The Ramsey Show - App - The Math Behind Paying Cash for Cars (Hour 1)

Episode Date: February 3, 2020

Debt, Retirement, Career Tools to get you started:  Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

🎵 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'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Allie is on the line in Kansas. Hi, Allie. Welcome to the Dave Ramsey Show. Hi, thank you for taking my call. Sure, what's up? Yeah, so my husband and I are a young couple.

We're 23, and we have a one-year-old daughter. We're also a military family. So before being a stay-at-home mom, I was a military service member as well, so we were working on double income, so we had no debt prior. But now that I'm a stay-at-home mom and he's the sole provider, he's still stuck on just focusing on his own, like, debt, his own priorities, rather than the family and our own debt together as a couple. So I don't know how to get him kind of working with me to pay off both of our debt and not just his. Okay.

Well, thank you for your service and thank you to him for his service as well. I think the thing is this. The old marriage vows say for richer, for poorer, in sickness and in health,

unto thee are all my worldly goods I pledge. I'm going to take care of you. You're going to take care of me because we are now one. We are no longer two individuals. That was the message of those marriage vows. The reason for that message is that that's the healthiest way

from a mental health perspective, a relational perspective, a spiritual perspective, to have a good marriage, is to be unified, to be of one mind. And the interesting thing is you can be individuals while still being of one mind and be unified. And then the data in the financial world plays out to verify that in that we find almost no one building wealth over a long period of time where their spouse and them are not on the same page, where they're not unified. And so might say that to him, you know, when we got married, I promised to give you chicken soup if you had the flu. And you promised to take care of me and I promised to take care of you. We are not a joint venture.

We are now a couple coupled together. We are one. And I need you to be my man. He's a manly man. He's a military guy i need you to be my man and walk beside me with me and i will do my part you will do your part and we will be together in this and um but we're not a joint venture if you wanted to be a joint venture we shouldn't have gotten married if you wanted to be separate we shouldn't have been together

so when you say that kind of stuff to him what was it what If he wanted to be separate, we shouldn't have been together. So when you say that kind of stuff to him, what's he going to say? He kind of, he's passive with it, so he just wants to focus on what his is. Yeah, so don't, I mean, so you don't allow him to be passive. I'm not, passive's not going to be okay with me. I don't believe it. No, passive's not going to be okay with me. I'm not passive not passive is not going to be okay with i don't give it now passive is not going to be okay with me i'm not okay with passion i'm not okay with you nodding your head and then doing something else this is me and you talking about our relationship it's about talking about our marriage and we're going to have some real clear conversations about it here because what you're describing um is something and you may need to sit down with a

pastor the chaplain you may need to sit down with a good marriage counselor it won't hurt anything in your young marriage to get some guidance but what you're describing is a young man who got married and didn't think about that what all that meant when he got married. He just thought he was going to have ready access to sex. Yeah, but I've talked to him about getting counseling and he's not for that as well. Well, go. Go without him then. And go see a counselor.

Okay. And get some help. Because this is not going to end well. The trajectory that it's on is not heading in a positive thing it's not like it's going to hit the wall and blow up next week i'm not trying to be melodramatic but i've met you 10 years from now when you're 33 right before you file divorce because you put up with this crap for 10 years and it's gotten worse instead of better yeah because everything is growing or dying it's

either going to start healing and these issues are going to start being dealt with gradually over them it's not perfect god knows when sharon ramsey was married to a 23 year old dave you wouldn't want it to be her okay i made your husband look like a freaking saint so um you know and so you know you can have a little patience with the young man and you guys are going to grow up together you're both as you said a young couple with a baby and so just you know push on it push on it push on it read books about marriage learn about it but this is a relationship breakdown it's not a financial breakdown when you can't work together on anything because this is going to translate to raising kids it's going to translate when the car is broken down.

It's going to translate to, like, you know, I take out the garbage. I'm worth hundreds of millions of dollars, and I take the garbage out. You know, it translates into your marriage. What do you do? You know, I mean, I can hire somebody to do that all the time, and we actually have somebody who helps us with most of that stuff. But if Sharon needs that to go to the curb in one of those little wheeled trash cans, my little butt is hauling it down there at 60 years old after 38 years of marriage.

So there's stuff like this you just learn to do for each other as an act of love, as an act of service in the process. You all serve your country because you love your country. So serve each other because you love each other. And that's what I would tell you to do. But your husband's not a bad guy. He's just making the mistake that most people make and most people don't win at marriage and money.

That's why the number one cause of divorce in North America today is money fights and money problems. Alright, Ed is with us. Ed's in New York. Hi, Ed. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking the call. Sure. I'm 65 years old. I'm considering taking Social Security instead of waiting a year until I'm 66.

The purpose of that would be to pay down more of my debt and preserve the nest egg that I built for retirement that we're living off of currently. So I wanted to get your thoughts on that. Well, the only way we're positive when to take Social Security is when we know when we're going to die. So if we knew when you were going to die, we could calculate it real easy. And, of course, the sooner you die, the sooner you'd want to take it. But the math works out that if you take the money and invest it now, the investment returns would cover more than the reduction in payments that you will get versus having taken it later. So I would take it now and do what you're talking about.

Although I did hear one thing I want to learn about. How much debt do you have? About $200,000. On what? Most of it is the mortgage on my house. And how much is in your nest egg? $1.4 million. Cash it out and pay off everything today.

There's no reason for you to screw around with that nest egg with that debt sitting there. $1.2 million with zero debt i think you could struggle through brother well done this is the dave ramsey show Business leaders, I'm not going to lie. Finding the right people to make an impact at your company for years to come is hard work. But I can tell you from personal experience, you can find them when you use LinkedIn Jobs. LinkedIn Jobs reaches candidates you just can't find anywhere else.

And not only are they able to reach these candidates, they're able to get the right people for the right jobs. It's no wonder a hire is made every eight seconds on LinkedIn. And when you consider that over 600 million members visit LinkedIn to make connections, learn and grow as professionals, and discover new job opportunities, it's easy to understand why my team loves LinkedIn Jobs. They make it incredibly easy. Get started today with LinkedIn Jobs and get $50 off your first job post. Visit LinkedIn.com slash Ramsey.

That's LinkedIn.com slash Ramsey. Terms and conditions apply. Thank you for joining us, America. We're glad you're here. Our question of the day comes from Blinds.com, the number one online retailer of custom window coverings. You get free samples, free shipping, and with new promos every month, you save even more. Always use the magic word, the promo code Ramsey. Get a better deal.

I'm 30 years old. I purchased a whole life policy for $200,000 a year ago for $125 a month. Lord have mercy, I'm sorry. I did all this without doing my research, and before listening to you, should I cancel the policy? Yes. Getting none of the cash value? Yes. Cancel it.

Possibly pay fees and get a term life policy? Yes. Or should I hold on to the policy? No. It's a horrible idea. You cancel it as fast as you can cancel it. You're losing money every moment that you own this crap. How fast should I pay off a payday lender?

Same answer. Now. These people are the payday lenders of the middle class. Whole life life insurance is crap. Now, because you have life insurance on you, you need to get term insurance on you before you drop this stuff. But you can do that quickly and do it starting right now, ready, set, go. Go to ZanderInsurance.com, get you a quick quote, get signed up for a policy, and as soon as you get the policy in your hand, cancel this crap.

But this should not be around more than a couple more months. You to be done with this thing it is a bad idea so um a good rule of thumb when you realize you've done something is that you wish you hadn't and we've all done that something dumb with money or otherwise is how quickly can i undo it and what's the least damage to my pocketbook of the undoing? How quickly can I get out of this bad car deal? How quickly can I get out of a whole life policy? How quickly can I get out of credit card debt or student loan, right? And the faster you get out, normally the least damage it does to you. There's a few instances where you might hold on to something, but most of the time the answer is no. And if you're within 60 days of the issue in most states of the issue of the policy, you should get a 100% refund. You should not lose a dime. And so it would be important to cancel it inside that period of time if your state has

those particular laws. And that difference, you know And life insurance law is state law, and so it varies from state to state. But find out in your state how long you can keep a policy and cancel it. 60, 90 days is normal in most states without having to get a 100% refund. Zero cost during that time. And that's what you're facing. Nick is with us in Michigan. Hi, Nick. Welcome to the Dave Ramsey Show.

Hi, Dave. It's an honor to talk to you. You too, sir. How can I help? So I am 25. I'm in kind of a career exploration kind of mode right now. About two years ago, I was studying to become a teacher, and basically the teacher that I was a student teaching with told me she did

not think I was cut out for teaching, so I dropped out of the program, finished my bachelor's degree. One person decided your future? She kind of confirmed a lot of what I was thinking. I had a lot of family members that told me they thought I should become a teacher, and I started to realize that it just wasn't for me. Okay. So she kind of confirmed it.

Oh, okay. I can go with that easier than her telling you. Okay, so now you're not a teacher. What are you going to do? Okay, so that's actually where I'm at right now. So I've been working at UPS for the last few years trying to pay down my debt, and I'm completely debt-free now, which is awesome. But so now I'm starting to think about the possibility of,

I'm starting to feel the Lord calling me, I guess I should say, towards seminary. And I would like to hopefully go to seminary debt-free, and I'm kind of trying to figure out how I could do that. Okay. All right. Well, I mean, it's like anything else. It has any other degree field in terms of the mathematics of it. The biggest element of going to getting a degree of any kind is college choice because the college you choose can vary greatly in cost.

Seminaries are no exception to that. There's a lot of different seminary degrees that you can get from a lot of different places, certainly with a lot of doctrinal and theological differences for sure. And so are you a member of a denomination or a tradition? Yeah, so I am a member of the CRC Church in Grand Rapids, so I would assume that that would mean I would either go to Calvin's Seminary or

Western Seminary. Do they have any programs for any denominational or traditional support from within the group to help young men and or women go to seminary? I believe that some of the – there are some churches that have, like, scholarship opportunities for going to seminary.

I'm not sure if mine would or not. Yeah. Well, and that may be – you may want to talk to one of the ones that does have that opportunity and discuss maybe agreeing to serve on staff there as a result of them having helped you, you know, to get your seminary degree. So that's one thing I would look into is where can I source some scholarships? There's two primary seminaries that serve uh the background that you come up in it sounds like and so have you priced those out uh yeah they're both fairly uh similar in price they're um they're both local too which is kind of a nice

aspect of that too that's wonderful okay and how much are they um about $15,000, $16,000 a year. Not bad. And you can live at home, right? Probably. Okay. UPS has a program. I don't know if it applies to studying for the pastorate or not, but they have a program that will pay tuition while you work there. Are you aware of that? Yes, I am. I actually used it for the last year of my college, my undergrad. Okay. So that'll help, and you get some denominational support, and you're living at home. Of course, you're working your tail off while you're there. And so I think that's consistent with Scripture for you to find a way to pay for this, because I cannot tell you that—as a matter of fact, I can tell you I would not get a seminary degree with debt.

Lots of reasons. One is it's really inconsistent with Scripture because there's nowhere in Scripture God used debt to bless his people. Number two, typically pastors don't make huge piles of money and to go hugely in debt to have a job that is not known, a career field that is not known for overpaying would be kind of mathematically ridiculous. Agreed? Mm-hmm.

And so let's do the—and, oh, by the way, lots of people in Scripture did a lot of preaching and a lot of ministering with no seminary degrees. And so lots of people do that all the time. And I'm not saying it's a good thing to not be trained. I don't have any problem with you being trained. But the call to preach or the call to minister is independent of you getting a seminary degree. A seminary degree is a tool in your belt to follow the call. There's a lot of ways to follow the call that don't require you to go $200,000 in debt with a seminary degree.

Okay? Right. Like the pastor that led me to God never saw the inside of a seminary, just as an example. Okay? Now, again, he would tell you he's extremely well-read. He's studied after that, gone on to, you know, do a lot of study and learning. But, you know, the call on your life is a spiritual call, not an academic call. And the academics are a supplement to what God's called you to do. So don't confuse those.

Because I'm saying this, I didn't hear you say this, but I've heard in the last 30 years lots of people say, well, God called me, so I'm going $200,000 in debt and go to seminary. And I want to separate these two concepts for you and say, you know, seminary is not always congruent with your call, especially if it's going in debt to do it. And so, you know, we Christians, a lot of us have a tendency to play the God card when we want to do something, and God told me.

God told me to do this. You need to make sure it lines up with Scripture if God told you to do that, because otherwise we know it wasn't God. Going into debt to do this. You need to make sure it lines up with Scripture if God told you to do that, because otherwise we know it wasn't God. Going into debt to do this is not a plan. This is the Dave Ramsey Show. Thank you. Emily's with us in Texas. Hi, Emily. Welcome to the Dave Ramsey Show. Hey, Dave.

Thanks for taking my call. Sure. What's up? So here recently, in the last 15 months, my husband and I have been paying an additional $1,000 towards our mortgage with the intentions of lowering that balance. However, in support of the snowball effect, we do have a debt in front of that, which is a vehicle. Oh, you would stop that then, yeah. So my question to you would be, should we be applying the additional payment that we're making to the mortgage into the vehicle, knowing that the vehicle is going to continue to depreciate

in value. Well, if you're worried about depreciating in value, you should just sell it, not keep debt on it. Keeping debt on it doesn't keep it from depreciating. Right. Okay. Those things are incongruent. So if you're going to keep the car, you should pay it off as soon as possible.

Yeah, you should stop paying extra on your mortgage. I'm glad you're paying extra on your mortgage i like the idea that you're you know you're working towards getting out of debt but the power of focus uh is what has caused the system that we've used for so long to work and meaning that what you focus on you win at and so we stop doing everything except the baby step we're on and your case, you're on baby step two because you have a consumer debt left to pay off. Take it that's your only debt. Yes, that's our only debt. Cool.

And how much do you owe on the car? $54,000. On the car? Yes. And what's your household income? Me and my husband combined, $240,000. Okay, good. What do you all do for a living uh we work in the financial

industry business we're program managers wonderful what kind of car is that a yukon oh we have three kids yeah uh it's a family car it's the only family car that we have so i mean i wasn't telling you i wasn't gonna tell you to sell it you can you can you can handle it at 240 um it's just um it's an expensive car but you make a lot of money so yeah let's get that paid off do you have any I was going to tell you to sell it. You can handle it at $240. It's an expensive car, but you make a lot of money. So, yeah, let's get that paid off. Do you have any money saved anywhere that is not in retirement accounts? Yes.

How much? We do have money in our savings account. How much? Roughly $15,000. Okay. Well, if you've been reading our stuff, you'll find out real quickly what we teach is, and it's going to scare the crap out of you, the kind of money you make, but is $1,000 is baby step one. And anything that is not retirement assets,

any kind of investment or cash position that is not in a retirement account that would be penalized is taken out to pay off all debts in baby step two and so if i woke up in your shoes it's gonna be hard for you to do if i woke up in your shoes i would have one thousand dollars in my account and i would take everything else and throw it at this car and i'll get this stupid butt car paid off, I mean, within three months, four months, maybe, something like that. It needs to be done really, really fast. And once you're debt-free, everything but your home, then you build your emergency fund of three to six months of expenses. Then you start investing 15% of your income. By the way, if you're investing now, you should stop that temporarily until you get these other two things done. And that's the stuff that we teach.

That's how we teach it, Emily. And so you guys are making a lot of money, but you're making way too much money to have a $54,000 car loan, too. It's kind of just mathematically, financially lazy to have gotten that car loan. You make enough money to have paid for the car if you just saved up a little bit and done it? Hey, thanks for the call. Open phones at 888-825-5225. Here's what's interesting. A lot of you don't make $240,000 a year, okay? But most of you don't have $54,000 car debt either. People in the lobby just fell out. I had to revive two of them when I said that, you know? But it's just, everything's ratios.

Everything's relative. It's what you can emotionally stomach. It's easier to stomach $54,000 if you make $240,000 than it is to, you know, stomach $5,400 if you make $24,000. So, which is the exact same ratio, by the way. And how many times have you talked to somebody making $24,000 and got a $5,000 or $10,000 or $15,000 car loan, which would be like her having a $150,000 car loan, okay, by the way, ratio-wise. So if you make $30,000 a year and you have a $15,000 car loan, it's like her having $150,000 roughly. So just kind of think that through, think the ratios through.

But here's the thing. How many of us have said in our culture, regardless of where you are in income, what your ratios are, I can afford the payment. That's an easy payment. That's how I can do that. I know a bunch of people say that because the average car payment in America today is $506 over 84 months, according to the National Auto Dealers Association. So the average car payments, with the average household income being $59,000,

the average car payment is $506. Now, I don't know where you live, but I live in Tennessee, and $506 if you didn't pay it in a payment and you put it in a shoebox. In 10 months you would look down and there would be $5,000 in that shoebox. 10 times 500 is 5,000. So if you can afford the payment, you can afford to save up and pay cash for a $5,000 car, on average in America today every 10 months. So let's do it for 10 months and buy a $5,000 car.

What can you buy for $5,000? Pretty good old used Camry. Might be ugly, but might be mechanically okay. Pretty good old used, maybe a Honda, a little Honda Accord. It might be a 90s vintage, but you could do it for $5,000, right? And you can get a little bit of life left in those cars. Get you an old pickup for $5,000. It wouldn't be pretty, but it might be mechanically good, right?

I know I can buy one for that. I just sold one for $3,000 the other day that was here that we paid $3,000 for 10 years ago and drove it 10 years here at the office for delivery. And then we just sold it for $3,000. Isn't that amazing? So, you know, that kind of stuff's out there, right? Now, do you want to drive that crap the rest of your life? I don't want to drive crappy cars.

I want you to live like no one else so later you can live like no one else, right? But if you did that for 10 months and you bought a car for cash for $5,000 and then you drove that for 10 months, 10 months later you'd have another $5,000, wouldn't you, in your shoebox? By the way, you know how much a $5,000 Honda goes down in 10 months in value? Doesn't. Matter of fact, if you bought it right, it might be worth six and you might have only paid five for it.

So you can sell it for five and and you got five in your shoebox. Would you have a $10,000 car then 20 months in that you paid cash for? No. And let's put $500 in the shoebox again for 10 more months, and let's sell your $10,000 car now 10 more months later for $10,000, because you paid $10,000 for it, and it doesn't go down much in value in 10 months. And you got another $5,000 in there in that shoebox. Now you got $15,000 because you paid $10,000 for it, and it doesn't go down much in value in 10 months, and you got another $5,000 in there in that shoebox. Now you got $15,000. We're only 30 months in,

and you're driving a $15,000 paid-for in-cash car, and you never borrowed a dime. 30 months is two and a half years. And I didn't ask you to walk during that time or uber or ride the bus or anything else you were driving a car the entire time you just paid cash you saved up and paid for it which is what you got to do folks i mean you just have to get your head around if i don't have have the money, that means I can't afford it. I think I might be able to pay the payments if I don't get laid off

or none of the kids get sick doesn't really mean I can afford it. That's a set of assumptions, and when you sit on your assumptions, you'll have trouble. Don't do that. Don't do that. Save up and pay for things, and that way, you know how much, even if you do a bad purchase, when you pay for it in cash, you know how much it hurts?

Not nearly as much. But try paying payments on something that was stupid. Oh, my goodness. Every month you have this reminder that says, you're stupid, you're stupid, you're stupid, just like last month month you have this reminder that says, You're stupid. You're stupid. You're stupid. Just like last month.

You're stupid again. And now you're stupid again. I pay payments on stuff like that, man. I just hated that reminder. It's like a little parrot in the corner of my wallet. You're stupid. You're stupid. That's what that payment does once a month.

You're immature. You didn't have the ability to delay pleasure. Children do what feels good. Adults devise a plan and follow it. This is the Dave Ramsey Show. Thank you. Here's an interesting number. Happy marriages are twice as likely to talk about their future dreams and money together. Twice as likely. People when surveyed ask if they have a happy marriage. Yes.

Do you talk about your future dreams and your money together? They're twice as likely as those that answered no i have a bad marriage ta-da so here's an idea make an investment in valentine's day with some gifts that can help you build a bright and debt-free future together i i'd like chocolate my wife does like roses she always says you're wasting money but then she grins and looks at them so i don't know how that is but um i like those investments but you know what they don't change my marriage the crap you buy valentine's day generally doesn't change your marriage but here's the deal here's something that would you need to go to our valentine's day sale at

davramsey.com because if you just got engaged or you're looking for a wedding gift or you just want to do this marriage thing right, you could save up to 66% off our Valentine's Day sale on books, bundles, and tools that will help you strengthen your marriage. Check it out at DaveRamsey.com or call the Ramsey Concierge Team at 888-22-PIECE, 888-227-3223. And on Valentine's Day, I think there's a couple of tickets left to this, the Money and Marriage event here in Nashville with Rachel Cruz and Dr. Les Parrott. And there's all kinds of add-on things you can do, events with Rachel, events with Les,

events at the Grand Ole Opry and other stuff that we've got all arranged for you if you want to do any of that. Valentine's Day, February the 14th, the Money and Marriage event, plus add-ons because you get to take a Valentine's trip to Nashville. So check it all out. Check that out at DaveRamsey.com as well. Just click on Live Events. Sam is with us. Sam is in Texas. Hi, Sam. Welcome to the Dave Ramsey Show. Hi, Dave. How are you, sir?

Better than I deserve. What's up? So my question to you is, should we pay off debts in collections that have been removed off a credit report? Wow. How old are they? This one is in, I believe, opened in 2011. Why was it taken off your credit report? Well, it's legally under my wife's name, but it's now my debt. Well, I mean, why was it taken off of her credit report?

Oh, well, I guess because it was, I guess they removed them after eight years. I'm not really too sure. Yeah, okay. Well, there's two reasons to go back and deal with this. It's a hassle, but the problem is even if it's off the credit report, depending on your state's laws, you may or may not still owe the money based on a statute of limitations. And I don't know that in your state. I'm not an attorney. But even if the statute of limitations has run,

you can be assured that these things will pop up later at the worst opportune time. About the time you get ready to buy a house, these people will just reappear and mess up her life, mess up her credit bureau report. And so the fact that it's not reported on the credit bureau report doesn't mean that you're not legally liable, doesn't mean that they won't bother you later. It could mean both, but it doesn't necessarily mean that. And, of course, the third thing is that she actually owes the money. Right.

And there's that. So if it were me in this situation, I would call them and begin a negotiation to settle. It's obviously a very old debt. The original balance and certainly all the interest and penalties since then are not even relevant. But I would just come up with a number that I work with them to settle. It shouldn't be a lot of money. And percentage-wise, anyway, it should be a very, very small percentage, like 10%, 15%, 20% of the original balance, not what they say it is now.

And then get that in writing and then send them some money. Because then what you're doing is you're cleaning up your life. You have no skeletons in the closet that are going to pop out like a bad horror movie at the worst possible time. There's nothing hiding back there in your past that can come back after you later. And I just don't want the boogeyman under my bed. You know, that's what it amounts to. Drew is with us in California. Hi, Drew. How are you?

Hi, thank you for taking my call. I've been listening to you for several years and my wife and I have learned a lot from what you've taught us. Well, thank you. How can I help? Well, my wife is 46 and I'm 50 and I want to retire in 10 years. Our take home is $156,000 a year. We have $225,000 in our 529s for my 10 year old daughter and 13 year old son. I have $640,000 in retirement for the 403Bs. I have $14,000 in a Roth IRA, $18,000 in inherited IRA. I have $461,000 in a trust. And my wife and I, we have $353,000 left on a 15-year mortgage, and we're contemplating whether or not to pay it off either like all at once and then just start recontributing like $3,500 a month for 10 years until I retire,

or pay an additional $5,000 a month and then reinvest $3,500 a month for five years. What's the story on the trust? My dad passed away and then he left us some money and so we've had it in there. He left it into a trust? Yes. What's it invested in? Mutual funds. Okay.

And the terms of the trust are you're 100% in control? Yes. We have a, like, manage someone that's in charge of our money. And so, like, my wife and I have been talking about, like, either paying off the entire mortgage or just, like, kind of just paying off on the 13 years, letting the compound interest accrue, and then, like, in seven or eight years, maybe paying it off. Okay, you've been listening to me, you said, right? For a long time.

Yes. For a long time, right? Yes. Okay. And everything that is not in a retirement account we walk up with the baby steps don't we right and so if this money we're sitting in a checking account if this money we're sitting in a mutual fund i said if it were i know i said if it were if it were in a checking account if it were in mutual funds if it were in anything other than in a retirement account,

if you were sitting here while I was on vacation and you were taking the call, you would know to tell them to pay off the house with it because you know that's what I tell them all the time, don't you? Correct. So why would this be different? I was just wondering, like, in terms of the capital gains from the trust, like just paying it all off in one lump sum? Yeah, the capital gain is 15%. And it's not all capital gains because you've got a basis in the trust.

How much did your dad leave you originally? He left $418,000 in, like, the market crash. And then this last year up to today, I think the profit was $61,000. So I guess it would be $75,000. So it's $480,000, right? No, $460,000 right now. Okay, so that would be a $40,000 gain. Okay.

At 15% interest. Okay. Or 15% tax rate, I'm sorry. So $40,000 on $40,000. So this is a $6,000 tax bill. Okay. It's not taxes on $460, dude. You understand?

Okay. That's where I was like kind of. Yeah, your basis in this. I'm not really. Your basis in this is what it was worth when you received it. Okay. And originally it was $418. Right. And originally it was $418,000. Right.

And now it's $460,000, which is a $42,000 gain. And if you cash the whole stinking thing out, you would pay taxes at a 15% capital gains taxes at 15% on the $42,000 gain. So, yeah, I'm cashing it out tomorrow. Paying off my house. Absolutely. It's the best of all possible worlds. And by the way, your dad was obviously a smart guy and left you a bunch of money. Probably was really good with money.

So I suspect he's probably in heaven smiling that your house has paid off. That's another way I check against if this is smart or not. Would the smart people who left it to me be happy that I did this? Yes. This is The Dave Ramsey Show. Hey, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. If you would like to do your debt-free scream live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you to come to Nashville and tell Dave your story.