The Ramsey Show - App - The Dirty Little Secret Behind Credit Card Rewards (Hour 2)

Episode Date: March 17, 2023

Dr. John Delony & George Kamel answer your questions and discuss: "Should I save up for a down payment or pay for a house in cash?" The truth behind credit card reward points, "How do I best prepare for my future family?" "I have $230k in undergrad student loan debt", "I'm having a hard time emptying our savings to pay off debts" "We have rental properties but no retirement" 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 Pods Moving and Storage Studio, it's the Ramsey Show, live from Franklin, Tennessee, where we help people build wealth, do work they love, and create incredible relationships. I'm John Deloney, joined here by one of the greatest humans who's ever lived, George Camel, and we are taking your calls on life, money, relationships, marriage, whatever you got going on, we probably have an

opinion. Give us a buzz at 888-825-5225. The call is completely free, 888-825-5225 we're not supposed to talk about him but let's go out to bruno in lincoln what's up bruno bruno how sick are you of that hey what's up how's up guys how are you good hey are you sick of the uh don't talk about bruno jokes because i'm just going to keep making them oh yeah yeah i hear that a lot hey my, my name rhymes with a bad lunch meet, so same team. All right, so what's up, dude? My question is, is it better to save only for a 20% down payment to go ahead and purchase a house or maybe wait for the next five years and then buy the house cash? Okay, so walk us through the situation. So you're debt-free with an emergency

fund, and now you're looking to become a homeowner, and you're saying, hey, in five years, I could pay cash for a $300,000, $400,000 home? Is that the idea? Yeah, I'm looking at $250,000, $300,000. Yeah, that's the range. Okay. And it would take you five years to do this based on your current income? Yes. All right. Yes, you're correct. Here's the way I look at this, and John may have a different opinion. I get worried about waiting five years because we saw what the housing market did the last five years. And so the house that you're looking at that's 250 today could be 400 five years from now. And all of a sudden you're so excited, you save 250 and now you're still 150 shy. You see what I'm saying?

So it's a moving goalpost. And so what I like to do is just using the Ramsey parameter, saying, hey, if I did a 15-year fixed rate where the payment was no more than a quarter of my take-home pay, what would it take to get there? And that number may be 25% down. It may be 40% down. But I don't know that I would personally wait five years to become a homeowner if you're financially ready. I see. Yeah. Okay. It's an awesome goal to have. Because you're also paying rent too on top of it.

Yeah, yeah. I would say we're not paying like a huge amount for rent. It's only $1,300. We're fine where we are. And it's kind of a tough decision because whenever I'm thinking on interest rate, how much am I going to be paying interest, even if I pay principal early? But here's the thing, Bruno. Number one, you can always refinance later. Let's say the rates magically drop back to 3% or all high-fiving. You can always refinance later. And number two, your goal should be to pay off that house as soon as possible, which is going to save you probably six figures in interest. So if you pay that house off, let's say you bought it in the next year and you took the next four years to pay it off. Well, now you only paid five years of interest instead of what

people normally pay, which is 30 years of interest at a higher rate. So crunch the numbers. And I still think it's an awesome goal to pay cash, but generally we'd say, Hey, if you can't save up and pay cash for it within a few years, it's just a long time to wait while the housing market keeps appreciating and shifting. I see. Okay. And let's say if I go ahead, even though I can pay early, is it better to come up with a 30 years mortgage or a 15 years? No, 15 only. And then you'd be about the business of paying that thing off like a five year, seven year loan.

Okay. And you'll be better off that way because you'll be building equity. You're basically locking in that housing price and then building equity and paying that thing off very quickly. Bruno, are you married? Yes, I'm married. Is she sweating you down for a house? Yeah. I could say'm married. Is she sweating you down for a house? Yeah. I could say it again. Is she sweating you down for a house?

No, I haven't. That's what happened. My wife just started working and now we finally, we can breathe financially and then we can start building up the saving account so we can start looking at a house. Love it. Yeah. I foresee in one year and a half we'll be able to save enough for a 30% or a 40%. That's incredible. That's my question. Yeah, dude. That's awesome.

Yeah. I've been waiting my entire life to that, and finally we got to the point that we're very thankful for what happened to our lives. So, yeah. Dude, I'm so proud of you, man. You guys are in a great spot. And let me just say it's a fantastic goal to pay cash for a house. That's the way we would always recommend it if we could.

But we live in a fallen world. And so the only debt we won't yell at you for is a 15-year fixed rate loan. Let me make that clear. I thought Dave said debt's bad. It is. We don't like it. But we understand that in today's world, if we said you can only pay cash for a house we would have zero listeners left on the show these people are insane that's right all right let's go out to jason in pennsylvania what's up jason uh good afternoon

guys how are you great how are you man not too bad so quick question i'm going through some of the steps that you guys put out there and right right now I'm sitting around $45,000 in debt. That will be paid off in a maximum of four years with, if I continue doing the payment, but I also have $65,000 in classes. The capital gain would be 15,000. Or the capital gain tax, I would say, on it, roughly $2,500. Okay. Does it make sense to sell off that stock to eliminate that debt?

It makes perfect sense. I would do it yesterday. All right. And I've done this, Jason. When I was in debt, I had a few stocks from Apple, not nearly what you have, but it helped me pay off debt, and I've never looked back. And you can look at the numbers and go, well, what the stock would have been. But, man, single stocks, number one, are super volatile,

and that money is way better spent freeing you up instead of doing this for the next four years. Yeah, I would definitely save money on interest. Yeah. Yeah, I'm 100 george any stocks i'd sell them and get them out set aside the money for those taxes but man 2 500 bucks in taxes to be debt free today and still have almost 20 grand left over done that's your emergency fund too i mean you just get baby steps one two and three just leap frog that's right hey um before we head into commercial break it means a lot to people who

have no idea who we are when they are scrolling around on youtube and you have hit the subscribe button you've left a five-star review it pops up in their feed it sends this thing up into the magical wizard algorithms and it gets the show in front of more people who are sitting at home with their face in their hands and little kids running around. They don't know how they're going to pay their bills. Not asking for money, not asking for all the buying of us. Like what we're asking you to do is hit the subscribe button. It doesn't make us, it doesn't give us any more money.

It doesn't make us all feel better. It puts the show in front of other people. It's a zero cost way for you to help out your neighbors and to begin to take into our own hands this financial mess that our country is in. There is not going to be a savior on a white horse on this one. We're going to have to decide as neighbors how to do this. And if you've always wondered, why don't more people just do the Dave Ramsey play? A lot of people don't know about it. And so if you hit the subscribe button, if you hit, go to Spotify, go to Apple, hit the subscribe button. If you leave your five-star reviews, it just kicks it up and puts the show in front of more people.

And it's more people that can get help. And George, I've never in my life would have imagined that I was asking people to hit the subscribe button. Yeah, generally you're doing it for validation. This is out of very pure motives and intentions that he really just wants impact. Exactly. So that's growth, John. I'm proud of you. It's such an easy way to help out your neighbor these days.

It really is. Hit subscribe. Hey, this is The Ramsey Show, 888-825-5225. We'll be right back. 888-825-5225. This is The Ramsey Show. I'm John Deloney, joined here by George Kemmel. We're taking your calls on your mental health, your marriage, your money,

whatever's going on in your life, give us a shout. 888-825-5225. And George, I am usually not correct, but this time I was. Whoa. This time I was. Does your wife know about this? She does not. She's going to be ecstatic.

I'm going to keep it to myself. I need to put this one in my back pocket just in case I need it at a later date. Because usually, as the great social distortion said, I am wrong. Okay, so New York Times comes out a couple days ago. The New York Times, the dirty little secret of credit card reward programs. Wow. Now, for years, I've been saying they work they absolutely do work and people always call us and like oh you're telling me that you don't take free flights and they for

sure do if you're just swiping the card i got a buddy who puts a hundred percent of his life on these cards everything on the card so that and he pays off every month and he just does it for the for the free free miles or free whatever. Sure. That's a real thing that happens. Now, most people don't pay it off every month and they're like, no, I was just going too broke. And they don't, but fair enough. There are people who do. And my buddies were always surprised that I didn't participate. And it wasn't me trying to take a moral high ground or anything like that, but I didn't want to participate in this program because I knew that these credit card companies are not my friend. They don't like me. They're not hooking me up

because I'm hooking them up. It's not like, yeah, bro, let's do this. We're in this together. I'll buy some stuff. You give me free flights. That's not how it works. Somebody is paying for my flights. And as I dug into it a few years ago, it appeared to me that the single mom with three kids who can't float the price of eggs and the increase in gas prices and the natural gas prices, she was paying for my flights because she was having to put this stuff on a credit card conceivably to survive. And so my free flights were being paid for by people who had way less and were struggling to make it. And turns out I was right. Turned into studies and data.

That's incredible. This is wild. Okay. Tell us about this. Okay. So the, you know, it goes on to talk about, hey, you're these swipes you're using to get first-class airfare and trips and all your awards. It's not from nothing. The credit card perks for educated, usually urban pros are subsidized by people who have less. So poor consumers are ultimately footing the bill. And in 2022, the Federal Reserve data showed that the cost of rewards as a share of total transaction volume on these credit cards

increased 25% from 2015 through 2021. And so what's interesting, John, is the data was so clear in this study. It showed that $15 billion in reward value moved from the poor to the rich, from the unsophisticated folks who couldn't pay their bills on time to the affluent wealthy. And normal people go, well, yeah, that's how the system is set up, John. So I'm just going to take advantage of that. Why would I not? But here's what's wild. A lot of the people that come at us going, John's, I can't believe John's trying to use this moral angle to say that it's not coming from people who have less than it's coming from swipe fees from the businesses and interchange fees and my annual fees. But I looked at capital ones. They put

their shareholder reports out every year. And in Q4 of 2022 it turns out that two-thirds of their credit card revenue came from interest and fees not from the interchange not from the other fees interest so two-thirds is blood diamond money yeah and let's also it's also easy to to get on on a high horse and say well they're just making dumb purchases and they don't know. If you've ever spent some time with people on the margins, so many don't know, right? They haven't been told. They're just trying to claw their way out of the world that they found themselves in. And they don't know that it's not normal to roll fees over like this. They don't know that a 30% APR isn't just the price of doing life these days and so i i don't know how people can look in the mirror and say you know what i'm comfortable with a

single mom trying to just trying to scratch through life with her buying my flights because they're free now like i just can't wrap my head around it george and the other problem is we're all paying for this through the increased cost of goods. The United States has some of the highest credit card processing costs in the world, typically 2% to 2.25% on every purchase. And so the merchants, the businesses, the small businesses, they have to pass these costs on to the consumers by charging more for the products, regardless of how you pay. And you see some of the local merchants that will say,

here's the price if you play with the card. Here's the cash price. It's less. And, George, I'm sure it's happened to you more because you're out in the world more than I am. That's true. But I had my first exchange the other day where I was at a place. I was traveling at a speaking event, and I was out on the road, and they said, we don't take cash here. Whoa.

And it was like, I'm not going to do business with you. Just on principle, I'm just not going to do business with you. Wow. Well, the data is clear here, John. Lower income consumers are forced to pay higher prices on the goods they buy, but they rarely receive any benefit from rewards programs, according to the Federal Reserve. And so it's been tracking all of this. And so to put it another way, they say credit card rewards are essentially a tax on less affluent consumers who are much more likely to pay for the goods with cash, debit cards, or standard credit products that accrue no such rewards. So, you know, you have a lot of – people have a lot of opinions about this. But across the aisle politically, I mean, NPR and Vox and New York Times, they're covering the same thing going, hey, this is an innocent. Yeah. Someone is paying for this, and it's either the small business owner or the single mom,

but you can't act like this is just an innocent, I'm just going to reap the rewards. Your free vacation came from somewhere, and we have to at least acknowledge that. That's right. And God bless you if you can sleep at night knowing that I pay my bills, I do my thing. I mean, if your conscience can carry that weight, more power to you. And even if you don't have a conscience, every single piece of data shows that you spend more when you use a credit card. Right. Every piece of data.

So regardless, if you're saying, hey, I'm going to use my card for everything to get these rewards, the chances are you overspent to where the rewards were negligible. Right. You maybe got $1,000 in rewards. You spent more than $1,000 than you were if you were going to use a debit card on a budget or using cash. So to me, the cornerstone rule is opt out of the system. Just opt out, man. This is like Matrix-style stuff, but just opt out of the system. I haven't had a credit card in 10 years, and I can unequivocally say my life has been better for it.

No question about it. Not once have I wondered, well, they've got 5% cash back on restaurants this month. So I'm going to switch the card. I was hanging out with some guys the other night. They're all personal finance, influencer type guys. And they're all showing me their different cards. And this one's made of three inches of metal and I get this much rewards. And I'm like, guys, you make millions of dollars. How much money do you get back in rewards? They were like, I probably get two grand worth of value. I went, so you're playing this game for two grand worth of value, you make millions of dollars. How much money do you get back in rewards? They were like, I probably get two grand worth of value. I went, so you're playing this game for two grand worth of value,

and you make millions. Yeah. Why? Yeah, exactly. It's a crazy, I mean, when you put it that way, you go, is it worth? It's like real life Dungeons and Dragons. You're getting paid $200 a month to overspend and play this game and support this system.

Yeah. It's just not worth it for me. I'm out. I'm out. I opt out of the system. I opt out of the system. All right, let's go to Silas in Nashville down the street. What's up, Silas?

How we doing, brother? I'm doing good. How are you guys doing? Excellent. What's up, man? How can we help? Okay, so I'm 18 years old, and I just got a job making about $75,000 a year.

Wow, congratulations. What are you doing, man? Thank you about $75,000 a year. Wow. Congratulations. What are you doing, man? Thank you. I'm working on wind turbines. Excellent. No college degree needed. No, not 75 grand a year. And it's all paid for. Very cool. All right. Hey, we're up against the clock. Get right to your question, brother. So, um, I'm really trying to look in a way to save for my kids so that I can take off work. I don't have any kids yet. I don't even have a girlfriend, but I plan on having kids in the future. And I want the first five years or so, me being able to spend a majority of time,

because studies show that that's really important, spending time with your kids at that age. So I want to create a short-term savings account for five to 10 years in the future, but I can't find really good rates on it. Like it's usually like 3% for a bank. And so I was just curious what you guys thought of like short-term savings, where should I put that money? I don't know that savings is the best route to do this. What you're essentially saying is I want to be a stay-at-home dad for five to ten years. And I don't want my spouse to work either? Yeah.

Is that the idea? For five years. Yeah, for five years, yeah. I mean, you might be better off looking at some kind of passive income. It's not passive in the sense that it won't take work. But it may be tough to save up, you know, $400,000 to live off of for ten years in the next five years. So you can save aggressively. A high-yield savings account is good. Five years or longer, you can invest it into the market.

But also live your life, man. Yeah, and you might have read some research, but having one of the parents working full-time does not negatively correlate childhood development. So I don't know what studies you're reading, but that's not accurate. This is The Ramsey Show. What is up? What is up? This is The Ramsey Show, 888-825-5225. I'm John Deloney, joined here by George Camel, and we are saving the world. Listen, a lot of you have questions about taxes. We get it. Taxes are confusing. I think

they're intentionally confusing. That's another podcast. To help you get a better handle on them, let's unpack a question from one of our listeners. I'm looking into Ramsey Smart Tax and want to know if it offers forms and online filing for state tax returns. Is it as simple to use as TurboTax? Great question. Yes, you can add a state return if you need one, or you can just move to Texas or Tennessee. All the information on your federal return is automatically transferred to your state forms. It could not be much simpler than that. Ramsey Tax is easy to use and gives you access to all major federal forms and deductions without any upcharges. George, this year I got a tax person for the first time ever,

but the last few years I've just used Ramsey Tax at my kitchen table, and it is so easy. I'm just knocking it out right there. I actually like doing it at home because I like my kids watching. They get to ask questions and see it. What's this for me? What's this for me? They get to punch in some numbers too for fun.

I don't let them touch the numbers, but I do let them know this is how confusing the government makes it just to exist. When you switch from another software, Ramsey tax can save you up to 70%. Plus we won't offer you loans or credit cards. Most tax programs are designed just to get you in the door, free tax, free tax, so that they can sell you a bunch of crap. We're not going to do that. We're not going to put you into debt. That's not how we do things here at Ramsey. If you're ready to file, head to RamseySolutions.com slash SmartTax. It's just $24.95 right now to file a federal return, $39.95 for a state return. That's RamseySolutions.com slash SmartTax.

All right, let's go out to Mackenzie in Orlando, Florida. What's up, Mackenzie? Hi, how are you? Great, how are you? I'm really glad to be talking to you guys. We're here to save the day. What's up? So I'm 25 years old.

I have an overwhelming amount of undergraduate debt, and I'm at a point in my life where I'm hoping to be buying a house or something, but I know that the advice is to lower the debt before buying a house. Correct. Yeah. How bad is this overwhelming debt? It's $235,000. Ouch.

Wow, that is a box of farts on a pony, Mackenzie. How, like, what did you study? I studied electrical engineering. Okay. Did you do a special electrical engineering, like the secret underground kind? No, just the standard one, unfortunately. You just did it at 60 grand a year. So I just took a little longer.

I'm a first-generation college student, and I kind of, you know, there's a bunch of reasons, but I didn't really feel like I had like the toolbox starting out and took me a while to kind of get into the groove of things. Sure. So what are you doing now? I'm an engineer. Good. That's a good start. What are you making? I make about 70,000. Okay. And what other debt do you have outside of the 235? I have no other. I mean, I have about a thousand dollars on a credit card, but. Okay. Well, A1, let's pay that off and cut up the card. That'll cut that crutch out of our life and help us get rid of this debt. So are you calling to figure out how best to pay off the debt? Yeah, I guess I'm looking at two options,

kind of waiting for that 20-year forgiveness or just paying it down as quick as possible. Do you hear what you just, just the idea of like, well, one option is waiting 20 years. Not my favorite. No, terrible option. The better option is for you to take control of this and get rid of this in way under 20 years, and you can do it. So the $235,000, I'm assuming it's made up of a bunch of smaller loans? I have about $30,000 in private, and the rest is all federal. Okay, but they're made up of a ton of loans. There's like a dozen or more loans involved here?

Or is it a few big ones? It's a bunch of small ones, yes. Okay, so here's what to do to help you have some peace about this. Instead of staring at the mountain, let's break this up into little chunks. So lay them all out from smallest to largest, and we're going to start attacking the small one first. That's baby step two. Baby step one, $1,000 in the bank.

I assume you have that already? I do. How much other money do you have sitting around that's liquid? That's liquid maybe maybe seven grand. Great. That's going to knock out the credit card and probably one of the smallest student loans, the next smallest one? Yeah, I could see that.

Boom. We already have some progress, don't we, Mackenzie? We didn't need Biden. Yeah. Listen, Mackenzie, here's the uncomfortable truth about the situation you're in is a big old hole and there is not going to be some knight on a white horse coming to save you on this one there's just not and so all george and i were talking about this earlier off air. There is this moment when I want something else to be true so bad. And this can be any number of things.

This could be like, I wanted my dad to live forever and he passed away. I wanted this relationship with my romantic partner to go forever. And they stepped out on me. Like these things, this happens all throughout our life. And the, we got to grieve this thing that we hoped for, that we wanted to happen, that didn't happen.

And then we have to ask ourselves, okay, what are we going to do next? Because most of the time, nobody's coming to rescue us. And so you saying, I am an electrical engineer. I'm a first gen student. What that means to me is that I've worked with first-gen students my entire career. Here's what I know about you. You are really, really smart, right? Thank you.

No, no, no. I'm not just blowing smoke at you. You're a first-gen electrical engineering student. You are very smart, correct? Sometimes. Except when it comes to the loans you took out. You looked around your classes, and your classmates were mostly dumber than you, correct? I know this is a fact, right?

I don't know. Yes, you do. She's so humble. Exactly. You are correct, and I think that you're being underpaid. I think you can make more money than $70,000. You might not be at the most comfortable firm right now, or you might like,

I really want to be doing these kind of buildings instead of these kinds of buildings. Right now, we're going to take a few years and we're going to go for money. We're going to work really hard to make a great salary, and we're going to get this thing paid off. And I'm telling you, from a guy that has six figures of student loan debt myself, on the other side of this, you will be an unstoppable force in anything you do. You get what I'm saying? Because here's what I think. I think there's some shame wrapped up in this. Like, how can I be so smart and so dumb at the same time?

And I want you to put that down. The whole system preys on first-gen students. There absolutely is some shame. So, yeah, you're speaking correctly. You know what mckenzie the good news is you are among 43 million other people who feel the same way so you're not even special yeah you're not even a snowflake like we all call it right so there's a lot of people in this together the difference is you're gonna be the one who gets out and doesn't wait on someone else to

save the day and make no mistake this will be awful your friends are gonna be buying fancy cars and you're going to be in the same stupid car. And you're still not going to have a home two or three years from now because you're still going to be paying this off. And all of your family who didn't go to college is going to be like, McKenzie, you did all this work. Why aren't you buying this? And why aren't you dressed like this? Because they have a picture of success that is not based in reality. And they're not the ones paying your student loan bills. That's right. So they don't get a say.

Will you commit to this in front of a couple, I don't know, 10, 15 million people? Will you commit, I'm done with this, I'm going to knock it out? Absolutely, yes. Dude, we will walk with you every step of the way. I want you to hang on the line. I'm going to send you a copy of, we're going to send you a bunch of stuff. I'm going to send you a copy of Total Money Makeover, the book, and we're going to put you in Financial Peace University and give you a year subscription

to every dollar. And it's the premium budgeting app that we all use. It's just, it's first class, it's the best there is. And it's going to teach you the step by step by step process on how to get out of this thing forever. And as a first-gen student who's just now making big money, I mean, you're going to be first-gen in a lot of different stages here. And so this program is going to help you not only get out of debt, but build wealth on the back end too. And we're going to walk with you every step of the way. In about six months, you're going to get really frustrated

because you're going to have been working really hard, and this number is still going to be big. I want you to call us back, and we will give you another pep talk, or wherever you get stuck, we'll be here to help you along the way But this is gonna be getting roommates getting a side job Getting a different job that pays more for your full-time gig cutting your expenses down to nothing But then you're gonna be able to throw 30 40 grand at this debt and all of a sudden you see the light of near The Sun oh you go three years from now four years from now five years from now

I'm completely debt free and then we can look at home ownership down the road. And in four years of McKenzie, who has worked her way through electrical engineering school and has paid off all her debt, there's literally no stopping her. No. And go watch Borrowed Future if you want to know why John and I are so riled up about this. Delayed dreams are on the other side of student loans.

And that is why we're angry at them. You can rise above it. This is The Ramsey Show. We'll be right back. This is The Ramsey Show. We'll be right back. This is The Ramsey Show, 888-825-5225. The Ramsey Show question of the day is sponsored by Neighborly, your hub for home services. From repairs and maintenance to remodeling and upgrades, Neighborly's trusted home service providers have trained local experts who can handle just about any job.

So go to neighborly.com to find and schedule service today. Dude, I just wear out our maintenance guys here at the building. Winston and those guys are like, hey, I need a contractor. I need a deck person. You got a roofer person? Neighborly. Saves the day. They've got it all, man.

DIY, more like DIY. Just hire a guy. Yeah, right. That's their's their tag i'm just pitching taglines for them i don't think they want that one i don't think that one's free no okay here's here's the question of the day comes from chris in the ramsey baby steps community we are on baby step two and i'm having a hard time emptying our savings aside from the thousand bucks to pay down debt as our emergencies are never less than $1,000. Just trying to get over this mental hump. I feel like I will be forced to charge something like a car repair or furnace, which just happened. Then we will be thrown back so far.

I'm just really scared. I think that's the place to focus. This is more mental and emotional than it is financial. Correct. It's almost entirely um and as my friend dr lane norton says data is more important than feelings a lot of the times right so it's easy to look back and go all these repairs cost this much money be honest with yourself and they they usually don't a couple a couple times they do i've had to replace a roof i had to replace you know part of a car like They can be expensive. Most of the time they're not. And

George, you can tell me if I'm wrong, but they're not designed for that. This is designed to light a fire under you to get you running and gunning. Absolutely. It's not meant to cover the big emergencies. That's why we call it a starter emergency fund and baby step one. And here's the truth. If an emergency happened, what would you do if you had $1,000 and it was a $1,500 emergency? Well, you'd pause the baby steps. You'd pause it and you'd stack up cash as fast as you could in order to cover it. And then you're back on the wagon. The problem is right now you feel like you're safe even though you owe lenders a whole bunch of money.

That's the confusing part to me is like, if you wanted safety so badly, why are you sitting there with money in the bank while owing people money? To me, true safety, true freedom comes on the other side of being completely debt-free and not owing anyone anything. To where if everything went down, and I know, John, you like to think about this scenario.

I got to play it, man. Owing no one anything is the best way to go. It's just total freedom. That's right. It's total freedom. I don't want the government telling me what's it, man. Owing no one anything is the best way to go. It's just total freedom. That's right. It's total freedom. I don't want the government telling me what's it. Stop owing people money. I don't want my boss.

Stop owing people money. Right? It's super simple. You have more options. And so. On Saturday, you're coming in at 8 o'clock. Actually, no, I'm not. I'm actually not coming at 8 o'clock.

I've got other stuff with my family. And you can make that choice. You don't owe anybody any money. Right? That's right. So it's just total freedom. So you can do this. Again, I like being a little bit scared

because it fuels me to get rid of this debt once and for all and stop playing the game. And it takes something that drastic in order to get there. And Chris, let me affirm you. I work here. And $1,000 in a savings account, I would not be able to sleep. I would be so terrified. I got two little kids. I got a wife. I wouldn't be able to breathe. And that's kind of the point. I would be so paranoid that I would be delivering pizzas at night and driving people

Ubering before work in the morning. I would be so maniacal about getting this thing knocked out so that I could get this savings account up. And that is the point. Most people don't take us seriously when we say gazelle intense. That's an animal running for its life because it's about to be ripped apart and torn apart and eaten and killed. And that's the level of intense that we want people to have. And so I'm with you, Chris. If I had a thousand bucks in a savings account and that was it, I would not be able to breathe. And that's the point. That's the point. So let this fear drive you to none of us are eating out. Nobody's getting new shoes. None of us are going to the movies. We're cutting all the subscriptions. We're getting rid of everything

so we can get this crap done so that mama and dad can sleep again. That's right. All right, let's go out to Marissa in Richmond. What's up, Marissa? How we doing? Hi, how are y'all? Great, how are you? Good. What's up? I had a question about, I'm 53 and my husband's 54,

and we did Financial Peace University about 15 years ago. But now our kids have finished college and we're just trying to figure out what to do. So we don't have very much money in retirement. We only have about $90,000 each. And we do have five houses, two of which are paid off, and three we have mortgages on. We rent them all out.

So we're just trying to decide, should we try to pay off the mortgages or should we throw money into our IRAs and do that make up and put as much away as we can for that? Okay. So you're essentially using these rental homes as a replacement for your 401k currently? Yeah, that was right the intent yes and that can work what's the net profit of these properties currently per year um well they let's see i didn't write that down on my list that's so great george she's like do that tonight that's some good homework for you but here's why i ask my hunch my hunch is that you should sell one of these your least favorite rental property and use it to pay off the others

or sell two of them and pay off the others to where you have you have a fully paid for real estate portfolio to where you get to keep 100 of that profit and it'll lower your expenses and once you do that then I would start shoveling money into retirement accounts, which you have some great catch-up contributions you can make after 50. Right. Yeah. But you don't think, my only hesitation about that is, then is it bad if we don't have the deductions for the rental properties? The deductions are not what's going to save your butts in retirement you're you're stepping over a dollar to pick up a quarter and so that's that's not a like a wealth hack just to use the deductions that you can't live off of that in

retirement what you can live off of is having very little expenses and so you can make six grand a month and be okay because you don't need to cover 10. So that's where I would want to be in retirement is have as few expenses as possible, paid for home, paid for rental property, and a pile of money in investments. I think that's a well-rounded portfolio. Okay. So however you guys want to go about paying off the debt is great, but it sounds like right now you're feeling the pinch with retirement. I would want more cashflow to funnel into retirement, which means getting some of these rental properties, getting rid of the mortgages on them. And George, in some ways, Marissa and her husband just went about this backwards, right? Most people will fund their Roth IRAs, they'll fund another IRA,

and then if they've got money left over, they'll start thinking about buying rental properties. They just went ahead and bought rental properties. And so we're going to sell a couple of them, get clear of the debt. And so they're going to have their primary house, maybe two, maybe three other houses that are completely free and clear of theirs. And then they're going to start backfilling that. Yeah. And some people, I mean, they're clearly very comfortable with real estate, which is awesome. We love real estate. Pretty much Dave's entire portfolio, and he's worth hundreds of millions of dollars, is just real estate and mutual funds. It's that boring and he's that wealthy. So you tell me. He's not at work on Friday. That's all I'm saying.

We're here. What are we doing wrong, John? But it's a great question. And a lot of people are wondering, well, I should get into the real estate investment game. Here's when we tell you that that's a good move. you have a paid for personal residence and you pay cash for investment property that is an insane thing to say in today's world i understand how controversial that is but it's also the right way to do it to reduce risk and maximize your wealth and the question is always would you take a loan against your personal house to buy a rental property nobody would don't tempt america with a good time they might do that it's true that's a great idea i'll take the HELOC, use that as the down payment.

These are the wealth strategies that you find on social media these days. And it's all from real estate bros and permanent life insurance bros who all have a vested interest to get you to do that thing. We don't. We want you to build wealth. Independently, not dependent on if this thing goes right. It's like putting in a parlay bet, man. Like you got to make every shot. What a crazy way to live.

Just enjoy the game. Yeah. So that's the way to do it. And obviously, I'm a big fan of using your retirement accounts. Tax advantage accounts are awesome.

Your 401k, your IRA. You can become a millionaire. You invest a hundred bucks a month from 25 to 65. You're going to be a millionaire. A boring one. A hundred dollars a millionaire. A boring one. $100 a month. A boring one.

So don't feel like you have to do something fancy or like do nothing down on real estate property. You don't have to own real estate investments your whole life. You can have a paid-for house and millions of dollars in the bank. It's a choose-your-own-adventure. Just don't do something stupid. And don't do debt. Stay away from drugs and debt. There you go.

Don't do drugs and don't do debt. That is from drugs and debt. There you go. Don't do drugs and don't do debt. That is the new George Campbell t-shirt. Hey, it's another hour in the books here on The Ramsey Show. I want to thank the guys in the booth. I want to thank you, America, for listening to us. We will be right back right here on The Ramsey Show. Hey, George Camel here. If you love the show and you want a deeper dive on your money journey, we've got a weekly newsletter that gives you helpful articles and tips on following the Ramsey way.

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