite lessons is outrageous generosity inside of Financial Peace University, and you talk about this issue of, you know, splitting the tithes and splitting the hairs, and everyone wants to have an argument. And it really comes down to the heart. Are you a generous giver?

That's what it comes down to. And I think Austin's got a great heart about this. He's just wanting to get a little bit of that nitty-gritty. And it's a good question, but I like the idea of just going, what is the net profit? What is the net income? That's what we're going to tithe off of. If you want to give more than 10% of your net profit, you're welcome to, but that's not the definition of a tithe. No extra jewels on the crown in heaven for that?

I mean, tithing off the gross, tithing off the net, I mean, there's all kinds of scriptural indications it's off the net. Your gross revenues, you might not have a 10% margin even. You might have profits of 3%. That's possible. And so we tithe off a net increase straight out of Deuteronomy. But again, I'm not a legalist about it. God's crazy about me. He's crazy about you. I give because my loving Father says it's the best way to live, to be a giver. This is the Ramsey personality is my co-host today. Open phones at 888-825-5225. Washington Post is reporting that Fidelity Investments, with its quarterly retirement analysis, has discovered the same thing that we already knew from the Ramsey study of millionaires done a few years back. The largest study of millionaires ever done.

The title of the article is Move Over Crypto. A record number of workers are becoming millionaires with their boring 401ks and IRAs. I love to hear this news. The more boring, the more excited I get as an actual investment strategy. So here's what it says. Meet the newly minted millionaires next door. They didn't put all their money into Microsoft type stock that made them rich. They didn't take a chance on speculating in crypto with its crazy volatility or start a business that they sold to some billionaire. No, these are government workers, civil servants, educators, military folks, managers, co-workers clocking in just like you. And many never earn six-figure salaries, which we found in our millionaire study. One-third never had a six-figure household income in a single working year. And so in its quarterly retirement

analysis, Fidelity reported that the number of IRAs and 401k millionaires hit an all-time high that's impressive there it is and not shocking 401k millionaires by translation they had over a million dollars in their 401k they may or may not be actual millionaires depending on how much debt they have but uh because you're you're an actual millionaire is what you own minus what you owe is your net worth, your assets minus your liabilities. But assuming that they don't have a bunch of other debt running around, they've got over a million in their 401K, they very likely are millionaires. And that's what we found. We found that the typical millionaire, it took them 12 to 15 years to get there.

89% did not inherit the money that made them a millionaire. Did not. Nine out of ten, did not. That's actual facts, not your broke brother-in-law who votes left-wing's opinion. This is actual facts by actual airtight research. Okay? So 89% did not inherit the money that made them a millionaire. And we can actually prove that

with the largest study a millionaire has ever done. Now, having said that then, we say the average is 12 to 15 years to get there. We had two primary components to their net worth that caused them to get their first $1 to $5 million of net worth. One of those was a paid-for home, which we found that the average millionaire pays off their home in 11 years, and the other is their retirement account. And so when you add those things together, when you've got a paid-for home and you've invested 15% of your household income into

401ks and IRAs, it's amazing how quickly you get there. In the span of your lifetime, it's a blip. And 79% of millionaires in our research reach millionaire status through their employer-sponsored retirement plans. So this is not a theory. It's pretty simple, guys. Pretty simple. And it is kind of like the article says. It's a bit boring.

There's really nothing you get to brag about to your friends. There's no adrenaline rush. Yeah, you're playing golf or you're fishing with. There's really nothing you get to brag about to your friends. There's no adrenaline rush. Yeah, you're playing golf or you're fishing with your buddies. You don't get to brag and say you did something really brilliant. All you did was just steadily invest and pay off your house. Ding, ding. Then I can't watch crypto over the weekend 24-7 go up and down, up and down, which Bitcoin just had another crash.

No. I know. Not again. I don't want to hurt your feelings, Dave. down, which Bitcoin just had another crash. No. I know. Not again. I'm sorry to hurt your feelings, Dave. Oh, I hate it when I'm right. Do you? Not really. That was sarcasm.

I sensed a little bit of that. I actually don't want anybody to lose money. No. I'm not wishing for someone to get hurt. That is the truth. I'm really not. But it's the crypto bros who think Dave's out of touch. And they have been wearing me out, too. So, giving me giving me a hard time like i'm an idiot all over social media because you know once

you join the crypto bandwagon you're like oh yeah you know it's just it's like you've we talked about this at the building wealth event dave the people who are into crypto are really into crypto they're obsessed they're trying to sell all their buddies on crypto and so we came to the conclusion that cryptocurrency is just mary kay for young men but you don't get the pink cadillac that's upsetting no pink cadillac maybe in the metaverse they have a digital version a virtual you can get an nft of a cadillac yeah get a picture of it you don't really have a cadillac well it's a virtual i know but you don't really have one i'm just saying virtual means not really the next thing dave this is if i virtually send my wife flowers on the anniversary i don't get anything i'm just saying she's not gonna like this it's not gonna be a happy day at ramsey okay i virtually

sent you flowers darling that means i almost did it yeah i think the next trend is going to be nft timeshares it's a sense of ownership of a sense of ownership in the metaverse you buy the time share so we can both live next to snoop dog for one weekend at a time this is not a far future dave i think i'm a i'm a fortune teller oh this is a redundancy, redundancy department. We're losing our minds. Oh, we're going to get an NFT timeshare, a sense of ownership of a sense of ownership. That's how that works. That is what the timeshare people tell you. You have a sense of ownership, which means you don't really have ownership, but you kind of can get a whiff of it.

Yes, a whiff. I like that. A whiff. Oh, man. This is the culture. This is what we're up against, Dave. Lord Jesus, help us. You're going to do an NFT timeshare next door to Snoop Dogg.

I lose brain cells every time I read headlines like that. Well, if you were next door to Snoop Dogg, you might be. That's true. Can you get secondhand smoke in the metaverse? I'm going to like that. Well, if you were next door to Snoop Dogg, you might be last for yourself, too. Can you get secondhand smoke in the metaverse? I'm going to Google that. Can I get virtual secondhand? That is a Google search waiting to happen.

What a time to be alive. Did you ever think in your lifetime this would be a reality? Because you've seen a lot of stupid stuff in your day over 30 years. But it's getting out of control, even for you. Hey, man. I mean, no. No, I didn't have any idea. I actually didn't think the internet was going to work. You were one of those.

You went, oh, this is a fad. It's like, you want to spend $5,000 and build a website? What? This is when it was first starting you know with dial up all right 14-4 hook up right i remember those days i wore out those aol free trial you got that internet yeah yeah i got that internet and you had to either use the phone or use the internet see i'm not that not that young, guys. It's like your fax. Yeah.

You could fax stuff. I walked up both ways. Yeah, man. When I got in the real estate business in 1978, we had these things called fax machines. We were members of ERA, Electronic Realty Associates. We would send over this magic machine black and white pictures of a listing in another city. And it would print off. It took it about four minutes to print one page.

And it was an electronic transfer. And people were buying real estate based off of that? No, they would agree to come look at that piece of real estate with you. They were not dumb enough to buy it off of that. That's what's happening today. The dumb enough to buy it off of that that's what's happening dumb enough to buy it off of that happened later and they're coming from other cities where they're so desperate to buy a house i haven't even seen it i'll buy it sight unseen no inspection no appraisal don't care hundred thousand over asking yeah yeah i'm gonna i'm just in a bidding war oh we've lost our minds uh yeah Do they teach critical thinking still in school?

There's no class on that, right? No, we don't teach thinking anywhere in the United States. We don't think anymore. You see, we used to have, like, arguments and debates because we didn't have Google to solve it. You can't have a good fight now because somebody Googles the answer. It's me. He's talking about me. You and Rachel are fighting, and I go, guys, it was 2018.

We were having fun arguing. Why did you have to go and ruin it? Because Rachel and I do have fun arguing. So if you want to be a newly minted millionaire, according to this article, it is backing up the details that are in the book Baby Steps Millionaires and in the study that is outlined in the back of the book Baby Steps Millionaires. Now, if you want to be a billionaire it's a different formula you will not become a billionaire with your 401k it's mathematically impossible but a billion is 1 000 million it's a lot of millions so just in case you were wondering

you're one thousandth of a billionaire when you're a millionaire. Wow. You're just a peon. You're not even close at that point. Yeah, you're just a peon. But you can have a great life as a millionaire. You don't need to be a billionaire. That's the good news.

A greater life than if you don't. There it is. Perspective. That's what we needed. There we go. Thank you for using your critical thinking skills. You still have a few brain cells left, Dave. Turns out.

I'm worried about this sense of ownership of a sense of ownership next to Snoop Dogg with secondhand virtual smoke. I'm just worried about this whole line of thinking, George, has got me upset. Well, the only way to make money there is if you're the one selling it. So get to selling some NFTs, Dave. I'm going to have to. Hard pass. Hard pass. Hard pass. There you go.

This is The Ramsey personality is my co-host today here on the Ramsey show. David is with us in Rock Springs, Wyoming. Hi, David. How are you? Doing well. How about you? Doing well. How about yourself? Better than I deserve. What's up?

So I'm about $40,000 in debt. I was on Baby Step 2. I have about 15 of that in collections between credit cards and medical bills. I own a truck. I own a truck. I own a motorcycle. I'm wondering if I should attack the stuff in collections first or the stuff that I got current first. Are you paying payments on the things in collections? I am not.

I just recently started the job. I put about $9, grand towards getting current on things that things that didn't go in collections yet yeah good um i'm smart i've been asking i've been asking for proof of debt uh you know these things in writing but uh waiting to hear back yeah uh what kind of debt is the 15 000 worth that is in collections it's about five different credit cards uh ranging from a thousand dollars to five thousand dollars and then a medical bill at about 2500 and how long have you been since you paid on them oh it's been it's been a year okay i was out of work for over a year all right what we

usually recommend is that you do two debt snowballs that snowball number one is the things you are making payments on not the 15 000 okay so you list those things the car the motorcycle whatever smallest to largest and you're telling me you got about 25 000 of that yes what's your income uh new job but it's going to be probably about 90 to 100 okay you're single yes sir okay all right so making 100 000 how fast do you pay off 25 000 oh six months is what i'm hoping i was hoping to have this whole there you go i started at 50 i was hoping for one year yep uh had a couple wrenches thrown in it had a truck stolen and found out i have to move for this new job okay but so so six months from now six or seven months from now,

you will have plowed through your baby step one, and you do that smallest to largest, right, George? Yes. And the motorcycle, could you sell that? Is it worth anything? Man, it's going to hurt me. I can't do that. For my sanity, I can't't what kind of bike what kind of

bike is it uh harley ultra classic okay and uh what's it worth it is worth probably 12 000 okay uh i owe about i think i owe about nine on it all right well i'd start on would start without selling it then, but I'm with George. You could step up and do that at some point. You may choose to do that later. We'll leave that up to you, okay? Now, once your debt snowball, the first $25,000, smallest to largest, is cleared, you're starting to see the point now you don't have any payments. Yep.

Okay. Now, when you don't have any payments, then we're going to take big chunks of money and start saving. Now, we're going to list the $15,000, and you said it's like five or six different debts, right? Yes, sir. I'm going to list those smallest to largest. I'm going to call the small one. What is the smallest one? It's probably $500, $600.

Okay. I'm going to call them anything under a thousand i'm just going to get verification of the amount in writing and send them a check okay and so if you call them up and they say it's five hundred five hundred and four dollars they send me an email for that as a final payment and i will pay it this week okay no electronic access to your checking account now if you if you think it's five or six hundred dollars and you call them up and it's fifteen hundred dollars because they've added a bunch of collections fees and late charges and other stuff then you go uh we want to settle this for 500 what you originally owed right and you begin to begin a negotiation an argument with brain damaged people which will Right. We're going to keep arguing with it until we get it settled down to close to the original amount owed or a little less. They will negotiate down on a year-old debt, believe me.

Especially that medical debt, too. Yes. That one you should be able to negotiate down. And if they go, hey, is that $2,500? Are we willing to take $1,200? Do it. Right. So it's going to be a part-time job.

In every case. What are we doing? No access to the checking account, of course, and get everything in writing. That's the key here. But this is going to be a part-time job for you. I mean, this is going to be a little fight to the finish. But once you're done with that, man, you're never going to look back. You're never going to touch debt again.

And the reason we pay off the other $25,000 first is it gives you more money, since you don't have any payments after that, to be able to attack the stuff that's in collections. The stuff that's in collections feels like it's more urgent because it's behind, but you're not paying payments on it. So you get no cash flow benefit when you clear it. You just cleared it. But when you pay off the motorcycle, you get a cash flow benefit because you don't have the payment anymore.

Yeah. And it helps you move forward in the thing. So we knock out the things with payments first, and then we go do the ones that are in collections. And the good news is you're going to be done with all of it within a year. You'll be done in a year. But you're going to live on beans and rice, rice and beans, and that's if you keep the motorcycle.

That's right. I just like accelerating any plan that is painful, but clearly that motorcycle is going to cause them more pain to get rid of than the debt payoff. So that's your choice. Yep. Danny's with us in New York. Hi, Danny. Welcome to The Ramsey Show. Hi, Dave. How are you doing? Thanks for taking my call. I appreciate it. Sure. How can we help? I've been watching lots of your videos, and I have a high school senior who's looking to go to a school for physical therapy.

And I've watched a lot of your videos about the student debt crisis and all that. My wife and I have saved up enough to send him to his undergrad. He's looking to go to a private university. He offers physical therapy doctorate program. It's a six-year program. What me and my wife feel is that this entire process has been very rushed for him. It was a very last minute decision to attend this university and has left him kind of with no other choices. How could I, in your opinion, how could I explain it to him in a way that he understands how it will affect his future having to take out student loans for his doctorate degree?

Which could probably amass to around $130,000 to $140,000. Yeah. Without him resenting me saying that you couldn't go away or I didn't let him go. It's not that I don't want him to go away because he's a great student, great kid, no issues. I believe he'll probably be very successful at it. But there are cheaper alternatives where where i listen to pay for his entire let me tell you how many people ask where your physical therapist went to school none yeah i've heard you say that too

nobody why does he want to do the doctorate program you want to be a pt you have to get a doctorate now. Okay. Yeah, so the particular university that he's been accepted to offer him is like a 40% scholarship. 40% of too much is still too much. No, I agree with that. Yeah, so here's the thing. I'm going to put my arm around him and I'm going to say, look, here's the thing.

Where you go to school to be a PT and live your dream doesn't matter. Overpaying for your dream is going to turn it into a nightmare going into debt for your dream is going to turn your dream into a nightmare paying double or triple to become a pt at one place versus paying one third to be at it's ridiculous why because where you went to school 99.9 percent of the jobs don't give a rip the only people that care are the snobby people that went to those schools that you play golf with they're the only ones that care where you went to school and they don't pay you any money right they're not a customer and they're not a boss it's a flex that's what it is at that point so i'm not doing that what i would do is sit down with them and we'll gift you a promo code to watch borrowed future because i know you're in on

this but it doesn't sound like he's aware and so we got to make him aware of what the whole reality of the situation is so 88 minutes of your time kelly will pick up we'll get you a promo code for that sit down and watch that with him. Have a discussion. Here's the thing. There's three things you get when you go to school. An education, an experience, and the prestige of where you went to school. The experience and the prestige are worth zero. Don't pay $200,000 a year to play beer pong. That's a dumb butt move.

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